Full Adjusted Appraisal On One Boeing 737-528 Aircraft, Serial Number 27426, Registration Number FAP 356

Conducted By: ACI Aviation Consulting

Date: July 18, 2007

Table of Contents
REPORT PURPOSE ............................................................................................................................ 4 EXECUTIVE SUMMARY .................................................................................................................... 5 APPRAISAL ....................................................................................................................................... 8

Airline Industry Overview and Market Analysis............................................................ 9 The Post 9-11 Market...................................................................................................... 9 The Future..................................................................................................................... 13 The Manufacturer: Boeing........................................................................................... 14 The Boeing 737 Aircraft ............................................................................................... 15 The Boeing 737-500 Current Market............................................................................ 16 Aircraft Half-time Values ............................................................................................. 19 Value Adjustments........................................................................................................ 20 Value Adjustments From Half-time.............................................................................. 21
AIRCRAFT TECHNICAL SPECIFICATIONS ....................................................................................... 22

General.......................................................................................................................... 22 Operator Information .................................................................................................... 23 Aircraft Delivery........................................................................................................... 23 Aircraft Maintenance Program Summary..................................................................... 24
COMPONENT STATUS..................................................................................................................... 25

Engines.......................................................................................................................... 25 Landing Gear ................................................................................................................ 25 Auxiliary Power Unit.................................................................................................... 26 History of Major Airframe Damage ............................................................................. 26 Interior Configuration Data........................................................................................... 26 Additional ..................................................................................................................... 27 Deferred Maintenance Items......................................................................................... 27 Airworthiness Directives .............................................................................................. 28 Airframe.................................................................................................................... 28 Engine ....................................................................................................................... 28 Avionics Inventory........................................................................................................ 29
AIRCRAFT INSPECTION REPORT .................................................................................................... 32

General Aircraft Comments.......................................................................................... 32 Fuselage ........................................................................................................................ 32 Wings ............................................................................................................................ 32 Landing Gear ................................................................................................................ 33 ProInversion 2 of 43 Boeing 737-528 S/N 27426

Engines.......................................................................................................................... 34 Cockpit.......................................................................................................................... 35 Passenger Compartment................................................................................................ 37 Galleys .......................................................................................................................... 38 Lavatories...................................................................................................................... 39 Cargo/Baggage Compartments ..................................................................................... 40 Accessory and Equipment Bays.................................................................................... 41
STATEMENT OF INDEPENDENCE .................................................................................................... 42 METHODOLOGY ............................................................................................................................. 42 APPENDIX ...................................................................................................................................... 43

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REPORT PURPOSE
The purpose of this report is to set forth ACI Aviation Consultings (ACI) opinion of the current market adjusted value on one (1) Boeing 737528 aircraft, serial number 27426, registration number FAP 536 (the Aircraft). The Aircraft, serial number 27426, is currently being operated by the Peruvian Government, which is headquartered in Lima, Peru. The Aircraft is used for Presidential transport. This aircraft appraisal report has been conducted using industry recognized appraisal procedures and is primarily based upon aircraft data as supplied by the current operator (the Peruvian Government), market research conducted by ACI, an aircraft physical condition inspection, and a maintenance records audit. ACI conducted an aircraft physical inspection and records audit between July 8-10, 2007 at the Peruvian Air Force facility where the aircraft is maintained and parked. This report represents the opinion of ACI and is advisory only in nature. By accepting this report, the client agrees to hold ACI harmless for actions taken or not taken, based upon the

conclusions and findings expressed in this report.

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EXECUTIVE SUMMARY
Full Adjusted Appraisal On One (1) Boeing 737-528 Aircraft Serial Number 27426 and Registration Number FAP 356 At the request of ProInversion, ACI Aviation Consulting (ACI) has been retained to conduct a full aircraft appraisal, physical condition inspection and maintenance records audit on one (1) Boeing 737-528 aircraft, serial number 27426 and registration number FAP 356 (the Aircraft). The Aircraft, serial number 27426, is currently being operated by the Peruvian Government, which is headquartered in Lima, Peru. The Aircraft is used for Presidential transport. To conduct this assignment, ACI has relied upon specific data requested and obtained from the operator. ACI is not certifying the accuracy of the presented data; rather, ACI is conducting an audit of the data to determine proper content and compliance with standard industry practice. In conducting its assignments, ACI uses standard aviation auditing techniques that have been developed over the past two decades. These techniques require ACI to conduct an audit and obtain reasonable assurance

that the documents, as presented and obtained, contain no material misstatements or gross errors. Further, this assignment is not intended to substantiate airworthiness or compliance with mandated regulations. The Aircraft is currently operated by the Peruvian Air Force as an Air Force One for the official transportation of the President. The Aircraft was physically inspected while parked at its normal hanger location in Lima, Peru at Air Force Group 8. The aircraft was inspected on July 9, 2007 and the APU and engines were run on July 10, 2007. Overall the aircraft was found to be in excellent physical condition. Specifics concerning the physical inspection are fully covered within the Aircraft Inspection section of this report. This aircraft was noted to have a total of one (1) deferred maintenance item. Further details on this item can be found within the The aircraft is currently configured to accommodate sixty one (61) passengers in three classes. The presidential suite has four (4) single executive seats around a folding table and a three (3) place divan. There are twelve (12) first class seats aft of the presidential suite in mid-cabin and fortytwo (42) economy class seats in the aft cabin. Overall the maintenance records audit and physical condition inspection 5 of 43 Boeing 737-528 S/N 27426

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went well however, there were several discrepancies that were noted by ACI. The following are provided in no particular order. Currently, there is no Certificate of Airworthiness issued to this aircraft because it is operated by the Peruvian Air Force. However, ACI was told that the process to have one issued by the Peruvian DGAC has been started. Although the aircraft has been modified with the installation of a PATS auxiliary fuel tank system, which increases the fuel capacity by 1,000 gallons per STC SA725NE, a recent Airworthiness Directive (AD) 2006-1518 and a service bulletin (SA25NE-28SB-007_B) require the system to be deactivated. Structural modifications are currently being developed to correct negative loading margins under emergency and flight gust loads by PATS. Currently the auxiliary fuel tank is not operational. Some of the documentation is written in Spanish, including the airframe and engine logs, as well as the headings in various status reports. The inspection, maintenance and overhaul documents, as well as all modifications performed on the aircraft are in English. The Aircraft Flight Manual and the Flight Crew Operations Manual state that the aircraft is capable of a Maximum Takeoff and Landing Altitude of 14,000 feet. An interior modification to its present VIP / head-of-state configuration ProInversion 6 of 43

was performed by Associated Air Center of Dallas, Texas on November 28, 1995. The FAA form 8130, certifying the interior installation, was reviewed by ACI. ACI did not review the modification package, however ACI believes the modification details (engineering data and material certifications) would be available at Associated Air Center. Only a complete review of all documentation could determine compliance. As of July 8, 2007, the records provided by Proinversion showed that the aircraft had accumulated 3,884.7 flight hours and 2,938 cycles since new. ACI considers this to be very low accumulated time and cycles for a twelve year old aircraft. As of July 8, 2007, engine serial number 858237 had accumulated a total of 3,884.7 hours and 2,938 cycles since new. The first life limited component, the Compressor Rear Air Seal, is due for replacement in 12,062 cycles. As of July 8 2007, engine serial number 858238 had accumulated a total of 3,884.7 hours and 2,938 cycles since new. The first life limited component, the Compressor Rear Air Seal, is due for replacement in 12,062 cycles. Both engines are original to the aircraft and have been on wing since delivery. The nose landing gear, left main landing gear, and right main landing gear were overhauled by Goodrich Landing System Services in Florida on Boeing 737-528 S/N 27426

