<PAGE>   1

                                                      REGISTRATION NO. 333-66973
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 20-F
[ ]  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: March 31, 2001
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

    FOR THE TRANSITION PERIOD FROM
    ------------------------- TO
    -------------------------

                            Commission file number:
                             ---------------------
                                 AERCO LIMITED
             (Exact Name of Registrant as Specified in Its Charter)
                            JERSEY, CHANNEL ISLANDS
                (Jurisdiction of incorporation or organization)
                                 AERCO LIMITED
                              22 GRENVILLE STREET
                                   ST. HELIER
                                JERSEY, JE4 8PX
                                CHANNEL ISLANDS
                    (Address of principal executive offices)
     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:

               SUBCLASS A-2, B-1 AND C-1 NOTES DUE JULY 15, 2023
          SUBCLASS A-3, A-4, B-2, C-2 AND D-2 NOTES DUE JULY 15, 2025
                             (Title of each class)

The number of outstanding shares in the capital of AerCo Limited as of March 31,
                                     2001:
                          20 SHARES, U.S. $1 PAR VALUE

     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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                                   PAGE
                                                                                   ----
<S>         <C>      <C>                                                           <C>
INTRODUCTION
            Forward-Looking Statements...........................................     1
            Certain Information..................................................     1
PART I      ITEM 1   Identity of Directors, Senior Management and Advisors.......     1
                     A.  Directors and Senior Management.........................     1
                     B.  Advisors................................................     1
                     C.  Auditors................................................     1
            ITEM 2   Offer Statistics and Expected Timetable.....................     1
            ITEM 3   Key Information.............................................     1
                     A.  Selected Consolidated Financial Data....................     1
                     B.  Capitalization and Indebtedness.........................     5
                     C.  Reasons for the Offer and Use of Proceeds...............     5
                     D.  Risk Factors............................................     5
            ITEM 4   Information on the Company..................................    16
                     A.  History and Development of AerCo Limited................    16
                     B.  Business Overview.......................................    18
                     C.  Organizational Structure................................    40
                     D.  Property, Plants and Equipment..........................    41
            ITEM 5   Operating and Financial Review and Prospects................    41
                     A.  Operating Results.......................................    41
                     B.  Liquidity and Capital Resources.........................    48
                     C.  Research and Development, Patents and Licenses..........    50
                     D.  Trend Information.......................................    50
            ITEM 6   Directors, Senior Management and Employees..................    51
                     A.  Directors and Senior Management.........................    51
                     B.  Compensation............................................    60
                     C.  Board Practices.........................................    60
                     D.  Employees...............................................    60
                     E.  Share Ownership.........................................    60
            ITEM 7   Major Shareholders and Related Party Transactions...........    60
                     A.  Major Shareholders......................................    60
                     B.  Related Party Transactions..............................    61
                     C.  Interests of Experts and Counsel........................    61
            ITEM 8   Financial Information.......................................    61
                     A.  Consolidated Statements and Other Financial                 61
                     Information.................................................
                     B.  Significant Changes.....................................    61
            ITEM 9   The Listing.................................................    61
                     A.  Listing Details.........................................    61
                     B.  Plan of Distribution....................................    61
                     C.  Markets.................................................    61
                     D.  Selling Shareholders....................................    61
                     E.  Dilution................................................    61
                     F.  Expenses of the Issue...................................    61
            ITEM 10  Additional Information......................................    61
                     A.  Share Capital...........................................    61
                     B.  Articles of Association.................................    62
                     C.  Material Contracts......................................    65
                     D.  Exchange Controls.......................................    65
                     E.  Taxation................................................    65
                     F.  Dividends and Paying Agents.............................    67
</Table>

                                        i
<PAGE>   3

<Table>
<Caption>
                                                                                   PAGE
                                                                                   ----
<S>         <C>      <C>                                                           <C>
                     G.  Statement by Experts....................................    67
                     H.  Documents on Display....................................    67
                     I.   Subsidiary Information.................................    67
            ITEM 11  Quantitative and Qualitative Disclosures about Market           67
                     Risk........................................................
            ITEM 12  Description of Securities other than Equity Securities......    71
PART II     ITEM 13  Defaults, Dividend Arrearages and Delinquencies.............    71
            ITEM 14  Material Modifications to Rights of Security Holders and
                     Use of Proceeds.............................................    71
            ITEM 15  ............................................................    71
            ITEM 16  ............................................................    71
PART III    ITEM 17  ............................................................    71
            ITEM 18  Financial Statements........................................    71
            ITEM 19  Exhibits....................................................    72
                     Index to Financial Statements...............................   F-1
</Table>

                                        ii
<PAGE>   4

                                  INTRODUCTION

FORWARD-LOOKING STATEMENTS

     This annual report on Form 20-F 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", "Item 5. Operating and
Financial Review and Prospects" and "Item 11. Quantitative and Qualitative
Disclosures About Market Risk.

CERTAIN INFORMATION

     AerCo Limited was incorporated in Jersey as a public limited company under
the laws of Jersey. As used in this annual report on Form 20-F, "we", "us",
"our", the "Company", "AerCo" and "AerCo Group" refer to AerCo Limited and its
subsidiaries, except where it is clear that such terms mean only AerCo, "debis"
means debis AirFinance B.V., "debis group" means debis and its subsidiaries,
"debis Ireland" means debis AirFinance Ireland plc (formerly known as AerFi
Group plc prior to its acquisition by debis in November 2000) and "debis Ireland
group" means debis Ireland and its subsidiaries. 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 "USD" 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.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3.  KEY INFORMATION

A. SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data set forth below have been
extracted from the audited consolidated financial statements of ALPS 94-1, for
each of the fiscal years ended June 30, 1997 and 1998, and the period from July
1, 1998 to July 14, 1998 and of AerCo, for the period from July 15, 1998 to
March 31, 1999 and for each of the fiscal years ended March 31, 2000 and 2001.

     Arthur Andersen, independent chartered accountants, audited the financial
statements of ALPS 94-1 for the year ended June 30, 1997. KPMG, independent
chartered accountants, audited the financial statements of ALPS 94-1 for the
year ended June 30, 1998 and the period from July 1, 1998 to July 14, 1998.
KPMG, independent

                                        1
<PAGE>   5

chartered accountants, audited the financial statements of AerCo for the period
from July 15, 1998 to March 31, 1999 and for the years ended March 31, 2000 and
2001.

     The selected financial data of ALPS 94-1 include the results of operations
and financial condition of the 27 aircraft originally acquired by ALPS 94-1 from
the debis Ireland group in August 1994, including:

     - the Boeing 767-300ER aircraft that was purchased by the debis Ireland
       group from ALPS 94-1 prior to the closing of the initial offering of
       notes by AerCo on July 15, 1998 which was not one of the aircraft
       acquired by AerCo in July 1998; and

     - the A300-B4-200 aircraft up to April 28, 1998 when the debis Ireland
       group acquired this aircraft from ALPS 94-1. The debis Ireland group
       subsequently sold this aircraft to AerCo.

     Comparative financial information for ALPS 94-1 is presented because ALPS
94-1 is considered to be the predecessor business of AerCo. We believe that the
ALPS 94-1 selected financial data set forth below is an appropriate presentation
because:

     - AerCo was formed mainly for the purpose of refinancing the aircraft
       portfolio of ALPS 94-1;

     - our initial portfolio of 35 aircraft included 26 of the 27 aircraft that
       ALPS 94-1 originally acquired from debis Ireland;

     - the original ALPS 94-1 aircraft represented 79% of our initial portfolio
       by appraised value as at March 1, 1998; and

     - our ongoing aircraft leasing activities are largely the same as those
       conducted by ALPS 94-1.

     Such data, however, is not indicative of the financial results of AerCo
Group for the period from July 15, 1998 to March 31, 1999 and for the years
ended March 31, 2000 and 2001.

     The historical financial statements of AerCo Group and ALPS 94-1 have been
prepared in accordance with U.K. GAAP, which differ in certain significant
respects from U.S. GAAP. For a discussion of the principal differences and a
reconciliation from U.K. GAAP to U.S. GAAP of shareholders' deficit and net
income or loss for the year, see the notes to the relevant financial statements
included elsewhere in this annual report, "Item 3. Operating and Financial
Review and Prospects -- Results of Operations -- Year Ended March 31, 2001
Compared with Year Ended March 31, 2000 -- Differences between U.K. GAAP and
U.S. GAAP," and "-- Year Ended March 31, 2000 Compared with Eight and One half
Month Period from July 15, 1998 to March 31, 1999 -- Differences between U.K.
GAAP and U.S. GAAP."

                                        2
<PAGE>   6

                   CONSOLIDATED STATEMENTS OF OPERATIONS DATA

<Table>
<Caption>
                                                            ALPS 94-1                                  AERCO
                                              -------------------------------------    -------------------------------------
                                                                        PERIOD FROM    PERIOD FROM
                                                FISCAL       FISCAL       JULY 1,       JULY 15,       FISCAL       FISCAL
                                              YEAR ENDED   YEAR ENDED     1998 TO        1998 TO     YEAR ENDED   YEAR ENDED
                                               JUNE 30,     JUNE 30,     JULY 14,       MARCH 31,    MARCH 31,    MARCH 31,
                                                 1997         1998         1998           1999          2000         2001
                                              ----------   ----------   -----------    -----------   ----------   ----------
                                                                              (IN THOUSANDS)
<S>                                           <C>          <C>          <C>            <C>           <C>          <C>
U.K. GAAP
Revenues
 Aircraft leasing -- continuing
                  operations................  $ 101,434    $ 100,682     $  3,635       $  82,826    $ 109,146    $ 102,840
              -- acquisitions...............         --           --           --              --           --    $  62,094
Expenses
 Depreciation...............................    (38,062)     (37,826)      (1,519)        (33,821)     (46,998)     (69,063)
   Exceptional item --
   Additional depreciation..................    (34,385)          --           --              --           --           --
 Provision for impairment in aircraft
   value....................................         --       (8,720)          --              --      (13,079)      (3,794)
 Amortization of goodwill...................         --           --           --          (1,669)      (2,356)      (2,912)
 Net interest expense.......................    (71,037)     (69,785)      (2,757)        (54,108)     (78,818)    (137,942)
 Other expenses.............................     (5,053)      (6,599)        (646)         (8,311)     (15,742)     (11,444)
   Exceptional item --
   Termination fee..........................         --      (12,700)          --              --           --           --
                                              ---------    ---------     --------       ---------    ---------    ---------
Loss from operations -- continuing
                     operations.............    (47,103)     (34,948)      (1,287)        (15,083)     (47,847)     (32,639)
                -- acquisitions.............                                                                        (27,582)
Profit/(loss) on sale of aircraft...........         --        2,426           10              10         (941)          --
Reduction in indebtedness...................      5,258           --           --              --           --           --
                                              ---------    ---------     --------       ---------    ---------    ---------
Loss before provision for taxes.............    (41,845)     (32,522)      (1,277)        (15,073)     (48,788)     (60,221)
Taxes.......................................        143          (33)          --             (35)         (51)         (49)
Dividends...................................         --           --           --              --           --           --
                                              ---------    ---------     --------       ---------    ---------    ---------
Net loss....................................  $ (41,702)   $ (32,555)    $ (1,277)      $ (15,108)   $ (48,839)   $ (60,270)
                                              =========    =========     ========       =========    =========    =========
Loss from operations per ordinary share.....   (4,710.3)    (3,494.8)      (128.7)         (754.1)    (2,392.3)    (3,011.0)
Basic and diluted loss per ordinary share...   (4,170.2)    (3,255.5)      (127.7)         (755.4)      (2,442)    (3,013.5)
Weighted average number of ordinary shares
 Outstanding................................         10           10           10              20           20           20
                                              =========    =========     ========       =========    =========    =========
U.S. GAAP EXTRACT
Depreciation................................  $ (32,339)   $ (32,053)    $ (1,276)      $ (28,062)   $ (38,354)   $ (57,460)
Provision for impairment in aircraft
 value......................................  $      --    $    (520)    $     --       $      --    $  (6,100)   $  (5,325)
Reduction in indebtedness...................  $   5,258    $      --     $     --       $      --    $      --    $      --
Net (loss)/income...........................  $  (1,594)   $ (20,808)    $  5,973       $  19,760    $ (31,235)   $ (47,502)
</Table>

                                        3
<PAGE>   7

                        CONSOLIDATED BALANCE SHEET DATA

<Table>
<Caption>
                                                        ALPS 94-1                                   AERCO
                                          -------------------------------------    ---------------------------------------
                                            AS OF        AS OF         AS OF          AS OF         AS OF         AS OF
                                           JUNE 30,     JUNE 30,     JULY 14,       MARCH 31,     MARCH 31,     MARCH 31,
                                             1997         1998         1998           1999          2000          2001
                                          ----------   ----------   -----------    -----------   -----------   -----------
                                                                          (IN THOUSANDS)
<S>                                       <C>          <C>          <C>            <C>           <C>           <C>
U.K. GAAP EXTRACT
Aircraft, net of accumulated
  depreciation and provision for
  impairment in aircraft value..........  $ 854,596    $ 800,090     $ 732,905     $  904,253    $  829,194    $ 1,478,945
Total assets............................  $ 950,031    $ 890,873     $ 881,804     $1,019,328    $  943,457    $ 1,646,883
  Indebtedness..........................  $(919,157)   $(877,128)    $(875,015)    $ (949,217)   $ (901,198)   $(1,578,832)
  Provision for maintenance.............  $ (44,274)   $ (42,336)    $ (41,274)    $  (39,697)   $  (32,216)   $   (59,140)
Total liabilities.......................  $(994,722)   $(968,119)    $(960,327)    $(1,034,436)  $(1,007,404)  $(1,771,100)
Shareholders' deficit...................  $ (44,691)   $ (77,246)    $ (78,523)    $  (15,108)   $  (63,947)   $  (124,217)
U.S. GAAP EXTRACT
Aircraft, net of accumulated
  depreciation and provision for
  impairment in aircraft value..........  $ 734,472    $ 691,713     $ 631,778     $  767,820    $  708,009    $ 1,334,052
Indebtedness............................  $(919,157)   $(877,128)    $(875,015)    $ (953,908)   $ (904,991)   $(1,589,872)
Shareholders' deficit...................  $(184,375)   $(203,210)    $(197,237)    $ (169,238)   $ (200,473)   $  (291,534)
</Table>

              CONSOLIDATED STATEMENTS OF CASH FLOWS AND OTHER DATA

<Table>
<Caption>
                                                        ALPS 94-1                                   AERCO
                                          -------------------------------------    ---------------------------------------
                                                                    PERIOD FROM    PERIOD FROM
                                            FISCAL       FISCAL       JULY 1,       JULY 15,       FISCAL        FISCAL
                                          YEAR ENDED   YEAR ENDED     1998 TO        1998 TO     YEAR ENDED    YEAR ENDED
                                           JUNE 30,     JUNE 30,     JULY 14,       MARCH 31,     MARCH 31,     MARCH 31,
                                             1997         1998         1998           1999          2000          2001
                                          ----------   ----------   -----------    -----------   -----------   -----------
                                                                       (IN THOUSANDS, EXCEPT RATIO DATA)
<S>                                       <C>          <C>          <C>            <C>           <C>           <C>
U.K. GAAP EXTRACT
Cash paid in respect of interest........  $ (59,872)   $ (54,815)    $  (3,872)    $  (39,013)   $  (56,150)   $   (95,624)
Net cash provided/(utilized) by
  operating activities (after payment of
  interest).............................  $  45,119    $  45,721     $  (4,077)    $   27,961    $   35,672         58,263
Net cash provided by investing
  activities............................  $      --    $  10,386     $  65,677     $   14,500    $   14,041          1,444
Net cash provided by/(used in) financing
  activities............................  $ (43,494)   $ (59,108)    $  (3,719)    $  948,544    $  (48,917)       684,881
Net movements in cash...................  $  (2,886)   $     134     $  94,567     $   25,618    $      795         13,248
U.K. GAAP(1)(2)
Ratio of Earnings to Fixed Charges......      0.411        0.534         0.537          0.721         0.381          0.563
U.S. GAAP(1)(2)
Ratio of Earnings to Fixed Charges......      0.976        0.702         3.166          1.366         0.604          0.656
</Table>

     In relation to "Ratio of Earnings to Fixed Charges" under both U.K. GAAP
and U.S. GAAP, you should note the following:

          (1) Earnings include pretax income from continuing operations plus
     fixed charges. Fixed charges are the total of (i) interest, whether
     expensed or capitalized, (ii) amortization of debt expense and discount or
     premium relating to any indebtedness, whether expensed or capitalized and
     (iii) the portion of rental expense that can be demonstrated to be
     representative of the interest factor in the particular case.

          (2) A ratio of less than one indicates that earnings are inadequate to
     cover fixed charges. The amount by which fixed charges exceeded earnings
     for ALPS 94-1 (i) for the years ended June 30, 1997 and 1998 and for the
     period July 1, 1998 to July 14, 1998 under U.K. GAAP was $41.9 million,
     $32.5 million and $1.3 million and (ii) for the years ended June 30, 1997
     and 1998 under U.S. GAAP was $1.7 million and $20.8 million. The amount by
     which fixed charges exceeded earnings for AerCo for the period from July
     15, 1998 to March 31, 1999 and for the years ended March 31, 2000 and 2001
     under U.K. GAAP was $15.1 million, $48.8 million and $60.2 million and for
     the years ended March 31, 2000 and 2001 under U.S. GAAP was $31.2 million
     and $47.4 million.

                                        4
<PAGE>   8

     For a discussion of the differences between AerCo's and ALPS 94-1's results
of operations and financial position under U.S. GAAP compared with U.K. GAAP,
see notes 24, 25 and 26 to the AerCo audited consolidated financial statements
and "Item 3. Operating and Financial Review and Prospects -- Results of
Operations -- Year Ended March 31, 2001 Compared with Year Ended March 31,
2000 -- Differences between U.K. GAAP and U.S. GAAP," and -- Year Ended March
31, 2000 Compared with Eight and One-half Month Period from July 15, 1998 to
March 31, 1999 -- Differences between U.K. GAAP and U.S. GAAP."

B. CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.

D. RISK FACTORS

     The following summarizes certain risks which may materially affect the
ability of AerCo 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 us. 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

     POTENTIAL NEGATIVE CONSEQUENCES FOR THE AVIATION INDUSTRY OF RECENT
TERRORIST ATTACKS IN THE UNITED STATES COULD ADVERSELY AFFECT OUR LESSEES AND
THEREBY ADVERSELY AFFECT OUR CASH FLOW.

     On September 11, 2001, the United States was the subject of attacks by
terrorists who used the hijacked aircraft of certain airlines. The full effect
that these terrorist attacks may have for the aviation industry is not yet
known. However, the effects of these tragic events can be expected to include,
among other things, a reduction in demand for air travel due to fears regarding
additional acts of terrorism, an increase in the price of fuel, increased costs
and reduced operations by airlines due to new security directives adopted by the
relevant aviation authorities, and new insurance requirements. In particular,
airlines worldwide are currently experiencing significant difficulties in
maintaining war insurance cover in the amounts required under their leases with
us and other lessors. In the absence of satisfactory solutions on this matter,
it may be necessary for the relevant aircraft to be grounded.

     Such consequences, depending on their scope and duration, which we cannot
predict at this time, are likely to have a material adverse impact on the
financial condition of our lessees and their ability to perform under their
leases. They may also lead to reduced demand for our aircraft, which may impact
our ability to re-lease aircraft on a timely basis and at favorable rates, and
may reduce the value of our aircraft. These effects could cause a reduction in
our cash flow which would adversely affect our ability to make payments on the
notes and to refinance the notes as planned.

     On September 20, 2001, Fitch announced that it was putting all structured
aircraft bonds, including the AerCo notes, on ratings watch negative following
the recent terrorist attacks.

RISKS RELATING TO AERCO AND THIRD PARTIES

     THERE IS NO SECURITY INTEREST IN THE AIRCRAFT. NOTEHOLDERS CANNOT SELL THE
AIRCRAFT TO REPAY THE NOTES IF WE DO NOT MEET OUR OBLIGATIONS UNDER THE NOTES.

     Neither the trustee, the security trustee, Bankers Trust Company, nor any
noteholder has any security interest, mortgage, charge or other similar interest
in any aircraft. If there is an event of default, they will not be able to sell
the aircraft to repay the notes or exercise similar remedies on behalf of the
noteholders which they

                                        5
<PAGE>   9

would have if they had a security interest in the aircraft. AerCo Group has,
however, pledged to the security trustee, Bankers Trust Company, as security for
AerCo's various obligations (including under the notes), 100% of AerCo's equity
in its subsidiaries, the interests of all AerCo Group members in the leases, any
intercompany loans from AerCo to its subsidiaries, any cash contained in the
accounts and investments made with the cash balances.

     OUR SUBSIDIARIES MAY HAVE CONTINGENT LIABILITIES THAT ARE UNKNOWN TO US. IF
WE HAVE TO PAY LIABILITIES OF THIS KIND, WE MAY BE UNABLE TO MAKE PAYMENTS ON
THE NOTES.

     There is a risk that our subsidiaries could have material contingent
liabilities that are unknown to us. For example, our subsidiaries could have
incurred liabilities to third parties from operating and leasing the aircraft
before we acquired them. debis Ireland agreed to indemnify us for breaches of
its representations and warranties relating to the debis transferred companies
and aircraft which it sold to us in 1998. These representations and warranties
survived until July 15, 2001 and we made no claims under them. In addition,
debis Ireland has agreed to indemnify us for breaches of its representations and
warranties relating to the new debis transferred companies and 30 additional
aircraft which were sold to us in connection with the offering of the notes on
July 17, 2000. These representations and warranties will survive for three years
from the date of transfer to AerCo of the relevant company. Our potential
recovery under these representations and warranties is limited to approximately
$175.0 million. If any contingent liability becomes known and we are called on
to pay it, we may be unable to recover the amount of the liability from the
debis Ireland group or any other person. If we have to pay any such liability,
we may be unable to make the required payments on the notes.

     WE RELY ON SWAP COUNTERPARTIES TO MANAGE INTEREST RATE RISK. IF WE ARE
UNABLE TO ENTER INTO APPROPRIATE SWAP ARRANGEMENTS WITH ELIGIBLE COUNTERPARTIES
OR IF SUCH COUNTERPARTIES DEFAULT ON THEIR OBLIGATIONS, WE MAY BE UNABLE TO MAKE
PAYMENTS ON THE NOTES.

     AerCo manages any interest rate risk arising from any mismatch in fixed and
floating rate lease rental payments and fixed and floating rate interest
obligations through swaps and other derivative instruments. This strategy relies
upon our ability to enter into interest rate swaps with eligible counterparties
and each swap counterparty fulfilling its obligations under the related interest
rate swap. If a counterparty were to default in its obligations, or we are
unable to enter into interest rate swaps with eligible counterparties, then a
mismatch in the fixed and floating rate interest obligations and fixed and
floating rate lease payments may arise, which could harm our ability to make
payments on the notes.

     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 we may not be able to repay the notes. 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. You
should refer to "Item 6. Directors, Senior Management and Employees -- Directors
and Senior Management -- The Servicer" and "-- Corporate Management" for
detailed information on the responsibilities delegated to service providers.

     THE DEBIS GROUP, AS SERVICER, ADMINISTRATIVE AGENT AND CASH MANAGER, MAY
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.

     The debis group owns other aircraft and may face conflicts of interest in
managing and marketing our aircraft for re-lease or sale. In addition, the debis
group provides administrative agency and cash management services to others,
including other aircraft securitization vehicles.

                                        6
<PAGE>   10

     If the debis group cannot resolve a conflict of interest, the conflict
could have an adverse effect on our ability to manage, re-lease or sell the
aircraft. In that case, we may be unable to make the required payments on the
notes.

     OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST.

     From time to time the directors of AerCo 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 -- Directors" for a discussion of the directors of AerCo and their
other relationships.

     AERCO AND DEBIS IRELAND HAVE THE SAME LEGAL ADVISORS. IF NECESSARY, AERCO
MAY NEED TO RETAIN SEPARATE COUNSEL.

     AerCo and debis Ireland are represented by the same Jersey, Irish and
United States legal counsel, and it is anticipated that such multiple
representation will continue in the future. Because AerCo and debis Ireland do
not have independent legal representation, the terms of the agreements and other
arrangements negotiated between AerCo and debis Ireland could disproportionately
benefit one party over the other. Should a significant dispute arise in the
future between AerCo and debis Ireland or any of their respective affiliates,
AerCo anticipates that it will retain separate counsel to represent it in such
matter.

AIRCRAFT RISKS

     THE COMMERCIAL AIRCRAFT MARKET IS CYCLICAL. DECREASED DEMAND OR EXCESS
SUPPLY OF AIRCRAFT MAY DECREASE OUR CASH FLOWS.

     The market for commercial jet aircraft is very cyclical and can produce
sharp increases and decreases in aircraft values and lease rates. The aircraft
leasing market was experiencing a reduction in demand prior to September 11,
2001, particularly for older widebody aircraft. It is expected that this
reduction in demand will be exacerbated as a result of the terrorist attacks in
the United States on September 11, 2001. Decreases in aircraft values or lease
rates may cause a decrease in our cash flows. 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
can be expected to be adversely impacted by the terrorist attacks of September
11, 2001) 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;

     - 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;

                                        7
<PAGE>   11

     - 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 G.I.E.
is also a threat to aircraft values. Boeing and Airbus have increased production
to an amount substantially above the long-term requirement implied by industry
forecasts. If production is maintained at this level the increased supply of new
aircraft may depress used aircraft values and lease rates. This development
could cause a decrease in our cash flow and adversely affect our ability to make
payments on the notes.

     THE APPRAISED VALUE OF THE AIRCRAFT MAY BE SIGNIFICANTLY HIGHER THAN THE
ACTUAL VALUE WE WOULD RECEIVE UPON A SALE OF THE AIRCRAFT. IN THAT CASE, OUR
ABILITY TO MAKE SCHEDULED PAYMENTS ON THE NOTES MAY SUFFER.

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

     Appraised values are based on the assumption that there is an "open,
unrestricted and stable market environment with a reasonable balance of supply
and demand." However, the aircraft market is not always stable and there may be
supply and demand imbalances at any given time, especially for specific aircraft
types. At the high point in the aircraft market cycle, the current market value
of some aircraft may be close to their appraised value while the current market
value of others, particularly older or widebody aircraft, may be significantly
less than their appraised values. At the low point in the aircraft market cycle,
the current market value of most aircraft types is likely to be less than
appraised values. Furthermore, as a result of the terrorist attacks of September
11, 2001, it is expected that airlines may reduce or scale back planned growth
of their fleets. This would reduce the value of our aircraft. As a result you
should not rely on aircraft appraised values as an indication of the market
value for the aircraft.

     IF THE APPRAISED VALUES OF OUR AIRCRAFT DECLINE AT A FASTER RATE THAN WE
HAVE ASSUMED, WE MAY BE REQUIRED TO SUSPEND PAYMENTS ON CLASS B AND CLASS C
NOTES.

     Due to various market factors, aircraft appraisers have recently reduced
appraised values for aircraft, especially older widebody aircraft. Under the
indenture, we must accelerate the scheduled principal payments on the class A
notes if the aircraft appraised values decline at a greater rate than we
assumed. In that case, payments on the class B and class C notes may be
suspended because of the increased principal amount that we must pay on the
class A notes. As a result of the terrorist attacks of September 11, 2001, it is
possible that aircraft appraisers may reduce aircraft appraised values at a
greater rate than previously assumed.

     NEW, 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, WE MAY BE UNABLE TO MAKE PAYMENTS ON THE NOTES.

     The availability of newer, 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. This risk is particularly
significant for us given our need to repay principal and interest on the notes
over a relatively long period. This will require us to lease or sell many of the
aircraft close to the end of their useful economic life. We expect that our
ability to manage these technological risks through modifications to aircraft
and sale of aircraft will be limited.

                                        8
<PAGE>   12

     THE CONCENTRATION OF AIRCRAFT TYPES IN OUR PORTFOLIO COULD MAGNIFY THE
IMPACT OF DECLINES IN LEASE RATES OR AIRCRAFT VALUES AND ADVERSELY AFFECT OUR
CASH FLOW

     As of May 31, 2001, the MD-82, MD-83 and B767-300ER models of aircraft
comprised more than 17% of our portfolio by appraised value as of February 19,
2001. This concentration on particular models or types of aircraft could magnify
the adverse impact to our cash flow if there is a decline in lease rates or
aircraft values for these models or types of aircraft, or if significant costs
are required to be incurred with respect to these aircraft. The negative impact
can be especially severe (a) where there is a sharp decrease of lease rates or
aircraft values or (b) if specific governmental or technical regulations are
imposed on particular aircraft types, as we have seen with (x) the
discontinuation of production of MD-82s and MD-83s and the reduction in demand
for B767s including, in particular, B767s powered by Pratt and Whitney engines
and (y) the Airworthiness Directives with respect to the MD-80s and B737s, all
as described more fully below in "Item 4. Information on the Company -- Business
Overview -- The Leases". These events have caused, and could continue to cause,
our overall lease rates or the aircraft values to significantly decrease and may
cause us to incur significant costs which would reduce our cash flow.

ADDITIONAL AIRCRAFT RISKS

     IF WE ACQUIRE ADDITIONAL AIRCRAFT IN THE FUTURE THIS MAY INCREASE THE RISKS
WE ALREADY FACE OR EXPOSE US TO NEW RISKS.

     We expect to acquire additional aircraft and related additional leases in
the future. The cash flows derived from additional aircraft are expected to be,
together with the cash flows derived from the existing aircraft and existing
leases as well as any future leases, the principal source of payment of
interest, principal, and premium, if any, on the notes and related additional
notes. Depending on the extent to which we are able to acquire additional
aircraft, the cash flows derived from additional aircraft may become a more
important source of payment than the cash flows derived from the existing
aircraft.

     It is expected, however, that most, if not all, of the risks described
above will be relevant, and may be relevant to a significantly greater extent,
to any additional aircraft we may acquire in the future. Under the indenture,
the issuance of additional notes to finance the acquisition of other additional
aircraft is subject to conditions that are designed to protect our ability to
meet our obligations under the notes. Despite these protections, there can be no
assurance that the acquisition in the future of additional aircraft and
additional leases will not intensify some or all of the risks identified herein
or expose AerCo Group to other risks not so identified and that such intensified
or additional risks will not adversely affect our ability to make payments on
the notes.

     IF WE SELL AIRCRAFT-RELATED TAX BENEFITS, WE MAY BE UNABLE TO RECOVER LEGAL
OWNERSHIP OF THE AIRCRAFT. IN THAT CASE, WE MAY BE UNABLE TO RE-LEASE OR SELL
THE AIRCRAFT.

     In addition to selling aircraft outright, we may make more limited
transfers of aircraft ownership to investors who wish to acquire depreciation or
other tax benefits available to aircraft owners. If we enter into tax-related
dispositions, we will be exposed to the credit risk of the investor. This
includes the risk that we will not be able to recover legal title to the
aircraft or other aspects of ownership transferred to the investor if the
investor becomes insolvent. This would harm our ability to re-lease or sell the
aircraft. Because the terms of tax-related dispositions are not standardized, we
cannot identify with certainty the nature and the level of the risks we would
face if we entered into these transactions.

     RESTRICTIONS IN THE INDENTURE AND OUR GOVERNING CORPORATE DOCUMENTS MAY
IMPAIR OUR ABILITY TO COMPETE EFFECTIVELY IN THE AIRCRAFT LEASING MARKET.

     The indenture and our 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.

                                        9
<PAGE>   13

     THE PURCHASE OPTION PRICES THAT WE HAVE GRANTED TO OUR LESSEES MAY BE LESS
THAN THE PROPORTION OF THE UNPAID PRINCIPAL OF THE NOTES ALLOCABLE TO THE
RELEVANT AIRCRAFT AND, THEREFORE, WE MAY BE UNABLE TO MAKE REQUIRED PAYMENTS ON
THE NOTES.

     As of May 31, 2001, two lessees have options to purchase a total of two
aircraft, representing 4.48% of the portfolio by appraised value as of February
19, 2001. There is a risk that the purchase prices may be less than the pro rata
portion of the unpaid principal of the notes allocable to the aircraft being
purchased. If those options are exercised, there could be a reduction in the
amount, or a delay in the timing, of required payments on the notes.

     IF LESSEES DO NOT DISCHARGE LIENS THAT ATTACH TO THE AIRCRAFT, WE MAY BE
UNABLE TO REPOSSESS, RE-LEASE OR SELL 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
which secure the payment of airport taxes, customs duties, air navigation
charges, landing charges, crew wages, repairer's charges or salvage attach to
the aircraft in the normal course of operation. The amounts which 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.

     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 which are or will be operated must be registered with
an appropriate aviation authority. If an aircraft is operated without a valid
registration, 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.

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

LEASE RISKS

     WE MAY NOT HAVE ENOUGH CASH FLOW TO MAKE PAYMENTS ON THE NOTES 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. If we cannot re-lease the aircraft we
may not have enough cash flow 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
terrorist attacks of September 11, 2001, are expected to result in reduced
demand for aircraft generally, including aircraft on operating lease. Our
ability to re-lease aircraft and obtain acceptable lease payments and terms may
also 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 the indenture.

                                        10
<PAGE>   14

     The leases for five of the aircraft, representing approximately 7% of the
portfolio by appraised value at February 19, 2001, are scheduled to expire
before December 31, 2001. The leases for 37 of the aircraft, representing 65% of
the portfolio by appraised value at February 19, 2001 are scheduled to expire
before December 31, 2004. Re-leasing may also affect the rental rates we are
able to obtain and may adversely affect our ability to make payments on the
notes, especially when there is less demand for aircraft on operating lease.

     WE MAY INCUR SUBSTANTIAL COSTS IF LESSEES DO NOT PERFORM REQUIRED
MAINTENANCE. THIS WOULD REDUCE THE AMOUNTS AVAILABLE TO MAKE PAYMENTS ON THE
NOTES.

     The standards of maintenance observed by our lessees and the condition of
the aircraft at the time of sale or lease may offset future values and rental
rates from our aircraft. Under the leases, the lessee has the main
responsibility to maintain the aircraft and to comply with all applicable
governmental requirements. Some lessees may experience periodic difficulties in
meeting their maintenance obligations resulting from adverse environmental
conditions or financial and labor difficulties. If a lessee fails to perform
required or recommended maintenance on an aircraft or comply with any
airworthiness directives during the term of such lease, the aircraft may be
grounded and we may incur substantial costs to restore the aircraft to an
acceptable maintenance condition before sale or re-lease. If our lessees do not
perform their obligation to maintain the aircraft, we may have to fund
maintenance work on the aircraft. Because our maintenance costs are expenses
that rank senior to payments on the notes, we may be unable to make payments on
the notes if our maintenance costs were to become sufficiently large. In some
cases, we may have an obligation to reimburse the lessee or pay some or all of
the cost of aircraft maintenance. Our cash resources may not be sufficient both
to fund maintenance requirements and make payments on the notes, especially as
the aircraft age.

     WE MAY BE UNABLE TO MAKE PAYMENTS ON THE NOTES IF AIRCRAFT INSURANCE IS NOT
ADEQUATE TO COVER ANY LOSSES OR LIABILITIES WE INCUR.

     Our lessees have an obligation 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 the 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.

     POTENTIAL INSURANCE ISSUES ARISING FROM THE RECENT TERRORIST ATTACKS IN THE
UNITED STATES COULD ADVERSELY AFFECT OUR LESSEES AND THEREBY ADVERSELY AFFECT
OUR CASH FLOW.

     As a consequence of the terrorist attacks in the United States on 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. In the absence of satisfactory solutions on this
matter, 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 cash flow 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 PAYMENTS ON THE NOTES.

     If we 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 cash flows may
be insufficient to make payments on the notes.

                                        11
<PAGE>   15

     IF WITHHOLDING TAXES ARE IMPOSED ON LEASE RENTALS, THESE TAXES WOULD REDUCE
OUR CASH FLOW AVAILABLE FOR 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, these amounts will be
unavailable for note payments.

RISK OF LESSEE DEFAULT

     LESSEES IN WEAK FINANCIAL CONDITION COULD FAIL TO MAKE LEASE PAYMENTS. THIS
WOULD REDUCE THE CASH FLOW 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, we will be unable 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 or
Latin America that from time to time experience severe economic crises. You
should refer to "Item 4. Information on the Company -- Business Overview -- The
Lessees -- 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 condition.

     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. The environment for commercial aircraft operators in
most geographic regions has been generally favorable in the past few years.
Therefore, the current level of defaults and lessee arrears should not be seen
as representative of future defaults and arrears as economic conditions may
deteriorate, including as a result of the terrorist attacks in the United States
on September 11, 2001. We can give no assurance that defaults and amounts in
arrears will not increase as the market for aircraft on operating lease
experiences cyclical downturns. You should refer to "Item 4. Information on the
Company -- Business Overview -- The Lessees -- Payment History" for a detailed
discussion of the lessees that are having financial difficulties or are in
arrears on their lease obligations.

     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 right to terminate the lease and repossess the aircraft if
there is an event of default under a lease. However, we may be unable to
terminate the lease or 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, we may be unable to make
payments on the notes.

     Our ability to terminate the lease and repossess the aircraft may be
limited by the following factors:

     - a lessee contesting AerCo Group's 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.

                                        12
<PAGE>   16

     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;

     - costs of obtaining a certificate of airworthiness for the aircraft; and

     - swap breakage costs incurred under our agreements with swap providers.

RISKS RELATING TO PAYMENTS ON THE NOTES

     IF OUR ASSUMPTIONS ABOUT CASH FLOW AND OPERATING COSTS DO NOT MATCH ACTUAL
EXPERIENCE, WE MAY BE UNABLE TO MAKE NOTE PAYMENTS ON TIME OR AT ALL.

     We have determined the expected final payment dates for the notes based on
assumptions made at the time of their issue about our future cash flows and
interest and operating costs and possible future economic conditions. The
purpose of these assumptions is to illustrate the payment provisions of the
notes. Many of these assumptions relate to future political, economic and market
conditions that are outside our control and are difficult or impossible to
predict. Market interest rates are an example of such an assumption. Other
assumptions relate to future events that depend on the actions of lessees or
others with whom we deal. Insurance recoveries and maintenance payments are
examples of such assumptions. For this reason, it is unlikely that our
experience in the future will be consistent with the assumptions we have made
relating to cash flow and operating costs. As a result, we may be unable to make
payments on the notes at the times and in the amounts that our assumptions
indicate. Further, our assumptions clearly did not anticipate events such as the
terrorist attacks of September 11, 2001, which are likely to impact cash flow
adversely in a manner not illustrated by the assumptions.

     NOTEHOLDERS' RIGHT TO RECEIVE PAYMENTS ON THE NOTES RANKS JUNIOR TO OUR
EXPENSES, CERTAIN OTHER PAYMENTS WE MAY MAKE AND ANY MORE SENIOR SUBCLASSES OF
NOTES.

     Our expenses 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, noteholders' right to receive payments of interest, principal
and any premium on your notes ranks junior to payments on more senior subclasses
of notes. If an event of default occurs, then the holders of a class of notes
may not exercise remedies under the indenture 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.

     THERE IS NO PUBLIC MARKET FOR THE NOTES. AS A RESULT NOTEHOLDERS MAY BE
UNABLE TO SELL THEIR NOTES OR THE PRICE OF THE NOTES MAY SUFFER.

     The notes have a limited trading market which may harm noteholders' ability
to sell the notes or the price at which they are sold. 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.

                                        13
<PAGE>   17

     WE MAY BE UNABLE TO REFINANCE THE SUBCLASS A-3, SUBCLASS B-2 AND SUBCLASS
C-2 NOTES IN THE CAPITAL MARKETS. THIS MAY DELAY THE REPAYMENT OF PRINCIPAL AND
LOWER THE MARKET PRICE OF OUR OTHER SUBCLASSES OF NOTES.

     The subclass A-3, subclass B-2 and subclass C-2 notes may reach their
expected final payment date before we have received sufficient cash flows to
repay them. In that case, we plan to refinance the subclass A-3, subclass B-2
and subclass C-2 notes by issuing refinancing notes. The refinancing notes will
rank equally with the other class A, class B or class C notes, as the case may
be, but the interest rate, principal payment provisions and other terms will be
different. Our ability to refinance the subclass A-3, subclass B-2 and subclass
C-2 notes will depend on many factors outside our control. These factors include
general conditions in the capital markets and the markets' perception of the
commercial aviation industry, the aircraft leasing business generally or our own
company, all of which may be adversely affected by the terrorist attacks of
September 11, 2001. If we cannot refinance the subclass A-3, subclass B-2 and
subclass C-2 notes on acceptable terms, we may not be able to repay the subclass
A-3, subclass B-2 and subclass C-2 notes by their expected final payment date.
This may also further delay repayment of principal on the class B and class C
notes and may result in lower market prices for the notes.

     In the future, we may issue additional notes and refinancing notes that may
also require refinancing like the subclass A-3, subclass B-2 and subclass C-2
notes. These notes would present the same refinancing risk that we describe
above.

BANKRUPTCY RISKS

     IF DEBIS OR ANY OF ITS SUBSIDIARIES BECOMES BANKRUPT OR INSOLVENT, THE
AIRCRAFT AND OUR OTHER ASSETS MAY NOT BE AVAILABLE TO REPAY THE NOTES AND OUR
OTHER OBLIGATIONS.

     We have taken steps in the previous and present transaction to structure
our company, and the acquisition of our aircraft owning companies from AerFi
Group prior to its acquisition by debis group to ensure that our assets are not
consolidated with the debis group's assets and do not become available to the
debis group's creditors in any bankruptcy or insolvency proceeding involving the
debis group.

     If debis or any of its subsidiaries becomes bankrupt or insolvent, there is
a legal risk that a court or other authority could decide that these steps were
not effective to insulate our assets from the debis group's assets or that the
debis group's transfer of aircraft to us was improper. As a result, the aircraft
and our other assets could become available to repay both debis's creditors and
our creditors, including you. We could also lose all of our rights in the
aircraft and our other assets. In either case, it may be impossible to repay
amounts outstanding under the notes.

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 NOTEHOLDERS.

     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 E.U. 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 noteholders 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 members of AerCo Group and the lessees are organized, reside or
operate. You should refer to "Item 10. Additional Information -- Taxation -- Tax
Considerations" for a more detailed discussion of the possible tax consequences
of owning the notes.
                                        14
<PAGE>   18

     OUR OPERATIONS MAY BECOME SUBJECT TO INCOME TAXES, WHICH WOULD REDUCE THE
CASH FLOW 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 members of AerCo Group to tax
liabilities outside Ireland. If our income is subject to taxation, the cash
flows available to make payments on the notes may be reduced.

     IF WE LOSE OUR IRISH TAX BENEFITS, THE RATING AGENCIES MAY DOWNGRADE THE
NOTES AND WE MAY BE UNABLE TO MAKE REQUIRED NOTE PAYMENTS.

     Our Irish-resident aircraft owning companies, including those we acquired
from the debis Ireland group, are entitled to certain corporate tax benefits for
Shannon, Ireland certified companies, including a preferential corporate
taxation rate of 10% through December 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.

     If, whether because of its acquisition by debis or otherwise, debis Ireland
were liquidated or were to cease to hold its 5% shareholding in AerCo, or if the
debis Ireland group were to reduce or relocate its operations for any reason
such that it failed to maintain, among other things, certain employment levels
at Shannon, Ireland, or if a member of the debis Ireland group were to resign or
be removed as servicer, administrative agent or cash manager of AerCo Group,
then our aircraft owning companies may become subject to Irish corporate
taxation at the general Irish statutory rate. That rate is currently 20%. Irish
tax law provides for a reduction of this rate to 16% for 2002 and 12.50% for
2003 and subsequent years. debis Ireland has agreed to use its best efforts to
maintain the Shannon corporate tax benefits for the benefit of AerCo Group.

     Upon the scheduled termination of the Irish preferential 10% tax rate on
December 31, 2005, AerCo and the other Irish tax-resident members of AerCo Group
will become subject to Irish corporate tax on their 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 to be
taxed at 25%. There can be no assurance that these tax rates will not be changed
in the future.

     You should refer to "Item 10. Additional Information -- Taxation -- Tax
Considerations -- Irish Tax Considerations -- Irish Income and Withholding Taxes
on Payments on the Notes" for additional discussions of the Irish tax benefits.

     THE ACTIVITIES OF OUR SERVICE PROVIDERS OR LOSS OF TREATY BENEFITS COULD
EXPOSE US TO U.S. FEDERAL INCOME TAXATION, WHICH COULD HARM OUR ABILITY TO MAKE
PAYMENTS ON THE NOTES.

     AerCo and its non-U.S. aircraft owning subsidiaries do not expect to have
any material U.S. federal income tax liability. However, this conclusion will
depend, in part, on:

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

     - in the case of AerCo and its Irish-resident subsidiary companies,
       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 AerCo and its
non-U.S. aircraft owning subsidiaries to U.S. federal income tax on part or all
of their income, which would reduce the cash flow available to make payments on
the notes.

