UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

|                                                       |  | 
|------------------------------------------------------ |  | 
|FORM 10-Q                                             
|                                                       |  | 
|QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF   
|THE SECURITIES EXCHANGE ACT OF 1934                   
|                                                      
|For the Quarterly Period ended May 31, 2005           
|                                                      
|Commission File Number: 333-109667-04                 
|                                                       |  | 
|                                                      
|EVERGREEN HOLDINGS, INC.                              
|(Exact name of registrant as specified in its charter)
|                                                      
|                                                       |  | 

|Oregon                          | 91-1797880                       
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  

|3850 Three Mile Lane, McMinnville, Oregon | 97128-9496
|----------------------------------------- | ----------
|(Address of principal executive offices)  | (Zip Code)

|Registrant's telephone number, including area code:  (503) 472-9361
|-------------------------------------------------------------------
|                                                                   
|                                                                   

Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the 12 preceding months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.   Yes  (X)   
No  (    )

Indicate by check mark whether
the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).        
Yes  (    )   No  (X)

As of July 15, 2005, there were 10,054,749 outstanding shares of no par value common
stock of the registrant.



---

# TABLE OF CONTENTS

|PAGE
|----

|PART I. | FINANCIAL INFORMATION | 
|------- | --------------------- | 

| | Item 1. | Financial Statements                                                                 | 3 
| | ------- | ------------------------------------------------------------------------------------ | --
| | Item 2. | Management's Discussion and Analysis of Financial Condition
and Results of Operation | 30
| | Item 3. | Quantitative and Qualitative Disclosures About Market Risk                           | 50
| | Item 4. | Controls and Procedures                                                              | 51

|PART II. | OTHER INFORMATION | 
|-------- | ----------------- | 

| | Item 1. | Legal Proceedings | 52
| | ------- | ----------------- | --
| | Item 6. | Exhibits          | 53

|SIGNATURES | 54
|---------- | --

|EXHIBIT INDEX | 55
|------------- | --

-2-



---

PART I - FINANCIAL INFORMATION

|       
|-------
|ITEM 1.

CONSOLIDATED BALANCE SHEETS(in thousands, except share data)

|                                   | May 31, 2005                                      |         |                  
|---------------------------------- | ------------------------------------------------- | ------- | -----------------
|                                   | (unaudited)                                       |         | February 28, 2005
|                                   |                                                   |         |                  
|                                   |                                                   |         |                  
|ASSETS                             |                                                  
|Current assets:                    |                                                  
|                                   | Cash and cash equivalents                         | $       | 1,144            
|                                   | Accounts receivable, less allowance of $1,661 for | 70,074  |                  
|                                   | doubtful accounts                                
|                                   | Accounts receivable from affiliates, net          | 496     |                  
|                                   | Inventories                                       | 20,877  |                  
|                                   | Prepaid expenses and other                        | 2,997   |                  
|                                   | Current portion notes receivable from affiliates  | 2,022   |                  
|                                   | Deferred tax asset and income taxes receivable    | 4,173   |                  
|                                   |                                                   |         |                  
|                                   | Total current assets                              | 101,783 |                  
|                                  
|Property and equipment, net        | 548,396                                           |         | 543,562          
|Assets held for sale               | 6,797                                             |         | 6,831            
|Notes receivable from affiliates   | 11,653                                            |         | 14,093           
|Capitalized loan acquisition costs | 10,112                                            |         | 11,015           
|Other assets                       | 13,677                                            |         | 11,757           
|Goodwill                           | 5,494                                             |         | 5,494            
|                                   |                                                   |         |                  
|                                   | Total assets                                      | $       | 697,912          
|                                   |                                                   |         |                  

(continued on the next page)

-3-



---

CONSOLIDATED BALANCE SHEETS  continued
At May 31, 2005 and February 28, 2005(in thousands, except share data)

|                                     | May 31, 2005                                                   |         |                  
|------------------------------------ | -------------------------------------------------------------- | ------- | -----------------
|                                     | (unaudited)                                                    |         | February 28, 2005
|                                     |                                                                |         |                  
|                                     |                                                                |         |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                               
|Current liabilities:                
|                                     | Accounts payable                                               | $       | 84,657           
|                                     | Accrued liabilities                                            | 24,007  |                  
|                                     | Accrued interest                                               | 1,563   |                  
|                                     | Affiliate trade and notes payable                              | 1,639   |                  
|                                     | Current portion of long-term debt                              | 12,575  |                  
|                                     |                                                                |         |                  
|                                     | Total current liabilities                                      | 124,441 |                  
|                                    
|Long-term debt                       | 286,805                                                        |         | 292,860          
|Deferred rentals payable             | 78                                                             |         | 80               
|Deferred tax liabilities             | 97,983                                                         |         | 95,151           
|                                     |                                                                |         |                  
|                                     | Total liabilities                                              | 509,307 |                  
|                                     |                                                                |         |                  
|                                     | Minority interest                                              | 989     |                  
|                                     |                                                                |         |                  
|                                    
|Stockholders' equity:               
|                                     | Common stock, no par value; 20,000,000 shares authorized       | 7,568   |                  
|                                     | 10,054,749 shares issued and outstanding                      
|                                     | Retained earnings                                              | 180,048 |                  
|                                     |                                                                |         |                  
|                                     | Total stockholders' equity                                     | 187,616 |                  
|                                     |                                                                |         |                  
|                                     | Total liabilities, minority interest, and stockholders' equity | $       | 697,912          
|                                     |                                                                |         |                  

See condensed notes to
unaudited consolidated financial statements.

-4-



---

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands)

|                                                        |                                                                                              |         |         |         |        |        |  | 
|------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------- | ------- | ------- | ------ | ------ |  | 
|                                                        | For the Three Months Ended May 31,                                                          
|                                                        |                                                                                             
|                                                        | 2005                                                                                         |         | 2004    |        
|                                                        |                                                                                              |         |         |        
|Operating revenues:                                     |                                                                                             
|                                                        | Flight revenue                                                                               | $       | 118,482 |         | $      | 87,269 | 
|                                                        | Sales of aircraft, parts, and other property and equipment                                   | 11,204  |         | 2,286   |       
|                                                        | (including sales to affiliates of $7,400 during the three months
ended May 31, 2005)         |        
|                                                        | Ground handling and logistics services revenue                                               | 29,795  |         | 25,610  |       
|                                                        | Support services and other revenue                                                           | 16,815  |         | 10,988  |       
|                                                        |                                                                                              |         |        
|                                                        | Total operating revenues                                                                     | 176,296 |         | 126,153 |       
|                                                       
|Operating expenses:                                     |                                                                                             
|                                                        | Flight costs                                                                                 | 19,417  |         | 17,538  |       
|                                                        | Fuel                                                                                         | 39,737  |         | 25,423  |       
|                                                        | Maintenance                                                                                  | 17,922  |         | 17,723  |       
|                                                        | Aircraft and equipment                                                                       | 12,383  |         | 12,058  |       
|                                                        | Cost of sales of aircraft, parts, and other property and equipment                           | 8,880   |         | 1,008   |       
|                                                        | (including cost of sales to affiliates of $7,400 during the three months
ended May 31, 2005) |        
|                                                        | Cost of ground handling and logistics services                                               | 24,787  |         | 21,755  |       
|                                                        | Cost of support services and other support costs                                             | 18,601  |         | 10,726  |       
|                                                        | Selling, general, and administrative expense                                                 | 18,597  |         | 17,468  |       
|                                                        |                                                                                              |         |        
|                                                        | Total operating expenses                                                                     | 160,324 |         | 123,699 |       
|                                                        |                                                                                              |         |        
|                                                        | Income from operations                                                                       | 15,972  |         | 2,454   |       
|                                                       
|Non-operating income (expense):                         |                                                                                             
|                                                        | Interest expense                                                                             | (9,373  | )       |         | (8,959 | )     
|                                                        | Other non-operating income (expense), net                                                    | 547     |         |         | (3,569 | )     
|                                                        |                                                                                              |         |        
|Income (loss) before minority interest and income taxes | 7,146                                                                                        |         |         | (10,074 | )     
|                                                       
|                                                        | Minority interest                                                                            | (334    | )       |         | (307   | )     
|                                                        |                                                                                              |         |        
|Income (loss) before income taxes                       | 6,812                                                                                        |         |         | (10,381 | )     
|                                                       
|                                                        | Income tax (expense) benefit                                                                 | (2,808  | )       |         | 3,721 
|                                                        |                                                                                              |         |        
|Net income (loss)                                       | $                                                                                            | 4,004   |         | $       | (6,660 | )     
|                                                        |                                                                                              |         |        

See condensed notes to unaudited consolidated financial statements.

-5-



---

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

|                                               |                                                            |         |       |        |          |        |   |  |  | 
|---------------------------------------------- | ---------------------------------------------------------- | ------- | ----- | ------ | -------- | ------ | - |  |  | 
|                                               | For the Three Months Ended May 31,                        
|                                               |                                                           
|                                               | 2005                                                       |         | 2004  |       
|                                               |                                                            |         |       |       
|Cash flows from operating activities:         
|                                               | Net income (loss)                                          | $       | 4,004 |        | $        | (6,660 | )
|                                               | Adjustments to reconcile net income (loss) to             
|                                               | net cash provided by operating activities:                
|                                               | Depreciation and amortization                              | 16,846  |       | 16,369 |         
|                                               | Deferred income taxes                                      | 2,832   |       |        | (3,714   | )     
|                                               | Gain on disposal of property and equipment                 | (260    | )     |        | (323     | )     
|                                               | Deferred income and foreign currency exchange gain         | (109    | )     |        | (25      | )     
|                                               | Write-off of unamortized loan acquisition costs            | -       |       |        | 3,464    |       
|                                               | Minority interest                                          | 334     |       |        | 307      |       
|                                               | Changes in operating assets and liabilities:              
|                                               | Accounts receivable                                        | (7,718  | )     |        | (4,398   | )     
|                                               | Receivables from affiliates                                | (598    | )     |        | 422      |       
|                                               | Inventories                                                | 8,183   |       |        | 549      |       
|                                               | Prepaid expenses and short-term notes receivable           | (385    | )     |        | 749      |       
|                                               | Accounts payable and accrued liabilities                   | 2,866   |       |        | (4,341   | )     
|                                               | Income taxes payable                                       | 121     |       |        | (78      | )     
|                                               |                                                            |         |      
|                                               | Net cash provided by operating activities                  | 26,116  |       |        | 2,321    |       
|                                               |                                                            |         |      
|                                              
|Cash flows from investing activities:         
|                                               | Purchases of property, equipment, and overhauls            | (21,179 | )     |        | (11,360  | )     
|                                               | Proceeds from disposal of property and equipment           | 538     |       |        | 605      |       
|                                               | Payments received on notes receivable from affiliates      | 2,440   |       |        | 1,585    |       
|                                               | Other assets                                               | (1,763  | )     |        | (3,624   | )     
|                                               |                                                            |         |      
|                                               | Net cash used in investing activities                      | (19,964 | )     |        | (12,794  | )     
|                                               |                                                            |         |      
|                                              
|Cash flows from financing activities:         
|                                               | Proceeds from long-term debt                               | 355     |       |        | 222,247  |       
|                                               | Payments on long-term debt and notes payable to affiliates | (8,081  | )     |        | (208,849 | )     
|                                               |                                                            |         |      
|                                               | Net cash (used in) provided by financing activities        | (7,726  | )     |        | 13,398   |       
|                                               |                                                            |         |      
|                                               | Net (decrease) increase in cash                            | (1,574  | )     |        | 2,925    |       
|                                              
|Cash and cash equivalents, beginning of period | 2,718                                                      |         | 4,071 |       
|                                               |                                                            |         |      
|Cash and cash equivalents, end of period       | $                                                          | 1,144   |       | $      | 6,996    |       
|                                               |                                                            |         |      

See condensed notes to unaudited consolidated financial statements.

-6-



---

CONDENSED NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  OVERVIEW

Evergreen Holdings, Inc. ("Holdings")
is the parent company of Evergreen International Aviation, Inc. ("Aviation"), a leading provider of integrated air
cargo transportation and aviation support services. Holdings, Aviation, and their consolidated subsidiaries (collectively, "Company",
"we", "us", or "our") provide global air cargo shipping, ground handling and logistics services, helicopter transportation services,
small aircraft charters, and aircraft maintenance and repair services.

Business Segments

We conduct business
in six major business segments through our wholly-owned subsidiaries:

| |  | Evergreen International Airlines, Inc. ("Airlines") provides air
cargo services for both international and domestic markets;                                                                                                                                                                                                                                                                                                                                                                     
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Evergreen Aviation Ground Logistics Enterprise, Inc. ("EAGLE") provides
full-service aviation ground handling and logistics services, including mail handling, aviation hub management, aircraft handling,
cargo handling, ground system management, ground equipment maintenance, ground equipment sales and leasing, aircraft line maintenance,
 terminal services, aircraft de-icing and washing, check-in and ticketing, baggage acceptance and seat selection, and passenger
cabin cleaning;
|
| |  | Evergreen Helicopters, Inc. ("Helicopters") provides helicopter and small
fixed-wing aircraft services throughout the world in connection with activities such as forest fire fighting, health services,
aerial spraying, heavy lift construction, law enforcement, helicopter logging, petroleum support services, search and rescue,
peacekeeping and relief support, helicopter skiing, and agriculture;                                                                                      
|
| |  | Evergreen Air Center, Inc. ("the Air Center" or "Air Center") an unlimited Class IV airframe
repair station certified by the FAA, performs aircraft maintenance, repair and overhaul services, and aircraft storage services;                                                                                                                                                                                                                                                                    
|
| |  | Evergreen Aircraft Sales and Leasing Co. (EASL) selectively
buys, sells, leases, and brokers commercial aircraft, helicopters, and aircraft spare parts; and                                                                                                                                                                                                                                                                                                                                   
|
| |  | Evergreen Agricultural Enterprises, Inc. (Agriculture)
conducts farming operations, nursery and horticulture operations, and delivers nursery and processed agricultural products to
wholesale and retail customers.                                                                                                                                                                                                                                                                           

Trust Created February 28, 1986

Aviation also holds an
approximate two-thirds beneficial interest in the Trust Created February 25, 1986 (the "Trust"). The Trust was created pursuant
to the Trust Agreement, dated as of February 25, 1986, as amended and restated pursuant to the Amended and Restated Trust
Agreement, dated as of August 31, 1987, as amended on August 31, 1988, and as amended and restated pursuant to the Second Amended and
Restated Trust Agreement, dated as of September 29, 1995, as amended by the First Amendment thereto as of May 8, 2003, as amended by
the Second Amendment thereto as of January 14, 2004, and as amended by the Third Amendment thereto as of May 10, 2004, among
Evergreen International Aviation, Inc. (an assignee of Evergreen Holdings, Inc., as successor to 747, Inc. and King Christian,
Inc.) and Mr. Delford M. Smith, as Beneficiaries, and Wilmington Trust Company, not in its individual capacity, but solely as Owner
Trustee. The Trust assets consist primarily of one Boeing 747 aircraft and three McDonnell Douglas DC-9 ("DC-9") aircraft. The Trust
leases these aircraft to Airlines.

-7-



---

Controlling Shareholder and Related Parties

Mr. Delford M. Smith, our founder
and the chairman of our board of directors, has control, either directly or indirectly, over 85.1% of the outstanding
shares of Holdings common stock. In addition, Mr. Smith owns or controls other entities, or does business under other trade names,
including, but not limited to, the following:

| |  | Ventures Acquisition Company LLC ("Ventures Acquisition Company");
| | - | ------------------------------------------------------------------
| |  | Ventures Holding, Inc. ("Ventures Holding");                      
| |  | DMS Properties; and                                               
| |  | Greenpatch Farms.                                                 

From time to time, we engage
in transactions with Mr. Smith and the entities owned by, or controlled by, Mr. Smith. See "Note 11 - Related Party Transactions"
below.

Selected financial results
by business segment are found in "Note 2 - Business Segments" below.

BASIS FOR PRESENTATION

The interim consolidated financial
statements included in this quarterly report have been prepared by Holdings and its subsidiaries, without audit,
pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC").  Certain information and note
disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC.

