| | As filed with the Securities and Exchange Commission on December 27, 2002 | Registration
No. 333-5650
| | ------------------------------------------------------------------------- | -------------------------

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SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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FORM 20-F

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|(Mark One) | 
|---------- | 

||__| | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
        SECURITIES EXCHANGE ACT OF 1934
|---- | ------------------------------------------------------------------------------------------------------

| | OR
| | --

|| X | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
|----- | --------------------------------------------------------------------------------------------

| | For the Fiscal Year Ended June 30, 2002
| | ---------------------------------------

||__| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
|---- | ------------------------------------------------------------------------------------------------

Commission file number 333-5650AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
            (Exact name of Registrant as specified in its charter)
                           JERSEY, CHANNEL ISLANDS
               (Jurisdiction of incorporation or organization)Forum House
                               Grenville Street
                              St. Helier, Jersey
                           JE2 4UF Channel Islands
                   (Address of principal executive offices)

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Securities registered or to be registered pursuant to Section 12(b) of the Act: None
  Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. 
                               (Title of Class)

ALPS 96-1 Pass Through Trust $245,673,000 Class A Pass Through Certificates, Series A
ALPS 96-1 Pass Through Trust $56,868,750 Class B Pass Through Certificates, Series A
ALPS 96-1 Pass Through Trust $50,044,500 Class C Pass Through Certificates, Series A
ALPS 96-1 Pass Through Trust $40,945,500 Class D Pass Through Certificates, Series A

Indicate the number of
outstanding shares of each of the issuers classes of capital or Ordinary
Shares as of the close of the period covered by the annual report. 
              
              
              
Shares, $1 par value...........................................................................  10
        
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

| | Yes    | X |        
No     |__| | 
| | -------------------------------- | 

Indicate
by check mark which financial statement item the registrant has elected to
follow.

| | Item 17    |__|       
 Item 18    | X | | 
| | ---------------------------------------- | 

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`Page
                                                                          ----
Introduction
            Definitions and Technical Terms.......................           1
            Forward-Looking Statements............................           1
            Certain Information...................................           1

Part I      Item 1.  Identity of Directors, Senior Management and Advisors   1
                     A. Directors and Senior Management...........Not applicable
                     B. Advisors..................................Not applicable
                     C. Auditors..................................Not applicable

            Item 2.  Offer Statistics and Expected Timetable......           2
                     A. Offer Statistics..........................Not applicable
                     B. Method and Expected Timetable.............Not applicable

            Item 3.  Key Information..............................           2
                     A. Selected Financial Data...................           2
                     B. Capitalization and Indebtedness...........Not applicable
                     C. Reasons for the Offer and Use of Proceeds.Not applicable
                     D. Risk Factors..............................           3

            Item 4.  Information on the Company...................          24
                     A. History and Development of the Company....          24
                     B. Business Overview.........................          25
                     C. Organizational Structure..................          35
                     D. Property, Plants and Equipment............          35

            Item 5.  Operating and Financial Review and Prospects.          35
                     A. Operating Results.........................          35
                     B. Liquidity and Capital Resources...........          44
                     C. Research and Development, Patents and Licenses
Not applicable
                     D. Trend Information.........................          48

            Item 6.  Directors, Senior Management and Employees...          49
                     A. Directors and Senior Management...........          49
                     B. Compensation..............................          53
                     C. Board Practices...........................          53
                     D. Employees.................................          54
                     E. Share Ownership...........................          54

            Item 7.  Major Shareholders and Related Party Transactions      54
                     A. Major Shareholders........................          54
                     B. Related Party Transactions................          55
                     C. Interests of Experts and Counsel..........Not applicable

            Item 8.  Financial Information........................          55
                     A. Consolidated Statements and Other Financial
                        Information...............................          55
                     B. Significant Changes.......................          55

            Item 9.  The Listing..................................          55`

I

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`A. Listing Details...........................          55
                     B. Plan of Distribution......................Not applicable
                     C. Markets...................................          55
                     D. Selling Shareholders......................Not applicable
                     E. Dilution..................................Not applicable
                     F. Expenses of the Issue.....................Not applicable

            Item 10.    Additional Information....................          56
                     A. Share Capital.............................Not applicable
                     B. Articles of Association...................          56
                     C. Material Contracts........................          60
                     D. Exchange Controls.........................          60
                     E. Taxation..................................          60
                     F. Dividends and Paying Agents...............Not applicable
                     G. Statement by Experts......................Not applicable
                     H. Documents on Display......................          61
                     I. Subsidiary Information....................Not applicable

            Item 11.    Quantitative and Qualitative Disclosures
                        about Market Risks........................          61

            Item 12.    Description of Securities other than
                        Equity Securities.........................Not applicable

Part II     Item 13.    Defaults, Dividend Arrearages and Delinquencies     63

            Item 14.    Material Modifications to the rights of Security
                        Holders and use of Proceeds...............          65

            Item 15. .............................................Not applicable

            Item 16. .............................................Not applicable

Part III    Item 17. .............................................Not applicable

            Item 18.    Financial Statements......................          65

            Item 19.    Exhibits..................................          65

            Certain Definitions and Technical Terms...............          66`

II

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INTRODUCTION

Definitions and Technical Terms

This
annual report on Form 20-F uses defined terms and technical terms. Definitions
for these terms can be found on pages 66 to 72 of this annual report.

Forward-Looking Statements

This
annual report contains forward-looking statements that involve risks and
uncertainties. In most cases, you can identify forward-looking statements by
terminology such as may, should, expects,
plans, anticipates, believes,
estimates, predicts, potential or
continue or the negative of such terms or similar terminology. Such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and actual results may differ materially from those in
the forward-looking statements. In evaluating these statements, you should
specifically consider various factors, including, without limitation, the
information contained in this annual report under Item 3 - Key
Information  Risk Factors, Item 4 - Information on the
Company and Item 5 - Operating and Financial Review and
Prospects.

Certain Information

Aircraft
Lease Portfolio Securitisation 92-1 Limited was incorporated in Jersey on May
13, 1992 (registered number 52674) as a private limited company under the laws
of Jersey and became a public limited company pursuant to a special resolution
passed on June 15, 1992. As used in this annual report on Form 20-F,
we, us, our and the Company
refer to Aircraft Lease Portfolio Securitisation 92-1 Limited and its
subsidiaries, except where it is clear that such terms mean only Aircraft Lease
Portfolio Securitisation 92-1 Limited, and you and your
refer to the holders of Notes.

In
this annual report, references to United States are to the United
States of America and references to U.S. dollars, $ or
U.S. $ or U.S.D are to United States dollars.

PART I

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

|A. | Directors and Senior Management Not Applicable.
|-- | -----------------------------------------------

|B. | Advisors Not Applicable.
|-- | ------------------------

|C. | Auditors Not Applicable.
|-- | ------------------------



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ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

|A. | Offer Statistics Not Applicable.
|-- | --------------------------------

|B. | Method and Expected Timetable Not Applicable.
|-- | ---------------------------------------------

ITEM 3.     KEY INFORMATION

A.    Selected Financial Data

The
following table summarizes selected consolidated financial data and operating
information of the Company drawn from our audited financial statements. The
financial statements for each of the fiscal years ended June 30, 1998 through
2002 have been prepared in accordance with U.S. GAAP and audited by KPMG,
independent chartered accountants. The selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements and
notes thereto and Item 5  Operating and Financial Review and
Prospects - Operating Results.

Selected Consolidated Financial Data and Operations Information

`FISCAL YEAR ENDED (1)
                                    June 30    June 30   June 30   June 30  June 30,
                                      2002       2001      2000      1999     1998
OPERATIONS STATEMENT DATA:
Lease Revenue - Aircraft Leasing    $32,605    $37,948   $43,087   $47,373   $47,972
Gain/(Loss) on sale of Aircraft           -          -       284    (1,905)        -
                                    --------  ---------  --------  -------- --------
Net Revenue                          32,605     37,948    43,371    45,468    47,972
Net Expenses                        (63,370)   (90,984)  (52,680)  (52,993)  (59,286)
                                    --------  ---------  --------  -------- --------
Loss before taxes                   (30,765)   (53,036)   (9,309)   (7,525)  (11,314)
Taxes                                   (24)       (20)      (20)      (20)      (15)
Dividend                                  -          -         -         -        (2)
                                    --------  ---------  --------  -------- --------
Net Loss                           $(30,789)  $(53,056)  $(9,329)  $(7,545) $(11,331)
                                    --------  ---------  --------  -------- --------

BALANCE SHEET DATA:
Total assets                       $254,987   $291,244  $340,876  $380,849  $405,694
Total liabilities                  $388,273   $393,741  $390,317  $420,961  $438,261
Shareholders' deficit             $(133,286) $(102,497) ($49,441) $(40,112) $(32,567)
OTHER DATA
Aircraft owned at period end             11         11        11        13        13`

______________________
(1)   All dollar amounts are listed in thousands.

|B. | Capitalization and Indebtedness Not Applicable.
|-- | -----------------------------------------------

2

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|C. | Reasons for the Offer and Use of Proceeds Not Applicable.
|-- | ---------------------------------------------------------

|D. | Risk Factors
|-- | ------------

The
following summarizes certain risks which may materially affect our ability to
pay interest, principal and premium, if any, on the Notes in full at or before
their respective final maturity dates.

The
risks and uncertainties described below are not the only ones facing our
company. Additional risks and liabilities that we are not aware of at present,
or that we believe today are immaterial, may also impair our business
operations. Our business, financial condition and results of operations could be
materially adversely affected by any of these risks. If any of the following
risks actually occur, we may not be able to make the required payments on the
Notes.

Recent Developments

Continued
negative trends caused by the depression in the aviation industry have adversely
affected our lessees and our ability to sell and lease aircraft and thereby have
adversely affected our revenue.

In
the fiscal year ended June 30, 2002 and in the subsequent period to date, we
have continued to suffer from a very difficult business environment given global
economic conditions as exacerbated by the terrorist attacks of September 11,
2001 and the subsequent and continuing political and economic fallout. The
airline industry has yet to recover from the terrorist attacks and subsequent
temporary suspension of airline flights in the United States and the world wide
depression in air travel. These events highlighted the deteriorating business
fundamentals in the industry that have been further weakened by passengers
fears and economic recession. Losses of $11 billion were estimated for the
global airline industry in calendar year 2001, the largest losses in aviation
history, with losses in calendar year 2002 expected to reach $7.5 billion. Most
of the losses of 2001 came in the weeks and months following the attacks when
the temporary suspension of all flights in the United States and the
publics fear of flying sent industry load factors to historic lows.

The
impact of these events has been seen in most airlines cutting their flight
schedules with many taking the opportunity to retire aircraft from service.
Industry experts indicate that the percentage of western built commercial jet
aircraft (excluding current production) on-the-ground and available
for lease or sale has increased from approximately 3% in the late 1990s to
approximately 6% in 2002. In addition, many carriers chose to postpone delivery
of new aircraft purchases on which they had made firm commitments and canceled
orders for many on which they had options. Some carriers have filed for
bankruptcy or consolidated, while others, including many of our lessees, have
suffered large losses or face severe financial difficulties. There is a
significant increase of aircraft on the market available for sale or lease
(especially older technology and less fuel-efficient aircraft or models no
longer in production), increasing pressure on the rentals and sales prices
offered. The depressed aircraft market has made it difficult to sell aircraft at
reasonable prices. Lease rates have also been suffering from the increase in
availability of aircraft and this reduction in aircraft values. As a result, we
have experienced increased time between redelivery and re-leasing of aircraft, a
decline in lease rates upon re-leasing or extensions of leases, requests from
certain lessees to restructure their leases, deferrals or early returns of
aircraft and an increasing number of power-by-the-hour leases in
which lease rates are based on the number of hours the lessee uses the aircraft.
Our business has been adversely affected by these negative developments in the
industry, particularly in respect of new aircraft leases which have mostly been
based on power-by-the-hour terms and the increased negotiating power
by lessees to, among other things, require that

3

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certain aircraft maintenance and
overhaul costs be paid by the Company. As a result of the loss of investor
appetite for aircraft on operating lease, the sales prices of aircraft have
declined. There have been few aircraft sale transactions that we are aware of in
the past twelve months and this has had an adverse affect on sales prices
generally. The sales prices we received for the aircraft we sold in the period
subsequent to June 30, 2002, in our efforts to comply with our requirement to
satisfy the Trust Note Sales Goals, reflected the industry wide decline in sales
prices for older aircraft.

There
are indications that air-traffic figures are beginning to improve (although at
this time industry commentators do not expect pre-September 11, 2001 levels to
be reached again until 2004 at the earliest). However, in spite of traffic
trends improving, yields remain weak.

In
fiscal year 2000, we determined that projected lease and sale proceeds combined
with lease and sale proceeds received indicated that proceeds expected through
to the final maturity dates of the Notes would not be sufficient to repay the
Class E Notes in full and may not be sufficient to repay the Class D Notes in
full. Recognizing this projected shortfall and the potential for further
deterioration in lease rates and sale values for older aircraft, we considered
the limited alternatives available to us, given the restrictions imposed by the
Deed of Charge on the Companys operations, to maximize the proceeds
available to pay noteholders the amounts owing to them at the time such amounts
become due. With the assistance of the Servicer, we solicited bids for a sale of
our aircraft portfolio.

By
September 11, 2001, we were in advanced negotiations for a sale of the Company
to a prospective purchaser that would have, if consummated, resulted in payment
of all amounts owing to the Class A, Class B and Class C noteholders and all
amounts owing to the Class D noteholders except make-whole premium. As a result
of the terrorist attacks of September 11, 2001 and the resulting disruption to
the economy generally and the airline industry specifically, the prospective
purchaser initially put these negotiations on hold and ultimately informed us
that they were no longer interested in purchasing the portfolio. Assuming we
were able to find another prospective purchaser, we do not believe that the
terms we negotiated prior to September 11, 2001 would be achievable at this time
given the current condition of the airline industry. Further, because the sale
values of most older aircraft have declined so significantly and with respect to
certain aircraft models there is currently no sales market, it is likely we will
continue to have difficulty satisfying the Trust Note Sales Goals.

This
difficult business environment has already had serious adverse implications for
our revenue, and consequently for our ability to pay noteholders certain amounts
due. At various times during fiscal year 2002, certain target principal payments
scheduled to be paid to holders of Class A and Class D Notes, certain interest
payments due to holders of Class A and Class D Notes and certain interest
payments scheduled to be paid to holders of Class E Notes were in arrears. As at
the end of fiscal year 2002, these arrears consisted of $0.068 million of Class
A Note step-up interest, $0.320 million of Class D Note default interest and
$36.068 million of Class E Note interest. As of December 16, 2002, the unpaid
amounts consisted of $0.549 million of Class A Note Target Amount, $0.302
million of Class A Note step-up interest, $1.338 million of Class B Note Target
Amount, $0.100 million of Class B Note step-up interest, $2.720 million of Class
C Note Target Amount, $0.089 million of Class C Note step-up interest, $2.226
million of Class D Note Target Amount, $0.275 million of Class D Note interest,
$0.320 million of Class D Note default interest, $0.142 million of Class D Note
step-up interest and $40.268 million of Class E Note interest.

Re-evaluation
of our Notes by the rating agencies has resulted in downgrades to our Class A,
Class B, Class C and Class D Notes and could result in some or all of these
Notes being further downgraded by one or both of the rating agencies.

4

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On
March 21, 2002, Standard & Poors downgraded our Class D Notes from a
rating of BB- to B+ and indicated that our Class A,
Class B, Class C and Class D Notes remained on creditwatch with negative
implications.

On
November 15, 2002, Standard & Poors announced that it was lowering its
ratings on each of the Companys classes of Notes rated by Standard &
Poors and removing them from creditwatch. The Standard & Poors
downgrades announced on November 15, 2002 are as follows:

`Class      To                 From
       A         A+            AA/Watch Neg
       B         BBB+           A/Watch Neg
       C         BB-          BBB/Watch Neg
       D         CCC+          B+/Watch Neg`

On November 15, 2002,
Moodys announced that it was lowering its ratings on each of the
Companys classes of Notes rated by Moodys. The Moodys
downgrades announced on November 15, 2002 are as follows:

`Class    To                                            From

 A       Aa3                                  Aa2/Review for Possible Downgrade
 B       Baa3/Review for Possible Downgrade   A2/Review for Possible Downgrade
 C       Caa1                                 Baa2/Review for Possible Downgrade`

Copies of the announcements
of these downgrades by Standard & Poors and Moodys may be viewed
at their respective web sites.

We
were unable to repay any of the Notes by their expected final payment date and
current projections indicate that we will not have sufficient funds to pay any
further step-up interest on any of the Notes, any further principal of or
interest on the Class D and Class E Notes or to repay the principal of the Class
C Notes in full.

The
September 11, 2001 terrorist attacks on the United States have had a significant
adverse effect on the aircraft industry in general and on the Company. This
event combined with the slowdown in the airline industry prior to September 11,
2001 have negatively impacted projected rental amounts and sale proceeds through
to the final maturity dates of the Notes. Our current projections indicate that
we will not be able to pay interest on or repay the principal of the Class D and
Class E Notes or to repay the principal of the Class C Notes in full.

The
Company did not have sufficient funds to repay the Class A Notes on their
expected final payment date of May 15, 2002 or to repay the Class B, Class C or
Class D Notes on their expected final payment date of July 15, 2002. Failure to
repay in full the principal of those Notes by such dates is not an Event of
Default; however, the Deed of Charge requires, to the extent the Company does
not repay in full the principal of those Notes by such dates, that the Company
pay to the Class A, Class B and Class C Noteholders additional step-up interest
of 0.50% per annum and to the Class D Noteholders additional step-up interest of
1.00% per annum for each month until the earlier of the date such Notes are
repaid in full and their final maturity date of June 15, 2006. These additional
interest costs will only be paid to the extent there are available collections
in accordance with the priority of payments set forth in the Deed of Charge. The
Company has paid some step-up interest, but our current projections indicate
that we will not have sufficient funds to pay any further step-up interest.

5

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We
were unable to comply with the Trust Note Sales Goals from November 5, 2002 to
December 20, 2002 and expect that this inability to comply may reoccur in fiscal
year 2003 and in subsequent fiscal years.

The
Deed of Charge sets out the following Trust Note Sales Goals which require us to
approve sales of our aircraft on an ongoing basis:

`Aircraft to be Sold
   (measured by Initial Appraised         Date by which Sales Goals
      Value as of 3 June 1996)               are to be Satisfied
             $65,000,000                        June 27, 2001
            $130,000,000                        June 27, 2002
            $200,000,000                        June 27, 2003
            $454,950,000                        June 27, 2004`

We
were in compliance with and had exceeded the Trust Note Sales Goals as of June
27, 2001 and were required to sell a further $54,330,000 (as measured by Initial
Appraised Value) worth of aircraft to be in compliance with the Trust Note Sales
Goals as of June 27, 2002.

As
discussed above the current market for sale of used aircraft is extremely poor
and it is not clear when the market will improve. Nevertheless, in order to meet
the Trust Note Sales Goals, following an extensive marketing effort by the
Servicer, the Company had entered into non-binding agreements to sell a B737-300
and an A320-200 aircraft to two separate purchasers by June 27, 2002.

The
sale of the B737-300 on lease to Malev was completed on October 1, 2002. The
agreed purchase price for this aircraft was $12,308,000 assuming a June 27, 2002
closing date. The ultimate purchase price was adjusted downward by $730,933 to
reflect rent received by the Company for this aircraft during the period between
June 27, 2002 and October 1, 2002 after netting out notional interest on the
purchase price which accrued to the Companys benefit during this period.
The net cash proceeds were further adjusted downward to reflect accrued
maintenance reserves of $3,358,536 transferred to the purchaser. The purchaser
was an affiliate of a Class D Noteholder which exercised its pre-emption right
under the Deed of Charge to purchase the aircraft at 102% of the price agreed
upon as at June 2002 by the prospective purchaser. The Class D Noteholder
received the option to exercise this right because the agreed upon purchase
price was below the Class D Note Target Price of $17,252,908. The final purchase
price was also below the Class C Note Target Price of approximately $14.7
million as at May 21, 2002.

Despite
extensive efforts to complete the sale of the A320-200, we were informed by the
prospective purchaser on November 5, 2002 that it had decided to not proceed
with the transaction for reasons outside our control. As a result, the Company
was not in compliance with the Trust Note Sales Goals from November 5, 2002
until the aircraft was sold to a different purchaser on December 20, 2002. The
agreed purchase price for this aircraft was $21,124,754 assuming a November 15,
2002 closing date. The ultimate purchase price was adjusted downward by $229,810
to reflect rent received by the Company for this aircraft during the period
between November 15, 2002 and December 20, 2002 after netting out notional
interest on the purchase price which accrued to the Companys benefit
during this period. The net cash proceeds were further adjusted downward by
$137,903 to reflect advance rentals received by the Company through January 4,
2003. The agreed purchase price for this aircraft was above the Class C Note
Target Price and above the Class D Note Target Price.

6

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We
have directed the Servicer to market other aircraft for sale in order to meet
the ongoing Trust Note Sales Goals. However, unless market conditions improve,
we believe it will continue to be very difficult to comply with the Trust Note
Sales Goals set for June 27, 2003 and June 27, 2004.

To
date, the Company has sold $133,190,000 (measured by Initial Appraised Value) of
aircraft. Given the current environment for aircraft sales, we can offer no
assurance as to whether the Company will be able to comply with the Trust Note
Sales Goals for June 27, 2003 or thereafter.

Failure
to comply with the Trust Note Sales Goals may, under certain circumstances,
constitute an Event of Default under the Deed of Charge if such failure
continues for 30 days or more after written notice thereof has been given to the
Company or the Security Trustee by holders of at least 25% of the aggregate
Outstanding Principal Balance of the Notes of any class which has been
materially adversely affected by such failure.

The
Deed of Charge further provides that if an Event of Default were to occur and be
continuing an Enforcement Notice may only be served by
662/3% or more of the aggregate Outstanding Principal
Balance of the directing class, which will be Class A so long as any Class A
Notes are outstanding.

The
Deed of Charge provides that the failure to satisfy the Trust Note Sales Goals
gives the Noteholders the right to replace the Servicer at the direction of
Noteholders representing at least 75% of the aggregate Outstanding Principal
Balance of the Class A, Class B, Class C and Class D Notes. The Deed of Charge
also provides that, subject to the pre-emption rights of the Class D and Class E
Noteholders, at any time the Trust Note Sales Goals are not satisfied the
Company would be required to accept any Sale Offer for any aircraft if such
offer was at or above the Class C Note Target Price.

Risks Relating to Payments on the Notes

Our
assets are limited. Our current projections indicate that our proceeds from
leasing and selling aircraft will not be enough to repay any further step-up
interest on the Notes, any further principal of or interest on the Class D and
Class E Notes or to repay the principal of the Class C Notes in full.

We
do not have, nor are we permitted or expected to have, any significant assets
other than our specific portfolio of aircraft and our rights as lessor under the
leases for these aircraft, including our rights to the payments thereunder. Our
ability to pay interest on and repay the principal of the Notes is primarily
dependent upon the receipt of rental payments under the leases and of sales and
other disposition proceeds in respect of the aircraft, which will depend upon a
number of factors, including (i) the timing of the receipt of payments under the
leases and the ability of our lessees to make such payments; (ii) our ability to
sell the aircraft at the times and for the amounts contemplated in the
Prospectus and the timing of our receipt of the proceeds of any such aircraft
sales; (iii) our ability to re-lease any aircraft upon termination of the
existing lease with respect thereto, whether upon the scheduled expiration date
thereof or as a result of a lessee default thereunder or otherwise, and to
re-lease the aircraft on the scheduled re-lease date with respect to such
aircraft at the rates contemplated in the Prospectus; (iv) the exercise by a
lessee of an extension, early termination or purchase option under the related
lease; and (v) the occurrence of an event of loss under a lease with respect to
any aircraft and timing of our receipt of casualty insurance or other proceeds,
if any, in respect thereof. We expect many of these factors to be adversely
impacted by the current depression in the airline industry, accentuated by
reductions in tourist travel following increased world wide terrorist action,
and the ongoing threat of such action and the potential economic repercussions
from the threat of continued military action in the Middle East. The rental
amounts and sale proceeds received to date combined with projected rental
amounts and sale proceeds through the final maturity date of the Notes indicate
that there will not be sufficient proceeds to repay any further step-up interest
on the Notes, any further principal of or interest on the Class D and Class E
Notes, or to repay the

7

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principal of the Class C Notes in full. See Item 4
 Information on the Company  History and Development of the
Company, Item 5  Operating and Financial Review and Prospects
 Liquidity and Capital Resources  The Companys Cash
Needs and Item 13  Defaults, Dividend Arrearages and
Delinquencies.

The
Deed of Charge requirements that the Company sell aircraft of a certain value by
specific dates may reduce our ability to generate dependable funds to pay
noteholders amounts due.

Assuming
we are able to sell aircraft to satisfy our Trust Note Sales Goals, we will
reduce the diversification of our portfolio and increase the Companys
dependence upon each remaining aircrafts lease revenues as a percentage of
total lease revenue. To the extent any remaining aircraft is off-lease or
re-leased at reduced rates it will have a more significant impact on our funds
available to pay noteholders amounts due. This situation is exacerbated by the
current weak environment in the aircraft industry because there is currently
little to no economically viable market for the sale of most of our aircraft
which forces us to sell the aircraft that attract better lease rates and which
have longer lease terms outstanding.

Our
original assumptions about revenue and operating costs have not matched actual
experience and as a result we have been unable to make all Note payments at the
times and in the amounts that our assumptions indicated. We expect that actual
experience will continue to be more negative than our original assumptions.

On
the Closing Date, we determined the expected final payment dates for the Notes
based on assumptions about our future revenue and interest and operating costs
and possible future economic conditions. The purpose of these assumptions was to
illustrate the payment provisions of the Notes. Many of these assumptions
related to future political, economic and market conditions that were outside
our control and difficult or impossible to predict. Market interest rates are an
example of such an assumption. Other assumptions made at that time related to
future events that depend on the actions and future financial condition of
lessees or others with whom we deal. Insurance recoveries and maintenance
payments are examples of such assumptions. For the reasons discussed above, our
actual experience has not been consistent with the assumptions we made.

The
Company did not have sufficient funds to repay the Class A Notes on their
expected final payment date of May 15, 2002 or to repay the Class B, Class C or
Class D Notes on their expected final payment date of July 15, 2002. Failure to
repay in full the principal of those Notes by such dates is not an Event of
Default; however, the Deed of Charge requires, to the extent the Company does
not repay in full principal of these Notes by such dates, that the Company pay
to the Class A, Class B and Class C Noteholders additional step-up interest of
0.50% per annum and to the Class D Noteholders additional step-up interest of
1.00% per annum for each month until the earlier of the date such Notes are
repaid in full and their final maturity date of June 15, 2006. These additional
interest costs would only be paid to the extent there are available collections
in accordance with the priority of payments set forth in the Deed of Charge. We
have paid some step-up interest, but our current projections indicate that we
will not have sufficient funds to pay any further step-up interest.

The
September 11, 2001 terrorist attacks on the United States have had a significant
adverse effect on the aircraft industry in general and on the Company. This
event combined with the slowdown in the airline industry prior to September 11,
2001 have negatively impacted projected rental amounts and sale proceeds through
to the final maturity dates of the Notes. Current projections indicate that
there will not be sufficient proceeds to repay any further interest on or
principal of the Class D and Class E Notes or to repay the principal of the
Class C Notes in full.

8

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Your
right to receive payments ranks junior to our operational fees and expenses,
certain other payments we may make and any more senior classes of Notes.

Our
operational fees (including fees of the Servicer, Administrative Agent, Cash
Manager, Financial Consultant and Trustee and legal fees) and expenses
(including expenses payable under the terms of our leases, such as payments in
respect of ADs and reimbursement of maintenance costs) and certain other
payments that we must make rank senior to the Notes and are payable out of our
funds before any payments are made on the Notes. Depending on the amount of
these more senior payments, we may be unable to make the required payments on
the Notes.

In
addition, your right to receive payments of interest, principal and any premium
will rank junior to payments on more senior classes of Notes. Upon the
occurrence of an Event of Default, the holders of a class of Notes may not
exercise remedies under the Deed of Charge until all amounts we owe on more
senior classes of Notes and our other more senior obligations have been paid. In
that case, holders of the most senior class of Notes will control the exercise
of these remedies. For example, see Item 13  Defaults, Dividend
Arrearages and Delinquencies.

We
rely on lease payments and aircraft sales proceeds to make principal payments on
the Notes. To date, these lease payments and aircraft sales proceeds have not
met expectations and based on our current projections, future lease payments and
aircraft sales proceeds will not be sufficient to repay principal in full to all
noteholders.

A
portion of the rental payments under the leases is used to pay a portion of the
principal of the Class A Notes. In the event that one or more of the lessees
does not make the required payments under the leases or does not make such
payments when and in the amounts due or one or more of the aircraft are not
re-leased without significant downtime or at favorable rates, principal payments
on the Class A Notes may occur later than expected. As a decline in the airline
industry continues following the events of 2001, many airlines are flying fewer
aircraft and downsizing or reducing planned growth of their fleets. In addition,
since September 11, 2001 a number of airlines have declared bankruptcy and
ceased operations and it is expected that the industry will experience further
consolidation as well as additional bankruptcies in the near future. As a
result, aircraft owned by or leased to these airlines may also be put on the
market for sale or lease thereby increasing the supply of available aircraft at
a time of decreasing demand. All of this may significantly impact our ability to
re-lease our aircraft on a timely basis and at favorable rates.

Our
ability to repay the balance of the principal of the Notes depends on our
ability to sell the aircraft for an amount that will be sufficient to repay the
outstanding principal on such Notes. In the event we are unable to sell the
aircraft, or if the proceeds of the sales of aircraft are less than such amount,
we will not have sufficient funds to pay all the principal of the Notes.
Aircraft appraisers have recently been reducing, and in some cases significantly
reducing, their appraised base values for aircraft. Further, the substantial
difficulties faced by airlines in the current market have reduced demand for and
increased supply of aircraft which is expected to result in accelerated
reductions in aircraft values. Therefore, there can be no assurance that we will
be able to repay the holders of the Class A and Class B Notes the full amount
owed to them when due. Further, based on our current projections, we expect to
have insufficient funds to repay some Class C Note principal or any remaining
Class D and Class E Note principal. The failure of the Company to pay principal
of the Class A, Class B, Class C or Class D Notes on any day prior to the final
maturity date because funds of the Company are not available in accordance with
the priorities described in the Prospectus, will not constitute an Event of
Default with respect to such class of Notes.

9

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We
rely on lease payments to make interest payments on the Notes. To date, these
lease payments have not met expectations and based on our current projections we
do not expect to have sufficient funds to pay any further interest on the Class
D and Class E Notes and in the future we may not have sufficient funds to pay
all interest due to the other noteholders in the amounts and on the dates
contemplated and we do not expect to have sufficient funds to pay any step-up
interest due to any noteholders.

