EFTA00605232.pdf

"atateoft /44,dee Equipment Asset Management and Financial Appraisal Services Monarch Professional Centre Accredited Senior Appraisers Daniel H. Rausch. ASA Gary A. Webster, ASA 1W\ Norman Soclaly of Appr.son. Providing Value World.ido An Appraisal of One 1999 Hawker 800XP Aircraft Serial Number 258418 Registration Number N516TH As of March 21. 2016 Prepared For CGM Capital Prepared By Aviation Asset Management Inc 4A$ March 23, 2016 /I p Helicopter NATIONAL BISINESS AVIATION \\International ASSOCIATION, INC EFTA00605232  Index Section Page No. Introduction 1-2 Report Options and Approaches to Value 3-4 Value Considerations and Value Calculations 5-9 Specifications and Physical Inspection 10-11 Photographs 12-19 Introduction to the Hawker 800XP Series and the 20-24 Honeywell TFE-731 Engine Series Statement Of Limiting Conditions Appraisers Certification 25-27 Business/General Aviation Outlook 28-37 Appraiser Qualifications 38-39 Glossary of Terms 40-61 EFTA00605233  Adateemt Ada Equipment Asset Management and Financial Appraisal Services Monarch Professional Centre Accredited Senior Appraisers ASV" a Daniel H. Rausch, ASA Gary A. Webster, ASA Asnencan Sous,, of Apprantaim dir Providing Value Worldwide March 23, 2016 CMG Capital C/O Shawn Chemtov Dear Mr. Chemtov, In response to your request, Aviation Asset Management, Inc. (AAMI) is pleased to provide a Full Appraisal and our opinion of the Current Fair Market Value (CFMV) of one 1999 Hawker 800XP aircraft, SIN 258418, Registration N516TH registered to South Aviation Inc, This appraisal is based on information provided by L&L International, along with publicly available data as of March 21, 2016. No consideration has been given to any liens or encumbrances which may be held against the asset appraised. No investigation of legal fee or title to the property has been made and the claim to the property is assumed to be valid. No additional values or appraisals have been made regarding such intangibles as patents, rights to manufacture, trademarks, goodwill, customer lists, etc. This appraisal has been developed and is being submitted in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP), as promulgated by the Appraisal Standards Board of the American Society of Appraisers. N Helicopter Association International NATIONAL BISINESS AVIATION ASSOCIATION, A EFTA00605234  Attalla( Alai Nanagafrait Sac Aviation Asset Management Inc. is not a manufacturer or engaged in the sale or distribution of the aircraft that comprises this appraisal. AAMI makes no representations or warranties, expressed or implied, with respect to the merchantability or fitness for a particular purpose of the aircraft. This appraisal represents the opinion of AAMI, as an independent and disinterested party to the transaction as well as the known parties thereto. It is not given for or as an inducement for any financial transaction and, further is prepared for the exclusive use of CMG Capital, our client, and shall not be provided to other parties without the consent of CMG Capital. It is assumed that the Current Fair Market Value stated in this appraisal is to be obtained in an arms-length transaction between an informed and willing buyer and an informed and willing seller without undue pressure on either the buyer or the seller. Sincerely, Aviation Asset Management, Inc. Dela Retold Daniel H. Rausch, President Accredited Senior Appraiser America Society of Appraisers Certified Appraiser International Society of Transport Aircraft Trading Page 2 EFTA00605235  Agitation ;444et 2llanagement lac Appraisal Report Options There are two USPAP-approved appraisal report options used in presenting appraisal data: 1. Appraisal Report. 2. Restricted Appraisal Report. The Restricted Appraisal Report is limited in information and can only be used when the report is to be used by the client and will not be relied upon by anyone else. The essential difference among the two report options is in the content and level of information provided. This Appraisal Report was prepared in accordance with USPAP Standards Rule 2-2(a). This is a Full Appraisal Report, which contains sufficient information to explain the appraisal process and includes a physical inspection or on-site audit of the aircraft, but not the records which were not available during the physical inspection. The purpose of this appraisal is to determine the Current Fair Market Value (CFMV) of one Hawker 800XP aircraft. The use of this appraisal