In the opinion of management,
the interim consolidated financial statements included in this quarterly report contain all adjustments necessary to present fairly
the financial position, results of operations, and cash flows of the Company for the periods indicated.  Such adjustments, other
than adjustments that have been separately disclosed, are of a normal recurring nature.

Seasonality

Certain aspects of our business
are seasonal in nature. Flight revenue generated from contracts with commercial airlines and freight forwarders has historically been
higher from September through December of each year as the levels of flight activity increase with the build-up of inventories by
retailers in anticipation of the holiday season. Revenues in our EAGLE segment also reflect similar seasonal fluctuations,
predominantly as a result of increased volumes of mail and packages being processed by the U.S. Postal Service and United Parcel
Service in the lead-up to the holiday season. In comparison, our Helicopters segment experiences higher revenues during the summer
months as a result of increased fire-fighting activities, while our Agriculture segment generates higher revenues during the peak
shipping periods for nursery products and Christmas trees.

Because certain aspects of our
business are seasonal, the interim results presented in this report are not necessarily indicative of operating results for a
full year. The interim consolidated financial statements included in this report should be read in conjunction with our consolidated
financial statements and the accompanying notes that were included in our Annual Report on Form 10-K for the fiscal year ended
February 28, 2005, which was filed with the SEC on June 14, 2005.

Reclassifications

Certain amounts in the
Companys prior period's financial statements and notes have been reclassified to conform to the current period presentation.
Previously reported net loss or net cash flows were not affected by these reclassifications.

-8-



---

RECENT ACCOUNTING PRONOUNCEMENT

In December 2003, the Financial
Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities - An Interpretation of ARB No. 51 (FIN 46-R). FIN 46-R addresses how a company should apply the
provisions of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain variable interest entities.
In particular, FIN 46-R will apply in those situations in which i) the company does not have a controlling financial interest in the
variable interest entity or ii) the variable interest entity does not have sufficient equity at risk for the variable interest entity
to finance its activities without additional subordinated financial support. In those situations, FIN 46-R requires existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries if the variable interest entities do not effectively disperse risks among the parties involved.

The Company adopted
FIN 46-R as of March 1, 2005. In connection with the adoption of FIN 46-R, management completed an assessment to determine if there
were any variable interest entities ("VIE" or "VIEs") that the Company was required to consolidate. Management's assessment included an
evaluation of leases, consisting primarily of building and aircraft leases, between the Company and certain related party entities
including, but not limited to, Ventures Holding and Ventures Acquisition Company. As a result of the assessment, management
determined that there were no VIEs that the Company was required to consolidate for the period ended May 31, 2005.

As discussed
in the section "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" below, on July 11, 2005, Holdings, as Guarantor,
and Ventures Acquisition Company, as Borrower, entered into a $32.0 million loan agreement with Landsbanki Íslands hf., as Lender,
for the purpose of financing Ventures Acquisition Company's purchase of two Boeing 747 aircraft. As discussed in the section "Lease
Transactions" in "Note 11 - Related Party Transactions" below, the two Boeing 747 aircraft will be leased by Ventures Acquisition
Company to Airlines. Management is currently evaluating
this transaction pursuant to the requirements of FIN 46-R, and believes that this transaction
could result in a VIE transaction which may require consolidation by the Company.

-9-



---

NOTE 2  SELECTED FINANCIAL RESULTS BY BUSINESS SEGMENT

The following charts present
selected financial information of the Company, as further segregated by each of the major business segments.

|                                                          
|----------------------------------------------------------
|Selected Financial Results by Business
Segment - Unaudited
|(in thousands)                                            
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Operating revenues:                                       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Intercompany revenues: (1)                                
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|(1)  Amounts are eliminated in consolidation              

|                    |             |        |         |  |        |         |  | 
|------------------- | ----------- | ------ | ------- |  | ------ | ------- |  | 
|Operating expenses:
|                    | Airlines    | $      | 94,849  |  | $      | 78,053  | 
|                    | EAGLE       | 27,691 |         |  | 24,361 |        
|                    | Helicopters | 14,231 |         |  | 10,976 |        
|                    | Air Center  | 13,225 |         |  | 6,563  |        
|                    | EASL        | 8,463  |         |  | 1,531  |        
|                    | Agriculture | 1,865  |         |  | 2,215  |        
|                    |             |        |         | 
|                    | Total       | $      | 160,324 |  | $      | 123,699 | 
|                    |             |        |         | 

-10-



---

|                                                          
|----------------------------------------------------------
|Selected Financial Results by Business Segment
- Unaudited
|(in thousands)                                            
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|Income (loss) from operations:                            
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          

|                  |             |     |       |  |    |       |  | 
|----------------- | ----------- | --- | ----- |  | -- | ----- |  | 
|Interest expense:
|                  | Airlines    | $   | 9,194 |  | $  | 8,862 | 
|                  | EAGLE       | 106 |       |  | 51 |      
|                  | Helicopters | 47  |       |  | -  |      
|                  | Air Center  | 15  |       |  | 26 |      
|                  | EASL        | 5   |       |  | 8  |      
|                  | Agriculture | 6   |       |  | 12 |      
|                  |             |     |       | 
|                  | Total       | $   | 9,373 |  | $  | 8,959 | 
|                  |             |     |       | 

|                               |             |       |        |  |     |        |  | 
|------------------------------ | ----------- | ----- | ------ |  | --- | ------ |  | 
|Depreciation and amortization:
|                               | Airlines    | $     | 14,083 |  | $   | 14,297 | 
|                               | EAGLE       | 585   |        |  | 612 |       
|                               | Helicopters | 1,713 |        |  | 999 |       
|                               | Air Center  | 332   |        |  | 311 |       
|                               | EASL        | 17    |        |  | 23  |       
|                               | Agriculture | 116   |        |  | 127 |       
|                               |             |       |        | 
|                               | Total       | $     | 16,846 |  | $   | 16,369 | 
|                               |             |       |        | 

|                      |             |       |        |  |       |        |  | 
|--------------------- | ----------- | ----- | ------ |  | ----- | ------ |  | 
|Capital expenditures:
|                      | Airlines    | $     | 16,475 |  | $     | 8,414  | 
|                      | EAGLE       | 205   |        |  | 156   |       
|                      | Helicopters | 4,030 |        |  | 2,655 |       
|                      | Air Center  | 167   |        |  | 130   |       
|                      | EASL        | -     |        |  | -     |       
|                      | Agriculture | 302   |        |  | 5     |       
|                      |             |       |        | 
|                      | Total       | $     | 21,179 |  | $     | 11,360 | 
|                      |             |       |        | 

-11-



---

|                                
|--------------------------------
|Total Assets by Business Segment
|(in thousands)                  
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                
|                                

NOTE 3  LIQUIDITY

# Risk of Default on Debt Obligations

We finance a portion
 of our capital expenditures and operations through long-term debt obligations. In particular, Aviation has obtained long-term
financing by means of i) the issuance of $215.0 million of 12% senior second secured notes (the "Indenture Notes") and
ii) a $100.0 million three-year senior secured credit facility financing agreement (the "Secured Credit Facility"). In
addition, we have various other long-term debt instruments which consist primarily of equipment purchase notes.

Substantially all of
our assets are pledged as collateral under our various debt agreements. Furthermore, the Indenture Notes
and the Secured Credit Facility both contain cross-default provisions whereby certain events of default under one or more of the
our debt obligations will result in an event of default under either, or both, the Indenture Notes and the Secured Credit
Facility. See "Note 4 - Long-Term Debt Obligations" below. In the event that we are unable to cure such defaults or obtain waivers with respect to such defaults, we are at risk
that our payment obligations under either, or both, the Indenture Notes and the Secured Credit Facility
will be accelerated, thereby forcing us to either obtain alternative financing or seek legal protection from our creditors.

-12-



---

# NOTE 4  LONG-TERM DEBT OBLIGATIONS

# Indenture Notes

The Indenture Notes were issued
 by Aviation on May 16, 2003, pursuant to an indenture agreement which was executed by Aviation, as issuer, by Holdings and
substantially all of the subsidiaries of Aviation, as guarantors, and by J.P. Morgan Trust Company, N.A., as successor trustee to
Bank One, N.A., as trustee.

The Indenture Notes are secured
by a second priority lien, subject to certain permitted liens, on substantially all of the assets of Aviation and its domestic
subsidiaries, excluding the assets of Agriculture and Evergreen Vintage Aircraft, Inc. ("Vintage"), a wholly-owned subsidiary of
Holdings. The Indenture Notes are designated as senior second secured obligations.  As a
result, the Indenture Notes rank equally with all of Aviations existing senior, or unsubordinated, debt, and are senior to
any of Aviations future senior subordinated or unsubordinated debt.

To the extent of assets securing
both the Indenture Notes and the Secured Credit Facility (as defined in "Secured Credit Facility" below), the Indenture Notes are
effectively second in priority to our indebtedness under the Secured Credit Facility. However, to the extent of the assets securing
the Indenture Notes, the Indenture Notes are senior to our unsecured debt obligations. In addition, the Indenture Notes are fully and
unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviations subsidiaries, and the Trust.
The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Agriculture,
Vintage, and the foreign subsidiaries of the Company.

The Indenture Notes bear interest
at an annual fixed rate of 12%. Payments of interest are due semi-annually on May 15 and November 15 of each year.

On May 13, 2005, we
made the semi-annual payment of accrued interest on the Indenture Notes in the amount of $12.9 million. Payment of the accrued
interest was funded from our operations.

The next semi-annual payment of
accrued interest on the Indenture Notes, in the amount of $12.9 million, is due and payable on November 15, 2005. We intend to fund
payment of the accrued interest from our operations.

Optional Redemption
  The Indenture Notes will mature
 on May 15, 2010, at which time the outstanding principal of the Indenture Notes, plus all accrued and unpaid interest, will
become due. However, we may elect to redeem the Indenture Notes prior to the maturity date. The Indenture Notes are redeemable
 after the dates and at the prices (expressed in percentages of principal amount on the redemption date) as set forth below:

|If redeemed during the 12-month period commencing: | Redemption Price
|-------------------------------------------------- | ----------------

| | May 15, 2007                | 106 %
| | --------------------------- | -----
| | May 15, 2008                | 103 %
| | May 15, 2009 and thereafter | 100 %

In addition, at any time prior
to May 15, 2006, we may redeem, on one or
more occasions, up to 35% of the principal amount of the Indenture Notes with the net cash proceeds from sales of certain kinds of
capital stock at a redemption price of 112%, plus accrued and unpaid interest at the redemption date.

-13-



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Repurchase of Notes Upon
Certain Asset Sales or a Change in Control.  If an Asset Sale or a Change in Control (as
defined in the Indenture Notes) occurs, each holder of Indenture Notes
will have the right to require us to repurchase all or part of the holder's Indenture Notes at the price set forth in the Indenture
Notes.

Covenant Compliance.
  The Indenture Notes impose certain financial and non-financial covenant restrictions on Aviation and its restricted
subsidiaries. Such covenant restrictions include, but are not limited to, restrictions on our ability to:

| |  | incur additional debt or create liens;                       
|- |  | -------------------------------------------------------------
| |  | pay dividends or acquire shares of capital stock;            
| |  | make payments on subordinated debt or make investments;      
| |  | make distributions from restricted subsidiaries;             
| |  | issue or sell capital stock of restricted subsidiaries;      
| |  | issue guarantees;                                            
| |  | sell or exchange assets, or make capital expenditures;       
| |  | enter into transactions with shareholders and affiliates; and
| |  | effect mergers and other changes of control.                 

As of May 31, 2005, we were in
compliance with these covenants.

If Aviation or any of its restricted
subsidiaries violates any of these covenants and are unable to obtain waivers, we would be
in default under the Indenture Notes and the debt could be accelerated.

# Secured Credit Facility

On May 13, 2004, Aviation and
certain of its subsidiaries entered into the Secured Credit Facility with Wells Fargo Foothill, Inc. and Ableco Finance LLC
(collectively, the Wells Fargo Lenders). The Secured Credit Facility consists of two loans - a $50.0 million term
loan and a $50.0 million revolving loan. The Secured Credit Facility is secured by substantially all of the assets of Aviation and
its domestic subsidiaries, excluding the assets of Agriculture and Vintage.

Interest Rates.
 The term loan bears interest at an annual rate of either LIBOR plus 5.5% or prime plus 3.0%, and the revolving loan bears interest
at an annual rate of either LIBOR plus 3.0% or prime plus 0.5%. So long as we are not in default under the Secured Credit
 Facility, we may elect at any time to have interest on all or a portion of the advances on the revolving loan or the term
loan calculated under the applicable LIBOR interest rate option. LIBOR interest rate elections are available for LIBOR periods of
1, 2, 3, or 6 months. Interest on a LIBOR rate loan is payable on the last day of the LIBOR period (if the elected LIBOR period is
 less than three months) or on the last day of each three month interval (if the elected LIBOR period is six months). For any portion
 of the term loan or revolving loan which is not covered by a LIBOR interest rate election, monthly
payments of accrued interest are due on the first day of each month.

Term Loan Advances.
The $50.0 million term loan was fully funded at the closing of the Secured Credit Facility. No additional advances are permitted under
 the term loan at any time, and any principal amount of the term loan which is repaid or prepaid may not be reborrowed. We are
required to make payments of principal on the term loan in monthly installments of $0.5 million. Payment of the monthly principal
 installments commenced on June 1, 2004 and will continue on the first day of each succeeding calendar month throughout the term of
 the Secured Credit Facility. Then, unless paid in full earlier, all outstanding principal and accrued and unpaid interest of the term
 loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

Revolving Loan Advances.
 During the term of the Secured Credit Facility, we may receive advances of principal on the revolving loan at any time. However,
 the outstanding principal of the revolving loan may not at any time be greater than an amount which is determined by reference to
certain eligible receivables and eligible inventory of the Company. See Loan Balance and Availability below.
We may also make payments of principal on the revolving loan at any time. All outstanding principal and all accrued and unpaid
interest of the revolving loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

-14-



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Loan Balance and
Availability. As of May 31, 2005, the outstanding balance of the Secured Credit Facility was $74.0 million. Taking into
consideration the limitations on our ability to obtain additional advances of principal from the revolving loan
(see Revolving Loan Advances above) and the Minimum Availability Requirement (see "Covenant Compliance" below), as of
May 31, 2005, our availability under the Secured Credit Facility was $0.8 million.

Covenant Compliance.
We are subject to certain financial and non-financial covenants under the Secured Credit Facility. In addition to other
requirements that are set forth in such
covenants, we are required to maintain: i) either a qualified cash reserve balance or an undrawn availability on the revolving loan of not less than
$5.0 million ("Minimum Availability Requirement"), ii) minimum thresholds with respect to certain consolidated and non-consolidated
earnings before interest, taxes, depreciation and amortization (EBITDA), and iii) a minimum ratio with respect to fixed
charge coverages.

The following are the required
 covenant thresholds under the Secured Credit Facility for the twelve-month period ended May 31, 2005:

|Consolidated EBITDA Covenant  The covenant requires a consolidated
EBITDA in a minimum amount of $100.0 million. As of May 31, 2005, we were in compliance with this covenant.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Airlines EBITDA Covenant  The covenant requires an EBITDA for
 Airlines in a minimum amount of $85.0 million. As of May 31, 2005, Airlines was in compliance with this covenant.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Fixed Charge Coverage Covenant  The covenant requires a
 fixed charge coverage in a minimum ratio of 1.15 to 1.00. As of May 31, 2005, we were in compliance with this covenant.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the amount of
capital expenditures that may be made by us in any fiscal year is limited to $75.0 million, of which at least $10.0 million
must be financed from sources other than the Secured Credit Facility. As of May 31, 2005, we were in compliance with the
 capital expenditures covenant.

If Aviation or any of its
restricted subsidiaries violates these covenants and are unable to obtain waivers from the Wells Fargo Lenders, we would be
 in default under the Secured Credit Facility and the debt could be accelerated.