     Following the acquisition of debis Ireland by debis, AerCo and its
Irish-resident aircraft owning subsidiaries may no longer qualify for the
benefits of the United States-Ireland income tax treaty, and as a result may be
subject to United States federal income tax on part or all of their income,
which would reduce the cash flow available to make payments on the notes.

                                        15
<PAGE>   19

ITEM 4.  INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF AERCO LIMITED

  AerCo

     AerCo Limited is a special purpose limited liability company formed on June
4, 1998 under the laws of Jersey to purchase and own a portfolio of aircraft. It
is resident in Ireland for tax purposes and is entitled to certain corporate tax
benefits available to Shannon, Ireland certified companies.

     AerCo has an authorized share capital of 10,000 ordinary shares, $1 par
value per share, 20 of which are issued and outstanding. Nineteen shares are
held by Juris Limited and Lively Limited, each a Jersey limited liability
company (together, the "NOMINEES"), for the benefit of AerCo Holding Trust, a
charitable trust established under the laws of Jersey (the "CHARITABLE TRUST").
One share is held by debis Ireland.

     AerCo's registered and principal office is located at 22 Grenville Street,
St. Helier, Jersey, JE4 8PX, Channel Islands and its telephone number is
+44-1534-609000.

  The Initial Acquisition

     On July 15, 1998, we made an offering of subclass A-1, subclass A-2,
subclass B-1 and subclass C-1 notes in the aggregate principal amount of $800
million. We used these proceeds, together with the proceeds of an offering of
subclass D-1 and subclass E-1 notes (the subclass D-1 and subclass E-1 notes,
together with the subclass A-1, subclass A-2, subclass B-1 and subclass C-1
notes, the "OLD NOTES") to debis Ireland to purchase, in addition to the
purchases described below, all of the outstanding capital stock of ALPS 94-1,
another securitization vehicle, from the trustees of a charitable trust (the
"ALPS 94-1 TRUST") for a nominal amount. This purchase price reflected the very
limited economic entitlements of these trustees as shareholders of ALPS 94-1. On
July 15, 1998, ALPS 94-1 was the owner of 25 commercial jet aircraft.

     On July 15, 1998, we also purchased all of the capital stock of three
wholly-owned newly incorporated subsidiaries of debis Ireland, AerCo Ireland
Limited, AerCo Ireland II Limited and AerCo USA Inc. (together the "DEBIS
TRANSFERRED COMPANIES") for a net purchase price equal to $0.3 million. On July
15, 1998, the debis transferred companies were the owners of ten commercial jet
aircraft.

     On July 15, 1998, we loaned ALPS 94-1 a portion of the net cash proceeds
from the issuance of the old notes for the purpose of immediately redeeming or
repaying ALPS 94-1's existing financial indebtedness and paying fees and other
expenses payable by ALPS 94-1 in connection with the refinancing of ALPS 94-1
and the offering.

     On July 15, 1998, we loaned each debis transferred company a portion of the
net proceeds from the issuance of the old notes to immediately repay its
indebtedness to debis Ireland. All letters of credit, guarantees or similar
arrangements securing obligations of any lessee of the transferred aircraft were
transferred to, renewed, amended or reissued in the name of, a debis transferred
company.

     ALPS 94-1 and GECAS, the former servicer to ALPS 94-1 and currently
servicer to debis Ireland in respect of certain of its assets, also reached an
agreement to terminate the existing ALPS 94-1 servicing agreement on July 15,
1998 in exchange for a termination fee. ALPS 94-1 agreed, upon termination of
the ALPS 94-1 servicing agreement to waive all claims it might have against
GECAS, its affiliates and their representatives. ALPS 94-1 also agreed to
indemnify GECAS, its affiliates and their representatives for any losses they
might have incurred in connection with the termination of the ALPS 94-1
servicing agreement, the offering and the issuance of the old notes and the
refinancing of ALPS 94-1. The trustees of the ALPS 94-1 Trust made no
representations, warranties or indemnities in selling their shares to AerCo.
debis Ireland made customary representations and warranties in the share
purchase agreement for the acquisition of the debis transferred companies and
aircraft, including representations relating to solvency, undisclosed contingent
liabilities and insurance. debis Ireland agreed to indemnify AerCo Group for
breaches of its representations and warranties relating to the debis transferred
companies and the transferred aircraft. These representations and warranties
survived until July 15, 2001. AerCo did not make any claims for breaches of
these representations and warranties. AerCo Group's potential recovery under
them was limited to approximately $185 million.
                                        16
<PAGE>   20

  The Refinancing and Additional Aircraft Acquisition

     On July 17, 2000, we made an additional offering of subclass A-3, subclass
A-4, subclass B-2 and subclass C-2 notes in the aggregate principal amount of
$960 million (the "NEW NOTES"). We used these proceeds, together with the
proceeds of an offering of subclass D-2 and subclass E-2 notes to debis Ireland,
to finance our acquisition of 30 additional aircraft (the "ADDITIONAL AIRCRAFT")
through the acquisition of all the outstanding capital stock of 18 aircraft
owning subsidiaries of debis Ireland (the "NEW DEBIS TRANSFERRED COMPANIES") and
to refinance our then existing subclass A-1 and subclass D-1 notes. The 30
additional aircraft had an appraised value of $724.1 million at April 30, 2000
and were on lease to 20 lessees in 13 countries as of July 17, 2000. Only six of
the 30 additional aircraft were delivered to AerCo as of the closing date
because the debis Ireland group needed additional time in order to obtain lessee
consents, necessary governmental authorizations, revised insurance certificates
and meet other requirements in order to transfer such aircraft. We deposited the
proceeds of this offering allocable to the 24 remaining aircraft into the
aircraft purchase account and we used these funds to purchase the remaining
aircraft as they became ready for delivery. A further eight of the additional
aircraft were purchased by AerCo on August 3, 2000, six on October 5, 2000, four
on November 2, 2000, one on November 15, 2000, one on December 8, 2000, two on
December 20, 2000 and two on January 31, 2001. See "Item 6. Directors, Senior
Management and Employees -- Directors and Senior Management" for a more detailed
description of debis and our servicing arrangements.

     Although we did not acquire all of the additional aircraft on the closing
date, we structured the purchase agreement to provide for net payments from
debis Ireland to AerCo designed to put AerCo in substantially the position it
would have been in if all 30 additional aircraft had been delivered on July 17,
2000. debis Ireland made customary representations and warranties in the share
purchase agreement for the acquisition of the additional aircraft including
representations relating to solvency, undisclosed contingent liabilities and
insurance. debis Ireland indemnified us for breaches of its representations and
warranties relating to the new debis transferred companies and additional
aircraft which it would be selling to us. The representations and warranties
with respect to each of the new debis transferred companies and its related
aircraft survive for three years from the date of transfer to AerCo of that new
debis transferred company. Our potential recovery under these representations
and warranties is limited to approximately $175.0 million.

     Because of the timing uncertainties of obtaining lessee consents that a
direct transfer of aircraft from the debis Ireland group to AerCo presented,
debis Ireland structured the acquisition of aircraft and associated leases as
the sale of the capital stock of wholly-owned, recently incorporated
subsidiaries to occur in a series of transactions on or following the closing of
the offering on July 17, 2000. Prior to each acquisition, debis Ireland
pre-positioned ownership of the additional aircraft in the appropriate new debis
transferred company. Each of the new debis transferred companies financed its
acquisition of the applicable additional aircraft with debt payable to the debis
Ireland group or third-party creditors. AerCo purchased all of the outstanding
capital stock of the appropriate new debis transferred companies from the debis
Ireland group and refinanced the indebtedness of those companies to the debis
Ireland group or third party creditors for an aggregate amount equal to
approximately $706.4 million, calculated as follows: (1) the aggregate appraised
value at April 30, 2000 of the 30 additional aircraft ($724.1 million); less the
sum of: (2) the amount of cash security deposits held in respect of those
aircraft (approximately $7.4 million for all 30 additional aircraft as of June
30, 2000); and (3) the amount of the transaction expenses of $10.3 million
inclusive of subscription discounts and commissions. The cumulative aggregate
net purchase price of the capital stock was paid in installments and the related
indebtedness was simultaneously repaid upon delivery of the shares of each of
the new debis transferred companies. All of the transaction expenses were paid
on July 17, 2000.

     AerCo loaned each of the new debis transferred companies a portion of the
net proceeds of the offering of the new notes to repay its indebtedness to the
debis group or third party creditors. All letters of credit, guarantees or
similar arrangements securing obligations of any lessee of the additional
aircraft were transferred to, renewed, amended or reissued in the name of, the
relevant new debis transferred company upon the purchase of each new debis
transferred company by AerCo.

     In consideration of AerCo agreeing to purchase the new debis transferred
companies and raising funds in anticipation of delivery of all the remaining
additional aircraft, debis Ireland paid to AerCo, for each remaining

                                        17
<PAGE>   21

additional aircraft, an amount equal to gross lease rentals on the remaining
additional aircraft received by debis Ireland from the closing date. AerCo paid
to debis Ireland an amount equal to (a) any interest earned on the funds in the
aircraft purchase account allocable to the remaining aircraft, which funds would
have been transferred to debis Ireland had the remaining aircraft been delivered
to AerCo on the closing date, and (b) an amount equal to interest which would
have been payable to debis Ireland on the relevant principal amount of the
subclass D-2 notes and the subclass E-2 notes according to the priority of
payments had debis Ireland been issued such notes on the closing date. Such
amounts were paid monthly by debis Ireland to AerCo and deposited into the
collection account and, together with other cash amounts received under the
leases of aircraft already owned by AerCo Group, were paid to the noteholders on
each payment date.

     The purchase price paid by AerCo for each additional aircraft was adjusted
for the expenses relating to the management of the leases (not including
payments under the servicing agreement with debis Ireland) from the closing date
and maintenance expenses not paid under the servicing agreement as of the
closing date by the lessees directly or from supplemental rent paid by the
lessees for maintenance costs, which debis Ireland paid, net of any related
aircraft maintenance income received by debis Ireland since the closing date.
AerCo issued to debis Ireland the subclass D-2 notes and the subclass E-2 notes
allocable to the purchase price of the additional aircraft as they were
delivered.

  Additional Aircraft and Debt Issuances

     We intend to acquire further aircraft assets from various sellers, which
may include the debis group, in the future. Such additional aircraft may be
serviced by parties other than debis. We will finance acquisitions of such
aircraft with external funds, including issuing debt securities in up to five
classes which will rank equally in right of payment of principal and interest
with the corresponding classes of the then outstanding notes. Any acquisition of
further aircraft and related issuance of further notes or other debt securities
will be subject to various conditions under the indenture, including rating
agency confirmation that such acquisition will not result in the lowering or
withdrawal by the rating agencies of their current rating of any subclass of
notes then outstanding.

B. BUSINESS OVERVIEW

PORTFOLIO INFORMATION

     As of May 31, 2001, our total portfolio comprised 61 aircraft on lease to
33 lessees in 19 countries and excludes one B747-200B aircraft which is being
sold for scrap. One aircraft was off-lease at May 31, 2001. As of September 24,
2001, this aircraft was subject to a letter of intent for lease.

     As of May 31, 2001, the total appraised value of our 61 aircraft based upon
the appraised values as of February 19, 2001 was $1,411.3 million. As of May 31,
2001, the weighted average remaining contracted lease term of the portfolio (by
appraised values as of February 19, 2001 and without giving effect to purchase
options or extension options) was 35 months. The longest lease is scheduled to
expire in March 2008. Therefore, we will be required to re-lease each of the
aircraft one or more times prior to the final maturity date for the notes. See
"Risk Factors -- Lease Risks."

APPRAISERS' REPORT

     We obtained appraised values of our portfolio of aircraft at February 19,
2001. The values provided by the appraisers represent the base value in respect
of 61 of the aircraft (excluding the B757 aircraft sold in April 2001 and the
scrap value in respect of one aircraft, the B747-200B).

     The base value is equal to the average of the opinions of the appraisers as
to the value of each aircraft at normal utilization rates in an open,
unrestricted and stable market at February 19, 2001, adjusted to take account of
the reported maintenance standard of the aircraft. The appraisals were not based
on physical inspection of the aircraft and do not take into account the value of
the leases, maintenance reserves or security deposits. The scrap value is
determined by the appraisers based on the assumption that the aircraft will no
longer be utilized for flight operation and assumes that the aircraft will
ultimately be disassembled to a point where all economically viable assets,
including the engines, are sold individually.

                                        18
<PAGE>   22

     On the basis of the three independent appraisals, the average base value
for 61 of the aircraft was approximately $1,411.3 million compared with an
average base value of $1,482.1 million (excluding the B757 aircraft sold in
April 2001 and the B747 aircraft which is being sold for scrap) on April 30,
2000, the date of the last appraisals. The reduction in value represents
utilization for the period. The aggregate base and scrap values calculated by
each of the three appraisers for the aircraft are $1,437.8 million in the case
of BK Associates, Inc., $1,446.4 million in the case of Aircraft Information
Services, Inc. and $1,349.9 million in the case of Airclaims Limited.

     You should not rely on the appraised value as a measure of the realizable
value of any aircraft. See "Key Information -- Risk Factors -- Aircraft Risks."

                                        19
<PAGE>   23

     The following table lists the appraised values of the 61 aircraft at
February 19, 2001.

<Table>
<Caption>
                                                                     APPRAISAL OF
                                                       -----------------------------------------        AVERAGE
                                          DATE OF        AIRCRAFT                                      APPRAISED
                  ENGINE       SERIAL   MANUFACTURE/    INFORMATION    AIRCLAIMS                       VALUE AT
AIRCRAFT TYPE  CONFIGURATION   NUMBER    CONVERSION      SERVICES       LIMITED    BK ASSOCIATES   FEBRUARY 19, 2001
-------------  -------------   ------   ------------   -------------   ---------   -------------   -----------------
                                                                             (U.S.$'000S)
<S>            <C>             <C>      <C>            <C>             <C>         <C>             <C>
A300B4-200     CF6-50C2          240       May-83            8,560         5,550        11,677             8,596
A320-200       V2500-A1          354       Oct-92           26,310        30,310        28,449            28,356
A320-200       V2500-A1          411       Mar-93           27,670        31,220        29,242            29,377
A320-200       V2527-A5          934       Jan-99           40,290        38,190        39,171            39,217
A320-200       CFM56-5A1          85       Feb-90           24,830        24,000        22,827            23,886
A320-200       CFM56-5A3         299       Apr-92           26,860        28,300        29,247            28,136
A320-200       V2500-A1          362       Nov-92           25,840        28,280        29,334            27,818
A320-200       CFM56-5A3         391       Feb-93           28,920        28,150        30,816            29,295
A320-200       CFM56-5A1         403       Dec-93           28,520        29,460        30,656            29,545
A321-200       V2533-A5         1207       Apr-00           54,870        47,320        52,636            51,609
B737-300       CFM56-3B1       23345       Jul-85           16,060        12,320        12,080            13,487
B737-300       CFM56-3C1       24834       Jun-90           21,230        19,550        20,658            20,479
B737-300       CFM56-3C1       24856       Aug-90           21,500        19,530        21,256            20,762
B737-300       CFM56-3B2       25041       Mar-91           22,120        21,480        22,135            21,912
B737-300       CFM56-3C1       25604       Jan-93           22,510        19,940        22,789            21,746
B737-300       CFM56-3B2       26440       Mar-92           23,220        21,370        23,551            22,714
B737-300       CFM56-3B1       24465       Aug-89           19,490        17,190        18,920            18,533
B737-300       CFM56-3B1       24677       Mar-90           20,510        18,990        20,272            19,924
B737-300       CFM56-3C1       24908       Mar-91           22,550        22,020        22,284            22,285
B737-300       CFM56-3C1       24909       Apr-91           21,490        20,990        20,900            21,127
B737-300       CFM56-3C1       26068       Jun-92           23,680        21,930        24,309            23,306
B737-300       CFM56-3B2       26442       May-92           23,460        20,780        22,493            22,244
B737-300QC     CFM56-3B2       24021       Nov-88           21,020        22,420        18,360            20,600
B737-400       CFM56-3C1       24270       May-89           22,570        21,720        21,161            21,817
B737-400       CFM56-3C1       24271       Jun-89           22,790        21,940        21,619            22,116
B737-400       CFM56-3C1       24901       May-90           23,850        23,110        23,570            23,510
B737-400       CFM56-3C1       25594       May-92           25,850        24,930        25,002            25,261
B737-400       CFM56-3C1       27074       Apr-92           26,080        25,160        25,788            25,676
B737-400       CFM56-3C1       23868       Oct-88           21,660        17,950        20,660            20,090
B737-400       CFM56-3C1       23979       Jan-89           22,040        21,830        21,153            21,674
B737-400       CFM56-3C1       24685       May-90           23,640        22,480        23,338            23,153
B737-400       CFM56-3C1       24904       Feb-91           24,860        23,060        23,412            23,777
B737-400       CFM56-3C1       25764       Jun-92           24,560        20,440        25,067            23,356
B737-400       CFM56-3C1       25765       Jul-92           24,890        20,840        25,555            23,762
B737-400       CFM56-3C1       26066       Jun-92           26,020        23,260        25,767            25,016
B737-500       CFM56-3C1       24651       Apr-90           18,440        20,040        17,368            18,616
B737-500       CFM56-3C1       25768       May-95           22,710        22,940        21,833            22,494
B737-500       CFM56-3C1       25789       Feb-92           19,790        21,370        19,649            20,270
B737-500       CFM56-3C1       27153       Aug-93           20,160        21,120        20,080            20,453
B737-500       CFM56-3C1       27155       Mar-93           20,000        20,660        18,268            19,643
B737-500       CFM56-3C1       26067       Jun-92           20,130        21,720        19,913            20,588
B757-200       RB211-535E4     26152       Aug-92           38,050        31,570        36,471            35,364
B757-200       RB211-535E4     26153       Aug-92           40,070        33,550        38,496            37,372
B757-200       RB211-535E4     26158       Feb-93           41,270        34,670        39,279            38,406
B767-300ER     PW4060          24947       Mar-91           58,060        51,040        55,644            54,915
B767-300ER     PW4060          24999       Feb-91           56,790        49,640        52,027            52,819
DC8-71F        CFM56-2C1       46040       Mar-91           14,100        15,720        12,401            14,074
DC8-71F        CFM56-2C1       46064       Mar-92           12,970        12,140        10,998            12,036
F100           TAY650-15       11320       Apr-91           10,450        11,060        12,149            11,220
F100           TAY650-15       11322       Jun-91           10,560        10,670        12,236            11,155
F100           TAY650-15       11341       Aug-91           10,460        12,100        11,934            11,498
F100           TAY650-15       11350       Apr-92           11,240        11,390        13,525            12,052
F100           TAY650-15       11351       Sep-91           10,230        11,530        12,300            11,353
MD-82          JT8D-217C       49570       Feb-88           16,620        12,680        16,441            15,247
MD-82          JT8D-219        49905       Oct-90           17,880        15,010        19,322            17,404
MD-82          JT8D-219        49931       Aug-90           19,060        14,960        19,507            17,842
MD-82          JT8D-219        49932       Sep-90           19,070        14,750        19,676            17,832
MD-82          JT8D-219        53245       Apr-92           19,660        16,240        20,615            18,838
MD-83          JT8D-219        49627       Apr-89           19,250        15,540        19,621            18,137
MD-83          JT8D-219        49790       Oct-89           18,870        15,450        19,613            17,978
MD-83          JT8D-219        49952       Dec-91           20,150        16,310        22,285            19,581
                                                         ---------     ---------     ---------         ---------
                                                         1,446,360     1,349,880     1,437,805         1,411,349
                                                         =========     =========     =========         =========
</Table>

                                        20
<PAGE>   24

THE AIRCRAFT

     All of the aircraft hold or are capable of holding, a noise certificate
issued under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago
Convention or have been shown to comply with the Stage 3 noise levels set out in
Section 36.5 of Appendix C of Part 36 of the United States Federal Aviation
Regulations.

     The following table lists the 61 aircraft by type and number as of May 31,
2001 and the percentage of appraised value of each aircraft at February 19,
2001.

<Table>
<Caption>
                    TYPE OF     NUMBER OF      BODY      ENGINE   % OF PORTFOLIO BY
MANUFACTURER       AIRCRAFT     AIRCRAFT       TYPE      STAGE     APPRAISED VALUE
------------      -----------   ---------   ----------   ------   -----------------
<S>               <C>           <C>         <C>          <C>      <C>
Airbus
  (20.97%).....   A300-B4-200       1       Widebody       3             0.61%
                  A320-200          8       Narrowbody     3            16.70%
                  A321-200          1       Narrowbody     3             3.66%
Boeing
(74.97%).......   B737-300         12       Narrowbody     3            17.61%
                  B737-300QC        1       Narrowbody     3             1.46%
                  B737-400         12       Narrowbody     3            19.78%
                  B737-500          6       Narrowbody     3             8.64%
                  B757-200          3       Narrowbody     3             7.87%
                  B767-300ER        2       Widebody       3             7.63%
                  MD-82             5       Narrowbody     3             6.18%
                  MD-83             3       Narrowbody     3             3.95%
                  DC8-71F           2       Freighter      3             1.85%
Fokker
(4.04%)........   F100              5       Narrowbody     3             4.06%
                                   --                                  ------
                                   61                                  100.00%
                                   ==                                  ======
</Table>

                                        21
<PAGE>   25

     The following table sets forth the exposure of our portfolio by lessee at
May 31, 2001 by reference to the appraised value at February 19, 2001.

<Table>
<Caption>
                                                                                  % OF
                                                                NUMBER OF      AIRCRAFT BY
LESSEE(1)                                                       AIRCRAFT     APPRAISED VALUE
---------                                                       ---------    ---------------
<S>                                                             <C>          <C>
BMI Limited.................................................        2              6.44%
Spanair S.A. ...............................................        4              7.38%
Air Canada..................................................        2              5.98%
Asiana Airlines Inc.........................................        3              4.93%
Frontier Airlines Inc.......................................        3              4.66%
TAM-Transportes Aereos Regionais S.A. ......................        5              4.06%
JMC Airlines................................................        2              4.09%
Airtours International Airways Limited......................        2              3.96%
Blue Panorama Airlines SpA..................................        2              3.49%
THY Turkish Airlines........................................        1              1.77%
China Southern Airlines Company Limited.....................        2              3.19%
Pegasus Hava Tasimaciligi A.S...............................        2              3.18%
Virgin Express S.A..........................................        3              4.67%
Air 2000 Limited............................................        1              2.72%
Xiamen Airlines Limited.....................................        2              2.84%
Philippine Airlines Inc.....................................        3              4.51%
Finnair Oy..................................................        2              2.57%
China Xinjiang Airlines.....................................        1              2.65%
Avianca.....................................................        1              2.51%
Reno Air Inc................................................        2              2.53%
Monarch Airlines Limited....................................        1              2.08%
Volare Airlines SpA.........................................        1              1.69%
Malev Hungarian Airlines....................................        2              3.18%
VARIG.......................................................        1              1.45%
Societe d'Exploitation Aeropostale..........................        1              1.46%
Far Eastern Air Transport Corporation (F.E.A.T.)............        1              1.39%
Nordeste Linhas Aereas Regionais S.A. ......................        1              1.46%
British Airways Plc.........................................        2              3.02%
Braathens ASA S.A.F.E. .....................................        1              1.32%
Delta Air Lines.............................................        1              0.96%
Aircraft International Leasing Limited (A.I.L.L.)...........        1              1.00%
BAX Global Inc..............................................        1              0.85%
Indian Airlines Limited.....................................        1              0.61%
Off-lease(2)................................................        1              1.42%
                                                                   --            ------
                                                                   61            100.00%
                                                                   ==            ======
</Table>

---------------
(1) Total number of lessees as of May 31, 2001 = 33

(2) As of September 24, 2001, the off-lease aircraft was subject to a letter of
    intent for lease.

                                        22
<PAGE>   26

     The following table lists the 61 aircraft by country at May 31, 2001
according to the number of aircraft and the percentage of the appraised value at
February 19, 2001.

<Table>
<Caption>
                                                                                % OF
                                                              NUMBER OF      AIRCRAFT BY
                         COUNTRY(1)                           AIRCRAFT     APPRAISED VALUE
                         ----------                           ---------    ---------------
<S>                                                           <C>          <C>
United Kingdom..............................................     10             22.30%
United States...............................................      7              8.99%
China.......................................................      5              8.68%
Turkey......................................................      3              4.95%
Spain.......................................................      4              7.38%
Brazil......................................................      7              6.97%
Canada......................................................      2              5.98%
Italy.......................................................      3              5.18%
South Korea.................................................      3              4.93%
Belgium.....................................................      3              4.67%
Philippines.................................................      3              4.51%
Finland.....................................................      2              2.57%
Colombia....................................................      1              2.51%
Hungary.....................................................      2              3.18%
France......................................................      1              1.46%
Taiwan......................................................      1              1.39%
Norway......................................................      1              1.32%
Chile.......................................................      1              1.00%
India.......................................................      1              0.61%
Off-lease...................................................      1              1.42%
                                                                 --            ------
                                                                 61            100.00%
                                                                 ==            ======
</Table>

---------------
(1) Total number of countries = 19

     The following table lists the 61 aircraft by region at May 31, 2001
according to the number of aircraft and to the percentage of the appraised value
at February 19, 2001.

<Table>
<Caption>
                                                                                % OF
                                                              NUMBER OF      AIRCRAFT BY
                           REGION                             AIRCRAFT     APPRAISED VALUE
                           ------                             ---------    ---------------
<S>                                                           <C>          <C>
Developed Markets:
  Europe....................................................     24             44.87%
  North America.............................................      9             14.98%
Emerging:
  Asia......................................................     13             20.12%
  Europe and the Middle East................................      5              8.13%
  Latin America.............................................      9             10.48%
Off-lease(1)................................................      1              1.42%
                                                                 --            ------
                                                                 61            100.00%
                                                                 ==            ======
</Table>

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

(1)  As of September 24, 2001, the off-lease aircraft was subject to a letter of
     intent for lease.

                                        23
<PAGE>   27

     The following table lists the 61 aircraft by year of aircraft manufacture
or conversion to freighter at May 31, 2001 according to the number of aircraft
and to the percentage of the appraised value at February 19, 2001.

<Table>
<Caption>
                                                                                % OF
                                                              NUMBER OF      AIRCRAFT BY
             YEAR OF MANUFACTURE OR CONVERSION                AIRCRAFT     APPRAISED VALUE
             ---------------------------------                ---------    ---------------
<S>                                                           <C>          <C>
1983........................................................      1              0.61%
1985........................................................      1              0.96%
1988........................................................      3              3.96%
1989........................................................      6              8.52%
1990........................................................     10             14.41%
1991........................................................     12             19.54%
1992........................................................     18             30.62%
1993........................................................      7             13.35%
1995........................................................      1              1.59%
1999........................................................      1              2.78%
2000........................................................      1              3.66%
                                                                 --            ------
                                                                 61            100.00%
                                                                 ==            ======
</Table>

     The following table lists the aircraft by seat category at May 31, 2001
calculated by reference to the number of aircraft and to the percentage of the
appraised value at February 19, 2001.

<Table>
<Caption>
                                                                                           % OF
                                                                         NUMBER OF      AIRCRAFT BY
SEAT CATEGORY                        AIRCRAFT TYPE                       AIRCRAFT     APPRAISED VALUE
-------------                        -------------                       ---------    ---------------
<S>             <C>                                                      <C>          <C>
91-120          B737-500, F-100........................................     11             12.71%
121-170         A320-200, B737-300, B737-300QC, B737-400, MD82, MD83...     41             65.67%
171-240         A321-200, B757-200.....................................      4             11.53%
241-350         A300-B4-200, B767-300ER................................      3              8.24%
Freighter       DC8-71F................................................      2              1.85%
                                                                            --            ------
                                                                            61            100.00%
                                                                            ==            ======
</Table>

DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA

     The following table indicates the distribution of AerCo's revenues by
geographic area for fiscal periods indicated:

<Table>
<Caption>
                                                                                          AERCO
                                                  AERCO               AERCO            PERIOD FROM
                                               YEAR ENDED          YEAR ENDED       JULY 15, 1998 TO
                                             MARCH 31, 2001      MARCH 31, 2000      MARCH 31, 1999
                                            -----------------   -----------------   -----------------
                                            U.S.$'000     %     U.S.$'000     %     U.S.$'000     %
<S>                                         <C>         <C>     <C>         <C>     <C>         <C>
Europe...................................     84,629     51.3     52,956     48.5    40,456      48.8
North America............................     26,657     16.2      9,186      8.4     7,009       8.5
South/Central America....................     21,615     13.1     21,366     19.6    14,318      17.3
Asia/Pacific.............................     32,033     19.4     25,638     23.5    21,043      25.4
                                             -------    -----    -------    -----    ------     -----
                                             164,934    100.0    109,146    100.0    82,826     100.0
                                             =======    =====    =======    =====    ======     =====
</Table>

     All revenues are derived from aircraft leasing.

     In the year ended March 31, 2001, 18% and 13% of AerCo's lease revenues was
derived from the United Kingdom and the United States, respectively. No other
country accounted for greater than 10% of AerCo's lease revenues.

                                        24
<PAGE>   28

     In the year ended March 31, 2000, 17% and 11% of AerCo's lease revenues was
derived from the United Kingdom and Spain respectively. No other country
accounted for greater than 10% of AerCo's lease revenues.

     In the period from July 15, 1998 to March 31, 1999, 18% and 10% of AerCo's
lease revenues was derived from the United Kingdom and Spain, respectively. No
other country accounted for greater than 10% of AerCo's lease revenues.

                                        25
<PAGE>   29

                            AERCO PORTFOLIO ANALYSIS
<Table>
<Caption>
                                                                                                     DATE OF          APPRAISED
                                                             AIRCRAFT        ENGINE       SERIAL   MANUFACTURE/       VALUE AT
     REGION          COUNTRY               LESSEE              TYPE       CONFIGURATION   NUMBER    CONVERSION    FEBRUARY 19, 2001
     ------          -------               ------           -----------   -------------   ------   ------------   -----------------
                                                                                                                    (U.S.$'000S)
  <S>             <C>              <C>                      <C>           <C>             <C>      <C>            <C>
  Europe.......   Belgium          Virgin Express (1)       B737-400      CFM56-3C1       24270       May-89             21,817
  (Developed)     Belgium          Virgin Express           B737-400      CFM56-3C1       24271       Jun-89             22,116
                  Belgium          Virgin Express           B737-300      CFM56-3B2       25041       Mar-91             21,912
                  Finland          Finnair                  MD-82         JT8D-219        49905       Oct-90             17,404
                  Finland          Finnair                  MD-82         JT8D-219        53245       Apr-92             18,838
                  France           Europe Airpost           B737-300QC    CFM56-3B2       24021       Nov-88             20,600
                  Italy            Air Europa (2)           A320-200      CFM56-5A1          85       Feb-90             23,886
                  Italy            Blue Panorama            B737-400      CFM56-3C1       24901       May-90             23,510
                  Italy            Blue Panorama            B737-400      CFM56-3C1       27074       Apr-92             25,676
                  Norway           Braathens SAFE           B737-500      CFM56-3C1       24651       Apr-90             18,616
                  Spain            Spanair                  B767-300ER    PW4060          24999       Feb-91             52,819
                  Spain            Spanair                  MD-83         JT8D-219        49627       Apr-89             18,137
                  Spain            Spanair                  MD-83         JT8D-219        49790       Oct-89             17,978
                  Spain            Spanair                  MD-82         JT8D-217C       49570       Feb-88             15,247
                  United Kingdom   Air 2000                 B757-200      RB211-535E4     26158       Feb-93             38,406
                  United Kingdom   Airtours (3)             A320-200      CFM56-5A3         299       Apr-92             28,136
                  United Kingdom   Airtours                 A320-200      V2500-A1          362       Nov-92             27,818
                  United Kingdom   British Airways          B737-500      CFM56-3C1       25789       Feb-92             20,270
                  United Kingdom   British Airways          B737-300      CFM56-3C1       24908       Mar-91             22,285
                  United Kingdom   BMI                      A320-200      V2527-A5          934       Jan-99             39,217
                  United Kingdom   BMI                      A321-200      V2533-A5         1207       Apr-00             51,609
                  United Kingdom   JMC Airlines             A320-200      V2500-A1          354       Oct-92             28,356
                  United Kingdom   JMC Airlines             A320-200      V2500-A1          411       Mar-93             29,377
                  United Kingdom   Monarch                  A320-200      CFM56-5A3         391       Feb-93             29,295
  North
   America.....   Canada           Air Canada               A320-200      CFM56-5A1         403       Dec-93             29,545
  (Developed)     Canada           Air Canada               B767-300ER    PW4060          24947       Mar-91             54,915
                  United States    BAX Global               DC8-71F       CFM56-2C1       46064       Mar-92             12,036
                  United States    Delta                    B737-300      CFM56-3B1       23345       Jul-85             13,487
                  United States    Frontier                 B737-300      CFM56-3C1       24856       Aug-90             20,762
                  United States    Frontier                 B737-300      CFM56-3B2       26440       Mar-92             22,714
                  United States    Frontier                 B737-300      CFM56-3B2       26442       May-92             22,244
                  United States    Reno Air (4)             MD-82         JT8D-219        49931       Aug-90             17,842
                  United States    Reno Air (4)             MD-82         JT8D-219        49932       Sep-90             17,832
  Europe.......   Hungary          Malev                    B737-300      CFM56-3C1       24909       Apr-91             21,127
  (Emerging)      Hungary          Malev                    B737-400      CFM56-3C1       24904       Feb-91             23,777
                  Turkey           Pegasus                  B737-400      CFM56-3C1       23979       Jan-89             21,674
                  Turkey           Pegasus                  B737-400      CFM56-3C1       24685       May-90             23,153
                  Turkey           THY                      B737-400      CFM56-3C1       26066       Jun-92             25,016
  Asia.........   China            China Xinjiang           B757-200      RB211-535E4     26153       Aug-92             37,372
  (Emerging)      China            China Southern           B737-300      CFM56-3C1       26068       Jun-92             23,306
                  China            China Southern           B737-300      CFM56-3C1       25604       Jan-93             21,746
                  China            Xiamen Airlines          B737-500      CFM56-3C1       27153       Aug-93             20,453
                  China            Xiamen Airlines          B737-500      CFM56-3C1       27155       Mar-93             19,643
                  India            Indian Airlines          A300-B4-200   CF6-50C2          240       May-83              8,596
                  Philippines      PAL                      B737-300      CFM56-3B1       24465       Aug-89             18,533
                  Philippines      PAL                      B737-300      CFM56-3B1       24677       Mar-90             19,924
                  Philippines      PAL                      B737-400      CFM56-3C1       25594       May-92             25,261
                  South Korea      Asiana Airlines          B737-400      CFM56-3C1       25764       Jun-92             23,356
                  South Korea      Asiana Airlines          B737-400      CFM56-3C1       25765       Jul-92             23,762
                  South Korea      Asiana Airlines          B737-500      CFM56-3C1       25768       May-95             22,494
                  Taiwan           FEAT                     MD-83         JT8D-219        49952       Dec-91             19,581
  Latin
   America.....   Brazil           Nordeste                 B737-500      CFM56-3C1       26067       Jun-92             20,588
  (Emerging)      Brazil           TAM                      F100          TAY650-15       11341       Aug-91             11,498
                  Brazil           TAM                      F100          TAY650-15       11350       Apr-92             12,052
                  Brazil           TAM                      F100          TAY650-15       11351       Sep-91             11,353
                  Brazil           TAM                      F100          TAY650-15       11320       Apr-91             11,220
                  Brazil           TAM                      F100          TAY650-15       11322       Jun-91             11,155
                  Brazil           Varig                    B737-300      CFM56-3C1       24834       Jun-90             20,479
                  Chile            A.I.L.L. (5)             DC8-71F       CFM56-2C1       46040       Mar-91             14,074
                  Columbia         Avianca                  B757-200      RB211-535E4     26152       Aug-92             35,364
  Off-lease....   Off-lease (6)                             B737-400      CFM56-3C1       23868       Oct-88             20,090
                                                                                                                      ---------
                                                                                                                      1,411,349
                                                                                                                      =========

<Caption>

                 % OF PORTFOLIO BY
     REGION       APPRAISED VALUE
     ------      -----------------

  <S>            <C>
  Europe.......          1.5%
  (Developed)            1.6%
                         1.6%
                         1.2%
                         1.3%
                         1.7%
                         1.8%
                         1.7%
                         1.8%
                         1.3%
                         3.7%
                         1.3%
                         1.3%
                         1.1%
                         2.7%
                        2.09%
                         2.0%
                         1.4%
                         1.6%
                         2.8%
                         3.7%
                         2.0%
                         2.1%
                         2.1%
  North
   America.....          2.1%
  (Developed)            3.9%
                         0.9%
                         1.0%
                         1.5%
                         1.6%
                         1.6%
                         1.3%
                         1.3%
  Europe.......          1.5%
  (Emerging)             1.7%
                         1.5%
                         1.6%
                         1.8%
  Asia.........          2.6%
  (Emerging)             1.7%
                         1.5%
                         1.4%
                         1.4%
                         0.6%
                         1.3%
                         1.4%
                         1.8%
                         1.7%
                         1.7%
                         1.6%
                         1.4%
  Latin
   America.....          1.5%
  (Emerging)             0.8%
                         0.9%
                         0.8%
                         0.8%
                         0.8%
                         1.5%
                         1.0%
                         2.5%
  Off-lease....          1.4%
                      ------
                       100.0%
                      ======
</Table>

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

(1) Subleased to Citybird from Virgin Express.

(2) Subleased to Volare Airlines SpA from Air Europa.

(3) Subleased to Premiair from Airtours.

(4) Reno Air is a 100% subsidiary of American Airlines.

(5) A.I.L.L. is an indirect 100% subsidiary of Lan Chile.

(6) At September 24, 2001, the off-lease aircraft was subject to a letter of
    intent for lease.

                                        26
<PAGE>   30

THE LEASES

  General

     All leases are managed by a subsidiary of debis under the servicing
agreement.

     The leases are all operating leases under which AerCo generally retains the
benefit, and bears the risk, of the residual value of the aircraft at the end of
the lease. The lessees have agreed to lease the aircraft for a fixed term.
However, AerCo has granted purchase, extension or early termination options on
certain aircraft to the lessee or an affiliate of the lessee. Although the lease
documentation is fairly standardized in many respects, significant variations do
exist as a result of lessee negotiation.

  Lease Payments and Security

     Each lease requires the lessee to pay periodic rentals during the lease
term. Certain of the leases require the lessee to pay periodic amounts as
maintenance reserves or to provide maintenance letters of credit or guarantees.

     The lessees must make payments to the lessor without set-off or
counterclaim, and must gross-up payments under the lease where payments are
subject to certain withholding and other taxes. However, in certain cases, such
payments will be limited to the amount that would have been payable had the
lease not been transferred from debis AirFinance to AerCo. The leases generally
contain indemnification of the lessor for certain taxation liabilities and
taxation of indemnity payments. Indemnification for taxation liabilities
typically includes value added and stamp duty taxes, but excludes income taxes
or their equivalent. The lessees must also pay default interest on any overdue
amounts.

     The lessees are liable through various operational indemnities for
operating expenses accrued or payable during the term of the lease. These
expenses include maintenance, operating, overhaul, airport and navigation
charges, certain taxes, licenses, consents and approvals, aircraft registration
and hull and liability insurance premiums. The lessees must remove liens on the
aircraft other than liens permitted under the leases.

     Under 53 of the leases, the lessee has provided security for its
obligations. Lessees have provided cash security deposits in the case of 31
leases, or 53.0% of the leases by appraised value at February 19, 2001.

     Lessees have provided letters of credit in the case of 25 leases
representing 39.45% of the leases by appraised value at February 19, 2001.
Lessees provided a combination of cash security deposits and letters of credit
in the case of six leases or 10.05% of the leases by appraised value at February
19, 2001.

     Under 14 of the leases, the lessor received general guarantees from third
parties for the lessee's payment obligations under the lease. In some cases, the
lessor also received guarantees of the lessee's performance obligations under
the lease. In the case of 11 of the leases, these guarantees were issued by the
lessee's shareholder or affiliate. In the case of the leases to Xiamen Airlines
and China Xinjiang, a guarantee for each lessee's payment obligations was issued
by the Bank of China. In each case, the guarantee was subject to a stipulated
maximum amount.

  Rentals

     Rentals under 52 of the leases, representing 84.35% of the leases by
appraised value at February 19, 2001, are payable monthly in advance. Rentals
under six of the leases, representing 9.38% of the leases by appraised value at
February 19, 2001, are payable quarterly or semi-annually in advance. Rentals
under the remaining two leases are payable monthly in arrears.

     Rental payments on the leases are calculated either on a fixed or floating
rate basis. The rental payment of a lease that is calculated on a floating rate
basis generally has a rental floor that is payable even if LIBOR is 0% per annum
plus an amount which varies with LIBOR or varies itself. The rental floor varies
from lease to lease. Lessees increasingly wish to negotiate fixed rate leases.

     The rentals under one lease, a B767-300ER aircraft, are determined on the
basis of a charge per flight hour for every hour that the aircraft is flown by
the lessee, Air Canada. There is no minimum monthly rental under this lease and
there can be no certainty that this aircraft will generate any lease revenue
during the course of the

                                        27
<PAGE>   31

Air Canada lease which expires in May 2003. In addition, the maximum monthly
rental which Air Canada may be obliged to pay is approximately two-thirds of the
monthly rental received from the previous lessee. These lease terms are
generally reflective of the market at present for B767-300ER aircraft
particularly those which are powered by Pratt and Whitney engines.

  Operation of the Aircraft

     The lessees must operate the aircraft in compliance with all applicable
laws and regulations. Generally, the aircraft must remain in the possession of
the lessees, and the lessor must approve any subleases of the aircraft. In some
cases, the lessees may enter into charter or "wet lease" arrangements with the
aircraft, as long as the lessees do not relinquish possession or operational
control of the aircraft. A wet lease is a lease with crew and services provided
by the lessor.

     Under certain leases, the lessees may enter into subleases to specified
operators without the lessor's consent, if certain conditions are met.

     The lessees may subject the engines and other equipment or components to
removal or replacement and to pooling arrangements with permitted entities
without the lessor's consent but subject to conditions and criteria in the
relevant lease. The lessees may deliver possession of the aircraft, engines and
other equipment or components to the manufacturer for testing or similar
purposes, or to a third party for service, maintenance, repair or other work
required or permitted under the lease.

  Maintenance and Maintenance Reserves

     The leases contain detailed provisions specifying maintenance standards and
aircraft redelivery conditions. Lessees must provide monthly maintenance
reserves under approximately half of the leases. Under the balance of the
leases, the lessee or the lessor may be required to make certain adjustment
payments to each other if the aircraft or specified items at redelivery do not
meet the standards. During the term of each lease, the lessee must ensure that
the aircraft is maintained in accordance with an agreed maintenance program
designed to ensure that the aircraft meets applicable airworthiness and other
regulatory requirements. Generally, the lessee performs the agreed maintenance
program. If the lessee has paid maintenance reserves, the payments are used to
reimburse the lessee for significant maintenance charges, including major
airframe and engine overhauls.

     If the leases do not provide for maintenance reserve payments, the lessor
must rely on the lessee's credit and its ability to perform scheduled
maintenance throughout the lease term, return the aircraft in the condition
required by the lease, or make any payments required upon termination of the
lease.

     Because many of our aircraft are approximately the same age and have
similar usage patterns, a large portion of the portfolio came due for major
airframe and engine overhauls in the period from July 1998 to March 2001. This
trend is expected to reverse over the two year period from March 2001 to March
2003. However, due to the size and uncertainty of the incidence of maintenance
expenditures, the level of maintenance receipts, the timing of overhauls and the
level of maintenance already done by the lessee, completing such maintenance
overhauls could significantly impact the cashflows of AerCo in any note payment
period.

  Lessees' Options

     At May 31, 2001 purchase options for two of the aircraft or 4.48% of the
aircraft by appraised value at February 19, 2001 have been granted to lessees
under the lease or a separate purchase option agreement.

     All of the purchase options are currently exercisable. The duration of some
purchase options depends on whether the lessee exercises a separate option to
extend the lease. There is a risk that the option purchase prices may be less
than the proportional portion of the unpaid principal of the notes allocable to
the aircraft being purchased.

     Twenty-six of the leases or 42.67% of the leases by appraised value at
February 19, 2001 include options for the lessee to extend the lease term. The
rent payable during the extension period varies from lease to lease. Three

                                        28
<PAGE>   32

of the leases or 4.18% of the leases by appraised value at February 19, 2001,
contain provisions allowing early termination of the lease.

COMPLIANCE WITH GOVERNMENTAL AND TECHNICAL REGULATION

     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. AerCo Group 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, AerCo Group 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 the 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. Chapters 2 and 3 of the
Chicago Convention establish two progressively restrictive noise level standards
that correspond to the requirements for Stage 2 and 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. Such regulations restrict the future operation of aircraft
that are not Stage 3 aircraft and are expected imminently to prohibit the
operation of such aircraft in the relevant jurisdictions. In the United States
such a prohibition went into effect at the end of 1999. Since AerCo Group has
the ability to acquire Stage 2 aircraft, these regulations may affect AerCo
adversely. 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 AerCo Group, 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 traffic collision avoidance systems,
automatic emergency locator transmitters and certain other systems. Depending on
whether the costs of complying with these regulations are borne by AerCo or the
lessees, installation of these systems could result in significant cash
expenditures by AerCo in the future.