is for valuation of the aircraft for support of financing. Our client is CMG Capital and an intended user of this report is L&L International Ltd.. All data gathered in support of our CFMV opinion used in the compilation of this appraisal is available in our workfile for your inspection for a period of five years. Page 3 EFTA00605236  Agitated* ;444el Iltanagement Tee APPROACHES TO VALUE There are three recognized approaches utilized to determine value which may be used in appraising, described briefly as follows: COST APPROACH: This approach begins with the determination of the current cost to reproduce the asset (Reproduction Cost New) or replace the utility (Replacement Cost New) of the subject property as of the valuation date. From the more appropriate of these two costs all forms of depreciation, physical deterioration, functional and economic obsolescence are deducted resulting in a value estimate by the Cost Approach. This approach is not widely used in aircraft appraisals. INCOME APPROACH: In this approach, the future income stream, associated with the item is first estimated. From this potential income, all expenses involved in the exchange or overhaul of the item is deducted yielding net income which is the money an investor could expect to receive from the item. This data is then processed into value either by means of a capitalization rate embodying consideration of capital cost, remaining economic life and degree of risk involved, or by means of a discounted cash flow analysis over an appropriate economic life. The Income Approach is typically not used in the aerospace industry. It is very difficult to separate and allocate the portion of the operating income attributable to specific aircraft. Consequently it is not used in this analysis. SALES COMPARISON APPROACH: In this approach, sales of comparable parts or equipment are analyzed. If detailed information is available, the individual sales are adjusted for various aspects of similarity to the subject. The resultant adjusted sales prices are correlated and a value estimate for the subject is derived from them. The Sales Comparison Approach is an appropriate method to estimate the value of the subject aircraft by using appropriate comparable sales, however all details concerning the status and condition of the comparables must be known. If sufficient details are not known about the comparables, then using references sources which list average sales values during a given time period, would be more appropriate. In the analysis of the subject aircraft, the Sales Comparison Approach, using reference sources of sales prices and current market information was utilized. Page 4 EFTA00605237  Adettion "twee Iltanagenteat Sac Value Considerations AAMI follows the traditional industry standards for market evaluations, which are based on half-life (time) of life-limited parts and time between overhaul (TBO) on the aircraft high-cost maintenance items. The following parameters and assumptions are utilized for purposes of standardized comparisons; namely that the aircraft has half-life remaining on the time-controlled components to its next scheduled major overhaul or shop visit; is under an approved maintenance program and in compliance with all Airworthiness Directives (ADs), and applicable Service Bulletins (SBs). It has traceability of life-limited and time-controlled parts; all repairs and modifications accomplished are approved and signed off with full documentation; is in standard configuration; has no damage history, and is sold for a cash transaction. This, moreover, assumes the aircraft is equipped with standard part/components and options of the types and models generally accepted and utilized in the industry, and that it is one of the standard or widely used configurations utilized in domestic or international operations in private or commercial operations. Additional factors, including date of delivery, total and ratio of hours to cycles and modifications, are considered when making adjustments for a specific aircraft. Changes in the aforementioned parameters, assumptions and standards can increase or decrease the market price. Conversely, market values, as well as actual appraised values are detrimentally affected on aircraft that have been out of service for prolonged periods or not currently certified as airworthy. Deterioration in value will also apply to aircraft, which have disproportionately high cycle-to-hour ratios relative to the average achieved