Notice and Waiver of Specified Events of Default under Secured
Credit Facility. On June 1, 2005, the Wells Fargo Lenders notified us that the Wells Fargo Lenders believed that we were
in violation of certain covenants of the Secured Credit Facility (the "Specified Events of Default"), as follows:

| | i)   |  | occurrence of a default at the final maturity, on April 29, 2005,
of the obligations under the FINOVA Note (defined below);
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------
|
| | ii)  |  | failure to maintain insurance on the Collateral (as defined in the Secured
Credit Facility);                               
|
| | iii) |  | making an unpermitted investment toward the purchase of two Boeing 747
airplanes (the "Designated 747s"); and              
|
| | iv)  |  | unauthorized use of the proceeds from advances under the Secured Credit
Facility to renovate the Designated 747s.          

-15-



---

The Wells Fargo Lenders further notified us that, as a result of the Specified Events of Default, the Wells
Fargo Lenders had elected to charge the default rate of interest, which, as set forth in the Secured Credit Facility, is a per annum
rate equal to 2 percentage points above the per annum rate otherwise applicable. The default rate of interest was charged
from April 29, 2005, the date on which the Wells Fargo Lenders asserted that a default had occurred under the FINOVA Note, until June
14, 2005, the date on which the Wells Fargo Lenders, by execution of the Amendment Number Two (as defined below) waived the Specified
Events of Default. At April 29, 2005, the per annum rates of interest on the Secured Credit Facility ranged from 6.09% to 8.75%.

On June 14, 2005,
we entered into an Amendment Number Two and Waiver to Loan and Security Agreement (the "Amendment Number Two") with the Wells Fargo
Lenders whereby the Wells Fargo Lenders agreed to waive the Specified Events of Default, and both parties agreed to amend the Secured
Credit Facility to allow the Company to maintain only all-risk ground insurance coverage for aircraft that the Company has grounded
and taken out of service.

Amendment Number Three to Secured Credit Facility. On July 11, 2005, Ventures Acquisition Company purchased the
Designated 747s. See "Landsbanki Loan Agreement" below. On the same day, we entered into an Amendment Number Three and Consent (the
"Amendment Number Three") with the Wells Fargo Lenders. Amendment Number Three amends the Secured
Credit Facility to allow Airlines to i) lease the Designated 747s from Ventures Acquisition Company (see "Lease Transactions" in
"Note 11 - Related Party Transactions" below)
and ii) reimburse Ventures Acquisition Company for certain out-of-pocket transaction costs incurred by Ventures Acquisition Company
in connection with the purchase of the Designated 747s. In exchange, Mr. Smith pledged to Wells Fargo Foothill, Inc., as
administrative agent and for the benefit of the Wells Fargo Lenders, all of his rights, title, and interest in
Ventures Acquisition Company.

WCMA Loan Agreement

On August 12, 2003, EASL entered
 into Working Capital Management Account Loan Agreement No. 54F-07164 (the WCMA Loan) with Merrill Lynch Business Financial
 Services, Inc. (Merrill Lynch) for the purpose of obtaining an $8.0 million reducing revolver credit facility. The WCMA Loan
 provides for a reducing revolver loan which is funded from a line of credit. EASL may repay the loan balance in whole or in part at
 any time without penalty, and may request a re-borrowing of amounts repaid on a revolving basis. The WCMA Loan does not require
 monthly payments of principal. However, on the last business day of each calendar month, the maximum amount of the line of credit
 will be reduced by an amount equal to 1/60th of the loan amount. The WCMA Loan bears interest at the variable rate of LIBOR plus 3.0%
 and monthly payments of accrued interest are due and payable on the first business day of each
calendar month. The WCMA Loan shall terminate on August 31, 2008, at which time all outstanding unpaid principal and all accrued and
unpaid interest shall be due and payable in full.

An amendment letter from
Merrill Lynch, dated May 12, 2004, established certain financial covenants for the WCMA
 Loan that are consistent with the financial covenants contained in the Secured Credit Facility. The amendment
letter established i) a schedule for fixed charge coverage ratios to be measured on a quarter-end basis, ii) a $75.0 million maximum
limit on capital expenditures of which at least $10.0 million must be funded by indebtedness, and iii) a minimum consolidated EBITDA
that must be achieved by the Company on a quarter-end basis. Specifically, the amendment letter adjusted the fixed charge coverage
 ratios and minimum consolidated EBITDA requirements of the WCMA Loan to correspond with the fixed charge coverage ratios and
consolidated EBITDA requirements of the Secured Credit Facility.
See Secured Credit Facility above.

Covenant Compliance.
 As of May 31, 2005, we were in compliance with the covenants contained in the WCMA Loan. See Secured Credit
 Facility above.

FINOVA Note

In May 1997, the Trust entered into
a $30.0 million Secured Loan Agreement with FINOVA Capital Corporation(the "FINOVA Note"), with interest at the
annual rate of 10.44%. Monthly installments of principal and interest were payable through April 2005, at which time the FINOVA Note
matured with a final payment of approximately $2.5 million in principal, plus accrued interest, due upon maturity.

-16-



---

Effective April 29, 2005, the
Trust and FINOVA executed a Third Amendment Agreement to amend and extend the FINOVA Note (the "Third Amendment").  The Third Amendment
extends the maturity date of the FINOVA Note to September 29, 2005, with the annual rate of interest remaining at 10.44%.
Monthly installments of principal and interest in the amount of $471,650 are scheduled through the extended maturity date,
resulting in a full amortization of the remaining outstanding principal balance. All outstanding principal and accrued, but unpaid
interest, will be due upon maturity, as extended.

The FINOVA Note
is secured by means of a first priority security interest granted to FINOVA in one Boeing 747 aircraft and three DC-9 aircraft
owned by the Trust.

Intervest Note

On December 30, 2004, Vintage entered into a Construction Loan Agreement with Intervest-Mortgage Investment
Company ("Intervest") whereby Intervest agreed to loan to Vintage a total of $9.0 million for the purpose of financing Vintage's
construction of an IMAX theater on the Evergreen Museum Land. The Construction Loan Agreement is
further evidenced by a Promissory Note from Vintage to Intervest in the principal sum of $9.0 million (the "Intervest Note").  At
May 31, 2005, the outstanding principal balance of the Intervest Note was $0.2 million.

The Intervest
Note provides for an annual rate of interest equal to 1% in excess of the rate established for a Bank Prime Loan, as published
in the Federal Reserve Statistical Release H.15 (the "Index").  The interest rate on all sums advanced under the Intervest Note
shall be adjusted on the first
day of each month following the date that the Bank Prime Loan rate changes in the Index, with such interest rate to be equal to 1%
in excess of the week-ending average rate established for the Bank Prime Loan, as published in the Index.  However, the interest rate
shall never be less than 5.75% per annum. Accrued interest on the outstanding balance of sums advanced under the Intervest Note
shall be due and payable on the first day of each month. In addition, following any default in the payment of interest under the
Intervest Note, or any default under any of the other
documents executed in connection with or to secure the Intervest Note (the "Loan Documents") and expiration of the applicable cure
period, Intervest may elect to (i) declare the Intervest Note due and payable, and/or (ii) increase the rate of interest payable
under the Intervest Note by three percent (3.00%) per annum.

The entire principal
balance and any accrued, but unpaid, interest on the Intervest Note shall be due and payable on January 1, 2006.  However, so long as
Vintage is not in default under the provisions of the Construction Loan Agreement, Vintage may elect to extend the maturity date of
the Intervest Note to July 1, 2006. Vintage may exercise its right to extend the maturity date by providing Intervest with at least
30 days prior written notice and paying  to Intervest the amount of $67,500 in consideration for the extension period.  In addition,
Vintage may, at any time, prepay the whole or any part of the Intervest Note without penalty.

Vintage's obligations under the Intervest Note and Construction Loan Agreement are secured by a security interest in i) the
Evergreen Museum Land, the Evergreen Aviation Museum Building, and the tangible personal property owned by Vintage which is located
on or in the Evergreen Museum Land and the Evergreen Aviation Museum Building, ii) a pledge of all rents arising out of the operation
of the Evergreen Museum Land and the Evergreen Aviation Museum Building, and iii) the aircraft owned by Vintage.
In addition, Mr. Smith has guaranteed payment of the amounts due under the Intervest Note and Construction Loan Agreement.

The Construction Loan Agreement includes certain events of default, including: i) the filing of certain mechanics' liens against the
Evergreen Museum Land, ii) failure to comply with the Construction Loan Agreement, the Intervest Note, the Loan Documents or any
requirement of any governmental authority, iii) certain events of bankruptcy, iv) impairment of the security interest in the
Evergreen Museum Land, and v) failure to construct the theater in accordance with written plans and specifications or within
specified time periods.

Intervest has agreed, subject to certain conditions, to provide permanent financing for the theater following the completion of the
theatre's construction.

-17-



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Landsbanki Loan Agreement

On July 11, 2005, Holdings, as Guarantor, and Ventures Acquisition Company, as Borrower, entered into
a $32.0 million Loan Agreement (the "Landsbanki Loan Agreement") with Landsbanki Íslands hf., as Lender, for the purpose of financing Ventures Acquisition Company's purchase of the
Designated 747s.

The Landsbanki
Loan Agreement bears interest at an annual rate of LIBOR plus 2.3%.  The applicable LIBOR rate is determined by reference to
LIBOR periods of 30 days. Interest shall accrue daily and is payable monthly, with the applicable LIBOR rate
being determined at the beginning of each monthly payment period.  However, if an Event of Default (as defined in the Landsbanki Loan
Agreement) has occurred and continuing, then the Landsbanki Loan Agreement shall bear interest at a rate that is 2% per annum higher
than the otherwise applicable rate. Monthly installments of principal and accrued interest in
the amount of $680,000 per installment are due and payable on the 11th day of each month through the maturity date. The Landsbanki Loan
Agreement will mature on July 11, 2010, at which time all outstanding principal and accrued, but unpaid, interest will be due and
payable.

The Landsbanki
Loan Agreement contains certain restrictions on Holdings' ability to i) effect mergers and other changes of control and ii) enter
into transactions with its affiliates.  In addition, the Landsbanki Loan Agreement provides that, among other events, a default under
either of the leases of the Designated 747s (see "Lease Transactions" in "Note 11 - Related Party Transactions" below) shall consitute
a default under the Lanksbanki Loan Agreement.

As Guarantor,
Holdings has guaranteed all obligations of Ventures Acquisition Company under the Landsbanki Loan
Agreement. Holdings' obligations as Guarantor under the Landsbanki Loan Agreement are absolute and unconditional.

-18-



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NOTE 5  PREPAID EXPENSES AND OTHER

Prepaid expenses and other
at May 31, 2005 and February 28, 2005 consisted of the following:

|                                   | May 31, 2005 |             |      
|---------------------------------- | ------------ | ----------- | -----
|(in thousands)                     |              | (unaudited) |      
|                                   |              |             |      
|                                   |              |             |      
|Prepaid expenses                   | $            | 2,786       |      
|Notes receivable - current portion | 211          |             | 170  
|                                   |              |             |      
|                                   | Total        | $           | 2,997
|                                   |              |             |      

NOTE 6  OTHER ASSETS

Other assets
at May 31, 2005 and February 28, 2005 consisted of the following:

|                                  | May 31, 2005 |             |       
|--------------------------------- | ------------ | ----------- | ------
|(in thousands)                    |              | (unaudited) |       
|                                  |              |             |       
|                                  |              |             |       
|Non-current agricultural assets   | $            | 4,358       |       
|Deposits                          | 7,347        |             | 5,933 
|Notes receivable                  | 1,043        |             | 1,204 
|Finance fees, net of amortization | 477          |             | 481   
|Other assets                      | 452          |             | 377   
|                                  |              |             |       
|                                  | Total        | $           | 13,677
|                                  |              |             |       

NOTE 7  SUPPORT SERVICES AND OTHER REVENUE

Support services and other
revenue for the three months ended May 31, 2005 and May 31, 2004 consisted of the following:

|                               |                                    |     |        |   |     |        |  |  | 
|------------------------------ | ---------------------------------- | --- | ------ | - | --- | ------ |  |  | 
|                               | For the Three Months Ended May 31,
|                               |                                   
|(in thousands - unaudited)     | 2005                               |     | 2004  
|                               |                                    |     |       
|Support services - Airlines    | $                                  | 912 |        | $ | 343 |       
|Support services - Helicopters | 928                                |     | 700    |  
|Support services - Air Center  | 12,613                             |     | 7,658  |  
|Sales of agricultural products | 2,346                              |     | 2,287  |  
|Support services - other       | 16                                 |     | -      |  
|                               |                                    |     |       
|                               | Total                              | $   | 16,815 |   | $   | 10,988 | 
|                               |                                    |     |       

-19-



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NOTE 8  COST OF SUPPORT SERVICES AND OTHER SUPPORT COSTS

Cost of support services and
other revenue for the three months ended May 31, 2005 and May 31, 2004 consisted of the following:

|                                                            |                                    |       |        |   |       |        |  |  | 
|----------------------------------------------------------- | ---------------------------------- | ----- | ------ | - | ----- | ------ |  |  | 
|                                                            | For the Three Months Ended May 31,
|                                                            |                                   
|(in thousands - unaudited)                                  | 2005                               |       | 2004  
|                                                            |                                    |       |       
|Cost of support services and other support costs - Airlines | $                                  | 6,258 |        | $ | 4,200 |       
|Cost of support services - Helicopters                      | 568                                |       | 141    |  
|Cost of support services - Air Center                       | 10,371                             |       | 4,720  |  
|Cost of sales of agricultural products                      | 1,365                              |       | 1,601  |  
|Cost of support services - other                            | 39                                 |       | 64     |  
|                                                            |                                    |       |       
|                                                            | Total                              | $     | 18,601 |   | $     | 10,726 | 
|                                                            |                                    |       |       

NOTE 9  OTHER NON-OPERATING INCOME (EXPENSE), NET

Other non-operating
income (expense), net for the three months ended May 31, 2005 and May 31, 2004 consisted of the following:

|                                                |                                    |   |      |        |   |        |   |  | 
|----------------------------------------------- | ---------------------------------- | - | ---- | ------ | - | ------ | - |  | 
|                                                | For the Three Months Ended May 31,
|                                                |                                   
|(in thousands - unaudited)                      | 2005                               |   | 2004
|                                                |                                    |   |     
|Gain on sale of property and equipment          | 260                                |   | 323  |       
|Foreign currency exchange gain                  | 107                                |   | 25   |       
|Other non-operating gain (loss)                 | 180                                |   | (124 | )     
|Write-off of unamortized loan acquisition costs |                                    | - |      | (3,463 | )
|Penalties and legal fees on loan prepayment     | -                                  |   | (330 | )     
|                                                |                                    |   |     
|                                                | Total                              | $ | 547  |        | $ | (3,569 | )
|                                                |                                    |   |     

-20-



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NOTE 10  CASH FLOWS FROM INVESTING ACTIVITIES - OTHER ASSETS

Cash flows from investing activities
- other assets during the three months ended May 31, 2005 and 2004 were as follows:

|                                                                 |                                    |        |        |        |      |        |   |  | 
|---------------------------------------------------------------- | ---------------------------------- | ------ | ------ | ------ | ---- | ------ | - |  | 
|                                                                 | For the Three Months Ended May 31,
|                                                                 |                                   
|(in thousands - unaudited)                                       | 2005                               |        | 2004  
|                                                                 |                                    |        |       
|Deposits on aircraft                                             | $                                  | (1,414 | )      | $      | (512 | )     
|Aircraft and parts held for sale                                 | 34                                 |        |        | (16    | )   
|Non-current agricultural assets                                  | (596                               | )      |        | -      |     
|Minority interest applied against note receivable from affiliate | -                                  |        |        | (307   | )   
|Payments received on notes receivable                            | 140                                |        |        |        |     
|Advances made on notes receivable                                | -                                  |        |        | (454   | )   
|Capitalized loan acquisition costs                               | (17                                | )      |        | (3,464 | )   
|Other                                                            | 93                                 |        |        | 1,129  |     
|                                                                 |                                    |        |       
|                                                                 | Total                              | $      | (1,763 | )      | $    | (3,624 | )
|                                                                 |                                    |        |       

# NOTE 11  RELATED PARTY TRANSACTIONS

Mr. Delford M. Smith, our founder
and the chairman
of our board of directors, has control, either directly or indirectly, over 85.1% of the outstanding shares of Holdings
common stock. In addition, Mr. Smith owns or controls other entities, or does business under other trade names, including, but not
limited to, the following:

| |  | Ventures Acquisition Company LLC ("Ventures Acquisition Company");
| | - | ------------------------------------------------------------------
| |  | Ventures Holding, Inc. ("Ventures Holding");                      
| |  | DMS Properties; and                                               
| |  | Greenpatch Farms.                                                 

# Transactions Under Mr. Smith's Employment Agreement

During
the three months ended May 31, 2005, the board of directors granted a $2.9 million bonus to Mr. Smith. Payment of the bonus was recorded by us as a
part of selling, general, and administrative expenses. In accordance with the terms of the Employment Agreement, Mr. Smith
utilized $2.0 million of the bonus to pay $1.4 million of principal and $0.6 million of accrued interest on obligations owed to us
by Mr. Smith or his affiliates, and the remaining portion of the bonus was utilized to satisfy taxes payable by Mr. Smith or his
affiliates as a result of the receipt of the bonus.