July 21, 2006 based on calendar requirements. The next overhaul will be required on July 21, 2016. All of the landing gear currently have 90% time remaining until overhaul. The landing gear back to birth (BTB) traceability is currently incomplete. As previously stated, the landing gear were overhauled by Goodrich Landing Services on July 21, 2006 and certified with an FAA form 8130, however the life limited component (LLP) tracking is incomplete at present. ACI believes a LLP trace could be conducted but this comprehensive records review was not within the scope of this assignment. The airframe is currently being maintained on a Boeing approved Low Utilization Maintenance Program (LUMP) which requires the following inspections: an 1A Check 60 days, a 2A Check every 120 days, a 4A Check every 240 days, an 8A check every 485 days, a C check every 730 days, CPCP at 6 years and a Structural Inspection (SI) at 12 years. The next 1A Check is currently due now, the next 2A Check is due in 61 days, the next 4A Check is due in 181 days, the next 8A Check is due in 183 days, the next C check is due in 422 days. At present the 12 year Structural Inspection (SI) is due now. In conversations with the operator they indicate that the SI is being deferred to the next C check which is due in 422 days.

Complete information on the aircraft physical inspection and the maintenance records audit are covered within this report. The current market for the Boeing 737-528 passenger aircraft is very good. Low market availability, favorable operating economics and increasing demand have placed a premium on this aircraft type. The current market for large, VIP equipped aircraft is also very strong. Accordingly, the current market adjusted value of the subject aircraft, serial number 27426, is $18.48mm. The C Check, engines, and landing gear accounted for a positive value adjustment of $1.33mm. Specifics concerning the appraisal and current market information are contained in this appraisal.

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APPRAISAL

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Airline Industry Overview and Market Analysis Historical Perspective

of the major U.S. airlines were further evidence of an industry in recession. Higher fuel costs, contentious labor negotiations, and a slowdown of the world economy in late 2000 through the middle of 2001 hit the airlines hard. Not only was leisure travel slowing, but as corporations sought to control costs in the weakening economy, demand for the highly-profitable business travel decreased. The terrorist acts committed in the United States on September 11, 2001 further weakened an already declining U.S. economy, particularly in the airline industry. The attacks were directly responsible for the temporary grounding of the entire U.S. airline industry with the consequent loss of revenue. In spite of a massive government bailout which allowed several airlines to survive in the months after the crisis, much of that revenue did not return. In fact, by some estimates, overall demand had contracted by as much as 20 to 30 percent. The Post 9-11 Market What began as a normal cyclical downturn, well underway by the second half of 2001, turned into a much deeper downturn as a result of the terrorist attacks on 9/11/01. Airlines immediately

During the years, postderegulation, up to and including 1989, the airline industry experienced a period of strong growth. The major U.S. airlines had placed large aircraft orders and were looking forward to continued profits. These airlines experienced record operating income in 1988 and 1989. The U.S. economic slump of 1990-1991, coupled with the invasion of Kuwait, caused an industry-wide recession, followed by the reorganization of several airlines and consolidation within the industry. From 1990 through 1992, the major U.S. airlines suffered operating losses of approximately $7.2 billion due to flat passenger demand. From late 1994 until early 2000, the industry experienced a recovery as a result of a rebounding economy, increasing passenger demand, and a focus on tightly controlling costs. The major U.S. airlines enjoyed steady growth, record earnings, and a return to overall profitability. Prior to September 11, 2001, however the aviation industry had begun to see a cyclical downturn. Demand for air travel declined in early 2001 and lower second quarter results from many

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reacted by directly reducing capacity, in some cases by as much as 30 percent, in an attempt to meet the reduced passenger demand. This quick reduction in capacity caused an immediate imbalance between aircraft supply and demand. Prior to 9-11 the total number of jet aircraft in storage was 912; by the end of 2001 that total rose to 1,884 units, a 100% increase1. This situation caused a decline in the market value of almost all commercial aircraft. The wave of bankruptcies that followed 9-11 only made matters worse. The bankruptcies at Swissair, Sabena, Midway, US Airways, and others put many aircraft onto an already glutted market. The 737 Classics, along with other older technology jets such as the DC-9, L1011, older 747s and B727s series, were among the hardest hit in the initial months following 9/11. Unable to predict when demand would return and, in an attempt to conserve capital, numerous airlines deferred or cancelled new aircraft orders, parked older aircraft, laid off employees, curtailed flying and reduced station activity. Boeing and Airbus did their best to manage their dramatically revised delivery schedules but were clearly impacted by the downturn. The reduction in demand left both manufacturers in a precarious situation, necessitating massive layoffs and substantial reductions in aircraft production rates.
1

Boeing, as well as some increasingly desperate operating lessors, pushed hard to replace older aircraft in the worlds operational fleet with newer aircraft types now left without a home. While the manufacturers remained marginally profitable, the airlines continued to suffer substantial operating losses in the years 2002 to 2005. The following chart depicts the U.S. major carrier net losses for those years:
US Major Carrier Financials (In Millions of USD) 2002 2003 2004 Airlines Net Net Net Income Income Income American $ (3,511) $ (1,228) $ (761) Delta $ (1,272) $ (773) $ (5,200) United $ 3,200 $ (2,800) $ (1,600) Southwest $ 241 $ 442 $ 313 Northwest $ (798) $ 248 $ (891) Continental $ (451) $ 38 $ (363) US Airways $ (1,646) $ 1,461* $ (611) Source: The Airlines (20070110)
**Merged with America West

2005 Net Income $ (861) $ (3,800) $ (21,176) $ 548 $ (2,600) $ (205) $ -(537)**

* Includes special items from 2003 restructuring.