by the industry in operating the specific types of aircraft, or to aircraft that have a damage history. No accident, incident, or damage history was reported to us and none was found in a search of the FAA and NTSB databases for this aircraft. Page 5 EFTA00605238  Acattion 444et Nanagement Sae Forced liquidation and bankruptcy sales can cause prices to fall as much as 30% or more below current market prices during certain market trends. Sales by non-operating entities that do not include the benefits of in-house financing usually bring lower prices on a cash or cash equivalent basis. Additionally, market values are also based on knowledge of asking, offered and transaction prices similar, competitive, and alternative equipment. The analysis contained in this report, although acknowledging immediate effects, excludes extremely short-term market stimulants and depressants from both present base values and forecasted values, when it is determined that they are transient in nature. It is expected that short-term situations tend only to affect availability temporarily, rather than cause consequential price changes. This is due to the long-term economic consequences of price considerations outweighing the short-term consequences of reduced or high availability caused by these temporary problems. The pressures on the manufacturers to overcome major problems promptly as they arise lessen the chance of the values of their product lines being affected detrimentally in the long-term. Conversely, the implementation requirements of high cost Airworthiness Directives, mandatory Service Bulletins, and high time/cycle special maintenance requirements, are treated as long term impact items for applicable engines and aircraft. There were 475 total Hawker 800s built between 1995-2006 They are no longer in production. There are 469 of these aircraft remaining, 307 of which are operated in North America, and 160 in other regions. Total time ranges from 68 hours to 12,958 hours. There are 54 of these aircraft for sale and none offered for lease. Average asking price is $2.3M and the average days on the market is 314. The average total time on the aircraft that are currently listed for sale is 5,586 hours. In 2016 so far there have been 22 transactions on this model. In 2015 there were 108 transactions. Page 6 EFTA00605239  Ailation 444et 71tanagenteat Tied Value Calculations A. Current Fair Market Value (CFMV) (Half-life) Current Fair Market Value (Half-Life) is a base-line value that assumes its physical condition is average for an aircraft of its type and age, and its maintenance time status is at mid-life, mid-time (or benefiting from an above- average maintenance status if it is new or nearly new, as the case may be). It also assumes that the aircraft is equipped with the manufacturer's standard compliment of equipment. It is the starting point for making maintenance and other adjustments to arrive at the adjusted CFMV. When reliable actual sales data is available, it is preferable to use those actual sales values of recent sales for comparison purposes to establish a Base Value. We were able to ascertain current asking prices of similar aircraft currently on the market. We also subscribe to aircraft pricing services that report values based on actual sales comparables. In addition, we had a discussion with a number of owners, previous owners, and brokers concerning recent offerings and transactions. We considered all values in addition to a broad knowledge about the current executive aviation marketplace. AAMI considered numerous reference sources for the Half-Life CFMV starting point We have used a mid-life CFMV of 2,200,000. This is the point from which we make our maintenance adjustments. A. Airframe Time: Adjustments for Airframe Total Time are based on the fleet average of all of the 1999 Hawker 800XP aircraft. According to the Blue Book, the average airframe time for a 1999 Hawker 800XP is 410 hours per year. N516TH has an average of 277 hours per year 68% of the average. Page 7 EFTA00605240  24atartion 1144et Iltanagement Tad B. Airframe Maintenance: The airframe major check is the 48-month airframe check at an average cost of $75,000. C. APU There is an adjustment of $15.50 per hour for hours more or less than half life (5,000 hours). D. Engines: The engines are maintained in accordance with the manufacturer's maintenance program. The condition of the engines is a very important element in determining the value of the