-21-



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# Lease Transactions

We rent aircraft and
buildings from entities that are owned by, or controlled by, Mr. Smith. During the three months ended May 31, 2005 and May 31, 2004, we
incurred rent expense for these leases in the aggregate amounts of $1.5 million and $1.7 million, respectively.

On July 11, 2005, Airlines, as
lessee, entered into two three-year Aircraft Leases with Ventures Acquisition Company, as lessor, for the Designated 747s. Rental payments of
$345,000 per aircraft are due on the 11th day of each month throughout the terms of the leases. The Aircraft Leases are
subject and subordinate to the terms of the Landsbanki Loan Agreement (see "Landsbanki Loan Agreement"
in "Note 4 - Long-Term Debt Obligations" above), and Airlines' right to possession and use of the Designated
747s is subject to the right of Landsbanki Íslands hf., as the secured lender, to repossess the Designated 747s.

In addition, Aviation and Mr.
Smith are co-beneficiaries of the Trust, which leases certain aircraft to Airlines. Specifically, Aviation and Mr. Smith share a
beneficial interest in one of the assets of the Trust, a Boeing 747 aircraft. Mr. Smith holds a one-third beneficial interest in the
Boeing 747, while Aviation holds the remaining two-thirds beneficial interest. Airlines leases the Boeing 747 from the Trust.

During each of the three-month
periods ended May 31, 2005 and May 31, 2004, Airlines incurred aircraft lease expense on the Boeing 747 in the amount of $1.8 million.
Of these amounts in each three-month period, $0.6 million was attributable to Mr. Smith's one-third beneficial interest in the aircraft.

# Sale and Lease of Aircraft

Sale and Lease of Puma
Aircraft.  During May 2005,
EASL sold two Aerospatiale Model SA 330J rotor-wing aircraft, with corresponding aircraft parts (collectively, the "Puma Aircraft"),
to Ventures Acquisition
Company for an aggregate sales price of $5.0 million. EASL's cost for the Puma Aircraft was also $5.0 million, thus EASL did not
recognize any profit from the sale. Immediately upon its purchase
of the Puma Aircraft from EASL, Ventures Acquisition Company agreed to lease the Puma Aircraft to Helicopters under a three-year
lease agreement at a lease rate of $55,000 per month, per aircraft.

Sale and Lease of Sikorsky
CH-54 Aircraft.  During May 2005,
EASL sold a Sikorsky CH-54 rotor-wing aircraft, with corresponding aircraft parts (collectively, the "CH-54 Aircraft") to
Ventures Acquisition
Company for an aggregate sales price of $2.4 million. EASL's inventory cost for the CH-54 Aircraft was also $2.4 million, thus EASL did not
recognize any profit from the sale. Ventures Acquisition Company has agreed to lease the CH-54 Aircraft to Helicopters
under a three-year lease agreement at a lease rate of $120,000 per month.

-22-



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# Notes Receivable from Affiliates and Notes Payable to Affiliates

We also have a number of notes
receivable from Mr. Smith, Ventures Holding, and Ventures Acquisition Company. The chart below
summarizes the various notes receivable from Mr. Smith, Ventures Holdings, Inc., or Ventures Acquisition Company at May 31, 2005
and February 28, 2005:

|                                                   |                                                                                                   |             |        |                   |       |        |  |  | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ----------- | ------ | ----------------- | ----- | ------ |  |  | 
|                                                   | May 31, 2005                                                                                      |            
|(in thousands)                                     |                                                                                                   | (unaudited) |        | February 28, 2005
|                                                   |                                                                                                   |             |       
|Notes receivable from Ventures Holdings            | $                                                                                                 | 8,590       |        | $                 | 9,777 |       
|                                                   | due in annual installments
of $1,134 through March 31, 2013, with an annual interest rate of 4%   |            
|                                                  
|Notes receivable from Ventures Acquisition Company | 991                                                                                               |             | 1,128  |                  
|                                                   | due in annual installments of
$146 through March 31, 2013, with an annual interest rate of 4%     |            
|                                                  
|Note receivable from Mr. Smith                     | 4,094                                                                                             |             | 4,661  |                  
|                                                   | due in ten annual installments of $802 through March 31,
2013, with an annual interest rate of 4% |            
|                                                   |                                                                                                   |             |       
|                                                   | Net notes receivable from affiliates                                                              | $           | 13,675 |                   | $     | 15,566 | 
|                                                   |                                                                                                   |             |       

Notes Receivable from
Affiliates During the three months ended May 31, 2005, the principal balances of our notes receivable from affiliates
increased by $0.1 million of accrued interest receivable. During the same time period, we received $1.4 million of principal
payments and $0.6 million of accrued interest payments. See "Transactions Under Mr. Smith's Employment Agreement" above.

NOTE 12  CONTINGENCIES AND COMMITMENTS

# LEGAL PROCEEDINGS

We are currently
involved in a number of legal proceedings. While the results of these proceedings
cannot be predicted with certainty, we believe, based on our examination of the subject matter of the proceedings,
experience with similar proceedings, and discussion with legal counsel regarding possible outcomes, that the final outcome of such
proceedings will not have a material adverse effect on our consolidated financial position, results of operations, or
cash flows. As material developments related to pending litigation occur, we will reassess our potential
liability and revise any estimates accordingly.

# Banc of America

We are a defendant
in Banc of America Securities LLC v. Evergreen International Aviation, Inc. et al., which was filed on May 22, 2003 in the
Superior Court of the County of Meeklenburg in the State of North Carolina. Banc of America has alleged claims for breach of contract
and quantum meruit, arising out of agreements in which Banc of America agreed to act as our financial agent in
exchange for the payment of certain fees. The plaintiff has not yet specified an amount for damages.

We filed a motion to
dismiss for lack of jurisdiction, but both the trial court and the North Carolina Court of Appeals have denied the motion.
We are currently evaluating further appellate and trial options.

-23-



---

# Asiana Airlines

On January 28, 2000,
we entered  into a contract with Asiana Airlines (Asiana) whereby we agreed to provide air freight services
to Asiana in exchange for minimum payments to be made by Asiana throughout the term of the contract. The minimum payments were
based on guaranteed block hour utilization and the contract was to continue through February 28, 2003. On August 28, 2001, Asiana
notified us that Asiana would not make any further payments under the contract.

On September 19, 2001,
we filed proceedings in the United States District Court for the District of Oregon against Asiana to recover amounts owed by
Asiana to us pursuant to the contract. On February 28, 2003, a jury returned a verdict in our favor and awarded damages of $16.6
million, and Asiana subsequently filed a motion for judgment as a matter of law.  The district court denied the motion and
Asiana appealed the judgment to the United States Ninth Circuit Court of Appeals.

On June 20, 2005, a three-judge
panel of the United States Court of Appeals for the Ninth Circuit affirmed in all respects the judgment of the district court. In its
decision, the Ninth Circuit rejected Asiana's arguments that the damage award should be reversed, holding that the District
Court properly instructed the jury on the measure of Evergreen's damages and that Evergreen provided extensive evidence of its
damages in accordance with Oregon law.

On July 11,
2005, the Ninth Circuit issued a mandate returning the action to the District Court. It is anticipated that the District Court will,
upon conclusion of proceedings, order the disbursement to Evergreen of the full amount of damages, in addition to costs and
interest, from the amount that Asiana previously deposited in the District Court's bank account.

# Ducor Express Airlines

On February 25, 2005, Ducor
Express Airlines, Inc. ("Ducor") filed a claim against Airlines for breach of contract (the "Action") in the Supreme Court of New
York, County of Queens (the "Court"). Ducor sought damages of $41.7 million against Airlines in regard to certain agreements between
the parties wherein Airlines was to provide charter cargo flights from Hong Kong, China to Los Angeles, California during
September 2004 through November 2004 (collectively, the "Charter Agreements"). On March 21, 2005, Airlines filed a counterclaim
against Ducor in regard to the Charter Agreements.

On July 6, 2005, the parties
executed a Settlement Agreement whereby Ducor and Airlines i) agreed to file with the Court a stipulation of discontinuance of the
Action with prejudice and ii) agreed to release and discharge the other from any and all claims and liabilities with respect to the Action.

# Claim for Losses under the Air Transportation Safety and System
Stabilization Act

We
may be asked to return all or a portion of the $7.2 million that we received in fiscal year 2002 for claims pursuant
to the Air Transportation Safety and System Stabilization Act. As of May 31, 2005, we have not received any further correspondence
and have not participated in any further negotiations regarding this matter. Currently, we do not anticipate that we will be required
to return any of $7.2 million. To the extent we need to actually pay any of these amounts, we believe that cash on hand and amounts
expected to be available under our Secured Credit Facility will be sufficient.

-24-



---

# AIRCRAFT PURCHASE COMMITMENTS

As of May 31, 2005,
we had entered into agreements to purchase the following aircraft:

|                          |          |          |         |       |       |     
|------------------------- | -------- | -------- | ------- | ----- | ----- | ----
|(in thousands)           
|                          | Purchase |          | Deposit
|                          | Aircraft | Quantity |         | Price |       | Paid
|Boeing 747-230SF aircraft | 2        | $        | 32,000  | $     | 2,000
|Bell AB139 helicopter     | 1        |          | 7,950   |       | 1,500
|Bell AB139 helicopters    | 3        |          | 25,000  |       | -    
|Bell 206 L-4 helicopter   | 1        |          | 1,310   |       | 196  
|Bell 412EP IFT helicopter | 2        |          | 12,670  |       | 2,534
|                          |          |          |        
|Total                     | $        | 78,930   | $       | 6,230

On July 11, 2005, Ventures Acquision
Company purchased the Boeing 747-230SF aircraft for $32.0 million. The purchase of the aircraft was financed through a $32.0 million
Loan Agreement between Ventures Acquisition Company, as Borrower, Holdings, as Guarantor, and Landsbanki Íslands hf., as Lender.
See "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" above.

Subject to finalization of
financing or leasing arrangements, we expect to take delivery of one Bell AB139 helicopter, the Bell 206 L-4 helicopter, and the
two Bell 412EP IFT helicopters during fiscal year 2006, with the remaining three Bell AB139 helicopters to be delivered in fiscal
year 2007. In addition, we anticipate that upon taking delivery, we will simultaneously sell and lease back the aircraft under
operating lease agreements for lease terms not greater than three years.

-25-



---

|         
|---------
|NOTE 13 

The Indenture Notes that were
issued by Aviation are fully and unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviations
subsidiaries (the Guarantor Subsidiaries), and the Trust (the Non-Wholly Owned Guarantor Subsidiary). The only
subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Evergreen Agricultural
Enterprises, Inc., Evergreen Vintage Aircraft Inc., and the foreign subsidiaries of the Company (collectively, the Non-Guarantor
Subsidiaries).

The Company accounts for all
investments in its subsidiaries utilizing the equity method of accounting. As a result, the net income and loss of each of the
Companys subsidiaries is reflected on the books of the Company as either an increase in, or reduction of, the Companys
equity in the earnings of each such subsidiary. For the purposes of reporting on a consolidated basis, eliminating entries are made
by the Company at the holding company level in order to eliminate the balances of the Companys investments in its subsidiaries
against all intercompany balances and intercompany transactions.

The following supplemental
consolidated financial statements separately present the results of operations for Evergreen Holdings, Inc., Evergreen International
Aviation, Inc., the wholly-owned Guarantor Subsidiaries on a combined basis, the Non-Wholly Owned Guarantor Subsidiary, and the
Non-Guarantor Subsidiaries on a combined basis, with consolidating adjustments and total consolidated amounts.

|                                             
|---------------------------------------------
|
|
|
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|Operating revenues                           
|Operating expenses                           
|Selling, general, and administrative expenses
|                                             
|Operating (loss) income                      
|                                             
|Interest income (expense)                    
|Other non-operating income (expense), net    
|                                             
|Income (loss) before minority interest,      
|                                             
|                                             
|                                             
|Equity in earnings of subsidiaries           
|                                             
|Income (loss) before minority interest       
|                                             
|                                             
|Minority interest                            
|                                             
|Income (loss) before income taxes            
|                                             
|Income tax benefit (expense)                 
|                                             
|                                             
|                                             

-26-



---

|                                             
|---------------------------------------------
|
|
|
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|Operating revenues                           
|Operating expenses                           
|Selling, general, and administrative expenses
|                                             
|Operating (loss) income                      
|                                             
|Interest expense                             
|Other non-operating income, net              
|                                             
|Income (loss) before minority interest,      
|                                             
|                                             
|Equity in earnings of subsidiaries           
|                                             
|(Loss) income before minority interest       
|                                             
|                                             
|Minority interest                            
|                                             
|(Loss) income before income taxes            
|                                             
|Income tax benefit (expense)                 
|                                             
|                                             
|                                             

-27-



---

|            
|------------
|
|
|
|            
|            
|            
|            
|            
|            
|            
|            
|ASSETS      
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|Total assets
|            



|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |   |        |     |   |          |   |   |         |        |  | 
|------------------------------------------ | ------------------------------------------------- | ------- | - | - | ------- | ----- | - | ------- | ------ | - | ------ | - | - | ------ | --- | - | -------- | - | - | ------- | ------ |  | 
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                  
|                                           | Current liabilities:                             
|                                           | Accounts payable                                  | $       | - |   | $       | 5,748 |   | $       | 78,425 |   | $      | - |   | $      | 484 |   | $        | - |   | $       | 84,657 | 
|                                           | Accrued liabilities and payables to affiliates    | -       |   |   | 5,704   |       |   | 19,598  |        |   | 18     |   |   | 326    |     |   | -        |   |   | 25,646  |       
|                                           | Accrued interest                                  | -       |   |   | 1,508   |       |   | 40      |        |   | -      |   |   | 15     |     |   | -        |   |   | 1,563   |       
|                                           | Current portion long-term debt                    | -       |   |   | 6,516   |       |   | 3,012   |        |   | 2,035  |   |   | 1,011  |     |   | 1        |   |   | 12,575  |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total current liabilities                         | -       |   |   | 19,476  |       |   | 101,075 |        |   | 2,053  |   |   | 1,836  |     |   | 1        |   |   | 124,441 |       
|                                          
|                                           | Long-term debt                                    | 76,967  |   |   | 64,622  |       |   | 121,300 |        |   | -      |   |   | 23,917 |     |   | (1       | ) |   | 286,805 |       
|                                           | Deferred rentals and other payables to affiliates | -       |   |   | -       |       |   | (5,379  | )      |   | 5,457  |   |   | -      |     |   | -        |   |   | 78      |       
|                                           | Deferred tax liabilities                          | (45,587 | ) |   | (1,204  | )     |   | 142,334 |        |   | -      |   |   | 2,440  |     |   | -        |   |   | 97,983  |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total liabilities                                 | 31,380  |   |   | 82,894  |       |   | 359,330 |        |   | 7,510  |   |   | 28,193 |     |   | -        |   |   | 509,307 |       
|                                          
|                                           | Minority interest                                 | -       |   |   | 989     |       |   | -       |        |   | -      |   |   | -      |     |   | -        |   |   | 989     |       
|                                          
|                                           | Stockholders' equity                              | 187,616 |   |   | 197,620 |       |   | 240,548 |        |   | 4,785  |   |   | 22,554 |     |   | (465,507 | ) |   | 187,616 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|Total liabilities and stockholders' equity | $                                                 | 218,996 |   | $ | 281,503 |       | $ | 599,878 |        | $ | 12,295 |   | $ | 50,747 |     | $ | (465,507 | ) | $ | 697,912 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  