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

     The U.S. Federal Aviation Administration has 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. AerCo has eight MD-80 series
aircraft representing 10% of our portfolio by appraised value at February 19,
2001. AerCo will incur significant costs in ensuring these aircraft comply with
these standards. We expect to complete the modification of three of the eight
aircraft by April 2002 at an estimated cost of approximately $1.7 million and to
modify the remaining five aircraft by April 2006 at an estimated cost of
approximately $2.1 million after lessee contributions.

                                        29
<PAGE>   33

     The U.S. Federal Aviation Administration is expected to issue an AD by the
end of 2001 mandating the modification of affected lapjoints on Boeing 737
aircraft when the aircraft has completed 50,000 cycles. The estimated labor cost
to implement such modifications for each aircraft is approximately $230,000 per
aircraft. We have 31 Boeing 737 aircraft in our portfolio, representing 47% of
the portfolio by appraised value at February 19, 2001. 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 2008. However, AerCo could
incur significant costs in ensuring its Boeing 737 aircraft comply with these
standards, which could impact adversely on AerCo's results of operations

     The U.S. Federal Aviation Administration is also expected to issue an AD in
the near future mandating a re-design of the rudder systems of Boeing 737
aircraft. The average cost per aircraft of such modifications is expected to be
approximately $50,000. We have 31 Boeing 737 aircraft in our portfolio,
representing 47% of the portfolio by appraised value at February 19, 2001.
Depending on the time period within which such modifications are required to be
made, the costs may be the responsibility of existing lessees. However, if the
costs are not the responsibility of some or all existing lessees, AerCo could
incur significant costs in ensuring its Boeing 737 aircraft comply with such
modifications, which could impact adversely on AerCo's results of operations.

INDEMNIFICATION AND INSURANCE OF THE AIRCRAFT

  General

     The lessees will bear responsibility through an operational indemnity to
carry insurance for any liabilities arising out of the operation of the
aircraft. The indemnity includes liabilities for death or injury to persons and
damage to property that ordinarily would attach to the operator of the aircraft.
In addition, the lessees are required to carry further liability insurance that
is customary in the air transportation industry. The servicer monitors the
lessee's compliance with the insurance provisions of the leases. AerCo also has
its own contingent liability coverage. This will cover a liability that is in
excess of the coverage provided by a lessee's policy and where a lessee's policy
lapses. AerCo's contingent third party liability insurance will cover all of the
aircraft, and its contingent hull and war risk insurance covers certain of the
aircraft. The amount of the contingent liability policies may not be the same as
required under the lease. The amount of third party contingent liability
insurance is subject to certain limitations imposed by the air transportation
insurance industry.

     All insurance certificates contain a breach of warranty endorsement so that
an additional insured party remains protected even if the lessee violates any of
the terms, conditions or warranties of the insurance policies, provided that the
additional insured party has not caused, contributed to or knowingly condoned
the breach.

     As a consequence of the terrorist attacks in the United States on 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. In the absence of satisfactory solutions on this
matter, 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 cash flow which would adversely affect our ability to
make payments on the notes.

  Liability Insurance

     The lessees are required to have third party liability insurance for a
combined single limit in minimum amounts ranging between $350.0 million and
$850.0 million, depending on aircraft type, for each aircraft. In general,
liability coverage on each aircraft includes third party legal liability,
property damage legal liability, passenger legal liability, baggage legal
liability, cargo legal liability, mail and aviation general third party legal
liability.

     In some jurisdictions, liabilities for risks that the lessees insure may
attach to AerCo Group as owner of the aircraft regardless of whether AerCo Group
is in any way responsible for the loss for which liability is asserted. In
addition, claimants may assert claims against AerCo Group on the basis of
alleged responsibility for a loss, even if the claim is not sustained. Under the
leases, the lessees are obligated to indemnify the lessor against claims.
Covered claims include the costs of defending claims by third parties against
them for liabilities while the aircraft are owned by AerCo Group and under lease
to the lessees.

                                        30
<PAGE>   34

     The indemnified losses include both operating costs relating to the actual
operation of the aircraft as well as losses to persons and property resulting
from the operation of the aircraft. The latter types of losses are generally
covered by the lessee's liability insurances.

  Aircraft Property Insurance

     The lessees must carry other types of insurance that are customary in the
air transportation industry, including hull, war risk and spares insurance. The
value of the hull and war risk insurance is usually stipulated in the lease.
Spares insurance is usually on a replacement cost basis. Both types of insurance
are subject to customary deductibles. In addition to the stipulated loss value
coverage obtained by the lessees, AerCo Group purchases declining "total loss
only" coverage with respect to certain aircraft. As of May 31, 2001, the sum of
the stipulated loss value and the additional coverage for the aircraft in place
for hull and war risk insurance was at least 105% of the appraised value of each
aircraft. On average, the sum of such coverages in place for each aircraft was
approximately 140% of the appraised value of each aircraft. In many cases, the
lessor can increase the insured value above the stipulated loss value consistent
with industry practice with the lessee paying any increased premium. Permitted
deductibles range from $250,000 to $1,000,000; however, the deductible generally
applies only in the case of a partial loss.

     The leases include provisions defining an event of loss or a casualty
occurrence so that where a total loss of the airframe occurs, with or without
loss of the engines installed on the airframe, the agreed value is payable by
the lessee. This payment is generally funded by insurance proceeds. However, the
air transportation insurance industry practice is to treat only a loss of
greater than 75% of the value of the aircraft, including the engines, as a total
loss. If insurance proceeds following a total loss exceed the amount due from
the lessee then most leases require the lessor to pay to the lessee the balance
of the insurance proceeds received under the hull or war risk policy after
deduction of all amounts payable by the lessee to the lessor under the lease.

  Political Risk Repossession Insurance

     Under certain leases, the lessor may arrange separate political risk
repossession insurance for its own benefit, covering confiscation,
nationalization and requisition of title of any aircraft by the government of
the country of registry and denegation and deprivation of legal title and
rights. The political risk repossession insurance also covers the failure of the
authorities in that country to allow de-registration and export of the aircraft,
subject to the conditions of the policies.

THE LESSEES

     As of May 31, 2001, our aircraft were leased to 33 lessees in 19 countries
throughout the world, with one aircraft off-lease which, at September 24, 2001,
was subject to a letter of intent for lease. On September 11, 2001, the United
States was the subject of attacks by terrorists who used the hijacked aircraft
of certain airlines. The full effect that these terrorist attacks may have for
the aviation industry is not yet known. However, they are likely to have a
material adverse impact on the financial condition of our lessees and their
ability to perform under their leases. They may also lead to reduced demand for
our aircraft. These effects could cause a reduction in our cash flow in which
event we may be unable to make payments on the notes. See "Item 3 D. Risk
Factors -- Recent Developments."

  Regional Concentrations

     Asia Concentration.  At May 31, 2001, 20.12% of the aircraft by appraised
value at February 19, 2001 were leased by operators in "emerging" markets in the
Asia Pacific region, including China, the Philippines, South Korea, Taiwan and
India. One lessee, Asiana, leased 4.93% of the aircraft by appraised value at
February 19, 2001.

     Trading conditions in Asia's civil aviation industry were adversely
affected by the severe economic and financial difficulties experienced in the
region in 1998 and 1999. The economies of the region experienced acute
difficulties resulting in many business failures, significant depreciation of
local currencies against the dollar, downgrading of sovereign and corporate
credit ratings and internationally organized financial stability measures.
                                        31
<PAGE>   35

Since 1999, there has been some stabilization and recovery in the economies of
this region. One Asian lessee, PAL, which leases 4.51% of the aircraft by
appraised value at February 19, 2001 was adversely affected by the Asian
economic crisis such that it sought bankruptcy protection in 1998. As part of
its rehabilitation plan, certain of PAL's outstanding lease obligations were
rescheduled in 1999. Several other airlines in the region rescheduled their
aircraft purchase obligations, eliminated certain routes and reduced the number
of employees. A repeat of this downturn in the region's economies, including as
a consequence of the terrorist attacks in the United States on September 11,
2001, may further undermine business confidence, reduce demand for air travel
and adversely affect the Asian lessees' operations and their ability to meet
their obligations.

     Latin American Concentration.  At May 31, 2001, 10.48% of the aircraft by
appraised value at February 19, 2001 were leased by operators in emerging
markets in Latin America, principally Brazil, Chile and Colombia. The financial
prospects for lessees in Latin America depends on the level of political
stability and economic activity and policies in the region. Developments in the
United States, Europe and/or other emerging markets may also affect the
economies of Latin American countries and the entire region.

     Most significantly, in 1999 Brazil experienced significant downturns in its
economy and financial markets, with large decreases in financial asset prices
and dramatic decreases in the value of its currency. One of the lessees, TAM,
representing 4.06% of the aircraft by appraised value at February 19, 2001,
operates five of the aircraft in Brazil. Continued weakness in the value of the
Brazilian real, as well as any future general deterioration in the Brazilian
economy means that this lessee may be unable to generate sufficient revenues in
Brazilian currency to pay the dollar denominated rental payments under the
leases. More importantly, financial and economic problems in Brazil could spread
throughout Latin America and other "emerging" economies, having a similar effect
on many of AerCo Group's other lessees in this region.

     Colombia has recently suffered economically as a result of the
deterioration in the value of the Colombian Peso and the resulting negative
impact on the Colombian economy. AerCo Group leases one aircraft, representing
2.51% of the portfolio by appraised value at February 19, 2001, to a Colombian
lessee. Continued weakness in the value of the Colombian Peso, as well as
general deterioration in the Colombian economy, will mean that this lessee may
be unable to generate sufficient revenues in the Colombian currency to pay the
U.S. dollar denominated rental payments under the lease. See "-- Payment
History" for further information on this lessee.

     European Concentration.  At May 31, 2001, 53.00% of the aircraft by
appraised value at February 19, 2001 were leased by operators based in Europe.
Lessees of 44.66% of the aircraft are based in developed European markets,
principally the United Kingdom and Spain. Lessees of the remaining 8.13% of the
aircraft were based in emerging European markets, principally Turkey. One
lessee, Spanair, leased 7.38% of the aircraft by appraised value at February 19,
2001. As of May 31, 2001, 16.03% of the aircraft by appraised value at February
19, 2001 were leased to charter operators in the tourism industry, principally
in the United Kingdom.

     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 fuel prices and/or a weak euro,
may adversely affect the European lessees' ability to meet their financial and
other obligations. Most European currencies in which European airlines primarily
receive their revenues have fallen in value in the last number of months when
measured against the United States dollar adversely affecting the ability of
those airlines to meet dollar denominated lease rental and other operating
costs. 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.

     At May 31, 2001, 4.95% of the aircraft by appraised value at February 19,
2001 were on lease to Turkish lessees. Turkey was hit by a series of severe
earthquakes in 1999 and damage caused by the earthquakes and the consequent fall
off in tourist traffic adversely affected the ability of these airlines to
operate and meet their financial obligations under the leases. In addition, the
fall in value of the Deutsche Mark relative to the U.S. dollar, the principal
currency in which Turkish airlines receive their revenues, may affect these
airlines' ability to pay U.S. dollar denominated costs including lease rentals.
                                        32
<PAGE>   36

     North American Concentration.  At May 31, 2001, 14.97% of the aircraft by
appraised value at February 19, 2001 were leased by operators 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 U.S. airlines have ceased operations. On September 11, 2001, the
United States was the subject of attacks by terrorists who used the hijacked
aircraft of certain airlines. The full effect that these terrorist attacks may
have for the aviation industry in the United States is not yet known. For a more
detailed analysis of possible consequences, see Item 3.D. "Risk Factors."

     Tower Air, the previous lessee of one Boeing 747-200B aircraft, filed for
Chapter 11 bankruptcy protection on February 29, 2000. The relevant U.S.
bankruptcy court issued an order terminating the lease on January 23, 2001. On
February 27, 2001, AerCo executed a sale agreement in respect of three engines
attached to the B747-200B aircraft for a sales price of $4.3 million. The three
engines have been sold as of September 24, 2001. The airframe has been
dismantled and is expected to be sold as spares over the next two years.

  Payment History

     Weakly capitalized airlines are more likely than well capitalized airlines
to seek operating leases. Therefore, many of the lessees are in a relatively
weak financial position and several of them have faced and continue to face
severe economic difficulties.

     As of May 31, 2001, amounts outstanding for more than 30 days for rental
payments, maintenance reserves and other amounts due under the leases equaled
$4.4 million for three lessees who had a total of four aircraft on lease. The
outstanding amounts are net of agreed deferrals or other restructurings, default
interest and cash in transit.

     As of May 31, 2001, a Colombian lessee representing 2.51% of the portfolio
by appraised value at February 19, 2001 owed $2.8 million, $2.7 million of which
was in arrears for more than 30 days. See "-- Latin American Concentration." The
servicer agreed not to exercise its remedies in respect of events of default
existing under the lease in order to permit the Colombian lessee to have a
stable business environment in which to develop, negotiate and commence
implementing a long-term business plan. During the period to May 31, 2001, we
received approximately 61% of amounts due under the lease in cash with the
remainder provided by way of secured and unsecured notes issued by the lessee.
The Colombian lessee's other aircraft lessors and major creditors agreed similar
forbearance arrangements. On June 19, 2001, the servicer signed a restructuring
agreement with the lessee which agreement was conditional on the fulfillment of
certain conditions precedent which were met as of July 11, 2001. The secured
notes have been paid in full as at the date of this filing. Under the terms of
the restructuring agreement, assuming satisfaction of all conditions subsequent,
payments of the unsecured notes are to be made over a seven-year period. In
addition, the lessee has agreed to extend the lease term by 66 months. However,
the monthly lease rental in respect of the aircraft will be reduced by
approximately 19%. The continued effectiveness of the restructuring agreement is
conditional on the completion of certain undertakings by the lessee's parent,
including the assumption by the parent of certain significant obligations of the
lessee. The servicer is actively monitoring the status, and likelihood, of
completion of these undertakings. In the absence of completion of these
undertakings, AerCo will have to consider all of its options in respect of its
aircraft, which would include early return of the aircraft.

     On January 10, 2001, TWA, one of our former lessees, filed for Chapter 11
bankruptcy protection in the U.S. TWA had leased one aircraft from AerCo Group.
Under these circumstances, AerCo became entitled to call on a rental support
agreement with a third party. Under the terms of this rental support agreement,
the third party had an option to purchase the aircraft from AerCo which it
elected to do on April 9, 2001 at its option price of $46.2 million.

     As of May 31, 2001, an Italian lessee representing 3.49% of the portfolio
by appraised value at February 19, 2001 owed $1.4 million, which was in arrears
for more than 30 days. See "-- European Concentration." The servicer has signed
a restructuring agreement with the lessee regarding the repayment of arrears and
future lease rentals.
                                        33
<PAGE>   37

     As of May 31, 2001, an Italian lessee representing 1.69% of the portfolio
by appraised value at February 19, 2001 owed $0.7 million, $0.3 million of which
was in arrears for more than 30 days. See "-- European Concentration." The
lessee subsequently paid these arrears in full.

     PAL, the lessee of two B737-300 and one B737-400 aircraft representing
4.51% of the portfolio by appraised value at February 19, 2001, was adversely
affected by the Asian economic crisis such that in 1998 it sought bankruptcy
protection. As part of PAL's rehabilitation plan, the servicer has agreed with
PAL to a schedule covering the payment of arrearages over the period to December
31, 2003 and the extension of leases. At May 31, 2001, these arrearages amounted
to $1.4 million. All amounts have been paid in accordance with the scheduled
terms as of May 31, 2001.

     During the year to March 31, 2001, one Spanish lessee, representing 7.38%
of the portfolio by appraised value at February 19, 2001, restructured its
payment obligations under its leases with AerCo Group. The lessee extended the
lease terms of its two MD-83s, one MD-82 and one B767-300ER aircraft leased from
AerCo Group by 12 months, 18 months, 18 months and 18 months, respectively in
return for a reduction in its monthly lease rental obligations during the
extension period of 17% on the two MD-83s, 31% on the MD-82s and 34% on the
B767-300ER aircraft.

     AerCo expects to respond to the needs of lessees in financial difficulty
including restructuring the applicable leases or agreeing to rent deferrals. The
restructurings will typically involve the rescheduling of rental payments for a
specified period. In addition, certain restructurings may involve the voluntary
early termination of a lease, the replacement of aircraft with less expensive
aircraft and the arrangement of sub-leases from the lessee to another aircraft
operator. In certain cases, it may be necessary to repossess aircraft from
defaulting lessees and re-lease the aircraft to other lessees. The early
termination of leases may lead AerCo to incur swap breakage costs under its
agreements with swap providers which could be substantial. You should refer to
"Item 5. Operating and Financial Review and Prospects -- Interest Rate Risk and
Management" for additional information on swap breakage costs.

     Certain lessees have experienced periodic difficulties in meeting their
maintenance obligations under the leases. Such difficulties are caused by the
failure of the lessee to have in place a well established maintenance program,
adverse climate and other environmental conditions in the locations where the
aircraft are operated or financial and labor difficulties experienced by the
relevant lessee.

  Downtime

     There can be no assurance that AerCo's experience and debis Ireland's
experience will be indicative of AerCo Group's ability to keep the aircraft
on-lease in the future. AerCo Group may be unable to re-lease aircraft upon the
expiration of leases as a result of a deterioration in industry conditions,
decreased demand for specific types of aircraft or other factors.

     The table below shows the number and type of aircraft that we must re-lease
through December 31, 2005. The table assumes that no lease will terminate early
and that there are no sales of aircraft or purchases of additional aircraft. The
expiry date of the leases on two of the aircraft referred to in the table below
(scheduled to expire in 2001) is determined by reference to the timing of
certain maintenance events on these aircraft. More aircraft may need to be
re-leased if aircraft become available through early lease terminations or if
new leases or re-leases are for relatively short terms.

                                        34
<PAGE>   38

            AERCO GROUP LEASE PLACEMENT REQUIREMENTS AT MAY 31, 2001

<Table>
<Caption>
                                                                  TO DECEMBER 31,
                                                        ------------------------------------
AIRCRAFT TYPE                                           2001    2002    2003    2004    2005
-------------                                           ----    ----    ----    ----    ----
<S>                                                     <C>     <C>     <C>     <C>     <C>
A300..................................................    --      --       1      --      --
A320..................................................    --       2       2       2      --
B737..................................................     3       2       4      10      10
B757..................................................    --       1       1       1      --
B747..................................................    --      --      --      --      --
B767..................................................    --       1       1      --      --
DC8...................................................    --      --       2      --      --
MD80..................................................     2       1      --       1       3
Total.................................................     5       7      11      14      13
</Table>

  Description of the Lessees

     The table below lists certain available information with respect to the
country of domicile, government, airline or principal shareholders, operating
fleet size and composition and the first year of operation of each lessee. See
"Portfolio Information" above for additional tables detailing the exposure of
the portfolio as a percentage of appraised value at February 19, 2001 to each
lessee and the countries and geographic regions in which the lessees are
domiciled.

<Table>
<Caption>
                                            BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
<S>                  <C>                  <C>         <C>                                              <C>
AILL                 Bahamas                1998      Lan Chile (100%)                                        See Lan Chile

Air Canada           Canada                 1937      Institutions (70%)                                        36 A319-100
                                                      Retail (19%)                                              46 A320-200
                                                      Employees (11%)                                            8 A330-300
                                                                                                                12 A340-300
                                                                                                                17 DC9-32HK
                                                                                                                2 B737-200A
                                                                                                             34 B737-200AHK
                                                                                                             3 B737-200CAHK
                                                                                                                 4 B747-400
                                                                                                            3 B747-400Combi
                                                                                                                 7 B767-200
                                                                                                               7 B767-200EM
                                                                                                               7 B767-200ER
                                                                                                              30 B767-300ER
                                                                                                               25 CRJ-100ER

Airtours             United Kingdom         1990      Airtours Group (100%)                                     11 A320-200
                                                                                                                 4 A321-200
                                                                                                                 4 A330-200
                                                                                                                  3 DC-1010
                                                                                                                 6 B757-200
                                                                                                               3 B767-300ER

Air 2000             United Kingdom         1986      First Choice Holidays plc (100%)                           6 A320-200
                                                                                                                 6 A321-200
                                                                                                                16 B757-200
                                                                                                               4 B767-300ER
</Table>

                                        35
<PAGE>   39

<Table>
<Caption>
                                            BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
<S>                  <C>                  <C>         <C>                                              <C>
American Airlines    United States          1934      AMR Corp. (100%)                                         35 A300-600R
                                                                                                             58 B727-200AHK
                                                                                                                 1 B737-300
                                                                                                                69 B737-800
                                                                                                               108 B757-200
                                                                                                                 8 B767-200
                                                                                                              22 B767-200ER
                                                                                                              49 B767-300ER
                                                                                                              36 B777-200ER
                                                                                                                    75 F100
                                                                                                                    6 MD-11
                                                                                                                  229 MD-82
                                                                                                                   40 MD-83
                                                                                                                    3 MD-87

Asiana               South Korea            1988      Kumho Group (47.1%)                                        2 A321-100
                                                      Unspecified Investors (43.9%)                              5 A321-200
                                                      Korean Development Bank (7.2%)                            22 B737-400
                                                      Korea Exchange Bank (1.2%)                                 3 B737-500
                                                      Cho-Hueng Bank (0.6%)                                      3 B747-400
                                                                                                            5 B747-400Combi
                                                                                                                4 B747-400F
                                                                                                                 9 B767-300
                                                                                                               3 B767-300ER
                                                                                                              1 B767-300ERF
                                                                                                               2 B777-200ER

Avianca              Colombia               1919      Grupo Valores Bavaria (62.5%)                              3 B757-200
                                                      Unspecified Investors (37.5%)                            4 B767-200ER
                                                                                                               2 B767-300ER
                                                                                                                 5 F50 High
                                                                                                                Performance
                                                                                                                   13 MD-83

                     United States          1972      Burlington Northern Air Freight (a subsidiary           3 B727-200FHK
BAX Global                                            of
                                                      Pittston Burlington Group) (100%)                      3 B727-200AFHK
                                                                                                                11 DC-8-71F

                     Italy                  1998      Antonio De Ponti, Sandro Giulianelli and                   4 B737-400
Blue Panorama                                         Franco
                                                      Pecci (100%)

Braathens SAFE       Norway                 1946      KLM (30%)                                                  5 B737-400
                                                      Braganza (33.4%)                                          16 B737-500
                                                      Bramora (5.4%)                                            11 B737-700
                                                      Unspecified Investors (31.2%)
                                                      (Braganza and Bramora are Braathens holding
                                                      companies)

British Airways      United Kingdom         1974      Publicly Listed Company                                   26 A319-130
                                                                                                                 5 A320-110
                                                                                                                 5 A320-210
                                                                                                                12 B737-300
                                                                                                                34 B737-400
                                                                                                                10 B737-500
                                                                                                               10 B747-200B
                                                                                                          1 B747-200B Combi
                                                                                                                55 B747-400
                                                                                                                1 B747-400F
                                                                                                                38 B757-200
                                                                                                              21 B767-300ER
                                                                                                                 5 B777-200
                                                                                                              38 B777-200ER
</Table>

                                        36
<PAGE>   40

<Table>
<Caption>
                                            BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
<S>                  <C>                  <C>         <C>                                              <C>
bmi british midland  United Kingdom         1938      Airlines of Britain plc (100%)                             8 A320-230
                                                      Airlines of Britain is owned by the BBW                   10 A321-230
                                                      partnership of Sir Michael Bishop, John                    2 A330-200
                                                      Wolfe, Stuart Balmforth (60%), Lufthansa (20%)             6 B737-300
                                                      and SAS (20%)                                              2 B737-400
                                                                                                                 8 B737-500
                                                                                                                     6 F100
                                                                                                                      3 F70

China Southern       People's Republic      1991      SA Group (62.5%)                                          20 A320-230
                     of China                         Unspecified Investors (37.5%)                             25 B737-300
                                                                                                                11 B737-500
                                                                                                                18 B757-200
                                                                                                                 4 B777-200
                                                                                                               5 B777-200ER

China Xinjiang       People's Republic      1985      CAAC (50%)                                                5 ATR72-500
                     of China                         Xinjiang Province (50%)                                    2 B737-300
                                                                                                                 8 B757-200
                                                                                                            3 IlyushinII-86
                                                                                                          5 Tupolev Tu-154M

Delta Airlines       United States          1928      Publicly Quoted                                              15 MD-11
                                                      Swissair (4.6%)                                             120 MD-88
                                                                                                                16 MD-90-30
                                                                                                             73 B727-200AHK
                                                                                                                23 B737-300
                                                                                                             54 B737-200AHK
                                                                                                                50 B737-800
                                                                                                               121 B757-200
                                                                                                                15 B767-200
                                                                                                                28 B767-300
                                                                                                              58 B767-300ER
                                                                                                              17 B767-400ER
                                                                                                               7 B777-200ER
                                                                                                               1 L-1011-250

Europe Airpost       France                 1986      Sofipost (100%)                                        3 A300-B4-100F
                                                                                                              15 B737-300QC
                                                                                                                2 B737-300F
                                                                                                             1 B737-200QCHK

FEAT                 Taiwan                 1957      Unspecified Investors (67.05%)                                4 MD-82
                                                      China Development Corp (14%)                                  5 MD-83
                                                      China Airlines (10%)                                       7 B757-200
                                                      Taiwan Aerospace Corporation (4.95%)
                                                      Fubon Insurance (4%)

Finnair              Finland                1923      Government Owned (58.4%)                                  9 ATR72-200
                                                      Smaller Investors and other companies (20.3%)              4 A319-110
                                                      Odin Forvaltning (9.9%)                                    2 A320-210
                                                      Ilmarinen Pension Insurance Company (2.9%)                 4 A321-210
                                                      Local government pension companies (2.6%)                   9 DC-9-51
                                                      Tapiola Group (2.2%)                                      1 DC-9-51HK
                                                      Sampo Group (1.6%)                                            4 MD-11
                                                      Pohjola Life Assurance (1.1%)                                 9 MD-82
                                                      Suomi Mutual Life Assurance (1%)                             12 MD-83
                                                                                                                 4 B757-200

Frontier             United States          1994      Unspecified Investors (49%)                                2 A319-100
                                                      DDJ Capital Management (33%)                              17 B737-300
                                                      Wexford Management (10%)                                7 B737-200AHK
                                                      WR Hambrecht & Co (8%)
</Table>

                                        37
<PAGE>   41

<Table>
<Caption>
                                            BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
<S>                  <C>                  <C>         <C>                                              <C>
Indian Airlines      India                  1953      Government of India (100%)                        3 Fairchild/Dornier
                                                                                                                    228-200
                                                                                                              6 A300-B2-100
                                                                                                              7 A300-B4-200
                                                                                                                32 A320-200

JMC Airlines         United Kingdom         1999      Thomas Cook (100%)                                        10 A320-200
                                                                                                                14 B757-200
                                                                                                                 2 B757-300
                                                                                                                  1 DC10-30

Lan Chile            Chile                  1929      Grupo Cueto (38.5%)                                        6 A320-200
                                                      Grupo Pifiera (33.1%)                                      2 A340-300
                                                      Grupo Eblen (8.1%)                                       14 B737-200A
                                                      Unspecified Investors (20.3%)                           12 B767-300ER
                                                                                                              4 B767-300ERF

Malev                Hungary                1946      Government (97%)                                           6 B737-300
                                                      Municipalities, Private Entities,                          6 B737-400
                                                      Organisations and employees (3%)                           2 B737-500
                                                                                                               2 B767-200ER
                                                                                                               1 B767-300ER
                                                                                                                      6 F70

Monarch              United Kingdom         1967      Cosmos Guide Holding                                      4 A300-600R
                                                      International NV (100%)                                    5 A320-200
                                                                                                                 7 B757-200
                                                                                                                  1 DC10-30
                                                                                                                 4 A321-230
                                                                                                                 2 A330-240

Nordeste             Brazil                 1976      Rio Sul Servicos Aereos Regionals (99%)                    4 B737-500
                                                      Unspecified Investors (1%)                                  1 EMB-120
                                                                                                                2 EMB-120ER
                                                                                                                      5 F50

PAL                  Philippines            1941      L T Group (57.7%)                                          3 A320-210
                                                      Top Wealth Enterprises, Maxell Holdings and                8 A330-300
                                                      Richmark Holdings (35.1%)                                  4 A340-310
                                                      Philippine Government (4.3%)                               6 B737-300
                                                      Airline Employees (2.6%)                                   3 B737-400
                                                      Unspecified Investors (0.3%)                               3 B747-400
                                                                                                           1 B747-400 Combi
                                                                                                                3 B747-200B

Pegasus              Turkey                 1990      Yapi Kredit Bank (49%)                                     2 A320-200
                                                      Alper Elchin (21%)                                         4 B737-400
                                                      Silkar and Net Holdings (30%)                              8 B737-800

                     United States          1990      American Airlines (100%)                                 See American
Reno Air                                                                                                           Airlines

Spanair              Spain                  1986      Tour operator Viajes Marsans (51%)                         3 A320-200
                                                      SAS Leisure AB (Vingresor) (49%)                           3 A321-200
                                                                                                                    5 MD-82
                                                                                                             6 MD-82 (SAIC)
                                                                                                                   20 MD-83
                                                                                                                    3 MD-87
                                                                                                               3 B767-300ER
</Table>

                                        38
<PAGE>   42

<Table>
<Caption>
                                            BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
<S>                  <C>                  <C>         <C>                                              <C>
                     Brazil                 1986      Taxi Aereo Marilia (owned by the estate of the             6 A319-130
TAM                                                   late
                                                      Captain Rolim Amaro) (100%)                               15 A320-230
                                                                                                                 7 A330-200
                                                                                                                    49 F100
                                                                                                                      2 F50
                                                                                                        3 Cessna Citation V
                                                                                                       1 Cessna CitationJet

THY                  Turkey                 1933      Government of Turkey (98.17%)                              7 A310-300
                                                      Unspecified Investors (1.83%)                              7 A340-310
                                                                                                                    9 RJ100
                                                                                                                     3 RJ70
                                                                                                               1 B727-200FA
                                                                                                                15 B737-400
                                                                                                                 2 B737-500
                                                                                                                24 B737-800

Varig                Brazil                 1927      Ruben Berta Foundation (of employees and                  3 DC-10-30F
                                                      executives) (55.63%)                                        3 MD-11ER
                                                      Rio Grande do Sul State Government (0.43%)                   13 MD-11
                                                      Unspecified Investors (43.94%)                            1 B727-100C
                                                                                                                2 B727-100F
                                                                                                               2 B727-100QC
                                                                                                               2 B727-200FA
                                                                                                                34 B737-300
                                                                                                                 4 B737-400
                                                                                                               13 B737-200A
                                                                                                                 5 B737-700
                                                                                                               6 B767-200ER
                                                                                                               6 B767-300ER

Virgin Express       Belgium                1991      Virgin Group (59%)                                         9 B737-300
                                                      Unspecified Investors (41%)                                2 B737-400

Volare Airlines Spa  Italy                  1997      Volare Group (100%)                                       11 A320-200
                                                                                                                 1 A321-200
Xiamen Airlines      People's Republic      1984      China Southern (60%)                                       4 B737-300
                     of China                         Fujian Investment and Enterprise                           4 B737-500
                                                      Corporation (20%)                                         2 B737-200A
                                                      Xiamen Province (20%)                                      5 B737-700
                                                                                                                 5 B757-200
</Table>

---------------
Source: Airclaims Limited CASE Database, July 13, 2001.

                                        39
<PAGE>   43

C. ORGANIZATIONAL STRUCTURE

AERCO STRUCTURE AND PAYMENT FLOWS

     The following diagram illustrates the AerCo organizational structure and
the nature of payment flows:

                                    [Chart]

     - AerCo and its aircraft owning subsidiaries are owners of the aircraft
       that form the portfolio.

     - AerCo owns 100% of the equity in each of its aircraft owning
       subsidiaries.

     - The security trustee has a security interest in the leases, including all
       rental payments as well as a security interest in the equity of each of
       the aircraft owning subsidiaries.

     - The indenture contains a negative pledge covenant that prohibits AerCo
       and its aircraft owning subsidiaries from granting a security interest in
       the aircraft, the leases or the equity in the aircraft owning
       subsidiaries to any third party.

     - AerCo is owned 95% by AerCo Holding Trust, a Jersey charitable trust, and
       5% by debis Ireland. debis Ireland also holds 100% of the subclass E-1
       notes and 100% of the subclass D-2 and subclass E-2 notes.

                                        40
<PAGE>   44

D. PROPERTY, PLANTS AND EQUIPMENT

     AerCo Group has no ownership or leasehold interest in any real property.
AerCo's registered and principal office is located at 22 Grenville Street, St.
Helier, Jersey JE4 8PX, Channel Islands. For a description of AerCo Group's
interest in other property, see "-- Business Overview -- Portfolio Information."

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The review of operating results set forth below is based on the aircraft
owned by AerCo Group at March 31, 2001 and March 31, 2000 and therefore is
limited to a discussion of historical financial data with respect to those
aircraft and the related leases from their date of acquisition. You should note,
however, that because the following discussion only covers historical data from
July 17, 2000 in respect of the additional aircraft which AerCo Group acquired
from debis Ireland on July 17, 2000, it will not be indicative of an analysis of
the consolidated financial results of AerCo in future periods.

A. OPERATING RESULTS

GENERAL

     AerCo was incorporated on June 4, 1998. However, it did not conduct any
business operations until it acquired its initial aircraft portfolio and issued
notes on July 15, 1998. On that date AerCo purchased all of the outstanding
capital stock of ALPS 94-1 and also purchased all of the capital stock of the
debis transferred companies from debis Ireland. The debis transferred companies
owned 10 aircraft at July 15, 1998.

     On July 17, 2000 AerCo acquired 30 additional aircraft and related leases
from debis Ireland and refinanced its existing subclass A-1 and D-1 notes. The
acquisition of the additional aircraft from debis was achieved through the
purchase of the capital stock of 18 100% owned subsidiaries of debis. AerCo
financed the acquisition of the additional aircraft from debis and refinanced
its subclass A-1 and D-1 notes through the issue of $960 million of new public
notes and the issue of new D-2 notes and E-2 notes which were acquired by debis.

     The following discussion of AerCo's results of operations for 2001 compared
to 2000 is based on the audited results of AerCo for the years ended March 31,
2001 and 2000.

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2001 COMPARED WITH YEAR ENDED
MARCH 31, 2000

  Overview

     AerCo Group's results for the year ended March 31, 2001 reflected a
continuation of difficult trading conditions for some of its lessees, along with
an unfavorable market for some of its aircraft, in particular widebody aircraft,
with a corresponding negative impact on aircraft values and lease rates and
increased levels of aircraft downtime. (For recent developments, see "Item 3. D.
Risk Factors -- Recent Developments" and "Item 5. D. Trend Information.") In
addition, AerCo's results for the year were adversely affected by financial
difficulties experienced by two North American lessees. On February 29, 2000,
one of the lessees, Tower Air filed for Chapter 11 bankruptcy protection in the
US in its attempts to restructure its operations. On January 23, 2001, the
relevant US bankruptcy court granted an order terminating the lease with Tower
Air. The second lessee, TWA, filed for Chapter 11 bankruptcy protection on
January 10, 2001 and reached agreement with American Airlines in March 2001 for
the sale of its business. As a result, an aircraft purchase option relating to
the aircraft leased by AerCo to TWA was exercised by a third party under the
terms of a rental support agreement which became effective on the filing by TWA
for Chapter 11 bankruptcy protection. See "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."
During the year, one Colombian lessee continued to experience difficulties in
meeting its contracted rental and other payments. See "Item 4. Information on
the Company -- Business Overview -- The Lessees -- Latin American
Concentration." Further slowdown in economic growth may result in AerCo Group
increasingly having to address the problems of lessees in financial difficulty
with lease reschedulings, rent deferrals and other restructuring arrangements.
In these circumstances, AerCo's ability to pay interest on, and repay principal
of, the notes may be adversely affected.

                                        41
<PAGE>   45

  Revenues

     Revenues for AerCo Group in the year ended March 31, 2001 were $164.9
million, including revenue earned for an eight and one-half month period on
aircraft acquired on July 17, 2000 of $62.1 million, compared with $109.1
million in the year ended March 31, 2000. The decrease in lease revenues
(excluding the acquired aircraft) in the year ended March 31, 2001 is primarily
attributable to downtime incurred in the current year on lease expiries and also
a softening in lease rates achieved for operating lease rentals in the year.
Rentals from European and Asia Pacific carriers represented 51.3%
(2000 -- 48.5%) and 19.4% (2000 -- 23.5%), respectively, of AerCo's leasing
revenues in the year ended March 31, 2001. One lessee (Spanair) accounted for 9%
of AerCo's leasing revenues in the year ended March 31, 2001. The same lessee
accounted for 11% of AerCo's leasing revenues in the year ended March 31, 2000.
At March 31, 2001, AerCo had one aircraft off-lease and one aircraft held for
scrap. AerCo had no aircraft off-lease at March 31, 2000.

     Rental rates on 24 of the 32 new leases written by AerCo Group since July
1998, reflect the current softening in lease rates in the commercial aviation
market for operating lease rentals. These rates were on average 18% below the
previous lease rates for these aircraft. Rental rates on the remaining eight
leases written by AerCo Group in the period were on average 8% above previous
lease rates for these aircraft. AerCo Group entered into 10 new leases/lease
extensions (including three new leases/lease extensions on three of the aircraft
acquired in July 2000) in the year ended March 31, 2001 for the following
aircraft: two B737-300s (62 months and 54 months), three B737-400s (64 months,
36 months and 18 months), two MD 83's (18 months and 12 months), one MD 82 (18
months) and two B767-300ER's (30 months and 21 months). AerCo Group entered into
12 new leases/lease extensions in the year ended March 31, 2000 for the
following aircraft: one F100 (71 months), five B737-300s (65 months, 60 months,
12 months, 65 months and 36 months), two B737-400s (56 months and 48 months),
one B737-500 (42 months), two A320-200s (24 months and 36 months) and one
B767-300ER (1 month).

  Sale of Aircraft

     During the year ended March 31, 2001, one engine (from B747-200B MSN 22496)
was sold to IAI Bedek Aviation Group for a price of $1.4 million. The net book
value of this engine at the date of sale was $1.4 million. Sales proceeds of
$14.7 million from the sale of one aircraft, an F100 sold to an affiliate of
Portugalia, were received by AerCo Group in the year ended March 31, 2000. The
net book value of this aircraft at the date of sale was $15.6 million.

  Depreciation and Provision for Impairment in Aircraft Values

     The depreciation charge for AerCo Group for the year ended March 31, 2001
amounted to $69.1 million, including depreciation charged on aircraft acquired
during the year of $25.0 million, compared to $47.0 million for the year ended
March 31, 2000. The decrease in depreciation charged (excluding the acquired
aircraft) in the year ended March 31, 2001 is primarily due to a reduced
depreciation charge on the B747-200B aircraft in the current year as a result of
the impairment provision made on the aircraft in the year ended March 31, 2000.
AerCo Group has depreciated each aircraft at a rate calculated to write-off the
cost of the aircraft to its estimated residual value of generally 15% of its
initial appraised value, on a straight-line basis, over its estimated useful
economic life of 25 years from the date of manufacture.

     For the year ended March 31, 2001, the directors of AerCo determined to
make a provision of $3.8 million in respect of an impairment in the value of one
B757-200 aircraft in its fleet. The directors arrived at such determination
having consideration for a contract for the disposal of this aircraft entered
into prior to March 31, 2001, which was completed shortly after the year end.
For more information regarding this aircraft, you should refer to "Item 4.
Information on the Company -- Business Overview -- The Lessees -- North American
Concentration."

     For the year ended March 31, 2000, the directors of AerCo determined to
make a provision of $13.1 million in respect of an impairment in the value of
AerCo Group's one B747-200B aircraft. The directors arrived at such
determination based on the financial condition of the aircraft's lessee, the
physical condition of the aircraft and the unfavorable market conditions for
this aircraft type. The carrying value of this aircraft at March 31, 2000 was
                                        42
<PAGE>   46

$5.4 million net of maintenance provisions of $3.6 million and an amount of $3.5
million provided in respect of one engine on this aircraft. For more information
regarding this aircraft, you should refer to "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."

  Net Interest Expense

     Net interest expense for AerCo amounted to $137.9 million in the year ended
March 31, 2001, including net interest expense of $55.1 million incurred on new
debt raised to acquire the 30 additional aircraft during the year, compared to
$78.8 million in the year ended March 31, 2000. The increase in net interest
expense for AerCo of $59.1 million in the year ended March 31, 2001 was
primarily due to a combination of the new debt raised to acquire the 30
additional aircraft and a higher interest rate environment in the year ended
March 31, 2001 compared to the year ended March 31, 2000. The average
indebtedness outstanding for AerCo during the year ended March 31, 2001 was
$1,406.0 million compared to $925.2 million for the year ended March 31, 2000.

     Under the terms of the AerCo subclass E-1 and E-2 notes, interest accrues
at a rate of 20% per annum payable monthly in arrears. Except for the class E
note primary interest amount, which is payable at the rate of 15% per annum
multiplied by the initial outstanding principal balance of the subclass E-1
notes on July 15, 1998 and by the outstanding principal balance of the subclass
E-2 notes issued under the July 17, 2000 refinancing, no interest is payable on
the subclass E-1 and E-2 notes until all of the interest, principal and premium,
if any, on the other notes have been repaid in full. The class E note primary
interest amount is paid on each payment date only to the extent that AerCo has
available collections sufficient to make such payment after paying or providing
for each of the items ranking prior to such payment in the order of priority.
Approximately $48.3 million was accrued during the year ended March 31, 2001 in
respect of unpaid interest on the subclass E-1 and E-2 notes compared with $23.9
million on the subclass E-1 notes during the year ended March 31, 2000. Cash
paid in respect of interest amounted to $95.6 million (including $6.9 million
paid to debis which AerCo earned on the aircraft purchase account) in the year
ended March 31, 2001 compared with net interest expense of $137.9 million and
cash paid in respect of interest amounted to $56.2 million in the year ended
March 31, 2000 compared with net interest expense of $78.8 million, principally
reflecting subclass E-1 and E-2 note interest accrued but not paid in each year.

     Net interest expense also includes expenses incurred under AerCo's interest
rate swaps. AerCo has entered into interest rate swaps in order to correlate its
contracted fixed and floating rate rental payments to the fixed and floating
rate interest payments on the notes, resulting in a charge of $3.6 million ($3.1
million relating to the early termination of the TWA B757-200 lease) in the year
ended March 31, 2001 and a charge of $1.4 million in the year ended March 31,
2000.

     Net interest expense is stated after deducting interest income earned
during each year. In the year ended March 31, 2001, AerCo earned interest income
of $13.5 million (including $6.9 million earned on the cash raised to acquire
the 30 additional aircraft from debis) compared with $2.1 million in the year
ended March 31, 2000.

  Other Expenses

     Other expenses consist of servicer fees, administrative agency fees, cash
manager fees, insurance premiums (political risk and directors' liability
insurance), other service provider costs and miscellaneous expenditure items.
Other expenses for AerCo amounted to $11.4 million in the year ended March 31,
2001 compared to $15.7 million in the year ended March 31, 2000.

     In the year ended March 31, 2001, servicer, administrative agency and cash
manager fees payable by AerCo to Babcock & Brown and to debis totaled $8.7
million compared with $6.4 million in the year ended March 31, 2000. The
increase in servicer, administrative agency and cash manager fees in the current
year is primarily due to the increased fleet size from July 17, 2000 and a
termination fee paid to Babcock & Brown in the year ended March 31, 2001 on
termination of its servicing agreement with AerCo. Babcock & Brown acted as
lease manager to AerCo from July 15, 1998 to July 17, 2000. debis has acted as
lease manager to AerCo from July 17, 2000. Substantially all of the AerCo
servicer and administrative agency fees represent revenue based fees calculated
as a monthly percentage of lease rentals received on aircraft under management.

                                        43
<PAGE>   47

     AerCo Group's practice is to provide specifically for any bad debt amounts
due but unpaid by lessees. Each provision is based primarily on the amount due
in excess of security held and also takes into account the financial strength
and condition of a lessee and the economic conditions existing in the lessee's
operating environment. A small number of AerCo Group's lessees failed to meet
their contractual obligations in the years ended March 31, 2001 and 2000,
resulting in the requirement for additional provisions in respect of bad and
doubtful debts in respect of these lessees. Overall, there was a net provision
of $2.24 million required in respect of bad and doubtful debts in the year ended
March 31, 2001, compared with a net provision of $2.15 million in the year ended
March 31, 2000, in both cases primarily in respect of Tower Air.