Jet Information Services, Year End 2001

In addition to the excess capacity and fare wars, airlines have faced skyrocketing fuel costs. The price of jet fuel has effectively doubled since 9-11. Only the airlines with hedged fuel prices have been somewhat sheltered. Those airlines are led by Southwest and, to a lesser degree: Alaska, United, and Jet Blue. As many experts believe the

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hedging strategy employed by these airlines will become less of a factor later this decade (2009) when their fuel hedges run out and oil remains above $50 per barrel.2 ACI views aircraft economics, and in particular, engine/aircraft fuel burn rates, among new production aircraft to be paramount. As one could imagine, the price of fuel is of substantial concern for all airlines. Traditionally, the largest operational costs for an airline were (in no particular order): maintenance, crew, insurance and fuel. For most airlines fuel is now at the top of the expense category. Ever increasing attention is now paid to fuel conservation. Fuel burn rates, advanced aerodynamics and efficient flight planning have become essential to all airlines. Traditional economic factors leading to the retirement of some aircraft types included maintenance and new generation system improvements. Now fuel burn rates are at the top of the list and are becoming primary considerations in the design and development of newer, more efficient engines and airfoils. ACI does not see any reverse in this trend and believes it may accelerate given the current global political environment. ACI anticipates additional negative pressure on older, less economical aircraft over the long term. Thus far, American Airlines and Continental Airlines have both been able
2

to hold off bankruptcy. Both carriers made significant inroads with sweeping cost reduction plans and fleet rationalization programs aimed at rightsizing their network systems. While both airlines appear ready to make a run at solid future profits, it is not clear if they can make those profits on a consistent basis, given the disadvantage of higher operating costs as compared to airlines that operate in, or have been through, bankruptcy. It is ACIs opinion that American or Continental will not hesitate to resort to bankruptcy should it be in their best interest to do so. Additional market consideration and discussion should also be directed towards the demand for freighter services. Traditionally, this demand has been historically met by (1) the manufacture of freighter aircraft by the prime manufacturers and (2) the freighter conversions of existing passenger aircraft. According to both Boeing and Airbus, the supply of freighter aircraft will be met primarily by the conversion of existing passenger aircraft. This may be one solution to the current excess overcapacity but by no means an answer. At best, the freighter fleet requirements will absorb only a small percentage of the excess passenger aircraft oversupply. Passenger to freighter aircraft conversions are also driven by economics. The first economic condition is the proposed acquisition price of the passenger aircraft which must be low enough to accommodate the additional Boeing 737-528 S/N 27426

Time, Global Business June 20, 2005.

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capital investment required to modify the aircraft. Additional considerations regarding passenger to freighter conversions include, but are not limited to: aircraft age, maximum take-off weight, and installed engine type. Accordingly, as aircraft values decline and stay low, there may be some additional aircraft absorption by the freighter industry. This alone will not be a solution to excess passenger aircraft capacity but in ACIs opinion it must be a consideration in any value analysis. On the bright side of the supply and demand equation, emerging markets in South America, Eastern Europe, the former Soviet Union and Asia (in particular India and China) have been quick to absorb newer aircraft variants and some older aircraft types as they become available. These markets, the result of long-delayed de-regulation, have the potential to become large consumers of new and used aircraft alike. This situation is not likely to slow down anytime soon. However, what is not clear is the ability of these markets to continue their current rate of growth. Historically, as these markets develop, they have tended to grow quickly over brief periods and not steadily over sustained periods. ACI suspects that the periods of growth are limited by infrastructure, capital, airline economics and government control.

Since 2004 the airline industry has significantly rebounded. Several U.S. airlines have recently exited bankruptcy and the demand for transportation services has significantly recovered. During 2004, five U.S. main line carriers were operating under Chapter 11 bankruptcy protection and several others appeared to be on the brink. 3 In that same year, the demand for transportation services experienced a strong recovery although profits for all of the airlines were not achieved.4 According to the FAA, U.S. commercial air carrier system capacity (Domestic and International) grew by 7 percent in 2004 and commercial aircraft flights experienced a net gain of 3.7 percent. In 2004 the U.S. commercial air carrier system revenue passenger miles (RPMs) and passenger enplanements grew by 10.6 and 7.2 percent respectively. By the end of 2004, commercial RPMs exceeded pre 9-11 levels. Additionally, in 2004 air carriers achieved an all time high load factor of 75.2 percent. 5 ACI believes that this milestone was the turning point for the U.S. aviation industry. In 2005, passenger demand on U.S. airlines remained strong. System
Source: FAA 2005-2006 forecast. Airlines included Aloha Airlines, American Trans Air, Hawaiian, United Airlines and US Airways. 4 Source: FAA 2005-2006 Forecast. 5 Source: FAA 2005-2006 Forecast.
3

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RPMs and enplanements grew at 8 and 7.1 percent respectively. The system wide load factors increased to an all time high of 77.1 percent. In spite of all this good news, profitability eluded most U.S. airlines in 2005 because of the high price of oil and falling yields.6 2005 saw continued growth within the regional and Low Cost Carriers (LCCs) sector with the domestic market share of these operators growing another 2.2 percent to 45 percent of the total U.S. market share. As a comparison, these carriers represented only a 30 percent market share in 2000. The LCC market presence has forced the legacy carriers to cut costs and prices in markets served by both. These factors have been tough for the legacy carriers to navigate in an extremely competitive market. 2006 was overall a much better year for the US majors. The exceptions were Delta and United. The following chart represents the U.S. Majors financial performance in 2006:

US Major Carrier Financials 2006 Net Income (In Millions of USD) Airlines 2006 2006 2006 3rd 2006 2006 1st Qtr 2nd Qtr Qtr 4th Qtr Year End

American $ (92) $ 291 $ 15 $ 17 $ 231 Continental $ (66) $ 198 $ 237 $ (26) $ 343 Delta $ (2,100) $ (2,200) $ 52 $ (2,000) $ (6,200) Northwest $ (1,100) $ (285) $ (1,200) $ (7) $ 301 Southwest $ 61 $ 333 $ 48 $ 57 $ 499 United $ 2,300 $ 119 $ 190* $ (61) $ 25** US Airways $ 64 $ 305 $ (78) $ 12 $ 303 Source: The Airlines (20070703) NOTE: All Net Income values are in millions of US dollars and include * After-tax net income ** Emergence from reorganization for 11 months ending Dec. 31, 2006

The Future The Air Transportation Association (ATA) is forecasting that the U.S. airline industry will record an aggregate $4.00 billion profit in 2007.7 Over the long run, the FAA expects significant market growth in aviation with only small gains in the short term. According to the FAA, the biggest hurdle for commercial aviation may be the price of oil. Boeing expects an annual average increase of 4.9 percent in passenger travel and a 6.1 percent

Source: FAA 2006-2017 Forecast

Speednews January 2007.