-28-



---

|            
|------------
|
|
|
|            
|            
|            
|            
|            
|            
|            
|            
|ASSETS      
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|Total assets
|            



|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |   |        |       |   |          |   |   |         |        |  | 
|------------------------------------------ | ------------------------------------------------- | ------- | - | - | ------- | ----- | - | ------- | ------ | - | ------ | - | - | ------ | ----- | - | -------- | - | - | ------- | ------ |  | 
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                  
|                                           | Current liabilities:                             
|                                           | Accounts payable                                  | $       | - |   | $       | 5,327 |   | $       | 66,484 |   | $      | - |   | $      | 1,021 |   | $        | 2 |   | $       | 72,834 | 
|                                           | Accrued liabilities and payables to affiliates    | -       |   |   | 4,790   |       |   | 22,642  |        |   | -      |   |   | 810    |       |   | -        |   |   | 28,242  |       
|                                           | Accrued interest                                  | -       |   |   | 7,961   |       |   | 28      |        |   | 29     |   |   | 14     |       |   | -        |   |   | 8,032   |       
|                                           | Current portion long-term debt                    | -       |   |   | 6,515   |       |   | 3,734   |        |   | 3,370  |   |   | 626    |       |   |          |   |   | 14,245  |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total current liabilities                         | -       |   |   | 24,593  |       |   | 92,888  |        |   | 3,399  |   |   | 2,471  |       |   | 2        |   |   | 123,353 |       
|                                          
|                                           | Long-term debt                                    | 78,640  |   |   | 57,320  |       |   | 133,169 |        |   | -      |   |   | 23,731 |       |   | -        |   |   | 292,860 |       
|                                           | Deferred rentals and other payables to affiliates | -       |   |   | -       |       |   | (5,098  | )      |   | 5,178  |   |   | -      |       |   | -        |   |   | 80      |       
|                                           | Deferred tax liabilities                          | (45,410 | ) |   | (387    | )     |   | 138,592 |        |   | -      |   |   | 2,356  |       |   | -        |   |   | 95,151  |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|                                           | Total liabilities                                 | 33,230  |   |   | 81,526  |       |   | 359,551 |        |   | 8,577  |   |   | 28,558 |       |   | 2        |   |   | 511,444 |       
|                                          
|                                           | Minority interest                                 | -       |   |   | 655     |       |   | -       |        |   | -      |   |   | -      |       |   | -        |   |   | 655     |       
|                                          
|                                           | Stockholders' equity                              | 183,612 |   |   | 193,888 |       |   | 236,600 |        |   | 3,794  |   |   | 22,437 |       |   | (456,719 | ) |   | 183,612 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  
|Total liabilities and stockholders' equity | $                                                 | 216,842 |   | $ | 276,069 |       | $ | 596,151 |        | $ | 12,371 |   | $ | 50,995 |       | $ | (456,717 | ) | $ | 695,711 |       
|                                           |                                                   |         |   |   |         |       |   |         |        |   |        |   |  

-29-



---

|                                     
|-------------------------------------
|
|
|
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|Net cash (used in) provided by       
|                                     
|                                     
|Cash flows from investing activities:
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|Net cash provided by (used in)       
|                                     
|                                     
|Cash flows from financing activities:
|                                     
|                                     
|                                     
|                                     
|Net cash provided by (used in)       
|                                     
|                                     
|Net (decrease) increase in cash      
|                                     
|Cash, beginning of period            
|                                     
|                                     
|                                     

-30-



---

|                                     
|-------------------------------------
|
|
|
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|Net cash (used in) provided by       
|                                     
|                                     
|Cash flows from investing activities:
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|Net cash provided by (used in)       
|                                     
|                                     
|Cash flows from financing activities:
|                                     
|                                     
|                                     
|                                     
|Net cash provided by (used in)       
|                                     
|                                     
|Net (decrease) increase in cash      
|                                     
|Cash, beginning of period            
|                                     
|                                     
|                                     

-31-



---

|       
|-------
|ITEM 2.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form
10-Q contains statements, which to the extent they are not recitations of historical fact, constitute "forward-looking statements"
as defined in Section 21E of the Securities Exchange Act of 1934, as amended.  Statements and assumptions with regard to future
revenues, income and cash flows, program performance, the outcome of litigation, and planned dispositions of assets are examples of
forward-looking statements.  Wherever possible, we have identified these forward-looking statements by words such as "anticipates",
"believes", "could", "may", "intends", "estimates", "expects", "projects", and similar phrases.

Forward-looking statements involve
risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations.
The risks and uncertainties to which our business is subject include, but are not limited to, those risks and uncertainties included
under the heading "Risk Factors Relating to the
Company" in our Annual Report on Form 10-K for the fiscal year ended February 28, 2005. Such risks and uncertainties include:

| |  | the financing agreements of Evergreen Aviation which include financial covenants
that impose substantial restrictions upon us;                              
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our access to additional financing;                                                                                                                         
| |  | volatility in aircraft values which may affect our ability to obtain financing secured
by our aircraft;                                                     
| |  | the age of our aircraft fleet;                                                                                                                              
| |  | our dependence upon utilization of our Boeing 747 aircraft fleet to generate
the majority of our flight revenue;                                            
| |  | the price and availability of aircraft fuel;                                                                                                                
| |  | our dependence upon revenue from the United States Air Force ("USAF") Air Mobility
Command and the United States Postal Service ("U.S. Postal Service"); and
| |  | government regulation.                                                                                                                                      

For further information regarding the
risks and uncertainties associated with our business, please see the Company's other reports and filings with the SEC, including, but
not limited to, our Annual Report on Form 10-K for the fiscal year ended February 28, 2005.

Readers of this Quarterly Report
on Form 10-Q are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of
the date hereof. We assume no obligation to publicly update or revise our forward-looking statements included in this report,
whether as a result of new information future events or otherwise, except as required by law.

OVERVIEW

Evergreen Holdings, Inc. ("Holdings")
is the holding company of Evergreen International Aviation, Inc. ("Aviation"), a leading provider of integrated air
cargo transportation and aviation support services. Holdings, Aviation, and their consolidated subsidiaries (collectively, "Company",
"we", "us", or "our") provide global air cargo shipping, ground handling and logistics services, helicopter transportation services,
small aircraft charters, and aircraft maintenance and repair services. Our diverse fleet of commercial aircraft and helicopters gives us
the capability and flexibility to provide a wide array of air cargo and transportation services to our customers.

-32-



---

BUSINESS OVERVIEW

Business Segments

We conduct business in six major
business segments through our wholly-owned subsidiaries:

| |  | Evergreen International Airlines, Inc. ("Airlines") provides air
cargo services for both international and domestic markets;                                                                                                                                                                                                                                                                                                                                                                     
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Evergreen Aviation Ground Logistics Enterprise, Inc. ("EAGLE") provides
full-service aviation ground handling and logistics services, including mail handling, aviation hub management, aircraft handling,
cargo handling, ground system management, ground equipment maintenance, ground equipment sales and leasing, aircraft line maintenance,
 terminal services, aircraft de-icing and washing, check-in and ticketing, baggage acceptance and seat selection, and passenger
cabin cleaning;
|
| |  | Evergreen Helicopters, Inc. ("Helicopters") provides helicopter and small
fixed-wing aircraft services throughout the world in connection with activities such as forest fire fighting, health services,
aerial spraying, heavy lift construction, law enforcement, helicopter logging, petroleum support services, search and rescue,
peacekeeping and relief support, helicopter skiing, and agriculture;                                                                                      
|
| |  | Evergreen Air Center, Inc. ("the Air Center" or "Air Center") an unlimited Class IV airframe
repair station certified by the FAA, performs aircraft maintenance, repair and overhaul services, and aircraft storage services;                                                                                                                                                                                                                                                                    
|
| |  | Evergreen Aircraft Sales and Leasing Co. (EASL) selectively
buys, sells, leases, and brokers commercial aircraft, helicopters, and aircraft spare parts; and                                                                                                                                                                                                                                                                                                                                   
|
| |  | Evergreen Agricultural Enterprises, Inc. (Agriculture)
conducts farming operations, nursery and horticulture operations, and delivers nursery and processed agricultural products to
wholesale and retail customers.                                                                                                                                                                                                                                                                           

Trust Created February 25, 1986

Aviation also holds an
approximate two-thirds beneficial interest in the Trust Created February 25, 1986 ("Trust"). The Trust was created pursuant
to the Trust Agreement, dated as of February 25, 1986, as amended and restated pursuant to the Amended and Restated Trust
Agreement, dated as of August 31, 1987, as amended on August 31, 1988, and as amended and restated pursuant to the Second Amended and
Restated Trust Agreement, dated as of September 29, 1995, as amended by the First Amendment thereto as of May 8, 2003, as amended by
the Second Amendment thereto as of January 14, 2004, and as amended by the Third Amendment thereto as of May 10, 2004, among
Evergreen International Aviation, Inc. (an assignee of Evergreen Holdings, Inc., as successor to 747, Inc. and King Christian,
Inc.) and Mr. Delford M. Smith, as Beneficiaries, and Wilmington Trust Company, not in its individual capacity, but solely as Owner
Trustee. The Trust assets consist primarily of one Boeing 747 aircraft and three DC-9 aircraft. The Trust
leases these aircraft to Airlines.

-33-



---

Controlling Shareholder and Related Parties

Mr. Delford M. Smith, our founder
and the chairman of our board of directors, has control, either directly or indirectly, over 85.1% of the outstanding
shares of Holdings common stock. In addition, Mr. Smith owns or controls other entities, or does business under other trade names,
including, but not limited to, the following:

| |  | Ventures Acquisition Company LLC ("Ventures Acquisition Company");
| | - | ------------------------------------------------------------------
| |  | Ventures Holding, Inc. ("Ventures Holding");                      
| |  | DMS Properties; and                                               
| |  | Greenpatch Farms.                                                 

From time to time, we engage
in transactions with Mr. Smith and the entities owned by, or controlled by, Mr. Smith. See "Note 11 - Related Party Transactions" in
Item 1 of this quarterly report.

RECENT ACCOUNTING PRONOUNCEMENT

In December 2003, the Financial
Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities - An Interpretation of ARB No. 51 (FIN 46-R). FIN 46-R addresses how a company should apply the
provisions of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain variable interest entities.
In particular, FIN 46-R will apply in those situations in which i) the company does not have a controlling financial interest in the
variable interest entity or ii) the variable interest entity does not have sufficient equity at risk for the variable interest entity
to finance its activities without additional subordinated financial support. In those situations, FIN 46-R requires existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries if the variable interest entities do not effectively disperse risks among the parties involved.

The Company adopted
FIN 46-R as of March 1, 2005. In connection with the adoption of FIN 46-R, management completed an assessment to determine if there
were any variable interest entities ("VIE" or "VIEs") that the Company was required to consolidate. Management's assessment included an
evaluation of leases, consisting primarily of building and aircraft leases, between the Company and certain related party entities
including, but not limited to, Ventures Holding and Ventures Acquisition Company. As a result of the assessment, management
determined that there were no VIEs that the Company was required to consolidate for the period ended May 31, 2005.

As discussed
in the section "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" below, on July 11, 2005, Holdings, as Guarantor,
and Ventures Acquisition Company, as Borrower, entered into a $32.0 million loan agreement with Landsbanki Íslands hf., as Lender,
for the purpose of financing Ventures Acquisition Company's purchase of two Boeing 747 aircraft. As discussed in the section "Lease
Transactions" in "Note 11 - Related Party Transactions" below, the two Boeing 747 aircraft will be leased by Ventures Acquisition
Company to Airlines. Management is currently evaluating
this transaction pursuant to the requirements of FIN 46-R, and believes that this transaction
could result in a VIE transaction which may require consolidation by the Company.

Available Information

General information about us
can be found at www.evergreenaviation.com.  Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to those reports are available free of charge on our website at
www.evergreenaviation.com/invr.html as soon as reasonably practicable after such reports are filed with, or furnished to, the
SEC. Information on our website is not incorporated into this Form 10-Q or our other securities filings, and is not a part of such
filings.

-34-



---

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2005
AS COMPARED TO THE THREE MONTHS ENDED MAY 31, 2004

The
following table sets forth the results of operations with respect to our consolidated reportable segments for the three months
ended May 31, 2005 and May 31, 2004.

|                                                        |                                                                    |       |       |       |        |      |      |      |      |  | 
|------------------------------------------------------- | ------------------------------------------------------------------ | ----- | ----- | ----- | ------ | ---- | ---- | ---- | ---- |  | 
|                                                        | Three Months Ended May 31,                                        
|                                                        |                                                                   
|(in millions - UNAUDITED)                               | 2005                                                               |       | 2004  |       | Change |     
|                                                        |                                                                    |       |       |       |       
|Operating revenues:                                    
|                                                        | Flight revenue                                                     | $     | 118.5 |       | $      | 87.3 |      | $    | 31.2 | 
|                                                        | Sales of aircraft, parts and other property and equipment          | 11.2  |       | 2.3   |        | 8.9  |     
|                                                        | Ground handling and logistics services revenue                     | 29.8  |       | 25.6  |        | 4.2  |     
|                                                        | Support services and other revenue                                 | 16.8  |       | 11.0  |        | 5.8  |     
|                                                        |                                                                    |       |       |       |       
|                                                        | Total operating revenues                                           | 176.3 |       | 126.2 |        | 50.1 |     
|                                                       
|Operating expenses:                                    
|                                                        | Flight costs                                                       | 19.4  |       | 17.5  |        | 1.9  |     
|                                                        | Fuel                                                               | 39.7  |       | 25.4  |        | 14.3 |     
|                                                        | Maintenance                                                        | 17.9  |       | 17.7  |        | 0.2  |     
|                                                        | Aircraft and equipment                                             | 12.4  |       | 12.1  |        | 0.3  |     
|                                                        | Cost of sales of aircraft, parts, and other property and equipment | 8.9   |       | 1.0   |        | 7.9  |     
|                                                        | Cost of ground handling and logistics services                     | 24.8  |       | 21.8  |        | 3.0  |     
|                                                        | Cost of support services and other support costs                   | 18.6  |       | 10.7  |        | 7.9  |     
|                                                        | Selling, general, and administrative expenses                      | 18.6  |       | 17.5  |        | 1.1  |     
|                                                        |                                                                    |       |       |       |       
|                                                        | Total operating expenses                                           | 160.3 |       | 123.7 |        | 36.6 |     
|                                                        |                                                                    |       |       |       |       
|                                                        | Income from operations                                             | 16.0  |       | 2.5   |        | 13.5 |     
|                                                       
|Non-operating income (expense):                        
|                                                        | Interest expense                                                   | (9.4  | )     |       | (9.0   | )    |      | (0.4 | )   
|                                                        | Other non-operating income (expense), net                          | 0.5   |       |       | (3.6   | )    |      | 4.1  |     
|                                                        |                                                                    |       |       |       |       
|Income (loss) before minority interest and income taxes | 7.1                                                                |       |       | (10.1 | )      |      | 17.2 |     
|                                                       
|                                                        | Minority interest                                                  | (0.3  | )     |       | (0.3   | )    |      | -    |     
|                                                        |                                                                    |       |       |       |       
|Income (loss) before income taxes                       | 6.8                                                                |       |       | (10.4 | )      |      | 17.2 |     
|                                                       
|                                                        | Income tax (expense) benefit                                       | (2.8  | )     |       | 3.7    |      |      | (6.5 | )   
|                                                        |                                                                    |       |       |       |       
|                                                        | Net income (loss)                                                  | $     | 4.0   |       | $      | (6.7 | )    | $    | 10.7 | 
|                                                        |                                                                    |       |       |       |       

We recorded net income of
$4.0 million for the three months ended May 31, 2005, as compared to a net loss of $6.7 million during the three months ended May 31,
2004.