Our
ability to make payments of interest on the Notes when and in the amounts due
depends primarily upon our receipt of payments under the leases and the re-lease
of each of the aircraft and the timing and amount of proceeds from such leases.
The financial condition of certain of our lessees and many of the airlines which
utilize operating leases is generally weak, and as a result our lessees are
often in arrears, sometimes significantly. Further, as a result of the decline
in air travel experienced at the end of 2001 and during 2002, many airlines are
flying fewer aircraft and downsizing or reducing planned growth of their fleets.
In addition, a number of airlines have declared bankruptcy and ceased operations
since September 11, 2001 and it is expected that the industry will experience
further consolidation as well as additional bankruptcies in the near future. All
of this may significantly impact our ability to re-lease our aircraft on a
timely basis and at favorable rates. Further, the reduced revenue and increased
expenses that many airlines are encountering since the terrorist attacks are
likely to negatively impact the already weak financial condition of these
airlines, including our lessees. This may result in an increase in delayed,
missed or reduced rental payments. In the event that one or more of the lessees
does not make the required payments under the leases or one or more of the
aircraft are not re-leased on or promptly after the applicable scheduled lease
expiration date, payments of interest on the Notes will not be made unless we
are able to satisfy our obligation to make such payments from payments on other
leases that are current or that are entered into following a repossession of the
relevant aircraft or out of collateral provided under the defaulted lease or
other amounts that may be on deposit in the lessee funded account or out of
available collections distributed on any payment date in accordance with the
priority of payments established for the Notes. No assurance can be given,
however, that amounts will be available from such other sources to satisfy our
obligations to pay interest on the Notes or that such other sources will exist.
This situation will also become more difficult assuming we are able to continue
to sell aircraft to satisfy the Trust Note Sales Goals and thereby become more
dependent on the lease revenue from each aircraft remaining in our portfolio as
a percentage of total lease revenue. Based on current projections, we expect our
lease payments will not be sufficient to pay any remaining interest due on the
Class D or Class E Notes. An Event of Default occurs if we do not pay interest
(excluding additional interest, default interest or step-up interest) on any
Note within five days of its due date. This Event of Default has occurred on
several occasions when we have had insufficient funds to pay such interest in
full to Class D Noteholders. This Event of Default also occurred on several
occasions subsequent to fiscal year-ended June 30, 2002, including on the
December 16, 2002 interest payment date. We now expect this Event of Default to
continue as the Company does not expect to have sufficient funds to pay any
further Class D Note interest. See Item 13  Defaults, Dividend
Arrearages and Delinquencies for a discussion of the limited remedies
available upon the occurrence of an Event of Default under these circumstances.
Further, based on our current projections we may not have sufficient funds to
pay all interest due to the other noteholders in the amounts and on the dates
contemplated and we do not expect to have sufficient funds to pay any step-up
interest due to any noteholders.

Our
leases are all interest-rate-fixed leases (some leases are based on
power-by-the-hour fixed hourly rates and others on fixed monthly
rates) and our interest payments on the Notes are fixed and floating rate
obligations. If LIBOR materially increases it may adversely affect our ability
to make interest payments when due.

Our
lease rentals are invested based upon recommendations of the Cash Manager and
our other advisors. Based on these recommendations, we currently do not believe
it is necessary to invest our lease rentals in swaps, options or other hedging
alternatives to protect against materially adverse movements in

10

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interest rates.
We may, however, invest in such instruments at any time if we and our advisors
determine it is appropriate. There can be no assurance that the strategy adopted
to invest or to not invest in such instruments at any time will be effective in
protecting your payments of interest in an environment of material increases to
LIBOR.

The
Notes have a limited trading market. As a result you may be unable to sell your
Notes or the price of the Notes may suffer.

The
Notes have a limited trading market, which may adversely affect your ability to
sell the Notes or the price at which you sell them. The Notes are listed only on
the Luxembourg Stock Exchange. No one has an obligation to make a market in the
Notes. We do not intend to seek approval for quotation through any automated
quotation system. Future trading prices for the Notes will depend on many
factors, including general economic conditions and our financial condition,
performance and prospects.

Risks Relating to Sales of Aircraft

Overview.  Our ability to make  payments of  principal on the Notes will
be dependent  principally  upon our ability to lease and sell the aircraft and
to  receive  proceeds  from  such  leases  and  sales at the times and for the
amounts  initially  contemplated  by the  Prospectus,  which has been and will
continue  to be  affected  by factors  such as the demand for  commercial  jet
aircraft  in  general,  demand for our  aircraft  in  particular,  the cost of
comparable  new  aircraft,  the future value of our aircraft and the timing of
the sale of our aircraft.  Each of these factors has been  adversely  impacted
by the terrorist  attacks of September 11, 2001 and the ongoing  depression in
the airline industry and reduction in airline traffic.

The
commercial aircraft market is cyclical. In addition, decreased demand and excess
supply of aircraft has decreased our revenue.

The
market for commercial jet aircraft is cyclical and can produce sharp increases
and decreases in aircraft values and lease rates. Prior to September 11, 2001,
the aircraft leasing market was already experiencing a reduction in demand,
particularly for older widebody aircraft (which accounted for two of our eleven
aircraft as at June 30, 2002). Decreases in aircraft values or lease rates have
caused and are likely to continue to cause a decrease in our revenue. Depending
on market conditions, we may be unable to sell or re-lease aircraft on terms
that allow us to make payments on the Notes.

Aircraft
values and lease rates depend on various factors (many of which have been
adversely impacted by the depression in the airline industry) that are outside
our control, including:

| |  | general economic conditions affecting lessee operations;
| | - | --------------------------------------------------------

| |  | used aircraft supply;
| | - | ---------------------

| |  | interest rates and credit availability;
| | - | ---------------------------------------

| |  | fuel and other operating costs;
| | - | -------------------------------

| |  | manufacturer production levels and prices for new aircraft;
| | - | -----------------------------------------------------------

| |  | passenger demand;
| | - | -----------------

| |  | retirement and obsolescence of aircraft models;
| | - | -----------------------------------------------

11

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| |  | manufacturers merging or leaving the aircraft industry;
| | - | -------------------------------------------------------

| |  | re-introduction into service of aircraft previously in storage;
| | - | ---------------------------------------------------------------

| |  | governmental regulations; and
| | - | -----------------------------

| |  | lack of capacity in the air traffic control system.
| | - | ---------------------------------------------------

In
addition to values for aircraft generally, the value of specific aircraft may
increase or decrease sharply depending on factors that are not within our
control, including:

| |  | maintenance and operating history of the aircraft;
| | - | --------------------------------------------------

| |  | number of operators using a type of aircraft;
| | - | ---------------------------------------------

| |  | legal or  regulatory  requirements  that prevent us from  re-leasing  or
         selling an aircraft in the condition that it is in; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

| |  | the discovery of  manufacturing  defects in an aircraft model. See "Item
         4 - Information on the Company - Business  Overview - Compliance with
         Governmental and Technical Regulation."
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Current
competition between The Boeing Company and Airbus Industrie is also a threat to
aircraft values. These major producers have reduced their output following the
events at the end of 2001 in response to the decline in the aircraft market.
However, as an increasing number of airlines are reducing their capacity and
retiring older aircraft, there has been an increasing number of aircraft
available for sale and lease. This will have a negative impact on the proceeds
to be received from the sale of an aircraft or the revenue to be received from
its lease. Therefore, there can be no assurance that we will be able to repay
the holders of the Class A and Class B Notes the full amount of principal owed
to them when due. Further, based on our current projections, we expect to have
insufficient funds to repay some Class C Note principal and any remaining Class
D and Class E Note principal.

The
pool of potential purchasers for our aircraft is likely to be a limited group.
Various factors outside our control may further reduce their interest in
purchasing our aircraft which may adversely affect our ability to pay principal
on the Notes.

Although
operators of aircraft may purchase one or more of the aircraft in our portfolio,
we expect that most of the aircraft will be sold with leases in place, which
makes it unlikely that aircraft operators will be purchasers of our aircraft.
Our aircraft are marketed principally as financial assets for purchase by
corporate, institutional and other investors who seek returns based on a
combination of the underlying rentals and the residual value of an aircraft and,
in certain cases, tax benefits. Our aircraft are marketed globally, and, from
time to time, sales of our aircraft with leases in place to purchasers in a
single country may represent a substantial portion of sales of our aircraft in
an attempt to maximize returns in the most favorable marketplace. In certain
countries, local financial intermediaries may be important to our efforts to
sell the aircraft. Adverse developments in particular financial markets, home
country regulatory requirements or changes in tax regimes, however, may impair
our ability to market the aircraft successfully in a particular country or to a
particular group of investors in such country or may require the creation of new
tax-advantaged structures. There can be no assurance that, at the time the
aircraft are marketed for sale, historical purchasers of assets such as the
aircraft, or other institutional and corporate investors, will desire to
purchase assets such as the aircraft, or that particular developments in
financial markets, regulatory requirements or tax regimes will not make the
purchase of the aircraft an

12

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unattractive investment. In addition, there can be
no assurance that it will be possible to create any such tax-advantaged
structures at or by the time the aircraft are being marketed for sale. Further,
the effect of the Trust Note Sales Goals contained in the Deed of Charge is to
require us to sell one or more further aircraft having an aggregate Initial
Appraised Value of at least $66,810,000 by June 27, 2003. Given the adverse
impact of the terrorist attacks of September 11, 2001 on the airline industry
and, in particular, on aircraft values, this obligates us to sell aircraft at a
time when aircraft values are significantly lower than they might otherwise be,
which adversely affects our ability to pay principal on the Notes.

When
we sell our aircraft we will be competing with others who will have various
advantages in their ability to sell aircraft. This may adversely affect our
ability to sell our aircraft and the amount of proceeds we receive upon such
sale.

We
have encountered and expect to continue to encounter competition from sellers of
other aircraft at the time we offer the aircraft for sale. There are numerous
other entities which own and sell aircraft that will compete with us in the sale
of our aircraft. These entities include, but are not limited to, distributors,
aircraft manufacturers, airlines, aircraft leasing companies, financial
institutions, public and private limited partnerships and funds with investment
objectives similar to ours and special purpose vehicles similar to ours (such as
Airplanes Group and AerCo Limited) formed for the purpose of acquiring, leasing,
re-leasing and selling aircraft. In addition, because the Servicer performs
lease management services with respect to our aircraft as well as with respect
to aircraft owned by third parties, our aircraft may be offered for sale in
competition with other aircraft for which the Servicer performs management
services. Some of these other entities with aircraft available for sale have, or
have access to, financial resources substantially greater than ours and may be
able to offer financing, management, remarketing and other services, inducements
or concessions that we will not be able to provide. The decline in the airline
industry following the terrorist attacks of September 11, 2001 and subsequent
decline in passenger demand caused the fragile position many airlines were in to
worsen considerably. A number of airlines have either declared bankruptcy or
face bankruptcy in light of the depressed market. The bankruptcies that have
occurred and the threat of bankruptcy for others has increased the number of
aircraft on the market. The aircraft market is experiencing an increase in
supply at a time of decreasing demand. According to Airclaims, there were 1,119
western built commercial jet aircraft available for sale and lease in mid
November 2002. This is an increase of 64 available aircraft since November 2001
and an increase of 257 available aircraft since June 2001 and an increase of 433
available aircraft since January 2001. It is expected that it will take several
years for the international aviation industry to work out this backlog, during
which time competition among lessors will remain strong and lease rental rates
and aircraft values are expected to remain depressed.

We
believe the appraised base value of our aircraft is significantly higher than
the actual value we would receive upon a sale of such aircraft. To the extent
the sale price of an aircraft is below the aircrafts appraised base value,
our ability to make payments on the Notes may suffer.

Aircraft
appraised base values do not necessarily reflect the market value for an
aircraft at a specific time. We determined the scheduled principal payments on
the Notes based on the assumptions set forth in the Prospectus with respect to
the appraised base value of the aircraft. If we sell an aircraft to generate
cash to make payments on the Notes, the proceeds of the sale are likely to be
significantly less than its appraised base value. We expect therefore to have
insufficient cash to make payments in full on some of the Notes. Market lease
rates may also depend on current market values for aircraft. If market values
are less than appraised base values, we may be unable to re-lease aircraft at
rental rates sufficient to repay the Notes.

We
have obtained three desktop appraisals (without physical inspection) of the
appraised base value of each aircraft as of June 2002 from Avitas, AISI and BK.
Based on such desktop appraisals, the

13

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aircraft (including the aircraft sold
subsequent to year-end) had an aggregate appraised base value of $242,100,000,
$226,810,000 and $295,340,000, respectively, or an average aggregate appraised
base value of approximately $254,740,000.

The
appraised base values were determined assuming an arms-length, cash
transaction between willing and knowledgeable parties, with a reasonable period
of time available for marketing, assuming, among other things, sales of the
aircraft in an open, unrestricted stable market environment with a reasonable
balance of supply and demand, and assuming the maintenance status of each
aircraft with regard to such things as airframe, engines and landing gear to be
at its half-life condition (i.e., its condition at midpoint between service
intervals), adjusted to account for certain aspects of the actual maintenance
status of each aircraft, as provided to the Independent Appraisers.

As
discussed in the Statement of Accounting Policies in the Financial Statements
contained in Item 18, the Directors undertake a review to determine whether an
impairment provision is required in respect of both long-lived assets and
aircraft identified for sale. The Directors, in applying Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets
(SFAS No. 121), have determined that the carrying value for seven of
the Companys aircraft, classified as long-lived assets, is greater than
the undiscounted future cashflows in respect of such aircraft and have recorded
an impairment provision for these aircraft equal to the difference between their
carrying value and fair value.

In
applying SFAS No. 121 the Directors have used average Appraised Current Market
Value, which was in aggregate $186,430,000 as at June 30, 2002 for the nine
aircraft classified as long-lived assets, and represents the Independent
Appraisers opinion of the most likely trading price that may be generated
for an aircraft under current market conditions. The Independent Appraisers
assume that the aircraft are valued for their highest, best use, that the
parties to the hypothetical sale are willing, able, prudent and knowledgeable,
and under no unusual pressure for a prompt sale, and that the transaction would
be negotiated in an open and unrestricted market on an arms length basis.

Appraised
Current Market Values have been estimated by the Independent Appraisers based on
value curves from the last downturn in the aircraft market. An Appraised Current
Market Value is an estimate of value and should not be relied upon as a measure
of current sales value; the proceeds realized upon a sale of an aircraft may be
less than the average Appraised Current Market Value, particularly in current
market conditions as discussed in note 3 of the Financial Statements. In the
current environment, there is a lack of hard data available on which to base
aircraft valuations and therefore the appraisal process is more difficult.

The
Directors believe that, as a result of the factors discussed above and in note 3
of the Financial Statements, the sales value of the long-lived assets in the
current market may be less than the average Appraised Current Market Value and
the carrying value as at June 30, 2002. Also, if it were necessary to dispose of
an aircraft quickly, the proceeds from the sale of such aircraft would probably
be even less than the value in the current market. In that event, further
write-downs would most likely be required.

The
application of the accounting policies in the fiscal year ended June 30, 2002
has led to an increase in the impairment provision of $20.321 million. A
previous provision was made at June 30, 2001 for $30.259 million. At June 30,
2002 the impairment provision carried forward represents both write-downs to
estimated net realizable value less costs to sell (in respect of the two
aircraft identified for sale at June 30, 2002) and write-downs to average
Appraised Current Market Value (in respect of aircraft classified as long-lived
assets).

14

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New
and/or more technologically advanced aircraft may impair our ability to re-lease
or sell our aircraft. If we are unable to re-lease or sell our aircraft on
favorable terms, this will adversely affect our ability to make payments on the
Notes.

The
availability of newer and/or more technologically advanced aircraft or the
introduction of increasingly stringent noise or emissions regulations may make
it more difficult for us to re-lease or sell aircraft. We expect that our
ability to manage these technological risks through modifications to the
aircraft and sale of aircraft will be limited.

If
our lessees do not properly maintain the aircraft it may impair the
aircrafts rental and sale value and have other adverse consequences which
will reduce the rental and sale proceeds available to make payments on the
Notes.

The
standards of maintenance observed by the lessees and the condition of the
aircraft at the time of sale or re-lease may affect the future values of and
rental rates for the aircraft. Under each lease, it is the responsibility of the
relevant lessee to maintain the aircraft and to comply with all governmental
requirements applicable to the lessee or the aircraft, including, without
limitation, operational, maintenance and registration requirements and, in most
cases, manufacturer recommendations, although in certain cases the Company, as
lessor, has agreed to share the cost of certain required modifications to the
aircraft and certain overhaul costs. If a lessee does not perform such
obligations or if the aircraft is off-lease, we will be responsible for
maintenance obligations and for the cost, in whole or in part, of complying with
governmental requirements or manufacturer recommendations. Failure to perform
such required or recommended maintenance with respect to an aircraft (a) could
result in a grounding of such aircraft, (b) is likely to adversely affect the
value of that aircraft upon the sale thereof and (c) in the event of a re-lease
of such aircraft, is likely to require us to incur costs, which could be
substantial, in restoring such aircraft to an acceptable maintenance condition
prior to re-leasing. Payment by us of such maintenance costs, or a reduction in
the sale value of the aircraft, would adversely affect our ability to make
payments on the Notes.

Risks Relating to Leasing of Aircraft

Our
funds available to make payments on the Notes will be reduced if we are unable
to re-lease aircraft quickly or on favorable terms.

We
may not be able to re-lease the aircraft upon expiration of the leases without
incurring significant downtime prior to commencement of a new lease. If we
cannot re-lease the aircraft, we may not have enough revenue to make payments on
the Notes. Even if we can re-lease the aircraft, we may be unable to receive
favorable rental rates, especially if there is reduced demand for aircraft on
operating lease. The decline in the aircraft industry at the end of 2001 and the
subsequent depression and airline bankruptcies have significantly reduced demand
for and increased supply of aircraft generally, including aircraft available for
operating lease. Our ability to re-lease aircraft and obtain acceptable lease
payments and terms may suffer because of:

| |  | economic conditions affecting the airline industry;
| | - | ---------------------------------------------------

| |  | the supply of competing aircraft and demand for particular types;
| | - | -----------------------------------------------------------------

| |  | lessor competition; and
| | - | -----------------------

| |  | restrictions   on  our  re-leasing   flexibility   under  our  operative
         documents.
| | - | --------------------------------------------------------------------------------------------

15

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Aircraft
re-leased during fiscal year 2002 were leased at rates significantly below
historic rates achieved on these aircraft. Further many of these aircraft were
re-leased on shorter terms and on power-by-the-hour leases which
(subject in some cases to minimum or maximum amounts) allow for the lessee to
pay for only the time that the aircraft is being used.

We
currently have no aircraft off-lease. On December 23, 2002, a lease agreement
was executed with a new lessee in respect of one of our B737-400 aircraft which
was off lease at June 30, 2002. This aircraft is expected to be delivered to the
lessee in January 2003. The leases for two aircraft, representing approximately
12.0% of our aircraft portfolio by appraised base value at June 30, 2002, are
scheduled to expire before December 31, 2003, and there can be no assurance that
other aircraft will not come off-lease before expiration of their lease terms.
In the current circumstances, re-leasing our aircraft in a timely fashion at
reasonable rates represents a significant challenge to the Company. Any lack of
success in meeting this challenge may have a significant effect on our ability
to make payments on the Notes. Based on current projections, we expect our lease
payments will not be sufficient to pay any remaining interest due on the Class D
and Class E Notes. An Event of Default occurs if we do not pay interest
(excluding additional interest, default interest or step-up interest) on any
Note within five days of its due date. This Event of Default has occurred on
several occasions when we have had insufficient funds to pay such interest in
full to Class D Noteholders, and we expect these Events of Default to occur on a
regular basis with respect to missed interest payments to the Class D
Noteholders. See Item 13  Defaults, Dividend Arrearages and
Delinquencies for a discussion of the limited remedies available upon the
occurrence of an Event of Default under these circumstances.

Lessees
in weak financial condition could fail to make lease payments and may require
the restructuring of their leases to avoid default. This would reduce the
revenue available to make payments on the Notes.

There
is a significant risk that lessees in weak financial condition may default on
their obligations under the leases. If lessees do not make rent and maintenance
payments or are significantly in arrears, it will impair our ability to make
payments on the Notes. The ability of each lessee to perform its obligations
under its lease will depend primarily on its financial condition. A
lessees financial condition may be affected by various factors beyond its
control, including competition, fare levels, passenger demand, operating costs,
the cost and availability of finance, and environmental and other governmental
regulation of the air transportation business. The economic conditions of the
regions where our lessees operate will also affect their ability to meet their
lease obligations. Many of our lessees are based or operate in regions such as
Asia that from time to time experience severe economic crises. You should refer
to Item 4  Information on the Company - Business Overview 
Regional Concentrations for a detailed discussion of the regional
concentrations of our lessees and the economic trends of the regions that may
impact the lessees financial conditions.

In
addition, the events of September 11, 2001, together with global conditions,
have resulted in airlines worldwide experiencing financial difficulties. Some of
our lessees are in a weak financial position. Investors should also expect this
to be the case with future lessees. As a result, a large proportion of lessees
may consistently be significantly in arrears in their rental payments or
maintenance payments. Also, as a result of the decline in the aircraft industry,
the financial position of many airlines, including our lessees, is likely to be
weakened which in turn may cause an increase in delayed, missed or reduced
payments. Further, in order to keep aircraft on lease and generating rental
proceeds in this difficult economic environment, many aircraft lessors,
including the Company, have agreed to rental holidays, rental restructurings,
the early return of aircraft and similar measures for some lessees. We expect
this may continue to occur with our lessees. We can also give no assurance that
defaults, amounts in arrears and the frequency of lease restructurings will not
increase as the market for aircraft on operating lease experiences a continued
decline.

16

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Our
ability to re-lease aircraft and generate cash to make payments on the Notes
will be impaired if we cannot terminate leases and repossess aircraft when a
lessee defaults.

We
have the contractual right to terminate a lease and repossess the aircraft if
there is an event of default under a lease. However, due to circumstances
outside our control, we may be prevented from terminating a particular lease.
Further, we may incur substantial costs if we terminate a lease and repossess
the aircraft. If we cannot repossess the aircraft, it will not be available for
re-lease or sale. In that event, or if we incur substantial costs in terminating
a lease and repossessing an aircraft, our revenue available to make payment on
the Notes will be reduced.

Our
ability to terminate a lease and repossess the aircraft may be limited by a
number of factors, including the following:

| |  | a lessee  contesting  our right to terminate the lease and repossess the
         aircraft;
| | - | -------------------------------------------------------------------------------------------

| |  | our inability to export, deregister and redeploy the aircraft;
| | - | --------------------------------------------------------------

| |  | legal  restrictions  on  our  ability  to  terminate  or  repossess  the
         aircraft; and
| | - | -----------------------------------------------------------------------------------------------

| |  | the  appointment  of a trustee in bankruptcy  or similar  officer in the
         case of a bankrupt or insolvent lessee.
| | - | -------------------------------------------------------------------------------------------------------------------------

Even
if we are able to terminate the lease and repossess the aircraft, we may incur
substantial costs, including:

| |  | the  direct  costs  associated  with  the  termination  of the  lease or
         repossession of an aircraft, including technical and legal costs;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  | the cost of returning the aircraft to the appropriate jurisdiction;
| | - | -------------------------------------------------------------------

| |  | the  payment of debts and taxes  secured by liens on the  aircraft  that
         were not paid by the lessee;
| | - | --------------------------------------------------------------------------------------------------------------

| |  | the  costs  of  retrieving  or  recreating  aircraft  records  that  are
         required for re-registering the aircraft;
| | - | ---------------------------------------------------------------------------------------------------------------------------

| |  | the costs of putting  the  aircraft  back in a  condition  suitable  for
         leasing or sale; and
| | - | ------------------------------------------------------------------------------------------------------

| |  | costs of obtaining a certificate of airworthiness for the aircraft.
| | - | -------------------------------------------------------------------

Our
revenue available to make payments on the Notes will be reduced if aircraft
insurance is not adequate to cover any losses or liabilities we incur.

Our
lessees have obligations under the leases to maintain property and liability
insurance covering their operation of the aircraft. We can give no assurance
that this insurance will be adequate to cover any losses or liabilities that we
may incur in our business. For example, the loss or liability from an aviation
accident or other catastrophic event may exceed the coverage limits in the
policy. Other losses may not be covered by insurance. There is also a risk that
our lessees will not perform their insurance obligations under the lease, which
may mean that insurance will not be available to us. In either case, we may be
unable to make payments on the Notes if insurance proceeds do not cover losses
or liabilities we may incur.

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Potential
insurance issues arising from the terrorist attacks of September 11, 2001 in the
United States could adversely affect our lessees and thereby adversely affect
our revenue.

As
a consequence of the terrorist attacks of September 11, 2001, airlines worldwide
are currently experiencing significant difficulties in maintaining war insurance
cover in the amounts required under their leases with us and other lessors.
Until recently, our lessees have relied on government indemnities to provide
coverage for third party liability (other than to passengers) arising from war
and terrorism risks, above a greatly reduced ceiling of cover provided by the
aviation insurance market as a reaction to the events of September 11, 2001.
However, most governments have now terminated their indemnity support and there
can be no assurance that our lessees will be able to replace that support by
insurance coverage. If such insurance coverage were not purchased or otherwise
available from government support, it may be necessary for the relevant aircraft
to be grounded. Such consequences would have a material adverse impact on the
financial condition of our lessees and their ability to perform under their
leases. These effects could cause a reduction in our revenue which would
adversely affect our ability to make payments on the Notes.

If
we cannot obtain the required licenses, consents and approvals to re-lease or
sell aircraft, we may be unable to make all payments on the Notes.

If
we or, where applicable, the lessee cannot obtain required government licenses,
consents and approvals, we may be unable to re-lease or sell aircraft. Several
leases require specific licenses, consents or approvals. These include licenses,
consents or approvals from governmental or regulatory authorities to certain
lease payments and to the import, re-export or deregistration of the aircraft.
There is a significant risk that subsequent legal and administrative changes
will increase such requirements or that a license, consent or approval, once
given, will be withdrawn. We may be unable to receive licenses, consents or
approvals needed in connection with future re-leasing or sale of an aircraft. In
any such case, our revenue available to make payments on the Notes may be
reduced.

If
withholding taxes are imposed on lease rentals, these taxes would reduce our
revenue available to make payments on the Notes.

We
have attempted to structure our leases in such a way that either no withholding
taxes will be applicable to payments by the lessees under the leases or, if
withholding taxes are applicable, the lessees would be required to pay
corresponding additional amounts. If such taxes must be paid and we cannot
recover these additional amounts from the lessee, that amount will be
unavailable for Note payments.

United
States federal income withholding taxes at a rate of 30% are applicable to lease
payments relating to an aircraft that was re-delivered in October 2002 and was
immediately placed on lease to Allegiant Air, a United States airline, and that
lease makes no provision for recovery of such taxes from the lessee. The lease
to Allegiant Air has a lease expiration date as of the date of completion of the
next C Check for this aircraft, which date is estimated to be in
October 2003. Allegiant Air also has two extension options on the lease. If both
extensions were exercised, the estimated date of expiration would be in March
2006. There can also be no assurance that any subsequent lease will avoid United
States or other withholding taxes.

If
lessees do not comply with their obligations under their operating leases it may
increase our costs and reduce our revenue available to make payments on the
Notes.

The
leases are all fixed term operating leases, under which we retain substantially
all of the risks and rewards associated with ownership of the aircraft,
including the aircrafts residual value. The leases are net
leases pursuant to which the lessees are obligated to make periodic rental
payments and

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generally assume responsibility for, inter alia, (i) maintaining
the aircraft, (ii) ensuring proper operation of the aircraft, (iii) providing
indemnification against and insurance for losses resulting from operation of the
aircraft, (iv) paying all costs of operating the aircraft and keeping the
aircraft free of liens (as defined in the relevant lease) (other than permitted
liens under the relevant lease) resulting from such operation and (v) complying
with all applicable governmental licensing and other requirements, including
airworthiness directives (although in certain cases, the terms of the relevant
lease require the lessor to share the cost thereof). Failure of a lessee to
comply with such obligations could result in increased costs to us and reduce
our revenue available to make payments on the Notes.

Other Risks Related to the Sale and Leasing of the Aircraft

Restrictions
in our operative and governing corporate documents may impair our ability to
compete effectively in the aircraft leasing market.

Our
operative and governing corporate documents impose restrictions on how we
operate our business. These restrictions limit our ability to compete
effectively in the aircraft leasing market. For example, we cannot grant
privileged rental rates to airlines in return for equity investments in such
airlines. There are also restrictions on persons to whom we may lease aircraft
and limits on leasing to lessees in specific geographical regions. Most
competing aircraft lessors do not operate under similar restrictions.

If
lessees do not discharge liens that attach to the aircraft, we may be unable to
repossess, re-lease or sell the aircraft.

Liens
may attach to the aircraft in the course of their operation. These liens may
impair our ability to repossess, re-lease or sell the aircraft. Liens that
secure the payment of airport taxes, customs duties, air navigation charges,
landing charges, crew wages, repairers charges or salvage charges attach
to the aircraft in the normal course of operation. The amounts that the liens
secure may be substantial and may exceed the value of the aircraft against which
the lien is asserted. In some jurisdictions, a holder of aircraft liens may have
the right to detain, sell or cause the forfeiture of the aircraft. The lessees
may fail to comply with their obligations under the leases to discharge liens
arising during the terms of the leases. Prior to terminating our lease with
Istanbul, Istanbul incurred a debt to Eurocontrol. Istanbul failed to comply
with their obligation under the lease to pay this debt and cause the related
lien to be discharged. As owner of the aircraft, the Company was forced to
settle this debt of approximately $1.8 million with Eurocontrol (which was
accrued for in the fiscal years ended June 30, 2001 and 2002). The settlement of
this debt, post fiscal year-end 2002, has reduced our funds available to make
payments on the Notes, and any other similar debt we may be required to settle
in the future in order to have liens discharged would also reduce our revenue
available to make payments on the Notes.

Lessees
may fail to maintain valid registration of the aircraft. The impact of the loss
of aircraft registration or the inability of the aircraft to generate rental
income for us could harm our ability to make payments on the Notes.

All
of the aircraft that are or will be operated must be registered with an
appropriate aviation authority. If an aircraft is operated without a valid
registration or other required licenses, certificates and approvals, the lessee
operator or, in some cases, the owner or lessor, may be subject to penalties
which may result in a lien being placed on the aircraft. Loss of registration
could have other adverse effects, including grounding of the aircraft and loss
of insurance, which may have an adverse effect on our ability to make payments
on the Notes.

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Increased
regulation of the aircraft industry may impair our ability to re-lease or sell
aircraft.

The
aircraft industry is heavily regulated and aviation authorities may adopt
additional regulations in jurisdictions where our aircraft are registered or
operated. For example, as a result of the terrorist attacks in the United States
on September 11, 2001, installation of enhanced Ground Proximity Warning Systems
in all aircraft by 2005 has been mandated by the U.S. Federal Aviation
Administration (FAA) and the European Joint Airworthiness
Authorities and further new security directives are under consideration by a
number of aviation authorities. To the extent the cost of complying with such
regulations is required to be borne by the Company rather than the lessees, we
could incur significant cash expenditures in order to comply with such
regulations. Further, additional regulations relating to security and aircraft
noise and emissions, may cause us to incur significant costs, depress the value
of the aircraft and impair our ability to re-lease or sell aircraft.

Factors Affecting the Yield to Maturity on the Notes

Various
factors beyond our control may impact the timing of payments to noteholders.