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increase in freight carried by air over the next 20 years.8 Airbus forecasts annual world passenger traffic growth rates of 4.8 percent and freighter traffic growth at 6.0 percent between 2006 and 2025. Airbus also believes the world fleet of commercial jet aircraft will grow from 17,153 (in 2005) to approximately 33,500 by 2025.9 Although ACI generally concurs with the above forecasts, should there be another aviation terrorist attack, a change in the world geopolitical situation (a larger or expansion of the current Gulf war or the start of another conflict in the Middle East) or a significant increase in the price of oil, the above forecasts may not accurately reflect aviation industry growth and expansion. The Manufacturer: Boeing Founded in Seattle, Washington in 1916, the Boeing Company began as the brainchild of William Boeing. Boeing, who had already made his fortune in trading forest land, used his substantial resources to learn to fly and design aircraft for a fledgling aviation industry. Over the next 9 decades, the company built itself into the worlds largest aerospace corporation.
8 9

Currently, the company is comprised of four major business segments: Integrated Defense Systems, the Boeing Commercial Airplane Group, Boeing Phantom Works and Boeing Capital Corporation. In addition, a fifth segment (the Shared Services Group) provides common shared services for the overall organization. The Boeing Commercial Airplane Company is headquartered in Renton, Washington, and is responsible for the development and production of the companys family of commercial airliners. The dominant force in commercial aircraft for the past 50+ years, Boeing aircraft comprise approximately 75 percent of the world fleet with nearly 13,000 airframes in service. The company currently produces its narrow-body 737NG, and Boeing Business Jet (a derivative of the 737) in Renton, Washington, and the wide-body 747, 767, 787 and 777 in Everett, Washington. To counter Airbuss strong family of aircraft, Boeing announced plans in 2004 to develop the 787 Dreamliner. The 787 Dreamliner aircraft, with plans for at least three variants, will place an emphasis on efficiency, higher speeds and modern manufacturing techniques. This strategy is in contrast to its major competitor, Airbus Industries, which is well on its

Boeing 2006 Current Market Outlook. Airbus Global Market Forecast 2006 2025.

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way to delivering the giant A380 with seating of up to 555 passengers. The Boeing 787 is truly an innovative aircraft. The aircraft is being manufactured using new, state-of-the art, manufacturing techniques which take advantage of lighter weight composites, more efficient engines, advanced systems and aerodynamic improvements. The first Boeing 787 flight is scheduled in late 2007 with entry into service projected in 2008. As of July 2007 a total of 677 Boeing 787 aircraft have been ordered. ACI considers this number of orders to be significant considering the 787 hasnt even taken its first flight. Since a slowdown immediately following 9-11 Boeing has made a complete turnaround. Boeing recorded a record year in 2006 with 1,044 commercial jet net orders from 76 customers. This number surpassed the previous Boeing record set in 2005 of 1,002 net orders. In 2005 Boeings revenues were $53.62 billion dollars. In 2006 Boeings revenue was $61.53 billion dollars. The Boeing 737 Aircraft The Boeing 737 is a twin- engine narrow body aircraft powered by the CFM56-3 series engines. ProInversion

The first Boeing 737 was delivered to Lufthansa in December of 1967 (a Boeing 737-100). The 737-500 received its FAA certification on February 12, 1990. Soon thereafter, March 2, 1990, the aircraft entered service with Southwest Airlines. The last 737-500 was produced in July 26, 1999. The Boeing 737-500 has a shorter fuselage when compared to the 737-300 and 737-400. The Boeing 737500 is capable of accommodating up to a maximum of 132 passengers; however the aircraft is generally configured for approximately 100 to 122 passengers depending upon class and layout. The Boeing 737-500 has a maximum gross take-off weight of between 115,500 to 136,000 pounds. The subject aircraft has a maximum take-off weight of 134,000 pounds. This high take-off weight favors value. Although the 737-500 is the shortest of the 737 Classic series, it has the greatest range. The Boeing 737 family of aircraft (all of 737 series aircraft) is the most successful commercial jet aircraft type in history. The Boeing 737 family represents nearly 25 percent of the worlds active commercial jet fleet.

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The Boeing 737 is favored by operators throughout the world for its maintainability and excellent operational performance. This aircraft type (the Boeing 737-300, -400, -500, -600NG, 700NG, -800NG, -900NG) is the primary competitor to the Airbus A320 family. With backorders, the Boeing 737 world fleet is expected to grow significantly over the next decade. The Boeing 737-500 series of aircraft currently has 65 operators. Like the Airbus A320 family, the Boeing 737 aircraft family has a common pilot type rating. This common pilot type rating allows pilots to train in a 737 flight simulator and, once trained, the pilots can operate all 737 family aircraft types. The Boeing 737-500 Current Market At present the current market for the Boeing 737-500 is very good. Low availability and high current demand favor this aircraft type. A total of 389 Boeing 737-500s have been produced. ACI views this number to be low when compared to other aircraft in the Boeing 737 family; however this production number is significant.

At present there is only one (1) Boeing 737-500 that is currently available for sale.10 When considering the current availability as a percentage, less than 1% of the Boeing 737-500 world fleet, ACI considers this to be a very tight market and favorable when considering value. There are approximately 65 operators, of the Boeing 737-500 aircraft. ACI considers this operator base to be diverse and will tend to favor value. Although there are approximately 65 operators, 191 aircraft are operated by only 7 carriers. ACI believes that this operator concentration may be a slight weakness for the Boeing 737-500 aircraft market. Another problem facing the Boeing 737-500 is the introduction of the New Generation (NG) of the Boeing 737s, the Boeing 737-600, -700, -800 and -900. These aircraft are more modern and have the capability to fly further, faster and more efficiently than their predecessors, however the NG aircraft are very tough to source in the current market and are very expensive compared to the earlier 737 variants. When compared within its family, the Boeing 737-500 is not as favored due to the low number of seats compared to 737-300 and -400 as well as
10

Over the next six months ACI is aware of up to ten (10) additional 737-500 aircraft that will enter the market. Even at 10 available aircraft the market will remain very strong.

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the 737-700, -800 and -900. In ACIs opinion, the Boeing 737-500 is truly a niche market aircraft. ACI conducted current research to determine current asking prices and recent sales of Boeing 737-500s. As listed in Airfax a 1990 vintage 737-500 with approximately 40,000 hours and 32,900 cycles is currently being advertised for sale at $11.50mm asking price. ACI is also aware of 5 Boeing 737-500 aircraft that were recently sold out of the Continental Airlines fleet at $14.00mm to $15.00mm each. These aircraft were 1997 and 1998 vintage with typical airline utilization and were at approximate half-time maintenance status. Several unique, positive circumstances surround this particular aircraft in the fact that it has (1) very low hours and cycles, (2) is in excellent condition and (3) is in VIP/head-of-state configuration. These above three unique circumstances are all positive factors for value assuming a purchaser is sought that can immediately use and operate the aircraft in its current configuration. The current market for large, VIP equipped aircraft is very strong. Dominated by aircraft such as the Boeing BBJ (a 737-700/800 derivative), the Airbus ACJ (Airbus 318) and the Gulfstream G550, the heavy jet category has benefited from the growth of multinational business interests who require immediate and reliable transportation ProInversion

worldwide. ACI believes that the current market strength favors the subject aircraft. In its, Business Jet Monthly publication for July 2007, US investment bank JPMorgan observes that the used heavy jet inventory (available aircraft) was down to 3.2 percent of the active fleet. This is down from nearly 4 percent one year ago and a high of nearly 8 percent in early 200311. Further, they noted favorable changes in pricing for used aircraft in this class. This situation also favors the subject aircraft. While much of this analysis centers on traditional, purpose-built business aircraft, it can be assumed that the 737-500, with a modern airframe with proven lineage, can participate in this very strong market environment. That is, if the potential purchaser requires the payload, passenger and performance characteristics of this aircraft with a low acquisition price. In ACIs opinion, a VIP/head-ofstate conversion would cost approximately $3.50mm to $4.00mm if conducted today to similar specifications. This is a consideration for this appraisal. Should a purchaser seek the aircraft for traditional passenger use, they would typically discount the aircraft value due to its current configuration. Therefore, it is highly recommended that
11

JPMorgan Global Equity Research, Aerospace and Defense, Business Jet Monthly, 09 July 07.