-35-



---

# Operating Revenue

Total operating revenues for the
three months ended May 31, 2005 were $176.3 million, which was a $50.1 million, or 39.7%, increase from total operating revenues of $126.2
million for the three months ended May 31, 2004.

Flight Revenue 
Flight revenue accounted for $118.5 million, or approximately 67.2%, of our total operating revenue during the three months ended May 31,
2005. Compared to the three months ended May 31, 2004, we experienced a $31.2 million, or 35.7%, increase in our flight revenue.

| |         
Airlines  During the three months ended May 31, 2005, Airlines generated $105.0 million of flight revenue, as compared to
$79.8 million during the three months ended May 31, 2004, resulting in a $25.2 million increase. The increase was primarily attributable
to a $21.0 million increase in revenues from USAF Air Mobility Command contracts.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | USAF Air Mobility Command Contracts 
Flight revenue earned by Airlines
under USAF Air Mobility Command contracts increased by $21.0 million during the three months ended May 31, 2005, as compared to the three
months ended May 31, 2004. During the three months ended May 31, 2004, our revenues from USAF Air Mobility Command contracts had declined because the
USAF Air Mobility Command had shifted away from the use of commercial aircraft in favor of using organic military transport for
movements of cargo directly into Iraq.  After May 31, 2004, the USAF Air Mobility Command shifted back to
utilizing some commercial aircraft for movements of cargo.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Commercial Contracts  During the three
months ended May 31, 2005, flight revenue from our commercial customers increased by $4.2 million as compared to the three months
ended May 31, 2004.
Increased utilization of our Boeing 747 fleet for commercial flights out of Asia accounted for a $6.2 million increase in commercial
flight revenue. However, those increases were partially offset by a $2.0 million decrease in flight revenue from our DC-9 fleet
due to the completion, during our previous fiscal year, of an air cargo contract with DHL.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  During the three months ended May 31, 2005, Helicopters generated $13.4 million of flight revenue, as compared
to $7.5 million during the three months ended May 31, 2004, resulting in a $5.9 million increase in revenue. Of the increase, $3.9 million
was attributable to new service contracts with the United Nations and additional long-term contracts with the United States Navy.
The remaining increase of $1.9 million was attributable to increased utilization of the Sikorsky S-64 "Skycrane" helicopter,
particularly for construction and air-lift services.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-36-



---

Sales of Aircraft, Parts,
and Other Property and Equipment  Revenue from sales of aircraft, parts, and other property and equipment was $11.2
million during the three months ended May 31, 2005, as compared to $2.3 million during the three months ended May 31, 2004, resulting
in an $8.9 million, or 387.0%, increase in sales revenue.

Approximately $7.6 million of
the increase in sales revenue was primarily
attributable to the following sales by our EASL segment to Ventures Acquisition Company during the three months ended May 31, 2005:

| |  | the sale of two Aerospatiale Model SA 330J rotor-wing
aircraft, with corresponding aircraft parts (collectively, the "Puma Aircraft") for an aggregate
sales price of $5.0 million; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the sale of a Sikorsky CH-54 rotor-wing aircraft, with corresponding
aircraft parts (collectively, the "CH-54 Aircraft") for an aggregate sales price of $2.4 million.                 

Because the sales prices of the Puma
Aircraft and the CH-54 Aircraft were the same as EASL's inventory costs for the aircraft, EASL did not
recognize any profit from the sales. Ventures Acquisition Company will lease the Puma Aircraft and the CH-54 Aircraft to
Helicopters under three-year lease agreements.  See "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item
1 of this quarterly report.

The remaining $1.3 million
increase in sales revenue was primarily attributable to increased sales of aircraft hulls, engines, and engine parts in our Air
Center segment.

Ground Handling and Logistics Services
Revenue  Our EAGLE segment generated $29.8 million of revenue from ground handling and logistics services during the three months ended
May 31, 2005, as compared $25.6 million during the three months ended May 31, 2004, resulting in a $4.2 million, or 16.4%, increase
in revenue.

| | Commercial Customers.
An increase in volume of services provided by EAGLE to its domestic and international commercial customers accounted
for $3.9 million of the increase in EAGLE's revenues.
In particular, an expansion in the volume of ground handling and logistics services provided by EAGLE to British Airways accounted
for $3.5 million of EAGLE's growth in revenue from its commercial customers.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

Support Services and Other
Revenue  Support services and other revenue was $16.8 million during the three months ended May 31, 2005, as compared
to $11.0 million during the three months ended May 31, 2004, resulting in a $5.8 million, or 52.7%, increase in revenue.

| |         
Air Center  An increase in the level of heavy aircraft maintenance, line maintenance, and aircraft storage services
provided by the Air Center to third parties resulted in a $5.0 million increase in support services revenue.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |         
Airlines An increase in the volume of air and ground transportation logistics services provided to third parties by a
division of our Airlines segment resulted in a $0.7 million increase in support services revenue.         
|
| |         
Helicopters An increase in the volume of non-flight helicopter support services provided to third parties by our
Helicopters segment resulted in a $0.1 million increase in support services revenue.                           

-37-



---

# Operating Expenses

Total operating expenses during the
three months ended May 31, 2005 were $160.3 million, which was a $36.6 million, or 29.6%, increase from $123.7 million of expense during
the three months ended May 31, 2004.

Flight Costs 
Flight costs were $19.4 million during the three months ended May 31, 2005, as compared to $17.5 million of expense during the
three months ended May 31, 2004, resulting in a $1.9 million, or 10.7% increase in expense.

| |         
Airlines  Flight costs for Airlines increased by $1.2 million, primarily as a result of increased commissions paid
on USAF Air Mobility Command contracts.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Increases in Expense.   The increased
flight activity for USAF Air Mobility Command contracts resulted in a $2.2 million increase in the amount of commissions that Airlines
paid on those contracts. Also, with the increased flight activity, crew costs and overfly charges increased by approximately
$0.6 million.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | Decreases in Expense.  The completion of a DHL
air freight services contract during the prior fiscal year resulted in current fiscal year reductions in travel costs (by
approximately $1.2 million) and DC-9 crew costs (by approximately $0.4 million).                                                              

| |         
Helicopters  Flight costs for Helicopters increased by $0.7 million, primarily due to the additional flight crew costs,
training costs, and travel expenses associated with an increase in the number of helicopter contracts for the current fiscal year,
as compared to the prior fiscal year.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fuel 
Fuel expense was $39.7 million during the three months ended May 31, 2005, as compared to $25.4 million of expense during the three
months ended May 31, 2004, resulting in a $14.3 million, or 56.3%, increase in fuel expense.

| |         
Airlines  Airlines' fuel expense increased by $14.5 million. Approximately $11.4 million of the increase in fuel expense was
attributable to sharply rising prices for aviation fuel within the commercial flight sector. Another $3.1 million
increase in fuel expense was attributable to an increase in the number of block hours flown by our aircraft. In comparison, fuel
expense for USAF Air Mobility Command missions did not significantly fluctuate because the pegged contract fuel rate for military flights is more favorable
than for commercial contracts.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

| |         
Helicopters  A $0.2 million decrease in Helicopters' fuel expense was primarily attributable to i) a change in our contracts
whereby many of our customers now assume direct responsibility for the purchase of aviation fuel and ii) the classification of
the cost of certain fuel sales by Helicopters to the line item "Cost of support services and other costs."
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Maintenance
  Aircraft maintenance expense was $17.9 million during the three months ended May 31, 2005, as compared to $17.7 million of expense
during the three months ended May 31, 2004, resulting in a $0.2 million, or 1.1%, increase in expense.

| |         Airlines
  Amortization expense for our DC-9 fleet decreased by approximately $0.4 million due to a decrease in flight activity in
the current fiscal year. The decrease in the DC-9 flight activity was primarily attributable to the termination of the DHL air freight contract
during the prior fiscal year.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  Maintenance expense for Helicopters' aircraft increased by approximately $0.6 million. The increase was primarily
attributable to an increase in start-up and configuration costs incurred during the current fiscal year, as compared to
the prior fiscal year.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-38-



---

Aircraft and Equipment
Expense  Aircraft and equipment expense was $12.4 million during the three months ended May 31, 2005, as compared to
$12.1 million of expense during the three months ended May 31, 2004, resulting in a $0.3 million, or 2.5%, increase in expense.

| |         
Airlines  Aircraft and equipment expense for our Airlines segment decreased by $1.0 million primarily as a result of:
i) a $0.3 million reduction in aircraft insurance costs, ii) a $0.4 million reduction in engine rental expense due to lower lease
rates and greater utilization of owned engines, and iii) a $0.3 million reduction in aircraft lease expense attributable to the
expiration of a DC-9 aircraft lease.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         
Helicopters  A $1.3 million increase in aircraft and equipment expense for our Helicopters segment was primarily
attributable to an increase in helicopter lease expenses.  The increase in helicopter lease expense is primarily attributable to
an increase in the number of aircraft resources that we need in order to service our long-term commercial contracts.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of Sales of Aircraft,
Parts, and Other Property and Equipment  Cost of sales of aircraft, parts, and other property and equipment was
$8.9 million during the three months ended May 31, 2005, as compared to $1.0 million of expense during the three months ended May 31, 2004,
resulting in a $7.9 million, or 790.0%, increase in cost of sales.

Approximately $7.6 million of
the increase in cost of sales was primarily attributable to sales by EASL of the Puma Aircraft and the CH-54 Aircraft to Ventures
Acquisition Company during the three months ended May 31, 2005. See "Operating Revenue - Sales of Aircraft, Parts, and Other Property
and Equipment" above and "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item
1 of this quarterly report.

Because the sales prices of the Puma
Aircraft and the CH-54 Aircraft were the same as EASL's inventory costs for the aircraft, EASL did not
recognize any profit from the sales. Ventures Acquisition Company will lease both the Puma Aircraft and the CH-54 Aircraft to
Helicopters under three-year lease agreements.  See "Operating Revenue - Sales of Aircraft, Parts, and Other Property
and Equipment" above and "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item
1 of this quarterly report.

The remaining $0.3 million
increase in cost of sales is primarily attributable to increased sales of aircraft and engine part-outs.

Cost of Ground Handling
and Logistics Services  Cost of ground handling and logistics services was $24.8 million during the three months ended
May 31, 2005, as compared to $21.8 million of expense during the three months ended May 31, 2004, resulting in a $3.0 million, or 13.8%,
increase in expense. The increase was primarily attributable to a $2.4 million increase in labor expense and a $0.8 million increase
in equipment expense attributable to expansion of services provided by EAGLE to British Airways and other commercial customers.

-39-



---

Cost of Support Services
and Other Support Costs
 Cost of support services and other revenue was $18.6 million during the three months ended May 31, 2005, as compared to
$10.7 million of expense during the three months ended May 31, 2004, resulting in a $7.9 million, or 73.8%, increase in support costs.
Cost of support services increased in the following areas:

| |  | approximately $1.6 million of the increase was attributable to increased landing fees and ground handling expenses for Airlines;                                                                       
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | approximately $5.6 million of the increase was attributable
to increased support costs for providing heavy aircraft maintenance, line maintenance, and aircraft storage services at the Air Center; and
| |  | approximately $0.9 million of the increase was attributable to other support costs for the provision of helicopter and
transportation logistics support services.                                      

Agriculture 
In comparison to the above increases in other support costs, Agriculture's cost of goods sold decreased by
$0.2 million during the three months ended May 31, 2005, as compared to the three months ended May 31, 2004, primarily as a result
of decreased sales of nursery plants.

Selling, General, and
Administrative  Total selling, general, and administrative expense during the three months ended May 31, 2005 was
$18.6 million, as compared to $17.5 million of expense during the three months ended May 31, 2004, resulting in a $1.1 million, or 6.3%
increase in expense. The increase was primarily attributable to increases in professional fees incurred for legal and consulting services.

-40-



---

# Interest Expense

Interest expense during the three
months ended May 31, 2005 was $9.4 million, which was a $0.4 million, or 4.4%, increase from $9.0 million of interest expense
during the three months ended May 31, 2004. The increase was primarily
attributable to higher interest rates being charged by the Company's lenders during the three months ended May 31, 2005, as compared
to the three months ended May 31, 2004.

# Other Non-Operating Expense and Income

During the three months ended
May 31, 2005, we recognized $0.5 million of other non-operating income, which was a $4.1 million increase in income from
$3.6 million of other non-operating expense during the three months ended May 31, 2004.

During the three months
ended May 31, 2004, we incurred $3.8 million of non-operating expense that was primarily attributable to loan prepayment penalties,
legal fees, and the write-off of unamortized loan acquisition costs which were incurred in conjunction with the full repayment and
termination of our revolving line of credit with PNC Bank, N.A. (PNC Bank) in May 2004. The expense was partially
offset by $0.2 million of gains realized on the sale of real property rights and farming equipment in our Agriculture segment.

# Income Tax Expense

Our income tax expense for the
three months ended May 31, 2005 was $2.8 million, as compared to an income tax benefit of $3.7 million for the three months ended
May 31, 2004. The increase in income tax expense was attributable to pre-tax income of $6.8 million for the three months ended May 31, 2005, as compared to a pre-tax
loss of $10.4 million for the three months ended May 31, 2004. The income tax expense for the three months ended May 31, 2005, and
the income tax benefit for the three months ended May 31, 2004 were both computed
at the statutory rate of 34.0% for federal tax and a blended rate of approximately 4.13% for state taxes.

The following table sets forth
the calculation of our income tax benefit (expense) for the three months ended May 31, 2005 and May 31, 2004:

|                                        |                    |        |   |       |         |  
|--------------------------------------- | ------------------ | ------ | - | ----- | ------- | -
|                                        | Three Months Ended
|                                        | May 31,           
|                                        |                   
|(in thousands)                          |                    | 2005   |   | 2004  |        
|                                        |                    |        |  
|Income (loss) before income taxes       | $                  | 6,812  |   | $     | (10,381 | )
|                                       
|Combined federal and state tax rates    | 38.13              | %      |   | 38.13 | %      
|                                        |                    |        |  
|"Expected" income tax benefit (expense) | (2,597             | )      |   | 3,958 |        
|                                       
|Other adjustments                       | (211               | )      |   | (237  | )      
|                                        |                    |        |  
|Income tax (expense) benefit            | $                  | (2,808 | ) | $     | 3,721   |  
|                                        |                    |        |  

-41-



---

# LIQUIDITY

At May 31, 2005, we had cash and cash equivalents of $1.1 million, as compared to cash and cash equivalents of $2.7 million at
February 28, 2005.

Cash Flows from Operating Activities

During the three months ended May 31, 2005, we generated $26.1 million of cash from our operating activities, as compared to $2.3
million of cash generated from operating activities during the three months ended May 31, 2004.

During the Three Months
Ended May 31, 2005 Net income of $4.0 million, non-cash depreciation and amortization expenses of
$16.8 million, an $8.1 million decrease in inventories, a $2.9 million increase in accounts payable, and a $2.8 million increase in
deferred income taxes accounted for most of our positive cash flow from operating activities during the three months ended May 31, 2005.
Non-cash minority interest expense and an increase in income taxes payable also increased cash flow by approximately $0.5 million.

The positive cash flow from
operating activities was partially reduced as a result of a $7.7 million increase in outstanding accounts receivable
balances and $1.0 million of increases in prepaid assets and receivables from affiliates.

During the Three Months
Ended May 31, 2004 In comparison, during the three months ended May 31, 2004, non-cash depreciation and amortization
expenses of $16.4 million and a $3.5 million write-off of unamortized loan acquisition costs accounted
for most of our positive cash flow from operating activities. Payments received on
accounts receivable from affiliates, decreases in inventories and prepaid expense accounts, and a
non-cash write-off of unamortized loan acquisition costs also increased cash flow by approximately $2.0 million.

The positive cash flow from
operating activities was partially reduced primarily as a result of i) our $6.7 million net loss for the three months ended May 31,
2004, ii) a $4.4 million increase in outstanding accounts receivable balances, iii) a $4.3 million decrease in accounts payable,
and iii) a $3.7 million increase in deferred income taxes.

Cash Flows from Investing Activities

During the three months ended May 31, 2005, we used $20.0 million of cash for investing activities, as compared to a use of $12.8
million of cash during the three months ended May 31, 2004.