The
yield to maturity on the Notes will vary based on a number of factors, including
the amount and timing of all payments and redemptions of the Notes. In addition,
the payment experience on the leases and our actual experience with respect to
the re-leasing and sale of the aircraft, as well as other events outside of our
control, will affect the actual payment experience on and the weighted average
lives of the Notes. Early termination or extension options in some of the
leases, or lessee defaults or other terminations in other leases, may cause
aircraft to be sold earlier or later than expected, resulting in earlier or
later payments of principal of the Notes. The exercise of these lease options or
the occurrence of such defaults or other termination events cannot be predicted
and may be influenced by a variety of economic and other factors, including
future interest rates and the availability and market value of aircraft at
future dates. Moreover, the weighted average life of one or more classes of
Notes may be shortened or extended by, among other things, the extent to which
available collections are applied to fund certain reserve accounts or to pay
certain costs and expenses of the Company.

We
may be unable to find financially able and willing purchasers of the aircraft at
acceptable prices and during the relevant marketing periods. If this scenario
were to occur it would affect the timing of and amount of proceeds realized from
sales of aircraft. In addition, favorable worldwide and regional economic and
political factors, favorable prevailing interest rates and the availability of
credit, the interest of corporate, institutional and other investors in
purchasing the aircraft as financial assets and the financial resources of
potential buyers to purchase aircraft in the amounts and within the time frames
or in the order assumed cannot be assured. Lease collections, insurance
recoveries, expenses and liabilities will often be dependent upon the actions of
third parties, which can be difficult to predict and are generally not within
our control. Clearly, many of these factors were adversely impacted by the
terrorist attacks of September 11, 2001 and the subsequent depression and
financial uncertainty in the aircraft industry. Accordingly, collections and
other realizations on the aircraft and the leases could be significantly
different or could occur at substantially different times than anticipated or
may not occur at all with respect to certain of the aircraft and the leases. As
a result, the stream of payments received by a holder of the Notes may not be
uniform or consistent.

The
failure of actual experience to match the assumptions may adversely affect the
yield on the Notes.

At
the time the Notes were issued, the expected principal balances of the Notes
were arrived at based on certain judgments, assumptions and estimates about then
future economic events, the aircraft, the leases and our ability to re-lease and
sell the aircraft at particular times and for particular prices. There

20

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have been
significant differences between the then expected results and actual results,
both with respect to timing of aircraft re-leasing and aircraft sales and the
aggregate lease payments and sale proceeds realized. Further, our assumptions at
that time clearly did not anticipate events similar to the terrorist attacks of
September 11, 2001 and such events have and are expected to continue to
adversely impact our current and future revenue in a manner that the assumptions
did not anticipate. It is likely that there will continue to be significant and,
possibly, increasing differences between the assumptions and expectations at the
time the Notes were issued and actual experience. These differences are expected
to adversely affect the yield on the Notes.

Reliance on Third Parties and Conflicts of Interest

We
rely on third parties to manage our business. Our operations may suffer and we
may be unable to make payments on the Notes if our service providers do not
perform their obligations to us or if we have to replace them.

We
have no executive management resources of our own. We therefore rely on several
service providers for the leasing, re-leasing and sale of the aircraft and all
other executive and administrative responsibilities. If these service providers
do not perform their contractual obligations to us, our operations may suffer
and our revenue available to repay the Notes may be reduced. We can give no
assurance that we will continue our arrangements with these service providers or
that the service providers will continue their relationship with us until the
Notes are paid in full. If a service provider resigns or we terminate its
appointment, we may be unable to find suitable replacement service providers
that we can engage on suitable terms. Additionally, our appointment of
replacement service providers may cause a lowering or withdrawal of the ratings
on the Notes. The Administrative Agent has tendered its resignation but, in
accordance with the Administrative Agency Agreement, such resignation will not
be effective until a suitable replacement has been appointed. Discussions are
currently under way to find such a replacement. You should refer to Item 6
- Directors, Senior Management and Employees  Directors and Senior
Management for detailed information on the responsibilities delegated to
service providers.

Babcock
& Brown, as servicer will have conflicts of interest from their other
aircraft management activities. We may be unable to re-lease or sell aircraft if
they cannot resolve these conflicts.

Babcock
& Brown own and manage other aircraft and may face conflicts of interest in
managing and marketing our aircraft for re-lease or sale.

Our Directors may have conflicts of interest.

From
time to time our Directors may have conflicts of interest that arise as a result
of their other relationships in the aviation industry. See Item 6 -
Directors, Senior Management and Employees - Directors and Senior Management.

Bankruptcy Risks

If
the Company were to be consolidated with another entity upon such entitys
bankruptcy our assets may be unavailable to repay the Notes and our other
obligations.

We
have taken steps, described below, to ensure that our assets and liabilities
will not be consolidated with those of any other entity, including WFC, in the
event that such entity voluntarily or involuntarily becomes the subject of an
application for relief under applicable bankruptcy or insolvency

21

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laws. At the
time the Notes were issued, we received an opinion of U.S. counsel concluding
that neither our activities nor the activities of WFC would result in a court
holding that our assets and liabilities should be consolidated with those of WFC
in a proceeding under the applicable insolvency laws in the United States.
However, there can be no assurance that the circumstances upon which such
counsel based its opinion will not change, that a court of competent
jurisdiction would not find differently, that such opinion will prove to be
correct or that the law of another jurisdiction would not apply.

In
addition, WFC warranted to us, among other things, that upon delivery of the WFC
Aircraft to us we would be the owner of the WFC Aircraft, that the sale of the
WFC Aircraft by it to us was a true sale of the WFC Aircraft to us
and that the conveyance was effective to transfer title to us. WFC and the
Company have treated the conveyance of the WFC Aircraft as a sale of the WFC
Aircraft and transfer of the related lease to us, and we have taken all actions
that are required to perfect our ownership interest in the WFC Aircraft and the
related lease. However, if WFC were to become a debtor in a bankruptcy case
under the U.S. Bankruptcy Code and a creditor or trustee-in-bankruptcy of WFC or
WFC itself were to take the position that the sale of WFC Aircraft to us should
be recharacterized as a pledge of the WFC Aircraft and the related lease to
secure a borrowing of WFC, then delays in payments of lease rentals to us on the
WFC Aircraft could occur. A court ruling in favor of any such creditor, trustee
or WFC could result in reductions in the amount of such payments and/or
forfeiture or subordination of our rights in the WFC Aircraft and the related
lease. Such delays or reductions and/or forfeiture also could result in delays
or reductions in our ability to make payments on the Notes. If the transfer of
the WFC Aircraft and the related lease to us is recharacterized as a pledge or a
lien on the property of WFC, our position with respect to WFC would be that of a
secured creditor of WFC with a claim in an amount equal to the purchase price of
the WFC Aircraft secured by such pledge or lien. On the other hand, if the
conveyance of the WFC Aircraft is treated as a sale, the WFC Aircraft and rental
payments under the related lease would not be part of WFCs bankruptcy
estate and would not be available to WFCs creditors. On the Closing Date,
we received an opinion of United States counsel concluding that, under
applicable state law, the sale of the WFC Aircraft and the related lease would
constitute a true sale from WFC to us and should not be characterized as a
pledge of these assets to secure a loan from us to WFC. However, there can be no
assurance that the circumstances upon which such counsel has based its opinion
will not change, that a court of competent jurisdiction would not find
differently, that such opinion would prove to be correct or that the law of
another jurisdiction would not apply.

Certain Income Tax Risks

If
payments of principal and interest on the Notes become subject to withholding
tax, we will not make additional payments to you.

We
will not make any additional payments to noteholders for any withholding or
deduction that is required under applicable law on payments on the Notes. If we
are required to make a withholding or deduction, whether because of the
implementation of the proposed European Union Savings Directive or for any other
reason, we will use reasonable efforts to avoid the application of withholding
taxes. If we cannot avoid the withholding taxes, we may redeem the Notes. If
withholding taxes are imposed on the Notes and we do not redeem them, we will
reduce the amount of interest that you will receive by the amount of the
withholding taxes. We have received opinions from our tax advisors that payments
on the Notes will not be subject to Jersey or Irish withholding tax. You should
be aware, however, that these opinions represent only the best judgment of
counsel and are not binding on the applicable tax authorities or the courts. The
opinions depend upon certain factual assumptions and the existence of different
facts could lead to circumstances not anticipated by counsel.

Ownership
of the Notes entails certain risks regarding the application of the tax laws of
Ireland, the United States, Jersey and the jurisdictions in which the Company,
its subsidiaries and the lessees are

22

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organized, reside or operate. You should
refer to Item 10 - Additional Information  Taxation for a more
detailed discussion of some of the possible tax consequences of owning the
Notes.

Our
operations may become subject to income taxes, which would reduce the revenue
available to make payments on the Notes.

Our
operations may be subject to the income tax laws of Ireland, the United States,
Jersey and other jurisdictions. There is also a risk that the Servicers
future management of the aircraft might expose the Company and its subsidiaries
to tax liabilities outside Ireland and the United Kingdom. If our income is
subject to taxation, the revenue available to make payments on the Notes may be
reduced.

If
our Irish subsidiary were to lose its Irish tax benefits, the rating agencies
may downgrade the Notes and we may be unable to make required Note payments.

Our
Irish tax-resident subsidiary is entitled to certain corporate tax benefits for
International Financial Services Center certified companies, including a
preferential corporation tax rate of 10% in respect of prescribed leasing
operations through December 31, 2005. The loss of these tax benefits could lead
to a downgrade in the then current ratings on the Notes and it could also affect
our ability to make the required payments on the Notes.

Upon
the scheduled termination of the Irish preferential 10% corporation tax rate on
December 31, 2005, the Companys Irish tax-resident subsidiary will
become subject to Irish corporation tax on its net trading income, which would
include leasing income, at a 12.5% rate as provided for in the Irish Finance Act
of 1999. This legislation provides for non-trading income (for example, deposit
interest) to be taxed at 25%. There can be no assurance that these tax rates
will not be changed in the future.

The
activities of our service providers or loss of treaty benefits could expose us
to United States federal net income taxation, which could harm our ability to
make payments on the Notes.

The
Company and its subsidiaries do not expect to have any material United States
federal net income tax liability. However, this conclusion may depend, in part,
on:

| |  | the nature of such companies' income and operations, and
| | - | --------------------------------------------------------

| |  | in the case of the Companys Irish-resident subsidiary company,
qualification for the benefits of the income tax treaty between the United
States and Ireland.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------

There
can be no assurance that the activities of the Servicer, the Administrative
Agent and other service providers will not expose the Company and its
subsidiaries to United States federal net income tax on part or all of their
income, which would reduce the revenue available to make payments on the Notes.

United
States withholding taxes currently apply to one lease, may continue to do so,
and may apply to other leases.

United
States federal income withholding taxes at a rate of 30% are applicable to lease
payments relating to an aircraft that was re-delivered in October 2002 and was
immediately placed on lease to Allegiant Air, a United States airline, and that
lease makes no provision for recovery of such taxes from the lessee. The lease
to Allegiant Air has a lease expiration date as of the date of completion of the
next C Check for this aircraft, which date is estimated to be in
October 2003. Allegiant Air also has two extension options on the lease. If both
extensions were exercised, the estimated date of expiration would

23

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be in March
2006. There can be no assurance, however, that any subsequent lease will avoid
United States withholding taxes. Likewise, there can be no assurance that other
leases will not become subject to United States federal income tax withholding.

ITEM 4.     INFORMATION ON THE COMPANY

A.    History and Development of the Company

The
Company was incorporated in Jersey (registered number 52674) as a private,
limited liability company under the Companies (Jersey) Law 1991 on May 13, 1992,
for an unlimited duration, and became a public company pursuant to a special
resolution passed on June 15, 1992. The registered office of the Company is at
Fourth Floor, Forum House, Grenville Street, St. Helier, Jersey, JE2 4UF,
Channel Islands and its telephone number is 011-44-1534-824200. The Company has
an authorized share capital of 15,000 ordinary shares, $1 par value per share,
10 of which have been issued. All of the issued ordinary shares are held by the
Nominees for the benefit of the trustee of the ALPS Trust, a charitable trust
established in Jersey.

The
Company has two direct wholly owned subsidiaries, one in each of Ireland and
England. The subsidiaries directly or indirectly lease aircraft from the Company
and sublease them to operators where commercial or other reasons make it
desirable to do so.

The
Company was formed for the purpose of acquiring a portfolio of 14 commercial jet
aircraft all of which were subject to operating leases. The Company agreed to
purchase such aircraft from GPA and received delivery and legal title from GPA
of the aircraft over the four month period from June 23, 1992 to October 30,
1992. One aircraft was sold on March 15, 1996, reducing the fleet size to 13.
The WFC Aircraft was purchased on November 27, 1996 from WFC, and on July 24,
1997 the B747-283B aircraft was sold to WFC. Four further aircraft were sold on
July 2, 1999, June 27, 2000, October 1, 2002 and December 20, 2002,
respectively.

In
June 1996, the Company elected to refinance the Prior Debt through the issuance
of the Notes rather than remarketing and selling all 13 aircraft during the
one-year period prior to the originally scheduled maturity of the Prior Debt in
June 1997. The decision to refinance the Prior Debt was primarily due to the
uncertainty as to the ability of the Company to make payment in full on the Old
Class B Notes and Old Class M Notes under the then current schedule for sale of
the aircraft. In connection with the refinancing of the Prior Debt, the Old
Class A Notes and the Old Class M Notes were redeemed and the Old Class B Notes
were exchanged for the Class E Notes. The Company believed that the revised
schedule for sale of the Companys then current aircraft portfolio would
allow it to realize better returns on such aircraft, because the Company
expected at that time to sell such aircraft over a period of five to seven years
from the Closing Date (compared to fifteen months under the terms of the Prior
Debt).

The
Class A, Class B, Class C and Class D Notes were issued on the Closing Date with
an aggregate face amount of approximately $394 million. The proceeds together
with cash balances previously held in reserve accounts were utilized to repay
the outstanding interest on the Old Notes, the $367 million of outstanding
principal on the Old Class A Notes and the Old Class M Notes, the refinancing
expenses of $13 million, the premium paid to the holders of certain of the Old
Notes of $4 million and to create an aircraft purchase reserve account for the
purchase of the WFC Aircraft. In addition, in connection with such refinancing
(i) the Old Class B Notes were exchanged for the Class E Notes, and (ii) the Old
SM Loan of $78 million was repaid.

The
Company is obligated to pay interest on the Notes and a portion of the principal
of the Class A Notes from the revenue generated by the Companys leasing
operations. The Company is required to

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sell one or more further aircraft having
an aggregate Initial Appraised Value of at least $66,810,000 million by June 27,
2003 in order to comply with the Trust Note Sales Goals. Proceeds from the sale
of aircraft are required to be used to pay principal of the Notes in the
priority set forth in the Deed of Charge. The Company is reviewing alternatives,
including sale of the aircraft, either individually, in a manner designed to
ensure compliance with the Trust Note Sales Goals or, in the aggregate, in a
manner designed to maximize the amount available to pay outstanding principal
and interest to the noteholders. However, selling any of the aircraft in the
current industry environment at reasonable prices is extremely difficult and
there can be no assurance that we will be able to repay the holders of the Class
A and Class B Notes the full amount owed to them when due. Further, based on
current projections, we expect to have insufficient funds to repay some of the
Class C Note principal and any remaining Class D and Class E Note principal, and
we expect to have insufficient funds to pay any further step-up interest due on
the Class A, Class B, Class C or Class D Notes or any remaining interest due on
the Class D and Class E Notes. An Event of Default occurs if we do not pay
interest (excluding additional interest, default interest or step-up interest)
on any Note within five days of its due date. This Event of Default has occurred
on several occasions when we have had insufficient funds to pay such interest in
full to Class D Noteholders. This Event of Default also occurred on several
occasions subsequent to fiscal year-ended June 30, 2002, including on the
December 16, 2002 interest payment date. We now expect this Event of Default to
continue as the Company does not expect to have sufficient funds to pay any
further Class D Note interest. See Item 3  Key Information 
Risk Factors, and Item 5  Operating and Financial Review and
Prospects  Liquidity and Capital Resources and see Item 13
 Defaults, Dividend Arrearages and Delinquencies for a discussion of
the limited remedies available upon the occurrence of an Event of Default under
these circumstances.

The
Company did not have sufficient funds to repay the Class A Notes on their
expected final payment date of May 15, 2002 or to repay the Class B, Class C or
Class D Notes on their expected final payment date of July 15, 2002. The Deed of
Charge requires, to the extent the Company does not repay principal on those
Notes by such dates, that the Company pay to the Class A, Class B and Class C
Noteholders additional step-up interest of 0.50% per annum and to the Class D
Noteholders additional step-up interest of 1.00% per annum for each month until
the earlier of the date such Notes are repaid in full and their final maturity
date of June 15, 2006. These additional interest costs would only be paid to the
extent there are available collections in accordance with the priority of
payments set forth in the Deed of Charge. The Company has paid some step-up
interest, but our current projections indicate that we will not have sufficient
funds to pay any further step-up interest.

At
various times during fiscal year 2002, certain target principal payments
scheduled to be paid to holders of Class A and Class D Notes, certain step-up
interest payments due to holders of Class A Notes, certain interest payments due
to holders of Class D Notes and all interest payments scheduled to be paid to
holders of Class E Notes were in arrears. As at the end of fiscal year 2002,
these arrears consisted of $0.068 million in Class A Note step-up interest,
$0.320 million in Class D Note default interest and $36.068 million in Class E
Note interest.

B.    Business Overview

Business Objectives

Our
business objectives (the Business Objectives) are (a) to re-lease
certain of the aircraft promptly after the scheduled expiration date of the
applicable original lease and to manage the aircraft with a view towards
receiving rental payments under the existing leases, and, in the case of any
renewed or replacement lease relating to any aircraft, to maximize the amount of
any rental payments thereunder so as to be able to make the required payments of
interest and principal on the scheduled payment dates with respect to the Senior
Trust Notes, (b) to market and sell the aircraft at such times and for such

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amounts to realize, on an aggregate basis, an amount sufficient to repay in full
the Outstanding Principal Balance of each class of the Senior Trust Notes and
(c) to the extent consistent with the objective described in clause (b) above,
upon the sale of the aircraft, to realize the value of the aircraft on an
aggregate basis so as to provide the maximum return to the Company on its
investment therein, in all cases taking into account the present and anticipated
market conditions affecting the sale of used aircraft and the commercial
aviation industry generally. With respect to the re-leasing, marketing and sale
of aircraft described in clauses (a) and (b) above, the Deed of Charge provides
that our Business Objectives change after certain dates. Accordingly, (i) prior
to June 27, 2001 our Business Objectives were to (x) re-lease aircraft to
maximize rental payments so as to be able to make required payments of interest
and principal on the scheduled payment dates with respect to each class of Notes
and (y) market and sell aircraft so as to repay the Outstanding Principal
Balance of all Notes, (ii) from June 27, 2001 through June 26, 2004 our Business
Objectives are to (x) re-lease aircraft to maximize rental payments so as to be
able to make required payments of interest and principal on the scheduled
payment dates with respect to the Senior Trust Notes and (y) market and sell
aircraft to repay the Outstanding Principal Balance of the Senior Trust Notes,
and (iii) from June 27, 2004 through June 15, 2006 our Business Objectives will
be to (x) re-lease aircraft to maximize rental payments so as to be able to make
required payments of interest and principal on the scheduled payment dates with
respect to the senior most class of Notes and (y) market and sell aircraft to
repay the Outstanding Principal Balance of the senior most class of Notes.

The
management and administration of the leases and the aircraft is conducted
principally by Babcock & Brown, as servicer.

Aircraft Leasing

As
of June 30, 2002, our fleet of aircraft was comprised of 11 aircraft (two
aircraft were sold subsequent to June 30, 2002) , 10 of which were on lease to 8
lessees in 8 countries. As of June 30, 2002, the remaining terms of the leases
ranged from approximately two months to four years and eleven months. The
following table shows the scheduled terminations by aircraft type and lessee for
the leases relating to our aircraft as of June 30, 2002:

`Aircraft Type    Lessee                    Month and Year of Expiration
A320 - 200       Air Canada(1)             March 2006
B737 - 300       Malev(2)                  May 2004
B737 - 400       Asiana                    December 2003
B737 - 400       Travel Service            March 2005(3)
B737 - 400       Off lease (4)             N/A
B737 - 500       China Southern            March 2004
B757 - 200       Britannia(5)              August 2002
B767 - 300ER     Air Canada                March 2004
B767 - 300ER     Air Canada                May 2007
MD83             Meridiana                 March 2004
MD83             BWIA(6)                   October 2002
________________`

|(1) | This aircraft was sold on December 20, 2002.
|--- | --------------------------------------------

|(2) | This aircraft was sold on October 1, 2002.
|--- | ------------------------------------------

|(3) | On December  23, 2002 a lease  extension  was executed to extend the lease
      expiration date for this aircraft to October 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(4) | A lease for this  aircraft was  executed  with Skynet on December 23, 2002
      with a lease  expiration  date in March 2005. The aircraft is scheduled to be
      delivered to Skynet in January 2003.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The  scheduled  lease  expiry  date for the  Britannia  lease was in March
      2002,  however the  aircraft  was  redelivered  to the  Company  later and in
      accordance  with its terms on August  15,  2002.  On August  16,  2002,  this
      aircraft was leased to Air 2000 with a lease expiration date in April 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | This aircraft was re-delivered in October 2002 and was immediately  placed
      on  lease  to  Allegiant  Air  with a lease  expiration  date of the  date of
      completion  of the next "C Check" for this  aircraft.  Such date is estimated
      to be in October 2003.  Allegiant  Air also has two  extension  options which
      could if  exercised  extend  the lease for up to a further  two years and six
      months.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

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All
of the leases relating to our aircraft are operating leases under which we (i)
will not recover fully the cost of each aircraft and (ii) retain the benefit and
assume the risk of the residual value of the aircraft. The aircraft are included
as assets on our balance sheet and depreciation is charged to income over the
estimated useful lives of the aircraft. See Item 18  Financial
Statements Statement of Accounting Policies  Aircraft. Minimum
lease rentals in respect of the aircraft are reported as revenue over the term
of the lease on a straight line basis. Contingent rents are recorded as the
contingency is resolved.

All
leases are on a net basis, under which the lessee is responsible for
all operating expenses, generally including, without limitation, fuel, crews,
airport and navigation charges, taxes, licenses, registration, insurance and
certain maintenance costs. However, in some of the more recently executed
leases, the Company has agreed to cover certain aircraft maintenance and
overhaul costs. Under the provisions of the leases, the lessee may also be
obligated to pay an agreed upon charge based on the use of the aircraft as a
provision for certain future maintenance costs. Normally, such amounts could be
reclaimed by the lessee once the relevant maintenance has been completed by the
lessee. The leases contain specific provisions regarding maintenance standards
during the terms thereof and regarding the condition of the aircraft upon
redelivery to us. The lessee is responsible for compliance with all applicable
laws and regulations with respect to the aircraft. We require our lessees to
maintain the aircraft in accordance with an approved maintenance program
designed to ensure that the aircraft meets applicable regulatory requirements in
the jurisdictions where the lessee operates.

Babcock
& Brown, on our behalf, is required to inspect or arrange for the inspection
of the condition of each aircraft at least once every 18 months. Generally, we
require a security deposit and/or a letter of credit from the lessee as security
for the performance of the lessees obligations under the lease although
this has not been the case for all of the leases. In addition, the leases
contain extensive provisions regarding our rights and remedies in the event of a
default thereunder by the lessee. Notwithstanding the foregoing, no assurance
can be given that all lessees will comply with the terms of their related leases
or that all of the lease provisions discussed herein will be enforceable against
each lessee. As of December 23, 2002, the aggregate arrears for all lessees was
less than $5,000; however, some lessees have at times been significantly in
arrears. During the fiscal year ended June 30, 2000, $881,114 was written off as
non-recoverable in respect of a debt due from one lessee, Istanbul. As at June
30, 2001, the outstanding debt owed by Istanbul totaled $3,281,502. After
offsetting the lessees security deposit, default interest and maintenance
reserves, $2,373,575 was written off as non recoverable in respect of this
lessees debts. The lease with Istanbul was terminated on August 24, 2000
and the aircraft was subsequently re-leased.

27

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Aircraft Fleet

As
of June 30, 2002, our fleet was comprised of 11 aircraft (two aircraft were sold
subsequent to June 30, 2002). Our aircraft consist of widebody and narrowbody
Stage 3 Aircraft. As of June 30, 2002, two of the aircraft were classified as
widebody aircraft, being two Boeing 767-300ERs. The remaining nine aircraft were
classified as narrowbody aircraft.

As
of June 30, 2002, our aircraft, divided by manufacturer, were as follows:

COMPANY FLEET

`Net Book Value
                                                         (in thousands of
Manufacturer         Aircraft Type         Number           dollars)(1)
Boeing               B737 - 300(2)            1              12,004
                     B737 - 400               3              48,891
                     B737 - 500               1              16,113
                     B757 - 200               1              25,930
                     B767 - 300ER             2              77,390

McDonnell Douglas    MD83                     2              21,370
Airbus               A320 - 200(3)            1              21,621
                                             --              ------
Total                                        11            $223,319
                                             ==            ========
______________________`

|(1) | Net book  value in  respect  of each of the 11  aircraft  is stated as of
     June 30, 2002.
|--- | ---------------------------------------------------------------------------------------------

|(2) | This aircraft was sold on October 1, 2002.
|--- | ------------------------------------------

|(3) | This aircraft was sold on December 20, 2002.
|--- | --------------------------------------------

Aircraft Value

We have
obtained three desktop appraisals (without physical inspection) of the appraised
base value of each aircraft as of June 2002 from Avitas, AISI and BK. Based on
such desktop appraisals, the aircraft (including the aircraft sold subsequent to
the fiscal year-end) had an aggregate appraised base value of $242,100,000,
$226,810,000 and $295,340,000, respectively, or an average aggregate appraised
base value of approximately $254,740,000.

We
obtained desktop appraisals (without physical inspections) of the appraised base
values of the 11 aircraft from Avitas, dated May 25, 2001, AISI, dated May 23,
2001, and BK, dated May 18, 2001. On such dates, the aircraft had an average
aggregate appraised base value of approximately $292.45 million, calculated as
the average of the appraised base values as determined by the Independent
Appraisers.

For
the purpose of the valuations, appraised base value is defined by the
International Society of Transport Aircraft Trading as the value of the aircraft
assuming an arms-length, cash transaction between willing and
knowledgeable parties, with a reasonable period of time available for marketing,
assuming, among other things, sales of the aircraft in an open, unrestricted,
stable market environment with a reasonable balance of supply and demand, and
assuming the maintenance status of each aircraft with regard to such things as
airframe, engines and landing gear to be at its half-life condition (i.e., its
condition at midpoint between service intervals), adjusted to account for
certain aspects ofthe actual maintenance status of each aircraft, as
provided to the appraisers. Appraised base values, as so determined, are only
estimates of resale values in a hypothetical market environment.

28

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We
believe that the reduction in the average appraised base value of the aircraft
from $292.45 million as of June 2001 to $254.74 million as of June 2002
representing a reduction of 12.9% of the average appraised base value from the
prior year, is due primarily to the ageing of the aircraft and, with respect to
certain aircraft, those market conditions which have had a negative effect on
aircraft values.

As
discussed in the Statement of Accounting Policies in the Financial Statements
contained in Item 18, the Directors undertake a review to determine whether an
impairment provision is required in respect of both long-lived assets and
aircraft identified for sale. The Directors, in applying SFAS No. 121, have
determined that the carrying value for seven of the Companys aircraft,
classified as long-lived assets, is greater than the undiscounted future
cashflows in respect of such aircraft and have recorded an impairment provision
for these aircraft equal to the difference between their carrying value and fair
value.

In
applying SFAS No. 121 the Directors have used average Appraised Current Market
Value, which was in aggregate $186,430,000 as at June 30, 2002 for the nine
aircraft classified as long-lived assets, and represents the Independent
Appraisers opinion of the most likely trading price that may be generated
for an aircraft under current market conditions. The Independent Appraisers
assume that the aircraft are valued for their highest, best use, that the
parties to the hypothetical sale are willing, able, prudent and knowledgeable,
and under no unusual pressure for a prompt sale, and that the transaction would
be negotiated in an open and unrestricted market on an arms length basis.

Appraised
Current Market Values have been estimated by the Independent Appraisers based on
value curves from the last downturn in the aircraft market. An Appraised Current
Market Value is an estimate of value and should not be relied upon as a measure
of current sales value; the proceeds realized upon a sale of an aircraft may be
less than the Appraised Current Market Value, particularly in current market
conditions as discussed in note 3 of the Financial Statements. In the current
environment, there is a lack of hard data available on which to base aircraft
valuations and therefore the appraisal process is more difficult.

The
Directors believe that, as a result of the factors discussed above and in note 3
of the Financial Statements, the sales value of the long-lived assets in the
current market may be less than the average Appraised Current Market Value and
the carrying value as at June 30, 2002. Also, if it were necessary to dispose of
an aircraft quickly, the proceeds from the sale of such aircraft would probably
be even less than the value in the current market. In that event, further
write-downs would most likely be required.

The
application of the accounting policies in the fiscal year ended June 30, 2002
has led to an increase in the impairment provision of $20.321 million. A
previous provision was made at June 30, 2001 for $30.259 million. At June 30,
2002 the impairment provision carried forward represents both write-downs to
estimated net realizable value less costs to sell (in respect of the two
aircraft identified for sale at June 30, 2002) and write-downs to average
Appraised Current Market Value (in respect of aircraft classified as long-lived
assets).

Following
the terrorist attacks of September 11, 2001 and the subsequent downturn in the
airline industry, many airlines have been flying fewer aircraft and downsizing
or reducing planned growth of their fleets. In addition, since September 11,
2001 a number of airlines have declared bankruptcy and ceased operations and it
is expected that the industry will experience further consolidation as well as
additional bankruptcies in the near future. As a result, aircraft owned by or
leased to these airlines have been put on the market for sale or lease thereby
increasing the supply of available aircraft at a time of decreasing demand.
Further, in the current environment there is a lack of hard data available on
which to base aircraft valuations and therefore the appraisal process is more
difficult. As discussed above, an appraisal is an estimate of value and should
not be relied upon as a measure of current sales value. We believe that as a
result of all of these factors the sales value of the long-lived assets in the
current market

29

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(as compared with the open, unrestricted stable market
environment with a reasonable balance of supply and demand assumed in the
determination of the appraised base values) is significantly less than the
average appraised base value and may be less than the average Appraised Current
Market Value and the carrying value as at June 30, 2002. Also, if it were
necessary to dispose of an aircraft quickly, the proceeds from the sale of such
aircraft would probably be even less than the value in the current market. The
effect of the Trust Note Sales Goals contained in the Deed of Charge is to
require that we sell one or more further aircraft having an aggregate Initial
Appraised Value of at least $66,810,000 by June 27, 2003. There can be no
assurance that we will not be forced to sell one or more aircraft in a
distressed sale situation. See Item 3 - Key Information  Risk
Factors  Risks Relating to Sales of Aircraft.

The
foregoing indications of appraised base value provided by the Independent
Appraisers do not reflect the value of the leases, maintenance reserves,
security deposits or other related collateral, if any. All dollar amounts listed
under this subsection are rounded to the nearest $0.1 million.