aircraft. There is no Adjustment for Time Remaining on the Engine Refurbishment on the engines as the engines are on a Maintenance Service Plan (MSP Gold) and are considered at Half Life E. Current Fair Market Value (Adjusted): Is the Appraiser's opinion of the most likely trading price that may be generated for a property under the market circumstances that are perceived to exist at the time in question. The term assumes that the property is valued for its highest and best use, that the parties to the hypothetical sale transaction 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. It is synonymous with Market Value, and likewise Current Fair Market Value is synonymous with Current Market Value because the criteria typically used in those documents that use the term "Fair" reflect the same criteria set forth in the above definition of Market Value. By itself, the term "Fair" does not bring any additional qualifications to the appraised value, but it is a term sometimes used in leases, sales contracts, tax regulations and legal documents, and is sometimes accompanied with a specific definition to which the contracting parties have agreed. Page 8 EFTA00605241  Athiuda Awe vtaa49emea Tae 1999 Hawker 800XP Serial Number 258418, N516TH Value Summary as of March 22, 2016 Current Half-Life Market Value of a (Base 1999) HAWKER 800XP $2,200,000 Adjustment for Fresh New Paint & Interior, March 2016 (interior assumes complete re-rag, refurbished ceiling and sidewall panels, and new carpet. + 150,000 CURRENT HALF-LIFE VALUE of this 1999 HAWKER 800XP Serial Number 258418, N516TH $2,350,000 Adjustment for 32% fewer hours than average. This is a low-time aircraft + 82,100 Adjustment for Fresh12, 24 and 48-Month inspections as of March 2016 + 85,000 Adjustment for the 21 months more than half life remaining on the 144-Month Landing Gear Restoration at $194,000 per restoration + 28,287 No Adjustment for Time Remaining on the Engine Refurbishment on Engine #1 as the engine is on a MSP Gold maintenance plan and is considered at Half Life +/- 0 No Adjustment for Time Remaining on the Engine Refurbishment on Engine #2 as the engine is on a MSP Gold maintenance plan and is considered at Half Life +/- 0 Adjustment for 1,329 hours more than half life (5,000 hours) remaining on the APU overhaul @ $175,000 per O/H or $15.50 per hour + 20,600 CURRENT FAIR MARKET VALUE of 1999 Hawker 800XP, Serial Number 258418, N516TH $2,5-65.gaZ BASE AVG = Full complement of electronics, dual systems, color radar, dual air data, HF corn, CVR, RVSM, Eng MSP, Maintenance and Inspections Half-Life unless specified, Paint and interior rated 8+, ADs SBs complied with, Avg AFTT, No Damage History, Complete Logbooks since new Page 9 EFTA00605242  Acattecut liatt 2ganagentent Tice Specifications As of December 8, 2015 1999 HAWKER 800 XP S/N 258418 Airframe: 4,702.6 hrs.2,665 Landings Engines: Garrett TFE731-5BR-1H RH: P107377 TT 4,702.6 TC 2,665 LH: P107376 TT 4,702.6 TC 2,665 ON MSP GOLD APU: P-461 GRT GTCP36-150W3,300 TT 3,671.0 Avionics: Honeywell SPZ 8000 1FCS/Primus II Dual RCZ 850 Comms with 8.33 spacing Dual RNZ 850Nays Dual DF 850 ADF Dual DM 850 DME Dual KHF 950 HF Honeywell LSZ-850 Stormscope Honeywell SPZ 8000 Flight Director Dual Honeywell FMZ-2000 w 5.2 software and & dual GPS. Honeywell Primus 880 Dual Honeywell FZ-800 FGC Five tube EFIS Features: Exxon Mobil previous owner TCAS 2000-11 with change 7 Teledyne angle of attack Allied Signal Mark VII EGPWS No damage history Flight Display Airshow On CAMP Interior: New 8 place interior. Forward club and aft 3 place divan. Exterior: New 850 XP paint scheme. Page 10 EFTA00605243  Agitation 444et 2llanagement lac Physical Inspection 1999 Hawker 800XP Serial Number 258418 Registration N516TH The aircraft was inspected at the Ft Lauderdale International airport on March 23, 2016 at Jetscapes. It is currently undergoing installation of a new interior. I did not observe the new seats or other interior pieces, so I can only assume it is getting the typical re-rag on the seats, refurbished sidewalls and ceiling panels and new carpet. They just completed a complete fresh paint job in the 850XP paint scheme. The fuselage is in good condition with no skin patches or dents. The passenger windows and pilot's windows are also in good condition. There are no oil or Skydrol leaks evident, as one would expect following a fresh paint job. No fuel leaks are evident, which can be a problem on these aircraft. They also just completed