     In the year ended March 31, 2000, AerCo made a provision of $3.5 million in
respect of an engine on the B747-200B aircraft on lease to Tower Air.

  Goodwill

     On July 17, 2000 AerCo acquired 30 additional aircraft and related leases
from debis Ireland. The acquisition of the 30 aircraft from debis Ireland was
achieved through the purchase of the capital stock of 18 100% owned subsidiaries
of debis Ireland. The difference between the fair value of the net assets
acquired and the consideration paid by AerCo for these new debis transferred
companies, of $15.7 million, represents purchased goodwill, which is capitalized
on the balance sheet of AerCo. On July 15, 1998 AerCo acquired 100% of the
capital stock of ALPS 94-1, thus indirectly acquiring a portfolio of 25 aircraft
and the related leases, and purchased certain aircraft owning subsidiaries of
debis, which owned 10 aircraft and related leases. The difference between the
fair value of the net assets acquired and the consideration paid by AerCo for
the acquisition of ALPS 94-1 and these debis transferred companies, of $47.1
million, represents purchased goodwill, which is capitalized on the balance
sheet of AerCo. Purchased goodwill is amortized on a straight-line basis over
its estimated economic life.

     In the results of AerCo for the year ended March 31, 2001 goodwill of $2.9
million was amortized compared to $2.4 million in the year ended March 31, 2000
as a result of the additional goodwill described above.

  Operating Loss

     In the year ended March 31, 2001, AerCo recorded an operating loss of $60.2
million (including $27.6 million relating to the additional 30 aircraft acquired
from debis) compared with an operating loss of $48.8 million for the year ended
March 31, 2000.

  Taxes

     AerCo had a tax charge of approximately $0.05 million in the year ended
March 31, 2001, compared with a tax charge of approximately $0.05 million for
the year ended March 31, 2000.

  Net Loss

     As a result of the above factors, AerCo had a net loss of $60.3 million for
the year ended March 31, 2001 compared with a net loss of $48.8 million for the
year ended March 31, 2000.

  Differences between U.K. GAAP and U.S. GAAP

     The principal differences between U.S. GAAP and U.K. GAAP that have
affected the results of operations and financial position of AerCo and ALPS 94-1
relate to the accounting treatment of aircraft cost and related impairment and
depreciation, goodwill and debt issue costs.

     Aircraft are stated at purchase cost under U.K. GAAP. Under U.S. GAAP
aircraft are stated at debis's amortized cost at the date of delivery to, and
acquisition by, AerCo and ALPS 94-1, respectively. The difference between the
purchase cost and debis's amortized cost is treated as a distribution to debis.
The impact is to reduce the net book value of aircraft and shareholders' equity
under U.S. GAAP compared with U.K. GAAP. This difference in net book value
causes differences in depreciation expense, gain or loss on disposal and
impairment charges.
                                        44
<PAGE>   48

     Under U.K. GAAP AerCo has depreciated each aircraft at a rate calculated to
write off the cost of the aircraft from the date of acquisition, on a
straight-line basis, to a residual value of generally 15% of cost over a period
of 25 years from the date of manufacture. Under U.S. GAAP aircraft are
depreciated on a straight-line basis at a rate designed to write off debis's
amortized cost at the date of delivery to AerCo to a residual value of generally
15% of cost over a period of 25 years from the date of manufacture.

     Under U.K. GAAP the difference between the fair value of the net assets of
ALPS 94-1 and the debis transferred aircraft, and the purchase consideration
paid by AerCo to acquire these entities in July 1998 gave rise to goodwill of
$47.1 million and the difference between the fair value of the net assets of the
new debis transferred companies, and the purchase consideration paid by AerCo to
acquire these entities in July 2000 gave rise to goodwill of $15.7 million. This
purchased goodwill is capitalized and amortized over a period of 20 years. No
goodwill arises under U.S. GAAP as these transactions are accounted for on a
predecessor cost basis as transactions between entities under common control.

     Goodwill of $6.1 million representing the difference between the fair value
of the net assets acquired and the consideration paid by the new debis
transferred companies in respect of their acquisition of aircraft from Indigo,
is eliminated under acquisition accounting in U.K. GAAP. Under U.S. GAAP this
goodwill will continue to be recognized in the consolidated financial statements
of AerCo.

     Under U.K. GAAP the costs of debt issuance arising on the completion of the
refinancing transactions in July 1998 and July 2000 are disclosed as a reduction
of the related indebtedness. Under U.S. GAAP the costs of issuance are disclosed
separately as deferred financing costs.

     For a discussion of these and other differences between U.K. GAAP and U.S.
GAAP, including certain income recognition and depreciation differences relating
to AerCo's acquisition of the capital stock of ALPS 94-1 and the debis
transferred companies in July 1998 and the capital stock of the new debis
transferred companies acquired in July 2000, see notes 23, 24, 25 and 26 to the
AerCo audited consolidated financial statements.

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2000 COMPARED WITH THE EIGHT AND
ONE-HALF MONTH PERIOD FROM JULY 15, 1998 TO MARCH 31, 1999

  Overview

     AerCo Group's results for the year ended March 31, 2000 were adversely
affected by the significant increase in the number of aircraft available for
lease or sale in the period, with a corresponding negative impact on aircraft
values and lease rates particularly for older widebody aircraft. Although growth
in air travel increased in 1999, reflecting a measure of economic recovery in
the Asia Pacific region and strong performance in the rest of the world,
aircraft lease rates generally declined. In addition, AerCo's results for the
year were significantly adversely affected by financial difficulties experienced
by one North American lessee in meeting its contracted lease payments. The
lessee, Tower Air, has filed for Chapter 11 bankruptcy protection and AerCo has
petitioned the relevant U.S. bankruptcy court to terminate the lease to Tower
Air. As a result, AerCo may have to take redelivery of one B747-200B aircraft on
lease to that lessee in the near term. See "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."
During the year, as a result of the deterioration in the value of the Colombian
currency and negative impact on the Colombian economy, one Colombian lessee
continued to experience difficulties in meeting its contracted rental and other
payments. See "Item 4. Information on the Company -- Business Overview -- The
Lessees -- Latin American Concentration." Excess supply of aircraft in the
operating lease market is continuing. This gave rise to a softening of lease
rates and more limited placement prospects for aircraft which came off-lease
during the year. In addition, any slowdown in economic growth may result in
AerCo Group increasingly having to address the problems of lessees in financial
difficulty with lease reschedulings, rent deferrals and other restructuring
arrangements. In these circumstances, AerCo's ability to pay interest on, and
repay principal of, the notes may be adversely affected.

  Revenues

     Revenues for AerCo Group in the year ended March 31, 2000 were $109.1
million compared with $82.8 million in the period from July 15, 1998 to March
31, 1999. Rentals from European and Asia Pacific

                                        45
<PAGE>   49

carriers represented 48.5% (1999 -- 48.8%) and 23.5% (1999 -- 25.4%), of AerCo's
leasing revenues in the year ended March 31, 2000. One lessee accounted for more
than 10% of AerCo's leasing revenues (Spanair: 11.1%). The same lessee accounted
for more than 10% of AerCo's leasing revenues in the period from July 15, 1998
to March 31, 1999, (Spanair: 10.5%). At March 31, 2000 and March 31, 1999, AerCo
had no aircraft off-lease.

     Rental rates on 14 of the 22 new leases written by AerCo Group since July
1998, reflect the current softening in lease rates in the commercial aviation
market for operating lease rentals. These rates were on average 15% below the
previous lease rates for these aircraft. Rental rates on the remaining eight
leases written by AerCo Group in the period were on average 8% above previous
lease rates for these aircraft. AerCo Group entered into 12 new leases/lease
extensions in the year ended March 31, 2000 for the following aircraft: one F100
(71 months), five B737-300s (65 months, 60 months, 12 months, 65 months and 36
months), two B737-400s (56 months and 48 months), one B737-500 (42 months), two
A320-200s (24 months and 36 months) and one B767-200ER (1 month). AerCo Group
entered into 10 new leases/lease extensions in the year ending March 31, 1999
with respect to one B757-200 (72 months), three MD-83s (60 months, 60 months and
40 months), two A320-200s (60 months and 11 months), one B737-400 (57 months),
one F100 (35 months), one B737-300 (24 months) and one B737-500 (2 months).

  Sale of Aircraft

     Two aircraft have been sold. Sales proceeds of $14.7 million from the sale
of one aircraft, an F100 sold to an affiliate of Portugalia, were received by
AerCo Group in the year ended March 31, 2000. The net book value of this
aircraft at the date of sale was $15.6 million. Sales proceeds of $14.5 million
from the sale of another F100 also sold to an affiliate of Portugalia, were
received by AerCo Group in the period from July 15, 1998 to March 31, 1999. The
net book value of this second aircraft at the date of sale was $13.9 million and
other sales costs were $0.6 million.

  Depreciation and Provision for Impairment in Aircraft Values

     The depreciation charge for AerCo Group for the year ended March 31, 2000
amounted to $47.0 million compared to $33.8 million in the period from July 15,
1998 to March 31, 1999. AerCo Group has depreciated each aircraft at a rate
calculated to write-off the cost of the aircraft to its estimated residual value
of generally 15% of its initial appraised value, on a straight-line basis, over
its estimated useful economic life of 25 years from the date of manufacture.

     For the year ended March 31, 2000, the directors of AerCo determined to
make a provision of $13.1 million in respect of an impairment in the value of
AerCo Group's one B747-200B aircraft. The directors arrived at such
determination based on the financial condition of the aircraft's current lessee,
the physical condition of the aircraft and the unfavorable market conditions for
this aircraft type. The carrying value of this aircraft at March 31, 2000 was
$5.4 million net of maintenance provisions of $3.6 million and an amount of $3.5
million provided in respect of one engine on this aircraft. For more information
regarding this aircraft, you should refer to "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."

  Net Interest Expense

     Net interest expense for AerCo amounted to $78.8 million in the year ended
March 31, 2000 compared to $54.1 million in the period from July 15, 1998 to
March 31, 1999. The increase in net interest expense for AerCo of $24.7 million
in the year ended March 31, 2000 was primarily due to a combination of the
longer accounting period and a higher interest rate environment in the year
ended March 31, 2000 compared to the period from July 15, 1998 to March 31,
1999. The average indebtedness outstanding for AerCo during the year ended March
31, 2000 was $925.2 million compared to $973.8 million for the period from July
15, 1998 to March 31, 1999.

     Under the terms of the AerCo subclass E-1 notes, interest accrues at a rate
of 20% per annum payable monthly in arrears. Except for the subclass E-1 note
primary interest amount, which is payable at the rate of 15% per annum
multiplied by the initial outstanding principal balance of the subclass E-1
notes, no interest is payable
                                        46
<PAGE>   50

on the subclass E-1 notes until all of the interest, principal and premium, if
any, on the notes have been repaid in full. The subclass E-1 note primary
interest amount is paid on each payment date only to the extent that AerCo has
available collections sufficient to make such payment after paying or providing
for each of the items ranking prior to such payment in the order of priority.
Approximately $23.9 million was accrued during the year ended March 31, 2000 in
respect of unpaid interest on the subclass E-1 notes compared with $14.1 million
during the period from July 15, 1998 to March 31, 1999. Cash paid in respect of
interest amounted to $56.2 million in the year ended March 31, 2000 compared
with net interest expense of $78.8 million and cash paid in respect of interest
amounted to $39.0 million in the period from July 15, 1998 to March 31, 1999
compared with net interest expense of $54.1 million, principally reflecting
subclass E-1 note interest accrued but not paid in each period.

     Net interest expense also includes expenses incurred under AerCo's interest
rate swaps. AerCo has entered into interest rate swaps in order to correlate its
contracted fixed and floating rate rental payments to the fixed and floating
rate interest payments on the notes, resulting in a charge of $1.4 million in
the year ended March 31, 2000 and a charge of $1.2 million in the period from
July 15, 1998 to March 31, 1999.

     Net interest expense is stated after deducting interest income earned
during the relevant period. In the year ended March 31, 2000, AerCo earned
interest income of $2.1 million compared with $1.9 million in the period from
July 15, 1998 to March 31, 1999.

  Other Expenses

     Other expenses consist of servicer fees, administrative agency fees, cash
manager fees, insurance premiums (political risk and directors' liability
insurance), other service provider costs and miscellaneous expenditure items.
Other expenses for AerCo amounted to $15.7 million in the year ended March 31,
2000 compared to $8.3 million in the period from July 15, 1998 to March 31,
1999.

     In the year ended March 31, 2000, servicer, administrative agency and cash
manager fees payable by AerCo to Babcock & Brown and the debis group totaled
$6.4 million compared with $4.4 million in the period from July 15, 1998 to
March 31, 1999. Substantially all of the AerCo fees represent revenue based fees
calculated as a monthly percentage of lease rentals received on aircraft under
management.

     AerCo Group's practice is to provide specifically for any bad debt amounts
due but unpaid by lessees. Each provision is based primarily on the amount due
in excess of security held and also takes into account the financial strength
and condition of a lessee and the economic conditions existing in the lessee's
operating environment. A small number of AerCo Group's lessees failed to meet
their contractual obligations in the year ended March 31, 2000, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these lessees. Overall, there was a net provision of $2.15 million
required in respect of bad and doubtful debts in the year ended March 31, 2000
primarily in respect of Tower Air, compared with a net provision of $0.55
million in the period from July 15, 1998 to March 31, 1999 primarily in respect
of PAL.

     In the year ended March 31, 2000, AerCo made a provision of $3.5 million in
respect of an engine on the B747-200B aircraft on lease to Tower Air.

  Goodwill

     On July 15, 1998 AerCo acquired 100% of the capital stock of ALPS 94-1,
thus indirectly acquired a portfolio of 25 aircraft and the related leases, and
purchased certain aircraft owning subsidiaries of debis, which owned 10 aircraft
and related leases. The difference between the fair value of the net assets
acquired and the consideration paid by AerCo for the acquisition of ALPS 94-1
and the debis aircraft owning companies of $47.1 million represents purchased
goodwill, which is capitalized on the balance sheet of AerCo and amortized on a
straight-line basis over its estimated economic life. In the results of AerCo
for the year ended March 31, 2000, goodwill of $2.4 million was amortized
compared with $1.7 million in the period from July 15, 1998 to March 31, 1999.

                                        47
<PAGE>   51

  Operating Loss

     In the year ended March 31, 2000, AerCo recorded an operating loss of $48.8
million compared with an operating loss of $15.1 million for the period from
July 15, 1998 to March 31, 1999.

  Taxes

     AerCo had a tax charge of approximately $0.05 million in the year ended
March 31, 2000, compared with a tax charge of approximately $0.03 million for
the period from July 15, 1998 to March 31, 1999.

  Net Loss

     As a result of the above factors, AerCo had a net loss of $48.8 million for
the year ended March 31, 2000 compared with a net loss of $15.1 million in the
period from July 15, 1998 to March 31, 1999.

  Differences between U.K. GAAP and U.S. GAAP

     The principal differences between U.S. GAAP and U.K. GAAP that have
affected the results of operations and financial position of AerCo and ALPS 94-1
relate to the accounting treatment of aircraft cost and related impairment and
depreciation, goodwill and issue costs.

     Aircraft are stated at purchase cost under U.K. GAAP. Under U.S. GAAP
aircraft are stated at debis's amortized cost at the date of delivery to, and
acquisition by, AerCo and ALPS 94-1, respectively. The difference between the
purchase cost and debis's amortized cost is treated as a distribution to debis.
The impact is to reduce the net book value of aircraft and shareholders' equity
under U.S. GAAP compared with U.K. GAAP.

     Under U.K. GAAP AerCo has depreciated each aircraft at a rate calculated to
write off the cost of the aircraft from the date of acquisition, on a
straight-line basis, to a residual value of generally 15% of cost over a period
of 25 years from the date of manufacture. Under U.S. GAAP aircraft are
depreciated on a straight-line basis at a rate designed to write off debis's
amortized cost at the date of delivery to AerCo to a residual value of generally
15% of cost over a period of 25 years from the date of manufacture.

     Under U.K. GAAP the difference between the fair value of the net assets of
ALPS 94-1 and the debis transferred aircraft, and the purchase consideration
paid by AerCo to acquire these entities gave rise to goodwill of $47.1 million
which is capitalized and amortized over a period of 20 years. No goodwill arises
under U.S. GAAP as these transactions are accounted for on a predecessor cost
basis as transactions between entities under common control.

     Under U.K. GAAP the costs of issuance arising on the completion of the
refinancing transaction are disclosed a reduction of the related indebtedness.
Under U.S. GAAP the costs of issuance are disclosed separately as deferred
financing costs.

     For a discussion of these and other differences between U.K. GAAP and U.S.
GAAP, including certain income recognition and depreciation differences relating
to AerCo's acquisition of the capital stock of ALPS 94-1 and the debis aircraft
owning companies, see notes 24, 25 and 26 to the AerCo audited consolidated
financial statements.

B. LIQUIDITY AND CAPITAL RESOURCES

  Liquidity

     AerCo's primary source of liquidity is rental payments made by lessees
under the lease agreements. The principal uses of cash rental payments are
expenses related to the aircraft and their servicing, corporate expenses and the
payment of interest on and principal of indebtedness. Such indebtedness consists
of the additional notes offered in the additional notes offering, AerCo's
previously outstanding notes that were not refinanced in that offering and the
subclass E-1 notes which are held by debis and the subclass D-2 and subclass E-2
notes which were taken up by debis in the additional notes offering.

                                        48
<PAGE>   52

     The cash balances (including short-term investments in commercial paper) at
March 31, 2001 amounted to $104.7 million compared to $66.4 million at March 31,
2000. Under the terms of its indebtedness, AerCo is required to maintain cash
balances in an amount equal to (1) the amount of lessee security deposits ($20.9
million at March 31, 2001), and (2) the "liquidity reserve amount" ($65.0
million at March 31, 2001).

     The terms of AerCo's indebtedness restrict the use of such cash so that it
is generally not available to service debt. The liquidity reserve amount has
been determined largely based on an analysis of historical experience,
assumptions regarding AerCo Group's future experience and the frequency and cost
of certain contingencies in respect of the aircraft. It is intended to provide
liquidity for meeting the cost of maintenance obligations and non-maintenance,
aircraft-related contingencies such as removing regulatory liens, complying with
ADs and repossessing and re-leasing aircraft. In analyzing the future impact of
these costs, assumptions have been made regarding their frequency and amount
based upon historical experience. There can be no assurance, however, that
historical experience will prove to be relevant or that actual cash received by
AerCo Group will not be significantly less than that assumed. Any significant
variation may materially adversely affect AerCo's ability to make payments of
interest and principal on the notes.

     During the next two years, AerCo may have to incur unusually high cash
expenditures for the purpose of airframe and engine overhauls and complying with
new regulatory requirements for aircraft operating in Europe and North America.
These payments could adversely affect AerCo's ability to make certain principal
payments on the notes, depending on their level and timing.

     Arising from the acquisition by debis of AerFi, the rating agencies
requested that AerCo have additional liquidity available to it as its servicer
and its standby servicer were now the same entity. On June 28, 2001, AerCo
entered into a Liquidity Facility Agreement (the "AGREEMENT") with Kreditanstalt
fur Wiederaufbau ("KFW") to provide additional funds to AerCo for the payment of
certain liabilities if and to the extent that insufficient funds are available
in the form of periodic revenues.

     Under the terms of the Agreement, KfW has made available to AerCo a
revolving facility of up to $35 million for a period of 364 days, with the
option to extend the facility for further periods of up to 364 days prior to the
expiry of the previous 364 day period. Under the terms of the Agreement, KfW is
not obliged to extend the facility, and, in the event that KfW does not grant an
extension of the facility, AerCo may choose to make a one-off drawing of an
amount up to the Minimum Liquidity Reserve at the time, providing always that
the aggregate amount of drawings does not exceed $35 million. AerCo paid KfW an
upfront fee of $50,000 and has also agreed to pay a commitment fee of $100,000
per annum payable quarterly in arrears.

     The revolving facility has a maturity date of August 15, 2025 or the date
of repayment of the outstanding principal balance of the class A notes, if
earlier. However, AerCo may cancel the whole or any part of the facility at any
time by giving 10 days prior written notice to KfW.

     If AerCo defaults on any of its obligations under the Agreement, KfW may
prevent further drawings and cancel the facility. In such circumstances, all
outstanding amounts payable under the facility would become immediately due and
payable, notwithstanding any other provision of the Agreement. If such
circumstances were to arise, AerCo's ability to make certain payments on the
notes may be adversely affected, depending on their level in the order of
priority of payments and timing.

     As of September 24, 2001, the liquidity reserve amount includes the amount
of $65 million held at March 31, 2001 and the additional facility amount of $35
million provided by KfW under the Agreement.

  Operating Activities

     Net cash provided by AerCo's operating activities in the year ended March
31, 2001 amounted to $58.3 million compared with $35.7 million for the year
ended March 31, 2000 reflecting the additional aircraft acquired during the
year. These amounts are net of cash paid in respect of interest of $95.6 million
(March 31, 2000: $56.2 million), net maintenance cash inflows of $6.0 million
(March 31, 2000: $7.5 million cash outflow) and security deposits refunded of
$2.5 million (March 31, 2000: $1.5 million received). The potential maintenance
and regulatory compliance expenditures described above may have an adverse
impact on AerCo's net operating cash flow in future periods.
                                        49
<PAGE>   53

  Investing and Financing Activities

     Cash flows from financing activities for the year ended March 31, 2001
reflect the issue by AerCo of its subclass A-3, A-4, B-2, C-2, D-2 and E-2 notes
on July 17, 2000 of $1,169.1 million and the repayment of $484.2 million of
principal on the AerCo subclass A-1, A-2, B-1, C-1, D-1, A-4, B-2 and C-2 notes
in the year. Cash flows used in financing activities in the year ended March 31,
2000 reflect the repayment of $48.9 million of principal on the subclass A-2,
subclass B-1 and subclass C-1 notes.

  Indebtedness

     At May 15, 2001, the outstanding principal amount of the notes we issued on
July 15, 1998 and July 17, 2000 was as follows:

<Table>
<Caption>
                              OUTSTANDING
                          PRINCIPAL AMOUNT AT   ANNUAL INTEREST RATE    EXPECTED FINAL
SUBCLASS OF NOTES            MAY 15, 2001        (PAYABLE MONTHLY)       PAYMENT DATE      FINAL MATURITY DATE
-----------------         -------------------   --------------------   -----------------   -------------------
<S>                       <C>                   <C>                    <C>                 <C>
Subclass A-2............         161.2          LIBOR + 0.32    %      December 15, 2005      July 15, 2023
Subclass A-3............         565.0          LIBOR + 0.46    %          June 15, 2002      July 15, 2025
Subclass A-4............         180.7          LIBOR + 0.52    %           May 15, 2011      July 15, 2025
Subclass B-1............          68.9          LIBOR + 0.60    %          July 15, 2013      July 15, 2023
Subclass B-2............          73.7          LIBOR + 1.05    %          June 15, 2008      July 15, 2025
Subclass C-1............          83.3          LIBOR + 1.35    %          July 15, 2013      July 15, 2023
Subclass C-2............          79.7          LIBOR + 2.05    %          June 15, 2008      July 15, 2025
Subclass D-2............         100.0          8.50%                       May 15, 2014      July 15, 2025
Subclass E-1............         112.0          20.00%                     July 15, 2023      July 15, 2023
Subclass E-2............         109.1          20.00%                     July 15, 2025      July 15, 2025
</Table>

     We used part of the proceeds of the additional notes offering on July 17,
2000 and the issuance of the subclass D-2 notes to refinance all of the then
outstanding subclass A-1 notes and subclass D-1 notes.

     Interest on any subclass of floating rate notes is calculated on the basis
of a 360-day year and the actual number of days elapsed in the interest accrual
period. Interest on any subclass of fixed rate notes is calculated on the basis
of a 360-day year consisting of twelve 30-day months.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

     Not applicable

D. TREND INFORMATION

     In the period prior to September 11, 2001, the airline industry was
experiencing a continuation of the difficult trading conditions which had become
increasingly evident in the year to March 31, 2001. These conditions led to a
continuing unfavorable market for some aircraft types, in particular widebody
aircraft, with a corresponding negative impact on aircraft values and lease
rates and increased levels of aircraft downtime. In addition, volatility in jet
fuel prices, together with the continued weakness of the euro against the U.S.
dollar had led to significant increases in operating costs for many airlines
based in the Euro-zone.

     On September 11, 2001, the United States was the subject of attacks by
terrorists who used the hijacked aircraft of certain airlines. The full effect
that the terrorist attacks may have for the aviation industry is not yet known.
However, the effects of these tragic events can be expected to exacerbate the
difficult trading conditions already being experienced by airlines worldwide.
These conditions are likely to adversely impact the ability of such airlines to
perform their lease obligations to us and have other adverse consequences as
further detailed in "Item 3.D. Recent Developments."

                                        50
<PAGE>   54

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

     AerCo's board of directors will have no more than five members at any time.
The holder or holders of a majority in aggregate principal amount of AerCo's
class E notes have the right to appoint two directors while the class E notes
are outstanding. The remaining directors must be independent directors. The
current independent directors are Mr. Frederick W. Bradley, Jr., Chairman of
AerCo, Mr. Kenneth N. Peters and Mr. G. Adrian Robinson. The succeeding
independent directors will be appointed by a majority of the then standing
directors. If no independent directors are serving on the board at any time,
three new independent directors will be appointed in accordance with AerCo's
Articles of Association. Mr. Edward Hansom and Ms. Rose Hynes were appointed
directors by debis Ireland as holder of the majority of the subclass E-1 notes.
Any resolution of the board of directors will require the affirmative vote of a
majority of the independent directors. Transactions and proceedings that relate
to certain insolvency proceedings, amendments to AerCo's Memorandum or Articles
of Association, acquisition of additional aircraft, mergers or the sale of all
or substantially all of AerCo's assets may only be approved by a unanimous vote
of all directors. The servicing, administrative agency and cash management
agreements between AerCo and the debis group provide that certain actions shall
be taken by AerCo by a special board resolution. A special board resolution will
require the affirmative vote of a majority of the independent directors and, at
any time at which the servicer and its affiliates hold the majority of AerCo's
class E notes, the two directors appointed by the holder of AerCo's class E
notes will not have the right to vote in respect of a special board resolution.

     The directors, their ages and principal activities are as follows:

<Table>
<Caption>
NAME                                                  AGE    OFFICES HELD WITH THE REGISTRANT
----                                                  ---    --------------------------------
<S>                                                   <C>    <C>
Frederick W. Bradley, Jr............................  74     Director and Chairman
Kenneth N. Peters...................................  65     Director
G. Adrian Robinson..................................  51     Director
Edward Hansom.......................................  42     Director
Rose Hynes..........................................  42     Director
</Table>

     Frederick W. Bradley, Jr. -- 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 has served as a
director and Chairman of ALPS 94-1 since 1994. Mr. Bradley also serves as a
director and Chairman of Aircraft Lease Portfolio Securitisation 92-1 Limited.
Mr. Bradley retired as a director of America West Airlines, Inc. in 1999, after
serving seven years on its board. 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.

     Kenneth N. Peters -- Mr. Peters was Assistant Treasurer of The Boeing
Company from 1985 to 1995 and was Vice President, Customer Financing at The
Boeing Company from 1995 until his retirement from The Boeing Company in 1997.
From 1960 to 1985, Mr. Peters held various positions with The Boeing Company
including the positions of Manager and Director of Customer Financing within the
Corporate Treasurer's Organization.

     G. Adrian Robinson -- 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 also serves as a director
of ALPS 94-1 and its subsidiaries and Aircraft Lease Portfolio Securitisation
92-1 Limited and its subsidiaries. Mr. Robinson also provides consulting
services from time to time to Air 2000 and JMC Airlines, two of the lessees.

     Edward Hansom -- Mr. Hansom is Chief Financial Officer and a member of the
Board of Management of debis. He joined debis Ireland in 1988 from the treasury
division of Schroders. Prior to taking up his current position, Mr. Hansom was
Chief Financial Officer and a director of debis Ireland.

                                        51
<PAGE>   55

     Rose Hynes -- Ms. Hynes is Executive Vice President, Commercial at debis.
She joined debis Ireland in 1988, having previously been a partner in an Irish
law firm. Prior to taking up her current position with debis in January 2001,
she was General Counsel of debis Ireland. Ms. Hynes also serves as a director of
Aer Lingus and certain of its subsidiaries.

     AerCo's directors are non-executive and AerCo does not and will not have
any employees or executive officers. Accordingly, the board of directors relies
upon debis, as servicer, the administrative agent, and 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 AerCo.

     All directors are compensated for travel and other expenses incurred by
them in the performance of their duties. AerCo Group pays each independent
director an aggregate fee of $75,000 per annum for their services. The directors
appointed by the holder of a majority in aggregate principal amount of the class
E notes do not and will not receive remuneration from AerCo for their services.

     Mr. Bradley, Mr. Peters and Mr. Robinson also act as directors of certain
AerCo Group subsidiaries. Mr. Bradley, Mr. Peters and Mr. Robinson each receive
$1,000 for each day, or portion of a day, which they are required to devote to
the activities of those subsidiaries and AerCo, excluding board meetings of
AerCo and ALPS 94-1.

BENEFICIAL OWNERSHIP OF AERCO

<Table>
<Caption>
                                                                        NUMBER OF      PERCENTAGE
TITLE OF CLASS                     NAME AND ADDRESS                      SHARES         OF CLASS
--------------                     ----------------                     ---------      ----------
<S>                  <C>                                                <C>            <C>
Ordinary Shares      Mourant & Co. Trustees Limited,                    19 Shares          95%
                     as trustee of AerCo Holding Trust
                     22 Grenville Street
                     St. Helier
                     Jersey, Channel Islands
                     debis AirFinance Ireland plc                       1 Share             5%
                     debis AirFinance House
                     Shannon
                     Ireland
</Table>

     Under the shareholders undertaking entered into on July 15, 1998 by Mourant
& Co. Trustees Limited as trustee of the charitable trust (the "CHARITABLE TRUST
TRUSTEE"), the nominees, debis Ireland, AerCo and the trustee, the charitable
trust trustee and debis Ireland agreed that, as long as the notes are
outstanding, they will not, without the prior written approval of the trustee
and all the directors, transfer any part of the ordinary shares held by them or
any interest therein unless the transferee:

          (1) in the case of the ordinary shares held by the nominees for the
     charitable trust trustee, is a trustee of a trust formed for charitable
     purposes substantially identical to those for which the charitable trust is
     established; and

          (2) enters into an agreement substantially identical to the
     shareholders undertaking in favor of the trustee.

     In consideration for the undertakings given by the charitable trust trustee
in the shareholders undertaking, the charitable trust trustee is entitled to
receive from AerCo an undertaking fee equal to $1,500 per annum. Under the
instrument of trust establishing the charitable trust, a certificate given by
the directors to the charitable trust trustee that its voting of the ordinary
shares in a specified manner is in the best commercial interests of AerCo shall,
for the purposes of the exercise of the charitable trust trustee's discretion,
be conclusive that any such action is in AerCo's best commercial interests.

                                        52
<PAGE>   56

THE SERVICER

     debis Ireland provides various aircraft related services to us as servicer
under the servicing agreement dated as of July 17, 2000. debis Ireland is a
wholly-owned indirect subsidiary of debis, a major participant in the global
commercial aviation industry. debis, directly and through debis Ireland and
other subsidiaries, owns and manages aircraft both for its own account and for
third parties. Including the AerCo fleet, at March 31, 2001, debis managed a
portfolio consisting of 194 aircraft on lease to 75 lessees in 34 countries and,
through debis Ireland managed a portfolio of 103 aircraft on lease to 52 lessees
in 25 countries. debis Ireland is also the holder of all of our subclass D-2,
E-1 and E-2 notes. As the holder of the majority of the class E notes, debis
Ireland has the right to appoint two directors to the Board of AerCo Limited.
debis Ireland also holds 5% of the ordinary share capital of AerCo Limited.
Subsidiaries of debis act as administrative agent and cash manager to Airplanes
Group, another aircraft securitization vehicle, and GPA-ATR Limited, a turboprop
aircraft joint venture company in which debis AirFinance Jetprop Limited holds
50% of the share capital.

     At March 31, 2001, the debis group employed 105 people worldwide, with 32
people employed in Shannon, Ireland by debis Ireland. debis has its headquarters
in Amsterdam, the Netherlands and it also has a U.S. subsidiary with an office
in Fort Lauderdale, Florida.

     debis and its affiliates cannot be held responsible for any liabilities of
AerCo or its affiliates, including any payments due to noteholders on the notes.

  Operating Guidelines

     debis Ireland provides services to AerCo Group under the servicing
agreement dated as of July 17, 2000. debis Ireland does not have any fiduciary
or other implied duties to noteholders or AerCo, and its obligations are limited
to the express terms of the servicing agreement. debis Ireland is obliged to act
in accordance with applicable law and with AerCo's directions.

     debis Ireland must also comply with the following two contractual standards
in performing its services:

          (1) It must perform its services with reasonable care and diligence at
     all times as if it were the owner of the aircraft consistent with the
     customary commercial practice of a prudent international aircraft lessor in
     the management, servicing and marketing of commercial jet aircraft and
     related assets. We refer to this as the "DEBIS SERVICES STANDARD."

          (2) If a conflict of interest arises regarding debis Ireland's
     management, servicing or marketing of: (a) any two aircraft or (b) any
     aircraft and any other assets owned, managed, serviced or marketed by the
     debis group, debis Ireland is required to notify AerCo and perform the
     services in good faith. If (x) the two aircraft or (y) the aircraft and
     other assets owned, managed, serviced or marketed by the debis group are
     substantially similar in terms of objectively identifiable characteristics
     that are relevant for the particular services to be performed, debis
     Ireland will not discriminate among the aircraft or between any of the
     aircraft and any other aircraft then owned, managed, serviced or marketed
     by the debis group on an unreasonable basis. We refer to this as the "DEBIS
     CONFLICTS STANDARD."

     All transactions to be entered into by debis on behalf of AerCo Group,
other than with other persons within AerCo Group, must be at arm's length and on
fair market value terms unless otherwise agreed or directed by AerCo. The
following transactions or matters with respect to the aircraft require AerCo's
specific written approval:

     - sales of or agreements to sell aircraft or any related aircraft engine
       unless required by the lease;

     - entering into new leases that do not comply with the operating covenants
       or any express direction of AerCo;

     - entering into amendments, renewals or extensions of existing leases that
       do not comply with the operating covenants or any express direction of
       AerCo;

     - terminating any lease or leases with any single lessee or related lessees
       with respect to any aircraft having an aggregate depreciated net book
       value over $100.0 million;
                                        53
<PAGE>   57

     - entering into any contract for modification or maintenance of the
       aircraft not provided for in the AerCo budget if:

      -- the cost to AerCo is more than the estimated cost of a heavy
         maintenance check for the airframe and the engines and the available
         maintenance reserves or other collateral under the related lease,
         whichever is greater, or

      -- the modification or maintenance is outside the ordinary course of AerCo
         Group's business;

     - entering into any capital commitment or confirming any order or
       commitment to acquire aircraft or engines;

     - issuing any guarantee on behalf of any person within AerCo Group other
       than guarantees:

      -- by one AerCo Group member of the lease obligations of another, or

      -- for trade payables incurred in the ordinary course of AerCo Group's
         business;

     - entering into any agreements for services costing more than $50,000 to be
       provided by third parties at AerCo Group's cost, unless this is an
       expense provided for in the budget;

     - entering into or amending or granting a waiver in any transaction with
       debis or any of its affiliates on behalf of any person within AerCo
       Group; and

     - entering into any agreement or commitment which is inconsistent with any
       express direction of AerCo.

     debis Ireland has agreed not to (1) execute any letter of intent, new lease
agreement, amendment to an existing lease or any agreement in respect of a sale
of any AerCo Group aircraft or aircraft assets outside Ireland (except pursuant
to a specific power of attorney issued on a case-by-case basis in Ireland), or
(2) make any material operational decision in respect of any AerCo Group
aircraft or aircraft assets outside Ireland.

  Limitation on Liability

     debis Ireland is not liable to any person, other than AerCo Group to the
limited extent described below, for any losses relating to:

     - the sale, lease or purchase of our aircraft on less favorable terms than
       might have been achieved at any time, so long as the transactions were
       entered into on the basis of a commercial decision or recommendation of
       debis Ireland in accordance with the debis services standard;

     - debis Ireland's obligation to apply the debis conflicts standard in
       performing its services, except where the losses are finally adjudicated
       to have been caused directly by the negligence, recklessness, willful
       misconduct or fraud of debis Ireland or its representatives;

     - the ownership, operation, maintenance, acquisition, leasing, financing,
       refinancing or sale of any of our aircraft, or any action, or failure to
       act on the part of any person at any time prior to the effective date of
       the servicing agreement;

     - any action that AerCo instructs debis Ireland to take, limit or terminate
       despite debis Ireland's contrary recommendation;

     - AerCo Group's refusal to take any action that debis Ireland recommends;

     - circumstances where any person within AerCo Group has received amounts
       sufficient to cover such losses; or

     - the gross negligence, recklessness, fraud or willful misconduct of any
       person within AerCo Group.

                                        54
<PAGE>   58

INDEMNIFICATION

     AerCo Group will indemnify debis Ireland and its representatives on an
after-tax basis for any losses that may be asserted against them relating to:

     - debis Ireland's performance under the servicing agreement, except where
       the losses are finally adjudicated to have been caused by debis Ireland's
       negligence, recklessness, fraud or willful misconduct in performing its
       obligations;

     - errors in judgment or omissions by debis Ireland or any action taken,
       limited or terminated in accordance with AerCo's instructions, except
       where the losses are finally adjudicated to have been caused by debis
       Ireland's negligence, recklessness, fraud or willful misconduct in
       performing its obligations; or

     - any of the circumstances under which debis Ireland would not be liable to
       AerCo as described above.

     debis Ireland will indemnify AerCo Group on an after-tax basis for losses
arising from the performance of its services, where the losses are finally
adjudicated to have:

     - been caused directly by the negligence, recklessness, fraud or willful
       misconduct of debis Ireland or any of its delegates in respect of its
       obligations to apply the debis services standard or the debis conflicts
       standard in connection with the performance of its services; or

     - directly resulted from a breach by debis Ireland of the express terms and
       conditions of the servicing agreement.

     debis Ireland's obligation to indemnify AerCo excludes circumstances where
any person within AerCo Group has already received an amount sufficient to cover
such losses.

  Aircraft Services

     debis Ireland provides a wide range of services to AerCo Group, including:

     - lease marketing, such as remarketing, lease drafting, negotiation and
       execution;

     - aircraft management, such as rent collection, aircraft maintenance,
       insurance, contract compliance and enforcement against current lessees,
       and accepting delivery and redelivery of aircraft;

     - aircraft sales;

     - arranging valuations and monitoring and advising AerCo on regulatory
       developments;

     - assisting AerCo Group to stay in compliance with certain covenants under
       the indenture;

     - providing AerCo Group with data and information relating to our aircraft
       and the commercial aviation industry;

     - assistance with any public or private offerings and sale of refinancing
       notes or additional notes;

     - assistance with permitted tax-related dispositions or other permissible
       tax-based financings;

     - legal and other professional services relating to the lease, sale or
       financing of our aircraft, and the amendment modification or enforcement
       of our aircraft leases; and

     - periodic reporting of operational, financial and other information on our
       aircraft and leases.

     debis Ireland has agreed to:

     - engage and maintain the necessary staff and supporting resources required
       to perform its services;

     - grant AerCo Group and its agents, access to its information, programs,
       records and personnel to enable AerCo Group to monitor its compliance
       with the servicing agreement and for general AerCo Group business; and

     - separate its own funds from the funds of any person within AerCo Group.

                                        55
<PAGE>   59

  Budgets

     AerCo adopts an annual and a three-year budget each year for all aircraft.
debis Ireland has agreed to use reasonable commercial efforts to achieve the
annual budget.

  Management Fees

     debis Ireland is paid an annual retainer fee of approximately 0.10% of the
initial appraised value of each aircraft in our fleet. The retainer fee is
payable monthly in arrears in equal installments and subject to pro-rata
reduction for any month in which we do not own all the aircraft currently in our
fleet. In calculating the retainer fee, the initial appraised value may not be
reduced below $250.0 million until all of the aircraft are sold. debis Ireland
also receive a monthly fee, equal to 1% of the aggregate rent paid for that
month or portion of a month that AerCo Group owns the related aircraft which are
subject to debis Ireland servicing.

     debis Ireland also will be reimbursed for certain expenses incurred in
connection with its performance of the services which in the aggregate may
constitute a significant additional component of AerCo's total overhead costs.

     Additionally, debis Ireland will be paid a fee at any time during the term
of the servicing agreement on the actual date of sale of any of our aircraft in
the amount of 1.25% multiplied by 90% of the initial appraised value of the
relevant aircraft, net of transaction expenses, subject to certain conditions.

  Term and Termination

     The servicing agreement is for a term commencing on July 17, 2000 and
expiring on the date of payment in full of all amounts outstanding to be paid on
the notes and the other securities issued by AerCo as relating to additional
aircraft owned by AerCo Group.

     debis Ireland may terminate the servicing agreement if:

     - AerCo does not pay:

      -- any servicing fees within five business days of a written delinquency
         notice, or

      -- any other amount payable by any person within AerCo Group within 10
         business days of a delinquency notice;

     - any person within AerCo Group violates any material term, covenant,
       condition or agreement under the servicing agreement or any other
       operative document;

     - an involuntary proceeding under applicable bankruptcy, insolvency,
       receivership or similar law against AerCo, any of its subsidiaries or a
       substantial part of the property or assets of any person within AerCo
       Group, continues undismissed for 100 days or an order or decree approving
       any of the foregoing shall be entered or any such person goes into
       liquidation, suffers a receiver or mortgagee to take possession of all or
       substantially all of its assets or have an examiner appointed over it, or
       a petition or proceeding is presented for any of the foregoing and not
       discharged within 100 days;

     - a voluntary proceeding is commenced under bankruptcy, insolvency,
       receivership or similar law against AerCo or any of its subsidiaries,
       AerCo or any of its subsidiaries consents to the institution of, or fails
       to contest the filing of, any petition described above, or files an
       answer admitting the material allegations of any such petition, or makes
       a general assignment for the benefit of its creditors;

     - debis Ireland becomes liable for taxes, except certain income and
       employment taxes, arising from its performing services to AerCo, if:

      -- debis Ireland cannot avoid the taxes using reasonable commercial
         efforts, and

      -- AerCo does not indemnify debis Ireland for the taxes;

     - directions given by AerCo or any of its subsidiaries are, or if carried
       out would be, unlawful under applicable law.
                                        56
<PAGE>   60

     AerCo may terminate the servicing agreement if:

     - debis Ireland materially breaches any of its obligations under the
       servicing agreement, including its obligation not to execute lease
       documents or make other operational decisions outside Ireland as
       described above, and fails to cure the breach after written notice from
       AerCo;

     - debis Ireland ceases or gives notice that it will cease to be actively
       involved in the aircraft advisory and management business;

     - AerCo repays, refinances or defeases all of its public or private debt
       securities in full;

     - debis Ireland undergoes, or may undergo, a change of control or
       transfers, or intends to transfer, more than 50% of the outstanding class
       E notes to one or more non-affiliates and, in either case, any credit
       rating agency which rates the notes (other than the class E notes)
       notifies or confirms to AerCo that it intends to downgrade, is
       downgrading or has downgraded the rating of any of the notes (other than
       the class E notes). debis Ireland will inform AerCo of any change of
       control of which it has actual knowledge or if it proposes to sell more
       than 50% of the outstanding class E notes to one or more non-affiliates;

     - an involuntary proceeding under bankruptcy, insolvency, receivership or
       similar law, against debis Ireland or a substantial part of its property
       or assets, continues undismissed for 100 days or an order or decree
       approving any of the foregoing shall be entered or debis Ireland goes
       into liquidation, suffers a receiver or mortgagee to take possession of
       all or substantially all of its assets or has an examiner appointed over
       it, or a petition or proceeding for any of the foregoing is presented and
       not discharged within 100 days;

     - a voluntary proceeding is commenced against debis Ireland under
       bankruptcy, insolvency, receivership or similar law upon consent by debis
       Ireland to the institution of, or failure by debis Ireland to contest the
       filing of, any petition described above, or filing of an answer admitting
       the material allegations of any such petition, or the making of a general
       assignment for the benefit of its creditors; or

     - debis Ireland and AerCo fail to resolve a conflict as provided in the
       servicing agreement.

     AerCo may terminate the servicing agreement for any aircraft to which any
of the following conditions apply:

     - in the case of marketing for re-lease of an aircraft, such aircraft has
       been off-lease and is reasonably available for re-lease for more than 180
       days after expiry of the agreed lease marketing period; or

     - debis Ireland fails, within a reasonable period of time not to exceed 180
       days, to submit to AerCo a bona fide third party offer to purchase an
       aircraft after written direction from AerCo to arrange such a sale; or

     - debis Ireland recommends a course of action for an aircraft or lease to
       AerCo which AerCo does not approve and, after negotiation in good faith,
       debis Ireland refuses to amend, withdraw or replace such recommendation
       with one that is consistent with its obligations.