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this aircraft be marketed and sold to a VIP/Head-Of-State end user. This valuation assumes the aircraft is sold and marketed to a VIP/Head-Of-State end user. The industry guide book values for a 1995 vintage passenger aircraft are as follows: APG12: US$10.92mm Avitas: US$11.30mm ACI must caution the reader that the industry guide books are a reference point for passenger configured half-time aircraft. For the purposes of this report, these values are used as a reference point only. Other factors regarding this aircraft were considered. These factors include but were not limited to: the maximum gross take-off weight (MTOW), the aircraft low hours and cycles, and the factory installed and delivered Electronic Flight Instrumentation System (EFIS) cockpit. Accordingly, ACI has established the current half-time value for the subject Boeing 737-522 serial number 27426. The establishment of a half-time value is considered to be the first step in conducting an adjusted appraisal. These values are found on the following page.
12

This publication is known as the Airliner Price Guide or (APG) and is owned and published by Brasie, Inc dba. ACI Aviation Consulting.

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AIRCRAFT HALF-TIME VALUES

Customer: Date: Aircraft Type: Serial Number: Construction Year: Configuration: Engine Type: Appraisal Reference Number: Inflation Rate:
Current Market Half-Time Value

ProInversion July 17, 2007 Boeing 737-528 27426 1995 Executive/Pax CFM56-3C1 Pro-1075A 2.50%

2007 Half-Time Value $17.15

Notes and Assumptions:
1. 2. 3. 4. 5. 6. 7. The above value is expressed in millions of U.S. dollars and assumes a half-time maintenance condition. The above value assumes VIP/Head-Of-State configuration. The aircraft is in excellent physical condition and all mintenance records are available. ACI has physically inspected this aircraft. The aircraft is valued on a "highest and best use" basis. The aircraft does not currently have a Certificate of Airworthiness. The aircraft has 3,885 total flight hours and 2,938 total cycles.

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Value Adjustments Once the half-time values are determined, ACI applies maintenance value adjustments (up or down) to the airframe (C and Structural Inspection), engines (overhaul and life limited parts) and landing gear. Value adjustments to this aircraft included the C check, the Structural Inspection, the engines and the landing gear. These maintenance value adjustments are necessary to accurately reflect the adjusted value of the subject aircraft. These maintenance value adjustments are calculated from halftime. The following page reflects the maintenance value adjustments.

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VALUE ADJUSTMENTS FROM HALF-TIME

Aircraft Type: Date Of Manufacture: Aircraft Serial Number: Registration Number: Engines: Date: Current Half-Time Value: Appraisal Number:
Component Action 1C Check Structural Inspection SI Nose Gear Left Main Landing Gear Right Main Landing Gear Engine #1 Disk Stack Engine #2 Disk Stack Engine #1 S/N Engine #2 S/N TBO 732 Days 12 Years 22,000 Hours 26,000 Hours 26,000 Hours Various Various 12,000 Hours 12,000 Hours Cost $0.30 $0.64 $0.09 $0.09 $0.09 $1.65 $1.65 $1.00 $1.00 Remaining 422 Days 0 Years 9 Years 9 Years 9 Years Various Various 8,115 8,115

Boeing 737-528 July 10, 1995 27426 FAP 356 CFM56-3C-1 July 17, 2007 $17.15 PRO-1075Adj
% Remaining 1/2 Life Delta Value Adjustment

58% 0% 90% 90% 90% 85% 85% 68% 68%

8% 50% 40% 40% 40% 35% 35% 18% 18%

Total $

$0.02 ($0.32) $0.04 $0.04 $0.04 $0.58 $0.58 $0.18 $0.18 $1.33

Adjusted Current Market Value Half-Time Value $17.15 Total Adjustment $1.33 Adjusted Value $18.48

NOTES: (1) Values Expressed In Millions Of Dollars. (2) Engine TBO is based upon on a 12,000 average on-wing hang time and do not reflect hard-time limits. (3) Disk stack cost based on 2007 GE pricing. (4) The Structural Inspection has not been accomplished.

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AIRCRAFT TECHNICAL SPECIFICATIONS

General
Aircraft Manufacturer Aircraft Type Serial Number Date of Manufacture Country of Registration Registration Number Line Number Engine Type Operating Weights Maximum Take-off Weight Maximum Landing Weight Maximum Zero Fuel Weight Maximum Taxi Weight 134,000 Lbs / 60,781 Kgs 110,000 Lbs / 49,895 Kgs 102,500 Lbs / 46,493 Kgs 134,000 Lbs / 60,781 Kgs Interior Configuration Current Configuration Number and Location Of Galleys Number and Location of Lavatories Executive / VIP/ Passenger (61 seats) 2 Forward & 3 aft 1 Forward, 1 in Executive Suite, 1 Aft Boeing 737-500 27426 June 1995 United States FAP 356 2739 CFM56-3C1

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Operator Information
Current Operator Average Daily Utilization Type Of Operation Operators Main Base Operating Environment Peruvian Air Force 0.88 Hours / 0.66 Cycles Presidential Aircraft Lima, Peru International

Aircraft Delivery
Date Operator June 1, 1995 Peruvian Air Force

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Aircraft Maintenance Program Summary

Data Effective Date: July 8, 2007 Total Aircraft Hours Total Aircraft Cycles 3,884.7 2,938

Airframe Maintenance Program Summary Maintenance Check 1A Check 2A Check 4A Check 8A Check C Check Structural Inspection SI Interval 60 Days 120 Days 240 Days 480 Days 730 Days 10,000 Hours or 12 Years

Current Status of Intermediate and Heavy Maintenance Visits Maintenance Visit 1A Check 2A Check 4A Check 8A Check C Check Structural Inspection SI Last Accomplished May 5, 2007 May 5, 2007 May 5, 2007 September 5, 2006 August 30, 2006 Not Yet Accomplished Next Due In 0 Days 61 Days 181 Days 183 Days 422 Days Currently Due

Note: Aircraft is on Low Utilization Maintenance Program (LUMP).