the 12, 24, and 48-Month airframe maintenance checks and brought all ADs and SBs up to date. The repairs will continue into next week. The aircraft has been operating under FAA FAR Part 91 rules, and a non-commercial maintenance program. In addition, routine maintenance, minor issues are being corrected as they are found. This aircraft was previously operated under the FAR 135 regulations. The records for the aircraft were viewed and no problems were apparent. There were numerous large airframe log books plus engine and APU logs. All Airworthiness Directives and all Service Bulletins have been complied with. The information in these log books stops after March 2014, but the records are being kept in a separate large binder and John Taylor is in the process of cleaning up the record books and putting all of the service items in the binders. There is no history of damage. Both engines are on a pre-paid maintenance service program (MSP) called MSP Gold which covers all routine maintenance. The engines are operated "on condition" which means they fly until there is something needing routine maintenance or repair, then the item is repaired. The airframe is on a computerized aircraft maintenance system (CAMS) which tracks all maintenance items. The Airworthiness Certificate and Registration certificates were inaccessible due to work being accomplished on the interior. Pictures of the aircraft follow: Page 11 EFTA00605244 Aactudw "Imet 7Itamagemagt Vac N516TH March 23, 2016 N516TH at Ft Lauderdale, FL Ceiling Panel Being Installed EFTA00605245 Adaave Aaaet 7/toutagemeat %c N516TH March 23, 2016 Nose Gear Nose EFTA00605246 14-mt/tt Auer Xtxurage..,e,t Twc N516TH March 23, 2016 RH Forward Fuselage RH Wing Fairing EFTA00605247 "1, 'Atintot ,44Jet 71tamaguiceat Ise N516TH March 23, 2016 Right Hand Wing Right Side EFTA00605248 :4‘dat/cot "imet Ilfamagemeat Tat N516TH March 23, 2016 Right Main Gear Rear View EFTA00605249 iliatation /hut Vtanagernact Sac N516TH March 23, 2016 Tail Section fiaytfreon Aircraft Aircraft Data Plate EFTA00605250 Ageism" ,4w Wanagemees Tad N516TH March 23. 2016 Left Wine Interior Removed for Refurbishment EFTA00605251 74otatton Ai.xt Nasagemcgt Tiec N516TH March 23, 2016 Cockpit Overhead Instrument Panel EFTA00605252  Aliaeat Amet Nana9entent TOCC Hawker 800XP INTRODUCTION The Hawker 800 is a derivative of the de Havilland 125. The British Aerospace Board sanctioned the program to improve the, then current and strongly selling, BAe 125 700 series in April 1981. By May 1983 the new aircraft was ready for its first test flight. The 800 series has a number of modifications and changes over the 700; most noticeable was the redesigned cockpit windscreen. Accompanying this are a modified rear fuselage fairing as well as a glass cockpit and uprated (from 3,700 to 4,300 Ib) Garrett TFE731-5R-1H engines. British Aerospace also improved the wing by incorporating new outer wing sections. This helped to reduce drag and improve aerodynamic efficiency. The launch of the Raytheon Hawker 800XP extended performance mid-size business jet was announced in 1995. The aircraft is in service both as a business / VIP jet and also in special mission versions. The XP features uprated engine, enhanced aerodynamics, increased weight and system upgrades. In December 2006, Raytheon announced the sale of Raytheon Aircraft to GS Capital Partners. The new company is called Hawker Beechcraft Inc and the sale was completed in March 2007. Page 20 EFTA00605253  Aveateos Azet 71faaagearat Tae The Hawker 800XP business jet is derived from the design of the UK-built de Havilland / Hawker Siddely and British Aerospace 125, first built in 1962, which evolved into the Series 400 to 800 produced up to the early 1990s. Raytheon purchased the Series 800 program in 1993 and the aircraft took the name Hawker 800. There were 475 total Hawker 800s built between 1995-2006 They are no longer in production. In November 2005, Raytheon introduced the Hawker 850XP, a successor to the Hawker 800XPi. The aircraft has composite, outwardly canted winglets, a range increased by 4% (an additional 185km) and 8% improvement in time to climb. The 850XP has the same Rockwell Collins Pro Line 21 avionics Airshow 21 cabin management system as the 800XPi. The Hawker 850XP received certification in March 2006 and is the current production model, superseding the 800XP. The aircraft is powered by two rear-mounted Honeywell TFE731-5BR-1H turbofan engines each rated at 20.73kN. The