Fleet Age Analysis

The
weighted average age of our aircraft by net book value was 11.5 years as of June
30, 2002.

Lessees

The
lessees of our aircraft as of June 30, 2002, such lessees home country and
the respective aircraft type and date of manufacture are as set forth below:

`Lessee             Country                  Aircraft Type    Date of Manufacture
Air Canada         Canada                   B767 - 300ER     March 1991
                                            B737 - 300ER     August 1991
                                            A320 - 200(1)    March 1992
Asiana             Korea                    B737 - 400       November 1988
BWIA(2)            Trinidad & Tobago        MD83             August 1989
China Southern     People's Republic of     B737 - 500       July 1991
                   China
Malev              Hungary                  B737 - 300(3)    May 1991
Meridiana          Italy                    MD83             July 1989
Travel Service     Czech Republic           B737 - 400       March 1989
Off lease (4)      N/A                      B737 - 400       October 1989
Britannia (5)      United Kingdom           B757 - 200       March 1991
___________________`

|(1) | This aircraft was sold on December 20, 2002.
|--- | --------------------------------------------

|(2) | This aircraft is now on lease to Allegiant Air, a United States airline.
|--- | ------------------------------------------------------------------------

|(3) | This aircraft was sold on October 1, 2002.
|--- | ------------------------------------------

|(4) | On December 23, 2002, a lease for this  aircraft was executed with Skynet,
an Irish airline. Delivery of this aircraft to Skynet is expected to occur in
January 2003.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | This aircraft is now on lease to Air 2000, another English airline.
|--- | -------------------------------------------------------------------

In
fiscal year 2002, two lessees accounted for more than 10% of our leasing revenue
(Air Canada 25% and Spanair 20%). There are no leases with respect to which the
present value of the lease payments due from the lessee (utilizing a discount
rate equal to the average coupon on the Notes) exceeds 10% of the original
aggregate principal balance of the Notes.

30

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Distribution of Revenue by Geographic Area

The
following table sets forth the dollar amount and percentage of total lease
revenue attributable to the indicated geographic areas for the period from July
1, 2001 to and including June 30, 2002:

`Amount              Percentage
                                   (in thousands of
                                       dollars)
Europe                                  $15,329               46.75
Americas                                $10,076               30.73
Asia/Pacific                             $6,660               22.52
                                         ------               -----
                                        $32,605              100.00%
                                         ======              ======`

Many
foreign countries have currency and exchange laws regulating the international
transfer of currencies. We attempt to minimize our currency and exchange risks
by negotiating our aircraft leasing transactions in U.S. dollars and all letters
of credit and any other forms of credit enhancement obtained to support various
leases are denominated for payment in U.S. dollars.

Our
revenue and income may be affected by political instability, changes in national
policy in the countries where our aircraft operate, competitive pressures and
other financial difficulties experienced by certain air carriers, fuel
shortages, labor stoppages, recessions and other political or economic events
adversely affecting world or regional trading markets or impacting a particular
customer. Many of these factors have been adversely impacted by the terrorist
attacks in the United States on September 11, 2001 and the subsequent decline in
the aircraft industry.

Regional Concentrations.

Asia
Concentration  At June 30, 2002, 12% of our aircraft by appraised base
value at June 30, 2002 were leased by operators in Asia.

Trading
conditions in Asias civil aviation industry were adversely affected by the
severe economic and financial difficulties in the region in 1998 and 1999.
Certain economies in the region have experienced acute difficulties resulting in
many business failures, significant depression of local currencies against the
dollar, downgrading of sovereign and corporate credit ratings and
internationally organised financial stability measures. Since 1999, there has
been some stabilization and recovery in the economies of this region. A repeat
of this downturn in the regions economies, including as a consequence of
the terrorist attacks in the United States of September 11, 2001, the terrorist
attacks in Bali of October 12, 2002 and the ongoing threat of terrorist attacks
worldwide may further undermine business confidence, reduce demand for air
travel and adversely affect the Asian lessees ability to meet their
obligations.

South/Central
America Concentration  At June 30, 2002, 6% of our aircraft by
appraised base value at June 30, 2002 were leased by an operator in the
emerging markets in the West Indies. This aircraft was redelivered
by the lessee in accordance with its lease terms in October 2002.

European
Concentration  At June 30, 2002, 31% of our aircraft by appraised base
value at June 30, 2002 were leased by operators based in developed
Europe.

The
commercial aviation industry in Europe is very sensitive to general economic
conditions. Since air travel is largely discretionary, the industry tends to
suffer severe financial difficulties during slow economic periods. As a result,
the financial prospects for European lessees will depend on the level of
economic activity in Europe and in the specific countries where they operate. A
recession or other worsening of economic conditions in one or more of those
countries, particularly if combined with high

31

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fuel prices and/or a weak euro,
may adversely affect the European lessees ability to meet their financial
and other obligations. Competitive pressures from continuing deregulation of the
airline industry by the EU may also adversely affect European lessees
operations and their ability to meet their obligations under the leases. For a
more detailed analysis of possible consequences, see Item 3  Key
Information  Risk Factors.

North
America Concentration  At June 30, 2002, 43% of our aircraft by
appraised base value at June 30, 2002 were leased by an operator in North
America. As in Europe, the commercial aviation industry in North America is
highly sensitive to general economic conditions. Since air travel is largely
discretionary, the industry has suffered severe financial difficulties during
economic downturns. Over the last several years, nearly half of the major North
American passenger airlines have filed for Chapter 11 bankruptcy protection and
several major United States airlines have ceased operations. The decline in the
airline industry following the terrorist attacks of September 11, 2001 has
resulted in further bankruptcies of United States airlines and an increased
likelihood of additional bankruptcies of other United States airlines. For a
more detailed analysis of possible consequences, see Item 3  Key
Information  Risk Factors.

Off
lease aircraft As at June 30, 2002, one aircraft was off lease
representing 8% of our aircraft by appraised base value at June 30, 2002. On
December 23, 2002, a lease for this aircraft was executed with Skynet. Delivery
of the aircraft to Skynet is expected to occur in January 2003. None of our
aircraft are off-lease as of the date hereof.

Payment History

As
of June 30, 2002 and as of December 23, 2002, there were no material amounts
outstanding for more than 30 days for rental payments, maintenance reserves or
any other amounts due under the leases.

Competition

Our
principal business is the provision of aircraft through leasing transactions to
aircraft operators. We focus on the leasing of widebody/narrowbody Stage 3
Aircraft. A number of other parties provide aircraft on operating leases similar
to those provided by us, including International Lease Finance Corporation,
debis AirFinance B.V., Airbus Industrie Financial Services, Boeing Capital
Corporation, Pembroke Capital Limited, Ansett Worldwide Aviation Services, GE
Capital Aviation Services, Limited, GATX Corporation, AerCo Limited, Airplanes
Limited, Airplanes U.S. Trust and others. In addition, there are a number of
specialist operators who concentrate on particular regions or types of customers
and on specific aircraft types. Furthermore, we face competition from airlines,
aircraft manufacturers, aircraft brokers, banks and other financial institutions
who may provide aircraft for lease. Many of these parties have access to
financial resources substantially greater than those at our disposal, which
adversely affects our competitive position. Further, we are also required to
sell our aircraft to comply with the Trust Note Sales Goals, including the sale
of one or more further aircraft having an aggregate Initial Appraised Value of
at least $66,810,000 by June 27, 2003. Many entities sell used aircraft. The
competition for the sale of used aircraft is intense, particularly under current
market conditions. As discussed in Item 3  Key Information 
Risk Factors, the terrorist attacks of September 11, 2001 and other
related political and economic factors have significantly increased the supply
of aircraft available for sale and significantly decreased demand for the
purchase of such aircraft.

Compliance with Governmental and Technical Regulation

Our
customers are generally subject to a high degree of regulation in the various
jurisdictions in which they operate. Such regulation also indirectly affects our
business operations. The nature of such

32

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regulation ranges from compliance with
technical, environmental and airworthiness standards to economic regulation of
the market for air travel. Some organizations and jurisdictions have already
begun to discuss the further tightening of noise and emissions certification
requirements for newly manufactured aircraft. Changes in regulation which are
adverse to our interests or our customers could have a significant effect upon
our results from operations or the value of our aircraft.

In
addition to general requirements regarding maintenance of aircraft, aviation
authorities issue airworthiness directives (ADs) requiring the
operators of aircraft to take particular maintenance actions or make particular
modifications to a number of aircraft of designated types. ADs normally specify
a period in which to carry out the required action or modification and generally
enough time is allowed to permit the implementation of the AD in connection with
scheduled maintenance of the aircraft or engines. The lessees usually bear the
cost of compliance with ADs issued by applicable aviation authorities and
relevant manufacturers recommendations. We may be required to contribute a
portion of such costs over a specified threshold. However, if a lessee fails to
perform ADs required on an aircraft or if an aircraft is off-lease, we would
bear the cost of compliance necessary for the aircraft to maintain its
certificate of airworthiness. In such circumstances, funds in the collection
account and lessee funded account will be available to mitigate the costs of
compliance, although such use would reduce the availability of such amounts to
cover the cost of scheduled maintenance. There can be no assurance that such
funds will be available at the time needed or that any funds available will be
sufficient for such purposes.

Other
governmental regulations may apply to our aircraft, including requirements
relating to noise and emissions levels. Such regulations may be imposed not only
by the jurisdictions in which the aircraft are registered, but also in
jurisdictions where the aircraft operate. Chapter 3 of the Chicago Convention
establishes two progressively restrictive noise level standards that correspond
to the requirements for Stage 3 Aircraft. A number of jurisdictions have
adopted, or are in the process of adopting, noise regulations which will require
all aircraft to comply with the most restrictive of these standards. In
addition, local municipalities may have more stringent noise regulations than
those applicable to Stage 3 Aircraft.

Volume
2 of Annex 16 of the Chicago Convention also contains standards and
recommendations regarding limitations on vented fuel and smoke and gaseous
emissions for aircraft. While a number of countries have adopted regulations
implementing these recommendations, such regulations generally have been
prospective in nature, requiring only that newly manufactured engines meet
particular standards after a particular date. To the extent that these
regulations require modifications to the engines owned by us, they would be
treated similarly to ADs under the leases.

Aviation
authorities in Europe and North America have recently adopted regulations
requiring the installation of enhanced ground proximity warning systems and
certain other systems by 2005. Depending on whether the costs of complying with
these regulations are borne by us or the lessees, installation of these systems
could result in significant cash capital expenditures of approximately $500,000
per aircraft (operated in Europe or North America) by us in 2003 through 2005.

As
a result of the terrorist attacks of September 11, 2001, new security directives
may be adopted by aviation authorities. Depending on whether the cost of
complying with such directives would have to be borne by us or our lessees, such
directives could result in significant cash expenditures by us in the future.

The
FAA has in the last eighteen months announced an AD that requires operators of
MD-11, MD-80 and DC-10 aircraft to replace certain insulation blankets in order
to reduce the risk of fire. The estimated cost to implement these modifications
is $665,000 per aircraft. We have two MD-80 series aircraft representing 11% of
our portfolio by appraised base value at June 30, 2002. We expect these

33

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modifications to be implemented for our two MD-80 series aircraft by June 2003.
We will incur significant costs in ensuring our two MD-80 series aircraft comply
with these standards, which will impact adversely on our results of operations.

The
FAA has issued an AD mandating the replacement of main landing gear shock strut
pistons on MD-80 and MD-90 aircraft prior to the accumulation of 30,000 cycles
on the existing main landing gear shock strut pistons. The cost for such
replacement is approximately $265,000 per aircraft. Depending on warranty credit
provided by the manufacturer, the majority of this cost may be claimed from the
manufacturer. We have two MD-80 series aircraft representing 11% of our
portfolio by appraised base value at June 30, 2002. In the event that warranty
credit is not available from the manufacturer for any aircraft, we could incur
significant costs in ensuring our MD-80 aircraft comply with these standards,
which will impact adversely on our results of operations.

In
July 2001, the FAA issued an AD mandating the modification of affected lapjoints
on Boeing 737 aircraft when the aircraft has completed 50,000 cycles. The
estimated cost to implement such modifications is approximately $270,000 per
aircraft. We have five Boeing 737 aircraft in our portfolio, representing 38% of
the portfolio by appraised base value at June 30, 2002. Based on the current
cycles completed to date by our Boeing 737 aircraft, our Boeing 737 aircraft are
not likely to require these modifications prior to 2005. However, we could incur
significant costs in ensuring that our Boeing 737 aircraft comply with these
standards, which could impact adversely on our results of operations.

The
FAA has issued an AD mandating a re-design of the rudder systems of Boeing 737
aircraft prior to November 2008. The average cost per aircraft of such
modifications is approximately $182,000. We have five Boeing 737 aircraft in the
portfolio, representing 38% of the portfolio by appraised base value at June 30,
2002. It is expected that we will incur the full cost of this modification,
which will impact adversely on our results of operations.

The
FAA has recently published an AD that requires operators of Pratt & Whitney
PW4000 powered Airbus Industrie A300, Airbus Industrie A310, Boeing 747, Boeing
767 and McDonnell Douglas MD-11 aircraft to carry out certain maintenance
actions up to and including overhaul in respect of the engines on a repetitive
basis. The estimated cost to comply with this AD is approximately $4.4 million
per aircraft. We have two PW4000 powered Boeing B767 series aircraft
representing 34% of our portfolio by appraised base value at June 30, 2002. The
series of engine overhauls required by this AD for these two aircraft are
scheduled to be completed in October 2004. It is currently not clear to what
extent the engine manufacturer, the Company as owner or our lessees will be
responsible for the costs to be incurred to bring these engines into compliance
with these new standards. We could incur significant costs in ensuring that our
two B767 series aircraft comply with these new standards. This could impact
adversely on our results of operations.

Employees

We
have no employees. Our management is provided by the Servicer, the
Administrative Agent, the Financial Consultant, the Cash Manager, the Insurance
Advisor and the Company Secretary.

Insurance

Pursuant
to each lease, we require our lessees to carry the types of insurance which are
customary in the air transportation industry, including comprehensive liability
insurance and aircraft hull insurance. We further require that we be named as an
additional insured on hull and liability policies carried by the lessees. All
policies are to contain a breach of warranty endorsement or severability of
interest clause so that we continue to be protected even if the operator/lessee
violates one or more of the warranties or

34

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conditions of the insurance policy.
The coverage usually is worldwide, subject to limitations consistent with
comparable operators operating similar aircraft on similar routes. The
comprehensive liability insurance policies are generally arranged on a combined
single limit basis for comprehensive liabilities with an amount not less than
$500 million for each widebody aircraft and an amount of not less than $350
million per narrowbody aircraft.

As
a consequence of the terrorist attacks of September 11, 2001, airlines worldwide
are currently experiencing significant difficulties in maintaining war insurance
cover in the amounts required under their leases with us and other lessors.
Until recently, our lessees have relied on government indemnities to provide
coverage for third party liability (other than to passengers) arising from war
and terrorism risks, above a greatly reduced ceiling of cover provided by the
aviation insurance market as a reaction to the events of September 11, 2001.
However, most governments have now terminated their indemnity support and there
can be no assurance that our lessees will be able to replace that support by
insurance coverage. If such insurance were not purchased or otherwise available
from government support, it may be necessary for the relevant aircraft to be
grounded. Such consequences would have a material adverse impact on the
financial condition of our lessees and their ability to perform under their
leases. These effects could cause a reduction in our revenue which would
adversely affect our ability to make payments on the Notes.

Babcock
& Brown, as servicer, monitors the compliance by the lessees with the
foregoing requirements relating to insurance to be maintained in respect of the
aircraft and, to the extent of any insufficiencies or other problems with
respect to the required insurance coverage, negotiates and arranges for
appropriate additional insurance coverage.

C.    Organizational Structure

The
Company has two wholly-owned subsidiaries. They are ALPS 92-1 UK Limited
incorporated in England and Carotene Limited incorporated in Ireland.

D.    Property, Plants and Equipment

We
have no ownership or leasehold interest in any real property. Our registered and
principal office is located at Fourth Floor, Forum House, Grenville Street, St.
Helier, Jersey JE2 4UF, Channel Islands. For a description of our interest in
other property, see Item 4 - Information on the Company  Business
Overview.

ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.    Operating Results

The  following  discussion is based on our  financial  statements  which
were  prepared  under U.S.  GAAP. We present our  statements in U.S.  dollars.
Except where  otherwise  indicated,  all dollar  amounts listed in this Item 5
are rounded to the nearest $0.1 million.

We
believe that our revenue and expenses were not materially affected by inflation
during the period from incorporation to and including June 30, 2002.

Overview

We
commenced operations in 1992 to acquire and own a portfolio of 14 commercial
passenger jet aircraft, re-lease the aircraft as necessary and sell the aircraft
in order to provide funds to pay the principal

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amount of the Companys debt
securities at maturity. Substantially all of our business consists of aircraft
operating lease activities and aircraft sales as required to satisfy our Trust
Note Sales Goals. We conduct some of our leasing operations through our wholly
owned subsidiaries Carotene Limited and ALPS 92-1 UK Limited, which were
established for the sole purpose of assisting us in accomplishing our Business
Objectives by leasing aircraft from us either directly or indirectly and
re-leasing them to operators where tax considerations or other business factors
make it desirable to do so. We sold one of our aircraft to GPA in March 1996,
bought the WFC Aircraft in November 1996, and sold a B747-283B aircraft to WFC
in July 1997. On July 2, 1999, we sold a Fokker 100 aircraft to Besleasing, on
June 27, 2000, we sold a A300 B4-200 aircraft to Cebi Aviation S.A., on October
1, 2002 we sold a B737-300 aircraft to JFM Aviation One LLC, and on December 20,
2002 we sold an A320-200 aircraft to Transamerica Aviation, LLC.

Our
net income consists principally of lease revenue and interest income, reduced by
interest expense, general and administrative expenses, depreciation and, in some
years, a provision for impairment in aircraft values.

Our
results of operations have been and will continue to be determined by
significant factors such as (i) conditions in the civil aviation industry for
both leased and owned aircraft, (ii) the mix, relative age and popularity of the
various aircraft types in our portfolio of aircraft and (iii) our financial
resources and liquidity position relative to our competitors, some of whom may
possess substantially greater financial resources. We have operated in a
difficult financial market environment since our formation in 1992. Although
there had been signs of recovery in the civil aviation industry, conditions
remained difficult through September 11, 2001 and have deteriorated
significantly since the terrorist attacks on that date. Even though the industry
is beginning to experience a slight up-turn, at this time industry commentators
expect that total passenger levels are unlikely to return to pre-September 11,
2001 levels until 2004 at the earliest.

Recent Developments

During
the calendar year 2001 there was a downturn in the world economic climate with a
consequential negative impact on the operating conditions in the world aviation
industry. On September 11, 2001, terrorists hijacked and crashed four United
States commercial aircraft causing significant loss of life, property damage and
economic disruption. As a result, air travel in the United States was suspended
for several days. Further weakened by passenger fears and economic recession,
the airline industry has yet to recover. The depressed economic environment
throughout much of the world has highlighted the deteriorating business
fundamentals in the industry which led to global losses of $11 billion in
calendar year 2001, the largest losses in aviation history with losses in
calendar year 2002 expected to reach $7.5 billion.

The
effects of the events of September 11, 2001, together with the continuing
downturn in the world economic conditions which was already evident before that
date, include, among other things, a reduction in demand for air travel,
grounding of aircraft by airlines, bankruptcy and/or consolidation of airlines
particularly in Europe and the United States, fluctuations in the price of fuel,
reduced operations by airlines, increased costs due to new security measures
adopted by the relevant aviation authorities, and increased insurance premiums
required by the insurance markets. In particular, airlines worldwide are
continuing to experience difficulties in maintaining war insurance covering the
amounts required under their leases with us and other lessors. Until recently,
our lessees have relied on government indemnities to provide coverage for third
party liability (other than to passengers) arising from war and terrorism risks,
above a greatly reduced ceiling of cover provided by the aviation insurance
market as a reaction to the events of September 11, 2001. However, most
governments have now terminated their indemnity support and there can be no
assurance that our lessees will be able to replace that support by insurance

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coverage. If such insurance coverage is not purchased or otherwise available
from government support, it may be necessary for certain aircraft to be
grounded. Such consequences would have a material adverse impact on the
financial condition of our lessees and their ability to perform under their
leases. These effects could cause a reduction in our revenue which would
adversely affect our ability to make payments on the Notes.

Lease Revenue

Revenue
decreased in fiscal year 2000 due to the sale of the Fokker 100 aircraft and the
A300B4-200 aircraft in July 1999 and June 2000, respectively. Revenue decreased
in fiscal year 2001 due to the re-leasing of various aircraft at reduced rates
and the downtime of one of our B737-400 aircraft which was subsequently leased
to a lessee in India. Revenue decreased further in fiscal year 2002 due to
downtime of the B737-400 for approximately three months, reduced revenue from
the B757-200 which was on a power-by-the-hour lease but was not
utilized by the lessee for eight months, and new power-by-the-hour
leases and lease extensions negotiated with a number of lessees which generally
result in reduced and less dependable rental income.

Our
ability to make payments of interest will depend in part on the successful
re-leasing of our two aircraft with leases which expire in 2003. See Item
3  Key Information - Risk Factors  Risks Relating to Leasing of
Aircraft. Such new leases may bear fixed or floating rate payments. The
rental rate achieved upon such re-leasing will be affected by a number of
factors including the age, condition and jurisdiction of registration of the
aircraft, the perceived credit risk of the lessee, demand for the particular
aircraft type, the availability and price of competing new and used aircraft,
the market into which the aircraft is leased, the terms of the lease and general
economic factors such as interest rates, inflation and the general availability
of credit. The decline in the airline industry and the number of bankruptcies
have increased the number of aircraft on the market while demand has been
dropping. Further, uncertainty with respect to short to medium term future
prospects of the aircraft industry has resulted in many aircraft lessees
requiring restructuring of leases and many new leases being agreed only on a on
power-by-the-hour basis. Many new leases and restructurings have
also shifted certain aircraft maintenance and overhaul costs to the Company, as
lessor. Generally, all lease restructurings result in reduced rates, deferred
payments or early returns of aircraft. Power-by-the-hour
arrangements result in generally lower and less dependable lease revenue.
Currently five of our leases are on power-by-the-hour arrangements.
These conditions, particularly should they continue, are likely to affect our
lessees ability to make rent and other lease payments, are likely to
impair our ability to re-lease aircraft on a timely basis and at favorable rates
and are likely to reduce the value of the aircraft for possible sale. These
factors have caused and are expected to continue to cause a reduction in our
revenue and are likely to have a significant adverse effect on our ability to
make payments on the Notes on a timely basis and in full. See Item 3
 Key Information - Risk Factors Risks Relating to Payments on the
Notes.

Lease
revenue attributable to lessees based in Europe has decreased over the seven
year period since fiscal year 1995, decreasing from $22.7 million for fiscal
year 1995 to $15.3 million for fiscal year 2002. Lease revenue attributable to
lessees based in Asia, has also decreased from $13.6 million to $7.4 million
over the same period. Lease revenue attributable to lessees based in North
America has decreased from $11.4 million to $8 million and lease revenue
attributable to lessees based in South/Central America has decreased from $6.6
million to $2 million over the same period. The decrease in lease revenue
attributable to lessees based in Europe, Asia and North America is primarily the
result of the portfolio being reduced from fourteen to eleven aircraft during
the period and also a result of all aircraft being re-leased at lower rates. The
most significant decreases in lease rates have been in respect of the aircraft
with power-by-the-hour leases and in the reduced lease rates for the
two B767-300ER aircraft. In connection with the re-lease or sub-lease of an
aircraft, we are required to satisfy certain criteria regarding geographic
concentrations and the credit ratings of the countries of domicile of new
lessees or sublessees

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unless we receive confirmation from each applicable rating
agency that not doing so will not result in the withdrawal or lowering of such
rating agencys then-current rating of certificates representing interests
in any class of the Notes. All our current leases provide for rental payments
based on fixed rates (some lessees are based on power-by-the-hour
fixed hourly rates and others on fixed monthly rates) whereas the interest
payments on the Notes are based on fixed and floating rates. A material increase
in LIBOR may adversely impact our cash flow in respect of expenses. See
Item 3  Key Information - Risk Factors - Risks Relating to Payments
on the Notes.

Sales Revenue

The
Deed of Charge sets out the following Trust Note Sales Goals which require us to
approve sales of our aircraft on an ongoing basis:

`Aircraft to be Sold
   (measured by Initial Appraised         Date by which Sales Goals
      Value as of 3 June 1996)               are to be Satisfied
             $65,000,000                        June 27, 2001
            $130,000,000                        June 27, 2002
            $200,000,000                        June 27, 2003
            $454,950,000                        June 27, 2004`

We
were in compliance with and had exceeded the Trust Note Sales Goals as of June
27, 2001 and were required to sell a further $54,330,000 (as measured by Initial
Appraised Value) worth of aircraft to be in compliance with the Trust Note Sales
Goals as of June 27, 2002.

As
discussed above the current market for sale of used aircraft is extremely poor
and it is not clear when the market will improve. Nevertheless, in order to meet
the Trust Note Sales Goals, following an extensive marketing effort by the
Servicer, the Company had entered into non-binding agreements to sell a B737-300
and an A320-200 aircraft to two separate purchasers by June 27, 2002.

The
sale of the B737-300 on lease to Malev was completed on October 1, 2002. The
agreed purchase price for this aircraft was $12,308,000 assuming a June 27, 2002
closing date. The ultimate purchase price was adjusted downward by $730,933 to
reflect rent received by the Company for this aircraft during the period between
June 27, 2002 and October 1, 2002 after netting out notional interest on the
purchase price which accrued to the Companys benefit during this period.
The net cash proceeds were further adjusted downward to reflect accrued
maintenance reserves of $3,358,536 transferred to the purchaser. The purchaser
was an affiliate of a Class D Noteholder which exercised its pre-emption right
under the Deed of Charge to purchase the aircraft at 102% of the price agreed
upon as at June 2002 by the prospective purchaser. The Class D Noteholder
received the option to exercise this right because the agreed upon purchase
price was below the Class D Note Target Price of $17,252,908. The final purchase
price was also below the Class C Note Target Price of approximately $14.7
million as at May 21, 2002.

Despite
extensive efforts to complete the sale of the A320-200, we were informed by the
prospective purchaser on November 5, 2002 that it had decided to not proceed
with the transaction for reasons outside our control. As a result, the Company
was not in compliance with the Trust Note Sales Goals from November 5, 2002
until the aircraft was sold to a different purchaser on December 20, 2002. The
agreed purchase price for this aircraft was $21,124,754 assuming a November 15,
2002 closing date. The ultimate purchase price was adjusted downward by $229,810
to reflect rent received by the Company for this aircraft during the period
between November 15, 2002 and December 20, 2002 after netting out notional
interest on the purchase price which accrued to the Companys benefit
during this period. The

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net cash proceeds were further adjusted downward by
$137,903 to reflect advance rentals received by the Company through January 4,
2003. The agreed purchase price for this aircraft was above the Class C Note
Target Price and above the Class D Note Target Price.

We
have directed the Servicer to market other aircraft for sale in order to meet
the ongoing Trust Note Sales Goals. However, unless market conditions improve,
we believe it will continue to be very difficult to comply with the Trust Note
Sales Goals set for June 27, 2003 and June 27, 2004.

To
date, the Company has sold $133,190,000 (measured by Initial Appraised Value) of
aircraft. Given the current environment for aircraft sales, we can offer no
assurance as to whether the Company will be able to comply with the Trust Note
Sales Goals for June 27, 2003 or thereafter.

Impairment

The
Directors undertake a review to determine whether an impairment provision is
required in respect of both the nine aircraft classified as long-lived assets
and the two aircraft identified for sale.

This
review has determined that the carrying value for seven aircraft, classified as
long-lived assets, is greater than the expected undiscounted future cashflows in
respect of such aircraft and the Directors have recorded an impairment provision
for these aircraft equal to the difference between their carrying value and fair
value. For the purpose of measuring impairment losses for long-lived assets,
fair value is the average Appraised Current Market Value as calculated by the
Independent Appraisers. The average Appraised Current Market Value was in the
aggregate $186,430,000 as at June 30, 2002 for the long-lived assets and
represents the Independent Appraisers opinion of the most likely trading
price that may be generated for an aircraft under current market conditions. The
Independent Appraisers assume that the aircraft are valued for their highest,
best use, that the parties to the hypothetical sale are willing, able, prudent
and knowledgeable, and under no unusual pressure for a prompt sale, and that the
transaction would be negotiated in an open and unrestricted market on an arms
length basis.

Current
Market Values have been estimated by the Independent Appraisers based on value
curves from the last downturn in the aircraft market. An appraisal is an
estimate of value and should not be relied upon as a measure of current sales
value; the proceeds realized upon a sale of an aircraft may be less than the
Appraised Current Market Value, particularly in current market conditions as
discussed in note 3 of the Financial Statements. In the current environment,
there is a lack of hard data available on which to base aircraft valuations and
therefore the appraisal process is more difficult.

The
Directors believe that as a result of the factors discussed above and in note 3
of the Financial Statements the sales value of the long-lived assets in the
current market (as compared with the open, unrestricted, stable market
environment with a reasonable balance of supply and demand assumed in the
determination of appraised base values) is significantly less than the average
appraised base value and may be less than the average Appraised Current Market
Value and the carrying value as at June 30, 2002. Also, if it were necessary to
dispose of an aircraft quickly, the proceeds from the sale of such aircraft
would probably be even less than the value in the current market. In that event,
further write-downs would most likely be required.

The
application of the accounting policies in the fiscal year ended June 30, 2002
has led to an increase in the impairment provision of $20.321 million. A
previous provision was made at June 30, 2001 for $30.259 million. At June 30,
2002 the impairment provision carried forward represents both write-downs to
estimated net realizable value less costs to sell (in respect of the two
aircraft identified for sale at June 30, 2002) and write-downs to average
Appraised Current Market Value (in respect of aircraft classified as long-lived
assets).

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Recently Issued Accounting Standards

In
August 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets
(SFAS No. 144). SFAS No. 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This Statement requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If the carrying value of an asset exceeds its
estimated future cash flows, an impairment charge is recognised by the amount by
which the carrying amount of the asset exceeds the fair value of the asset. SFAS
No. 144 requires companies to separately report discontinued operations and
extends that reporting to a component of an entity that either has been disposed
of (by sale, abandonment, or in a distribution to owners) or is classified as
held for sale. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell. The Company adopted SFAS No.
144 on July 1, 2002 and this will be applicable for the year ended June 30,
2003. However, the Directors do not believe that this will have a material
effect on the financial statements.

In
April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4,
44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections (SFAS
No. 145). SFAS No. 145 requires gains and losses from the extinguishment of debt
to be classified as extraordinary items only if they meet the criteria in
Accounting Principles Board (APB) Opinion No. 30. SFAS No. 145 also
requires that capital leases that are modified so that the resulting lease
agreement is classified as an operating lease be accounted for under
sales-leaseback provisions. These amendments and other issues addressed in SFAS
No. 145 are not expected to have a material effect on the financial position or
results of the Company.

In
June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities (SFAS No. 146). SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities,
often referred to as restructuring costs and nullified prior
accounting guidance with respect to such costs. The Directors believe the impact
of SFAS No. 146 will not have a material effect on the financial position or
results of operations of the Company.