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COMPONENT STATUS
Engines
Engine Type: CFM56-3C1 Data Effective Date: July 8, 2007 Hour / Cycles SLSV 3,885 / 2,938 3,885 / 2,938

Current Location #1 Position #2 Position

Serial Number 858237 858238

TT/TC

Limit Item Compressor Rear Air Seal Compressor Rear Air Seal

Cycles Remaining 12,062 12,062

3,885 / 2,938 3,885 / 2,938

Note: The engines have not been removed since installation.

Landing Gear
Data Effective Date: July 8, 2007 Position and Location Nose Left MLG Interval Between Overhaul 10 Years 10 Years

Serial Number

Next Due

Day Life Limit 3,650 3,650

Day Life Remaining 90% 90%

T5450P2739
MCO5465P2739

July 21, 2016 July 21, 2016

Right MLG

MCO5466P2739

10 Years

July 21, 2016

3,650

90%

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Auxiliary Power Unit

Model: T-62T-47C1 Data Effective Date: July 8, 2007 Date of Installation November 28, 2005 Cycles Remaining N/A

Serial Number SP-E952471

TSO/CSO 162 / 214

On-Condition? Yes

History of Major Airframe Damage: No:

.

Yes: _____

Interior Configuration Data

Total Number of Passenger Seats Class Breakout Number and Location of Galleys Number and Location of Lavatories Number of Crew Seats Aircraft Last Weighed Date 61 4+3 Executive / 12 Business / 42 Coach 2 Forward and 3 Aft 1 Forward, 1 in Executive Suite, 1 Aft 4 in Flight Deck / 2 FA Forward / 2 FA Aft August 26, 2006 White Upper / Gray Lower with Blue Stripes at Window Belt Line & Red Stripes on Aft Vertical Stabilizer

Aircraft Paint Scheme

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Additional
Cargo Loading System FAR 121 Compliant TCAS Windshear FAR part 36, Stage III Noise Compliant Reduced Vertical Separation Minimums (RVSM) Able Obtain Organizational Chart LOPA Drawing Supplied N/A No Yes Yes Yes No N/A Yes

Deferred Maintenance Items

Total Number of deferred maintenance items? Do the deferred maintenance items exceed US $25,000? One (1) - Hydraulic pump switch, awaiting parts to correct No

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Airworthiness Directives Airframe

Data Effective Date: July 8, 2007

Airframe
Repetitive Overdue Issued and not yet due Not Addressed AD 99-21-15 AD 2003-26-01 AD 2005-20-39 AD 2000-07-06 AD 2002-01-01 AD 2004-19-10 AD 2004-22-05 AD 2005-23-17 AD 2006-18-11 23 ADs AD 2006-26-13 AD 2007-03-03 AD 2007-07-02 AD 2007-10-12 AD 2007-03-07 AD 2007-11-07

Engine
Data Effective Date: July 8, 2007

Engines
Repetitive Overdue Issued and not yet due Not Addressed
N/A

N/A AD 2002-13-03 AD 97-08-01

AD 2006-26-01 issued and not on status list

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Avionics Inventory
Nomenclature E1-1 Rack Air Data Computer 1 Auto Throttle Stall Warning Computer (2 ea) Tape Reproducer Cabin Temp Controller Pressure Controller Air Data Computer 2 E1-2 Rack Flight Mgmt Computer Digital Analog Adapter (2 ea) IRS Transfer Relay (2 ea) Engine Vibration Monitor E1-3 Rack ACARS Flight Control Computer A Yaw Damper A IFAU Flight Control Computer B E2-1 Rack VHF Comm (3 ea) Selcal Decoder Remote Elex PA Amplifier Quick Access Recorder E2-2 Rack DME (2 ea) Flight Data Acquisition Unit Transponder Mode S Manufacture Honeywell Smiths Boeing Mitsushita Garrett Ham Standard Honeywell Model HG48E1 Part Number 4061100-90 755-CUE-2-4 65-52822-7 RD-AX7670 548376-6 763810-4 4061100-90

CPC22-1 HG48E1

Smiths Honeywell Vibro-meter

2907C1

EVM-250

176200-0101 DG1035AB01 No Data Plates Visible 241-250-0001212

Empty Honeywell Honeywell Boeing Honeywell

SP-300

SP-300

4051600-194 4084042-911 65-52820-2 4051600-194

Collins Team Avtech Collins Empty

RTA-83B 94VRY 436D-2B

064-50002-0101 SC2253AD0 10-62909-12 622-4096-001

Collins SFIM Collins

DME-700 TPR-720

622-4540-122 ED44B409 622-7878-201 Continued

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Nomenclature E2-3 Rack HF Comm EFIS (2 ea) E2-4 Rack Marker Beacon ADF (2) GPWS Transponder Mode S Radar Altimeter (2) E3-1 Rack Battery Charger Static Inverter Transformer Rectifiers (2 ea) E3-2 Rack Flap Slat Position Switches Misc Solid State Switching Unite Overheat Detector Break Temp Monitor Engine Accessory Unit Air-Conditioning Accessory Unit Anti Skid Controller Auto Speed Brake E3-3 Rack Window Heat Control Units (3 ea) Transformer Rectifier Engine Fire Warning Controller APU Control Unit E3-4 Rack VHF NAV (2) TCAS

Manufacture Collins Collins Collins Collins Allied Signal Collins Thomson-CSF

Model HFS-700 EFIP-701E 51Z-4 51Y-7 TPR-720 ETR530-A

Part Number 622-5272-120 622-9436-101 522-2996-011 777-1492-005 965-0976-003-105-105 622-7878-201 9599-607-1493

Eldec Avionic Inst Oeco Corp

4-254-04 1-002-0102-1000 080-20325-01

Boeing Boeing Fenwal Lewis Boeing Boeing Crane Boeing

65-52807-73 65-52806-361 10-62187-1 3100031 65-73606 65-52810-75 42719 65-84209-21

Kioto Oeco Corp Walter Kidde APIC

10-61-8334 080-20325-01 472622 171256-100A

T-62T-47C1

Collins Honeywell

51RV-5B

822-0761-006 066-50000-2220 Continued

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Nomenclature E3-5 Rack IRU (2 ea) Nose E & E Weather Radar RT Flight Deck Generator Control Unit (4 ea) Stateroom Audio/Video LCD Screen VHS Hi-Fi Cassette Recorder CD DVD/CD Audio Digital Tuner Amplifier Speaker System Display, Low Profile LCD (1 ea) Display, Retractable LCD Main Cabin Audio/Video LCD Screens Multi-media Disk Players (5 ea) Video System Control Unit Freq. Division Multiplex System

Manufacture Honeywell Collins Hamilton Standard

Model

Part Number HG1050AE09

WRT-701X AVZ-122

622-5132-109 948F458-5

Sirius Technologies Sony Philips Sony Sony Bose Sirius Technologies Sirius Technologies

FD201CV-LP SLV-R1000 736K ST-S211 TA-F605ES Acoustimass AMS FD151CV-LP AS-23-0220

Sirius Technologies Matsushita BE Avionics RD-AV 30001-31

FD932AVA-4

171757-03

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AIRCRAFT INSPECTION REPORT

On One Boeing 737-500 Aircraft Registration Number Serial Number General Aircraft Comments Overall the aircraft was noted to be in excellent condition.

the nose radome paint does not match the fuselage.