engines, fitted with Dee Howard thrust reversers, are mounted in Northrop Grumman pods on either side of the rear fuselage. The engines are fitted with BCF engine fire extinguishers and engine bleed air ice protection. SPECIFICATIONS TYPE: mid-size business jet Two rear-mounted Honeywell TFE731-5BR-1H turbofan engines POWERPLANTS: each rated at 20.73kN. FUEL CAPACITY: 1,273 gal ACCOMODATION: Flight Crew: 2 Passengers: between eight to 15 passengers Baggage Compartment: 29.6 cu ft DIMENSIONS, Wing Span: 15.66m (51ft 3in) EXTERNAL: Length Overall: 15.59m (51ft 1in) Maximum Height: 5.36m (17ft 5in) Fuselage Diameter: 1.93m (6 ft 3 in) Wing Area: 34.75 sq m (374 sq ft) Page 21 EFTA00605254  Adatieue ,4aae€ 7/tcugagemeat Tae DIMENSIONS, Total Cabin Length: 6.50m (21 ft 3 in INTERNAL: Maximum Width: 1.83m (6 ft 0 in) Maximum Height: 1.75m (5 ft 7 in) Cabin Volume: 17.1 cu m (604 cu ft) Baggage Volume: 2.46 cu m WEIGHTS: Empty Operating Weight: 7,303 kg (16,100 Ib) MTOW: 12,701 kg (28,000 Ib) Max Ramp Weight: 12,755 kg (28,120 Ib) Max Zero-Fuel Weight: 8,369 kg (18,450 Ib) Max Landing Weight: 10,591 kg (23,350 Ib) Max Payload: 989 kg (2,180 Ib) PERFORMANCE: Maximum Speed: 845km/h (456 kt) Service Ceiling: 13,100m Take-Off Field Length: 1,640m (5,380 ft) Landing Run From 15m: 1,372m (4,182 ft) Range: 4,222km (2,280 nm) PRODUCTION: Since it's introduction, there have been just over 470 800XPs built. Page 22 EFTA00605255  Afibviist Aadet 7/tanagesient Vac Honeywell TFE-731 INTRODUCTION The TFE731 was based on the core of the TSCP700, which was specifically developed for use as the auxiliary power unit (APU) on the McDonnell Douglas DC-10. The design featured two important factors, low fuel consumption, and low noise profiles which met the newly established U.S. noise abatement regulations. The first test run of the TFE731 occurred in 1970 at Garrett's plant in Torrance, California. The first production model, the TFE731-2 began rolling off the assembly line in August, 1972, and was used on the Learjet 35/36 and Dassault Falcon 10, both of which entered production in 1973. The TFE731-3 was developed for use in the Lockheed JetStar re-engining program, and subsequent versions of it have been used on a number of aircraft, including the Learjet 55. The -5 model was certified in 1982, and a decade later, an engine utilizing the TFE731-5 power section and a TFE731-3 fan was built and designated the TFE731-4, intended to power the Cessna Citation 650 and 750 series aircraft. The latest TFE731-50R, has 70 improvements to this already robust engine, including improved core and LP spool technologies, new Digital Electronic Engine Control (DEEC) and a complete nacelle and thrust reverser system. Page 23 EFTA00605256  Adatecut Aset 7llanagesteet %c These changes resulted in greater versatility, dramatically improved temperature margins, a better lapse rate than the TFE731-5BR and, depending on altitude condition, up to 8% better SFC. The TFE731 family of engines has a legacy of proven reliability. The first TFE731 was certified in 1972. Since that time, more than 13,000 engines have been produced, logging an astounding 100 million plus hours of service on more than 30 different aircraft applications. SPECIFICATIONS TYPE: Two-shaft geared turbofan FUEL CONSUMPTION: 23.65 mg/Ns (0.835 lb/h/lb COMPRESSOR STAGES: 1 stage fan, 4-stage low pressure axial compressor, 1 stage high pressure centrifugal compressor TURBINE STAGES: 1 stage high pressure turbine, 3 stage low pressure turbine COMBUSTION CHAMBER: annular reverse flow combustor DIMENSIONS & WEIGHTS: Max Envelope Diameter: 39.4 in. Max Envelope Length: 51 in. Dry Weight: 885 lb PERFORMANCE RATINGS: T-O Power Rating: 16.46 kN (3,700 Ib) Bypass Ratio: 2.80:1 ENGINE VARIANT TAKEOFF THRUST ALTITUDE THRUST ALTITUDE TSFC* TFE731-2 3500 755 0.790 TFE731-3 3700 817 0.794 TFE731-4 4080 929 0.771 TFE731-5 4304 955 0.777 TFE731-5B 4750 1050 0.735 TFE731-20 3650 870 0.719 TFE731-40 4250 1010 0.739 TFE731-60 5000 1120 0.679 (*) 40,000ft. max. cruise, .08Mm ISA Page 24 EFTA00605257  Adation timet 71tamagemeat Tow ASSUMPTIONS AND STATEMENTS OF LIMITING CONDITIONS ✓ The values stated in this report are based on our knowledge of the Aircraft, Engine and Spare Parts. The values stated in this report are based on our knowledge of the Aircraft, Engine and Spare Parts inventory market, current market conditions, and certain definitions and assumptions regarding the inventory condition and status, which is