Critical Accounting Policies

We
have determined the critical policies by considering those that involve the most
subjective decisions or assessments. The most critical accounting policies are
those related to adequacy of maintenance reserves, impairment of aircraft values
and depreciation methods since these policies involve elements which require us
to make assumptions as to matters that are highly uncertain at the time the
estimates were made. We also consider the going concern assumption to be a
critical element in our financial reporting.

Maintenance Reserves

In
many of the lease contracts the lessee makes a payment into a fund held by the
Company, from which the costs of future maintenance checks are reimbursed. The
receipts from lessees are held in the maintenance reserve fund, except where the
Directors believe that a surplus exists, in which case such a surplus is taken
to income as a reduction of expenses. Conversely, the Company also provides for
additional maintenance costs which are not expected to be paid out of the
maintenance reserves, and such costs are charged to expenses. The determination
of the adequacy of the maintenance reserves is based on an analysis of the lease
portfolio and reflects and takes into account the judgment of the Directors.

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Impairment

We
have adopted SFAS No. 121. In performing the review for recoverability, the
Directors estimate the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying value of
the asset, the asset is written down to fair value.

In
determining fair value, the Directors use external valuations. For the purposes
of measuring impairment losses for long-lived assets, fair value is the average
of the Appraised Current Market Values, as calculated by the Independent
Appraisers. An appraisal is an estimate of value and therefore should be relied
upon as a measure of current sales value; the proceeds realized upon a sale of
an aircraft may be less than the average Appraised Current Market Value,
particularly in the current market conditions. In the current environment, there
is a lack of hard data available on which to base aircraft valuations and
therefore the appraisal process is more difficult. The Directors believe that as
a result of these factors the sales value of the aircraft in the current market
may be less than the average Appraised Current Market Value and the carrying
value as at June 30, 2002. Also, if it were necessary to dispose of an aircraft
quickly, the proceeds from the sale of such aircraft would probably be even less
than the value in the current market. In that event, further write-downs would
most likely be required.

Depreciation

Aircraft
are recorded at cost and are depreciated at a rate calculated to write off the
cost of the assets to their estimated residual value on a straight line basis
over their estimated useful economic lives. The determinations of useful life
and residual value are critical to the calculation of depreciation. The current
estimates of residual value and useful economic lives are 10% of cost, and 25
years from the date of manufacture.

Going Concern

The
consolidated financial statements are prepared on the going concern basis.
Although the Company balance sheet shows that there are liabilities considerably
in excess of assets, the terms of the Notes are such that, prior to the final
maturity of the Notes, the Noteholders are only entitled to receive interest and
principal repayments in the event that cash is available. Therefore the
Directors believe that the Company is a going concern.

Results of  Operations  - Fiscal  Year Ended June 30, 2002  compared  with the
Fiscal Year Ended June 30, 2001

Aircraft Leasing

Lease
revenue, which constitutes substantially all of our revenue, was $32.6 million
for the fiscal year ended June 30, 2002, a decrease of 14% from the
corresponding figure of $37.9 million for the fiscal year ended June 30, 2001.
This decrease was due primarily to downtime of the B737-400 for approximately
three months, reduced revenue from the Companys B757-200 aircraft which
was on a power-by-the-hour lease but was not utilized by the lessee
for eight months, and by reduced rental rates negotiated by a number of lessees.

General and Administrative Expenses

General
and administrative expenses consist principally of lease management fees, cash
management fees, directors and officers insurance and legal and
professional fees. General and

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administrative expenses have increased from $3.0
million for the fiscal year ended June 30, 2001 to $3.6 million for the fiscal
year ended June 30, 2002, an increase of 20%. Lease management fees decreased by
16.5% from $1.4 million in the fiscal year ended June 30, 2001 to $1.2 million
in the fiscal year ended June 30, 2002 as a result of lower lease revenue
income. Aircraft costs of $0.8 million were incurred in the fiscal year ended
June 30, 2002 (none in prior period) as a result of redelivery conditions on an
aircraft the lease in respect of which expired during the fiscal year. Our
D&O insurance premium increased from $190,000 in the fiscal year ended June
30, 2001 to $445,500 in the fiscal year ended June 30, 2002 due to a general
increase in D&O insurance premiums across all industries.

Depreciation

Depreciation
of $16.4 million was charged for the fiscal year ended June 30, 2002 and $17.6
million for the fiscal year ended June 30, 2001.

Impairment  in Aircraft Values

In
accordance with SFAS No. 121, the Directors of the Company reviewed the carrying
value of the aircraft against the sum of the expected undiscounted future
cashflows of the aircraft and determined that shortfalls existed for seven
aircraft classified as long-lived assets as their carrying value was more than
the sum of the expected undiscounted future cash flows of these aircraft. The
Directors therefore made an impairment provision for each of these aircraft
equal to the difference between their carrying value and their fair value. In
respect to the two aircraft classified as available for sale at June 30, 2002,
these assets have been included as part of the portfolio at the lower of the
carrying amount and their estimated net realizable value less costs to sell.
Gains or losses arising on the revaluation of such assets have been taken to the
provision for impairment. A provision for impairment of the book value of
aircraft of $20.32 million was made for the fiscal year ended June 30, 2002. See
Overview  Impairment above.

The
decline in the fair value of the aircraft is due primarily to the ageing of the
aircraft, and with respect to certain aircraft, those market conditions which
have had a negative effect on aircraft values. These conditions have continued
to result in a reduction in lease rates.

Maintenance Reserves

The
Company has provided for future expected lessor AD costs of $7.2 million in
respect of four aircraft.

Bad Debts

There have been no bad debts during the fiscal year ended June 30, 2002.

Results of  Operations  - Fiscal  Year Ended June 30, 2001  compared  with the
Fiscal Year Ended June 30, 2000

Aircraft Leasing

Lease
revenue, which constitutes substantially all of our revenue, was $37.9 million
for the fiscal year ended June 30, 2001, a decrease of 12% from the
corresponding figure of $43.1 million for the fiscal year ended June 30, 2000.
This decrease was due primarily to the downtime of one of our B737-400 aircraft
which was not re-leased until the eighth month of the fiscal year 2001 and the
lower rental rates of one of our B767-300ERs in particular.

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General and Administrative Expenses

General
and administrative expenses consist principally of lease management fees, cash
management fees, directors and officers insurance, political risk
insurance and legal and professional fees. General and administrative expenses
have remained constant at $3.0 million for each of the fiscal years ended June
30, 2000 and 2001. Lease management fees decreased by 28.5% from $1.8 million in
the fiscal year ended June 30, 2000 to $1.4 million in the fiscal year ended
June 30, 2001. Legal and professional fees increased by 38.7% from $0.6 million
in the fiscal year ended June 30, 2000 to $0.9 million in the fiscal year ended
June 30, 2001.

Depreciation

Depreciation
of $17.6 million was charged for each of the fiscal years ended June 30, 2000
and 2001.

Impairment  in Aircraft Values

As
at June 30, 2001, our portfolio of aircraft (at that time consisting of 11
aircraft) was valued at $292.45 million, based upon the average appraised
valuation of the Independent Appraisers. The net book value of such aircraft on
such date was $260.0 million.

In
accordance with SFAS No. 121, the Directors of the Company reviewed the carrying
value of the aircraft against the sum of the expected undiscounted future
cashflows of the aircraft and determined that shortfalls existed for five
aircraft as their carrying value was more than the sum of the expected
undiscounted future cash flows of those aircraft. The Directors therefore made
an impairment provision for those five aircraft being the difference between
their carrying value and their fair value. A provision for impairment of the
book value of the five aircraft of $30.3 million was made for the fiscal year
ended June 30, 2001. No such provision was made for the fiscal year ended June
30, 2000.

The
decline in the fair value of the five aircraft is due primarily to a reduction
in demand for certain older aircraft as a result of a downturn in the world
economic climate. These conditions have also resulted in a reduction in lease
rates.

Write back of Maintenance Reserves

During
fiscal year 2001, the Directors updated the previous report on future
maintenance exposure obtained in fiscal year 2000. The updated information
indicated that future maintenance receipts on existing aircraft are expected to
be less than future maintenance payments. Considering the findings of this
updated report and the inherent uncertainties in determining the future
obligations of the Company to meet future maintenance payments out of the
proceeds of future maintenance receipts, the Directors determined that an amount
of $5.7 million, that had been credited to the Statement of Operations in
previous years, should be written back from the Statement of Operations during
the fiscal year ended June 30, 2001.

In
addition, the Company made provisions for lessor contributions of $4.5 million
in respect of five of the lessees. Of these contributions, $1.2 million has been
provided in respect of maintenance payments that may be required under ADs
relating to two of our aircraft. The lessee of these aircraft is not required to
pay maintenance accruals to the Company. In accordance with the relevant lease,
provisions for lessor contributions of $1.4 million were also made in respect of
one of our other aircraft for landing gear and engine overhauls. Further
contributions were made relating to the delivery of one of

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our B737-400 aircraft
to Royal Airways, which was entitled to maintenance accruals that had previously
been written off against Istanbuls debt with the Company.

An
amount of $1.0 million was credited in previous fiscal years in relation to a
lessee in arrears of $1,531,114 as of June 30, 2000 and an aircraft which was
subsequently repossessed. The Directors determined that the $1.0 million
previously re-leased should be provided for in the Maintenance Reserve.

Bad Debts

During
the fiscal year ending June 30, 2001 the Directors, after due consultation and
advice from the Servicer and the Companys legal advisers, determined that
the Company should write-off the debt of $3,281,502 owed to the Company by
Istanbul. After offsetting Istanbuls security deposit, default interest
and maintenance reserves, $2,373,575 was written off in the Statement of
Operations. It was agreed that the costs involved with issuing bankruptcy
proceedings against the airline would outweigh any amounts that were likely to
be recovered.

B.    Liquidity and Capital Resources

Cash position

We
acquired the original 14 aircraft with a portion of the proceeds we received
from the issuance of the Prior Debt. On June 27, 1996, we refinanced the Prior
Debt with the issuance of the Notes, the aggregate principal amount of which was
$435,110,000 as of June 30, 1997. Operating expenses and payments of interest on
and certain payments of principal of the Notes have been satisfied from rental
income received by us in respect of the leases as well as sale proceeds.

We
have maintained a positive cash position since our formation. Our cash resources
remained static during fiscal year 2002. Our cash resources increased by $1.5
million in fiscal year 2001, primarily as a result of reduced interest and
principal payments compared with cash inflows from operating activities during
the fiscal year. At June 30, 2002, cash resources equaled $30.2 million compared
to $30.2 million at June 30, 2001.

Cash from Operating Activities

Net
cash provided by operating activities amounted to $16.1 million in fiscal year
2002, $19.2 million in fiscal year 2001 and $14.3 million in fiscal year 2000.
This reflects cash received in respect of lease rentals of $31.1 million in
fiscal year 2002, $38.1 million in fiscal year 2001 and $42.2 million in fiscal
year 2000. Cash paid in respect of interest was $12.33 million in fiscal year
2002 as compared to $19.9 million in fiscal year 2001. Cash paid in respect of
interest is paid under the Deed of Charge and is limited to the net cash
provided by operating activities. The decrease in net cash provided by operating
activities is primarily due to the reduction in lease rental income and the
reduction in maintenance receipts less claims paid and interest and principal
payments made during the fiscal year ended June 30, 2002. During the fiscal year
ended June 30, 2000 there were maintenance payments of $5.6 million primarily in
respect of the B737-300 and the B757-200 aircraft. During the fiscal year ended
June 30, 2001 there were maintenance payments of $1.7 million primarily in
respect of the MD83 and B737-400 aircraft. During the fiscal year ended June 30,
2002, there were maintenance payments of $5.4 million primarily in respect of
the MD83 and B737-300 aircraft.

44

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Cash from Investing and Financing Activities

In
fiscal year 1993, we issued the Prior Debt and received cash of $521.0 million.
In addition, we received an escrow payment of $15.5 million from GPA and the Old
SM Loan of $78.1 million. These proceeds were used to finance the acquisition of
the original 14 aircraft for $521.0 million and the remaining cash balances were
invested in bank deposits and commercial paper.

In
March 1996, we sold one aircraft to GPA for $25.0 million. On June 27, 1996, we
refinanced the Prior Debt with the issuance of the Notes. Proceeds of $380.6
million were received from the issuance of the Class A, Class B, Class C and
Class D Notes, net of expenses. The proceeds together with cash balances
previously held in reserve accounts were used to redeem the Old Class A Notes
and Old Class M Notes, which were discharged in full pursuant to written
instruments entered into by the parties, with the balance of the proceeds of
such Notes being held in bank deposits. The Old Class B Notes which were owned
by WFC were exchanged by WFC for the Class E Notes, and the Old SM Loan was
repaid.

Since
1996 and as at June 30, 2002, approximately $133 million of principal and $121
million of interest has been paid to the Noteholders.

The Company's Cash Needs

At
various times during fiscal year 2002, certain target principal payments
scheduled to be paid to holders of Class A and Class D Notes, certain interest
payments due to holders of Class A and Class D Notes and certain interest
payments scheduled to be paid to holders of Class E Notes were in arrears. As at
the end of fiscal year 2002, these arrears consisted of $0.068 million in Class
A Note step-up interest, $0.320 million in Class D Note default interest and
$36.813 million in Class E Note interest. Our current projections for the
remainder of fiscal year 2003 indicate that we will not be able to pay any
further interest coming due on the Class D Notes.

The
Company did not have sufficient funds to repay the Class A Notes on their
expected final payment date of May 15, 2002 or to repay the Class B, Class C or
Class D Notes on their expected final payment date of July 15, 2002. Failure to
repay in full the principal of those Notes by such dates is not an Event of
Default; however, the Deed of Charge requires, to the extent the Company does
not repay in full principal of those Notes by such dates, that the Company pay
to the Class A, Class B and Class C Noteholders additional step-up interest of
0.50% per annum and to the Class D Noteholders additional step-up interest of
1.00% per annum for each month until the earlier of the date such Notes are
repaid in full and their final maturity date of June 15, 2006. These additional
interest costs will only be paid to the extent there are available collections
in accordance with the priority of payments set forth in the Deed of Charge. The
Company has paid some step-up interest, but our current projections indicate
that we will not have sufficient funds to pay any further step-up interest.

The
timing and amount of principal payments on the Notes will be primarily a
function of the Target Balances (as such term is defined in the Prospectus) for
the respective classes of Notes. Such Target Balances were determined based on
certain assumptions, including among other things, assumptions regarding the
timing of receipt and amount of proceeds of aircraft sales and lease payments.
Our actual experience in selling and leasing aircraft has resulted in proceeds
received by us being significantly less than that provided in these assumptions.
For the reasons discussed under Item 3  Key Information  Risk
Factors and Item 5  Operating and Financial Review and
Prospectus  Operating Results we expect that the difference between
these assumptions and actual experience will increase as the industry
experiences a period of prolonged decline. The Company is working with the
Servicer to sell aircraft in the manner we believe most advantageous to the
noteholders while attempting to comply with the Trust Note Sales Goals and the
Business Objectives. The Company will continue to review

45

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alternatives designed
to maximize the amount available to pay outstanding principal and interest to
the noteholders while attempting to comply with the Trust Note Sales Goals, the
Business Objectives and the other requirements of the Deed of Charge. However,
there can be no assurance that we will be able to repay the holders of the Class
A and Class B Notes the full amount owed to them when due. Further, based on our
current projections, we expect to have insufficient funds to repay some of the
Class C principal and any remaining Class D and Class E Note principal. Our
operative documents restrict our ability to consider many traditional forms of
financing and thereby circumscribe the options available to us. We cannot offer
any assurance that viable alternative arrangements will be available to us or
that any alternative arrangement selected will be successful.See
Item 3 - Key Information  Risk Factors, Item 4 -
Information on the Company  History and Development of the Company
and Item 13  Defaults, Dividend Arrearages and Delinquencies.

The
Deed of Charge sets out the following Trust Note Sales Goals which require us to
approve sales of our aircraft on an ongoing basis:

`Aircraft to be Sold
   (measured by Initial Appraised         Date by which Sales Goals
      Value as of 3 June 1996)               are to be Satisfied
             $65,000,000                        June 27, 2001
            $130,000,000                        June 27, 2002
            $200,000,000                        June 27, 2003
            $454,950,000                        June 27, 2004`

We
were in compliance with and had exceeded the Trust Note Sales Goals as of June
27, 2001 and were required to sell a further $54,330,000 (as measured by Initial
Appraised Value) worth of aircraft to be in compliance with the Trust Note Sales
Goals as of June 27, 2002.

As
discussed above the current market for sale of used aircraft is extremely poor
and it is not clear when the market will improve. Nevertheless, in order to meet
the Trust Note Sales Goals, following an extensive marketing effort by the
Servicer, the Company had entered into non-binding agreements to sell a B737-300
and an A320-200 aircraft to two separate purchasers by June 27, 2002.

The
sale of the B737-300 on lease to Malev was completed on October 1, 2002. The
agreed purchase price for this aircraft was $12,308,000 assuming a June 27, 2002
closing date. The ultimate purchase price was adjusted downward by $730,933 to
reflect rent received by the Company for this aircraft during the period between
June 27, 2002 and October 1, 2002 after netting out notional interest on the
purchase price which accrued to the Companys benefit during this period.
The net cash proceeds were further adjusted downward to reflect accrued
maintenance reserves of $3,358,536 transferred to the purchaser. The purchaser
was an affiliate of a Class D Noteholder which exercised its pre-emption right
under the Deed of Charge to purchase the aircraft at 102% of the price agreed
upon as at June 2002 by the prospective purchaser. The Class D Noteholder
received the option to exercise this right because the agreed upon purchase
price was below the Class D Note Target Price of $17,252,908. The final purchase
price was also below the Class C Note Target Price of approximately $14.7
million as at May 21, 2002.

Despite
extensive efforts to complete the sale of the A320-200, we were informed by the
prospective purchaser on November 5, 2002 that it had decided to not proceed
with the transaction for reasons outside our control. As a result, the Company
was not in compliance with the Trust Note Sales Goals from November 5, 2002
until the aircraft was sold to a different purchaser on December 20, 2002. The
agreed purchase price for this aircraft was $21,124,754 assuming a November 15,
2002 closing date. The ultimate purchase price was adjusted downward by $229,810
to reflect rent received by the Company

46

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for this aircraft during the period
between November 15, 2002 and December 20, 2002 after netting out notional
interest on the purchase price which accrued to the Companys benefit
during this period. The net cash proceeds were further adjusted downward by
$137,903 to reflect advance rentals received by the Company through January 4,
2003. The agreed purchase price for this aircraft was above the Class C Note
Target Price and above the Class D Note Target Price.

We
have directed the Servicer to market other aircraft for sale in order to meet
the ongoing Trust Note Sales Goals. However, unless market conditions improve,
we believe it will continue to be very difficult to comply with the Trust Note
Sales Goals set for June 27, 2003 and June 27, 2004.

To
date, the Company has sold $133,190,000 (measured by Initial Appraised Value) of
aircraft. Given the current environment for aircraft sales, we can offer no
assurance as to whether the Company will be able to comply with the Trust Note
Sales Goals for June 27, 2003 or thereafter.

Failure
to comply with the Trust Note Sales Goals may, under certain circumstances,
constitute an Event of Default under the Deed of Charge if such failure
continues for 30 days or more after written notice thereof has been given to the
Company or the Security Trustee by holders of at least 25% of the aggregate
Outstanding Principal Balance of the Notes of any class which has been
materially adversely affected by such failure.

The
Deed of Charge further provides that if an Event of Default were to occur and be
continuing an Enforcement Notice may only be served by
662/3% or more of the aggregate Outstanding Principal
Balance of the directing class, which will be Class A so long as any Class A
Notes are outstanding.

The
Deed of Charge provides that the failure to satisfy the Trust Note Sales Goals
gives the Noteholders the right to replace the Servicer at the direction of
Noteholders representing at least 75% of the aggregate Outstanding Principal
Balance of the Class A, Class B, Class C and Class D Notes. The Deed of Charge
also provides that, subject to the pre-emption rights of the Class D and Class E
Noteholders, at any time the Trust Note Sales Goals are not satisfied the
Company would be required to accept any Sale Offer for any aircraft if such
offer was at or above the Class C Note Target Price.

Except
as noted below, the Companys collection account is required to be
maintained at a balance equal to $23,907,000 (the Liquidity Reserve
Amount). Part of the Liquidity Reserve Amount consists of maintenance
reserves and security deposits received in cash from certain lessees under the
terms of their leases. The Liquidity Reserve Amount may be used to pay for
maintenance performed on aircraft, certain contingencies in respect of the
aircraft, repayment of cash security deposits and, subject to Board approval,
other Company expenses and liabilities, including, among other things, interest
due on the Class A, Class B and Class C Notes and costs incurred in removing any
lien imposed by Eurocontrol, in performing airworthiness directives on the
aircraft or in re-possessing or re-leasing any aircraft, to the extent that
available collections are not sufficient therefor, in accordance with the
priority of payments set out in the Deed of Charge. The Company must augment the
Liquidity Reserve Amount on a monthly basis out of available collections to the
extent it is used to pay such interest, costs, expenses or liabilities. The
Company may in certain circumstances reduce the Liquidity Reserve Amount. The
balance of funds in the collection account may fall below the Liquidity Reserve
Amount at any time and the Company may continue to make payments required on the
Class A, Class B, Class C and Class D Notes provided that the balance of funds
in the collection account does not fall below the Maintenance Reserve
Amount (currently $10 million). The Company believes its maintenance
funding arrangements to be sufficient, based on anticipated future maintenance
expenses, to provide the Company with sufficient liquidity to meet its ongoing
maintenance liabilities.

47

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|C. | Research and Development, Patents and Licenses Not Applicable.
|-- | --------------------------------------------------------------

|D. | Trend Information
|-- | -----------------

We
have continued to suffer from a very difficult business environment for the
commercial aircraft industry in the light of global economic conditions, as
exacerbated by the terrorist attacks of September 11, 2001 and the subsequent
and continuing political and economic fallout. The resulting reduction in
passenger numbers and consequential reduction in flight schedules by airlines,
has caused a decline in demand for aircraft. Some carriers have filed for
bankruptcy or consolidated, while others, including many of our lessees, have
suffered large losses or face severe financial difficulties. Oversupply of
aircraft has resulted in increased aircraft downtime, aircraft being parked, a
fall in market value of aircraft (especially older technology and less
fuel-efficient aircraft or models no longer in production) and lower lease rates
throughout the industry. We have ourselves experienced a decline in lease rates
upon re-leasing or extensions of leases, an increase in the number of our leases
on power-by-the-hour arrangements, requests from certain of our lessees to
restructure their leases and/or allow rental holidays and deferrals, and a
decline in sales prices achievable for our aircraft. Further, in new or
restructured leases certain aircraft maintenance and overhaul costs have been
shifted from our lessees to the Company. We currently expect that the lease
rates we will obtain in coming months in respect of new leases or lease
extensions for aircraft coming off-lease will be lower and in some cases,
significantly lower, than currently contracted lease rates.

Furthermore,
oil prices have been volatile and may rise significantly, particularly if the
United States engages in military action in the Middle East, which would have an
adverse effect on the ability of our lessees to perform their obligations under
the leases. Furthermore, if there is military action in the Middle East,
passenger numbers would likely fall.

Additionally,
it has been difficult and expensive for lessees to obtain the level of insurance
coverage required under the leases, and in many cases, they rely on short-term
government solutions. If these are not renewed and the insurance market does not
provide the required coverage, it may be necessary for aircraft to be grounded.
Also, new ADs have been issued, and further ADs may be issued, in order to
improve security on aircraft, the cost of compliance with which, to the extent
that they are not the responsibility of lessees under their leases or if the
aircraft are not currently on lease, will be our responsibility.

We
have already experienced a number of rental restructurings, typically involving
the rescheduling of rental payments over a specified period and/or the reduction
of current rentals usually in return for extensions of the relevant leases.
These arrangements can also include forgiveness of amounts in respect of rental
arrears. While the Servicer attempts to limit concessions, the current worldwide
commercial aircraft market is characterized not only by a large number of weak
lessees, but also by overcapacity of available aircraft in almost every aircraft
category and restructuring of existing leases is often the only way to keep our
aircraft in use and earning revenues. There can be no assurance that we may not
have to agree to further restructurings in the future.

From
June 2001 to June 2002, there has been a decline of 12.9% in the appraised base
value of our fleet. The appraised base values are based upon the value of the
aircraft at normal utilization rates in an open, unrestricted and stable market,
and take into account long-term trends, including current expectations of
particular models becoming obsolete more quickly, as a result of airlines
switching to different models, or lease values for aircraft declining more
rapidly than previous predictions. As a theoretical value, the appraised base
value is not indicative of market value and it is not likely that we

48

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would
obtain the appraised base value upon sale of any aircraft, since we might sell
at a low point in the business cycle, and since appraised base values are
forward-looking.

See
Item 3 - Key Information - Risk Factors and Item 5 - Operating
and Financial Review and Prospects  Operating Results for a
discussion of additional trends affecting our operations.

ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.    Directors and Senior Management

Board of Directors

Our
Directors and their ages, business addresses and principal activities are as
follows:

`Name                           Age  Business Address         Principal Activities
-----------------------------  ---  ----------------         --------------------
Mr. Frederick W. Bradley, Jr.  75   764 Norgate, Westfield   Retired - Senior Vice
                                    New Jersey, United       President, Citibank,
                                    States 07090             N.A., Citicorp

Mr. G. Adrian Robinson         53   Timbers, Dean Street     Aerospace Consultant
                                    East Farleigh,
                                    Maidstone
                                    Kent ME15 OHS, England

Mr. Robert J. LaForest         48   Whirlpool Financial      Vice President,
(resigned June 12, 2002)            Corporation, Mail Drop   Whirlpool Financial
                                    2200, 2000, North        Corporation
                                    M-63, Benton Harbor,
                                    Michigan, United
                                    States 49022

Mr. Brian L. Chamness          43   1403 W. Lusher Ave.      Consultant, Whirlpool
(appointed June 12, 2002)           Elkhart, Indiana,        Financial Corporation
                                    United States 46517`

The
present principal occupation and other affiliations of our Directors are as
follows:

Frederick
W. Bradley, Jr.  Mr. Bradley has served as a Director of the Company and
as Chairman of the Board since June 15, 1992. From 1969 until 1992, Mr. Bradley
was a Senior Vice President of Citibank N.A., in charge of the banks
global airline and aerospace business having joined Citibank in 1958. Mr.
Bradley served as the Chairman of the Board of ALPS 94-1 Limited from
June 2, 1994 to October 18, 2001 and as Chairman of the Board of AerCo
Limited from June 23, 1998 to October 18, 2001. Mr. Bradley is also a Director
of First Citicorp Life Insurance Co., and the Institute of Air Transport Paris,
France and is president of the International Air Transport Associations
(IATA) International Airline Training Fund of the United States. Mr. Bradley
retired as a Director of America West Airlines, Inc. in 1999 after serving seven
years on its Board.

G.  Adrian  Robinson - Mr.  Robinson  has  served as a  Director  of the
Company  since June 27, 1996.  Mr.  Robinson has been an aerospace  consultant
since 1992.  From 1990 to 1992, Mr.  Robinson was a Deputy General  Manager of
The Nippon  Credit  Bank.  Until  1989,  he was a Managing  Director,  Special
Finance  Group,  of Chemical Bank,  which he joined in 1986. Mr.  Robinson has
served as a Director of ALPS 94-1  Limited  since June 2, 1994,  as a Director
of AerCo  Limited  since June 23,  1998

49

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and as the  Chairman  of the Boards of
ALPS 94-1 Limited and AerCo Limited since October 18, 2001. Mr.  Robinson also
provides  consulting  services  from  time  to time  to Air  2000,  one of the
lessees.

Robert
J. LaForest  Mr. LaForest served as a Director of the Company from
September 13, 2000 to June 12, 2002. Mr. LaForest has been a Vice President of
WFC since January 15, 1998 and WFCs Secretary since January 31, 2000. Mr.
LaForest is also Senior Counsel in the law department of WFCs parent,
Whirlpool Corporation. Mr. LaForest was Senior Counsel in the law department of
WFC from 1993 until 1998 when he joined Whirlpools law department.

Brian
L. Chamness  Mr. Chamness served as a Director of the Company from January
28, 1998 to June 30, 2000 and was re-appointed as a Director on June 12, 2002.
Mr. Chamness was a Vice President of WFC from January 1998 to June 2000 and was
a member of the Board of Directors of WFC from April 1999 to June 2000. Mr.
Chamness currently serves as a consultant to WFC.

Mr.  Bradley  and  Mr.  Robinson  both  serve  for  two  year  terms  as
Directors,  but there is no limit to the number of terms  they may serve.  Mr.
Chamness serves for a term of unlimited  duration until removed or replaced by
WFC. Mr.  Bradley's term expired in the second calendar  quarter of 2001, when
he was  re-appointed  to the  Board and Mr.  Robinson's  term  expired  in the
second calendar  quarter of 2002, when he was  re-appointed to the Board.  Mr.
Bradley's  term  expires  again in the second  calendar  quarter of 2003.  Mr.
Robinson  is the  Chairman  of the Board and a Director  of AerCo  Limited,  a
competitor of the Company in the aircraft leasing industry.

Our
Directors are non-executive and we do not and will not have any employees or
executive officers. Accordingly, the Board of Directors relies upon the
Servicer, the Administrative Agent, the Cash Manager and the other service
providers for all asset servicing, executive and administrative functions under
the service provider agreements. Certain individuals other than the Directors
listed above serve as Directors of various subsidiaries of the Company.

In
accordance with our Memorandum and Articles of Association, the holder of the
Class E Notes, currently WFC, is entitled to appoint one member of the Board of
Directors. Since June 12, 2002, Mr. Chamness has been the Director elected to
the Board by WFC.

Corporate Management

Servicer

The
Servicer, Babcock & Brown, provides a wide range of services including:

| |  | lease marketing and negotiation of lease agreements;
| | - | ----------------------------------------------------

| |  | aircraft sales;
| | - | ---------------

| |  | aircraft lease management including:
| | - | ------------------------------------

| | - | calculation, invoicing and collection of cash due under leases;
| | - | ---------------------------------------------------------------

| | - | monitoring  each  lessee's   performance  of  its  aircraft  maintenance
                 obligations;
| | - | ------------------------------------------------------------------------------------------------------

| | - | arranging for aircraft inspections;
| | - | -----------------------------------

| | - | accepting delivery and redelivery of aircraft;
| | - | ----------------------------------------------

50

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| | - | monitoring  lessee  insurance  compliance and arranging for  alternative
                 insurance where  appropriate  and to the extent  commercially
                 available;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - | monitoring of cash and lease security provisions;
| | - | -------------------------------------------------

| | - | monitoring lessee compliance under the leases;
| | - | ----------------------------------------------

| | - | enforcement of our rights under the leases;
| | - | -------------------------------------------

| |  | preparation of budgets;
| | - | -----------------------

| |  | preparation of Board agendas and reports;
| | - | -----------------------------------------

| |  | arranging  valuations,  and  monitoring  and  advising us on  regulatory
               developments;
| | - | -----------------------------------------------------------------------------------------------------

| |  | periodic  reporting of operational,  financial and other  information on
               our aircraft and leases; and
| | - | --------------------------------------------------------------------------------------------------------------------

| |  | providing us with data and information  relating to our aircraft and the
               commercial aviation industry.
| | - | ---------------------------------------------------------------------------------------------------------------------

The Servicer
is paid an annual asset based servicing fee of $454,800. The asset based
servicing fee is payable monthly in arrears in equal installments.