     The servicing agreement will terminate automatically if either of the
administrative agency or cash management agreement is terminated.

     In no event will the servicing agreement terminate unless and until a
successor servicer shall have been appointed and have accepted the appointment.

  Assignment of Servicing Agreement

     debis Ireland and AerCo may not assign their rights and obligations under
the servicing agreement without each other's prior written consent.

  Priority of Payment of Servicing Fees and Reimbursable Expenditures

     debis Ireland's fees and expenses rank senior in priority of payment to all
payments on the notes.

                                        57
<PAGE>   61

  Additional Servicers

     AerCo may appoint debis Ireland to service additional aircraft under the
terms of the servicing agreement.

CORPORATE MANAGEMENT

  Administrative Agent

     The administrative agent, which is debis AirFinance Administrative Services
Limited (a subsidiary of debis and formerly known as AerFi Administrative
Services Limited), provides administrative and accounting services to the board
of directors including:

     - acting as liaison with the rating agencies;

     - establishing and maintaining AerCo Group's accounting ledgers;

     - providing quarterly and annual draft accounts for AerCo Group and
       individual companies within AerCo Group;

     - preparing annual and three year budgets;

     - authorizing payment of certain expenses;

     - coordinating any amendments to the transaction agreements, other than the
       leases;

     - procuring, supervising and coordinating AerCo Group's outside legal
       counsel, accounting, tax and other professional advisors;

     - preparing and coordinating reports to investors and the Commission;

     - assisting AerCo Group's tax advisors with the preparation and filing of
       all required tax returns;

     - assisting AerCo Group in developing and implementing its interest rate
       management policy and developing financial models, cash flow projections
       and forecasts and in making aircraft lease, sale and capital investment
       decisions;

     - advising AerCo Group on the appropriate levels of the liquidity reserve
       amount; and

     - assisting AerCo Group with the public or private offerings of refinancing
       notes.

     AerCo's board of directors may ask the administrative agent to provide
additional administrative services. However, the administrative agent is not
obligated to perform any additional services that could reasonably result in the
business of AerCo or any of its subsidiaries ceasing to be separate and readily
identifiable from, and independent of, the administrative agent, debis or any of
their respective affiliates.

     The administrative agent receives a monthly administrative fee equal to 2%
of the rental payments for each month. The administrative fee must be at least a
minimum of $200,000 per year and will be adjusted for inflation. The
administrative agent will receive an additional fee for services provided in
connection with the public or private offering of securities by AerCo equal to
0.025% of the net proceeds of the offering. The administrative agent is
reimbursed for certain expenses incurred in performing its services under the
administrative agency agreement.

     In certain circumstances, AerCo may terminate the administrative agency
agreement and, in certain other circumstances, the administrative agent may
terminate it. The administrative agency agreement will terminate automatically
if either of the servicing agreement or the cash management agreement is
terminated.

     In no event will the administrative agency agreement terminate unless and
until a successor administrative agent shall have been appointed and have
accepted the appointment.

     The administrative agent is obligated to devote the same amount of time and
attention and is required to exercise the same level of skill, care and
diligence in the performance of its services as it would if it were
administering such services on its own behalf. We refer to this as the
"ADMINISTRATIVE AGENT'S SERVICES STANDARD."
                                        58
<PAGE>   62

     In addition, if any conflicts of interest arise with respect to the
administrative agent's role and its other interests, the administrative agent
must report such conflict promptly to AerCo and must act in a manner that treats
AerCo equally with the entities giving rise to the conflict of interest, does
not violate the administrative agent's services standard or any of its covenants
under the administrative agency agreement and would not be reasonably likely to
have a material adverse effect on AerCo. We refer to this as the "ADMINISTRATIVE
AGENT'S CONFLICT DUTIES."

  Cash Manager

     The cash manager, which is debis AirFinance Cash Manager II Limited (a
subsidiary of debis and formerly known as AerFi Cash Manager II Limited),
provides cash management and related services to AerCo Group. The cash manager's
duties include informing the servicer and the administrative agent of the
aggregate deposits in the accounts and any other information that is required
about the accounts. The cash manager is authorized to invest funds held by AerCo
Group in the accounts other than the tax defeasance account in certain
prescribed investments on permitted terms.

     The cash manager also calculates certain monthly payments and makes all
other calculations as required under the cash management agreement based on data
provided by the servicer on the aircraft and the leases. The cash manager also
provides information required by the trustee to provide reports to the
noteholders.

     The cash manager receives a fee of $250,000 per year for its services to
AerCo Group. The fee is subject to adjustment for inflation. The cash manager
will not be liable to AerCo Group for any losses or taxes payable by AerCo Group
unless the losses or taxes arise from the cash manager's own gross negligence,
simple negligence in the handling of funds, willful misconduct, deceit or fraud
or that of its officers, directors, agents or employees. The cash manager will
be indemnified by the members of AerCo Group for any loss, liability or tax
incurred by the cash manager, its officers, directors, agents and employees as a
result of the performance of services under the cash management agreement. AerCo
Group will not indemnify the cash manager for losses caused by its own deceit,
fraud, willful default or negligence or that of its officers, directors, agents
and employees.

     In certain circumstances, AerCo or the cash manager may terminate the cash
management agreement. The cash management agreement will terminate automatically
if either of the servicing agreement or administrative agency agreement is
terminated.

     In no event will the cash management agreement terminate unless and until a
successor cash manager shall have been appointed and have accepted the
appointment.

  Company Secretary

     The company secretary 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 in the
relevant jurisdictions.

     Mourant & Co. Secretaries Limited acts as company secretary for members of
AerCo Group that are incorporated in Jersey.

  Standby Servicer, Cash Manager and Administrative Agent

     debis Aircraft Leasing Limited, the standby servicer, acts as standby
servicer, cash manager and administrative agent with respect to the aircraft
pursuant to the terms of the standby servicing, administrative agency and cash
management agreement dated as of July 17, 2000 between AerCo, debis and the
standby servicer. In the event the standby servicer is called upon to provide
services, such services will be provided for all leases and aircraft and will be
performed under substantially the same terms and conditions as the debis group
performs its services under the servicing, administrative agency and cash
management agreements. Following the acquisition by debis of 100% of the
ordinary share capital of AerFi, debis Aircraft Leasing Limited no longer
receives any fees as standby servicer, cash manager or administrative agent. In
addition, it is proposed to terminate these standby servicing, administrative
agency and cash management agreements in due course.

                                        59
<PAGE>   63

B. COMPENSATION

     See "Item 6. Directors, Senior Management and Employees -- Directors and
Senior Management -- Directors" for details of compensation received by AerCo
directors.

C. BOARD PRACTICES

     See "Item 6. Directors, Senior Management and Employees -- Directors and
Senior Management -- Directors" for a description of AerCo's board practices.

     AerCo's existing directors have an indefinite term of office on the board
of directors. None of the directors' service contracts provide for benefits on
termination of their employment. AerCo does not have an audit or remuneration
committee.

D. EMPLOYEES

     AerCo's directors are non-executive and AerCo does 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.

E. SHARE OWNERSHIP

     None of the directors of AerCo own any shares of AerCo nor do they have
options to purchase shares of AerCo.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

     The ordinary shares of AerCo 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.

     Under the shareholders' undertaking entered into on July 15, 1998 by
Mourant & Co. Trustees Limited as trustee of the charitable trust, the nominees,
debis Ireland, AerCo and the trustee, the charitable trust trustee and debis
Ireland agreed that, as long as the notes are outstanding, they will not,
without the prior written approval of the trustee and all the directors,
transfer any part of the ordinary shares held by them or any interest therein
unless the transferee:

          (1) in the case of the ordinary shares held by the nominees for the
     charitable trust trustee, is a trustee of a trust formed for charitable
     purposes substantially identical to those for which the charitable trust is
     established; and

          (2) enters into an agreement substantially identical to the
     shareholders undertaking in favor of the trustee.

     In consideration for the undertakings given by the charitable trust trustee
in the shareholders' undertaking, the charitable trust trustee is entitled to
receive from AerCo an undertaking fee equal to $1,500 per annum. Under the
instrument of trust establishing the charitable trust, a certificate given by
the directors to the charitable trust trustee that its voting of the ordinary
shares in a specified manner is in the best commercial interest of AerCo shall,
for the purposes of the exercise of the charitable trust trustee's discretion,
be conclusive that any such action is in AerCo's best commercial interests. See
"Item 10. Additional Information -- Articles of Association" for a description
of the voting rights available to holders of AerCo ordinary shares.

                                        60
<PAGE>   64

B. RELATED PARTY TRANSACTIONS

     AerCo Group has had and currently maintains various relationships with
debis. First, debis Ireland acted as promoter in establishing the entities that
comprise AerCo Group. Second, AerCo Group purchased substantially all of its
assets from debis Ireland and ALPS 94-1. See "Item 4. Information on the
Company -- History and Development of AerCo Limited." Third, debis Ireland is a
holder of 5% of the ordinary share capital of AerCo. Fourth, subsidiaries of
debis act as servicer, administrative agent and cash manager for AerCo Group.
See "Item 6. Directors, Senior Management and Employees -- Directors and Senior
Management -- Corporate Management." Fifth, Mr. Hansom, Ms. Hynes and Mr.
Redmond, employees of debis, hold certain directorships in AerCo and ALPS 94-1.
Sixth, debis Ireland holds all of the AerCo subclass D-2, E-1 and E-2 notes.

C. INTERESTS OF EXPERTS AND COUNSEL

     Not applicable.

ITEM 8.  FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     Consolidated financial statements are included in Item 18.

B. SIGNIFICANT CHANGES

     See "Item 4. Information on the Company -- History and Development of AerCo
Limited -- The Additional Acquisition" for a description of significant changes
which have occurred since the date of the annual financial statements.

ITEM 9.  THE LISTING

A. LISTING DETAILS

     Not applicable.

B. PLAN OF DISTRIBUTION

     Not applicable.

C. MARKETS

     Not applicable.

D. SELLING SHAREHOLDERS

     Not applicable.

E. DILUTION

     Not applicable.

F. EXPENSES OF THE ISSUE

     Not applicable.

ITEM 10.  ADDITIONAL INFORMATION

A. SHARE CAPITAL

     Not applicable.

                                        61
<PAGE>   65

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 were filed as Exhibit 1 to the annual report on Form 20-F filed on
September 29, 2000.

  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 71839 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 include the following:

     - the purchase of aircraft and related leases and the management,
       operation, lease, re-lease and sale of aircraft or any interest therein
       and the entry into of all contracts and activities incidental thereto;

     - the financing or refinancing of the foregoing activities through the
       issue of debt securities and the granting of security over the Company's
       property to secure the repayment of such debt securities;

     - the provision of loans to, and guarantees of the Company's subsidiaries;
       and

     - engaging in currency and interest rate exchange transactions for hedging
       purposes.

  DIRECTORS

     We are managed by a board of directors which will consist of no more than
five persons at any time. See "Item 6. Directors, Senior Management and
Employees."

  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 such director's material interests, such
director:

     - may be a party to, or otherwise interested in, any transaction or
       arrangement with AerCo or in which AerCo is otherwise interested;

     - other than, in the case of an independent director, to the extent limited
       by the definition of that term in our Articles (which provides that a
       person acting as an independent director must not at any time during such
       director's service as a director or during the 24 months prior to such
       director's appointment be or have been an employee, consultant, officer
       or director of debis, any holder of the class E notes or any affiliate of
       any such person), 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 AerCo or in which AerCo is
       otherwise interested or which engages in transactions similar to those
       engaged in by AerCo and might present a conflict of interest for such
       director in discharging such director's duties;

     - shall not, by reason of such director's office, be accountable to AerCo
       for any benefit which such director 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.

     The servicing, administrative agency and cash management agreements between
AerCo and the debis group provide that certain actions shall be taken by AerCo
by a special board resolution. These actions relate to certain matters in which
a director appointed by the holder of AerCo's class E notes may have a potential
conflict of interest, for example the exercise by AerCo of its rights to
terminate any such agreement. Our Articles provide that a special board
resolution will require the affirmative vote of a majority of the independent
directors and, at

                                        62
<PAGE>   66

any time at which the servicer and its affiliates hold the majority of AerCo's
class E notes, the directors appointed by the holder of AerCo's class E notes
will not have the right to vote in respect of a special board resolution.

  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 $75,000 per annum for his
services. Our Articles provide that the class E note directors are not entitled
to remuneration for their 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 indenture.

  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 AerCo 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 10,000 ordinary shares of
$1 nominal value per share of which 20 have been issued and are fully paid. The
rights, preferences and restrictions attaching to the shares are as follows:

  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, dividends not claimed within 10 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
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.

                                        63
<PAGE>   67

  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 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

     AerCo 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
Finance and Economics Committee of the States (government) of Jersey 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 21 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 95% of the shares giving 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
                                        64
<PAGE>   68

involving AerCo or any of our subsidiaries. See, however, "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.

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

IRISH TAX CONSIDERATIONS

     The following is a summary of principles of Irish taxation law in relation
to Irish income tax and withholding tax on payments on the notes. These
principles depend on interpretation of current law, regulations, rulings and
decisions and Irish Revenue practice, and reliance on Irish Revenue
confirmations obtained prior to the issue of and in connection with the notes,
all of which are subject to change. Any such change may be applied retroactively
and may adversely affect the principles of Irish tax described below. This
summary does not address all Irish tax principles that may apply to all
categories of potential investors, some of which may be subject to special
rules.

  Irish Income and Withholding Taxes on Payments on the Notes

     There will be no withholding or deduction for Irish taxes on principal and
interest paid by AerCo on the global notes or any payment of the principal and
interest on the book-entry interests. The foregoing, insofar as it relates to
interest (the "EUROBOND EXEMPTION"), is based on certain assumptions, including
that the notes, including the global notes, are listed on the Luxembourg Stock
Exchange or on another stock exchange which is recognized for relevant purposes
of Irish law and that interest on the global and book-entry notes is paid by a
paying agent outside of Ireland.

     The issuance of definitive notes may cause interest payments to be subject
to Irish withholding tax at the standard income tax rate which is currently 20%.
If any Irish withholding tax is imposed, noteholders and holders of book-entry
interests should note that AerCo will not make any additional payments for any
withholding tax. In this regard, Ireland has tax treaties with a number of
jurisdictions which, under certain circumstances, reduce the rate of Irish
withholding tax on payments of interest to persons resident in those
jurisdictions. A holder of a definitive note who is entitled to the benefit of
Article 11 of the income tax treaty between the United States and Ireland (the
"TREATY") (such a holder a "U.S. HOLDER") will normally be eligible to recover
in full any Irish tax withheld from payments of interest to which such U.S.
Holder is beneficially entitled by making a claim under the Treaty on the
appropriate form. Alternatively, a claim may be made by a U.S. Holder in advance
of a payment of interest. If the claim is accepted by the Irish Revenue, it will
normally authorize subsequent payments to that U.S. Holder to be made without
withholding for Irish tax.

                                        65
<PAGE>   69

     Noteholders who are not ordinarily resident in Ireland will not be subject
to Irish income tax on interest paid by AerCo on the notes so long as the
interest payments are made by AerCo in the course of carrying on relevant
trading operations under its Shannon certificate. After December 2005 or on
earlier termination of AerCo's Shannon certified operations, the exemption from
Irish tax described above currently enjoyed by noteholders who are not
ordinarily resident in Ireland will terminate, absent a change in law in the
intervening period.

     Irish domestic law also provides that a person will be exempt from Irish
tax where there is no withholding tax or deduction from the interest by virtue
of the Eurobond exemption detailed above and the interest is paid to a resident
of a Member State of the European Union other than Ireland or to a resident of a
country with which Ireland has a double taxation treaty.

     Interest payments made by AerCo have an Irish source and whether or not
paid gross are, under existing Irish tax law, chargeable to Irish income tax by
self-assessment, subject, however, to such relief as may be afforded by the
provisions of any applicable double tax treaty. However, as a matter of
practice, the Irish tax authorities do not pursue collection of any such
liability for Irish tax for persons who are not resident in Ireland except where
such persons:

     - receive payments of interest through a person (including a trustee) or in
       the name of an agent or branch in Ireland having the management and
       control of the interest; or

     - seek to claim relief and/or repayment of tax deducted at source in
       respect of taxed income from Irish sources; or

     - are chargeable to Irish corporation tax on the income of an Irish branch
       or agency or to income tax on the profits of a trade carried on in
       Ireland to which the interest is attributable.

     The termination of the legislative provisions dealing with Shannon
certified operations on December 31, 2005 will not affect the exemption from
Irish withholding tax described above.

CERTAIN JERSEY TAX CONSIDERATIONS

     The following is a summary of the tax treatment under Jersey law of AerCo
and the tax treatment under Jersey law for 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. Unless otherwise noted, the term
"note" refers to both the actual global notes and the interest in the global
notes held indirectly through DTC, Clearstream, Luxembourg or Euroclear.

  Income Taxes

     AerCo currently qualifies as an "exempt company" under Article 123A of the
Income Tax (Jersey) Law 1961 as amended. As an exempt company, AerCo 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 long standing
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. For purposes of the 1961 Law the Comptroller of Income Tax in Jersey,
among other things, has granted certain concessions and given certain
confirmations to AerCo, the effect of which is that AerCo will not be subject to
Jersey income tax.

  Withholding Taxes

     In general, Jersey imposes a withholding tax at the rate of 20% on interest
and other amounts paid to non-residents of Jersey with respect to a debt
obligation of a company resident in Jersey. However, no such withholding tax is
imposed with respect to an exempt company. Accordingly, based upon AerCo's
qualification

                                        66
<PAGE>   70

as an exempt company, no Jersey withholding tax will be deducted from interest
and other amounts paid on the notes on account of Jersey taxes.

     In the event that any Jersey withholding tax is imposed, noteholders should
note that there is no income tax treaty between the United States and Jersey
that would apply to reduce or eliminate such withholding.

     Noteholders should note further that AerCo will not be obligated under the
terms of the notes to make any additional payments in respect of any such
withholding tax. Accordingly, in the event that withholding were to be required
on account of Jersey taxes, distributions to noteholders may be less than those
which would be made on the notes in the absence of any such withholding tax.

  Other Taxes

     In the event that on the death of a sole individual holder of notes who is
a non-resident of Jersey, such notes are situated in Jersey (by virtue of their
being held on a register in Jersey or in bearer form and held in Jersey at the
date of death or otherwise deemed to be situated under applicable rules of
private international law), a grant of probate or letters of administration
would have to be obtained in Jersey and a duty of up to 1% of the value of the
assets of the deceased situated in Jersey would be payable.

F. DIVIDENDS AND PAYING AGENTS

     Not applicable.

G. STATEMENT BY EXPERTS

     Not applicable.

H. DOCUMENTS ON DISPLAY

     The documents concerning the Company which are referred to herein may be
inspected at the Securities and Exchange Commission, or at the registered
offices of the Company at 22 Grenville Street, St Helier, Jersey, JE4 8PX,
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.

I. SUBSIDIARY INFORMATION

     Not applicable.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The following quantitative and qualitative information is provided about
financial instruments to which AerCo was a party as of March 31, 2001.

     The quantitative disclosure and other statements in this section are
forward-looking statements that involve risks and uncertainties. Although our
policy is to limit our exposure to changes in interest rates, we could suffer
higher cash flow losses than described above as a result of actual future
changes in interest rates. You should also note that our future exposure to
interest rate movements will change as the composition of our lease portfolio
changes or if we issue new subclasses of additional notes or refinancing notes
with different interest rate provisions from the notes. You should also refer to
"Item 3. Key Information -- Risk Factors" for more information about risks,
especially lessee credit risk, that could intensify our exposure to changes in
interest rates.

                                        67
<PAGE>   71

  Interest Rate Sensitivity

     AerCo Group's principal market risk exposure is to changes in interest
rates. This exposure arises from its notes and the derivative instruments used
by AerCo Group to manage interest rate risk. The basic terms of each subclass of
notes, including the outstanding principal amount and estimated fair value as of
March 31, 2001, are as follows:

<Table>
<Caption>
                                        PRINCIPAL                                          ESTIMATED
                        ANNUAL           AMOUNT                                          FAIR VALUE AT
                     INTEREST RATE     AT YEAR END    EXPECTED FINAL         FINAL       MARCH 31, 2001
SUBCLASS OF NOTES  (PAYABLE MONTHLY)    $MILLION       PAYMENT DATE*     MATURITY DATE      $MILLION
-----------------  -----------------   -----------   -----------------   -------------   --------------
<S>                <C>                 <C>           <C>                 <C>             <C>
Subclass A-2           LIBOR+0.32%          184      December 15, 2005   July 15, 2023          184
Subclass A-3           LIBOR+0.46%          565        June 15, 2002     July 15, 2025          565
Subclass A-4           LIBOR+0.52%          207        May 15, 2011      July 15, 2025          207
Subclass B-1           LIBOR+0.60%           72        July 15, 2013     July 15, 2023           71
Subclass B-2           LIBOR+1.05%           77        June 15, 2008     July 15, 2025           77
Subclass C-1           LIBOR+1.35%           84        July 15, 2013     July 15, 2023           80
Subclass C-2           LIBOR+2.05%           80        June 15, 2008     July 15, 2025           80
Subclass D-2         8.5% -- Fixed          100        May 15, 2014      July 15, 2025           70
Subclass E-1          20% -- Fixed          112        July 15, 2023     July 15, 2023           22
Subclass E-2          20% -- Fixed          109        July 15, 2025     July 15, 2025           22
                                          -----                                              ------
                                          1,590                                               1,378
                                          =====                                              ======
</Table>

---------------
* As determined at date of issue.

  Interest Rate Risk and Management

     The leasing revenues of AerCo are generated primarily from lease rental
payments which are either fixed or floating. In some cases, leases carry fixed
and floating rental payments for different rental periods. In the case of
floating rate leases, an element of the rental varies in line with changes in
LIBOR, generally six-month LIBOR. See "Item 4. Information on the
Company -- Business Overview -- The Leases" for more information regarding the
terms of our leases. As of March 31, 2001, leases with respect to approximately
78% of the aircraft by appraised value at February 19, 2001 provided for fixed
rate rental payments and approximately 20% provided for floating rate payments
(excluding the aircraft off-lease and held for scrap).

     In general, an exposure to interest rate risk arises when AerCo's fixed and
floating interest obligations do not correlate to the mix of fixed and floating
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. The mix of fixed and floating rental payments contains a
higher percentage of fixed rate payments than the percentage of fixed rate
interest payments on the notes. In part, this reflects the fact that the reset
periods on floating rental payments are generally longer than the monthly reset
periods on the floating rate notes. AerCo enters into interest rate swaps in
order to correlate the contracted fixed and floating rental payments to the
fixed and floating interest rate payments on the notes.

     Under the swaps, AerCo generally pays fixed amounts and receives floating
amounts on a monthly basis. The swaps amortize on the basis of the expected
paydown schedule of the class A, class B and class C notes, the expiry dates of
the leases under which lessees are contracted to make fixed rate rental payments
and the LIBOR reset dates under the floating rate leases. At least every three
months, and in practice more frequently, the administrative agent seeks to enter
into additional swaps or sell at market value or unwind part or all of the swaps
and any future swaps in order to rebalance the fixed and floating mix of
interest obligations and the fixed and floating mix of rental payments. As of
March 31, 2001, none of AerCo's existing swaps had a maturity date extending
beyond January 2008. The fair value of the swaps at March 31, 2001 was negative
$41.8 million.

     Additional interest rate exposure will arise to the extent that lessees
owing fixed rate rental payments default and interest rates have declined
between the contract date of the lease and the date of default. This exposure
can
                                        68
<PAGE>   72

be managed through the purchase of options on interest rate swaps. Because of
the credit quality of the lessees and the current interest rate environment,
AerCo does not currently intend to acquire any options on interest rate swaps.
If the credit quality of the lessees changes materially, or if the interest rate
environment warrants it, AerCo may decide to purchase options on interest rate
swaps, or enter into other derivative transactions such as credit derivatives as
a means of managing such risk.

     Through the use of interest rate swaps and other interest rate hedging
instruments, it is AerCo's policy not to be adversely exposed to material
movements in interest rates. We cannot assure you, however, that AerCo's
interest rate risk management strategies will be effective in this regard. Any
change to AerCo's policy with regard to its dealing in interest rate hedging
products is subject to periodic review by the rating agencies.

     The directors of AerCo are responsible for reviewing and approving the
overall interest rate management policies and transaction authority limits. As
described below, the administrative agent, acting within the overall policies
and limits, approves specific hedging instruments. Counterparty risk is
monitored on an ongoing basis. Counterparties are subject to the prior approval
of the directors of AerCo. AerCo's counterparties consist primarily of the
affiliates of major U.S. and European financial institutions (which may include
special purpose derivative vehicles) whose credit ratings are consistent with
maintaining the ratings of the most senior class of notes then outstanding. At
March 31, 2001, AerCo had five swap counterparties.

     In implementing its interest rate management policy described above, AerCo
seeks to manage its exposure to adverse changes in interest rates based on
regular reviews of its interest rate risk. Typically, before each payment date,
the administrative agent, on behalf of AerCo, estimates future principal
payments on the notes based on a model of its cash flows. The fixed and floating
rate components of our lease portfolio are then estimated. The administrative
agent reviews this estimate whenever lease rentals (whether fixed or floating
rate) are reset under the terms of the leases. This analysis invariably
indicates that AerCo is "short" floating rate revenues and thus is adversely
exposed to increases in LIBOR, the benchmark interest rate for the notes and the
floating rate leases. After taking into account its available cash balance and
its swap portfolio, AerCo then enters into additional interest rate swaps to
hedge against the estimated amount of this shortfall. This interest rate swap
portfolio is reviewed regularly on the basis described above.

     As an example, on January 23, 2001, AerCo entered into an interest rate
swap. With respect to the monthly period from February 15, 2001, to March 15,
2001 the estimated note balances (classes A through C) were $1,270 million,
leases maturing or rolling over amounted to $35.0 million, and relevant cash
deposits amounted to $65.0 million. As the swaps which had been previously
entered into carried a notional principal balance of $1,114 million, the new
swap has a notional principal balance in that particular one month period of $60
million.

     The following table sets forth terms of AerCo's swap portfolio as of March
31, 2001. In its swaps, AerCo generally pays a fixed monthly coupon and receives
one month LIBOR on the notional principal balance.

<Table>
<Caption>
CURRENT NOTIONAL                                             FIXED MONTHLY
BALANCE ($000S)      EFFECTIVE DATE       MATURITY DATE       PAY RATE %
----------------   ------------------   ------------------   -------------
<S>                <C>                  <C>                  <C>
      40,000         July 15, 1998         May 15, 2001        5.6690%
     125,000         July 15, 1998      September 15, 2004     5.7530%
      40,000        August 17, 1998      August 15, 2004       5.8240%
      20,000       September 28, 1998    January 15, 2004      5.0810%
      20,000        January 15, 1999      April 15, 2004       5.2140%
      15,000       February 23, 1999      March 15, 2004       5.3675%
      10,000         July 15, 1999        March 15, 2005       6.2650%
      60,000         July 27, 1999        March 15, 2006       6.3650%
      20,000       November 15, 2000      March 15, 2004       7.1925%
           0*         May 15, 2001        March 15, 2005       7.1200%
      80,000         July 17, 2000      November 15, 2004      6.9530%
      80,000         July 17, 2000        June 15, 2007        7.0000%
      28,000         July 17, 2000       January 15, 2006      7.0000%
</Table>

                                        69
<PAGE>   73

<Table>
<Caption>
CURRENT NOTIONAL                                             FIXED MONTHLY
BALANCE ($000S)      EFFECTIVE DATE       MATURITY DATE       PAY RATE %
----------------   ------------------   ------------------   -------------
<S>                <C>                  <C>                  <C>
      36,000         July 17, 2000        April 15, 2007       7.0100%
      14,000         July 17, 2000      November 15, 2001      6.9100%
      15,000         July 17, 2000        April 15, 2004       6.9700%
      15,000         July 17, 2000       October 15, 2005      6.9900%
      15,000         July 17, 2000        June 15, 2005        6.9900%
      16,000         July 17, 2000      December 15, 2003      6.9600%
      14,000         July 17, 2000        March 15, 2006       7.0000%
      14,000         July 17, 2000       October 15, 2005      6.9900%
      35,000         July 17, 2000       January 15, 2008      7.0200%
      11,000         July 17, 2000      November 15, 2003      6.9600%
      13,000         July 17, 2000        June 15, 2002        6.9400%
      13,000         July 17, 2000        June 15, 2002        6.9400%
      20,000         July 17, 2000      November 15, 2004      6.9550%
      15,000         July 17, 2000        April 15, 2004       6.9490%
      15,000         July 17, 2000         May 15, 2004        6.9500%
      16,000         July 17, 2000       October 15, 2004      6.9560%
      16,000         July 17, 2000        March 15, 2005       6.9610%
      13,000         July 17, 2000      February 15, 2005      6.9590%
      14,000         July 17, 2000        July 15, 2004        6.9560%
      35,000       September 15, 2000      May 15, 2006        6.6930%
      90,000        October 16, 2000    February 15, 2006      6.5370%
      25,000       November 15, 2000    November 15, 2002      6.5100%
      10,000        January 16, 2001      June 15, 2001        6.0750%
           0*        March 15, 2002     September 15, 2002     5.5600%
      60,000       February 15, 2001      July 15, 2001        5.2675%
           0*        April 17, 2001     September 15, 2001     4.5475%
--------------
   1,078,000
--------------
--------------
</Table>

---------------
* These are forward starting swaps which will become effective on the date shown
  on the "Effective Date" column.

  Derivative Instruments and Hedging Activities

     In June 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities." In June 2000 the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138
require that, under U.S. GAAP, all derivative instruments be recorded on the
balance sheet at their respective fair values. SFAS No. 133 and SFAS No. 138 are
effective for all fiscal quarters of all fiscal years beginning after June 30,
2000. We adopted SFAS No. 133 and SFAS No. 138 on April 1, 2001.

     Following the adoption of the standards, in respect of all future financial
statements, all derivatives will be recognized on the balance sheet at their
fair value. All derivatives will be designated as either a hedge of the fair
value of a recognized asset or liability or of an unrecognized firm commitment
("FAIR VALUE" hedge) or a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability ("CASH FLOW" hedge). We expect that all of our interest rate swaps
will be designed as cash flow hedges.

     AerCo has a detailed hedging policy, which has been approved by the Board
of Directors and the rating agencies, which rate certain of the notes issued by
AerCo. This policy has been employed by the administrative agent since the
inception of AerCo in 1998. As part of this hedging policy, AerCo has formally
documented all

                                        70
<PAGE>   74

relationships between hedging instruments and hedged items in the context of the
requirements of SFAS No. 133 and SFAS No. 138. This includes linking all
derivatives that are designated as cash-flow hedges to specific liabilities on
the balance sheet. Since April 1, 2001, AerCo Group formally assesses, both at
the hedge's inception and on an ongoing basis, whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in cash
flows of hedged items.

     At April 1, 2001 all of AerCo's derivatives were deemed highly effective.
Subsequent changes in the fair value of a derivative that is highly effective
and that is designated and qualifies as a cash-flow hedge will be recorded in
Other Comprehensive Income until earnings are affected by the variability in
cash flows of the designated hedged item.

     We will discontinue hedge accounting prospectively when it is determined
that the derivative is no longer highly effective in offsetting changes in the
cash flows of the hedged item, the derivative expires or is sold, terminated, or
exercised, or management determines that designation of the derivative as a
hedging instrument is no longer appropriate.

     In all situations in which hedge accounting is discontinued, we will
continue to carry the derivative at its fair value on the balance sheet, and
recognize any changes in its fair value in earnings.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

                                    PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None.

ITEM 14.  MATERIAL MODIFICATIONS TO 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-75.

                                        71
<PAGE>   75

ITEM 19.  EXHIBITS

<Table>
<C>     <S>
 8      List of significant subsidiaries
10.1    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from July 17, 2000 to
        September 15, 2000. (Incorporated by reference to Form 6-K
        filed on October 31, 2000)
10.2    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from September 15, 2000 to
        December 15, 2000. (Incorporated by reference to Form 6-K
        filed on January 31, 2001)
10.3    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from December 15, 2000 to
        March 15, 2001. (Incorporated by reference to Form 6-K filed
        on April 30, 2001)
10.4    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from March 15, 2001 to June
        15, 2001. (Incorporated by reference to Form 6-K filed on
        July 31, 2001)
 12     Statement re Computation of Ratios
</Table>

                                        72
<PAGE>   76

                                   SIGNATURE

     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.

                                          By:   /s/ Frederick W. Bradley Jr.
                                            ------------------------------------
                                            Name: Frederick W. Bradley Jr.
                                            Title: Director

Dated: September 26, 2001

                                        73
<PAGE>   77

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                PAGE
                                                                ----
<S>                                                             <C>
A.  HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS FOR AERCO
  AND ALPS 94-1
     Independent auditors' report...........................     F-5
     Consolidated balance sheets............................     F-6
     Consolidated statements of operations..................     F-7
     Consolidated statements of cash flows..................     F-8
     Statements of changes in shareholders' deficit.........     F-9
     Statement of accounting policies.......................    F-10
     Notes to the consolidated financial statements.........    F-14
B.  HISTORICAL FINANCIAL STATEMENTS FOR AERFI TRANSFERRED
  AIRCRAFT
     Independent auditors' report...........................    F-45
     Statement of operations................................    F-46
     Statement of cash flows................................    F-47
     Statement of changes in net assets.....................    F-48
     Statement of accounting policies.......................    F-49
     Notes to the financial statements......................    F-51
C.  HISTORICAL FINANCIAL STATEMENTS FOR NEW AERFI
  TRANSFERRED AIRCRAFT
     Independent auditors' report...........................    F-59
     Statements of net assets...............................    F-60
     Statements of operations...............................    F-61
     Statements of cash flows...............................    F-62
     Statements of changes in net assets....................    F-63
     Statement of accounting policies.......................    F-64
     Notes to the financial statements......................    F-67
</Table>

     COMPANY DEFINITIONS

     "AERCO LIMITED"         AerCo Limited, a special purpose limited liability
                             company incorporated under the laws of Jersey with
                             its registered office located at 22 Grenville
                             Street, St. Helier, Jersey, JE4 8PX, Channel
                             Islands.

     "AERCO"                 AerCo Limited and its consolidated subsidiaries.

     "AERFI"                 AerFi Group plc and its subsidiary undertakings.

     "DEBIS AIRFINANCE"      debis AirFinance Ireland plc (formerly AerFi Group
                             plc) and its subsidiary undertakings.

     "ALPS 94-1 LIMITED"     Aircraft Lease Portfolio Securitization 94-1
                             Limited, a special purpose limited liability
                             company incorporated under the laws of Jersey in
                             1994 to purchase 27 aircraft from debis AirFinance.

     "ALPS 94-1"             ALPS 94-1 Limited and its consolidated
                             subsidiaries.

     "INDIGO"                Indigo Aviation AB, a Swedish company with its
                             registered office located at Sodra Forstadsgatan 4,
                             S-211 43, Malmo, Sweden.

                                       F-1
<PAGE>   78

                        CONTENTS OF FINANCIAL STATEMENTS

     AerCo has included the following audited historical financial statements in
pages F-4 to F-75 of this Form 20-F.

A.  U.K. GAAP AERCO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH
31, 2001 AND 2000 AND FOR THE PERIOD FROM JULY 15, 1998 TO MARCH 31, 1999 AND
COMPARATIVE ALPS 94-1 FINANCIAL INFORMATION FOR THE PERIOD FROM JULY 1, 1998 TO
JULY 14, 1998.

     The AerCo financial statements include the results of operations and
financial condition of the 30 aircraft and related leases acquired by AerCo
through the acquisition of all the outstanding capital stock of 18 aircraft
owning subsidiaries of debis AirFinance in July 2000 and reflect the sale of one
engine during the year ended March 31, 2001.

     The AerCo financial statements also include the results of operations and
financial condition of the 25 aircraft and related leases acquired by AerCo
through the acquisition of all the outstanding capital stock of ALPS 94-1
Limited and the ten aircraft and related leases acquired by AerCo through the
acquisition of all the outstanding capital stock of certain aircraft owning
subsidiaries of debis AirFinance in July 1998, and reflect the sale of one F100
aircraft during the period from July 15, 1998 to March 31, 1999 and the sale of
one F100 aircraft during the year ended March 31, 2000.

     Comparative financial information for ALPS 94-1 is presented as ALPS 94-1
is considered to be the predecessor business of AerCo. We believe this is an
appropriate presentation because:

     - AerCo was formed mainly for the purpose of refinancing the aircraft
       portfolio of ALPS 94-1;

     - AerCo's initial portfolio of 35 aircraft included 26 of the 27 aircraft
       that ALPS 94-1 originally acquired from debis AirFinance;

     - The original ALPS 94-1 aircraft represented 79% of AerCo's initial
       portfolio by appraised value as at March 1, 1998; and

     - AerCo's ongoing aircraft leasing activities are largely the same as those
       conducted by ALPS 94-1.

     The financial statements of ALPS 94-1 include the results of operations and
financial condition of the 27 aircraft originally acquired by ALPS 94-1 from
debis AirFinance in August 1994, including:

     - the Boeing 767-300ER aircraft that was purchased by debis AirFinance from
       ALPS 94-1 immediately prior to the closing of the offering of notes by
       AerCo in July 1998 and which was not one of the aircraft acquired by
       AerCo on July 15, 1998; and

     - the A300-B4-200 aircraft up to April 28, 1998 when debis AirFinance
       acquired this aircraft from ALPS 94-1. debis AirFinance subsequently sold
       this aircraft to AerCo.

B.  U.K. GAAP AERFI TRANSFERRED AIRCRAFT FINANCIAL STATEMENTS FOR THE PERIOD
FROM JULY 1, 1998 TO JULY 14, 1998.

     These financial statements include historical financial information on the
ten aircraft acquired by AerCo from debis AirFinance in July 1998 and include
the A300-B4-200 aircraft only from April 28, 1998, the date debis AirFinance
acquired it from ALPS 94-1. These financial statements are prepared as if the
AerFi transferred aircraft were operated separately from debis AirFinance for
the periods presented.

                                       F-2
<PAGE>   79

C.  U.K. GAAP NEW AERFI TRANSFERRED AIRCRAFT FINANCIAL STATEMENTS FOR THE PERIOD
FROM APRIL 1, 2000 TO JULY 16, 2000 AND FOR THE TWO YEARS ENDED MARCH 31, 2000
AND 1999.

     These financial statements include historical financial information on the
two F100, one B737-300 and one A321 aircraft acquired by AerCo from debis
AirFinance under the refinancing and additional aircraft acquisition in July
2000, for the period from April 1, 2000 to July 16, 2000 and the years ended
March 31, 2000 and 1999 and on 26 of the Indigo transferring aircraft for the
period from December 16, 1999 (the date Indigo was acquired by debis AirFinance)
to March 31, 2000 and the period from April 1, 2000 to July 16, 2000. These
financial statements are prepared as if the New AerFi transferred aircraft were
operated separately from debis AirFinance for the periods presented.

                                       F-3
<PAGE>   80

                              FINANCIAL STATEMENTS

                                     AERCO

                                       F-4
<PAGE>   81

                                     AERCO

                          INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF AERCO LIMITED

     We have audited the accompanying consolidated balance sheets of AerCo as of
March 31, 2001 and March 31, 2000 and the related consolidated statements of
operations, cash flows and changes in shareholders' deficit for AerCo for the
years ended March 31, 2001 and 2000 and the period from July 15, 1998 to March
31, 1999 and for ALPS 94-1 for the period from July 1, 1998 to July 14, 1998.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AerCo as at
March 31, 2001 and March 31, 2000 and the results of operations and cash flows
of AerCo for the years ended March 31, 2001 and 2000 and for the period from
July 15, 1998 to March 31, 1999 and ALPS 94-1 for the period from July 1, 1998
to July 14, 1998 in conformity with generally accepted accounting principles in
the United Kingdom.

     Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations of AerCo for the
years ended March 31, 2001 and 2000 and the period from July 15, 1998 to March
31, 1999 and of ALPS 94-1 for the period from July 1, 1998 to July 14, 1998 and
the shareholders' deficit of AerCo as of March 31, 2001 and March 31, 2000 to
the extent summarized in notes 24, 25 and 26 to the consolidated financial
statements.

KPMG
Chartered Accountants
Dublin, Ireland
July 25, 2001, except note 30 which is as of September 26, 2001

                                       F-5
<PAGE>   82

                                     AERCO

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                          NOTES    MARCH 31, 2001    MARCH 31, 2000
                                                          -----    --------------    --------------
                                                                     U.S.$'000         U.S.$'000
<S>                                                       <C>      <C>               <C>
ASSETS
CURRENT ASSETS
Cash..................................................        1         39,661            26,413
Commercial paper......................................        1         65,000            39,998
Accounts receivable, net..............................        2          7,388             4,752
                                                                     ---------         ---------
TOTAL CURRENT ASSETS..................................                 112,049            71,163
INTANGIBLE ASSETS
Goodwill, net.........................................        3         55,889            43,100
FIXED ASSETS
Aircraft, net.........................................        5      1,478,945           829,194
                                                                     ---------         ---------
TOTAL ASSETS..........................................               1,646,883           943,457
                                                                     =========         =========
LIABILITIES & SHAREHOLDERS' DEFICIT
LIABILITIES
Accrued expenses and other liabilities................        7        171,388            89,902
Indebtedness..........................................        9      1,578,832           901,198
Security deposits.....................................       10         20,880            16,304
                                                                     ---------         ---------
TOTAL LIABILITIES.....................................               1,771,100         1,007,404
SHAREHOLDERS' DEFICIT
Share capital.........................................       11             --                --
Accumulated deficit...................................                (124,217)          (63,947)
                                                                     ---------         ---------
TOTAL SHAREHOLDERS' DEFICIT...........................                (124,217)          (63,947)
                                                                     ---------         ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT...........               1,646,883           943,457
                                                                     =========         =========
</Table>

     The accompanying notes, including the statement of accounting policies, on
pages F-10 to F-13 are an integral part of the consolidated financial
statements.

                                       F-6
<PAGE>   83

                                     AERCO

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                               AERCO                             ALPS 94-1
                                                         --------------------------------------------------   ---------------
                                                                                             PERIOD FROM        PERIOD FROM
                                                           YEAR ENDED       YEAR ENDED     JULY 15, 1998 TO   JULY 1, 1998 TO
                                                 NOTES   MARCH 31, 2001   MARCH 31, 2000    MARCH 31, 1999     JULY 14, 1998
                                                 -----   --------------   --------------   ----------------   ---------------
                                                           U.S.$'000        U.S.$'000         U.S.$'000          U.S.$'000
<S>                                              <C>     <C>              <C>              <C>                <C>
REVENUES
Aircraft leasing -- continuing operations......   12          102,840         109,146             82,826              3,635
             -- acquisitions...................                62,094              --                 --                 --
EXPENSES
Depreciation...................................    5          (69,063)        (46,998)           (33,821)            (1,519)
Provision for impairment in aircraft value.....   13           (3,794)        (13,079)                --                 --
Amortization of goodwill.......................    3           (2,912)         (2,356)            (1,669)                --
Net interest expense...........................   14         (137,942)        (78,818)           (54,108)            (2,757)
Other expenses.................................   15          (11,444)        (15,742)            (8,311)              (646)
                                                          -----------        --------        -----------        -----------
Total expenses.................................               (225,15)       (156,993)           (97,909)            (4,922)
                                                          -----------        --------        -----------        -----------
NET LOSS FROM OPERATIONS -- CONTINUING
                         OPERATIONS............               (32,639)        (47,847)           (15,083)            (1,287)
                      -- ACQUISITIONS..........               (27,582)             --                 --                 --
Profit/(loss) on sale of aircraft..............    5               --            (941)                10                 10
                                                          -----------        --------        -----------        -----------
NET LOSS BEFORE PROVISION FOR TAXES............   16          (60,221)        (48,788)           (15,073)            (1,277)
Provision for taxes............................   17              (49)            (51)               (35)                --
                                                          -----------        --------        -----------        -----------
NET LOSS FOR THE PERIOD........................               (60,270)        (48,839)           (15,108)            (1,277)
RETAINED LOSS BROUGHT FORWARD..................               (63,947)        (15,108)                --            (77,246)
                                                          -----------        --------        -----------        -----------
RETAINED LOSS CARRIED FORWARD..................              (124,217)        (63,947)           (15,108)           (78,523)
BASIC AND DILUTED LOSS PER ORDINARY SHARE......   18         (3,013.5)         (2,442)            (755.4)            (127.7)
                                                          -----------        --------        -----------        -----------
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
  OUTSTANDING..................................   18               20              20                 20                 10
                                                          ===========        ========        ===========        ===========
</Table>

     All recognized gains and losses are included in the consolidated statements
of operations above.

     There is no material difference between the net income for AerCo or ALPS
94-1 for any of the periods set out above, and the historical cost equivalent.