described in this report. ✓ The values stated in this report are based on the information supplied by the company that is being appraised. It has been assumed that this information along with any of management's statements relative to the topics discussed concerning the inventory, aircraft, or engines are full and complete representations that accurately depict the company, its inventory and the quality and condition of the market for the products produced and/or distributed. No warranty is given for its accuracy. Every reasonable attempt has been made to verify such information. ✓ Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of that party, in any event, only with proper written qualification and only in its entirety. ✓ Neither all nor part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraiser. ✓ No risk or guarantees have been purchased by the owner of this report. ✓ All values stated in this appraisal are the appraisers considered opinions based upon the facts and data set forth in this report. ✓ The appraiser, by reason of this appraisal, is not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been made previously. Page 25 EFTA00605258  Azatticut "islet Ngagarifteite TN& ✓ Aviation Asset Management, Inc. reserves the right to recall all copies of this report to correct any omissions or errors. ✓ No consideration has been given to any liens or encumbrances, which may be held against the assets being appraised. ✓ Aviation Asset Management Inc. expects the Lender or any other party, with regard to the subject-appraised inventory to conduct their own due diligence before determining and entering into any loan arrangements and shall not base any loan or borrowing base solely on the opinions of Aviation Asset Management. ✓ The maximum liability of Aviation Asset Management Inc for the breach of any obligation in connection with this engagement or the Report, and for any and all damages of any type or nature (whether in contract or in tort, and whether compensatory, consequential or punitive in nature) sustained or claimed by the Company(ies) or any other person or entity in connection with this engagement or the Report, shall be limited to the fee actually received by AAMI under the engagement agreement. In no event or circumstance shall AAMI have any liability to the Company(ies) or any other person or entity in excess of the fee actually paid to and received by AAMI under the engagement agreement. ✓ This appraisal is based upon the various types of values as defined in the Definition section of this report. ✓ This study and appraisal was accomplished by Aviation Asset Management, Inc. and will be held confidential. An experienced appraiser has prepared the appraisal and the analysis and conclusions are arrived at from many years of experience in the appraisal industry. ✓ We reserve the right to include your company name in our client list. AAMI will maintain the confidentiality of all reports, documents, and conversations provided to us for the preparation of this report, subject to any legal proceedings. ✓ This appraisal has been prepared in conformity with the Principles of Appraisal Practice and the Code of Ethics of the American Society of Appraisers. Page 26 EFTA00605259  Atatteon Asset Vtanagenfact Tee APPRAISERS CERTIFICATION We certify that to the best of our knowledge and belief: ✓ The statements of fact contained in this report are true and correct. ✓ The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, and unbiased professional, opinions, and conclusions. ✓ I have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved. ✓ I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. ✓ My engagement in this assignment was not contingent upon developing or reporting predetermined results. ✓ My compensation for completing this assignment is not contingent upon the development or reporting of predetermined value or direction of value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. ✓ My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. ✓ The signatories on this report all provided significant assistance in the compilation of this report. ✓ The American Society of Appraisers has a mandatory recertification program for all of its Senior members. All Accredited Senior Appraisers (ASA) signing this report are in compliance with that program. ✓ I / We have not previously appraised the property that is the subject of this assignment, within the three year period immediately preceding acceptance of this