During the Three Months
Ended May 31, 2005 
Purchases of aircraft parts and airframes, scheduled overhauls of engines, and upgrades and enhancements for our aircraft resulted
in a $21.2 million use of cash for capital expenditures. We also used approximately $1.4 million of cash for payment of deposits on
aircraft purchase agreements and other non-fixed assets. An increase in non-current agricultural products also accounted for an
approximate $0.5 million use of cash.

The uses of cash were partially
offset by i) $2.4 million of cash received as payments on notes receivable from affiliates, ii) $0.5 million of cash received
from the disposal of property and equipment, and iii) approximately $0.2 million of payments received on notes receivable.

As of the date of this report,
we have entered into agreements to purchase seven helicopters. As of the date of this report, total
commitments for the purchase of these aircraft is $46.9 million, of which $4.2 million of deposits have already been paid. We expect to finance
the purchase of these aircraft primarily through third-party or affiliate financing. See "Table of Contractual Obligations" below.

-42-



---

During the Three Months
Ended May 31, 2004 
Purchases of aircraft parts and airframes, scheduled overhauls of engines, and upgrades and enhancements for our aircraft resulted
in a $11.4 million use of cash for capital expenditures. We also used approximately $3.6 million of cash for payment of capitalized
loan acquisition costs and other non-fixed assets.

These uses of cash were slightly
offset by i) $1.6 million of payments received on notes receivable from affiliates and ii) $0.6 million of cash received from the
disposal of property and equipment during the three months ended May 31, 2004.

Cash Flows from Financing Activities

During the three months ended May 31, 2005, we used $7.7 million of cash in financing activities, as compared to $13.4 million of cash
provided from financing activities during the three months ended May 31, 2004.

During the Three Months
Ended May 31, 2005 During the three months ended May 31, 2005, we received approximately $0.4 million of cash proceeds
from long-term financing, and used approximately $8.1 million of cash for
payments on our Secured Credit Facility and various equipment purchase notes.

During the Three Months
Ended May 31, 2004 In comparison, during the three months ended May 31, 2004, we received approximately $222.2 million
of cash proceeds from long-term financing, and used approximately $205.6 million of cash for
payments on those long-term debt obligations.  In addition, we also made cash payments of approximately $3.2 million on various other
long-term instruments, which consist primarily of equipment purchase notes.

# CAPITAL RESOURCES

At May 31, 2005, our total
long-term debt balance was $299.4 million, which was a $7.7 million decrease from our long-term debt balance of $307.1 million at
February 28, 2005. Our long-term debt is comprised of a $215.0 million outstanding balance on the Indenture Notes, a $74.0 million
outstanding balance on the Secured Credit Facility, and outstanding balances of approximately $10.4 million on various equipment
purchase notes.

# Indenture Notes

The Indenture Notes were issued
by Aviation on May 16, 2003, pursuant to an Indenture agreement which was executed by Aviation, as
issuer, by Holdings and substantially all of the subsidiaries of Aviation, as guarantors, and by J.P. Morgan Trust Company, N.A., as
successor trustee to Bank One, N.A., as
trustee. The Indenture Notes are 12% senior second secured notes and were issued for their face value of $215.0 million.

The Indenture Notes are secured
by a second priority lien, subject to certain permitted liens, on substantially all of the assets of Aviation and its domestic
subsidiaries, excluding the assets of Agriculture and Evergreen Vintage Aircraft, Inc. ("Vintage"), a wholly-owned subsidiary of
Holdings. The Indenture Notes are designated as senior second secured obligations.  As a
result, the Indenture Notes rank equally with all of Aviations existing senior, or unsubordinated, debt, and are senior to
any of Aviations future senior subordinated or unsubordinated debt.

To the extent of assets securing
both the Indenture Notes and the Secured Credit Facility (see "Secured Credit Facility" below), the Indenture Notes are
effectively second in priority to our indebtedness under the Secured Credit Facility. However, to the extent of the assets securing
the Indenture Notes, the Indenture Notes are senior to our unsecured debt obligations. In addition, the Indenture Notes are fully and
unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviations subsidiaries, and the Trust.
The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Agriculture, Vintage,
and the foreign subsidiaries of the Company.

-43-



---

Interest Rate.
The Indenture Notes bear interest
at an annual fixed rate of 12%. Payments of interest are due semi-annually on May 15th and November 15th of each year. On May 13, 2005, we
made the semi-annual payment of accrued interest on the Indenture Notes in the amount of $12.9 million. We funded payment
of the accrued interest from our operations. The next semi-annual payment of
accrued interest on the Indenture Notes, in the amount of $12.9 million, is due and payable on November 15, 2005. We intend to fund
payment of the accrued interest from our operations.

Optional Redemption.
The Indenture Notes will
mature on May 15, 2010, at which time the outstanding principal of the Indenture Notes, plus all accrued and unpaid interest,
will become due. However, we may elect to redeem the Indenture Notes prior to the maturity date. The Indenture Notes are
 redeemable after the dates and at the prices (expressed in percentages of principal amount on the redemption date) as set forth below:

|If redeemed during the 12-month period commencing: | Redemption Price
|-------------------------------------------------- | ----------------

| | May 15, 2007                | 106 %
| | --------------------------- | -----
| | May 15, 2008                | 103 %
| | May 15, 2009 and thereafter | 100 %

In addition, at any time prior
to May 15, 2006, we may redeem, on one or
more occasions, up to 35% of the principal amount of the Indenture Notes with the net cash proceeds from sales of certain kinds of
capital stock at a redemption price of 112%, plus accrued and unpaid interest at the redemption date.

Repurchase of Notes
Upon Certain Asset Sales or a  Change in Control. If an Asset Sale or a Change of Control (as defined in the Indenture
 Notes) occurs, each holder of Indenture Notes
will have the right to require us to repurchase all or part of the holder's Indenture Notes at a price set forth in the Indenture
Notes.

Covenant Compliance.
  The Indenture Notes impose certain financial and non-financial covenant restrictions on Aviation and its restricted
subsidiaries. Such covenant restrictions include, but are not limited to, restrictions on our ability to:

| |  | incur additional debt or create liens;                       
|- |  | -------------------------------------------------------------
| |  | pay dividends or acquire shares of capital stock;            
| |  | make payments on subordinated debt or make investments;      
| |  | make distributions from restricted subsidiaries;             
| |  | issue or sell capital stock of restricted subsidiaries;      
| |  | issue guarantees;                                            
| |  | sell or exchange assets, or make capital expenditures;       
| |  | enter into transactions with shareholders and affiliates; and
| |  | effect mergers and other changes of control.                 

As of May 31, 2005, we were in
compliance with these covenants.

If Aviation or any of its restricted
subsidiaries violates any of these covenants and are unable to obtain waivers, we would be
in default under the Indenture Notes and the debt could be accelerated.

-44-



---

# Secured Credit Facility

On May 13, 2004, we
entered into the Secured Credit Facility with the Wells Fargo Lenders. The Secured Credit Facility is a three-year senior secured
credit facility that consists of two loans  a $50.0 million term loan and a $50.0 million revolving loan. The Secured Credit
Facility is collateralized by substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of
Agriculture and Vintage.

The Secured Credit Facility
 terminates in May 2007, at which time all outstanding amounts of principal, accrued and unpaid interest, and any other fees and
expenses owed under the Secured Credit Facility will be due and payable in full.

Interest Rates.The
 term loan bears interest at an annual rate of either LIBOR plus 5.5% or prime plus 3.0%, and the revolving loan bears interest at
 an annual rate of either LIBOR plus 3.0% or prime plus 0.5%. So long as we are not in default under the Secured Credit
 Facility, we may elect at any time to have interest on all or a portion of the advances on the revolving loan or the term
loan calculated under the applicable LIBOR interest rate option. LIBOR interest rate elections are available for LIBOR periods of
1, 2, 3, or 6 months. Interest on a LIBOR rate loan is payable on the last day of the LIBOR period (if the elected LIBOR period is
 less than three months) or on the last day of each three month interval (if the elected LIBOR period is six months). For any
portion of the term loan or revolving loan which is not covered by a LIBOR interest rate election, monthly
payments of accrued interest are due on the first day of each month.

Term Loan Advances.
The $50.0 million term loan was fully funded at the closing of the Secured Credit Facility. No additional advances are permitted
under the term loan at any time, and any principal amount of the term loan which is repaid or prepaid may not be reborrowed. We are
required to make payments of principal on the term loan in monthly installments of $0.5 million. Payment of the monthly
 principal installments commenced on June 1, 2004 and will continue on the first day of each succeeding calendar month throughout the
term of the Secured Credit Facility. Then, unless paid in full earlier, all outstanding principal and accrued and unpaid interest of
 the term loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

Revolving Loan Advances.
 During the term of the Secured Credit Facility, we may receive advances of principal on the revolving loan at any time.
 However, the outstanding principal of the revolving loan may not at any time be greater than an amount which is determined by reference
 to certain eligible receivables and eligible inventory of the Company. See Loan Balance and Availability below. We
may also make payments of principal on the revolving loan at any time. All outstanding principal and all accrued and unpaid interest of
 the revolving loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

Loan Balance and
Availability. As of May 31, 2005, the outstanding balance of the Secured Credit Facility was $74.0 million. Taking into
consideration the limitations on our ability to obtain additional advances of principal from the revolving loan
(see Revolving Loan Advances above) and the Minimum Availability Requirement (see "Covenant Compliance" below), as of
May 31, 2005, our availability under the Secured Credit Facility was $0.8 million.

-45-



---

Covenant Compliance.
We are subject to certain financial and non-financial covenants under the Secured Credit Facility. In addition to other requirements
that are set forth in such covenants, we are required to maintain: i) either a qualified cash reserve balance or an undrawn
availability on the revolving loan of not less than $5.0 million (the "Minimum Availability Requirement"),
 ii) minimum thresholds with respect to certain consolidated and non-consolidated EBITDA, and iii) a minimum ratio with respect to fixed
charge coverages.

The following are the required
covenant thresholds under the Secured Credit Facility for the twelve-month period ending May 31, 2005:

|Consolidated EBITDA Covenant  The covenant requires a consolidated
 EBITDA in a minimum amount of $100.0 million. As of May 31, 2005, we were in compliance with this covenant.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Airlines EBITDA Covenant  The covenant requires an EBITDA for
 Airlines in a minimum amount of $85.0 million. As of May 31, 2005, we were in compliance with this covenant.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Fixed Charge Coverage Covenant  The covenant
requires a fixed charge coverage in a minimum ratio of 1.15 to 1.00. As of May 31, 2005, we were in compliance with
this covenant.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the amount of
capital expenditures that we may make in any fiscal year is limited to $75.0 million, of which at least $10.0 million
 must be financed from sources other than the Secured Credit Facility. As of May 31, 2005, we were in compliance with the capital expenditures
 covenant.

If Aviation or any of its
restricted subsidiaries violates any of these covenants and are unable to obtain waivers from the Wells Fargo Lenders, we would be
in default under the Secured Credit Facility and the debt could be accelerated.

Notice and Waiver of Specified Events of Default under Secured
Credit Facility. On June 1, 2005, the Wells Fargo Lenders notified us that the Wells Fargo Lenders believed that we were
in violation of certain covenants of the Secured Credit Facility (the "Specified Events of Default"), as follows:

| | i)   |  | occurrence of a default at the final maturity, on April 29, 2005,
of the obligations under the FINOVA Note (defined below);
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------
|
| | ii)  |  | failure to maintain insurance on the Collateral (as defined in the Secured
Credit Facility);                               
|
| | iii) |  | making an unpermitted investment toward the purchase of two Boeing 747
airplanes (the "Designated 747s"); and              
|
| | iv)  |  | unauthorized use of the proceeds from advances under the Secured Credit
Facility to renovate the Designated 747s.          

The Wells Fargo Lenders further notified us that, as a result of the Specified Events of Default, the Wells
Fargo Lenders had elected to charge the default rate of interest, which, as set forth in the Secured Credit Facility, is a per annum
rate equal to 2 percentage points above the per annum rate otherwise applicable. The default rate of interest was charged
from April 29, 2005, the date on which the Wells Fargo Lenders asserted that a default had occurred under the FINOVA Note, until June
14, 2005, the date on which the Wells Fargo Lenders, by execution of the Amendment Number Two (as defined below) waived the
Specified Events of Default. At April 29, 2005, the per annum rates of interest on the Secured Credit Facility ranged from 6.09% to 8.75%.

-46-



---

On June 14, 2005,
we entered into an Amendment Number Two and Waiver to Loan and Security Agreement (the "Amendment Number Two") with the Wells Fargo
Lenders whereby the Wells Fargo Lenders agreed to waive the Specified Events of Default, and both parties agreed to amend the Secured
Credit Facility to allow the Company to maintain only all-risk ground insurance coverage for aircraft that the Company has grounded
and taken out of service.

Amendment Number Three to Secured Credit Facility. On July 11, 2005, Ventures Acquisition Company purchased the
Designated 747s. See "Landsbanki Loan Agreement" below. On the same day, we entered into an Amendment Number Three and Consent
(the "Amendment Number Three") with the Wells Fargo Lenders. Amendment Number Three amends the Secured
Credit Facility to allow Airlines to i) lease the Designated 747s from Ventures Acquisition Company
and ii) reimburse Ventures Acquisition Company for certain out-of-pocket transaction costs incurred by Ventures Acquisition Company
in connection with the purchase of the Designated 747s. In exchange, Mr. Smith pledged to Wells Fargo Foothill, Inc., as
administrative agent and for the benefit of the Wells Fargo Lenders, all of his rights, title, and interest in
Ventures Acquisition Company

# WCMA Loan Agreement

On August 12, 2003, EASL
entered into Working Capital Management Account Loan Agreement No. 54F-07164 (the WCMA Loan) with Merrill Lynch Business
 Financial Services, Inc. (Merrill Lynch) for the purpose of obtaining a $8.0 million reducing revolver credit facility. The WCMA
 Loan provides for a reducing revolver loan which is funded from a line of credit. EASL may repay the loan balance in whole or in part
 at any time without penalty, and may request a re-borrowing of amounts repaid on a revolving basis. The WCMA Loan does not require
 monthly payments of principal. However, on the last business day of each calendar month, the maximum amount of the line of credit
will be reduced by an amount equal to 1/60th of the loan amount. The WCMA Loan bears interest at the variable rate of LIBOR plus 3.00%
 and monthly payments of accrued interest are due and payable on the first business day of each
calendar month. The WCMA Loan shall terminate on August 31, 2008, at which time all outstanding unpaid principal and all accrued and
 unpaid interest shall be due and payable in full.

An amendment letter from
Merrill Lynch, dated May 12, 2004, established certain financial covenants for the WCMA Loan that
 are consistent with the financial covenants contained in the Secured Credit Facility. The amendment letter
established i) a schedule for fixed charge coverage ratios, to be measured on a quarter-end basis, ii) a $75.0 million maximum limit
on capital expenditures, of which, at least $10.0 million must be funded by indebtedness, and iii) a minimum EBITDA consolidated that
 must be achieved by the Company on a quarter-end basis. Specifically, the amendment letter adjusted the fixed charge coverage ratios
and minimum consolidated EBITDA requirements of the WCMA Loan to correspond with the fixed charge coverage ratios and consolidated
EBITDA requirements of the Secured Credit Facility. See Capital Resources  Secured Credit Facility above.

Covenant Compliance.
 As of May 31, 2005, we were in compliance with the covenants of the WCMA Loan. See "Capital Resources  Secured Credit
Facility" above.

-47-



---

FINOVA Note

In May 1997, the Trust entered into
a $30.0 million Secured Loan Agreement with FINOVA Capital Corporation (the "FINOVA Note"), with interest at the
annual rate of 10.44%. Monthly installments of principal and interest were payable through April 2005, at which time the FINOVA Note
matured with a final payment of approximately $2.5 million in principal, plus accrued interest, due upon maturity.