     The results for all periods up to and including the year ended March 31,
2000 are derived from continuing operations. The results for the year ended
March 31, 2001 are derived from continuing operations and the acquisition of an
additional 30 aircraft on July 17, 2000. The revenues and expenses attributable
to this acquired business for the period from July 17, 2000 to March 31, 2001
are disclosed in note 4(b) to the consolidated financial statements.

     The accompanying notes, including the statement of accounting policies on
pages F-10 to F-13, are an integral part of the consolidated financial
statements.

                                       F-7
<PAGE>   84

                                     AERCO

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                           AERCO                             ALPS 94-1
                                                     --------------------------------------------------   ----------------
                                                                                         PERIOD FROM        PERIOD FROM
                                                       YEAR ENDED       YEAR ENDED     JULY 15, 1998 TO   JULY 1, 1998 TO
                                                     MARCH 31, 2001   MARCH 31, 2000    MARCH 31, 1999     JULY 14, 1998
                                                     --------------   --------------   ----------------   ----------------
                                                       U.S.$'000        U.S.$'000         U.S.$'000          U.S.$'000
<S>                                                  <C>              <C>              <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period............................      (60,270)        (48,839)            (15,108)          (1,277)
ADJUSTMENTS TO RECONCILE NET LOSS FROM OPERATIONS
  TO CASH PROVIDED/(UTILIZED) BY OPERATING
  ACTIVITIES
Depreciation.......................................       69,063          46,998              33,821            1,519
Amortization of goodwill...........................        2,912           2,356               1,669               --
Amortization of debt issue costs...................        2,414             898                 673               --
Provision for impairment in aircraft value.........        3,794          13,079                  --               --
Changes in operating assets and liabilities
  Accounts receivable..............................       (2,276)           (748)             (1,077)            (252)
  Accrued expenses and other liabilities...........       39,111          27,888              14,080           (3,005)
Net maintenance receipts/(expenditure).............        6,014          (7,481)             (4,675)          (1,062)
Net security deposits (repaid)/received............       (2,499)          1,521              (1,422)              --
                                                       ---------         -------          ----------          -------
NET CASH PROVIDED/(UTILIZED) BY OPERATING
  ACTIVITIES.......................................       58,263          35,672              27,961           (4,077)
                                                       ---------         -------          ----------          -------
CAPITAL EXPENDITURE
Purchase of aircraft...............................           --            (622)                 --               --
Sale of aircraft...................................        1,444          14,663              14,500           65,677
                                                       ---------         -------          ----------          -------
                                                           1,444          14,041              14,500           65,677
ACQUISITIONS
Purchase of subsidiary undertakings................     (706,349)             --          (1,071,565)              --
Cash acquired with subsidiaries....................           11              --             146,175               --
                                                       ---------         -------          ----------          -------
                                                        (706,338)             --            (925,390)              --
MANAGEMENT OF LIQUID RESOURCES
Net (purchase)/sale of commercial paper............      (25,002)             (1)            (39,997)          36,686
                                                       ---------         -------          ----------          -------
FINANCING ACTIVITIES
Debt issued........................................    1,169,052              --             986,609               --
Indebtedness repaid................................     (484,171)        (48,917)            (38,065)          (3,719)
                                                       ---------         -------          ----------          -------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING
  ACTIVITIES.......................................      684,881         (48,917)            948,544           (3,719)
                                                       ---------         -------          ----------          -------
NET INCREASE IN CASH...............................       13,248             795              25,618           94,567
CASH AT BEGINNING OF PERIOD........................       26,413          25,618                  --           51,608
                                                       ---------         -------          ----------          -------
CASH AT END OF PERIOD..............................       39,661          26,413              25,618          146,175
                                                       =========         =======          ==========          =======
</Table>

     Disclosure of cash flow information is set out in Note 21.

     The accompanying notes, including the statement of accounting policies on
pages F-10 to F-13, are an integral part of the consolidated financial
statements.

                                       F-8
<PAGE>   85

                                     AERCO

                 STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

<Table>
<Caption>
                                                                                              TOTAL
                                                   NUMBER                     RETAINED    SHAREHOLDERS'
                                                  OF SHARES   SHARE CAPITAL     LOSS         DEFICIT
                                                  ---------   -------------   ---------   -------------
                                                                U.S.$'000     U.S.$'000     U.S.$'000
<S>                                               <C>         <C>             <C>         <C>
ALPS 94-1:
Balance at June 30, 1998.......................       10              --       (77,246)      (77,246)
Net loss for the period........................       --              --        (1,277)       (1,277)
                                                     ---         -------      --------      --------
BALANCE AT JULY 14, 1998.......................       10              --       (78,523)      (78,523)
                                                     ===         =======      ========      ========
-------------------------------------------------------------------------------------------------------
AERCO:
Balance at July 15, 1998.......................       20                            --            --
Net loss for the period........................       --              --       (15,108)      (15,108)
                                                     ---         -------      --------      --------
Balance at March 31, 1999......................       20              --       (15,108)      (15,108)
Net loss for the year..........................       --              --       (48,839)      (48,839)
                                                     ---         -------      --------      --------
Balance at March 31, 2000......................       20              --       (63,947)      (63,947)
Net loss for the year..........................       --              --       (60,270)      (60,270)
                                                     ---         -------      --------      --------
BALANCE AT MARCH 31, 2001......................       20              --      (124,217)     (124,217)
                                                     ===         =======      ========      ========
</Table>

     The accompanying notes, including the statement of accounting policies on
pages F-10 to F-13, are an integral part of the consolidated financial
statements.

                                       F-9
<PAGE>   86

                                     AERCO

                        STATEMENT OF ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

     AerCo Limited was incorporated in Jersey, Channel Islands on June 4, 1998
for the purpose of refinancing ALPS 94-1 and the acquisition of 10 aircraft from
debis AirFinance. AerCo did not conduct any business prior to July 15, 1998.

     This transaction, which occurred on July 15, 1998, involved the purchase by
AerCo Limited of 100% of the capital stock of ALPS 94-1 Limited and thereby a
portfolio of 25 aircraft and related leases and the purchase of 10 aircraft and
related leases from debis AirFinance. The acquisition of the 10 aircraft from
debis AirFinance was achieved through the purchase of the capital stock in a
number of aircraft owning subsidiaries of debis AirFinance. AerCo Limited
financed the acquisition of the capital stock of ALPS 94-1 Limited and the 10
aircraft from debis AirFinance through the issue of five classes of notes. All
of the three most senior classes of notes (the "A to C notes") were sold in a
U.S.$800 million underwritten global public offering. debis AirFinance
subscribed for all of the fourth and fifth classes of notes (the "D and E
notes").

     On the refinancing, AerCo Limited advanced ALPS 94-1 Limited a portion of
net cash proceeds from the offering which enabled ALPS 94-1 Limited to
immediately redeem or repay its existing financial indebtedness.

     On July 17, 2000, AerCo issued a further $960 million of notes in four
subclasses, subclass A-3, subclass A-4, subclass B-2 and subclass C-2 (the "2000
notes"). The Company also issued two additional subclasses of notes, the D-2
notes and E-2 notes which were purchased by debis AirFinance. The Company used
the proceeds from the issuance of the 2000 notes, the subclass D-2 notes and
subclass E-2 notes (i) to refinance the subclass A-1 notes, (ii) to refinance
the subclass D-1 notes and (iii) to acquire 30 additional aircraft (the
"additional aircraft") with an appraised fair market value of $724.1 million,
and associated leases through the acquisition of certain aircraft owning
subsidiaries, and one associated conduit leasing company, of debis AirFinance.
Certain of the additional aircraft were delivered to AerCo on July 17, 2000. As
of March 31, 2001, all of the additional aircraft had been delivered to AerCo.

     Comparative financial information for ALPS 94-1 is presented in these
financial statements as ALPS 94-1 is considered to be the predecessor business
of AerCo.

     The activities of AerCo and ALPS 94-1 include the sale, procurement and
leasing of aircraft together with associated support services.

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 Kingdom and comply with Financial Reporting Standards
of the Accounting Standards Board in the United Kingdom as promulgated by The
Institute of Chartered Accountants in England and Wales. Generally accepted
accounting principles in the United Kingdom differ in certain significant
respects from generally accepted accounting principles in the United States. A
summary of these differences are set out in notes 24, 25 and 26.

     The consolidated financial statements are prepared on the going concern
basis and under the historic cost convention and are stated in U.S. dollars,
which is the principal operating currency of AerCo, ALPS 94-1 and of the
aviation industry.

                                       F-10
<PAGE>   87
                                     AERCO

                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires the directors of AerCo Limited and ALPS
94-1 Limited to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. While the directors of AerCo Limited and
ALPS 94-1 Limited believe that the estimates and related assumptions used in the
preparation of these financial statements are appropriate, actual results could
differ from those estimates.

BASIS OF CONSOLIDATION

     The consolidated financial statements include the results of AerCo Limited
and all its subsidiaries (including ALPS 94-1). All intercompany profits,
transactions and account balances have been eliminated.

GOODWILL

     Purchased goodwill arising on the acquisition of a business represents the
excess of acquisition cost over the fair value of the identifiable net assets
when they were acquired. Purchased goodwill arising on acquisitions is
capitalized on the balance sheet and amortized on a straight line basis over the
estimated economic life of the goodwill.

     In accordance with Financial Reporting Standard No. 10 "Goodwill and
Intangible Assets", goodwill is subject to a mandatory impairment test at the
end of the first full financial year following the acquisition. Thereafter
goodwill is reviewed for impairment in any other period where events or changes
in circumstances indicate that the carrying value may not be recoverable.

REVENUE RECOGNITION

     Revenue from aircraft on operating leases is recognized as income on a
straight line basis over the period of the leases. Where rentals are adjusted to
reflect increases or decreases in prevailing interest rates such adjustments are
accounted for as they arise. This includes rental income earned on aircraft for
the period prior to delivery (see "-- Aircraft"). Lease rentals received in
advance are deferred and recognized over the period to which they relate.

INTEREST INCOME

     Interest is credited to the statement of operations as it is earned.

MAINTENANCE

     In most lease contracts the lessee has the obligation to pay for
maintenance costs on airframes and engines which arise during the term of the
lease and in many lease contracts the lessee makes a full or partial prepayment,
calculated at an hourly rate, into a maintenance reserve fund paid to AerCo and
ALPS 94-1 from which the lessee can draw in respect of maintenance expenditures
for major checks. Amounts held in respect of aircraft maintenance are recorded
as accrued expenses and other liabilities. Any surplus amounts held in the fund
on termination of a lease, to which the next lessee has no access, are recorded
as income at that time.

     Maintenance costs borne directly by AerCo and ALPS 94-1 and which are not
paid for by lessees are expensed as incurred.

                                       F-11
<PAGE>   88
                                     AERCO

                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

TAXATION

     AerCo Limited has been granted exempt company status by the Jersey taxation
authorities. It pays an exempt company fee of STG L600 per annum. AerCo Limited
and its Irish subsidiaries are subject to Irish corporation tax on qualifying
trading operations at a rate of 10% until December 31, 2005. Thereafter the
corporate tax rate is due to revert to 12.5%. Taxation is provided on the
profits of the foreign subsidiaries at the current rates. ALPS 94-1 Limited has
been granted exempt company status by the Jersey taxation authorities. It pays
an exempt company fee of STG L600 per annum. Taxation is provided on the profits
of its subsidiaries at the current rates.

AIRCRAFT

     In the period ended June 30, 1995 ALPS 94-1 agreed to purchase 27 aircraft
on operating leases from debis AirFinance.

     On July 15, 1998 AerCo completed a transaction resulting in a refinancing
and restructuring of ALPS 94-1 and the acquisition of an additional 10 aircraft
from debis AirFinance. The refinancing involved the purchase of aircraft at an
aggregate appraised fair market value of U.S.$951.97 million.

     On July 17, 2000 AerCo completed a refinancing of its subclass A-1 and D-1
notes and the acquisition of an additional 30 aircraft from debis AirFinance at
an aggregate appraised fair market value of U.S.$724.1 million.

     Aircraft are stated at cost less accumulated depreciation and are
depreciated at rates 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 current estimates of residual values and useful economic
lives are generally 15% of cost, and 25 years from date of manufacture,
respectively.

     Additional charges are made to reduce the book value of specific assets to
the recoverable amount where an impairment in value is considered to have
occurred in accordance with Financial Reporting Standard No. 11 "Impairment of
Tangible Fixed Assets and Goodwill." An impairment review is carried out when
there has been an indication of impairment, usually on the basis of independent
market appraisals and indications of market demand. An impairment is measured by
comparing the carrying value of the aircraft and engines with the recoverable
amount. Recoverable amount is the higher of the net realizable value and the
value in use on an after tax basis. Value in use is based on the anticipated
future cash flows from the aircraft, discounted at a market rate of return.

CASH AND LIQUID RESOURCES

     Substantially all of the cash and commercial paper balances are held for
specific purposes under the terms of the Trust Indenture. For the purposes of
the cash flow statements cash represents amounts available on demand and liquid
resources comprise other cash and commercial paper. While the cash balances are
held for specific purposes they may be applied for these purposes on demand and
are classified as cash in the cash flow statement.

INDEBTEDNESS

     Repayment of the principal amount of the class E notes in AerCo and accrued
interest thereon is dependent upon funds being available to meet such
liabilities as they fall due. Repayment of the principal amount of the class E
note in ALPS 94-1 and accrued interest thereon was dependent upon funds being
available to meet such liabilities as they fell due. Under the terms of the ALPS
94-1 class E note, the recognition by the directors of a permanent diminution in
the value of aircraft resulted in certain circumstances in a legal reduction in
the principal balance on the class E note.

                                       F-12
<PAGE>   89
                                     AERCO

                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

     AerCo manages its interest rate exposure through the use of interest rate
swaps. Under these swap arrangements AerCo will pay fixed interest and receive
floating interest on a monthly basis. The objective of AerCo's interest rate
risk management policy is to correlate the contracted fixed and floating rental
payments in its portfolio to the floating interest payments on the A, B and C
notes, taking account of expected amortization on these notes. Net receipts and
payments arising in respect of these swaps are recognized as adjustments to
interest expense on an accruals basis.

     AerCo is also exposed to losses in the event of non-performance by
counterparties on interest rate swaps or in the event of defaults by lessees
where income streams have been hedged. However, AerCo does not anticipate
non-performance by the counterparties and losses or gains related to hedging
instruments which result from lessee defaults are accounted for as they are
incurred.

     ALPS 94-1 did not use any interest rate swaps to manage its interest rate
exposure for any period for which the financial statements are presented.

                                       F-13
<PAGE>   90

                                     AERCO

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1   CASH AND COMMERCIAL PAPER

<Table>
<Caption>
                                                                  MARCH 31, 2001    MARCH 31, 2000
                                                                  --------------    --------------
                                                                  U.S.$'000         U.S.$'000
    <S>                                                           <C>               <C>
    Cash......................................................        39,661            26,413
    Commercial paper..........................................        65,000            39,998
                                                                     -------           -------
                                                                     104,661            66,411
                                                                     =======           =======
</Table>

     Substantially all of the cash and commercial paper balances of AerCo at
March 31, 2001 and March 31, 2000 are held for specific purposes under the terms
of the AerCo Trust Indenture.

2   ACCOUNTS RECEIVABLE, NET

<Table>
<Caption>
                                                                  MARCH 31, 2001    MARCH 31, 2000
                                                                  --------------    --------------
                                                                  U.S.$'000         U.S.$'000
    <S>                                                           <C>               <C>
    Trade receivables, net....................................         7,053             4,508
    Non-trade receivables.....................................           335               244
                                                                     -------           -------
                                                                       7,388             4,752
                                                                     =======           =======
</Table>

     Trade receivables comprise amounts in respect of rent and maintenance
payments due from lessees and are stated net of provisions for doubtful debt.

     As at March 31, 2001 four lessees accounted for 40%, 20%, 16% and 15%
respectively of trade receivables of AerCo. Trade receivables at March 31, 2001
are shown net of a bad debt provision of U.S.$0.2m.

     As at March 31, 2000 three lessees accounted for 36%, 32% and 20%
respectively of trade receivables of AerCo. Trade receivables at March 31, 2000
are shown net of a bad debt provision of U.S.$3.5m.

     Activity in the allowance for doubtful accounts was as follows:

<Table>
<Caption>
                                                   MARCH 31, 2001    MARCH 31, 2000    MARCH 31, 1999
                                                   --------------    --------------    --------------
                                                   U.S.$'000         U.S.$'000         U.S.$'000
    <S>                                            <C>               <C>               <C>
    Balance, beginning of period...............         3,512             1,366               819
    Provision for doubtful account.............         2,237             2,146               547
    Bad debts written off......................        (5,585)               --                --
                                                       ------            ------            ------
    Balance, end of period.....................           164             3,512             1,366
                                                       ======            ======            ======
</Table>

                                       F-14
<PAGE>   91
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3   GOODWILL, NET

<Table>
<Caption>
                                                   MARCH 31, 2001    MARCH 31, 2000    MARCH 31, 1999
                                                   --------------    --------------    --------------
                                                   U.S.$'000         U.S.$'000         U.S.$'000
    <S>                                            <C>               <C>               <C>
    COST
    At beginning of period.....................        47,125            47,125                --
    Addition in period.........................        15,701                --            47,125
                                                       ------            ------            ------
    End of period..............................        62,826            47,125            47,125
                                                       ======            ======            ======
    AMORTIZATION
    Beginning of period........................        (4,025)           (1,669)               --
    Amortization in period.....................        (2,912)           (2,356)           (1,669)
                                                       ------            ------            ------
    End of period..............................        (6,937)           (4,025)           (1,669)
                                                       ======            ======            ======
    NET BOOK VALUE
    Beginning of period........................        43,100            45,456                --
                                                       ------            ------            ------
    End of period..............................        55,889            43,100            45,456
                                                       ======            ======            ======
</Table>

     Goodwill of U.S.$47.125 million represents the difference between the fair
value of the net assets acquired and the consideration paid by AerCo Limited in
respect of its acquisition of ALPS 94-1 and the AerFi transferred aircraft in
July 1998. Goodwill of U.S.$15.701 million represents the difference between the
fair value of the net assets acquired and the consideration paid by AerCo
Limited in respect of its acquisition of the New AerFi transferred aircraft in
July 2000. Goodwill is amortized over a 20 year period which is the period over
which the directors of AerCo Limited estimate that the value of the underlying
businesses acquired is expected to exceed the values of its identifiable net
assets. Further information in relation to the calculation of goodwill is set
out in note 4.

4   ACQUISITIONS

     (A)  ACQUISITION OF ALPS 94-1 AND THE AERFI TRANSFERRED AIRCRAFT -- JULY
1998

     On July 15, 1998 AerCo Limited acquired 100% of the capital stock of ALPS
94-1 Limited and thereby a portfolio of 25 aircraft and the related leases and
purchased 10 aircraft and related leases from debis AirFinance. The acquisition
of the 10 aircraft from debis AirFinance was achieved through the purchase of
the capital stock in a number of aircraft owning subsidiaries of debis
AirFinance. AerCo Limited financed the acquisition of the capital stock of ALPS
94-1 Limited and the 10 aircraft from debis AirFinance through the issue of five
classes of notes and also used the proceeds from the issue of these notes to
repay the third party indebtedness of ALPS 94-1 and the intercompany
indebtedness to debis AirFinance of the aircraft owning companies in respect of
the 10 aircraft acquired from debis AirFinance.

                                       F-15
<PAGE>   92
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (A)  ACQUISITION OF ALPS 94-1 AND THE AERFI TRANSFERRED AIRCRAFT -- JULY
1998 (CONTINUED)

     The fair value of the net assets acquired and the consideration given on
the acquisition of ALPS 94-1 and the AerFi transferred aircraft is summarized as
follows:

<Table>
<Caption>
                                                                     FAIR VALUE ADJUSTMENTS
                                                AERFI TRANSFERRED   -------------------------
                                   ALPS 94-1        AIRCRAFT         VALUATION       OTHER       FAIR VALUE OF
                                   BOOK VALUE      BOOK VALUE       ADJUSTMENTS   ADJUSTMENTS   ASSETS ACQUIRED
                                   ----------   -----------------   -----------   -----------   ---------------
                                   U.S.$'000     U.S.$'000          U.S.$'000     U.S.$'000      U.S.$'000
<S>                                <C>          <C>                 <C>           <C>           <C>
Current assets...................    148,899             609               --          (406)        149,102
Fixed assets -- aircraft.........    732,905         178,756           40,312            --         951,973
Accrued liabilities & other
  liabilities....................    (72,057)         (5,799)              --       (11,603)        (89,459)
Security deposits................    (13,255)         (2,950)              --            --         (16,205)
Indebtedness (A to D notes)......   (680,701)             --               --            --        (680,701)
Indebtedness to debis
  AirFinance.....................   (194,314)        (48,435)              --      (118,776)       (361,525)
Deferred income tax..............         --          (5,148)           5,148            --              --
                                   ---------         -------          -------      --------        --------
NET ASSETS ACQUIRED..............    (78,523)        117,033           45,460      (130,785)        (46,815)
                                   =========         =======          =======      ========        ========
Consideration paid...........................................................................          (310)
                                                                                                   --------
GOODWILL ON ACQUISITION......................................................................       (47,125)
                                                                                                   ========
</Table>

     The fair value adjustments in respect of the aircraft arise as a result of
a valuation of these assets to reflect the directors' estimate of their current
market value at the date of acquisition. This valuation of the ALPS 94-1
aircraft and the AerFi transferred aircraft exceeded the book values in these
entities by $6 million and $34 million respectively. The fair value adjustment
in respect of deferred taxation arises on the AerFi transferred aircraft as a
result of the change in the tax basis of these aircraft on their acquisition by
AerCo Limited.

     The other adjustments in respect of current assets and accrued liabilities
and other expenses relate to current assets of the AerFi transferred aircraft
not acquired by AerCo Limited and the liability in respect of the make whole
premium payable by ALPS 94-1 on the refinancing of its A to D note indebtedness.

     The adjustment to indebtedness is comprised of (i) an amount of $37 million
in respect of indebtedness in the acquired entities which was forgiven as part
of the transaction whereby AerCo Limited acquired ALPS 94-1 and the AerFi
transferred aircraft and (ii) additional indebtedness to debis AirFinance of
U.S.$156 million representing the difference between the historic third party
indebtedness of debis AirFinance in respect of the AerFi transferred aircraft
and the intercompany indebtedness to debis AirFinance which arose on the
acquisition of the aircraft owning companies which held these aircraft at the
date they were acquired by AerCo Limited.

                                       F-16
<PAGE>   93
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (A)  ACQUISITION OF ALPS 94-1 AND THE AERFI TRANSFERRED AIRCRAFT -- JULY
1998 (CONTINUED)

     The historical financial information for ALPS 94-1 is shown in the
consolidated statements of operations as comparatives. The summarized statement
of operations information for the AerFi transferred aircraft for the 14 day
period immediately prior to the acquisition by AerCo Limited is set out below:

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
<S>                                                             <C>
REVENUES
Aircraft leasing............................................           983
EXPENSES
Depreciation................................................          (464)
Net interest expense........................................        (1,392)
Other expenses..............................................           355
                                                                    ------
                                                                    (1,501)
                                                                    ------
Net loss from operations before taxes.......................          (518)
Benefit for taxes...........................................             5
                                                                    ------
Net loss for the period.....................................          (513)
                                                                    ======
</Table>

     (B) ACQUISITION OF NEW AERFI TRANSFERRED AIRCRAFT -- JULY 2000

     On July 17, 2000 AerCo Limited acquired 30 additional aircraft and related
leases from debis AirFinance. The acquisition of the 30 aircraft from debis
AirFinance was achieved through the purchase of the capital stock of 18 100%
owned subsidiaries of debis AirFinance. AerCo Limited financed the acquisition
of the 30 aircraft from debis AirFinance through the issue of $960 million of
notes in four subclasses, subclass A-3, subclass A-4, subclass B-2 and subclass
C-2 and two additional subclasses of notes, the D-2 notes and E-2 notes, which
were purchased by debis AirFinance.

                                       F-17
<PAGE>   94
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (B)  ACQUISITION OF NEW AERFI TRANSFERRED AIRCRAFT -- JULY 2000 (CONTINUED)

     The fair value of the net assets acquired and the consideration given on
the acquisition of the New AerFi transferred aircraft is summarized as follows:

<Table>
<Caption>
                                            NEW AERFI       FAIR VALUE ADJUSTMENTS
                                           TRANSFERRED    --------------------------
                                            AIRCRAFT       VALUATION        OTHER        FAIR VALUE OF
                                           BOOK VALUE     ADJUSTMENTS    ADJUSTMENTS    ASSETS ACQUIRED
                                           -----------    -----------    -----------    ---------------
                                            U.S.$'000      U.S.$'000      U.S.$'000        U.S.$'000
<S>                                        <C>            <C>            <C>            <C>
Cash, restricted.......................       14,824            --         (14,813)              11
Accounts receivable, net...............        1,475            --          (1,115)             360
Fixed assets -- aircraft...............      690,272        33,780              --          724,052
Goodwill...............................        5,922            --          (5,922)              --
Accrued liabilities & other
  liabilities..........................      (28,756)           --           2,056          (26,700)
Security deposits......................       (7,075)           --              --           (7,075)
Indebtedness...........................     (470,562)           --        (137,622)        (608,184)
Deferred income tax....................         (970)          970              --               --
                                            --------        ------        --------         --------
Net assets acquired....................      205,130        34,750        (157,416)          82,464
                                            ========        ======        ========         ========
Consideration paid.....................                                                     (98,165)
                                                                                           --------
Goodwill on acquisition................                                                     (15,701)
                                                                                           ========
</Table>

     The fair value adjustments in respect of the aircraft arise as a result of
a valuation of these assets to reflect the directors' estimate of their current
market value at the date of acquisition. This valuation of the New AerFi
transferred aircraft exceeded their existing book value by U.S.$33.8 million.
The fair value adjustment in respect of deferred taxation arises as a result of
the change in the tax basis of the New AerFi transferred aircraft on their
acquisition by AerCo Limited.

     The fair value adjustment to Indebtedness represents the difference between
the historic third party indebtedness of debis AirFinance in respect of the New
AerFi transferred aircraft and the intercompany indebtedness to debis AirFinance
which arose on the acquisition of the aircraft owning companies which held these
aircraft at the date they were acquired by AerCo Limited.

     The other adjustments in respect of cash, current assets and accrued
liabilities relate to the cash balances, current assets and liabilities of the
New AerFi transferred aircraft not acquired by AerCo Limited.

                                       F-18
<PAGE>   95
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (B)  ACQUISITION OF NEW AERFI TRANSFERRED AIRCRAFT -- JULY 2000 (CONTINUED)

     The revenues and expenses attributable to this acquired business for the
period from July 17, 2000 to March 31, 2001 were as follows:

<Table>
<Caption>
                                                                   PERIOD FROM
                                                                JULY 17, 2000 TO
                                                                 MARCH 31, 2001
                                                                -----------------
                                                                    U.S.$000
<S>                                                             <C>
REVENUES
  Aircraft leasing..........................................          62,094
EXPENSES
  Depreciation..............................................         (24,980)
  Impairment provision......................................          (3,794)
  Net interest expense......................................         (55,129)
  Other expenses............................................          (5,773)
                                                                     -------
Total expenses..............................................         (89,676)
                                                                     -------
NET LOSS FROM OPERATIONS....................................         (27,582)
                                                                     =======
</Table>

     Aircraft leasing revenues, depreciation and impairment provision charges
represent the actual income and related charges for these aircraft in the
period. The net interest expense is an allocation of the cost of the net debt
raised to fund the acquisition transaction completed in July 2000 of U.S.$706.3
million. Other expenses have been allocated based on AerCo's estimate of the
percentage of such costs incurred in managing the additional fleet of aircraft
for the period. Management believes that the basis for these allocations is
reasonable.

     Unaudited proforma results of operations for the years ended March 31, 2001
and 2000 as if AerCo and the New AerFi transferred aircraft had been combined
from April 1, 1999 are as follows:

<Table>
<Caption>
                                                                  YEAR ENDED        YEAR ENDED
                                                                MARCH 31, 2001    MARCH 31, 2000
                                                                --------------    --------------
                                                                    U.S.$M            U.S.$M
<S>                                                             <C>               <C>
Revenues -- Aircraft leasing................................         191                188
Net loss....................................................         (60)               (78)
Basic and diluted loss per ordinary share...................          (3)              (3.9)
</Table>

     The proforma results of operations reflect the acquisition of one of the
New AerFi transferred aircraft during the year ended March 31, 2001 and of eight
of the New AerFi transferred aircraft during the year ended March 31, 2000 and
therefore only include the results of operations of such aircraft from their
date of acquisition.

     The proforma results of operations reflect the net interest expense which
would have been incurred had the acquisition occurred on April 1, 1999.

     The proforma results of operations are not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
as of April 1, 1999, nor are they necessarily indicative of future operating
results.

                                       F-19
<PAGE>   96
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5   AIRCRAFT, NET

<Table>
<Caption>
                                                              AERCO                           ALPS 94-1
                                         MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999   JULY 14, 1998
                                         --------------   --------------   --------------   -------------
                                           U.S.$'000        U.S.$'000        U.S.$'000        U.S.$'000
<S>                                      <C>              <C>              <C>              <C>
COST
Beginning of period....................      922,045         937,766               --          949,288
Additions..............................      724,052             622          951,973               --
Disposals..............................       (1,444)        (16,343)         (14,207)         (76,897)
                                           ---------         -------          -------         --------
End of period..........................    1,644,653         922,045          937,766          872,391
                                           =========         =======          =======         ========
DEPRECIATION
Beginning of period....................      (79,772)        (33,513)              --         (140,478)
Charge for the period..................      (69,063)        (46,998)         (33,821)          (1,519)
Disposal...............................           --             739              308           11,231
                                           ---------         -------          -------         --------
End of period..........................     (148,835)        (79,772)         (33,513)        (130,766)
                                           =========         =======          =======         ========
IMPAIRMENT PROVISIONS
Beginning of period....................      (13,079)             --               --           (8,720)
Charge for the period..................       (3,794)        (13,079)              --               --
Disposal...............................           --              --               --               --
                                           ---------         -------          -------         --------
End of period..........................      (16,873)        (13,079)              --           (8,720)
                                           =========         =======          =======         ========
NET BOOK VALUE
Beginning of period....................      829,194         904,253               --          800,090
                                           =========         =======          =======         ========
End of period..........................     1478,945         829,194          904,253          732,905
                                           =========         =======          =======         ========
</Table>

     Cost for AerCo represents the fair value of aircraft acquired by AerCo as
part of the AerCo transactions on July 17, 2000 and July 15, 1998 which was
based on the independent appraised values of the portfolios. Cost for ALPS 94-1
represents the purchase price of aircraft acquired by ALPS 94-1 which was based
on the independent appraised values of the portfolio of aircraft at August 24,
1994.

     In the year ended March 30, 2001, the directors of AerCo made a provision
of U.S.$3.794 million to reflect an impairment in the value of one B757-200
aircraft in its fleet. The directors arrived at such determination having
consideration for a contract for the disposal of this aircraft entered into
prior to March 31, 2001, which was completed shortly after the year end.

     In the year ended March 31, 2000, the directors of AerCo made a provision
of U.S.$13.1 million to reflect an impairment in the value of one B747 aircraft
in its fleet. The directors arrived at such determination based on the financial
condition of the aircraft's lessee, the physical condition of the aircraft and
the unfavorable market conditions for this aircraft type.

     During the year ended March 31, 2000, AerCo disposed of one aircraft to a
third party to whom the aircraft had been on lease giving rise to a loss on
disposal of U.S.$0.94 million.

     During the period from July 1, 1998 to July 14, 1998 ALPS 94-1 Limited
disposed of one aircraft to debis AirFinance. This disposal resulted in a profit
of U.S.$10,000 in the period.

                                       F-20
<PAGE>   97
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6   OPERATING LEASES

     61 of 63 aircraft owned by AerCo are leased on operating leases to 34
lessees as at March 31, 2001. Rentals on certain of the leases are variable in
accordance with prevailing interest rates. Two aircraft were off-lease at March
31, 2001.

     The following is a schedule of contracted future rentals receivable, by
year, on operating leases as of March 31, 2001. The interest rates prevailing at
March 31, 2001 have been applied in determining rentals which are variable in
accordance with prevailing interest rates.

<Table>
<Caption>
YEAR ENDING MARCH 31,                                           U.S.$'000
---------------------                                           ---------
<S>                                                             <C>
2002........................................................     167,813
2003........................................................     143,146
2004........................................................     107,201
2005........................................................      61,270
2006........................................................      25,512
Thereafter..................................................      20,850
                                                                 -------
                                                                 525,792
                                                                 =======
</Table>

     There are no contingent rentals.

     The leases have charges attached to them such that they represent security
for the notes issued.

7   ACCRUED EXPENSES AND OTHER LIABILITIES

<Table>
<Caption>
                                                               MARCH 31, 2001   MARCH 31, 2000
                                                               --------------   --------------
                                                                 U.S.$'000      U.S.$'000
<S>                                                            <C>              <C>
ACCRUED EXPENSES AND OTHER LIABILITIES COMPRISE:
Aircraft maintenance reserves...............................       59,140           32,216
Deferred income.............................................        7,195            3,014
Interest on A to D notes....................................        7,396            2,270
Interest on E notes.........................................       86,332           38,000
Taxation....................................................           47               46
Other accruals..............................................       11,278           14,356
                                                                  -------          -------
                                                                  171,388           89,902
                                                                  =======          =======
</Table>

     All accrued expenses and other liabilities fall due within one year with
the exception of the entire amount of the accrued interest on the E notes and
aircraft maintenance reserves which are split as follows:

<Table>
<Caption>
                                                               MARCH 31, 2001   MARCH 31, 2000
                                                               --------------   --------------
                                                                 U.S.$'000      U.S.$'000
<S>                                                            <C>              <C>
AIRCRAFT MAINTENANCE RESERVES:
Due within one year.........................................       10,716            6,342
Due after one year..........................................       48,424           25,874
                                                                  -------          -------
                                                                   59,140           32,216
                                                                  =======          =======
</Table>

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

     AerCo's financial instruments comprise its A through E note indebtedness,
cash and liquid resources and interest rate swaps. These financial instruments
are denominated in U.S. dollars and are used in connection with

                                       F-21
<PAGE>   98
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

AerCo's leasing operations. These financial instruments comprise a mixture of
fixed and floating items and AerCo has also contracted both fixed and floating
rental streams with its lessees.

     AerCo manages its interest rate exposure through the use of interest rate
swaps under which it will pay fixed and receive floating on a monthly basis. The
objective of AerCo's interest rate risk management policy is to correlate the
contracted fixed and floating rental payments on its aircraft to the interest
payments on the A, B and C notes taking into account the interest received on
its cash deposits. Thus, all of AerCo's interest rate swaps are for hedging
purposes.

     AerCo seeks to manage its liquidity risk through maintaining a liquidity
reserve amount of U.S.$65 million (U.S.$40 million at March 31, 2000) and
through the application of available collections from lessees to meet its debt
and other obligations in accordance with a predetermined priority of payments as
set out in the Trust Indenture.

     (I) INTEREST RATE PROFILE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

     The following tables depict the interest rate profile of AerCo's financial
assets and financial liabilities at March 31, 2001 after taking into account the
derivatives used by AerCo. In accordance with FRS 13 "Derivatives and Other
Financial Instruments." The tables do not include interests in associate
undertakings and short term debtors and creditors.

     Financial Assets

     After taking account of the interest rate swaps entered into by AerCo, the
interest rate profile of AerCo's assets at March 31, 2001 was:

<Table>
<Caption>
                                                                          FLOATING RATE    FIXED RATE
                                                              TOTAL          ASSETS          ASSETS
                                                            ----------    -------------    ----------
                                                            U.S.$'000     U.S.$'000        U.S.$'000
<S>                                                         <C>           <C>              <C>
Financial Assets
Cash....................................................      39,661          39,661             --
Commercial Paper........................................      65,000          65,000             --
                                                             -------         -------        -------
                                                             104,661         104,661             --
                                                             =======         =======        =======
</Table>

     The cash bears interest at rates based on daily U.S.$ LIBOR. The commercial
paper bears interest based on rates available for A1+/P1 U.S. commercial paper.

                                       F-22
<PAGE>   99
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)


     (I) INTEREST RATE PROFILE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(CONTINUED)

     Financial Liabilities

     The interest rate profile of AerCo's financial liabilities at March 31,
2001 was:

<Table>
<Caption>
                                                                         FLOATING RATE    FIXED RATE
                                                                           FINANCIAL       FINANCIAL
                                                             TOTAL        LIABILITIES     LIABILITIES
                                                           ----------    -------------    -----------
                                                           U.S.$'000      U.S.$'000       U.S.$'000
    <S>                                                    <C>           <C>              <C>
    Financial Liabilities
    Indebtedness
      A-2 notes........................................      184,347         184,347             --
      A-3 notes........................................      565,000         565,000             --
      A-4 notes........................................      206,595         206,595             --
      B-1 notes........................................       72,250          72,250             --
      B-2 notes........................................       77,254          77,254             --
      C-1 notes........................................       83,594          83,594             --
      C-2 notes........................................       79,807          79,807             --
      D-2 notes........................................      100,000              --        100,000
      E-1 notes........................................      111,973              --        111,973
      E-2 notes........................................      109,052              --        109,052
    Aircraft maintenance reserves due after one year...        7,436           7,436             --
    Security deposits due after one year...............        6,304           6,304             --
                                                           ---------       ---------        -------
    TOTAL..............................................    1,603,612       1,282,587        321,025
                                                           =========       =========        =======
</Table>

     A-2, A-3, A-4, B-1, B-2, C-1 and C-2 note indebtedness bear interest at
rates based on one month U.S.$ LIBOR plus a specified margin of 0.32%, 0.46%,
0.52%, 0.60%, 1.05%, 1.35% and 2.05% respectively.

     Aircraft maintenance reserves and security deposits bear interest at six
month U.S.$ LIBOR rates.

     The interest rate on the D-2, E-1 and E-2 notes is 8.5%, 20% and 20%
respectively. The weighted average period for which the D-2, E-1 and E-2 notes
are fixed is 11.1 years, 22 years and 24 years respectively.

     (II) MATURITY OF FINANCIAL LIABILITIES

     Information relating to the maturity profile of indebtedness is set out in
Note 9. The estimated maturity profile of aircraft maintenance reserves and
security deposits which are classified as financial liabilities is as follows:

<Table>
<Caption>
DUE:                                                          U.S.$'000
----                                                          ---------
<S>                                                           <C>
In more than one year but not more than two years...........     4,217
In more than two years but not more than five years.........     5,239
In more than five years.....................................     4,284
                                                               -------
                                                                13,740
                                                               =======
</Table>

     (III) BORROWING FACILITIES

     AerCo had no undrawn committed borrowing facilities at March 31, 2001.

                                       F-23
<PAGE>   100
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

     (IV) FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

     The book values and fair values of AerCo's financial assets and liabilities
as at March 31, 2001 and March 31, 2000 by category are set out below:

<Table>
<Caption>
PRIMARY FINANCIAL INSTRUMENTS HELD OR    BOOK VALUE       FAIR VALUE       BOOK VALUE       FAIR VALUE
ISSUED TO FINANCE AERCO'S OPERATIONS   MARCH 31, 2001   MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 2000
-------------------------------------  --------------   --------------   --------------   --------------
                                         U.S.$'000        U.S.$'000        U.S.$'000        U.S.$'000
<S>                                    <C>              <C>              <C>              <C>
Financial Assets
Cash...............................         39,661           39,661          26,413           26,413
Commercial paper...................         65,000           65,000          39,998           39,998
                                         ---------        ---------         -------          -------
Total..............................        104,661          104,661          66,411           66,411
                                         =========        =========         =======          =======
Financial Liabilities
Indebtedness
A-1 notes..........................             --               --         340,000          339,841
A-2 notes..........................        184,347          183,886         212,281          210,996
A-3 notes..........................        565,000          565,265              --               --
A-4 notes..........................        206,595          206,756              --               --
B-1 notes..........................         72,250           70,647          76,293           74,591
B-2 notes..........................         77,254           77,170              --               --
C-1 notes..........................         83,594           80,159          84,444           80,337
C-2 notes..........................         79,807           79,807              --               --
D-1 notes..........................             --               --          80,000           67,200
D-2 notes..........................        100,000           70,000              --               --
E-1 notes..........................        111,973           22,395         111,973           22,395
E-2 notes..........................        109,052           21,810              --               --
Aircraft maintenance reserves due
  after one year...................          7,436            7,436           5,844            5,844
Security deposits due after one
  year.............................          6,304            6,304              --               --
                                         ---------        ---------         -------          -------
Total..............................      1,603,612        1,391,635         910,835          801,204
                                         =========        =========         =======          =======
Derivative financial instruments:
Interest rate swaps (notional
  principal March 31, 2001 U.S.$1,078
  million; March 31, 2000 U.S.$565
  million).........................             --          (41,836)             --           11,673
                                         =========        =========         =======          =======
</Table>

     The fair values of notes outstanding have been determined by reference to
prices available from the markets in which these notes are traded. The fair
value of aircraft maintenance reserves and security deposits which are subject
to floating rates is their par value. All the other fair values shown have been
calculated by discounting future estimated cash flows at prevailing interest
rates.

     In accordance with the objectives of AerCo's hedging policies the fair
value loss arising in respect of AerCo's interest rate swaps at March 31, 2001
is offset to a significant extent by fair value gains inherent in the contracted
fixed rate leases entered into by AerCo.

                                       F-24
<PAGE>   101
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

     (V) GAINS AND LOSSES ON HEDGES

     AerCo enters into interest rate swaps to manage its interest rate profile.
Changes in the fair value of instruments used as hedges are not recognized in
the financial statements. An analysis of these unrecognized gains and losses is
as follows:

<Table>
<Caption>
                                                                                           TOTAL NET
                                                                 GAINS         LOSSES        GAINS
                                                               ----------    ----------    ----------
                                                               U.S.$'000     U.S.$'000     U.S.$'000
<S>                                                            <C>           <C>           <C>
Unrecognized gains and (losses) on hedges at March 31,
  2000.....................................................      11,703           (30)       11,673
Gains at the start of the year in a loss position at the
  end of year..............................................     (10,411)       10,411            --
                                                                -------       -------       -------
Unrecognized gains at March 31, 2000.......................       1,292        10,381        11,673
Losses arising in previous periods that were recognized in
  the year to March 31, 2001...............................        (200)       (2,246)       (2,446)
                                                                -------       -------       -------
Gains arising before March 31, 2000 that were not
  recognized in the year ended March 31, 2001..............       1,092         8,135         9,227
Gains on swaps entered into after March 31, 2000 recognized
  in the year ended March 31, 2001.........................          --         2,267         2,267
Losses arising in the current year that were not recognized
  in the year ended March 31, 2001.........................        (913)      (52,417)      (53,330)
                                                                -------       -------       -------
Unrecognized gains and (losses) on hedges at March 31,
  2001.....................................................         179       (42,015)      (41,836)
                                                                =======       =======       =======
of which:
Gains expected to be recognized in 2002....................         179        (8,554)       (8,375)
Gains and (losses) expected to be recognized in 2003 or
  later....................................................          --       (33,461)      (33,461)
</Table>

9   INDEBTEDNESS

     (A) PRINCIPAL

     The purchase during the year by AerCo Limited of the capital stock of 18
100% owned subsidiaries of debis AirFinance and thereby a portfolio of 30
aircraft and related leases and the refinancing of the existing subclass A-1 and
D-1 notes was funded by the issue of new subclass A-3, A-4, B-2, C-2, D-2 and
E-2 notes by AerCo Limited.

     The notes issued by AerCo Limited in July 1998 and July 2000 constitute
direct obligations of AerCo Limited. None of the Security Trustee (as defined
below) or the noteholders have any security interest, mortgage, charge or
similar interest in any of the aircraft.

     Pursuant to the Security Trust Agreement, Bankers Trust Company (the
"Security Trustee") has been granted an interest in the capital stock of certain
of the direct and indirect subsidiaries of AerCo Limited. The Security Trustee
has been granted a security interest, directly or indirectly, in the respective
interests of each AerCo Group member in the leases and leases within AerCo Group
relating to the aircraft, in any loans extended by AerCo Limited to its
subsidiaries and certain cash deposits.