Fuselage The fuselage was checked for general condition, damage, leaks, paint condition, doublers, corrosion, security and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition.

The upper aircraft fuselage is painted white and the lower fuselage is painted gray with three blue stripes along the window belt line coming to a point aft of the flight deck windows and red stripes on the aft vertical stabilizer Wings The wings were checked for general condition, damage, leaks, paint condition, doublers, corrosion, security and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition

The fuselage was found to be clean, recently painted and in excellent condition. Close visual inspection and documentation review revealed no damage or previous repairs. The lower skin surfaces were clean with no fluid leaks or corrosion. All panel edges were properly aligned, sealed and intact. The only abnormal item (cosmetic) was that

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The upper wing surfaces were visually inspected through the installed over wing emergency exits. These areas were checked for obvious existing repairs and other significant damage. The upper surfaces of the ailerons, aileron tabs, flaps and spoilers were free from structural defects and obvious mechanical damage. One repair was noted on the left #1 leading edge device and one on the right #5 leading edge device. Both repairs were found within the aircraft documents.

were in excellent condition and free of any defects or other damage. All leading edge slats, trailing edge flaps and spoilers were fully deployed affording an opportunity to inspect their corresponding actuators and control mechanisms. These were found to be secure, properly lubricated and in excellent working condition. Landing Gear The landing gear were checked for general condition, damage, leaks, the routing and security of support hydraulic lines and cables, paint condition, corrosion, security and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition. The general overall condition of the landing gear and wheel wells was excellent. Cosmetically, the landing gears were in above normal appearance. The landing gear had been properly lubricated and appeared to have been adequately maintained. The nose gear and main gear flying doors, door hinges, and actuating mechanisms were in good condition. The internal and external surfaces of the gear doors were free of delamination and major repairs. All painted surface areas were in excellent condition. The door hinges showed no wear and were free from excessive side play, as well as free of binding, operational interference, and

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excessive wear. Lubrication on all moving parts was found to be adequate.

Main Wheel Data: The main landing gear manufacturers data plates identify the left gear part number as 65-46100-79 and serial number MCO5465P2739 and the right gear part number is 65-46100-79 and serial number MCO5466P2739. The main gear is equipped with Goodyear Flightleader 40x14.5-19, 26 ply tires. The Bendix brakes, part number 2611513, were clean and in very good serviceable condition. Nose Tire Data: The installed nose landing gear data plate identifies the part number as 6546200-8 and the serial number as T5450P2739. The nose tires were manufactured by Goodyear and were 27x7.75-15 and 12 ply rated.

The nose and main landing gear shock struts and visible portions of the piston assemblies were free from corrosion and well protected with paint or chrome plating, as required. In aggregate, there were no observed damage, repairs, and abnormal wear. The landing gear drag links, swivels, actuators, and other secondary structural components were in good condition and free of obvious defects and damage. The left and right main landing gear wheel wells were inspected. Fluid lines and electrical wiring bundles were properly routed, secured and in good condition. The surface skin areas, as was in the main landing gear wheel wells, were very clean and the corrosion inhibiting compounds were applied in adequate quantities.

Engines The engines were checked for general condition, leaks, missing equipment and damage. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition. The installed #1 engine serial number is 858237 and the installed #2 engine serial number is 858238. Both engines are the original delivery engines and have not been removed from wing or had a shop visit. The QEC was inspected for general condition and found to be satisfactory.

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The engine installations were inspected with the cowling completely open. The inspection included the engine inlet, exhaust, drains, nose cowl, side cowls, thrust reversers, tailpipe, and pylons. The inlet acoustical treatment and abraidable lining was in very good condition and free of delamination and showed no evidence of damage or repairs.

damage or metal deposits. Both engine exhausts were free of external repair patches. Cockpit The cockpit was checked for general condition, damage, panel condition, windscreen condition, inoperative or missing equipment, seat condition, floor covering condition, security and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition. The general overall structural condition of the flight deck was excellent. No significant structural defects or damages were noted. The flight deck instruments, instrument panels, controls, and associated placards were in excellent condition, serviceable and legible. The flight deck layout and configuration, as well as the instrumentation, are considered standard for a B737-528. No Minimum Equipment List (MEL) placards were noted that would denote inoperative equipment on any equipment or system in the cockpit. Circuit breakers that were deactivated with a tie wrap were the HF1 DC, PH Captain Power, Printer and XFER and CMPTR on the FMCS. Additionally the AUX FUEL tank breakers were pulled however not deactivated as required by the Service Bulletin and Airworthiness Directive.

The pylons were in excellent condition and free of external repairs. The nacelle cowls, thrust reversers, and pylon fairings were in excellent condition with no repairs or other damage observed. The engine turbine - exhaust areas were clean with no signs of overheating, oil leakage, cracks, impact

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The flight deck windshields and windows were in good condition. The windshields were free of any delamination, evidence of internal arcing, and other damage. The forward, sliding, and side windows were free of crazing, scratches, and general exterior deterioration.

The flight deck seats appeared to be structurally sound with no defects, damage, or repairs noted. The covers were clean and in newly installed condition. The seats possessed the necessary fire blocking identification tags as required by FAR 25.853c and FAR Part 121. The seat belt and shoulder harness were free of damage and operated properly. The belts and harnesses possessed the proper Type Standard Order (TSO-C22f) tags on each.

The flight deck sidewall panels and overhead panels were in good condition. The floor was free of repairs with no soft spots and the floor paint was in new condition. The flight deck was painted in the standard light brown and tan color. The flight deck door was the original delivery door and not the reinforced variety which are currently required in most commercial application. The flight deck seating accommodates the pilot, co-pilot and one observer on the left aft bulkhead of the flight deck and an additional jump seat position which folds out in front of the flight deck door.

The aircraft is equipped with the standard EFIS flight instrumentation, communications, navigation, and auto flight control systems for the model type. Additionally, the aircraft is equipped with the system requirements to operate RVSM flights, however it is not certified for these operations. The aircraft is also equipped with life rafts and vests for ETOPS overwater operations.

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Passenger Compartment The passenger compartment was checked for general condition, damage, ceiling and sidewall panel condition, floor integrity, window condition, seat condition, carpet condition, entertainment and security equipment, and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition. The primary feature of this passenger compartment is the Associated Air Center custom designed executive suite. It is located aft of the R1 door along the right side of the cabin extending aft to just forward of the wing. The sidewalls, cabinets and drop-leaf table are finished in an exotic wood laminate while the overhead panels are finished in ultra-suede.

range of motion and a three place divan at the aft of the suite. Two fold down bench seats along the interior wall provide additional seating, however they cannot be occupied during take-off and landing. The suite has a dedicated stereo/DVD/VCR system with Sony, and Philips components, and Sirius Technologies, low profile LCD display with Bose Acoustimass speakers. Air to ground communication is provided with an Icarus satellite phone. The walkway between the executive suite and the left cabin sidewall features a low sideboard cabinet of the same wood laminate. The cabinet contains the life rafts and emergency equipment for overwater operations.