Effective April 29, 2005, the
Trust and FINOVA executed a Third Amendment Agreement to amend and extend the FINOVA Note (the "Third Amendment").  The Third
Amendment extends the maturity date of the FINOVA
Note to September 29, 2005, with the annual rate of interest remaining at 10.44%. Monthly installments of principal
and interest in the amount of $471,650 are scheduled through the extended maturity date, resulting in a full amortization of the
remaining outstanding principal balance. All outstanding principal and accrued, but unpaid interest, will be due upon maturity, as
extended.

The FINOVA Note
is secured by means of a first priority security interest granted to FINOVA in the one Boeing 747 aircraft and three DC-9 aircraft
owned by the Trust.

Intervest Note

On December 30, 2004, Vintage entered into a Construction Loan Agreement with Intervest-Mortgage Investment
Company ("Intervest") whereby Intervest agreed to loan to Vintage a sum total of $9.0 million for the purpose of financing Vintage's
construction of an IMAX theater on the Evergreen Museum Land. The Construction Loan Agreement is
further evidenced by a Promissory Note from Vintage to Intervest in the principal sum of $9.0 million (the "Intervest Note").

The Intervest
Note provides for an annual rate of interest equal to 1.00% in excess of the rate established for a Bank Prime Loan, as published
in the Federal Reserve Statistical Release H.15 (the "Index"). The interest rate on all sums advanced under the Intervest Note
shall be adjusted on the first
day of each month following the date that the Bank Prime Loan rate changes in the Index, with such interest rate to be equal to 1.00%
in excess of the week-ending average rate established for the Bank Prime Loan, as published in the Index.  However, the interest rate
shall never be less than 5.75% per annum. Accrued interest on the outstanding balance of sums advanced under the Intervest Note
shall be due and payable on the first day of each month. In addition, following any default in the payment of interest under the
Intervest Note, or any default under any of the other
documents executed in connection with or to secure the Intervest Note (the "Loan Documents") and expiration of the applicable cure
period, Intervest may elect to (i) declare the Intervest Note due and payable, and/or (ii) increase the rate of interest payable
under the Intervest Note by three percent (3.00%) per annum.

The entire principal
balance and any accrued, but unpaid, interest on the Intervest Note shall be due and payable on January 1, 2006.  However, so long as
Vintage is not in default under the provisions of the Construction Loan Agreement, Vintage may elect to extend the maturity date of
the Intervest Note to July 1, 2006. Vintage may exercise its right to extend the maturity date by providing Intervest with at least
30 days prior written notice and paying  to Intervest the amount of $67,500 in consideration for the extension period.  In addition,
Vintage may, at any time, prepay the whole or any part of the Intervest Note without penalty.

Vintage's obligations under the Intervest Note and Construction Loan Agreement are secured by a security interest in i) the
Evergreen Museum Land, the Evergreen Aviation Museum Building, and the tangible personal property owned by Vintage which is located
on or in the Evergreen Museum Land and the Evergreen Aviation Museum Building, ii) a pledge of all rents arising out of the operation
of the Evergreen Museum Land and the Evergreen Aviation Museum Building, and iii) the aircraft owned by Vintage.
In addition, Mr. Smith has guaranteed payment of the amounts due under the Intervest Note and Construction Loan Agreement.

Intervest has agreed, subject to certain conditions, to provide permanent financing for the theater following the completion of the
theatre's construction.

-48-



---

Landsbanki Loan Agreement

On July 11, 2005, Holdings, as Guarantor, and Ventures Acquisition Company, as Borrower, entered into
a $32.0 million Loan Agreement (the "Landsbanki Loan Agreement") with Landsbanki Íslands hf., as Lender, for the purpose of financing Ventures Acquisition Company's purchase of the
Designated 747s.

The Landsbanki
Loan Agreement bears interest at an annual rate of LIBOR plus 2.3%. The applicable LIBOR rate is determined by reference to
LIBOR periods of 30 days. Interest shall accrue daily and is payable monthly, with the applicable LIBOR rate
being determined at the beginning of each monthly payment period.  However, if an Event of Default (as defined in the Landsbanki Loan
Agreement) has occurred and continuing, then the Landsbanki Loan Agreement shall bear interest at a rate that is 2% per annum higher
than the otherwise applicable rate. Monthly installments of principal and accrued interest in
the amount of $680,000 per installment are due and payable on the 11th day of each month through the maturity date. The Landsbanki Loan
Agreement will mature on July 11, 2010, at which time all outstanding principal and accrued, but unpaid, interest will be due and
payable.

The Landsbanki
Loan Agreement contains certain restrictions on Holdings' ability to i) effect mergers and other changes of control and ii) enter
into transactions with its affiliates.  In addition, the Landsbanki Loan Agreement provides that, among other events, a default under
either of the leases of the Designated 747s (see "Lease Transactions" in "Note 11 - Related Party Transactions" in Item 1 of this
quarterly report) shall consitute
a default under the Lanksbanki Loan Agreement.

As Guarantor,
Holdings has guaranteed all obligations of Ventures Acquisition Company under the Landsbanki Loan
Agreement. Holdings' obligations as Guarantor under the Landsbanki Loan Agreement are absolute and unconditional.

# Risk of Default on Debt Obligations

Substantially all of our assets
are pledged as collateral under the Companys various debt agreements. Furthermore, the Indenture Notes and the
Secured Credit Facility both contain cross-default provisions whereby an event of default under one or more debt obligations of either
 Aviation or its restricted subsidiaries would also result in an event of default under either, or both, the Indenture Notes and the
Secured Credit Facility. In the event that we are unable to cure such defaults or obtain waivers with respect to such defaults,
we are at risk that our payment obligations under either, or both, the Indenture Notes and the Secured Credit
Facility will be accelerated, thereby forcing us to either obtain alternative financing or seek legal protection from our
creditors.

-49-



---

Table of Contractual Obligations

The following table summarizes
our contractual obligations as of May 31, 2005:

|                                |                                    |      |      |   |      |  |      |      |      |   |            |  |       |       |  |   |     |  |   |       | 
|------------------------------- | ---------------------------------- | ---- | ---- | - | ---- |  | ---- | ---- | ---- | - | ---------- |  | ----- | ----- |  | - | --- |  | - | ----- | 
|Contractual Obligations        
|(in millions)                  
|                               
|                                | Payments Due by End of Fiscal Year
|                                |                                   
|                                | 2006                               |      | 2007 |   | 2008 |  | 2009 |      | 2010 |   | After 2010 |  | Total |      
|                                |                                   
|Long-term debt obligations      | $                                  | 10.3 |      | $ | 8.8  |  | $    | 64.3 |      | $ | 0.9        |  | $     | 215.1 |  | $ | -   |  | $ | 299.4 | 
|including current maturities   
|and capital leases             
|Operating lease obligations
(1) | 16.9                               |      | 18.0 |   | 11.3 |  | 7.5  |      | 5.3  |   | 5.8        |  | 64.8  |      
|Purchase obligations
(2)        | 18.1                               |      | 24.6 |   | -    |  | -    |      | -    |   | -          |  | 42.7  |      
|Other obligations
(3)           | 2.2                                |      | 3.0  |   | 3.0  |  | 3.0  |      | 3.0  |   | 3.8        |  | 18.0  |      
|                                |                                    |      |      |   |      |  |      |      |      |   |            |  |      
|Totals                          | $                                  | 47.5 |      | $ | 54.4 |  | $    | 78.6 |      | $ | 11.4       |  | $     | 223.4 |  | $ | 9.6 |  | $ | 424.9 | 
|                                |                                    |      |      |   |      |  |      |      |      |   |            |  |      

|(1) |  | Total operating lease obligations of $64.8 million include $11.6
million of lease obligations to entities owned by, or controlled by Mr. Smith, the Company's controlling shareholder.                                                                                                    
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Purchase obligations consist of the purchase prices of $25.0
million for three Bell AB139 helicopters, $7.9 million for one Bell AB139 helicopter, $1.3 million for one Bell 206 L-4 helicopter,
and $12.7 million for two Bell 412EP IFT helicopters, less deposits paid of $4.2 million.
|   
|(3) |  | Other obligations consist primarily of the annual salary and
bonus to be paid to Mr. Smith pursuant to the Delford M. Smith Employment Agreement.                                                                                                                                         

|       
|-------
|ITEM 3.

Interest Rate Risk

As of May 31, 2005, we had
fixed rate debt of $219.7 million and variable rate debt of $79.7 million. Based on the outstanding balances at May 31, 2005, each 1%
increase or decrease in the interest rate of our variable rate debt would increase or decrease our annual interest expense by
approximately $0.8 million.  A 1% increase in interest rates would decrease the fair market value of our Indenture Notes
by approximately $2.2 million.  We have not entered into any obligations for trading purposes.

Foreign Currency Exchange Rate Risks

Although some of our revenues
are derived from foreign customers, substantially all of our revenues and expenses are denominated in U.S. dollars.  We maintain
minimal balances in foreign bank accounts to facilitate payments of expenses.

-50-



---

Commodity Price Risks

We are exposed to commodity
price risk with respect to the purchase of aviation fuel.  However, fluctuations in the price of fuel have not had a significant
impact on our results of operations in recent years because, in general, the fuel price adjustment clauses in our customer contracts
limit our exposure to increases in fuel prices.  We do not enter into, or purchase any fuel under, long-term fuel contracts, nor do
we enter into futures or swap contracts.

We are not exposed to any
other commodity price risk.

|       
|-------
|ITEM 4.

Disclosure Controls and Procedures

The Company's management, with
the participation of the Company's principal executive officer and principal financial officer, has evaluated the effectiveness of
the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report.  Based on such evaluation,
the Company's principal executive officer and principal financial officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis,
information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and are
effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company's management, including the Company's principal executive officer and
principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As a result of the Company's
need to restate its financial statements for the fiscal year ended February 29, 2004,
the Company retained a certified public accounting firm (the "Internal Audit Consultants") to provide certain internal audit
services to the Company. The Internal Audit Consultants interfaced with the registered independent public accounting firm during both the
audit of the Company's financial statements for the fiscal year ended February 28, 2005 and the period covered by this report, and
have performed analyses of major accounts included in the Company's financial statements. Although the Company was not able to file its
Annual Report on Form 10-K for the fiscal year ended February 28, 2005 on the original due date, the Company believes that initiating the
internal audit function improved the Company's effectiveness in recording, processing, summarizing and reporting financial information.
In addition, the Company believes that the internal audit function, and the account analyses performed at, and for, both the fiscal year
ended February 28, 2005 and the period covered by this report, will positively affect the Company's internal control over financial
reporting, and will enhance the Company's ability to meet its future reporting requirements in a timely manner.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) during the fiscal quarter ended May 31, 2005 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over financial reporting.

-51-



---

PART II.  OTHER INFORMATION

|       
|-------
|ITEM 1.

The Company is currently
involved in certain legal proceedings as discussed below.

# Banc of America

We are a defendant
in Banc of America Securities LLC v. Evergreen International Aviation, Inc. et al., which was filed on May 22, 2003 in the
Superior Court of the County of Meeklenburg in the State of North Carolina. Banc of America has alleged claims for breach of contract
and quantum meruit, arising out of agreements in which Banc of America agreed to act as our financial agent in
exchange for the payment of certain fees. The plaintiff has not yet specified an amount for damages.

We filed a motion to
dismiss for lack of jurisdiction, but a ruling was issued on April 19, 2005 by the North Carolina Court of Appeals denying our motion.
We are currently pursuing trial in the North Caroline Business Court and discovery is in the early stages.

# Asiana Airlines

On January 28, 2000,
we entered  into a contract with Asiana Airlines (Asiana) whereby we agreed to provide air freight services
to Asiana in exchange for minimum payments to be made by Asiana throughout the term of the contract. The minimum payments were
based on guaranteed block hour utilization and the contract was to continue through February 28, 2003. On August 28, 2001, Asiana
notified us that Asiana would not make any further payments under the contract.

On September 19, 2001,
we filed proceedings in the United States District Court for the District of Oregon against Asiana to recover amounts owed by
Asiana to us pursuant to the contract. On February 28, 2003, a jury returned a verdict in our favor and awarded damages of $16.6
million, and Asiana subsequently filed a motion for judgment as a matter of law.  The district court denied the motion and
Asiana appealed the judgment to the United States Ninth Circuit Court of Appeals.

On June 20, 2005, a three-judge
panel of the United States Court of Appeals for the Ninth Circuit affirmed in all respects the judgment of the district court. In its
decision, the Ninth Circuit rejected Asiana's arguments that the damage award should be reversed, holding that the District
Court properly instructed the jury on the measure of Evergreen's damages and that Evergreen provided extensive evidence of its
damages in accordance with Oregon law.

On July 11,
2005, the Ninth Circuit issued a mandate returning the action to the District Court. It is anticipated that the District Court will,
upon conclusion of proceedings, order the disbursement to Evergreen of the full amount of damages, in addition to costs and
interest, from the amount that Asiana previously deposited in the District Court's bank account.

-52-



---

# Ducor Express Airlines

On February 25, 2005, Ducor
Express Airlines, Inc. ("Ducor") filed a claim against Airlines for breach of contract (the "Action") in the Supreme Court of New
York, County of Queens (the "Court"). Ducor sought damages of $41.7 million against Airlines in regard to certain agreements between
the parties wherein Airlines was to provide charter cargo flights from Hong Kong, China to Los Angeles, California during September 2004 through
November 2004 (collectively, the "Charter Agreements"). On March 21, 2005, Airlines filed a counterclaim against Ducor in regard to the
Charter Agreements.

On July 6, 2005, the parties
executed a Settlement Agreement whereby Ducor and Airlines i) agreed to file with the Court a stipulation of discontinuance of the
Action with prejudice and ii) agreed to release and discharge the other from any and all claims and liabilities with respect to the Action.

|       
|-------
|ITEM 6.

A list of exhibits that are
filed as part of, or incorporated by reference into this Quarterly Report on Form 10-Q are set forth below.

|Exhibit No. |  | Description of Document
|----------- |  | -----------------------
|           

| | 10.1 | *               | Amendment Number Three and Consent, dated July 11, 2005, by and between the
lenders identified on the signature pages thereof (the "Lenders"),
Wells Fargo Foothill, Inc., as the arranger and administrative agent for the Lenders, and
Evergreen International Aviation, Inc. and each of its Subsidiaries that are signatories thereto, as Borrowers.
| | ---- | --------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10.2 | *               | Loan Agreement, dated July 11, 2005, between Ventures Acquisition Company,
LLC, as Borrower, Evergreen Holdings, Inc., as Guarantor, and Landsbanki Íslands hf., as
Lender.                                                                                                                                                                             
|
| | 10.3 | *               | Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company,
LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23286.                                                                                                                                                          
|
| | 10.4 | *               | Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company,
LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23287.                                                                                                                                                          
|
| | 31.1 | *               | Certification of President pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                        
|
| | 31.2 | *               | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                          
|
| | 32.1 | *               | Certification of President and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                        
|
| | *    | Filed herewith.

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---

Table of Contents

# SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| | EVERGREEN HOLDINGS, INC.
(Registrant)
| | -------------------------------------
|

|                    
|--------------------
|                    
|Date:  July 15, 2005
|                    
|                    
|Date:  July 15, 2005

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---

Table of Contents

# EXHIBIT INDEX

|Exhibit No. |  | Description of Document
|----------- |  | -----------------------
|           

| | 10.1 | *               | Amendment Number Three and Consent, dated July 11, 2005, by and between the
lenders identified on the signature pages thereof (the "Lenders"),
Wells Fargo Foothill, Inc., as the arranger and administrative agent for the Lenders, and
Evergreen International Aviation, Inc. and each of its Subsidiaries that are signatories thereto, as Borrowers.
| | ---- | --------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10.2 | *               | Loan Agreement, dated July 11, 2005, between Ventures Acquisition Company,
LLC, as Borrower, Evergreen Holdings, Inc., as Guarantor, and Landsbanki Íslands hf., as Lender.                                                                                                                                                                             
|
| | 10.3 | *               | Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company,
LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23286.                                                                                                                                                          
|
| | 10.4 | *               | Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company,
LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23287.                                                                                                                                                          
|
| | 31.1 | *               | Certification of President pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                        
|
| | 31.2 | *               | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                          
|
| | 32.1 | *               | Certification of President and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                        
|
| | *    | Filed herewith.

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