                                       F-25
<PAGE>   102
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9   INDEBTEDNESS (CONTINUED)

     (A) PRINCIPAL (CONTINUED)


<Table>
<Caption>
                                              AERCO                          AERCO
                                          MARCH 31, 2001    AT ISSUE     MARCH 31, 2000           AT ISSUE
                                          --------------    ---------    --------------           ---------
                                            U.S.$'000       U.S.$'000      U.S.$'000              U.S.$'000
    <S>                                   <C>               <C>          <C>                      <C>
    Subclass A-1 notes................             --              --        340,000                340,000
    Subclass A-2 notes................        184,347         290,000        212,281                290,000
    Subclass B-1 notes................         72,250          85,000         76,293                 85,000
    Subclass C-1 notes................         83,594          85,000         84,444                 85,000
    Subclass D-1 notes................             --              --         80,000                 80,000
    Subclass E-1 notes................        111,973         111,973        111,973                111,973
    Subclass A-3 notes................        565,000         565,000             --                     --
    Subclass A-4 notes................        206,595         235,000             --                     --
    Subclass B-2 notes................         77,254          80,000             --                     --
    Subclass C-2 notes................         79,807          80,000             --                     --
    Subclass D-2 notes................        100,000         100,000             --                     --
    Subclass E-2 notes................        109,052         109,052             --                     --
    Deferred financing costs..........        (11,040)         (9,661)        (3,793)                (5,364)
                                            ---------       ---------      ---------              ---------
                                            1,578,832       1,731,364        901,198                986,609
                                            =========       =========      =========              =========
</Table>

     Repayments of principal on the A, B, C and D notes are made monthly and
commenced in August 1998. The repayment of principal on the A to D notes is
dependent upon the cash available at each monthly payment date and is governed
by the Priority of Payments set out in the Trust Indenture entered into by AerCo
Limited on July 15, 1998.

     The repayment of class E note principal is not due until the class A to D
notes have been fully repaid. Repayment of the principal amount of the class E
notes and accrued interest thereon are dependent upon funds being available to
meet such liabilities as they fall due.

     (B) INTEREST

     Subclass A-1 notes bore interest at LIBOR plus 0.19%, payable monthly in
arrears The subclass A-1 notes were fully repaid in July 2000.

     Subclass A-2 notes bear interest at LIBOR plus 0.32%, payable monthly in
arrears.

     Subclass A-3 notes bear interest at LIBOR plus 0.46%, payable monthly in
arrears.

     Subclass A-4 notes bear interest at LIBOR plus 0.52%, payable monthly in
arrears.

     Subclass B-1 notes bear interest at LIBOR plus 0.60%, payable monthly in
arrears.

     Subclass B-2 notes bear interest at LIBOR plus 1.05%, payable monthly in
arrears.

     Subclass C-1 notes bear interest at LIBOR plus 1.35%, payable monthly in
arrears.

     Subclass C-2 notes bear interest at LIBOR plus 2.05%, payable monthly in
arrears.

     The subclass D-1 notes bore interest at 8.50%. Interest was payable monthly
in arrears and commenced in August 1998, subject to available cash. The subclass
D-1 notes were fully repaid in July 2000.

                                       F-26
<PAGE>   103
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9   INDEBTEDNESS (CONTINUED)

     (B) INTEREST (CONTINUED)

     The subclass D-2 notes bear interest at 8.50%. Interest is payable monthly
in arrears and commenced in August 2000 subject to available cash. Interest
accrued but not paid will be added to the principal outstanding and will accrue
interest until paid.

     The subclass E-1 and E-2 notes bear interest at 20% per annum accruing
monthly in arrears. Except for the class E Note Primary Interest Amount which
will be paid at a rate of 15.0% per annum multiplied by the Initial Outstanding
Principal Balance of the subclass E-1 notes on July 15, 1998 and by the
Outstanding Principal Balance of the subclass E-2 notes issued on July 17, 2000,
no interest is payable on subclass E-1 and E-2 notes until all of the interest,
principal and premium, if any, on the other notes have been repaid in full. The
class E note Primary Interest Amount will be paid on each Payment Date only to
the extent that AerCo has available collections sufficient to make such payment
after paying or providing for each of the items ranking prior to such payment in
order of priority under the Trust Indenture.

     (C) DEBT MATURITY

     The repayment terms of the class A, B, C and D notes are such that certain
principal amounts are expected to be repaid on certain dates based on certain
assumptions (the "Expected Final Payment Dates") or refinanced through the issue
of new notes by specified Expected Final Payment Dates but in any event are
ultimately due for repayment on specified final maturity dates (the "Final
Maturity Dates"). In the event that the A, B and C notes are not repaid or
refinanced by the Expected Final Payment Dates the interest rates applicable to
those notes may increase. The Expected Final Payment Dates, Final Maturity
Dates, Principal Amount and interest rates applicable to each class of notes
outstanding at March 31, 2001 are set out below:

<Table>
<Caption>
                                            PRINCIPAL AMOUNT    EXPECTED FINAL
CLASS OF NOTES             INTEREST RATES    MARCH 31, 2000      PAYMENT DATE      FINAL MATURITY DATE
--------------             --------------   ----------------   -----------------   -------------------
                                            U.S.$ MILLION
<S>                        <C>              <C>                <C>                 <C>
Class A-2................  LIBOR + 0.32%           184         December 15, 2005      July 15, 2023
Class A-3................  LIBOR + 0.46%           565             June 15, 2002      July 15, 2025
Class A-4................  LIBOR + 0.52%           207              May 15, 2011      July 15, 2025
Class B-1................  LIBOR + 0.60%            72             July 15, 2013      July 15, 2023
Class B-2................  LIBOR + 1.05%            77             June 15, 2008      July 15, 2025
Class C-1................  LIBOR + 1.35%            84             July 15, 2013      July 15, 2023
Class C-2................  LIBOR + 2.05%            80             June 15, 2008      July 15, 2025
Class D-2................           8.5%           100              May 15, 2014      July 15, 2025
Class E-1................            20%           112             July 15, 2023      July 15, 2023
Class E-2................            20%           109             July 15, 2025      July 15, 2025
                                                 -----
                                                 1,590
                                                 =====
</Table>

     The repayment dates and amounts of the notes shown in the table below are
not fixed contractual obligations but are the amounts AerCo will pay if cash
flows are in accordance with targets. To the extent that cash flows exceed, or
do not meet, the targets then these amounts will vary in accordance with the
Trust Indenture. The targets assume that the minimum future rentals as
summarized in Note 6 are received after making adjustments for the anticipated
performance of the lessees.

                                       F-27
<PAGE>   104
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9   INDEBTEDNESS (CONTINUED)

     (C) DEBT MATURITY (CONTINUED)

     The target principal balances repayable analyzed by year of repayment are
as follows (all amounts are in U.S.$'000):

<Table>
<Caption>
                                                                    SUBCLASS
YEAR ENDING               ---------------------------------------------------------------------------------------------
MARCH 31                    A-2        A-3        A-4       B-1       B-2       C-1       C-2        D-2        TOTAL
-----------               -------    -------    -------    ------    ------    ------    ------    -------    ---------
<S>                       <C>        <C>        <C>        <C>       <C>       <C>       <C>       <C>        <C>
2002..................     81,576         --     30,042     7,221     7,311     2,194     1,072         --      129,416
2003..................     21,574    565,000     37,062     3,947     4,823     2,815     2,619         --      637,840
2004..................     21,564         --     37,045     4,636     5,227     3,645     3,759         --       75,876
2005..................     19,990         --     34,342     5,078     5,726     4,646     4,629         --       74,411
2006..................     32,456         --     22,388     5,475     5,934     5,627     5,421         --       77,301
Thereafter............      7,187         --     45,716    45,893    48,233    64,667    62,307    100,000      374,003
                          -------    -------    -------    ------    ------    ------    ------    -------    ---------
Total.................    184,347    565,000    206,595    72,250    77,254    83,594    79,807    100,000    1,368,847
                          =======    =======    =======    ======    ======    ======    ======    =======    =========
</Table>

     The principal of the subclass E-1 and E-2 notes is not payable until the
outstanding principal balance of the class A to D notes is reduced to zero.

10  SECURITY DEPOSITS

     Security deposits of U.S.$20,880,000 in AerCo as at March 31, 2001
(U.S.$16,304,000 at March 31, 2000) are held as security for obligations in
accordance with the terms of certain leases. The deposits are held as cash and
commercial paper by AerCo (see Note 1).

11  SHARE CAPITAL

     Called up share capital comprises:

<Table>
<Caption>
                                                                MARCH 31, 2001    MARCH 31, 2000
                                                                --------------    --------------
                                                                    U.S.$             U.S.$
<S>                                                             <C>               <C>
AUTHORIZED
10,000 ordinary shares of U.S.$1 each.......................        10,000            10,000
                                                                    ======            ======
ISSUED AND FULLY PAID
20 ordinary shares of U.S.$1 each...........................            20                20
                                                                    ======            ======
</Table>

     AerCo Limited issued 20 ordinary shares at U.S.$1 each on June 4, 1998.

                                       F-28
<PAGE>   105
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12  REVENUES AND CONCENTRATION OF CREDIT RISK

     (A) DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA

<Table>
<Caption>
                                                                          AERCO             ALPS 94-1
                                  AERCO               AERCO            PERIOD FROM         PERIOD FROM
                               YEAR ENDED          YEAR ENDED       JULY 15, 1998 TO     JULY 1, 1998 TO
                             MARCH 31, 2001      MARCH 31, 2000      MARCH 31, 1999       JULY 14, 1998
                            -----------------   -----------------   -----------------   -----------------
                            U.S.$'000     %     U.S.$'000     %     U.S.$'000     %     U.S.$'000     %
                            ---------   -----   ---------   -----   ---------   -----   ---------   -----
    <S>                     <C>         <C>     <C>         <C>     <C>         <C>     <C>         <C>
    Europe...............     84,629     51.3     52,956     48.5    40,456      48.8       1,508    41.5
    North America........     26,657     16.2      9,186      8.4     7,009       8.5         144     4.0
    South/Central
      America............     21,615     13.1     21,366     19.6    14,318      17.3         716    19.7
    Asia/Pacific.........     32,033     19.4     25,638     23.5    21,043      25.4       1,267    34.8
                             -------    -----    -------    -----    ------     -----   ---------   -----
                             164,934    100.0    109,146    100.0    82,826     100.0       3,635   100.0
                             =======    =====    =======    =====    ======     =====   =========   =====
</Table>

     All revenues are derived from aircraft leasing.

     In the year ended March 31, 2001 18% and 13% of AerCo's lease revenues was
derived from the United Kingdom and the United States respectively. No other
country accounted for greater than 10% of AerCo's lease revenues.

     In the year ended March 31, 2000, 17% and 11% of AerCo's lease revenues was
derived from the United Kingdom and Spain respectively. No other country
accounted for greater than 10% of AerCo's lease revenues.

     In the period from July 15, 1998 to March 31, 1999, 18% and 10% of AerCo's
lease revenues was derived from the United Kingdom and Spain respectively. No
other country accounted for greater than 10% of AerCo's lease revenues.

     In the period from July 1, 1998 to July 14, 1998, 15%, 15%, 14% and 10% of
ALPS 94-1's lease revenues was derived from Chile, Hungary, Spain and the United
Kingdom respectively. No other country accounted for greater than 10% of ALPS
94-1's lease revenues.

     (B) CONCENTRATION OF CREDIT RISK

     Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.

     AerCo and ALPS 94-1 manage their exposures to particular countries through
obtaining security from lessees by way of deposits, letters of credit and
guarantees. In addition AerCo [and ALPS 94-1] maintain Political Risk Insurance
in respect of certain lessees.

     AerCo and ALPS 94-1 continually evaluate the financial position of lessees
and, based on this evaluation, the amounts outstanding and the available
security, make an appropriate provision for doubtful debts.

     As at March 31, 2001 one lessee accounted for 9% of AerCo's lease revenues.
No other lessee accounted for greater than 9% of AerCo's lease revenues for the
year ended March 31, 2001.

     As at March 31, 2000 one lessee accounted for 11% of AerCo's lease
revenues. No other lessee accounted for greater than 10% of AerCo's lease
revenues for the year ended March 31, 2000.

     As at March 31, 1999, one lessee accounted for 10% of AerCo's lease
revenues. No other lessee accounted for greater than 10% of AerCo's lease
revenues for the period from July 15, 1998 to March 31, 1999.

     At July 14, 1998 no lessee accounted for greater than 10% of ALPS 94-1's
lease revenues.

                                       F-29
<PAGE>   106
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13  EXCEPTIONAL ITEMS

<Table>
<Caption>
                                                                             AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
<S>                                 <C>               <C>               <C>                 <C>
Provision for impairment in
  aircraft value (note 5).......         3,794            13,079                 --                  --
                                       =======           =======            =======             =======
</Table>

14  NET INTEREST EXPENSE

<Table>
<Caption>
                                                                             AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
<S>                                 <C>               <C>               <C>                 <C>
Interest payable on notes.......       151,496            80,957             56,047               2,977
Net interest income.............       (13,554)           (2,139)            (1,939)               (220)
                                       -------           -------            -------             -------
                                       137,942            78,818             54,108               2,757
                                       =======           =======            =======             =======
</Table>

15  OTHER EXPENSES

<Table>
<Caption>
                                                                             AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
<S>                                 <C>               <C>               <C>                 <C>
Servicer's fees.................         5,168             4,023              2,637                 108
Political risk insurance........            --               292                247                  54
Hull war risks insurance........           485               363                329                  --
Administration fees.............         3,257             2,102              1,561                  20
Cash managers' fees.............           250               251                177                  --
Technical & leasing costs.......        (1,280)            5,021              1,521                  --
Provision for doubtful costs....         2,237             2,146                547                 174
Legal & professional fees.......           303               736                657                 260
Directors' & Officer's
  insurance.....................           271               352                282                  12
Directors' fees and expenses....           371               344                278                  18
Audit, accounting and tax
  fees..........................           382               112                 75                  --
                                       -------           -------            -------             -------
                                        11,444            15,742              8,311                 646
                                       =======           =======            =======             =======
</Table>

16  NET LOSS BEFORE PROVISION FOR TAXES

     (A) NET LOSS BEFORE PROVISION FOR TAXES IS STATED AFTER CHARGING:

<Table>
<Caption>
                                                                             AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
<S>                                 <C>               <C>               <C>                 <C>
Directors' remuneration.........           371               344                278                  18
                                       =======           =======            =======             =======
</Table>

                                       F-30
<PAGE>   107
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16  NET LOSS BEFORE PROVISION FOR TAXES (CONTINUED)

     (B) DIRECTORS' AND OFFICERS' INSURANCE

     Directors' and Officers' Insurance has been implemented for AerCo and ALPS
94-1. Directors of AerCo Limited and ALPS 94-1 Limited also have the protection
of an unsecured indemnity from AerCo Limited and ALPS 94-1 Limited in respect of
claims relating to them in their capacity as directors.

17  PROVISION FOR TAXES

<Table>
<Caption>
                                                                             AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                      U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
    <S>                             <C>               <C>               <C>                 <C>
    Corporation tax provision.....          49                51                 35                  --
                                       =======           =======            =======             =======
</Table>

     Taxation provisions for AerCo and ALPS 94-1 relate to taxes levied in local
jurisdictions in respect of the activities of subsidiaries.

     AerCo's income from approved activities in Ireland is taxable at a rate of
10% until December 31, 2005.

18  BASIC AND DILUTED LOSS PER ORDINARY SHARE

     The calculation of basic and diluted loss per ordinary share for AerCo
Limited for the years ended March 31, 2001 and 2000 and the period from July 15,
1998 to March 31, 1999 has been computed by dividing the losses of
U.S.$60,270,000, U.S.$48,839,000 and U.S.$15,108,000 respectively by the
weighted average number of ordinary shares outstanding during these periods of
20 shares.

     The calculation of basic and diluted loss per ordinary share for ALPS 94-1
Limited from July 1, 1998 to July 14, 1998 has been computed by dividing the
loss of U.S.$1,277,000 by the weighted average number of ordinary shares
outstanding during the period of 10 shares.

     No adjustments have been made to the basic or diluted loss per ordinary
share for ALPS 94-1 Limited for the period from July 1, 1998 to July 14, 1998 as
a result of the change in capital structure and the fair value adjustments
arising out of the refinancing and acquisition of ALPS 94-1 and the AerFi
transferred aircraft and therefore, the earnings per share figures for AerCo
Limited and ALPS 94-1 Limited are not directly comparable.

19  STAFF COSTS AND NUMBERS

     AerCo and ALPS 94-1 have no employees.

20  SUBSIDIARY COMPANIES

     AerCo Limited has the following subsidiary companies as at March 31, 2001:

<Table>
<Caption>
                                      COUNTRY OF
NAME                                 INCORPORATION                BUSINESS                % OF SHARES HELD
----                                 -------------    --------------------------------    ----------------
<S>                                  <C>              <C>                                 <C>
AerCo Ireland Limited..............  Ireland          Aircraft leasing and sub-leasing          100%
AerCo Ireland II Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing I Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing II Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing III Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing IV Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
</Table>

                                       F-31
<PAGE>   108
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20  SUBSIDIARY COMPANIES (CONTINUED)


<Table>
<Caption>
                                      COUNTRY OF
NAME                                 INCORPORATION                BUSINESS                % OF SHARES HELD
----                                 -------------    --------------------------------    ----------------
<S>                                  <C>              <C>                                 <C>
Gustav Leasing V Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing VI Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing VII Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing VIII Limited........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing IX Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing X Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XI Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XII Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XIII Limited........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XIV Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Pergola Limited....................  Ireland          Aircraft leasing and sub-leasing          100%
Baltic Airlease II LLC.............  Isle of Man      Aircraft leasing and sub-leasing          100%
Baltic Airlease III LLC............  Isle of Man      Aircraft leasing and sub-leasing          100%
AerCo POL Inc......................  USA              Aircraft leasing and sub-leasing          100%
AerCo USA Inc......................  USA              Aircraft leasing and sub-leasing          100%
ALPS 94-1 Limited..................  Jersey           Aircraft leasing and sub-leasing          100%
ALPS 94-1 (Belgium) N.V............  Belgium          Aircraft leasing and sub-leasing          100%
AerCom (Belgium) N.V...............  Belgium          Aircraft leasing and sub-leasing          100%
AerCo Sverige Leasing AB...........  Sweden           Aircraft leasing and sub-leasing          100%
ALPS 94-1 (France) S.A.R.L.........  France           Dormant                                   100%
</Table>

     As at July 14, 1998 and all previous periods, ALPS 94-1 was comprised of
ALPS 94-1 Limited and its 100% owned subsidiaries, Pergola Limited, ALPS 94-1
(Belgium) N.V. and ALPS 94-1 (France) S.A.R.L.

21  CASH FLOW STATEMENT

     (A) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<Table>
<Caption>
                                                                                              ALPS 94-1
                                            AERCO            AERCO            AERCO          PERIOD FROM
                                          YEAR ENDED       YEAR ENDED      PERIOD ENDED    JULY 1, 1998 TO
                                        MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999    JULY 14, 1998
                                        --------------   --------------   --------------   ---------------
                                          U.S.$'000        U.S.$'000        U.S.$'000         U.S.$'000
<S>                                     <C>              <C>              <C>              <C>
Cash paid in respect of:
Interest: A-C notes...................      77,743           43,585           30,694            3,872
Interest: D-E notes...................      11,120           10,999            7,332               --
Interest on aircraft purchase
  account.............................       6,940               --               --               --
Interest rate swaps...................        (179)           1,566              987               --
                                            ------           ------           ------            -----
                                            95,624           56,150           39,013            3,872
                                            ======           ======           ======            =====
</Table>

                                       F-32
<PAGE>   109
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21  CASH FLOW STATEMENT (CONTINUED)

     (B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT -- AERCO

<Table>
<Caption>
                                                                U.S.$'000
                                                                ----------
<S>                                                             <C>
Increase in cash in the year................................        13,248
Cash inflow from increase in debt...........................      (684,881)
Increase in liquid resources in year........................        25,002
                                                                ----------
Change in net debt resulting from cash flows................      (646,631)
Capitalization of issue costs...............................         9,661
Amortization of issue costs.................................        (2,414)
                                                                ----------
Movement in net debt in the year............................      (639,384)
Net debt at March 31, 2000..................................      (834,787)
                                                                ----------
Net debt at March 31, 2001..................................    (1,474,171)
                                                                ==========
</Table>

     (C) ANALYSIS OF NET DEBT -- AERCO

<Table>
<Caption>
                                                                         OTHER NON
                                         MARCH 31, 2000    CASH FLOW    CASH CHARGES    MARCH 31, 2001
                                         --------------    ---------    ------------    --------------
                                           U.S.$'000       U.S.$'000     U.S.$'000        U.S.$'000
<S>                                      <C>               <C>          <C>             <C>
Cash.................................         26,413         13,248           --              39,661
Liquid resources.....................         39,998         25,002           --              65,000
Indebtedness.........................       (901,198)      (684,881)       7,247          (1,578,832)
                                            --------       --------        -----          ----------
                                            (834,787)      (646,631)       7,247          (1,474,171)
                                            ========       ========        =====          ==========
</Table>

     (D) PURCHASE OF SUBSIDIARY UNDERTAKINGS

<Table>
<Caption>
NET ASSETS ACQUIRED -- JULY 1998                                U.S.$'000
--------------------------------                                ---------
<S>                                                             <C>
Aircraft....................................................      951,973
Accounts receivable.........................................        2,927
Cash........................................................      146,175
Accrued expenses and other liabilities......................      (60,430)
Security deposits...........................................      (16,205)
                                                                ---------
                                                                1,024,440
Goodwill....................................................       47,125
                                                                ---------
                                                                1,071,565
                                                                =========
Satisfied by cash...........................................    1,071,565
                                                                =========
</Table>

                                       F-33
<PAGE>   110
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21  CASH FLOW STATEMENT (CONTINUED)


<Table>
<Caption>
NET ASSETS ACQUIRED -- JULY 2000                                U.S.$'000
--------------------------------                                ---------
<S>                                                             <C>
Aircraft....................................................      724,052
Accounts receivable.........................................          360
Cash........................................................           11
Accrued expenses and other liabilities......................      (26,700)
Security deposits...........................................       (7,075)
                                                                ---------
                                                                  690,648
Goodwill....................................................       15,701
                                                                ---------
                                                                  706,349
                                                                =========
Satisfied by cash...........................................      706,349
                                                                =========
</Table>

22  COMMITMENTS

     AerCo Limited and its consolidated subsidiaries have no long-term contracts
other than those with their service providers (see note 29) and lessees (see
note 6).

     FOREIGN TAXATION

     The international character of AerCo's operations give rise to some
uncertainties with regard to the impact of taxation in certain countries. The
position is kept under continuous review and AerCo provides for all known
liabilities.

                                       F-34
<PAGE>   111
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES

     The consolidated financial statements are prepared in accordance with U.K.
GAAP which differ significantly in certain respects from U.S. GAAP. These
significant differences are described below:

     (A) BASIS OF ACCOUNTING FOR TRANSACTIONS BETWEEN AERCO, ALPS 94-1 AND DEBIS
AIRFINANCE

     Under U.K. GAAP the transactions whereby AerCo Limited acquired ALPS 94-1
Limited, the AerFi transferred aircraft and the New AerFi transferred aircraft
are accounted for using acquisition accounting. Under U.S. GAAP the transactions
between AerCo, ALPS 94-1 and debis AirFinance are transactions between entities
under common control as these entities are all part of a single consolidated
group. The U.S. GAAP historical financial information is presented for ALPS 94-1
and has not been retroactively restated using the "AS-IF-POOLING-OF
INTEREST-METHOD" in respect of the AerFi transferred aircraft because of the
restricted nature of the vehicles.

     (B) AIRCRAFT

     Under U.K. GAAP the aircraft acquired by ALPS 94-1 from debis AirFinance
and those acquired by AerCo as part of the transactions whereby AerCo acquired
ALPS 94-1, the AerFi transferred aircraft and the New AerFi transferred
aircraft, are recorded at their fair value on the acquisition date. Under U.S.
GAAP transfers of assets between AerCo, ALPS 94-1 and debis AirFinance are
accounted for on a historical cost basis as transactions between entities under
the common control of debis AirFinance.

     For U.S. GAAP purposes, AerCo and ALPS 94-1 have adopted FASB Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of." FASB Statement No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. 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 amount of the asset, an impairment loss is recognized.

     The differences between income recorded for U.K. GAAP and U.S. GAAP
therefore relate to (i) depreciation expense arising from the difference between
the historical cost of the aircraft under U.S. GAAP and the initial appraised
value under U.K. GAAP, (ii) the difference in the cost of aircraft disposed
under U.S. GAAP and U.K. GAAP, (iii) different impairment provisions because of
the different cost base for the aircraft.

     (C) CASH FLOWS

     In accordance with U.K. GAAP AerCo and ALPS 94-1 comply with Financial
Reporting Standard No. 1 (Revised) -- "Cash Flow Statements" ("FRS 1"). Its
objective and principles are similar to those set out in SFAS No. 95 "Statement
of Cash Flows." The principal difference between the standards is in respect of
classification. Under FRS 1, AerCo and ALPS 94-1 present their cash flows for:
(a) operating activities; (b) return on investments and servicing of finance;
(c) taxation; (d) capital expenditure and financial investment; (e) acquisitions
and disposals; (f) management of liquid resources and (g) financing activities.
SFAS No. 95 requires only three categories of cash flow activity; (a) operating;
(b) investing; and (c) financing.

     Cash flows arising from taxation and returns on investments and servicing
of finance under FRS 1 are included as operating activities under SFAS No. 95.
Cash flows arising from capital expenditure under FRS 1 are included as
investing activities under SFAS No. 95.

                                       F-35
<PAGE>   112
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)


     (C) CASH FLOWS (CONTINUED)

     For the purposes of cash flows under U.S. GAAP, AerCo and ALPS 94-1
consider all highly liquid deposits with a maturity of three months or less to
be cash equivalents. Under U.K. GAAP, cash represents amounts available on
demand and liquid resources comprise other cash and commercial paper.

     Substantially all of the cash balances of AerCo at March 31, 2001 and March
31, 2000 are held for specific purposes under the terms of the AerCo Trust
Indenture.

     (D) GOODWILL

     Under U.K. GAAP the difference between the fair value of the net assets of
ALPS 94-1 and the AerFi transferred aircraft, and the purchase consideration
paid by AerCo Limited to acquire these entities gave rise to goodwill of U.S.$47
million which is capitalized and amortized over a period of 20 years. Under U.K.
GAAP the difference between the fair value of the net assets of the New AerFi
transferred aircraft, and the purchase consideration paid by AerCo Limited to
acquire this entity gave rise to goodwill of U.S.$15.7 million which is
capitalized and amortized over a period of 20 years. No goodwill arises under
U.S. GAAP as these transactions are accounted for on an historical cost basis as
transactions between entities under common control.

     Goodwill of U.S.$6.1 million representing the difference between the fair
value of the net assets acquired and the consideration paid by the New AerFi
transferred aircraft in respect of its acquisition of aircraft from Indigo, is
eliminated under acquisition accounting in U.K. GAAP. Under U.S. GAAP this
goodwill will continue to be recognized in the consolidated financial statements
of AerCo.

     (E) ISSUE COSTS

     Under U.K. GAAP issue costs arising on the completion of the refinancing
transactions in July 1998 and July 2000 are disclosed as a reduction of the
related indebtedness. Under U.S. GAAP issue costs are disclosed separately as
deferred financing costs.

     (F) MAINTENANCE

     AerCo's accounting policy for aircraft maintenance reflects its adoption of
FRS 12 "Provisions, Contingent Liabilities and Contingent Assets" ("FRS 12").
The historic U.K. GAAP financial information for ALPS 94-1 has been restated to
reflect the application of the AerCo accounting policy for all periods. For U.S.
GAAP the cumulative effect of this change in accounting policy has been
reflected in the results for the period ended March 31, 1999.

     (G) GAIN ON EXTINGUISHMENT OF DEBT

     Under U.K. GAAP the make whole premium payable by ALPS 94-1 on the
settlement of its A to D note indebtedness and the indebtedness to debis
AirFinance which was forgiven as part of the AerCo transaction are fair value
adjustments to the net assets of ALPS 94-1 and the AerFi transferred aircraft
acquired by AerCo (see Note 4). Under U.S. GAAP the make whole premium and the
indebtedness forgiven by debis AirFinance are accounted for as an extraordinary
gain on the extinguishment of indebtedness.

                                       F-36
<PAGE>   113
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

     (H) FUTURE DEVELOPMENTS

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities." In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative instruments and Certain
Hedging Activity, an Amendment of SFAS No. 133." SFAS No. 133 and SFAS No. 138
require that all derivative instruments be recorded on the balance sheet at
their respective fair values. SFAS No. 133 and SFAS No. 138 are effective for
all fiscal quarters of all fiscal years beginning after June 30, 2000. AerCo
adopted SFAS No. 133 and SFAS No. 138 with effect from April 1, 2001.

     Following the adoption of these standards, in respect of all future
financial statements, all derivatives will be recognized on the balance sheet at
their fair value. All derivatives will be designated as either a hedge of the
fair value of a recognized asset or liability or of an unrecognized firm
commitment ("FAIR VALUE HEDGE") or a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability ("CASH FLOW HEDGE"). AerCo has designated all of its interest rate
swaps as cash flow hedges.

     AerCo has a detailed hedging policy, which has been approved by the Board
of Directors and the rating agencies, which rate certain of the notes issued by
AerCo. This policy has been employed by AerCo's Administrative Agent since the
inception of AerCo in 1998. As part of this hedging policy, AerCo has formally
documented all relationships between hedging instruments and hedged items in the
context of the requirements of SFAS No. 133 and SFAS No. 138.

     This process includes linking all derivatives that are designated as
cash-flow hedges to specific liabilities on the balance sheet. Since April 1,
2001, AerCo formally assesses, both at the hedge's inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged items.

     At April 1, 2001 all of AerCo's derivatives were deemed highly effective.
Subsequent changes in the fair value of derivatives that are highly effective
and that are designated and qualify as cash-flow hedges will be recorded in
Other Comprehensive Income, until earnings are affected by the variability in
cash flows of the designated hedged items.

     AerCo will discontinue hedge accounting prospectively when it is determined
that the derivative is no longer highly effective in offsetting changes in the
cash flows of the hedged item, the derivative expires or is sold, terminated or
exercised, or it is determined that designation of the derivative as a hedging
instrument is no longer appropriate.

     In all situations in which hedge accounting is discontinued, AerCo will
continue to carry the derivative at its fair value on the balance sheet, and
will recognize any changes in its fair value in earnings.

     SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities -- a replacement of FASB Statement No. 125"
("SFAS 140") is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. The adoption of
SFAS 140 has not had any effect on AerCo's financial position and results of
operations.

     In July 2001 the FASB announced it had voted to issue two new statements:
SFAS No. 141, "Business Combinations," ("SFAS 141") and SFAS No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142").

     Those Statements will change the accounting for business combinations and
goodwill in two significant ways. First, SFAS 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. Use of the pooling-of-interests method will be prohibited. Secondly,
SFAS 142
                                       F-37
<PAGE>   114
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)


     (H) FUTURE DEVELOPMENTS (CONTINUED)

changes the accounting for goodwill from an amortization method to an
impairment-only approach. Thus, amortization of goodwill, including goodwill
recorded in past business combinations, will cease upon adoption of SFAS 142,
which for AerCo can be adopted early with effect from 1 April, 2002 or must be
adopted on 1 April, 2003. AerCo has not decided when it will adopt SFAS 142 and
is currently assessing the impact on its US GAAP financial position and results
of operations.

     In July 2001 the FASB announced it had voted to issue SFAS 143, "Accounting
for Asset Retirement Obligations." SFAS 143, which is effective for fiscal years
beginning after 15 June, 2002, requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. AerCo has not decided
when it will adopt this new standard and is currently assessing the impact on
its US GAAP financial position and results of operations.

     UK GAAP accounting standards issued but not yet adopted.

     In December 2000, the ASB issued FRS 18, "Accounting Policies" ("FRS 18").
FRS 18 overhauls and replaces SSAP2. The FRS redefines accounting policies and
distinguishes them from estimation techniques for measuring items in the
financial statements. There is an explicit requirement for each company to
select accounting policies that it judges to be "most appropriate." AerCo is
required to comply with FRS 18 in its financial statements for the year ending
31 March 2002. AerCo is currently assessing the impact of FRS 18 on its
financial position and results of operations and does not believe the financial
statements will be materially impacted by its adoption.

     In December 2000, the ASB issued FRS 19, "Deferred Tax" ("FRS 19"). FRS 19
introduces a form of full provision for deferred taxation. Deferred tax should
be provided on timing differences that have originated but not reversed by the
balance sheet date, but only when there is an obligation to pay more tax in the
future as a result of the reversal of those timing differences. AerCo is
required to comply with FRS 19 in its financial statements for the year ending
31 March 2002. AerCo is currently assessing the impact of FRS 19 on its
financial position and results of operations and does not believe the financial
statements will be materially impacted by its adoption.

                                       F-38
<PAGE>   115
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

24 RECONCILIATION OF NET INCOME AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET
   INCOME IN ACCORDANCE WITH U.S. GAAP

<Table>
<Caption>
                                                                                                             ALPS 94-1
                                                           AERCO            AERCO            AERCO          PERIOD FROM
                                                         YEAR ENDED       YEAR ENDED      PERIOD ENDED    JULY 1, 1998 TO
                                                       MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999    JULY 14, 1998
                                                       --------------   --------------   --------------   ---------------
                                                         U.S.$'000        U.S.$'000        U.S.$'000         U.S.$'000
<S>                                                    <C>              <C>              <C>              <C>
Retained loss in accordance with U.K. GAAP...........      (60,270)         (48,839)          (15,108)         (1,277)
Goodwill amortization................................        2,696            2,356             1,669              --
Difference in depreciation of aircraft...............       11,603            8,644             5,759             243
Difference in provision for impairment of aircraft
  value..............................................       (1,531)           6,979                --              --
Difference in book value of aircraft sold............           --             (375)             (319)          7,007
                                                         ---------        ---------        ----------        --------
NET (LOSS)/INCOME IN ACCORDANCE WITH U.S. GAAP BEFORE
  EXTRAORDINARY ITEM.................................      (47,502)         (31,235)           (7,999)          5,973
                                                         ---------        ---------        ----------        --------
Cumulative effect of change in accounting policy for
  maintenance........................................           --               --             1,973              --
EXTRAORDINARY ITEM -- NET GAIN ON EXTINGUISHMENT OF
  DEBT:
Gain on forgiveness of indebtedness to debis
  AirFinance arising as part of the refinancing
  transaction........................................           --               --            37,389              --
Make whole premium arising on refinancing............           --               --           (11,603)             --
                                                         ---------        ---------        ----------        --------
                                                                --               --            25,786              --
                                                         ---------        ---------        ----------        --------
NET (LOSS)/INCOME IN ACCORDANCE WITH U.S. GAAP.......      (47,502)         (31,235)           19,760           5,973
                                                         =========        =========        ==========        ========
Weighted average number of ordinary Shares
  outstanding........................................           20               20                20              10
                                                         =========        =========        ==========        ========
BASIC AND DILUTED (LOSS)/PROFIT PER ORDINARY SHARE
  FOR THE PERIOD AS SO ADJUSTED, BEFORE CUMULATIVE
  EFFECT OF CHANGE IN ACCOUNTING POLICY FOR
  MAINTENANCE AND
  EXTRAORDINARY ITEM.................................       (2,375)          (1,562)             (400)            597
Cumulative effect of change in accounting policy for
  maintenance........................................           --               --                99              --
Extraordinary item...................................           --               --             1,289              --
                                                         ---------        ---------        ----------        --------
BASIC AND DILUTED PROFIT/(LOSS) PER ORDINARY SHARE
  FOR THE PERIOD AS SO ADJUSTED......................       (2,375)          (1,562)              988             597
                                                         =========        =========        ==========        ========
</Table>

                                       F-39
<PAGE>   116
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

25  RECONCILIATION OF SHAREHOLDERS' DEFICIT AS STATED IN ACCORDANCE WITH U.K.
    GAAP TO SHAREHOLDERS' DEFICIT IN ACCORDANCE WITH U.S. GAAP

<Table>
<Caption>
                                                         AERCO            AERCO            AERCO
                                                         AS AT            AS AT            AS AT
                                                     MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999
                                                     --------------   --------------   --------------
                                                       U.S.$'000        U.S.$'000        U.S.$'000
<S>                                                  <C>              <C>              <C>
SHAREHOLDERS' DEFICIT IN ACCORDANCE WITH U.K.
  GAAP.............................................     (124,217)         (63,947)         (15,108)
ITEMS HAVING THE EFFECT OF AMENDING SHAREHOLDERS'
  DEFICIT
Difference between the fair value of the assets
  acquired by AerCo and their predecessor cost.....     (175,653)        (141,873)        (141,873)
Goodwill arising on acquisitions...................      (56,904)         (47,125)         (47,125)
Amortization of goodwill...........................        6,721            4,025            1,669
Effect of extraordinary item differences between
  U.K. GAAP and U.S. GAAP (see note 24)............       25,786           25,786           25,786
Cumulative effect of change in accounting policy
  for maintenance..................................        1,973            1,973            1,973
Cumulative effect of other differences in net
  income between U.K. GAAP and U.S. GAAP (see note
  24)..............................................       30,760           20,688            5,440
                                                        --------         --------         --------
SHAREHOLDERS' DEFICIT IN ACCORDANCE WITH U.S.
  GAAP.............................................     (291,534)        (200,473)        (169,238)
                                                        ========         ========         ========
</Table>

                                       F-40
<PAGE>   117
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

26  RECONCILIATION OF AIRCRAFT AS STATED IN ACCORDANCE WITH U.K. GAAP TO
    AIRCRAFT AS STATED IN ACCORDANCE WITH U.S. GAAP

<Table>
<Caption>
                                                     U.K. GAAP                         U.S. GAAP
                                          -------------------------------   -------------------------------
                                              AERCO            AERCO            AERCO            AERCO
                                          MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 2001   MARCH 31, 2000
                                          --------------   --------------   --------------   --------------
                                            U.S.$'000        U.S.$'000        U.S.$'000        U.S.$'000
<S>                                       <C>              <C>              <C>              <C>
COST
Cost....................................      922,045         937,766           922,045          937,766
Step up cost............................           --              --          (142,528)        (142,185)
                                            ---------         -------         ---------         --------
Beginning of period.....................      922,045         937,776           779,517          795,581
Additions...............................      724,052             622           724,052              622
Step up cost............................           --              --           (33,780)              --
Disposals...............................       (1,444)        (16,343)           (1,444)         (16,686)
                                            ---------         -------         ---------         --------
End of period...........................    1,644,653         922,045         1,468,345          779,517
                                            =========         =======         =========         ========
DEPRECIATION
Beginning of period.....................      (79,772)        (33,513)          (65,408)         (27,761)
Charge for the period...................      (69,063)        (46,998)          (57,460)         (38,354)
Disposal................................           --             739                --              707
                                            ---------         -------         ---------         --------
End of period...........................     (148,835)        (79,772)         (122,868)         (65,408)
                                            =========         =======         =========         ========
PROVISION FOR PERMANENT DIMINUTION IN
  VALUE
Beginning of period.....................      (13,079)             --            (6,100)              --
Charge for the period...................       (3,794)        (13,079)           (5,325)          (6,100)
Disposal................................           --              --                --               --
                                            ---------         -------         ---------         --------
End of period...........................      (16,873)        (13,079)          (11,425)          (6,100)
                                            =========         =======         =========         ========
NET BOOK VALUE
Beginning of period.....................      829,194         904,253           708,009          767,820
                                            =========         =======         =========         ========
End of period...........................    1,478,945         829,194         1,334,052          708,009
                                            =========         =======         =========         ========
</Table>

27  FAIR VALUE OF FINANCIAL INSTRUMENTS

     AerCo Limited estimates that the fair value of its cash and cash
equivalents and other receivables and payables at March 31, 2001 and March 31,
2000 approximate to the amounts at which these items are reflected in AerCo's
balance sheet. This is due to the relatively short-term nature of the
instruments and the frequency at which they reprice.

28  FOREIGN CURRENCY TRANSACTIONS

     AerCo's and ALPS 94-1's foreign currency transactions are not significant
as all revenues and most costs are denominated in U.S. dollars.

29  RELATED PARTY TRANSACTIONS

     (A) DEBIS AIRFINANCE ACTS AS CASH MANAGER AND ADMINISTRATIVE AGENT TO AERCO
FROM JULY 15, 1998

     debis AirFinance received a fee as cash manager and administrative agent to
AerCo for the years ended March 31, 2001 and March 31, 2000 of U.S.$3,507,000
and U.S.$2,353,000 respectively and for the period from July 15, 1998 to March
31, 1999 of U.S.$1,738,000.

                                       F-41
<PAGE>   118
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

29  RELATED PARTY TRANSACTIONS (CONTINUED)

     (A) DEBIS AIRFINANCE ACTS AS CASH MANAGER AND ADMINISTRATIVE AGENT TO AERCO

FROM JULY 15, 1998 (CONTINUED)
     On July 15, 1998 AerCo Limited acquired a portfolio of 10 aircraft and
related leases from debis AirFinance and the capital stock of ALPS 94-1 Limited,
a vehicle in which debis AirFinance was the E noteholder, as explained in
"Statement of Accounting Policies -- Description of Business."

     On July 17, 2000 AerCo Limited acquired a second portfolio of 30 aircraft
and related leases from debis AirFinance through the acquisition of 100% of the
capital stock of 18 subsidiary companies of debis AirFinance.

     (B) DEBIS AIRFINANCE ACTS AS LEASE MANAGER TO AERCO FROM JULY 17, 2000

     debis AirFinance has acted as lease manager to AerCo from July 17, 2000. In
addition to managing AerCo's aircraft, debis AirFinance also manages aircraft
owned by itself. debis AirFinance may from time to time have conflicts of
interest in performing its obligations to AerCo and in respect of its owned
aircraft.

     debis AirFinance received a fee as lease manager which amounted to
U.S.$2,402,000 for the period from July 17, 2000 to March 31, 2001.

     (C) BABCOCK & BROWN LIMITED ("BABCOCK")

     Babcock acted as lease manager to AerCo from July 15, 1998 to July 17,
2000. In addition to managing AerCo's aircraft, Babcock also managed aircraft
owned by its affiliates and other third parties. Babcock may from time to time
have had conflicts of interest in performing its obligations to AerCo and other
entities to which it provides management, marketing and other services.

     Babcock received a fee as lease manager which amounted to U.S.$2,766,000
for the period from April 1, 2000 to July 16, 2000, U.S.$4,023,000 for the year
ended March 31, 2000 and U.S.$2,637,000 for the period from July 15, 1998 to
March 31, 1999.

     (D) GE CAPITAL AVIATION SERVICES LIMITED ("GECAS")

     GECAS acted as lease manager to ALPS 94-1 until July 14, 1998. In addition
to managing the ALPS 94-1 aircraft GECAS also managed aircraft owned by GE
Capital and its affiliates and other third parties, including debis AirFinance
from whom ALPS 94-1's aircraft were purchased. GECAS may from time to time have
had conflicts of interest in performing its obligations to ALPS 94-1 and other
entities to which it provides management, marketing and other services.

     GECAS received a fee as lease manager which amounted to U.S.$108,000 for
the period from July 1, 1998 to July 14, 1998.

     GECAS is an affiliate of GE Capital which held the Class D note of ALPS
94-1 Limited and had the right to appoint a representative to the board of ALPS
94-1 Limited.

     (E) MR. E. J. HANSOM (DIRECTOR)

     Mr. E. J. Hansom is the Chief Financial Officer and a member of the
management board of debis AirFinance B.V., the parent of debis AirFinance, and
is a representative on the board of AerCo Limited appointed by debis AirFinance,
as holder of the Class E notes of AerCo Limited. Mr. E. J. Hansom is also a
director of ALPS 94-1 Limited. ALPS 94-1 Limited purchased its aircraft from
debis AirFinance and AerCo Limited purchased the AerFi transferred aircraft and
the New AerFi transferred aircraft from debis AirFinance.

                                       F-42
<PAGE>   119
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

29  RELATED PARTY TRANSACTIONS (CONTINUED)

     (F) MS. R. HYNES (DIRECTOR)

     Ms. R. Hynes is Executive Vice President, Commercial at debis AirFinance
B.V., the parent of debis AirFinance, and is a representative on the board of
AerCo Limited appointed by debis AirFinance as holder of the Class E notes of
AerCo Limited. Ms. R. Hynes was also a director of ALPS 94-1 Limited until
January 19, 2000. ALPS 94-1 Limited purchased its aircraft from debis AirFinance
and AerCo Limited purchased the AerFi transferred aircraft and the New AerFi
transferred aircraft from debis AirFinance.

     (G) MR. G. A. ROBINSON (DIRECTOR)

     Mr. G. A. Robinson performs consulting services from time to time for Air
2000 and JMC Airlines, two of the lessees of AerCo. Included in aircraft leasing
revenue in respect of Air 2000 is an amount of U.S.$5,491,000 for the year ended
March 31, 2001 (March 31, 2000: U.S.$5,168,000, March 31, 1999: U.S.$3,588,000,
July 14, 1998: U.S.$202,000). Included in aircraft leasing revenue in respect of
JMC Airlines is an amount of U.S.$4,910,000 for the year ended March 31, 2001.

30  POST BALANCE SHEET EVENT

     On September 11, 2001, the United States was the subject of attacks by
terrorists who used the hijacked aircraft of certain airlines. The full effects
that these terrorist attacks may have for the aviation industry are not yet
known. However, the near term effects of these events can be expected to
include, among other things, a reduction in demand for air travel due to fears
regarding additional acts of terrorism, a cutback in the number of routes
serviced by airlines in response to the reduction of air travel resulting in a
decrease in demand for aircraft, an increase in the price of fuel, increased
costs and reduced operations by airlines due to new security directives adopted
by the relevant aviation authorities, and new insurance requirements.