appraisal assignment. ✓ The aircraft was inspected by Daniel Rausch for this appraisal. niota Reta4C4 Accredited Senior Appraiser Page 27 EFTA00605260 Business/General Aviation Outlook 2016 Prepared By Aviation Asset Management Inc. EFTA00605261  Aveatest Aa42et 21tanagesient Tat Aviation Outlook The following information is taken from numerous industry sources, including General Aviation Manufacturers Association (GAMA), Honeywell Aerospace Forecasts, Boeing, Embraer, Airbus Industries, Cessna Aircraft Corporation, Federal Aviation Administration, IATA, ATA, and the National Business Aircraft Association (NBAA). Inventories of pre-owned business jets for sale are climbing again, and the number of aircraft for sale in the six- to 10-year age range is at an all-time high. The inventory of business jets for sale inched up a percentage point in January, reaching 11 percent of the installed base of aircraft. Young aircraft for sale, those five years or younger, went up 2 percent in January and 1 percent over 2015. While this is still 63 percent less than peak, the inventory of slightly older aircraft for sale, those between six and 10 years old, jumped 19 percent over 2015 and is now above the 2009 absolute peak. In the six- to 10-year range, the number of large-cabin aircraft for sale has reached 12 percent of the installed base. The General Aviation Manufacturers Association (GAMA) announced that total worldwide general aviation (GA) airplane shipments fell 4.6 percent, from 2,376 units in 2014 to 2,267 units in 2015. Billings for GA airplanes also dropped to $20.9 billion, down 4 percent from $21.8 billion in 2014. Business Jet shipments were relatively flat, up 1.6 percent, from 644 units in 2014 to 654 units in 2015. Piston-engine airplanes fell for the first time since 2010, down 6.5 percent, from 1,129 units in 2014 to 1,056 units in 2015. Turboprop airplane shipments also declined, from 603 units in 2014 to 557 units in 2015, a 7.6 percent drop. 2015 AIRCRAFT SHIPMENTS OF AIRPLANES MANUFACTURED WORLDWIDE Manufactured Worldwide Manufactured in U.S. Only* 2014 2015 Change 2014 2015 Change Pistons 1,129 1,056 -6.5% 788 783 -6.4% Turboprops 603 557 -7.6% 468 420 -18.6% Business Jets 722 718 -0.6% 375 389 +3.7% Total Shipments 2,454 2,331 -5.0% 1,631 1,592 -2.4% Page 29 EFTA00605262  Adalecut Awe 21teutagement lac Bombardier delivered 199 business jets last year and expects shipments to drop by nearly a quarter this year, to about 150 business aircraft. Bombardier's business aircraft deliveries in 2015 comprised 73 Global 5000/6000s, 68 Challenger 300/350s, 25 Challenger 605/650s, one Challenger 850 and 32 Learjet 70/75s. Gross business jet sales also fell to 119 aircraft, from 181 in 2014. After accounting for Learjet 85 cancellations and restructuring certain customer agreements in the third quarter, net sales were -21, compared with 129 in the previous year. Dassault Falcon sales declined by 72 percent in 2015 compared with 2014. In 2015, Dassault reported 45 gross Falcon sales, but a NetJets cancellation of 20 Falcon 2000s brought the net tally to just 25 aircraft. A disappointing 55 new Falcons were delivered in 2015 versus an expected 65, which would have put 2015 on par with 2014. The backlog included 91 Falcons, compared to 121 Falcons one year before. Embraer delivered a total of 221 business jets and airliners in 2015, marking its highest number of aircraft shipments in five years. Deliveries were up by 13 aircraft year- over-year, with both its executive aviation and commercial aviation units making gains. The Brazilian manufacturer handed over 120 business jets in 2015, the most since 2010, when it shipped 144. Deliveries were up by four aircraft over the 116 delivered in 2014. The 2015 shipments included 82 Phenoms and 38 of the larger jets, which include the Legacy 450, 500 and 600 and Lineage 1000. In 2014, Phenoms accounted for 92 of the deliveries and larger jets the remaining 24 deliveries. Business And General Aviation Airplane Shipment Report 2015 versus 2014 Manufacturer Model 2015 2014 Airbus ACJ (A318, A319, A320, A330) 4 5 AT-401B & 402A & B 12 21 AT-502A & B 36 62 AT-504 3 3 Air Tractor AT-602 18 14 AT-802 8 10 AT-802A/F/AF 41 36 Page 30 EFTA00605263  liventbut 74444 71(anagesiat 'Zee Manufacturer Model 2015 2014 7EC Champ 1 1 7ECA Aurora 1 2 7GCAA Adventurer 0 0 American Champion 7GCBC Citabria Explorer 0 3 8GCBC Scout 6 7 8KCAB Super Decathlon 6 14 8KCAB Extreme Decathlon 5 3 BBJ 4 3 BBJ2 1 2