The
Servicer is paid lease incentive fees which are the aggregate of (i) 1% of the
basic rent amount received; (ii) 1% of the basic rent amount due; and (iii) an
amount equal to 10% of the amount by which the basic rent is exceeded for each
aircraft which is placed on a new lease. The lease incentive fees are payable
monthly in arrears.

The
Servicer is also paid a sales incentive fee in respect of the sale of aircraft
calculated as follows:

| | (i) | 1.25% of the net sale  proceeds  up to 87% of the  depreciated  value of
            such aircraft; plus
| | --- | --------------------------------------------------------------------------------------------------------

| | (ii) | 15% of the  amount  by which  the net sale  proceeds  exceed  87% of the
            depreciated value of such aircraft.
| | ---- | ------------------------------------------------------------------------------------------------------------------------

In
certain circumstances, we or the Servicer may terminate the ALPS 92-1 Servicing
Agreement.

Administrative Agent

The
Administrative Agent, Andersen Corporate Services (Jersey) Limited, which is
wholly owned by the United Kingdom partnership of Arthur Andersen, provides
administrative and accounting services to the Board of Directors including:

| |  | maintaining the corporate  books and records,  including our minute book
               and share register and the register of Notes;
| | - | -------------------------------------------------------------------------------------------------------------------------------------

| |  | making available to us telephone, telecopy, telex and post office facilities,
and maintaining our registered office in Jersey, at which it will accept service
of process in Jersey and other notices sent to us;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | providing other general administrative services;
| | - | ------------------------------------------------

51

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| |  | providing  administrative services to us in connection with the closings
               of the sale and re-lease of our aircraft;
| | - | ---------------------------------------------------------------------------------------------------------------------------------

| |  | providing various types of accounting assistance;
| | - | -------------------------------------------------

| |  | coordinating  with the  Financial  Consultant  with  respect  to various
               financial matters;
| | - | ----------------------------------------------------------------------------------------------------------

| |  | assisting us in connection with any hedging strategy;
| | - | -----------------------------------------------------

| |  | assisting with the preparation, filing and distributions of all reports which
need to be prepared, filed and/or distributed by us (including reports required
to be filed under the securities laws of the United States but excluding reports
relating to the aircraft and the Luxembourg Stock Exchange);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | coordinating any amendments to the transaction documents (other than the
leases), subject to the terms of such agreements and approval by the Board of
Directors; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | authorizing payment of certain bills and expenses, subject to approvals by the
Board of Directors.
| | - | --------------------------------------------------------------------------------------------------

The
Administrative Agent may resign on 30 days written notice, as long as we
have engaged another person or entity to perform the services that were being
provided by the Administrative Agent. We may remove the Administrative Agent at
any time on account of a material breach of its obligations.

The
Administrative Agent also may be asked by the Board of Directors to provide
other administrative services, including such other actions as may be
appropriate to facilitate the transactions contemplated by the Prospectus and
our operative documents and to assist the Board of Directors in carrying out its
duties.

The
Administrative Agent receives an administrative fee of £72,500 per year for
its services to the Company.

The
Administrative Agent has tendered its resignation. In accordance with the
Administrative Agency Agreement, such resignation will not be effective until a
suitable replacement has been appointed. Discussions are currently underway to
find such a replacement.

Cash Manager

The
Cash Manager, Deutsche Bank Trust Company Americas (f/k/a Bankers Trust
Company), provides cash management and related services to us. In the ordinary
course of our business, the Cash Manager will inform the Servicer of the
aggregate deposits in the collection account on a daily basis and with respect
to each payment period, provide such other information as shall be required in
connection with our accounts and make disbursements in accordance with the Deed
of Charge. The Cash Manager is authorized to invest the funds held by us in the
collection account and the lessee funded account in prescribed investments and
on permitted terms at our direction.

In
addition, the Cash Manager receives the data provided by the Servicer and the
Financial Consultant with respect to the aircraft, leases and other matters and
calculates certain monthly payments and makes all other calculations as required
under the Cash Management Agreement. The Cash Manager will also provide the
Trustee with such information as is required by the Trustee to provide its
report to the noteholders.

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The
Cash Manager may resign on 30 days written notice, as long as we have
engaged another person or entity to perform the services that were being
provided by the Cash Manager. We may remove the Cash Manager at any time on
account of a material breach of its obligations.

The
Cash Manager receives a fee of $17,000 per year for its services to the Company.

Financial Consultant

The Financial
Consultant, Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company),
develops financial models, revenue projections and forecasts and provides
computational services to assist the Board of Directors in making lease, sale
and hedging decisions, and in analyzing the budget. The Financial Consultant may
resign on 30 days written notice, as long as we have engaged another
person or entity to perform the services that were being provided by the
Financial Consultant. We may remove the Financial Consultant at any time on
account of a material breach of its obligations.

The
Financial Consultant receives a fee of $32,000 per year for its services to the
Company.

Company Secretary

The
Company Secretary, Andersen Secretaries (Jersey) Limited, a company which is
wholly owned by the United Kingdom partnership of Arthur Andersen, maintains
company books and records, including minute books and stock transfer records. It
makes available telephone, telecopy, telex and post office box facilities and
will maintain a registered office for the Company.

The
Company Secretary receives a fee of £1,000 per year for its services to the
Company. As described above, the Company Secretary has tendered its resignation
and a replacement is being sought.

Auditors

The Company's auditors are KPMG, Jersey, Channel Islands.

B.    Compensation

All
Directors are compensated for travel and other expenses incurred by them in
performing their duties as Directors. The Company currently pays each
Independent Director a fee of $50,000 per annum, which fee may be increased only
in accordance with the Deed of Charge, for his services. Non-Independent
Directors receive no remuneration for their services.

Additionally,
Mr. Robinson is paid fees of approximately Euro 6,400 per annum and fees of up
to £3,000 per annum as compensation for acting as a Director of the
Companys wholly owned Irish and English subsidiaries, respectively.

The Company has no other officers.

C.    Board Practices

None
of the Directors have service contracts and none of the Directors are entitled
to benefits on termination of their employment. The Company does not have a
remuneration committee. Subsequent to fiscal year-end the Company established an
audit committee which currently consists of the two Independent Directors. Prior
to this time, audit committee matters were considered at the regular

53

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meetings of
the full Board. See - Directors and Senior Management  Board of
Directors for additional information concerning our Directors.

D.    Employees

Our
Directors are non-executive and we do not and will not have any employees or
executive officers. Accordingly, the Board of Directors relies upon the
Servicer, the Administrative Agent, the Cash Manager, the Financial Consultant
and the other service providers for all asset servicing, executive and
administrative functions under the service provider agreements.

E.    Share Ownership

None
of our Directors own any shares of the Company nor do they have options to
purchase shares of the Company.

ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.    Major Shareholders

Our
Ordinary Shares are not listed on any national exchange or traded in any
established market. The beneficial ownership of the Ordinary Shares as of the
date of this report on Form 20-F is presented below.

BENEFICIAL OWNERSHIP OF THE COMPANY

`Identity of Person
   Title of Class         or Group          Amount Owned      Percent of Class

  Ordinary Shares       Mourant & Co.            10                 100%
                      Trustees Limited,
                      as trustee of the
                         ALPS Trust,
                        22 Grenville
                           Street,
                         St. Helier,
                       Jersey, Channel
                           Islands`

All
ten Ordinary Shares issued are held by the Nominees (five shares each) for the
benefit of Mourant & Co. Trustees Limited as trustee of the ALPS Trust, a
Jersey charitable trust.

Under
the deed of covenant entered into on June 27, 1996 by Mourant & Co. Trustees
Limited as trustee of the ALPS Trust (the charitable trust trustee),
WFC and the Company, the charitable trust trustee agreed that it will not, and
will procure that the Nominees will not, without the prior written approval of
the holder of the Class E Notes, transfer any part of the shares in the Company
held by them or any interest therein unless the transferee shall enter into a
covenant identical to that contained in the deed of covenant in favour of the
holder of the Class E Notes (including a covenant not to amend certain
provisions of our Articles without the prior written approval of the holder of
the Class E Notes).

See
Item 10 - Additional Information  Articles of Association for
a description of the voting rights available to holders of our Ordinary Shares.

54

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B.    Related Party Transactions

WFC
owns the Class E Notes and is entitled to appoint one Director to the Board for
as long as it owns such Notes. Currently, Brian Chamness, a consultant to WFC,
is the Director serving on the Board at the request of WFC.

|C. | Interests of Experts and Counsel Not Applicable.
|-- | ------------------------------------------------

ITEM 8.    FINANCIAL INFORMATION

|A. | Consolidated Statements and Other Financial Information.Consolidated financial statements are listed in Item 18.
We are not a party to any material legal proceedings.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|B. | Significant Changes
|-- | -------------------

There
have been significant changes which have occurred since the date of the annual
financial statements. These events are explained in Note 15 of Item 18
 Financial Statements.

ITEM 9.        THE LISTING

|A. | Listing Details
|-- | ---------------

The
Class A, Class B, Class C and Class D Notes are listed for trading on the
Luxembourg Stock Exchange. Additionally, in the United States at least one
investment bank makes a secondary market in such classes of Notes, but without
any obligation to do so. There can be no assurance that a secondary market will
continue or develop further for any class of Notes or that the market will
provide liquidity of investment or that it will remain for the term of the
Notes.

|B. | Plan of Distribution Not Applicable.
|-- | ------------------------------------

|C. | Markets
|-- | -------

The
Class A, Class B, Class C and Class D Notes are listed on the Luxembourg Stock
Exchange.

|D. | Selling Shareholders Not Applicable.
|-- | ------------------------------------

55

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|E. | Dilution Not Applicable.
|-- | ------------------------

|F. | Expenses of the Issue Not Applicable.
|-- | -------------------------------------

ITEM 10.       ADDITIONAL INFORMATION

|A. | Share Capital Not Applicable.
|-- | -----------------------------

|B. | Articles of Association
|-- | -----------------------

The
following summary contains a description of the material provisions of our
Memorandum and Articles of Association (which we refer to as our Memorandum and
our Articles respectively) and does not purport to be complete and is qualified
in its entirety by reference to our Memorandum and Articles, copies of which are
incorporated by reference at Exhibit 1 hereto.

Registration and Objects

The
Company is a public limited liability company incorporated pursuant to the
Companies (Jersey) Law 1991 (which we refer to as the Companies Law). We are
registered under number 52674 in the register of companies maintained by the
Jersey Registrar of Companies.

Our objects and purposes are set out in paragraph 4 of our Memorandum.

The purposes of the Company are, inter alia, the following:

| |  | to own, manage and lease out aircraft,
| | - | --------------------------------------

| |  | to purchase and dispose of aircraft,
| | - | ------------------------------------

| |  | to borrow or raise money and to raise or secure the repayment of such sums of
money in such manner and upon such terms and conditions as the Directors of the
Company shall think fit,
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | to engage in currency exchange and interest rate transactions and any other
financial or other transactions of whatever nature, and
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| |  | to  establish  companies  for the purpose of carrying on any business or
               acquiring  and  undertaking  any  property or  liability of the
               Company.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Directors

We
are managed by a Board of Directors which will consist of no more than three
persons and no less than two persons at any time. See Item 6 
Directors, Senior Management and Employees.

56

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Transactions in which our Directors are Interested

Our
Articles provide that if a Director has disclosed to the Board of Directors the
nature and extent of any of his material interests, a Director notwithstanding
his office:

| |  | may be a party  to, or  otherwise  interested  in,  any  transaction  or
               arrangement  with  the  Company  or in  which  the  Company  is
               otherwise interested;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | may be a Director or other officer of, or employed by, or a party to any
transaction or arrangement with, or otherwise interested in, any body corporate
promoted by the Company or in which the Company is otherwise interested or which
engages in transactions similar to those engaged in by the Company and might
present a conflict of interest for such Director in discharging his duties;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | shall not, by reason of his office, be accountable to the Company for any
benefit which he derives from any such office or employment or from any such
transaction or arrangement or from any interest in any such body corporate and
no such transaction or arrangement shall be liable to be avoided on the ground
of any such interest or benefit.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Directors' Compensation

All
Directors are compensated for travel and other expenses incurred by them in the
performance of their duties. Our Articles provide for each Independent Director
to be paid an aggregate fee of $50,000 per annum for his services (or such
higher amount, not exceeding $100,000 per annum, as shall be fixed by the
holders of our shares). Our Articles provide that the Director appointed by the
holder of the Companys Class E Notes is not entitled to remuneration for
his services. The provisions of our Articles may only be changed by special
resolution passed by the holders of our shares (as to which see Changes to
Shareholders Rights below).

Directors' Borrowing Powers

Our
Articles provide for our Directors to exercise all borrowing powers of the
Company. The exercise of such powers is limited as a result of the contractual
restrictions on our power to borrow contained in the Deed of Charge.

Directors' Age Limits

There
is no provision in our Articles or in the Companies Law as a result of which our
Directors would be required to retire from office upon reaching a certain age.

Directors' Share Ownership Requirements

There
is no provision in our Articles or in the Companies Law requiring our Directors
to hold shares in the Company in order to be able to hold the position of
Director.

Rights, Preferences and Restrictions Relating to Shares

We
have an authorized share capital consisting of 15,000 ordinary shares of $1
nominal value per share of which 10 have been issued and are fully paid (See
Item 7  Major Shareholders and Related Party Transactions 
Major Shareholders). The rights, preferences and restrictions attaching to
the shares are as follows:

57

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Dividend Rights

We
may distribute dividends to our shareholders from distributable profits in each
fiscal year. These distributions are subject to the requirements of the
Companies Law. For the purpose of calculating amounts available for
distribution, profits and losses must be accumulated in so far as not previously
utilized or written off in a reduction or re-organization of capital. Any
dividends must be distributed to our shareholders in proportion to their
shareholdings. Under our Articles, the holders of the 10 issued shares in the
Company are entitled to a fixed cumulative dividend of $1,500 per annum (to the
extent the Company has distributable profits in any year) and to any additional
dividends paid out of surplus profits of the Company. Under our Articles,
dividends not claimed within ten years from the date of declaration shall, if
our Directors so resolve, be forfeited and shall from that time belong to the
Company.

Voting Rights

Each
holder of our shares is entitled to one vote per share at any general meeting of
our shareholders.

Rights to share in the Profits

See Dividend Rights above.

Rights in the Event of Liquidation

In
the event that we are liquidated, our assets remaining after payment of our
debts, liquidation expenses and all of our remaining obligations will be used to
pay to the holders of the 10 issued shares in the Company any arrears of the
preferential dividend to which they are entitled and the balance, if any, will
be distributed to repay in full the nominal value of our shares. Any surplus
will then be distributed proportionately among our shareholders in proportion to
their shareholdings.

Redemption of Shares

Our shares are not redeemable shares.

Sinking Fund

Our shares are not subject to any sinking fund.

Liability to further Capital Calls

Shareholders are not liable to further capital calls.

Principal Shareholder Restrictions

There
are no provisions in our Articles or in the Companies Law which would
discriminate against any existing or prospective holder of our shares as a
result of such shareholder owning a substantial number of shares.

Changes to Shareholders' Rights

The
provisions of our Articles, which set out the rights attaching to our shares,
may only be amended by a special resolution (which is a resolution passed either
by a majority of not less than two

58

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thirds of votes cast in person or by proxy at
a meeting of shareholders or passed by way of written resolution signed by or on
behalf of each shareholder).

Shareholders' Meetings

The
Company is required to hold an annual general meeting and may also hold
extraordinary general meetings. All meetings of our shareholders other than the
annual general meeting are called extraordinary general meetings.

Annual
general meetings are convened by the Directors each year and must be held not
more than 18 months after the previous annual general meeting. The Jersey
Financial Services Commission has the power to call an annual general meeting of
a Jersey company if that company fails to do so and the Royal Court of Jersey
also has the power in certain circumstances set out in the Companies Law to call
a meeting of a Jersey company. The holders of at least one tenth in nominal
value of our shares may requisition a meeting of shareholders.

At
least twenty one days notice of the annual general meeting and of any
meeting at which a special resolution is to be proposed is required. Fourteen
days notice of any other meeting is required. An annual general meeting
may however be held at short notice provided that all the shareholders entitled
to attend and vote at the meeting agree. Any other meeting may be held at short
notice if a majority of shareholders together holding at least ninety five per
cent of the shares given a right to attend and vote at such meeting agree.

All
shareholders or their proxies may attend and vote at the annual general meeting
and extraordinary general meetings. Resolutions may be proposed either as
special resolutions or as ordinary resolutions. A special resolution requires
the affirmative vote of a majority of not less than two thirds of votes cast and
an ordinary resolution requires the affirmative vote of a simple majority of
votes cast.

The
Companies Law contains provisions governing the convening and holding of
meetings of shareholders which are reflected in our Articles.

Limitation on Security Ownership

There
are no restrictions under Jersey law or our Articles that limit the right of
non-resident or foreign shareholders to hold or exercise voting rights in
respect of our shares.

Change in Control

There
are no provisions in our Articles that would have the effect of delaying,
deferring or preventing a change in our control and that would operate only with
respect to a merger, acquisition or corporate restructuring involving the
Company or any of our subsidiaries. See, however, Item 7  Major
Shareholders and Related Party Transactions - Major Shareholders for a
description of certain contractual restrictions on the transfer of shares by the
existing shareholders.

Disclosure of Share Holdings

There
are no provisions in our Articles or in the Companies Law whereby persons
acquiring, holding or disposing of a certain percentage of our shares are
required to make disclosure of their ownership percentage.

59

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Jersey Law and our Memorandum and Articles

The
content of our Memorandum and Articles is largely derived from an established
body of corporate law and therefore they mirror the Companies Law in their
provisions. There are no provisions in our Memorandum and Articles concerning
changes of capital where these provisions would be considered more restrictive
than that required by the Companies Law.

|C. | Material Contracts  None.
|-- | -------------------------

|D. | Exchange Controls
|-- | -----------------

There
are currently no Jersey foreign exchange control restrictions on the payment of
interest or principal on the Notes. There are no restrictions under Jersey law
or under our Articles that limit the right of non-resident or foreign owners to
hold or vote the Notes.

|E. | Taxation
|-- | --------

Certain Jersey Tax Considerations

The
following summary is based upon advice provided by Mourant du Feu & Jeune
(Jersey Tax Counsel) as to the tax treatment under Jersey law of the
Company and the tax treatment under Jersey law in relation to the purchase,
ownership and disposition of the Notes. The discussion is based on an
interpretation of laws, regulations, rulings and decisions, including certain
letters from the Comptroller of Income Tax in Jersey and the Director of the
Jersey Financial Services Department (the functions of which were taken over by
the Jersey Financial Services Commission with effect from July 1, 1998), all of
which are currently in effect and are subject to change. Any such change may be
applied retroactively and may adversely affect the Jersey tax consequences
described herein.

Income Taxes

The
Company will qualify as an exempt company under Article 123A of the
Income Tax (Jersey) Law 1961, as amended (the 1961 Law), as long as
it makes the returns of information and pays the fees as required by that
Article and, subject to concessions obtained from the Comptroller of Income Tax
in Jersey, as long as no Jersey resident has a beneficial interest (for purposes
of the 1961 Law) in the Company. As an exempt company, the Company will be
treated for purposes of the 1961 Law as not resident in Jersey and will pay no
Jersey income tax other than on income arising in Jersey (but, by longstanding
concession, excluding bank deposit interest arising in Jersey) and on profits of
its trade (if any) carried on through an established place of business in
Jersey. Based upon the foregoing and the concessions obtained from the
Comptroller of Income Tax in Jersey, in the opinion of Jersey Tax Counsel, the
Company will not be subject to Jersey income tax.

Withholding Taxes

Based
upon the Companys qualification as an exempt company, in the opinion of
Jersey Tax Counsel, no withholding tax will be deducted from interest and other
amounts paid on the Notes on account of Jersey taxes.

60

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Other Taxes

There
is no taxation of capital gains (other than with respect to certain tax
avoidance transactions) in Jersey. As a result, the capital gains of the Company
on its investments will not be subject to taxation in Jersey. There is no value
added tax or other relevant taxation in Jersey.

Certain Tax Considerations Regarding Subsidiaries

The
Irish subsidiary is subject to Irish corporation tax at the rate of 10% of its
taxable profits.

The
U.K. subsidiary is subject to U.K. corporation tax at an effective rate of
between 10% and 20% depending on the level of profits that this subsidiary
generates.

|F. | Dividends and Paying Agents Not Applicable.
|-- | -------------------------------------------

|G. | Statement  by Experts Not Applicable.
|-- | -------------------------------------

|H. | Documents on Display
|-- | --------------------

The
documents concerning us which are referred to herein may be inspected at the
Securities and Exchange Commission, or at our registered office at Fourth Floor,
Forum House, Grenville Street, St. Helier, Jersey JE2 4UF, Channel Islands. You
may read and copy any documents filed or furnished by us at the SECs
public reference rooms in Washington D.C., New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the reference
rooms. Our SEC filings since November 1, 2002 are also available to the public
on the SEC Internet site (http://www.sec.gov).

|I. | Subsidiary Information Not Applicable.
|-- | --------------------------------------

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Interest Rate Risk and Management

The
leasing revenues of the Company are generated from lease rental payments which
are all fixed rate (some leases are based on power-by-the-hour fixed
hourly rates and others on fixed monthly rates). In general, an exposure to
interest rate risk arises when the Companys fixed and floating interest
rate obligations on its Notes do not correlate to the fixed rate lease rental
payments for different rental periods. This interest rate exposure can be
managed through the use of interest rate swaps and other derivative instruments.
Our lease collections are invested based upon recommendations of the
Administrative Agent and our other advisors. We have determined that it is not
necessary to invest our lease collections in swaps, options or other hedging
alternatives. Although we may invest in such instruments if we and our advisors
determine that such investments are appropriate, we and our advisors do not
currently anticipate any need for such investments in the foreseeable future.
There can be no assurance that the strategy adopted to invest or to not invest
in such instruments at any time will be effective in protecting your payments of
interest in an environment of material increases to LIBOR.

61

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ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

62

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PART II

ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

At various times during fiscal year 2002 and to date,  certain  regular
interest  payments  due to holders of Class D Notes were in arrears.  The Deed
of Charge  provides that, so long as the Class A, Class B or Class C Notes are
outstanding,  the only  remedy  available  to  holders of Class D Notes for an
Event of Default  caused by failure to pay  regular  Class D Note  interest is
that default  interest of 1% of such unpaid  interest shall accrue and be owed
to holders of Class D Notes in  accordance  with the  priority of payments set
forth  in the Deed of  Charge.  As at the end of  fiscal  year  2002,  arrears
consisted of $0.068 million in Class A Note step-up  interest,  $0.320 million
in  Class  D Note  default  interest  and  $36.068  million  in  Class  E Note
interest.  As of December 16,  2002,  the unpaid  amounts  consisted of $0.549
million of Class A Note Target Amount,  $0.302 million of Class A Note step-up
interest,  $1.338  million of Class B Note Target  Amount,  $0.100  million of
Class B Note step-up  interest,  $2.720 million of Class C Note Target Amount,
$0.089  million of Class C Note step-up  interest,  $2.226  million of Class D
Note Target Amount,  $0.275  million of regular Class D Note interest,  $0.320
million  of Class D Note  default  interest,  $0.142  million  of Class D Note
step-up interest and $40.268 million of Class E Note interest.  Our inability,
during  fiscal  year 2002 or to date,  to pay these  amounts,  other  than the
$0.275 million of regular Class D Note interest  (discussed  above),  does not
constitute an Event of Default.

The
Company did not have sufficient funds to repay the Class A Notes on their
expected final payment date of May 15, 2002 or to repay the Class B, Class C or
Class D Notes on their expected final payment date of July 15, 2002. Failure to
repay in full the principal of those Notes by such dates is not an Event of
Default; however, the Deed of Charge requires, to the extent the Company does
not repay in full principal of those Notes by such dates, that the Company pay
to the Class A, Class B and Class C Noteholders additional step-up interest of
0.50% per annum and to the Class D Noteholders additional step-up interest of
1.00% per annum for each month until the earlier of the date such Notes are
repaid in full and their final maturity date of June 15, 2006. These additional
interest costs will only be paid to the extent there are available collections
in accordance with the priority of payments set forth in the Deed of Charge. The
Company has paid some step-up interest, but our current projections indicate
that we will not have sufficient funds to pay any further step-up interest. Our
current projections also indicate that we will not have sufficient funds to pay
any further Class D Note interest.

The
Deed of Charge sets out the following Trust Note Sales Goals which require us to
approve sales of our aircraft on an ongoing basis:

`Aircraft to be Sold
   (measured by Initial Appraised         Date by which Sales Goals
      Value as of 3 June 1996)               are to be Satisfied
             $65,000,000                        June 27, 2001
            $130,000,000                        June 27, 2002
            $200,000,000                        June 27, 2003
            $454,950,000                        June 27, 2004`

We
were in compliance with and had exceeded the Trust Note Sales Goals as of June
27, 2001 and were required to sell a further $54,330,000 (as measured by Initial
Appraised Value) worth of aircraft to be in compliance with the Trust Note Sales
Goals as of June 27, 2002.

As
discussed above the current market for sale of used aircraft is extremely poor
and it is not clear when the market will improve. Nevertheless, in order to meet
the Trust Note Sales Goals, following

63

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an extensive marketing effort by the
Servicer, the Company had entered into non-binding agreements to sell a B737-300
and an A320-200 aircraft to two separate purchasers by June 27, 2002.

The
sale of the B737-300 on lease to Malev was completed on October 1, 2002. The
agreed purchase price for this aircraft was $12,308,000 assuming a June 27, 2002
closing date. The ultimate purchase price was adjusted downward by $730,933 to
reflect rent received by the Company for this aircraft during the period between
June 27, 2002 and October 1, 2002 after netting out notional interest on the
purchase price which accrued to the Companys benefit during this period.
The net cash proceeds were further adjusted downward to reflect accrued
maintenance reserves of $3,358,536 transferred to the purchaser. The purchaser
was an affiliate of a Class D Noteholder which exercised its pre-emption right
under the Deed of Charge to purchase the aircraft at 102% of the price agreed
upon as at June 2002 by the prospective purchaser. The Class D Noteholder
received the option to exercise this right because the agreed upon purchase
price was below the Class D Note Target Price of $17,252,908. The final purchase
price was also below the Class C Note Target Price of approximately $14.7
million as at May 21, 2002.

Despite
extensive efforts to complete the sale of the A320-200, we were informed by the
prospective purchaser on November 5, 2002 that it had decided to not proceed
with the transaction for reasons outside our control. As a result, the Company
was not in compliance with the Trust Note Sales Goals from November 5, 2002
until the aircraft was sold to a different purchaser on December 20, 2002. The
agreed purchase price for this aircraft was $21,124,754 assuming a November 15,
2002 closing date. The ultimate purchase price was adjusted downward by $229,810
to reflect rent received by the Company for this aircraft during the period
between November 15, 2002 and December 20, 2002 after netting out notional
interest on the purchase price which accrued to the Companys benefit
during this period. The net cash proceeds were further adjusted downward by
$137,903 to reflect advance rentals received by the Company through January 4,
2003. The agreed purchase price for this aircraft was above the Class C Note
Target Price and above the Class D Note Target Price.

We
have directed the Servicer to market other aircraft for sale in order to meet
the ongoing Trust Note Sales Goals. However, unless market conditions improve,
we believe it will continue to be very difficult to comply with the Trust Note
Sales Goals set for June 27, 2003 and June 27, 2004.

To
date, the Company has sold $133,190,000 (measured by Initial Appraised Value) of
aircraft. Given the current environment for aircraft sales, we can offer no
assurance as to whether the Company will be able to comply with the Trust Note
Sales Goals for June 27, 2003 or thereafter.

Failure
to comply with the Trust Note Sales Goals may, under certain circumstances,
constitute an Event of Default under the Deed of Charge if such failure
continues for 30 days or more after written notice thereof has been given to the
Company or the Security Trustee by holders of at least 25% of the aggregate
Outstanding Principal Balance of the Notes of any class which has been
materially adversely affected by such failure.

The
Deed of Charge further provides that if an Event of Default were to occur and be
continuing an Enforcement Notice may only be served by
662/3% or more of the aggregate Outstanding Principal
Balance of the directing class, which will be Class A so long as any Class A
Notes are outstanding.

The
Deed of Charge provides that the failure to satisfy the Trust Note Sales Goals
gives the Noteholders the right to replace the Servicer at the direction of
Noteholders representing at least 75% of the aggregate Outstanding Principal
Balance of the Class A, Class B, Class C and Class D Notes. The Deed of Charge
also provides that, subject to the pre-emption rights of the Class D and Class E
Noteholders, at any time the Trust Note Sales Goals are not satisfied the
Company would be required to accept any Sale Offer for any aircraft if such
offer was at or above the Class C Note Target Price.

64

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See Item 3 
Risk Factors, Item 4  Information on the Company 
History and Development of the Company and Item 5  Operating
and Financial Review and Prospects  Liquidity and Capital Resources.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15.

Not applicable.

ITEM 16.

Not applicable

PART III

ITEM 17.

Not applicable

ITEM 18.       FINANCIAL STATEMENTS

See pages F-1 through F-25.