The suite has take-off and landing seating for seven passengers. Four individual executive seats that recline, rotate, and slide in 360 degree

The floor is carpeted in a plush beige carpet that appeared to be clean and in very good condition. When the aircraft is parked, a plastic center isle

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runner is rolled out to protect the carpet from being soiled. The first class cabin just aft of the executive suite, feature twelve BE Aerospace leather covered seats arranged in a standard two by two configuration. The seat structures were in good condition with all controls functioning properly. The blue leather covers were clean and in very good condition. Each seat featured audio controls, in arm tables, and foot rests.

Cabin entertainment is provided via a five unit DVD/multi-channel audio system and viewed on one fixed and two retractable overhead LCD monitors. The overhead baggage bins that run the length of the main cabin and along the right side of the executive suite were found to be in excellent condition with no defects noted. All doors functioned as required with no binding, and opened and closed easily. Four flight attendants have seating at two locations, two at the forward L1 door and two at the aft L2 door. The flight attendant stations were in excellent condition with all controls and emergency equipment present and in working order. The emergency equipment, fixed and portable, that was located throughout the cabin was in good condition with current inspection stickers, properly stowed and secure. Emergency isle path lighting is incorporated on the left side of the center isle. Galleys The galleys were checked for general condition, damage, panel condition, countertops and cabinet condition, inoperative or missing equipment, leaks, cleanliness, security and overall appearance. The inspection is not intended to verify or certify

The coach cabin is equipped to accommodate forty-two passengers in a standard BE Aerospace manufactured three by three seat configuration. The seat structures were in good condition with all controls functioning properly. The burgundy cloth covers were clean and in very good condition. Each seat featured audio plug and controls, as well as a standard fold-down table in front of each seat, with the exception of the first seats which had in arm tables.

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airworthiness rather it is intended to assess current condition. The cabin is equipped with 5 galley units manufactured by Albert Muhlenberg, OHG. Two galley units are located at the forward and aft of the R1 door, one each at the forward L2 and R2 doors and one at the aft R2 door. The G1 galley located forward of the R1 door can accommodate two small rolling carts, three boxes, and features three storage cabinets and a trash compartment.

small rolling cart as well as three boxes. The galley features two storage cabinets and one trash compartment as well as working counter surfaces and two seethrough windows into the passenger cabin. The G3 galley located forward of the R2 door can accommodate two large rolling carts as well as one box. It also features two Rumbold ovens, a water heater, and two storage cabinets. The G4 galley located aft of the R2 door can accommodate one small rolling cart as well as three boxes, two storage cabinets, a trash compartment and a coat closet. All of the galleys were very clean and in excellent physical and cosmetic condition. Lavatories The lavatories were checked for general condition, damage, panel condition, cabinet condition, countertops, inoperative or missing equipment, floor integrity, leaks, odor, cleanliness, security, and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition. The aircraft is equipped with three lavatories, one forward of the R1

The G2 galley located aft of the R1 door can accommodate two large and one small rolling cart as well as two boxes. It also features one Rumbold oven, a water heater, and three storage cabinets. The G6 galley is located forward of the L1 door at the aft of the cabin. It can accommodate two large and one

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door, one aft of the L1 door, and one in the executive suite.

doors and vanity were in excellent condition, clean and highly polished. The counter tops were made of solid surfacing and the sink and fixtures were plated in a gold finish. The ample cabinets and wardrobe provide a space for hanging clothing and storing accessories. Cargo/Baggage Compartments The lower cargo compartments were checked for general condition, damage, sidewall and ceiling panel condition, cleanliness, security, and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition.

The two cabin lavatories, which are standard aircraft type, were manufactured by L.A. Rumbold, LTD, and found to be in excellent condition. All required placards were present and in very good condition. The sinks, vanities, mirrors and side wall panels were clean, defect and odor free.

The third lavatory is located in the forward executive suite. The lavatory is custom made by Associated Air Center. The wood laminate sidewalls, ProInversion

The aircraft is equipped with two cargo compartments in the forward and aft lower fuselage. The manually operated doors both have locks installed for security. The compartments were clean, with no repair patches on the sidewall or overhead panels. The panel edges were taped as required for fire containment purposes. The required Boeing 737-528 S/N 27426

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cargo loading placards and associated restraints were in good working condition. The aft cargo has a reduced capacity due to the installation of the two PATS auxiliary fuel tanks.

Accessory and Equipment Bays The accessory bays were checked for general condition, damage, leaks, cleanliness, security and overall appearance. The inspection is not intended to verify or certify airworthiness rather it is intended to assess current condition. The main electrical and equipment (E&E) bay was inspected for damage and irregularities. The primary structure was free of defects and damage. The installed avionics, electrical controls, control cables, and equipment were in very good condition. Some of the insulation blankets were slightly torn due to removal and installation during checks. There was no evidence of leaking lavatory fluids and the area was relatively dust free which is unusually good for this compartment. All antennas, probes, and panels in this area were in good condition and properly sealed. The forward door airstair stowage and motor mechanism was secure, clean and in proper working order.

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STATEMENT OF INDEPENDENCE
This report represents the opinion of ACI Aviation Consulting (ACI) and is advisory only. This report is subject to additional information that may be developed or provided at the request of the client. ACI assumes no responsibility or legal liability for actions taken or not taken by the client or any other party with regard to the subject aircraft values. By accepting this report, the client agrees that ACI shall bear no responsibility or legal liability regarding this report. Further, this report is prepared for the exclusive use of the client and shall not be provided to other parties without the clients consent. ACI hereby states that this report has been independently prepared and fairly represents ACIs opinion of the aircraft value set forth herein. ACI further states, that it has no present or contemplated future interest in or association with, the subject aircraft.

METHODOLOGY
When conducting its assessments of current aircraft value, ACI uses as its primary determinant, current and reported transaction prices. The transaction values are extracted from numerous public and private sources. In the absence of reliable transaction data, ACI places an asset into a specific category based upon asset mission capability and revenue potential. The categorization of assets allows ACI to determine value based upon comparisons of other assets that fall into the same category. It is not unreasonable to assume a similar value for assets having similar mission and revenue profiles. ACI also considers a multitude of other industry factors such as: aircraft economics, model popularity, operator base, population, reliability data, and manufacturer reputation. Once ACI has determined the current half-time value, adjustments may be required to accurately reflect the maintenance status of the aircraft, its engines, and major components. These value adjustments are calculated from the half-time value.

Signed,

Quentin Brasie Chairman & CEO ACI Aviation Consulting

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APPENDIX

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