ITEM 19.       EXHIBITS

| | 1. | Memorandum and Articles of Association of Aircraft Lease
            Portfolio Securitisation 92-1 Limited (incorporated by reference
            to Exhibit 3.1 of our Registration Statement on Form F-4
            (Registration No. 333-5650), filed with the Securities and
            Exchange Commission on September 24, 1996).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8. | List of subsidiaries.
| | -- | ---------------------

65

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CERTAIN DEFINITIONS AND TECHNICAL TERMS

|A300B4 - 200 aircraft .................................. | The Airbus  A300B4 - 200 aircraft  with serial  number 127 which we sold to Cebi
Aviation S.A. on June 27, 2000.
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------

|Administrative
Agency Agreement ............... | The Amended and Restated Administrative Agency
Agreement, dated as of February 5, 2001, between the Administrative Agent,
Arthur Andersen and the Company pursuant to which the Administrative Agent
maintains the corporate books and records and provides certain administrative
and other services to the Company.
|------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Administrative Agent ................................... | Andersen  Corporate  Services  (Jersey) Limited.
|---------------------------------------------------------- | ------------------------------------------------

|ADs.............................................................. | Shall have the meaning set forth on page 33.
|------------------------------------------------------------------- | --------------------------------------------

|Air Canada .................................................. | shall mean, with respect to the two B767-300ER  aircraft,  Air Canada,  and with
respect to the A320-200 aircraft, Air Canada Capital Limited.
|--------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------

|Air 2000 ...................................................... | Air 2000 Limited.
|----------------------------------------------------------------- | -----------------

|AISI.............................................................. | Aircraft Information Services, Inc.
|-------------------------------------------------------------------- | -----------------------------------

|Allegiant Air.............................................. | Allegiant Air, Inc.
|------------------------------------------------------------- | -------------------

|ALPS 94-1 Limited..................................... | Aircraft Lease Portfolio Securitization 94-1 Limited.
|-------------------------------------------------------- | -----------------------------------------------------

|ALPS 92-1 Servicing Agreement.................. | The Servicing Agreement, dated as of the
Closing Date, between the Company and Babcock & Brown pursuant to which
Babcock & Brown provides, among other things, certain management services
with respect to the leases and certain sales and marketing and re-leasing
services with respect to the aircraft to the Company.
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ALPS  Trust........................................... | The charitable  trust for whose benefit the Nominees hold 10 Ordinary  Shares of
the Company.
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------------

|Asiana........................................................ | Asiana Airlines, Inc.
|---------------------------------------------------------------- | ---------------------

|Avitas....................................................... | Avitas, Inc.
|--------------------------------------------------------------- | ------------

|B747-283B Aircraft................................ | The B747-283B aircraft with serial number 22381 which we sold to WFC on July 24,
1997.
|---------------------------------------------------- | --------------------------------------------------------------------------------------

|Babcock & Brown...................................... | Babcock & Brown Limited.
|------------------------------------------------------- | ------------------------

66

---

|Besleasing................................................ | Besleasing Mobiliaria - Sociedade de Locacao Financeira S.A.
|------------------------------------------------------------ | ------------------------------------------------------------

|BK............................................................. | BK Associates, Inc.
|----------------------------------------------------------------- | -------------------

|Britannia................................................... | Britannia Airways AB.
|-------------------------------------------------------------- | ---------------------

|Business Day........................................... | A day on which  commercial banks and foreign exchange markets settle payments in
U.S. dollars in London, England and New York, New York.
|--------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------

|Business Objectives.................................... | Shall have the meaning set forth on page 25.
|--------------------------------------------------------- | --------------------------------------------

|BWIA........................................................ | BWIA International Airways Limited.
|-------------------------------------------------------------- | -----------------------------------

|Cash Management Agreement................... | The Cash Management Agreement, dated as of the Closing Date, between the Company
and the Cash Manager,  pursuant to which the Cash Manager  provides certain cash
management,    computational    and    other    related    services    to    the
Company.
|---------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Cash Manager....................................... | Deutsche    Bank    Trust    Company     Americas     (f/k/a    Bankers    Trust
Company).
|----------------------------------------------------- | ------------------------------------------------------------------------------------------

|China Southern....................................... | China Southern Airlines.
|------------------------------------------------------- | ------------------------

|Class A Notes....................................... | The Company's Class A Notes issued on the Closing Date.
|------------------------------------------------------ | -------------------------------------------------------

|Class B Notes....................................... | The Company's Class B Notes issued on the Closing Date.
|------------------------------------------------------ | -------------------------------------------------------

|Class C Notes....................................... | The Company's Class C Notes issued on the Closing Date.
|------------------------------------------------------ | -------------------------------------------------------

|Class B Note Target Price..................... | Shall have the meaning set forth in the Deed of Charge.
|------------------------------------------------ | -------------------------------------------------------

|Class C Note Target Price........................ | Shall have the meaning set forth in the Deed of Charge.
|--------------------------------------------------- | -------------------------------------------------------

|Class D Notes........................................ | The Company's Class D Notes issued on the Closing Date.
|------------------------------------------------------- | -------------------------------------------------------

|Class D Note Target Price...................... | Shall have the meaning set forth in the Deed of Charge.
|------------------------------------------------- | -------------------------------------------------------

|Class E Notes..................................... | Collectively, the Class E-1 Note and the Class E-2 Note.
|---------------------------------------------------- | --------------------------------------------------------

67

---

|Class E-1 Note..................................... | The Company's Class E-1 Note issued on the Closing Date in a principal amount of
$82,918,150.
|----------------------------------------------------- | ---------------------------------------------------------------------------------------------

|Class E-2 Note..................................... | The Company's Class E-2 Note issued on the Closing Date in a principal amount of
$100.
|----------------------------------------------------- | --------------------------------------------------------------------------------------

|Closing Date........................................ | The   Closing   Date   of   the   refinancing   of   the   Company,   June   27,
1996.
|------------------------------------------------------ | --------------------------------------------------------------------------------------

|Company........................................... | Aircraft Lease Portfolio Securitisation 92-1 Limited, a public limited liability
company  incorporated  in Jersey,  together with,  unless the context  otherwise
requires, any subsidiaries thereof.
|---------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Company Secretary........................... | Andersen Secretaries (Jersey) Limited.
|---------------------------------------------- | --------------------------------------

|debis AirFinance................................... | debis  AirFinance  Ireland plc (formerly  known as AerFi Group plc and, prior to
that, GPA Group plc), together with its consolidated subsidiaries.
|----------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|Deed of Charge.................................... | The Deed of Charge,  Assignment  and  Priorities,  dated as of the Closing Date,
among the Company,  Deutsche  Trustee  Company  Limited (f/k/a  Bankers  Trustee
Company  Limited) as security  trustee,  Deutsche  Bank Trust  Company  Americas
(f/k/a/ Bankers Trust Company),  the Cash Manager, the Administrative Agent, the
Servicer,  the holder of the Class E-1 Note and certain other persons to secure,
among other things, the Notes.
|---------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Eurocontrol........................................ | European Organisation for the Safety of Air Navigation, the centralized European
agency established in 1960 pursuant to an international  convention  relating to
cooperation for the safety of air navigation.
|----------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Event of Default................................... | An  event  of   default   with   respect   to  the  Notes   under  the  Deed  of
Charge.
|----------------------------------------------------- | ----------------------------------------------------------------------------------------

|Financial Consultant............................ | Deutsche    Bank    Trust    Company     Americas     (f/k/a    Bankers    Trust
Company).
|-------------------------------------------------- | ------------------------------------------------------------------------------------------

|Fokker 100 aircraft............................. | The Fokker 100 aircraft  with serial number 11287 which we sold to Besleasing on
July 2, 1999.
|-------------------------------------------------- | ----------------------------------------------------------------------------------------------

|GPA................................................... | GPA Group plc (renamed AerFi Group plc,  effective November 23, 1998 and renamed
debis AirFinance Ireland plc,  effective  December 20, 2000),  together with its
consolidated subsidiaries.
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

68

---

|Independent Appraisers............................... | AISI, Avitas and BK.
|------------------------------------------------------- | --------------------

|Independent Directors................................. | Directors  of the  Company  who  are  independent  of  holders  of the  Class  E
Notes.
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------

|Initial Appraised Value................................. | The average appraised base value of each of the 14 aircraft owned by the Company
on the  Closing  Date  (or,  in the case of the WFC  Aircraft,  acquired  by the
Company  subsequent  thereto) as of June 3, 1996 obtained from AISI,  Avitas and
BK, and as set forth on Exhibit V of the Deed of Charge.
|---------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Insurance Advisor...................................... | Aon Group Limited.
|--------------------------------------------------------- | ------------------

|Istanbul..................................................... | Istanbul Hava Yollari A.S.
|--------------------------------------------------------------- | --------------------------

|Jersey Tax Counsel.................................... | Mourant du Feu & Jeune.
|-------------------------------------------------------- | -----------------------

|Leases...................................................... | The lease agreements relating to the aircraft.
|-------------------------------------------------------------- | ----------------------------------------------

|LIBOR...................................................... | London  Interbank  Offered Rate for deposits in U.S.  dollars as  determined  in
accordance with the terms of the relevant Note.
|------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------

|Liquidity Reserve Amount...................... | Shall have the meaning set forth on page 47.
|------------------------------------------------ | --------------------------------------------

|Malev....................................................... | Malev RT.
|-------------------------------------------------------------- | ---------

|Meridiana................................................ | Meridiana S.p.A.
|----------------------------------------------------------- | ----------------

|Nominees................................................ | Collectively,  Juris Limited and Lively Limited, the nominees for the trustee of
the ALPS Trust.
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------

|Notes...................................................... | The Company's  Class A Notes,  Class B Notes,  Class C Notes,  Class D Notes and
Class E Notes.  The  Notes  have been  issued  pursuant  to the Deed of  Charge.
Holders of each class of the Pass Through  Certificates,  Series A referenced on
the cover  page of this Form  20-F  derive  their  rights to  payments  from the
payments due on the related  class of the Notes.  Therefore,  all  references to
noteholders,  Notes and any class  thereof  throughout  this Form 20-F should be
read to apply  equally  to the  certificateholders,  certificates  and any class
thereof, respectively.
|------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Old Class A Notes................................. | The $208,400,000 Secured Class A1 Floating Rate Notes due 1997, the $104,200,000
Secured Class A2 Floating Rate Notes due 1997 and the $70,400,000  Secured Class
|---------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

69

---

| | A3 Floating Rate Notes due 1997 issued by the Company.
| | ------------------------------------------------------

|Old Class B Notes...................................... | The  $104,000,000  Secured  Class B Fixed  Rate  Notes  due 1997  issued  by the
Company.
|--------------------------------------------------------- | -----------------------------------------------------------------------------------------

|Old Class M Notes..................................... | The  $34,000,000  Secured  Class M Floating  Rate  Notes due 1997  issued by the
Company.
|-------------------------------------------------------- | -----------------------------------------------------------------------------------------

|Old Notes.................................................. | The Old Class A, Old Class B and Old Class M Notes.
|------------------------------------------------------------- | ---------------------------------------------------

|Old SM Loan............................................. | The $78,150,000  loan made to the Company  pursuant to the  Supermezzanine  Loan
Agreement,  dated June  16,1992,  among the Company,  Citibank,  N.A. and Credit
Lyonnais, originally payable in 1997.
|---------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Ordinary Shares......................................... | The Company's 15,000 authorized ordinary shares, par value $1 per share of which
10 have been issued.
|---------------------------------------------------------- | -----------------------------------------------------------------------------------------------------

|Outstanding Principal Balance.................. | With respect to any of the Notes at any time,
the outstanding principal balance as of the Closing Date less all amounts
distributed to the holder thereof and allocable to principal thereon on previous
Payment Dates.
|------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Payment Date......................................... | The 15th day of each month  (or,  if such day is not a  Business  Day,  the next
succeeding Business Day).
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------

|Prior Debt................................................ | The Old Notes and the Old SM Loan.
|------------------------------------------------------------ | ----------------------------------

|Prospectus................................................ | The prospectus related to the Class A, Class B, Class C and Class D Notes, dated
January 27, 1997.
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------

|Royal Airways......................................... | Modiluft Limited, the sublessee of Royal Finance Limited.
|-------------------------------------------------------- | ---------------------------------------------------------

|Sale Offer................................................. | Shall have the meaning set forth in the Deed of Charge.
|------------------------------------------------------------- | -------------------------------------------------------

|Security Trustee....................................... | Deutsche    Trustee    Company    Limited   (f/k/a   Bankers   Trustee   Company
Limited).
|--------------------------------------------------------- | ------------------------------------------------------------------------------------------

|Senior Trust Notes................................... | The Class A, Class B and Class C Notes.
|------------------------------------------------------- | ---------------------------------------

70

---

|Servicer............................................. | Babcock & Brown or any  replacement  servicer  appointed in accordance  with the
terms of the ALPS 92-1 Servicing Agreement.
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------

|Skynet............................................. | Skynet Airlines Ltd.
|----------------------------------------------------- | --------------------

|Spanair............................................. | Spanair, S.A.
|------------------------------------------------------ | -------------

|Stage 3 Aircraft............................... | An aircraft type that holds or is capable of holding a noise certificate  issued
under  Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago  Convention  or
has been shown to comply  with Stage 3 Noise  Levels set out in Section  36.5 of
Appendix   C   of   Part   36   of   the   United   States   Federal    Aviation
Regulations.
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Travel Service................................. | Travel Servis a.s.
|------------------------------------------------- | ------------------

|Trustee........................................... | Deutsche    Bank    Trust    Company     Americas     (f/k/a    Bankers    Trust
Company).
|---------------------------------------------------- | ------------------------------------------------------------------------------------------

|Trust Note Sales Goals................... | The Company must approve for sale (subject
to the rights of the holders of certain Notes to approve sales of aircraft as
set forth in Clause 10.10(b)(ii) of the Deed of Charge) sufficient aircraft to
meet the Trust Note Sales Goals. The Trust Note Sales Goals require that
aircraft having an Initial Appraised Value of at least (i) $65,000,000 be sold
by the fifth anniversary of the Closing Date, (ii) $130,000,000 be sold by the
sixth anniversary of the Closing Date, (iii) $200,000,000 be sold by the seventh
anniversary of the Closing Date and (iv) $454,950,000 be sold by the eighth
anniversary of the Closing Date. The Deed of Charge provides that if the Company
fails to meet any of the Trust Note Sales Goals set forth in clause (i), (ii) or
(iii) above, then, at the direction of the holders of the Class A, Class B,
Class C and Class D Notes representing in the aggregate 75% of the Outstanding
Principal Balance of such Notes, the Company shall replace the Servicer under
the Servicing Agreement and, if the Company fails to meet the Trust Note Sales
Goal set forth in clause (iv) above, then, at the direction of the holders of
the Class A, Class B, Class C and Class D Notes representing in the aggregate 66
2/3% of the Outstanding Principal Balance of such Notes, the Company shall
replace the Servicer under the Servicing Agreement. The Deed of Charge provides
that on or after the fifth, sixth, seventh and eighth anniversaries of the
Closing Date, if and so
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

71

---

| | long as the aggregate Initial Appraised Value of the
aircraft then owned by the Company exceeds $389,950,000, $324,950,000,
$254,950,000 and $0, respectively, the Company must accept any Sale Offer in
respect of the sale of an aircraft if the proposed sale price is at least equal
to the Class C Note Target Price (as defined in the Deed of Charge). On or after
the date that is eight years and six months following the Closing Date, the
Company must accept any Sale Offer in respect of the sale of an aircraft if the
proposed sale price is at least equal to the Note Target Price (as defined in
the Deed of Charge) for the then most senior outstanding class of Notes.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|U.S. GAAP.................................... | Generally   accepted   accounting    principles   applicable   in   the   United
States.
|----------------------------------------------- | ----------------------------------------------------------------------------------------

|WFC............................................... | Whirlpool Financial Corporation.
|---------------------------------------------------- | --------------------------------

|WFC Aircraft................................ | The Boeing 767-300ER  aircraft with  manufacturer's  serial number 24952 sold by
WFC to the Company on November 27, 1996.
|---------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------

72

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SIGNATURES

Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant certifies that it meets all of the requirements for filing on Form
20F and has duly caused this annual report to be signed on its behalf by
the undersigned, thereunto duly authorized.

| | AIRCRAFT LEASE PORTFOLIO
SECURITISATION 92-1 LIMITED
| | ----------------------------------------------------

|Date:  December 26, 2002 | By:/s/ Frederick W. Bradley, Jr.
         Frederick W. Bradley, Jr.
         Chairman of the Board
|------------------------ | --------------------------------------------------------------------------------------------------

73

---

Sarbanes-Oxley Certification

I, Frederick W. Bradley, Jr., certify that:

|1. | I have reviewed this annual report on Form 20-F of Aircraft Lease
      Portfolio Securitisation 92-1 Limited;
|-- | --------------------------------------------------------------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary
      to make the statements made, in light of the circumstances under which
      such statements were made, not misleading with respect to the period
      covered by this annual report; and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all
      material respects the financial condition, results of operations and
      cash flows of the registrant as of, and for, the periods presented in
      this annual report.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date:  December 26, 2002

|By: | /s/ Frederick W. Bradley, Jr.
         Frederick W. Bradley, Jr.
         Chairman of the Board1
|--- | ------------------------------------------------------------------------------------------------

____________________________

1 Aircraft Lease
Portfolio Securitisation 92-1 Limited is a special purpose vehicle that does not
employ and has not employed an individual as a chief executive officer or chief
financial officer and does not have and has not had any employees or officers
since its inception. For all executive management functions the Company retains
and relies upon its third party aircraft Servicer, Administrative Agent and Cash
Manager. These third party service providers are required to perform these
executive management functions in accordance with the requirements of the
Servicing Agreement, Administrative Agency Agreement and Cash Management
Agreement, respectively. With respect to the information contained in the annual
report, all information regarding the aircraft, the leases and the lessees is
provided by the Servicer pursuant to the Servicing Agreement. The Cash Manager
calculates monthly payments and makes all other calculations required by the
Cash Management Agreement. Pursuant to the Administrative Agency Agreement, the
Administrative Agent uses the information provided by the Servicer and the Cash
Manager and other information the Administrative Agent acquires in the
performance of its services to Aircraft Lease Portfolio Securitisation 92-1
Limited, to prepare all disclosure (including this annual report) required to be
filed with the Securities and Exchange Commission.

All members of the Board of
Directors of Aircraft Lease Portfolio Securitisation 92-1 Limited, including the
Chairman, are non-executives.

74

---

Index to Exhibits

|Exhibit No. | Description
|----------- | -----------

|1. | Memorandum  and  Articles  of  Association  of  Aircraft  Lease   Portfolio
     Securitisation  92-1 Limited  (incorporated  by reference to Exhibit 3.1 of
     our Registration  Statement on Form F-4 (Registration No. 333-5650),  filed
     with the Securities and Exchange Commission on September 24, 1996).
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | List of subsidiaries.
|-- | ---------------------

75

---

EXHIBIT 8

LIST OF SUBSIDIARIES

1.     Carotene Limited - incorporated in Ireland.
2.     ALPS 92-1 UK Limited - incorporated in England and Wales.

76

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# Aircraft
Aircraft Lease Portfolio Securitisation
92-1 Limited

Financial Statements for the years ended
June 30 2002, 2001 and 2000
together with independent auditors' report



---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Independent Auditors' report

To the Board of Directors and Shareholders of Aircraft Lease Portfolio
Securitisation 92-1 Limited:

We have audited the
accompanying consolidated balance sheets as of June 30, 2002 and 2001, and the
related consolidated statements of operations, changes in shareholders
deficit and cashflows for each of the years in the three year period ended June
30, 2002. These financial statements are the responsibility of the directors.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

As described more fully in
notes 1 and 3 to the financial statements the September 11, 2001 terrorist
attacks on the United States have had a significant adverse effect on the
aircraft industry in general and on the Group. This event, combined with the
slowdown in the airline industry prior to September 11, 2001 has resulted in
reductions in aircraft values and lease rates. In addition, airline costs have
increased and passenger demand for air travel has declined significantly. These
conditions have caused a reduction in the Groups revenue and have had a
significant adverse effect on the Groups ability to make payments on the
Notes on a timely basis and in full. The Group is currently projecting that
there will not be sufficient funds to pay step up interest on the Class A, Class
B and Class C Notes or interest on and principal of the Class D and Class E
Notes or to repay the principal of the Class C Notes in full. As discussed in
note 1, the Company is obliged to meet certain Trust Note Sales
Goals which set out the timetable for the sale of aircraft. During the
period between November 5, 2002 and December 20, 2002, the Company was not in
compliance with these Goals. Failure to comply with the Goals may, under certain
circumstances, constitute an event of default, the consequences of which are
described more fully in note 1.

In our opinion the
financial statements referred to above present fairly in all material respects,
the consolidated financial position of the Group as of June 30, 2002 and 2001,
and the results of their consolidated operations and cashflows for each of the
years in the three year period ended June 30, 2002, in conformity with generally
accepted accounting principles in the United States of America.

KPMG

Chartered Accountants

Jersey

26 December 2002

F-1

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Consolidated Statements of Operations

`Notes   Year ended   Year ended  Year ended
                                                      June 30,     June 30,    June 30,
                                                          2002         2001        2000

                                                       US$'000      US$'000     US$'000
Revenues
Aircraft leasing                              2,6       32,605       37,948      43,087
Interest income                                            781        1,782       2,011
Profit on sale of aircraft                                   -            -         284
Other income                                                 -            -          26
                                                    ----------   ----------  ----------
                                                        33,386       39,730      45,408
                                                    ----------   ----------  ----------
Expenses
General and administrative expenses                      3,565        3,018       3,025
Interest expense                               7        19,110       27,862      29,591
Amortisation of refinancing costs              13            -        1,176       2,360
Depreciation                                   1        16,360       17,588      17,588
Impairment in aircraft values                  1        20,321       30,259           -
Provision for maintenance                      4         4,569       10,108         960
Bad debt expense                                            77        2,374         881
Interest on lessee deposits                                149          381         312
                                                    ----------   ----------  ----------
Total expenses                                          64,151       92,766      54,717
                                                    ----------   ----------  ----------
Net loss before income taxes                           (30,765)     (53,036)     (9,309)
Income taxes                                   9           (24)         (20)        (20)
                                                    ----------   ----------  ----------
Net loss                                               (30,789)     (53,056)     (9,329)
                                                    ----------   ----------  ----------`

The accompanying notes are
an integral part of these consolidated financial statements.

F-2

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Consolidated balance sheets

`Notes       June 30,     June 30,
                                                                    2002         2001
                                                                  US$'000      US$'000

Assets
Cash and cash equivalents                                           6,274        6,342
Restricted cash                                                    23,907       23,907
Trade receivables                                       8           1,487          995
Aircraft - core portfolio                               1         189,693      260,000
Aircraft - available for sale                           1          33,626            -
                                                               ----------   ----------
Total assets                                                      254,987      291,244
                                                               ----------   ----------
Liabilities and shareholders' deficit
  Interest payable                                      7          36,853       30,074
  Prepaid and deferred lease revenue                                  924          740
  Accrued expenses and other liabilities                            9,709        5,315
  Income taxes payable                                                 23           26
  Long-term debt                                        3         319,283      335,490
  Maintenance reserves                                  4          19,023       19,306
  Security deposits                                     5           2,458        2,790
                                                               ----------   ----------

Total liabilities                                                 388,273      393,741
Share capital, 15,000 shares authorised at $1 par
value, 10 shares issued and outstanding                                 -            -
Retained deficit                                                 (133,286)    (102,497)
                                                               ----------   ----------
Shareholders' deficit                                            (133,286)    (102,497)
                                                               ----------   ----------

Total liabilities and shareholders' deficit                       254,987      291,244
                                                               ----------   ----------`

The accompanying notes are an
integral part of these consolidated balance sheets.

Signed on behalf of the Board:

Director

26 December 2002

F-3

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Consolidated statement of cash flows

`Notes   Year ended   Year ended  Year ended
                                                      June 30,     June 30,    June 30,
                                                          2002         2001        2000

                                                       US$'000      US$'000     US$'000

Net loss for the year                                 (30,789)     (53,056)     (9,329)
Adjustments to reconcile net loss to net
cash provided by operating activities:
  Depreciation                               1          16,360       17,588      17,588
  Amortisation                               13              -        1,176       2,360
  Impairment in aircraft values              1          20,321       30,259          -
  Profit on sale of aircraft                                 -            -       (284)
Changes in:
  Accounts receivable                        8           (492)        2,195       (867)
  Interest payable                           7           6,779        8,010       7,564
  Accrued expenses, other liabilities
and income taxes  payable                                4,391        5,074        (94)
  Prepaid and deferred lease revenue                       184        (120)          13
  Maintenance                                4           (283)        9,489     (1,646)
  Security deposits                          5           (332)      (1,385)       (977)
                                                    ----------   ----------  ----------
Net cash provided by operating activities               16,139       19,230      14,328
                                                    ----------   ----------  ----------

Cash flows from investing activities
  Proceeds from sale of aircraft                             -            -      18,222
                                                    ----------   ----------  ----------
Net cash provided by investing activities                    -            -      18,222

Cash flows from financing activities
  Repayment on long term debt                3        (16,207)     (17,641)    (35,504)
  Dividends relating to a prior year                         -          (2)           -
                                                    ----------   ----------  ----------
Net cash used in financing activities                 (16,207)     (17,643)    (35,504)
                                                    ----------   ----------  ----------
Net (decrease)/increase in cash and cash
equivalents                                               (68)        1,587     (2,954)
Cash and cash equivalents at start of                   30,249       28,662      31,616
year
                                                    ----------   ----------  ----------
Cash and cash equivalents at end of year                30,181       30,249      28,662
                                                    ----------   ----------  ----------`

The accompanying notes are an integral part of these financial statements.

F-4

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders' Equity

`Shares      Shares        Share     Retained   Shareholders'
                           Authorised      Issued      Capital     Earnings         Equity
                           ----------  ----------   ----------    ----------  ------------
                                                      US$'000       US$'000        US$'000


Balance June 30, 1999           15,000         10           -      (40,112)       (40,112)
Net loss                             -          -           -       (9,329)        (9,329)
                            ---------- ----------  ----------    ----------     ----------

Balance June 30, 2000           15,000         10           -      (49,441)       (49,441)
Net loss                             -          -           -      (53,056)       (53,056)
                            ---------- ----------  ----------    ----------     ----------

Balance June 30, 2001           15,000         10           -     (102,497)      (102,497)
Net loss                             -          -           -      (30,789)       (30,789)
                            ---------- ----------  ----------    ----------     ----------
Balance June 30, 2002           15,000         10           -     (133,286)      (133,286)
                            ---------- ----------  ----------    ----------     ----------`

The accompanying notes are
an integral part of the consolidated financial statements.

F-5

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Organisation of Group

Background

Aircraft Lease Portfolio  Securitisation 92-1 Limited (the  Company)
was incorporated in Jersey, Channel Islands as a private company on May 13, 1992
and was  re-registered as a public company on June 15, 1992. The Company has two
wholly owned  subsidiaries,  Carotene  Limited,  a company  incorporated  in the
Republic of Ireland,  and ALPS 92-1 UK Limited, a company incorporated under the
laws of England and Wales (together the  Subsidiaries  and, together
with the Company, the Group).

The Company was formed for
the purpose of acquiring a portfolio of 14 commercial jet aircraft all of which
were subject to operating leases. The Company agreed to purchase such aircraft
from debis AirFinance (formerly known as AerFi Group plc and, prior to that, GPA
Group plc) and received delivery and legal title from GPA Group plc of the
aircraft over the four month period from June 23, 1992 to October 30, 1992. One
aircraft was sold on March 15, 1996, reducing the fleet size to 13. An
additional aircraft (the WFC Aircraft) was purchased on November 27,
1996 from Whirlpool Financial Corporation (WFC) and on July 24, 1997
one aircraft was sold to WFC and the fleet of aircraft was reduced from 14 to
13. Two aircraft were sold in the year ended June 30, 2000 reducing the fleet
size to 11. At June 30, 2002 two aircraft had been identified for sale. These
two aircraft were subsequently sold on October 1, 2002 and December 20, 2002,
respectively.

In June 1996 the Company
elected to refinance the debt raised to finance the initial aircraft acquisition
in 1992 (the Prior Debt) through the issuance of notes (the
Notes) rather than remarketing and selling all 13 aircraft during
the one-year period prior to the originally scheduled maturity of the Prior Debt
in June 1997. The decision to refinance the Prior Debt was primarily due to
uncertainty as to the ability of the Company to make payment in full on the Old
Class B Notes and Old Class M Notes under the then current schedule for sale of
the aircraft. In connection with the refinancing of the Prior Debt, the Old
Class A Notes and the Old Class M Notes were redeemed and the Old Class B Notes
were exchanged for the Class E Notes which are held by WFC. The Company believed
that the revised schedule for sale of the Companys then current aircraft
portfolio would allow it to realise better returns on such aircraft, because the
Company expected at that time to sell such aircraft over a period of five to
seven years from June 1996 (compared to fifteen months under the terms of the
Prior Debt).

The Class A, Class B, Class
C and Class D Notes were issued on June 27, 1996 with an aggregate face amount
of approximately US$394 million. The proceeds together with cash balances
previously held in reserve accounts were utilized to repay the outstanding
interest on the Prior Debt, the US$367 million of outstanding principal on the
Prior Debt, the refinancing expenses of US$13 million, the premium paid to the
holders of certain of the Prior Debt of US$4 million and to create an aircraft
purchase reserve account for the purchase of the WFC Aircraft. In addition the
super mezzanine loan of US$78 million was repaid by the Company in connection
with such refinancing.

Upon receipt of the
proceeds of the Notes, the mortgages over the aircraft and the security in
respect of the leases and certain other property in favour of the previous
security trustee were released and transferred to the new security trustee,
Bankers Trustee Company Limited (now renamed Deutsche Trustee Company Limited)
(the Security Trustee), for the benefit of the holders of the Notes.

F-6

---

Background (continued)

The Company is obligated to
pay interest on the Notes and a portion of the principal of the Class A Notes
from the cash flows generated by the Groups leasing operations. Proceeds
from the sale of aircraft are required to be used to pay principal of the Notes
in the priority set forth in the deed of charge entered into by the Company on
June 27, 1996 (the Deed of Charge).

F-7

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Statement of Accounting Policies

Basis of preparation
The  accounting  policies  followed  in  the  preparation  of  the  accompanying
consolidated  financial  statements conform with generally  accepted  accounting
principles in the United States.

The consolidated financial
statements are prepared on the going concern basis and under the historic cost
convention and are stated in US dollars, which is the principal operating
currency of the Group and of the aviation industry. Although the Group balance
sheet shows that there are liabilities considerably in excess of assets, the
terms of the Notes are such that, prior to the final maturity of the Notes, the
Noteholders are only entitled to receive interest and principal repayments in
the event that cash is available. Therefore the Directors believe that the Group
is a going concern.

Basis of consolidation
The consolidated  financial  statements include the results of the Subsidiaries.
All intercompany profits, transactions and account balances have been eliminated
in the consolidated financial statements.

Revenue recognition
The Group enters into operating  leases with aircraft  operators.  Rental income
from  operating  leases is recorded on a straight line basis as revenue as it is
earned.  Lease rentals are paid in accordance with individual lease  agreements,
and are paid in a mixture of in advance and in arrears.  Some lease  rentals are
based on power  by the  hour  fixed hourly rates and others on fixed
monthly rates. Revenue from leases with escalating or scheduled rental increases
(stepped  rentals)  is spread evenly over the lives of those leases.

Maintenance reserves
In most lease contracts the lessee has the obligation for  maintenance  costs on
airframes  and engines,  and in many lease  contracts the lessee makes a full or
partial prepayment, calculated at an hourly rate, into a fund held by the Group,
from which maintenance  expenditures for major checks are disbursed. The balance
of these funds is included in the  provision  for  maintenance  except where the
directors  estimate that a surplus exists, in which case any surplus is taken to
income as a reduction of expenses. In addition,  the Group may incur maintenance
costs on the  re-leasing of the aircraft due to the  requirement  to restore the
aircraft to an acceptable  maintenance condition prior to leasing. In some lease
contracts,  the  Group is  required  to make a  contribution  to the fund if the
maintenance expenditure exceeds the amount in the fund.

F-8

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Statement of Accounting Policies

Taxation
The  Company  has been  granted  exempt  company  status by the Jersey  taxation
authorities.  It pays an exempt company fee of £600 per annum.  Taxation is
provided on the profits of the Subsidiaries at the current rates.

Aircraft
Aircraft  have been  divided into two classes:  (i)  Long-lived  assets and (ii)
Aircraft identified for sale at the balance sheet date.

Long-lived  assets
Long-lived  assets  are  stated  at  cost  less  accumulated  depreciation  less
accumulated impairment provisions.  Cost comprises the net purchase price of the
aircraft  acquired by the Company.  The aircraft are  depreciated  on a straight
line basis so as to write off the cost of the assets to a residual  value of 10%
over a period of 25 years from the date of manufacture.  The estimates of useful
lives,  depreciation rates and residual values are reviewed  periodically by the
Directors of the Company.

The Directors have applied
Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets, as at June 30, 2002 and in
all prior years since this accounting standard came into force. Under the terms
of this accounting standard, the Directors of the Company review the carrying
value of the aircraft against the sum of the undiscounted future cashflows
including the estimated eventual sales values of the aircraft. This review has
determined that shortfalls exist for seven aircraft, classified as long-lived
assets, where their carrying value was greater than the sum of these
undiscounted cashflows.

The application of SFAS No.
121 has resulted in an impairment provision for these aircraft equal to the
difference between their carrying value and fair value.

In determining fair value,
the Directors use external valuations. For the purposes of measuring impairment
losses for long-lived assets, fair value is the average of the Appraised
Current Market Values, as calculated by three independent professional
aircraft appraisers (the Appraisers).

F-9

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Statement of Accounting Policies

Aircraft (continued)

Aircraft identified for sale

Aircraft identified for
sale are defined as those where there were active discussions being held at June
30, 2002 with specific identified buyers. In respect of these aircraft held for
sale, the asset is separately identified and included as part of the portfolio
at the lower of the carrying amount and its estimated net realizable value less
costs to sell. Gains or losses arising on the revaluation of such assets are
taken to the provision for impairment.

Cash and cash equivalents
Cash and cash  equivalents  include  demand  deposits  with banks and all highly
liquid investments with an original maturity of 3 months or less.

Restricted  cash
Except as noted below, the  Companys  collection account is required to be
maintained  at a balance equal to  US$23,907,000  (the  Liquidity  Reserve
Amount).  Part of the Liquidity  Reserve  Amount  consists of  maintenance
reserves and security  deposits  received in cash from certain lessees under the
terms of their  leases.  The  Liquidity  Reserve  Amount  may be used to pay for
maintenance  performed  on  aircraft,  certain  contingencies  in respect of the
aircraft,  repayment of cash security  deposits and,  subject to Board approval,
other Group expenses and liabilities,  including,  among other things,  interest
due on the Class A Notes,  Class B Notes and Class C Notes and costs incurred in
removing any lien imposed by Eurocontrol, in performing airworthiness directives
on the aircraft or in  re-possessing  or re-leasing any aircraft,  to the extent
that available  collections are not sufficient therefor,  in accordance with the
priority of payments set out in the Deed of Charge.

The Company must augment
the Liquidity Reserve Amount on a monthly basis out of available collections to
the extent it is used to pay such interest, costs, expenses or liabilities. The
Company may in certain circumstances reduce the Liquidity Reserve Amount. The
balance of funds in the collection account may fall below the Liquidity Reserve
Amount at any time and the Company may continue to make payments required on the
Class A Notes, Class B Notes, Class C Notes and Class D Notes provided that the
balance of funds in the collection account does not fall below the
Maintenance Reserve Amount (currently US$10 million).

Political risk insurance
The Group paid political risk insurance  premiums in respect of certain aircraft
to its insurers in the fiscal years ended June 30, 2001 and June 30, 2000. These
were  recoverable  under most leases from the lessee and are included in amounts
billed to aircraft operations.  The Group recognises the insurance premiums paid
as an expense and accounts for the amount  recovered from lessees on an accruals
basis. No political risk insurance premiums were paid by the Group in the fiscal
year ended June 30, 2002.

F-10

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Statement of Accounting Policies

Foreign currency
Transactions  in  foreign  currencies  are  translated  into US  dollars  at the
exchange  rate  prevailing  as of  the  date  of  the  transaction.  Assets  and
liabilities  denominated in foreign currencies are translated into US dollars at
the rate of exchange prevailing at the year end. Any gain or loss arising from a
change in exchange rates  subsequent to the date of the  transaction is included
in the Statement of Operations.  The Groups foreign currency  transactions
are not  significant,  as all  revenues  and most  costs are  denominated  in US
dollars.

Use of estimates
In preparing the financial
statements in conformity with generally accepted accounting principles,
management is required to make estimates and assumptions that affect the amounts
of reported assets and liabilities as of the date of the financial statements.
The same is true of revenues and expenses reported for the year. Actual results
could differ from those estimates.

The determination of the
maintenance provision is based on an analysis of the lease portfolio and
reflects an amount which, in the Directors judgement, is adequate to
provide for all potential costs at the balance sheet date.

Bad debt provision
The Directors  review all  outstanding  debtors and full provisions are made for
those amounts believed to be unrecoverable.

Recently  Issued  Accounting  Standards
In August 2001,  the Financial  Accounting  Standards  Board  (FASB)
issued SFAS No. 144,  Accounting  for the  Impairment  or Disposal of Long-Lived
Assets (SFAS No. 144). SFAS No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived  assets.  This  Statement  requires
that long-lived assets be reviewed for impairment  whenever events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future net cash flows expected
to be generated  by the asset.  If the  carrying  value of an asset  exceeds its
estimated future cash flows, an impairment charge is recognised by the amount by
which the carrying amount of the asset exceeds the fair value of the asset. SFAS
No. 144 requires  companies to separately  report  discontinued  operations  and
extends that reporting to a component of an entity that either has been disposed
of (by sale,  abandonment,  or in a distribution  to owners) or is classified as
held for  sale.  Assets  to be  disposed  of are  reported  at the  lower of the
carrying amount or fair value less costs to sell. The Group adopted SFAS No. 144
on July 1, 2002 and this will be  applicable  for the year ended June 30,  2003.
However,  the Directors do not believe that this will have a material  effect on
the financial statements.

In April 2002, the FASB
issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13 and Technical Corrections (SFAS No. 145). SFAS No. 145
requires gains and losses from the extinguishment of debt to be classified as
extraordinary items only if they meet the criteria in Accounting Principles
Board (APB) Opinion No. 30. SFAS No. 145 also requires that capital
leases that are modified so that the resulting lease agreement is classified as
an operating lease be accounted for under sales-leaseback provisions.

F-11

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Statement of Accounting Policies

Recently Issued Accounting Standards (continued)
These  amendments and other issues addressed in SFAS No. 145 are not expected to
have a  material  effect on the  financial  position  or  results  of the Group.

In June 2002, the FASB
issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities (SFAS No. 146). SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities, often referred
to as restructuring costs and nullified prior accounting guidance
with respect to such costs. The Directors believe the impact of SFAS No. 146
will not have a material effect on the financial position or results of
operations of the Group.

F-12

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

1  Aircraft

`June 30,     June 30,
                                                                 2002         2001
                                                              US$'000      US$'000

Cost less impairment
Beginning of year                                             378,524      408,783
Impairment write-down                                         (20,321)     (30,259)
Reclassification to aircraft available for sale               (53,797)           -
                                                            ----------   ----------
End of year                                                   304,406      378,524
                                                            ----------   ----------


Accumulated depreciation
Beginning of year                                             118,524      100,936
Depreciation expense                                           16,360       17,588
Reclassification to aircraft available for sale               (20,171)           -
                                                            ----------   ----------
End of year                                                   114,713      118,524
                                                            ----------   ----------
Net carrying value - core portfolio                           189,693      260,000
Net carrying value - available for sale                        33,626            -
                                                            ----------   ----------
                                                              223,319      260,000
                                                            ----------   ----------
Average Appraised Base Value at end of year (unaudited)       254,740      292,450
                                                            ----------   ----------`

The Appraised Base
Values represent the Appraisers opinion of the underlying economic
value of an aircraft assuming an arms-length, cash transaction between
willing and knowledgeable parties, with a reasonable period of time available
for marketing, assuming, among other things, sales of the aircraft in an open,
unrestricted stable market environment with a reasonable balance of supply and
demand, and assuming the maintenance status of each aircraft with regard to such
things as airframe, engines and landing gear to be at its half-life condition
(i.e. its condition at midpoint between service intervals), adjusted to account
for certain aspects of the actual maintenance status of each aircraft, as
provided to the Appraisers.

As discussed in the
Statement of Accounting Policies, the Directors undertake a review to determine
whether an impairment provision is required in respect of both long-lived assets
and aircraft identified for sale. The Directors have determined that the
carrying value for seven aircraft, classified as long-lived assets, is greater
than the undiscounted future cashflows in respect of such aircraft and have
recorded an impairment provision for these aircraft equal to the difference
between their carrying value and fair value.

F-13

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

1 Aircraft (continued)

In applying SFAS No. 121
the Directors have used average Appraised Current Market Value, which was in
aggregate US$186,430,000 as at June 30, 2002 for the core portfolio, and
represents the Appraisers opinion of the most likely trading price that
may be generated for an aircraft under current market conditions. The Appraisers
assume that the aircraft are valued for their highest, best use, that the
parties to the hypothetical sale are willing, able, prudent and knowledgeable,
and under no unusual pressure for a prompt sale, and that the transaction would
be negotiated in an open and unrestricted market on an arms length basis.

Current Market Values have
been estimated by the Appraisers based on value curves from the last downturn in
the aircraft market. An appraisal is an estimate of value and should not be
relied upon as a measure of current sales value; the proceeds realized upon a
sale of an aircraft may be less than the Appraised Current Market Value,
particularly in current market conditions as discussed in note 3. In the current
environment, there is a lack of hard data available on which to base aircraft
valuations and therefore the appraisal process is more difficult.

The Directors believe that
as a result of the factors discussed above and in note 3 the sales value of the
long-lived assets in the current market may be less than the average Appraised
Current Market Value and the carrying value as at June 30, 2002. Also, if it
were necessary to dispose of an aircraft quickly, the proceeds from the sale of
such aircraft would probably be even less than the value in the current market.
In that event, further write-downs would most likely be required.

The application of the
accounting policies in the current year has led to an increase in the impairment
provision of US$20.321 million. A previous provision was made at June 30, 2001
for US$30.259 million.

At June 30, 2002 the
impairment provision carried forward represents both write-downs to estimated
net realisable value less costs to sell (in respect of the two aircraft
identified for sale at the balance sheet date) and write-downs to appraised
values (in respect of long-lived assets).

The decline in the fair
value of the aircraft is due primarily to the ageing of the aircraft and, with
respect to certain aircraft, those market conditions (described in note 3) which
have had a negative effect on aircraft values. These conditions have also
resulted in a reduction in lease rates.

Pursuant to the Deed of
Charge the Company is obliged to meet certain Trust Note Sales Goals
which required the Company to sell one or more aircraft having an aggregate
Initial Appraised Value of at least US$54.33 million by June 27, 2002. The
Initial Appraised Value of each of the aircraft was determined in
June 1996 immediately prior to the refinancing transaction undertaken by the
Company.

F-14

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

1 Aircraft (continued)

In order to meet the Trust
Note Sales Goals the Company had entered into non-binding agreements to sell a
B737-300 aircraft (MSN 24914 on lease to Malev) and an A320-200 aircraft (MSN
283 on lease to Air Canada) to two separate purchasers by June 27, 2002. These
aircraft are therefore classified as available for sale as at June 30, 2002.

The sale of MSN 24914 was
completed on October 1, 2002. Despite extensive efforts to complete the sale of
MSN 283, the Company was informed by the prospective purchaser on November 5,
2002 that it had decided not to proceed with the transaction for reasons outside
the Companys control. MSN 283 was subsequently sold to a different
purchaser on December 20, 2002. As a result, the Company was not in compliance
with the Trust Note Sales Goals from November 5, 2002 to December 20, 2002.

To date, the Company has
sold US$133.19 million (measured by Initial Appraised Value as of June 3, 1996)
of aircraft. The effect of the Trust Note Sales Goals is to require the Company
to sell one or more further aircraft having an aggregate Initial Appraised Value
of US$66.81 million by June 27, 2003.

Failure to comply with the
Trust Note Sales Goals may, under certain circumstances, constitute an event of
default under the Deed of Charge if such failure continues for 30 days or more
after written notice thereof has been given to the Company or the Security
Trustee by holders of at least 25% of the aggregate outstanding principal
balance of the Notes of any class which has been materially adversely affected
by such failure. The Deed of Charge further provides that if an event of default
were to occur and be continuing, an enforcement notice may only be served by 66
2/3% of the aggregate outstanding principal balance of the directing class of
the Noteholders, which will be Class A so long as any Class A Notes are
outstanding. The Deed of Charge further provides that the failure to satisfy the
Trust Note Sales Goals gives the Noteholders the right to replace Babcock &
Brown, the Groups aircraft servicer (the Servicer) at the
direction of Noteholders representing at least 75% of the aggregate outstanding
principal balance of the Class A, the Class B, the Class C and the Class D
Notes. The Deed of Charge also provides that, subject to the pre-emption rights
of the Class D and the Class E Noteholders, at any time the Trust Note Sales
Goals are not satisfied the Company would be required to accept any sale offer
for any aircraft if such an offer was at or above the Class C Note Target Price
(as defined in the Deed of Charge).

The market conditions
described in note 3 have had a significant adverse effect on aircraft values in
general and therefore have negatively impacted the price of the aircraft sold
subsequent to year end, and are also expected to impact on future sales prices.

F-15

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

2  Operating leases
As at June 30, 2002, ten of the aircraft are leased on operating leases to eight
lessees. As at June 30, 2002 there was one aircraft off-lease.

The following is a schedule
of future minimum rental payments receivable under operating leases as of June
30, 2002. A number of leases operate on a power by the hour basis
and, as such, future rentals are dependent upon lessee usage. Some of these
power by the hour leases have no minimum rentals and are therefore
not included in the schedule.

As at June 30, 2002, the
lease for one of the Companys aircraft, representing 5.74% of the aircraft
portfolio by appraised base value at June 30, 2002 was scheduled to expire
before June 30, 2003. This aircraft was redelivered in October 2002 and was
immediately re-leased. On December 23, 2002 a lease agreement was signed with a
new lessee in respect of the aircraft which was off-lease as at June 30, 2002.
This aircraft is expected to be delivered to the lessee in January 2003.

`Year ending June 30                                  US$'000

       2003                                           13,248
       2004                                            9,924
       2005                                            5,814
       2006                                            3,600
       2007                                            3,300
                                                  ----------
                                                      35,886
                                                  ----------`

The above minimum lease
rentals would be reduced to the extent that any of the aircraft are sold while
on lease. No rentals have been included in the above schedule in respect of the
two aircraft that have been identified as available for sale as at June 30,
2002.

The leases have charges
attached to them such that they represent security for the Notes issued by the
Company, as described in note 3 below.

F-16

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

2  Operating leases (continued)

The following table shows
the scheduled terminations by aircraft type and lessee for the leases relating
to the aircraft as of June 30, 2002:

`Manufacturer's                             Month and   % of Revenue
                       Serial                                 Year of     Year ended
Aircraft Type          Number                  Lessee      Expiration  June 30, 2002

A320-200                  283              Air Canada      March 2006          10.79
B737-300                24914                   Malev        May 2004           7.96
B737 - 400              23869                  Asiana   December 2003           8.37
B737 - 400              23870           Travel Servis      March 2005           8.74
B737 - 400              24519               Off lease            N/A*           6.54
B737 - 500              24898          China Southern      March 2004           7.61
B757 - 200              25054               Britannia   August 2002**           2.75
B767 - 300ER            24952              Air Canada      March 2004          13.76
B767 - 300ER            25000              Air Canada        May 2007          20.27
MD83                    49785               Meridiana      March 2004           7.03
MD83                    49786                    BWIA    October 2002           6.18`

*The lease in respect of
the B737-400 aircraft (MSN 24519) expired in November 2001. On December 23, 2002
a lease agreement was signed with a new lessee in respect of this aircraft which
was off-lease as at June 30, 2002. This aircraft is expected to be delivered to
the lessee in January 2003.

** The scheduled lease
expiry date for the lease in respect of the B757-200 aircraft (MSN 25054) was in
March 2002, however the aircraft was redelivered to the Company on August 15,
2002. On August 16, 2002 the aircraft was re-leased to Air 2000.

F-17

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

3  Long-term debt
The  Notes  are  secured  by  a  first  priority   security  interest  over  the
Companys  assets, which consist of the aircraft, the leases and amounts on
deposit in certain accounts.

`LOAN NOTES    Expected final                       Step up  Outstanding   Outstanding
                     payment  Interest rate  interest rate    principal     principal
                       date*  (per annum)**    (per annum)   balance as    balance as
                                                             at June 30,  at June 30,
                                                                   2001          2002

                                                                US$'000       US$'000

Class A        May  15, 2002    LIBOR+0.37%           0.5%      128,530       113,505

Class B        July 15, 2002    LIBOR+0.95%           0.5%       47,254        47,254

Class C        July 15, 2002    LIBOR+1.35%           0.5%       41,583        41,583

Class D        July 15, 2002         12.75%           1.0%       35,205        34,023

Class E                  N/A         10.00%            N/A       82,918        82,918
                                                              ----------   ----------
                                                                335,490       319,283
                                                              ----------   ----------

*   as determined at date of issue
**  payable monthly in arrears`

The Company is obligated to
pay interest on the Notes and a portion of the principal of the Class A Notes
from the revenue generated by the Companys leasing operations.

At various times during
fiscal year 2002, certain target principal payments scheduled to be paid to
holders of the Class A and the Class D Notes, certain step up interest payments
due to holders of the Class A Notes, certain interest payments due to holders of
the Class D Notes and certain interest payments scheduled to be paid to holders
of the Class E Notes were in arrears. As at June 30, 2002, these arrears
consisted of $0.068 million in Class A Note step up interest, $0.320 million in
Class D Note default interest and $36.068 million in Class E Note interest. The
failure to pay all of the interest (excluding default interest) owing to the
holders of the Class D Notes at certain times during the fiscal year ended June
30, 2002 was an event of default under the Deed of Charge.

F-18

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

3  Long-term debt (continued)
The Deed of Charge provides that so long as the Class A Notes,  Class B Notes or
Class C Notes are outstanding, the only remedy available to holders of the Class
D Notes for this event of default is that default  interest of 1% of such unpaid
interest  shall accrue and be owed to holders of the Class D Notes in accordance
with the priority of payments set forth in the Deed of Charge.

The Company did not have
sufficient funds to repay the Class A Notes on their expected final payment date
of May 15, 2002 and did not have sufficient funds to repay the Class B, Class C
or Class D Notes on their expected final payment date of July 15, 2002. Failure
to repay in full the principal of those Notes by such dates is not an event of
default, however the Deed of Charge requires that, to the extent the Company
does not repay in full the principal on those Notes by such dates, the Company
pay these Noteholders additional step-up interest as per the rates stated in the
above table for each month until the earlier of the date such Notes are repaid
in full and their final maturity date of June 15, 2006. These additional
interest costs will be paid only to the extent that there are available
collections in accordance with the priority of payments set out in the Deed of
Charge. The Company has paid some step up interest but its current projections
indicate that it will not have sufficient funds to pay any further step up
interest during fiscal year 2003 or beyond.

The September 11, 2001
terrorist attacks on the United States, combined with the slowdown in the
airline industry prior to September 11, 2001 have had a significant adverse
effect on the airline industry in general and on the Group. Following the
attacks, airline costs such as aircraft insurance and aircraft security have
increased and passenger demand for air travel has significantly declined. Many
airlines are flying fewer aircraft and downsizing or reducing planned growth of
their fleets. In addition, a number of airlines have declared bankruptcy and
ceased operations, and it is expected that the industry will experience further
consolidation as well as additional bankruptcies in the near future. These
conditions have adversely affected the ability of the Companys lessees to
make rent and other payments and the Companys ability to re-lease aircraft
on a timely basis and at rates similar to those previously obtained in the
market, and have also reduced the value that the Companys aircraft would
realise on sale. These factors have had a significant adverse effect on the
Companys revenue and the Companys ability to make payments on the
Notes on a timely basis and in full. Current projections indicate that there
will not be sufficient funds to pay step up interest on the Class A, Class B and
Class C Notes or interest on and principal of the Class D and Class E Notes or
to repay the principal of the Class C Notes in full.

Upon the final maturity
date (June 15, 2006) the cash available will be applied to pay principal and
interest on the Notes in the following order:

1.      Classes A, B, and C interest
2.      Class A principal
3.      Class B principal
4.      Class C principal

F-19

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AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

3  Long-term debt (continued)

5.      Class D interest
6.      Class D principal
7.      Class E interest
8.      Class E principal

The Class E Notes will not,
except in certain circumstances, receive any principal payments until the
outstanding principal amount of each of the Class A Notes, Class B Notes, Class
C Notes and the Class D Notes is reduced to zero and all interest due on these
Notes is paid in full.

The failure of the Company
to pay principal on the Notes on any day prior to their final maturity date due
to insufficient cash collections will not constitute an event of default under
the Deed of Charge. The limited recourse nature of the Notes means that no
payments will be payable in excess of the available collections.

`4  Maintenance reserves
                                                     June 30,    June 30,   June 30,
                                                         2002        2001       2000
                                                      US$'000     US$'000    US$'000

Opening balance                                        19,306       9,817     11,463
Received during year                                    6,574       5,850      3,021
Claims by lessees                                     (11,426)     (6,469)    (5,627)
Provision for maintenance in year                       4,569      10,108        960
                                                    ----------  ---------- ----------
Closing balance                                        19,023      19,306      9,817
                                                    ----------  ---------- ----------
Due within one year                                     5,388       2,380      3,109
Due after one year                                     13,635      16,926      6,708
                                                    ----------  ---------- ----------
                                                       19,023      19,306      9,817
                                                    ----------  ---------- ----------`

As at June 30, 2002 all of
the lessees are responsible under the terms of their leases to maintain the
aircraft and seven of the lessees provide security for such obligations through
regular contributions to maintenance reserves held by the Group. In addition,
the Group may incur maintenance costs on the re-leasing of the aircraft due to
the requirement to restore the aircraft to an acceptable maintenance condition
prior to leasing. In addition, in some lease contracts, the Group is required to
make a contribution where the maintenance expenditure exceeds the amount in the
fund. Any surplus in maintenance funds at the termination of a lease generally
accrues to the Group.

Inherent uncertainties make
it difficult to determine whether the future obligations of the Group to meet
future maintenance payments can be met out of the proceeds of future maintenance
receipts.

F-20

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AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

4  Maintenance reserves (continued)
Due to current  economic  factors in the  airline  industry,  lessees  have been
exerting  pressure on lessors to transfer any excess  maintenance funds upon the
re-leasing of an aircraft. In order to re-lease aircraft,  the Group is granting
maintenance  credits  as part of the  terms of the new  leases  and  expects  to
continue  to  grant  such  credits  on  new  leases.   Lessor  contributions  to
maintenance  costs resulted in a provision of  US$4,569,000  being charged as an
expense in the year ended June 30, 2002 (2001    US$10,108,000,  including
$5,695,000 of  maintenance  funds on previously  terminated  leases that are now
being made available to subsequent  lessees and previously  estimated surplus on
current leases).

5  Security deposits
Security  deposits of  US$2,458,000 at June 30, 2002 and of US$2,790,000 at June
30, 2001 are held as security for  obligations  in accordance  with the terms of
certain  leases.  The  deposits  are held as cash and are  included  within  the
restricted cash balance.

6  Revenues and concentration of credit riski) Distribution of leasing revenues by geographic area

`Year Ended    Year Ended   Year Ended
                                          June 30,      June 30,     June 30,
                                              2002          2001         2000
                                           US$'000       US$'000      US$'000

Europe                                      15,198        20,305       30,065
Americas                                    10,022        11,140        7,080
Asia/Pacific                                 7,385         6,503        5,942
                                         ----------    ----------   ----------
                                            32,605        37,948       43,087
                                         ----------    ----------   ----------`

ii)   Concentration of credit risk
Credit risk with respect to trade accounts receivable is generally
diversified due to the Group's fleet of aircraft being comprised of eleven
aircraft, ten of which were on lease to eight lessees in eight countries as
at June 30, 2002.

The Group manages its
exposure to leases with lessees based in particular countries through obtaining
security in the form of deposits, letters of credit and guarantees.

The Group continually
evaluates the financial position of lessees and, based on this evaluation, the
amounts outstanding and the available security, makes an appropriate provision
for doubtful debts.

Two lessees accounted for
24.55% and 20.27% respectively of the Groups aggregate lease revenues for
the year ended June 30, 2002. No other lessee accounted for more than 10% of the
Groups aggregate lease revenues for such period.

F-21

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AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

7  Interest expense

`Statement of Operations
                                               For the year For the year For the year
                                                      ended       ended      ended
                                                    June 30,    June 30,   June 30,
                                                       2002        2001       2000
                --------------------------------------------------------------------
                  Accrual                Accrual
                  June 30,               June 30,
                     2001       Paid        2002
                    $'000      $'000       $'000      $'000       $'000      $'000

New Notes
Class A               488     (3,779)       (147)    (3,438)     (8,624)    (9,826)
Class B               201     (1,708)        (60)    (1,567)     (3,233)    (3,370)
Class C               192     (1,672)        (59)    (1,539)     (3,014)    (3,150)
Class D             1,072     (5,172)       (519)    (4,619)     (4,699)    (4,953)
                ---------- ----------  ---------- ----------  ---------- ---------
                    1,953    (12,331)       (785)   (11,163)    (19,570)   (21,299)
Class E            28,121          -     (36,068)    (7,947)     (8,292)    (8,292)
                ---------- ----------  ---------- ----------  ---------- ---------
Total              30,074    (12,331)    (36,853)   (19,110)    (27,862)   (29,591)
                ---------- ----------  ---------- ----------  ---------- ---------`

8        Trade receivables

`June 30,       June 30,      June 30,
                                           2002           2001          2000
                                        US$'000        US$'000       US$'000

Gross receivables                         1,487            995         3,584
Allowance for bad debts                      -             -           (881)
                                      ----------     ----------    ----------
Net receivables                           1,487            995         2,703
                                      ----------     ----------    ----------`

9  Income taxes

The Company pays an annual
charge (currently £600) to qualify as a tax exempt company under Jersey
law. ALPS 92-1 UK Limited is subject to UK taxation on its profits at the
applicable rate and Carotene Limited is subject to Irish taxation on its profits
at the applicable rate. Taxable income is the same as book income for both of
these entities. Accordingly, there are no deferred taxes. Net operating loss
carry forwards at June 30, 2002 were zero.

`June 30,       June 30,      June 30,
                                           2002           2001          2000
                                        US$'000        US$'000       US$'000
Corporation tax                              24             20            20
                                      ----------     ----------    ----------`

F-22

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AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

10 Commitments
The Group has no long-term
contracts other than those with its service providers as at June 30, 2002.

The annual commitment to
Babcock & Brown, the Servicer, is US$454,800 plus 2% of all lease rentals
collected.

The annual commitment to
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company), the cash
manager, is US$17,000.

The annual commitment to
Andersen Corporate Services (Jersey) Limited, the administrative agent, is
£73,500.

The holders of the shares
in the Company are entitled to receive out of the distributable profits of the
Company a fixed cumulative preferential dividend at a rate of US$1,500 per
annum. As the Company did not have distributable profits as at June 30, 2002, it
did not pay a dividend. Total unpaid cumulative preferential dividends as at
June 30, 2002 were US$7,500.

11 Fair value of financial instruments
The Directors  estimate that the fair value of its cash and other receivables at
June 30, 2002  approximate  to the amounts at which these items are reflected in
the Groups balance sheet.

The Class A, B, C, D and E
Notes are recorded at their face values of US$113,505,000, US$47,254,000,
US$41,583,300, US$34,023,000 and US$82,918,000 respectively. It is not possible
to ascertain the fair value of the Notes. The Directors believe that the fair
value of the Class C, the Class D and the Class E Notes was materially less than
their face value as at June 30, 2002. However, the Class C, the Class D and the
Class E Notes cannot be written down in value unless and until the debt is
forgiven.

12 Related party transactionsa) Babcock and Brown
Babcock &  Brown acts as Servicer to the Group.  In addition to managing the
Groups aircraft,  Babcock & Brown also manages aircraft owned by other
third  parties.  Babcock  &  Brown may from time to time have  conflicts  of
interest in performing its  obligations to the Group and other entities to which
it provides management, marketing and other services.

Babcock & Brown
receives an annual fee as Servicer which amounted to US$1,180,714 for the year
ended June 30, 2002 (2001:US$1,375,358, 2000:US$1,766,806).

b) Mr R. La Forest
Mr R. La Forest was appointed as a director of the Company on September 13, 2000
and he  resigned  on 12 June 2002.  Mr R. La Forest is an  officer  of WFC,  the
holder of the Class E Notes.

F-23

---

AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

12 Related party transactions (continued)c) Mr B. Chamness
Mr B.  Chamness was appointed as a director of the Company on 12 June 2002. Mr B
Chamness was formerly an officer of WFC, the holder of the Class E Notes and was
formerly  a  director  of the  Company.  He now  acts  as a  consultant  to WFC.

d) Mr G. Adrian Robinson
Subsequent to year end the Group has entered into a lease agreement for aircraft
MSN 25054 with Air 2000.  Mr G.  Adrian  Robinson,  a director  of the  Company,
provides consulting services to Air 2000 from time to time.

13 Capitalised Refinancing Costs

`June 30,   June 30,    June 30,
                                              2002       2001        2000
                                           US$'000    US$'000     US$'000
Balance at start of year                         -      1,176       3,536
Amortised during year                            -     (1,176)     (2,360)
                                         ---------- ---------- ----------
Balance at end of year                           -          -       1,176
                                         ---------- ---------- ----------`

During the refinancing of
the Company in June 1996 costs were incurred in relation to the Notes. These
refinancing costs were capitalised and amortised over the then expected life of
the Notes.

14 Supplemental disclosure of cash flow information

|i) | Income tax
The Group made  income  tax  payments  of $3,631  during the year ended June 30,
2002,  $17,748 during the year ended June 30, 2001,  $18,238 and during the year
ended June 30, 2000.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ii) | Interest paid
The Company made net interest  payments of $12,331,000  during
the year ended June 30,  2002,  $19,852,000  during the year ended June 30, 2001
and $22,026,000 during the year ended June 30, 2000.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15 Subsequent Events
Subsequent to year end, the
Company disposed of two aircraft. The B737-300 aircraft, MSN 24914 was disposed
of at a sales price of $11.6 million to an affiliate of a Class D Noteholder.
The A320-200 aircraft, MSN 283, was disposed of at a sales price of $20.9
million to a third party purchaser. These assets had been written down to net
realisable value less costs to sell at June 30, 2002 and so no profit or loss
arose on either transaction.

F-24

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AIRCRAFT LEASE PORTFOLIO SECURITISATION 92-1 LIMITED
                               AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

15 Subsequent Events (continued)

Subsequent to year end, at
the direction of the Company, the Servicer has begun to market other aircraft
for sale in order to meet the ongoing Trust Note Sales Goals.

The Companys
administrative agent, Andersen Corporate Services (Jersey) Limited, has tendered
its resignation. Such resignation will not be effective until a suitable
replacement has been appointed and discussions are currently underway to find
such a replacement.

The interest arrears of the
Company have increased subsequent to year end. As at December 16, 2002 the
unpaid amounts consisted of $0.549 of Class A Note Target Amount, $0.302 million
of Class A Note step-up interest, $1.338 million of Class B Note Target Amount,
$0.100 million of Class B Note step-up interest, $2.720 million of Class C Note
Target Amount, $0.089 million of Class C Note step-up interest, $2.226 million
of Class D Note Target Amount, $0.275 million of Class D Note interest, $0.320
million of Class D Note default interest, $0.142 million of Class D Note step-up
interest and $40.268 million of Class E Note interest.

F-25

---