     The possible impact of these events on AerCo may include a deterioration in
the financial condition of AerCo's lessees and consequently their ability to
perform under their leases, an oversupply in the aviation industry market
resulting in an inability to re-lease aircraft when they become available or at
rates similar to those currently obtained in the market and valuation issues in
relation to AerCo's aircraft portfolio. While the full impact of these events on
AerCo is difficult to determine at this time they could have a material adverse
effect on the cash flow available to AerCo to make payments on its Notes and on
the ability of AerCo to refinance the Notes as they become due.

                                       F-43
<PAGE>   120

                              FINANCIAL STATEMENTS

                           AERFI TRANSFERRED AIRCRAFT

                                       F-44
<PAGE>   121

                           AERFI TRANSFERRED AIRCRAFT

                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF AERCO LIMITED

     We have audited the accompanying statements of operations, cash flows and
changes in net assets for the period from July 1, 1998 to July 14, 1998. These
financial statements are the responsibility of the directors of AerCo Limited.
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 Kingdom and the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the directors as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of the AerFi
transferred aircraft for the period from July 1, 1998 to July 14, 1998 in
conformity with generally accepted accounting principles in the United Kingdom.

     As discussed in note 11 to the financial statements, AerCo has adopted the
provisions of Financial Reporting Standard 12, "Provisions, Contingent
Liabilities and Contingent Assets." As a result, the accounting policy used to
record maintenance for the AerFi transferred aircraft has been amended to
reflect the adoption of the AerCo accounting policy.

     Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations of the AerFi
transferred aircraft for the period from July 1, 1998 to July 14, 1998 to the
extent summarized in note 12 to the financial statements.

KPMG
Chartered Accountants
Dublin, Ireland
August 9, 1999

                                       F-45
<PAGE>   122

                           AERFI TRANSFERRED AIRCRAFT

                            STATEMENT OF OPERATIONS

<Table>
<Caption>
                                                                           PERIOD FROM
                                                                         JULY 1, 1998 TO
                                                                NOTES     JULY 14, 1998
                                                                -----    ---------------
                                                                            U.S.$'000
<S>                                                             <C>      <C>
REVENUES
Aircraft leasing............................................      4             983
EXPENSES
Depreciation................................................      2            (464)
Net interest expense........................................      5          (1,392)
Other expenses..............................................      6             355
                                                                             ------
                                                                             (1,501)
                                                                             ------
NET LOSS FROM OPERATIONS BEFORE PROVISION FOR TAXES.........                   (518)
Benefit for taxes...........................................      7               5
                                                                             ------
NET LOSS FOR THE PERIOD.....................................                   (513)
                                                                             ======
</Table>

     All recognized gains and losses are included in the statements of
operations above.

     There is no material difference between the net loss for the period, and
its historical cost equivalent.

     The results for the period are derived from continuing operations.

     The accompanying notes, including the statement of accounting policies on
pages F-49 to F-50, are an integral part of the financial statements.

                                       F-46
<PAGE>   123

                           AERFI TRANSFERRED AIRCRAFT

                            STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
<S>                                                             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period.....................................           (513)
ADJUSTMENTS TO RECONCILE NET LOSS FROM OPERATIONS TO NET
  CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation charge for the period..........................            464
Deferred income tax.........................................             (5)
Changes in operating assets and liabilities
  Accounts receivable and due from debis AirFinance.........         24,539
  Accrued expenses and other liabilities....................           (970)
  Net maintenance expenditure...............................           (448)
  Net security deposits received............................             50
                                                                    -------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................         23,117
                                                                    -------
CAPITAL EXPENDITURE
Purchase of aircraft........................................             --
                                                                    -------
FINANCING ACTIVITIES
Contributions from debis AirFinance.........................         16,793
Indebtedness repaid.........................................        (39,910)
                                                                    -------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES.........        (23,117)
                                                                    -------
NET INCREASE IN CASH........................................             --
CASH AT BEGINNING OF PERIOD.................................             --
                                                                    -------
CASH AT END OF PERIOD.......................................             --
                                                                    =======
</Table>

     Disclosure of cash flow information is set out in note 9.

     The accompanying notes, including the statement of accounting policies on
pages F-49 to F-50, are an integral part of the financial statements.

                                       F-47
<PAGE>   124

                           AERFI TRANSFERRED AIRCRAFT

                       STATEMENT OF CHANGES IN NET ASSETS

<Table>
<Caption>
                                                                  TOTAL
                                                                ---------
                                                                U.S.$'000
                                                                ---------
<S>                                                             <C>
Balance at June 30, 1998....................................     100,753
Net contribution from AerFi.................................      16,793
Net loss for the period.....................................        (513)
                                                                 -------
Balance at July 14, 1998....................................     117,033
                                                                 =======
</Table>

     The accompanying notes, including the statement of accounting policies on
pages F-49 to F-50 are an integral part of the financial statements.

                                       F-48
<PAGE>   125

                           AERFI TRANSFERRED AIRCRAFT

                        STATEMENT OF ACCOUNTING POLICIES

INTRODUCTION AND BASIS OF PREPARATION

     These financial statements present the statement of operations and the cash
flows for the period from July 1, 1998 to July 14, 1998 and the statement of net
assets at July 14, 1998 of the aircraft (the "AERFI TRANSFERRED AIRCRAFT")
acquired by AerCo Limited from debis AirFinance pursuant to a secured financing
transaction on July 15, 1998.

     Under the transaction AerCo Limited acquired all of the capital stock of
ALPS 94-1 Limited, a company which owned 25 aircraft and related leases, and
also acquired 10 aircraft and related leases from debis AirFinance. The further
details of the transaction and of the basis of preparation of these financial
statements for the AerFi transferred aircraft are set out in Note 1.

     The accounting policies followed in the preparation of the accompanying
financial statements conform with generally accepted accounting principles in
the United Kingdom and comply with financial reporting standards of the
Accounting Standards Board in the United Kingdom as promulgated by The Institute
of Chartered Accountants in England and Wales.

     The financial statements are prepared on the going concern basis and under
the historic cost convention and are stated in U.S. dollars, which is the
principal operating currency of the entity and of the aviation industry.

REVENUE RECOGNITION

     Revenue from aircraft on operating leases is recognized as income on a
straight-line basis over the period of the leases. Where rentals are adjusted to
reflect increases or decreases in prevailing interest rates such adjustments are
accounted for as they arise. Lease rentals received in advance are deferred and
recognized over the period to which they relate.

INTEREST INCOME

     Interest earned during the period has been credited to the statement of
operations.

MAINTENANCE

     In most lease contracts the lessee has the obligation to pay for
maintenance costs on airframes and engines which arise during the term of the
lease and in many lease contracts the lessee makes a full or partial prepayment,
calculated at an hourly rate, into a maintenance reserve fund paid to the AerFi
transferred aircraft from which the lessee can draw in respect of maintenance
expenditures for major checks. Amounts held in respect of aircraft maintenance
are recorded as accrued expenses and other liabilities. Any surplus amounts held
in the fund on termination of a lease, to which the next lessee has no access,
are recorded as income at that time.

     Maintenance costs borne directly by the AerFi transferred aircraft and
which are not paid for by lessees are expensed as incurred.

TAXATION

     Corporation tax is provided based on the results for the period. Deferred
income tax assets and liabilities recognize the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets
and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.

                                       F-49
<PAGE>   126
                           AERFI TRANSFERRED AIRCRAFT
                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

AIRCRAFT

     Aircraft are stated at cost less accumulated depreciation less impairments
in value. Cost comprises the net purchase price of the aircraft when originally
acquired by debis AirFinance.

     Cost comprises the invoiced cost net of manufacturer's discounts.
Depreciation is calculated on a straight-line basis. The estimates of useful
economic lives and residual values are reviewed periodically. The current
estimates for residual values are generally 15% of cost and for useful economic
lives are as follows:

<Table>
<Caption>
                                                                YEARS          FROM
                                                                -----          ----
<S>                                                             <C>      <C>
Refurbished and upgraded aircraft -- converted to
  freighters................................................     20      Conversion Date
All other aircraft..........................................     25      Manufacture Date
</Table>

     Additional charges are made to reduce the book value of specific assets to
the recoverable amount where an impairment in value is considered to have
occurred in accordance with Financial Reporting Standard No. 11 "Impairment of
Tangible Fixed Assets and Goodwill." An impairment review is only required where
there has been an indication of impairment, usually on the basis of independent
market appraisals and indications of market demand. An impairment is measured by
comparing the carrying value of the aircraft and engines with the recoverable
amount. Recoverable amount is the higher of the net realizable value and the
value in use on an after tax basis. Value in use is based on the anticipated
future cash flows from the aircraft, discounted by a market rate of return.

     debis AirFinance adopted FASB Statement No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be disposed of" as
of July 1, 1996. FASB Statement No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the directors' estimated 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 amount of the asset, an impairment loss is recognized. This
statement did not materially change the carrying value of the entity's assets in
the period when it was first applied or in previous periods.

                                       F-50
<PAGE>   127

                           AERFI TRANSFERRED AIRCRAFT

                       NOTES TO THE FINANCIAL STATEMENTS

1   BASIS OF PREPARATION

     Under a refinancing transaction of July 15, 1998, AerCo Limited acquired
100% of the capital stock of ALPS 94-1 Limited and thereby acquired 25 aircraft
and related leases and acquired directly or indirectly 10 aircraft and related
leases from debis AirFinance. The transaction was effected by transferring ALPS
94-1 Limited and subsidiaries and the existing debis AirFinance subsidiaries
that own the AerFi transferred aircraft to AerCo Limited.

     Simultaneously with such transfers, AerCo Limited issued approximately
U.S.$800 million in aggregate principal amount of notes in four subclasses:
subclass A-1, subclass A-2, subclass B-1 and subclass C-1 (the "NOTES"). AerCo
Limited also issued two additional subclasses of notes, the subclass D-1 notes
and the subclass E-1 notes, which were initially and continue to be held by
debis AirFinance. In addition, as part of the transaction a subsidiary of debis
AirFinance surrendered its existing class E note issued by ALPS 94-1 Limited.
AerCo Limited used the proceeds of the issuance of the notes, the subclass D-1
notes and subclass E-1 notes to finance the repayment of all of ALPS 94-1's
existing financial indebtedness and to acquire or to finance the acquisition of
the AerFi transferred aircraft from debis AirFinance.

     These financial statements present, on the bases and assumptions set out
below, the results of operations, assets and liabilities relating to the
aircraft transferred to AerCo from debis AirFinance, reflecting the nine
aircraft owned by debis AirFinance during the year ended June 30, 1998 and the
acquisition in April 1998 of an A300-B4-200 aircraft by debis AirFinance from
ALPS 94-1 Limited. The financial statements have been prepared by debis
AirFinance Administrative Services Limited on behalf of the directors of AerCo
Limited.

     (i) The financial statements are presented on a historical cost basis as if
the AerFi transferred aircraft had been organized as single economic entity for
the period from July 1, 1998 to July 14, 1998.

     (ii) The transaction was approved as planned and was completed such that
AerCo was a going concern with adequate capital and finance in place.

     (iii) For the purposes of these financial statements, an allocation of
certain costs such as selling, general and administrative expenses of debis
AirFinance to the AerFi transferred aircraft has been made. The most significant
element of these costs relate to aircraft management fees, substantially all of
which are asset based fees calculated as an annual percentage of a reference net
book value of aircraft under management. The balance of such costs have been
calculated based on debis AirFinance's estimate of the other overhead costs
incurred in managing the fleet of aircraft for the year. Management believes
that the basis for these allocations are reasonable.

     (iv) During the period from July 1, 1998 to July 14, 1998 two of the
aircraft were financed by finance leases to debis AirFinance and one aircraft
was financed by notes issued by debis AirFinance. For these aircraft the
financial lease obligations, the liabilities under the notes and related cash
flows and interest costs are reflected in these financial statements.

     During the period from July 1, 1998 to July 14, 1998 the financial lease
obligations and the liabilities under the notes were repaid.

     In the case of the remaining aircraft, no separate identifiable financing
was in place. These aircraft are assumed to have been financed by intercompany
indebtedness to debis AirFinance at levels based on the ratio of debis
AirFinance's overall net debt to aircraft net book value of 42.06% at June 30,
1998 and 42.06% at July 14, 1998 and repayments to debis AirFinance are assumed
to have been made accordingly during the period.

     (v) The interest charged on the assumed indebtedness to debis AirFinance is
based on debis AirFinance's average cost of debt of 9.59% for the period from
July 1, 1998 to July 14, 1998.

                                       F-51
<PAGE>   128
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1   BASIS OF PREPARATION (CONTINUED)

     (vi) Cash generated from or absorbed by the activities of the entity during
the period is reflected through the intercompany account as distributions to or
transfers from debis AirFinance. This includes restricted cash held by debis
AirFinance with respect to the entity. No separate cash balances existed for the
entity.

     (vii) The tax provisions and deferred income tax assets and liabilities of
the entity have been determined as if the aircraft had been owned by taxable
entities separate from debis AirFinance.

2   AIRCRAFT

<Table>
<Caption>
                                                                JULY 14, 1998
                                                                -------------
                                                                  U.S.$'000
<S>                                                             <C>
COST
Beginning of period.........................................       283,713
Additions during the period.................................            --
                                                                  --------
End of period...............................................       283,713
                                                                  ========
DEPRECIATION
Beginning of period.........................................      (100,493)
Charge for the period.......................................          (464)
                                                                  --------
End of period...............................................      (100,957)
                                                                  ========
Impairment provision........................................        (4,000)
                                                                  ========
NET BOOK VALUE
Beginning of period.........................................       179,220
                                                                  ========
End of period...............................................       178,756
                                                                  ========
</Table>

     Cost represents the net purchase price of the aircraft when originally
acquired by debis AirFinance.

     The directors of AerCo Limited determine on an annual basis whether an
impairment in value of the AerFi transferred aircraft has occurred. Where an
impairment in value is considered to have occurred provision is made based upon
market appraisals of the individual aircraft prepared by three professional
appraisal firms, together with other factors such as maintenance reserves held
by the entity, the creditworthiness of particular lessees, current rental values
compared to open market and the length of remaining lease term.

3   OPERATING LEASES

     All the aircraft are held for operating lease. Rentals on certain of the
leases are variable in accordance with prevailing interest rates.

     The following is a schedule of contracted future rentals, by years, on
operating leases as of July 14, 1998. The interest rates prevailing at July 14,
1998 have been applied in determining rentals that are variable in accordance
with prevailing interest rates.

                                       F-52
<PAGE>   129
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3   OPERATING LEASES (CONTINUED)


<Table>
<Caption>
                                                                U.S.$'000
                                                                ---------
<S>                                                             <C>
Period July 15, 1998 to June 30, 1999.......................      22,595
Year ended June 30, 2000....................................      26,153
Year ended June 30, 2001....................................      17,439
Year ended June 30, 2002....................................      13,191
Year ended June 30, 2003....................................      15,181
Thereafter..................................................       9,458
                                                                 -------
                                                                 104,017
                                                                 =======
</Table>

4   REVENUES AND CONCENTRATION OF CREDIT RISK

     (A) DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA

<Table>
<Caption>
                                                                   PERIOD FROM
                                                                 JULY 1, 1998 TO
                                                                  JULY 14, 1998
                                                                ------------------
                                                                U.S.$'000      %
<S>                                                             <C>          <C>
Europe......................................................       543        55.3
North America...............................................       231        23.5
South/Central America.......................................       137        13.9
Asia/Pacific................................................        72         7.3
                                                                   ---       -----
                                                                   983       100.0
                                                                   ===       =====
</Table>

     All revenues are derived from aircraft leasing.

     In the period from July 1, 1998 to July 14, 1998, 27%, 24%, 15%, 14% and
14% of the entity's lease revenues were derived from Turkey, the United States,
the United Kingdom, Brazil and France respectively.

     (B) CONCENTRATION OF CREDIT RISK

     Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.

     The entity manages its exposure to particular countries in part through
obtaining security from lessees by way of deposits, letters of credit and
guarantees. In addition the entity maintains Political Risk Insurance in respect
of certain lessees.

     The entity 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.

     As at July 14, 1998, five lessees accounted for 15%, 15%, 14%, 14% and 13%
of the entity's lease revenues. No other lessee accounted for greater than 10%
of the entity's lease revenues for the period from July 1, 1998 to July 14,
1998.

                                       F-53
<PAGE>   130
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5   NET INTEREST EXPENSE

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
<S>                                                             <C>
Interest payable on finance lease obligations...............         1,125
Interest payable on debis AirFinance notes..................            55
Interest payable on indebtedness due to debis AirFinance....           212
                                                                     -----
                                                                     1,392
                                                                     =====
</Table>

6   OTHER EXPENSES

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
<S>                                                             <C>
Servicer's fees.............................................           52
Aircraft leasing costs......................................         (424)
Administration fees.........................................            2
Legal and professional fees.................................            4
Cash manager's fees.........................................            9
Audit and tax fees..........................................            2
                                                                     ----
                                                                     (355)
                                                                     ====
</Table>

     Aircraft leasing costs include costs relating to the repair and return to
re-leasable condition of aircraft following return from lessees.

7   BENEFIT FOR TAXES

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
<S>                                                             <C>
Tax benefit of the AerFi transferred aircraft consists of
  the following:
Deferred income tax benefit.................................            5
                                                                     ----
                                                                        5
                                                                     ====
</Table>

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
<S>                                                             <C>
Deferred tax assets and liabilities of the AerFi transferred
  aircraft:
Deferred tax assets relating to losses......................        (5,515)
Deferred tax liability relating to aircraft.................        10,663
                                                                    ------
                                                                     5,148
                                                                    ======
</Table>

     The entity's income from approved activities in Ireland is taxable at a
rate of 10% until December 31, 2005. U.S. Federal and State tax is provided at a
rate of 35%.

     Two aircraft, for tax purposes, are treated as being leased from third
parties under U.S. "SAFE HARBOR LEASE" tax rules. Under existing laws, certain
events could reverse the cumulative effect of this tax treatment, in which case
the entity would be required to make payments to third parties under the tax
indemnification clauses

                                       F-54
<PAGE>   131
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

7   BENEFIT FOR TAXES (CONTINUED)

included in the lease agreements. As of July 14, 1998 the maximum potential
exposure under this provision is U.S.$0.9 million (June 30, 1998: U.S.$0.9
million). The directors of AerCo Limited believe that no events have taken place
which would cause such payments to become due.

8   STAFF COSTS AND NUMBERS

     The entity has no employees.

9   CASH FLOW STATEMENT

     (A) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
<S>                                                             <C>
Cash paid in respect of:
Interest -- Individual financings...........................            212
Interest -- AerFi notes.....................................             55
Interest -- Indebtedness to AerFi...........................          1,175
                                                                    -------
                                                                      1,442
                                                                    =======
</Table>

     (B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

<Table>
<Caption>
                                                              U.S.$'000
                                                              ----------
<S>                                                           <C>
Increase in cash in the period..............................        --
Cashflow from increase in debt..............................   (39,910)
Increase in liquid resources in period......................        --
Change in net debt resulting from cashflows.................   (39,910)
                                                               -------
Movement in net debt in the period..........................   (39,910)
Net debt at June 30, 1998...................................    88,345
                                                               -------
Net debt at July 14, 1998...................................    48,435
                                                               =======
</Table>

     (C) ANALYSIS OF NET DEBT

<Table>
<Caption>
                                                          JUNE 30, 1998    CASHFLOW     JULY 14, 1998
                                                          -------------    ---------    -------------
                                                            U.S.$'000      U.S.$'000      U.S.$'000
<S>                                                       <C>              <C>          <C>
Cash..................................................            --             --             --
Liquid resources......................................            --             --             --
Indebtedness..........................................        88,345        (39,910)        48,435
                                                             -------        -------        -------
                                                              88,345        (39,910)        48,435
                                                             =======        =======        =======
</Table>

10  COMMITMENTS

     The entity has no long-term contracts other than those with its service
providers (see Note 14).

11  NEW ACCOUNTING STANDARDS IMPLEMENTED

     FRS 12 "Provisions, Contingent Liabilities and Contingent Assets" was
effective for AerCo for its first trading accounting period ended March 31,
1999.
                                       F-55
<PAGE>   132
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11  NEW ACCOUNTING STANDARDS IMPLEMENTED (CONTINUED)

     Under the accounting policy previously adopted by the entity all aircraft
maintenance reserves collected from lessees in respect of major aircraft and
engine overhauls were held as provisions. Under FRS 12 the pre-accrual of
maintenance costs is not permitted and accordingly the entity has changed its
accounting policy to reflect the adoption of the AerCo accounting policy for
maintenance. The effect of this change in accounting policy is that maintenance
reserves collected from lessees which cannot be drawn down by current lessees
are no longer provided. Such reserves only arose prior to June 30, 1996 and the
adjustment therefore has no effect on reported results. The balance sheet effect
of this change in accounting policy is to reduce maintenance provisions and to
increase net assets of the entity by U.S.$2.923 million at each balance sheet
date.

12  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES

     The financial statements are prepared in accordance with generally accepted
accounting principles applicable in the United Kingdom ("U.K. GAAP") which
differ significantly in certain respects from those generally accepted in the
United States ("U.S. GAAP").

     AerCo's accounting policy for aircraft maintenance reflects its adoption of
FRS 12 as explained in note 11. The historic U.K. GAAP financial information for
the AerFi transferred aircraft has been restated to reflect the application of
the AerCo accounting policy for all periods. For U.S. GAAP the cumulative effect
of this change in accounting policy has been reflected in the results for the
period ended July 14, 1998.

RECONCILIATION OF NET LOSS AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET LOSS IN
ACCORDANCE WITH U.S. GAAP.

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                  JULY 1, 1998
                                                                TO JULY 14, 1998
                                                                ----------------
                                                                   U.S.$'000
<S>                                                             <C>
NET LOSS IN ACCORDANCE WITH U.K. GAAP.......................          (513)
Cumulative effect of change in accounting policy for
  maintenance...............................................         2,923
                                                                     -----
NET INCOME/(LOSS) IN ACCORDANCE WITH U.S. GAAP..............         2,410
                                                                     =====
</Table>

RECONCILIATION OF NET ASSETS AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET
ASSETS IN ACCORDANCE WITH U.S. GAAP.

<Table>
<Caption>
                                                                  PERIOD FROM
                                                                  JULY 1, 1998
                                                                TO JULY 14, 1998
                                                                ----------------
                                                                   U.S.$'000
<S>                                                             <C>
NET ASSETS IN ACCORDANCE WITH U.K. GAAP.....................        117,033
Cumulative effect of change in accounting policy for
  maintenance                                                            --
                                                                    -------
NET ASSETS IN ACCORDANCE WITH U.S. GAAP.....................        117,033
                                                                    =======
</Table>

     There were no other significant differences between U.K. GAAP and U.S. GAAP
arising in respect of the entity for the period from July 1, 1998 to July 14,
1998.

13  FOREIGN CURRENCY TRANSACTIONS

     The entity's foreign currency transactions are not significant as all
revenues and most costs are denominated in U.S. dollars.

                                       F-56
<PAGE>   133
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14  RELATED PARTY TRANSACTIONS

     GE CAPITAL AVIATION SERVICES LIMITED ("GECAS")

     During the period from July 1, 1998 to July 14, 1998 GECAS acted as lease
manager for the entity. In addition to managing the entity's aircraft GECAS also
manages aircraft owned by GE Capital and its affiliates and other third parties,
including debis AirFinance. GECAS may from time to time have had conflicts of
interest in performing its obligations to the entity and other entities to which
it provides management, marketing and other services.

     GECAS receives an annual fee from debis AirFinance as lease manager of
certain of its aircraft -- U.S.$52,075 of this fee is attributed to the entity
for the period from July 1, 1998 to July 14, 1998.

                                       F-57
<PAGE>   134

                              FINANCIAL STATEMENTS

                         NEW AERFI TRANSFERRED AIRCRAFT

                                       F-58
<PAGE>   135

                         NEW AERFI TRANSFERRED AIRCRAFT

                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF AERCO LIMITED

     We have audited the accompanying statements of net assets of the New AerFi
Transferred Aircraft as of July 16, 2000, March 31, 2000 and March 31, 1999 and
the statements of operations, cash flows and changes in net assets for the
period from April 1, 2000 to July 16, 2000 and the years ended March 31, 2000
and 1999. These financial statements are the responsibility of the directors of
AerCo Limited. 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 Kingdom and the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the directors as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the New AerFi Transferred
Aircraft as of July 16, 2000, March 31, 2000 and March 31, 1999 and its results
of operation and cash flows for the period from April 1, 2000 to July 16, 2000
and the years ended March 31, 2000 and 1999 in conformity with generally
accepted accounting principles in the United Kingdom.

     Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have no significant effect on the results of operations
for the period from April 1, 2000 to July 16, 2000 and the years ended March 31,
2000 and 1999 and the statements of net assets as of July 16, 2000, March 31,
2000 and March 31, 1999.

KPMG
Chartered Accountants
Dublin, Ireland
July 25, 2001

                                       F-59
<PAGE>   136

                         NEW AERFI TRANSFERRED AIRCRAFT

                            STATEMENTS OF NET ASSETS

<Table>
<Caption>
                                              NOTES    JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                              -----    -------------    --------------    --------------
                                                         U.S.$'000        U.S.$'000         U.S.$'000
<S>                                           <C>      <C>              <C>               <C>
ASSETS
CURRENT ASSETS
Cash, restricted............................               14,824           16,784                --
Accounts receivable, net....................    2           1,475            2,349               786
                                                          -------          -------           -------
TOTAL CURRENT ASSETS........................               16,299           19,133               786
INTANGIBLE ASSETS
Goodwill, net...............................    3           5,922            6,011                --
FIXED ASSETS
Aircraft....................................    5         690,272          653,336            30,196
                                                          -------          -------           -------
TOTAL ASSETS................................              712,493          678,480            30,982
                                                          =======          =======           =======
LIABILITIES
Accrued expenses and other liabilities......    7          28,756           32,888               692
Indebtedness................................    8         470,562          483,302            20,527
Security deposits...........................    9           7,075            7,531               834
Deferred income tax.........................   13             970              899               855
                                                          -------          -------           -------
TOTAL LIABILITIES...........................              507,363          524,620            22,908
NET ASSETS..................................              205,130          153,860             8,074
                                                          =======          =======           =======
</Table>

     The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66, are an integral part of the financial statements.

                                       F-60
<PAGE>   137

                         NEW AERFI TRANSFERRED AIRCRAFT

                            STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                       PERIOD FROM
                                                     APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                            NOTES     JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                            -----    ----------------    --------------    --------------
                                                        U.S.$'000          U.S.$'000         U.S.$'000
<S>                                         <C>      <C>                 <C>               <C>
REVENUES
Aircraft leasing..........................   10           26,423             26,258             3,292
EXPENSES
Depreciation..............................    5           (9,444)           (10,086)           (1,360)
Amortization of goodwill..................    3              (89)               (89)               --
Net interest expense......................   11          (10,048)           (11,593)           (1,578)
Other expenses............................   12           (1,244)            (2,578)             (463)
                                                         -------            -------            ------
                                                         (20,825)           (24,346)           (3,401)
                                                         -------            -------            ------
NET PROFIT / (LOSS) FROM OPERATIONS BEFORE
  TAXES...................................                 5,598              1,912              (109)
(Provision) / benefit for taxes...........   13              (71)               (44)               11
                                                         -------            -------            ------
NET PROFIT / (LOSS) FOR THE PERIOD........                 5,527              1,868               (98)
                                                         =======            =======            ======
</Table>

     All recognized gains and losses are included in the statements of
operations above.

     There is no material difference between the net profit/(loss) for the
period, and its historical cost equivalent.

     The results for the period are derived from continuing operations.

     The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66, are an integral part of the financial statements.

                                       F-61
<PAGE>   138

                         NEW AERFI TRANSFERRED AIRCRAFT

                            STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                     PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
<S>                                                <C>                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit/(loss) for the period...............          5,527               1,868              (98)
ADJUSTMENTS TO RECONCILE NET PROFIT/(LOSS) FROM
  OPERATIONS TO NET CASH PROVIDED BY OPERATING
  ACTIVITIES
Depreciation charge for the period.............          9,444              10,086            1,360
Amortization of goodwill.......................             89                  89               --
Deferred income tax............................             71                  44              (11)
Changes in operating assets and liabilities
  Accounts receivable..........................            874                 718             (785)
  Accrued expenses and other liabilities.......         (1,923)               (220)             171
  Net maintenance expenditure..................         (2,209)              3,158               --
  Net security deposits repaid)/received.......           (456)                144               --
                                                       -------            --------           ------
NET CASH PROVIDED BY OPERATING ACTIVITIES......         11,417              15,887              637
                                                       -------            --------           ------
CAPITAL EXPENDITURE
Purchase of aircraft...........................        (46,380)            (21,191)              --
                                                       -------            --------           ------
ACQUISITION
Purchase of Indigo transferring Aircraft.......             --            (102,529)              --
Cash acquired with Indigo transferring
  Aircraft.....................................             --              14,424               --
                                                       -------            --------           ------
                                                            --             (88,105)              --
FINANCING ACTIVITIES
Contributions from debis AirFinance............         45,743             143,918            2,235
Net indebtedness repaid........................        (12,740)            (33,725)          (2,872)
                                                       -------            --------           ------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING
  ACTIVITIES...................................         33,003             110,193             (637)
                                                       -------            --------           ------
NET (DECREASE)/INCREASE IN CASH................         (1,960)             16,784               --
CASH AT BEGINNING OF PERIOD....................         16,784                  --               --
                                                       -------            --------           ------
CASH AT END OF PERIOD..........................         14,824              16,784               --
                                                       =======            ========           ======
</Table>

     Supplemental disclosure of cash flow information is set out in note 15.

     The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66, are an integral part of the financial statements.

                                       F-62
<PAGE>   139

                         NEW AERFI TRANSFERRED AIRCRAFT

                      STATEMENTS OF CHANGES IN NET ASSETS

<Table>
<Caption>
                                                                  TOTAL
                                                                ---------
                                                                U.S.$'000
<S>                                                             <C>
Balance at March 31, 1998...................................        5,937
Net contribution from debis AirFinance......................        2,235
Net loss for the year.......................................          (98)
                                                                ---------
Balance at March 31, 1999...................................        8,074
Net contribution from debis AirFinance......................      143,918
Net profit for the year.....................................        1,868
                                                                ---------
Balance at March 31, 2000...................................      153,860
Net contribution from debis AirFinance......................       45,743
Net profit for the period...................................        5,527
                                                                ---------
Balance at July 16, 2000....................................      205,130
                                                                =========
</Table>

     The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66 are an integral part of the financial statements.

                                       F-63
<PAGE>   140

                         NEW AERFI TRANSFERRED AIRCRAFT
                        STATEMENT OF ACCOUNTING POLICIES

INTRODUCTION AND BASIS OF PREPARATION

     Under the refinancing transaction entered into on July 17, 2000, AerCo
Limited acquired 30 additional aircraft and related leases from debis
AirFinance. On December 16, 1999 debis AirFinance tendered for 100% of the share
capital of Indigo who at that date owned 26 of the 30 aircraft purchased from
debis AirFinance by AerCo Limited (the "INDIGO TRANSFERRING AIRCRAFT"). At
December 16, 1999 debis AirFinance owned three of the aircraft transferred to
AerCo as part of the refinancing transaction in July 2000. debis AirFinance
acquired the final aircraft in April 2000 which was transferred to AerCo in July
2000. Further details of the transaction and of the basis of preparation of
these financial statements for the entity are set out in note 1.

     These financial statements present the statements of operations and the
cash flows for the period from April 1, 2000 to July 16, 2000 and for the years
ended March 31, 2000 and March 31, 1999 and the statements of net assets at July
16, 2000, March 31, 2000 and March 31, 1999 of the four debis AirFinance owned
aircraft and the Indigo transferring aircraft from December 16, 1999 (the date
of acquisition of Indigo by debis AirFinance) acquired by AerCo Limited from
debis AirFinance pursuant to a securitization and refinancing transaction
(together the "NEW AERFI TRANSFERRED AIRCRAFT").

     The accounting policies followed in the preparation of the accompanying
financial statements conform with generally accepted accounting principles in
the United Kingdom and comply with financial reporting standards of the
Accounting Standards Board in the Kingdom as promulgated by The Institute of
Chartered Accountants in England and Wales.

     The financial statements are prepared on the going concern basis and under
the historic cost convention and are stated in U.S. dollars, which is the
principal operating currency of the entity and of the aviation industry.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires the directors of AerCo Limited to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. While the directors of AerCo Limited believe that the
estimates and related assumptions used in the preparation of these financial
statements are appropriate, actual results could differ from those estimates.
Estimates are made in the assessment of collectibility of receivables, the
recoverable amounts in respect of aircraft and the related estimated lives of
such assets.

REVENUE RECOGNITION

     Revenue from aircraft on operating leases is recognized as income on a
straight-line basis over the period of the leases. Where rentals are adjusted to
reflect increases or decreases in prevailing interest rates such adjustments are
accounted for as they arise. Lease rentals received in advance are deferred and
recognized over the period to which they relate.

INTEREST INCOME

     Interest earned during the period has been credited to the statement of
operations.

MAINTENANCE

     In most lease contracts the lessee has the obligation to pay for
maintenance costs on airframes and engines which arise during the term of the
lease and in many lease contracts the lessee makes a full or partial prepayment,
calculated at an hourly rate, into a maintenance reserve fund paid to the entity
from which the lessee can draw in respect of maintenance expenditures for major
checks. Amounts held in respect of aircraft maintenance are

                                       F-64
<PAGE>   141
                         NEW AERFI TRANSFERRED AIRCRAFT
                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

MAINTENANCE (CONTINUED)

recorded as accrued expenses and other liabilities. Any surplus amounts held in
the fund on termination of a lease, to which the next lessee has no access, are
recorded as income at that time.

     Maintenance costs borne directly by the entity and which are not paid for
by lessees are expensed as incurred.

TAXATION

     Corporation tax is provided based on the results for the period. Deferred
income tax assets and liabilities recognize the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets
and liabilities of a change in tax rates is recognized in the year that includes
the enactment date.

AIRCRAFT

     On December 16, 1999, debis AirFinance tendered for 100% of the share
capital of Indigo. These financial statements reflect the acquisition by the
entity on December 16, 1999 of the Indigo transferring aircraft (the "STARTING
DATE OF PERIOD OF COMMON CONTROL") which transferred to AerCo as part of the
refinancing in July 2000. Aircraft are stated at cost less accumulated
depreciation less impairments in value and are depreciated at rates calculated
to write off the cost of the assets to their estimated residual value.

     Depreciation is calculated on a straight-line basis over their estimated
useful economic lives. The estimates of useful economic lives and residual
values are reviewed periodically. The current estimates for residual values and
useful economic lives are generally 15% of cost and 25 years from date of
manufacture respectively.

     Additional charges are made to reduce the book value of specific assets to
the recoverable amount where an impairment in value is considered to have
occurred in accordance with Financial Reporting Standard No. 11 "Impairment of
Tangible Fixed Assets and Goodwill." An impairment review is only required where
there has been an indication of impairment, usually on the basis of independent
market appraisals and indications of market demand. An impairment is measured by
comparing the carrying value of the aircraft and engines with the recoverable
amount. Recoverable amount is the higher of the net realizable value and the
value in use on an after tax basis. Value in use is based on the anticipated
future cash flows from the aircraft, discounted by a market rate of return.

     debis AirFinance adopted FASB Statement No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be disposed of" as
of July 1, 1996. FASB Statement No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the directors estimated 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 amount of the asset, an impairment loss is recognized. This
statement did not materially change the carrying value of the entity's assets in
the year when it was first applied or in previous years.

                                       F-65
<PAGE>   142
                         NEW AERFI TRANSFERRED AIRCRAFT
                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

CASH RESTRICTED

     The cash held by the entity is restricted and is held in interest bearing
accounts by certain lenders to the entity. These cash balances are held in
respect of the entity's maintenance obligations under certain of its leases and
may be applied on demand to meet these obligations. Cash restricted is
classified as cash in the statement of cash flows.

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

     The entity manages its interest rate exposure through the use of interest
rate swaps. Under these swap arrangements the entity will pay fixed interest and
receive floating interest on monthly basis. The objective of the entity's
interest rate risk management policy is to correlate the contracted fixed rental
payments in its portfolio to the floating interest payments on the related debt
facility, taking account of expected amortization on the debt. Net receipts and
payments arising in respect of these swaps are recognized as adjustments to
interest expense on an accruals basis.

     The entity is also exposed to losses in the event of non-performance by
counterparties on interest rate swaps or in the event of defaults by lessees
where income streams have been hedged. However, the entity does not anticipate
non-performance by the counterparties and losses or gains related to hedging
instruments which result from lessee defaults are accounted for as they are
incurred.

                                       F-66
<PAGE>   143

                         NEW AERFI TRANSFERRED AIRCRAFT
                       NOTES TO THE FINANCIAL STATEMENTS

1   BASIS OF PREPARATION

     Under the refinancing and securitization transaction entered into on July
17, 2000, AerCo Limited acquired directly or indirectly an additional 30
aircraft and related leases from debis AirFinance.

     On July 17, 2000, AerCo Limited issued approximately U.S.$960 million in
aggregate principal amount of notes in four subclasses: subclass A-3, subclass
A-4, subclass B-2 and subclass C-2. AerCo Limited also issued two additional
subclasses of notes, the subclass D-2 notes and the subclass E-2 notes, which
are held by debis AirFinance. AerCo Limited used substantially all of the
proceeds of the issuance of the offered notes, the subclass D-2 notes and
subclass E-2 notes to refinance all of AerCo's subclass A-1 notes and subclass
D-1 notes and to finance the acquisition of the additional 30 aircraft from
debis AirFinance.

     These financial statements present, on the bases and assumptions set out
below, the results of operations, assets and liabilities relating to the entity
transferred to AerCo from debis AirFinance, comprising two aircraft owned by
debis AirFinance during the two years ended March 31, 2000, one aircraft
acquired by debis AirFinance in December 1999, one aircraft acquired by debis
AirFinance in April 2000 and the 26 aircraft owned by Indigo which was acquired
by debis AirFinance on December 16, 1999. The financial statements have been
prepared by debis AirFinance Administrative Services Limited on behalf of the
directors of AerCo Limited.

     (i) The financial statements are presented on a historical cost basis as if
the entity had been organized as a single economic entity for the period from
April 1, 2000 to July 16, 2000 and the two years ended March 31, 2000 and March
31, 1999.

     (ii) For the purposes of these financial statements, an allocation of
certain costs such as selling, general and administrative expenses of debis
AirFinance to the entity has been made. These costs have been allocated to the
entity based on debis AirFinance's estimate of the percentage of such costs
incurred in managing the fleet of aircraft for each period. Management believes
that the basis for these allocations is reasonable.

     (iii) During the period from April 1, 2000 to July 16, 2000 and the two
years ended March 31, 2000 and March 31, 1999, two of the aircraft were financed
by debis AirFinance under a facility entered into between debis AirFinance and
KfW. The liabilities under the KfW facility and related cash flows and interest
costs are reflected in these financial statements.

     In the case of the one aircraft purchased in December 1999 and one aircraft
purchased in April 2000, no separate identifiable financing was in place. These
aircraft are assumed to have been financed by intercompany indebtedness to debis
AirFinance based on the ratio of debis AirFinance's overall debt to aircraft net
book value of 77% in this period and repayments to debis AirFinance are assumed
to have been made accordingly during the period. The interest charged on the
assumed indebtedness to debis AirFinance is based on debis AirFinance's average
cost of debt of 72% for the period between December 1999 and July 2000.

     (iv) During the period from acquisition to July 16, 2000 all of the Indigo
transferring aircraft were financed by debt secured on specific aircraft. For
these aircraft the specific debt obligations, related cash flows and interest
costs related to aircraft owned by the entity are reflected in these financial
statements.

     (v) Cash generated from or absorbed by the activities of the entity during
the period from April 1, 2000 to July 16, 2000 and the two years ended March 31,
2000 is reflected through the intercompany account as distributions to or
contributions from debis AirFinance.

     (vi) The tax provisions and deferred income tax assets and liabilities of
the entity have been determined as if the aircraft had been owned by taxable
entities separate from debis AirFinance and Indigo.

                                       F-67
<PAGE>   144
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2   ACCOUNTS RECEIVABLE, NET

<Table>
<Caption>
                                                     JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                       U.S.$'000        U.S.$'000         U.S.$'000
<S>                                                  <C>              <C>               <C>
Trade receivables, net...........................        1,315            2,226              786
Prepayments......................................          160              123               --
                                                         -----            -----              ---
                                                         1,475            2,349              786
                                                         =====            =====              ===
</Table>

     Trade receivables are stated net of a bad debt provision of $0.3 million
(March 31, 2000: $0.3 million and March 31, 1999: $nil) and comprise amounts in
respect of rent and maintenance payments due from lessees. As at March 31, 1999
one lessee accounted for 100% of trade receivables. As at March 31, 2000 four
lessees accounted for 43%, 24%, 13% and 10% respectively of trade receivables.
As at July 16, 2000, two lessees accounted for 72% and 27% respectively of trade
receivables.

3   GOODWILL, NET

<Table>
<Caption>
                                                     JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                       U.S.$'000        U.S.$'000         U.S.$'000
<S>                                                  <C>              <C>               <C>
COST
Goodwill on acquisition..........................        6,100            6,100               --
                                                         -----            -----              ---
AMORTIZATION
Opening Balance..................................           89)              --               --
Amortization in period...........................          (89)             (89)              --
                                                         -----            -----              ---
Closing Balance..................................         (178)             (89)              --
                                                         -----            -----              ---
NET BOOK VALUE
Beginning of period..............................        6,011               --               --
                                                         -----            -----              ---
End of period....................................        5,922            6,011               --
                                                         =====            =====              ===
</Table>

     Goodwill of $6.1 million represents the difference between the fair value
of the net assets and the consideration paid by the entity in respect of its
acquisition of the Indigo transferring aircraft. Goodwill is amortized over a 20
year period which is the period over which the directors of debis AirFinance
estimate that the value of the underlying business acquired is expected to
exceed the values of its identifiable net assets. Further information in
relation to the calculation of goodwill is set out in note 4 below.

4   ACQUISITION OF THE INDIGO TRANSFERRING AIRCRAFT

     On December 16, 1999 debis AirFinance tendered for 100% of the share
capital of Indigo whose registered office is Sodra Forstadsgatan 4, S-211 48
Malmo, Sweden. The acquisition was achieved through a combination of a cash
purchase and share exchange agreement.

                                       F-68
<PAGE>   145
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITION OF THE INDIGO TRANSFERRING AIRCRAFT (CONTINUED)

     The fair value of the net assets acquired and the consideration given on
the acquisition of the Indigo transferring aircraft is summarized as follows:

<Table>
<Caption>
                                                  INDIGO         FAIR VALUE ADJUSTMENTS
                                               TRANSFERRING    --------------------------    FAIR VALUE
                                                 AIRCRAFT       VALUATION        OTHER       OF ASSETS
                                                BOOK VALUE     ADJUSTMENTS    ADJUSTMENTS     ACQUIRED
                                               ------------    -----------    -----------    ----------
                                                U.S.$'000       U.S.$'000      U.S.$'000     U.S.$'000
<S>                                            <C>             <C>            <C>            <C>
Cash, restricted...........................        14,424            --              --         14,424
Accounts receivable, net...................         2,281            --              --          2,281
Fixed assets -- aircraft...................       587,631        24,404(i)           --        612,035
Accrued liabilities & other liabilities....       (29,258)           --              --        (29,258)
Security deposits..........................        (6,553)           --              --         (6,553)
Indebtedness...............................      (492,960)           --          (3,040)(ii)  (496,000)
Derivatives................................            --            --            (500)(iii)      (500)
Deferred income tax........................        (2,580)           --           2,580(iv)         --
                                                 --------        ------        --------       --------
Net assets acquired........................        72,985        24,404            (960)        96,429
                                                 ========        ======        ========       ========
Consideration paid.........................                                                   (102,529)
                                                                                              --------
Goodwill on acquisition....................                                                     (6,100)
                                                                                              ========
</Table>

     (i) The fair value adjustments in respect of the aircraft arise as a result
of a valuation of these assets to reflect debis AirFinance's estimate of their
current market value at the date of acquisition. This valuation of the Indigo
transferring aircraft exceeded their existing book value by U.S.$24.4 million.

     (ii) The fair value adjustment to Indebtedness is based on prevailing
interest rates at the acquisition date.

     (iii) The fair value adjustment to Derivatives is based on prevailing
interest rates at the acquisition date.

     (iv) The fair value adjustment in respect of deferred taxation arises as a
result of the planned change in the tax basis of the Indigo aircraft following
the acquisition of Indigo by debis AirFinance.

     The summarized statement of operations information for the Indigo
transferring aircraft for the period from January 1, 1999 to December 15, 1999
is set out below.

<Table>
<Caption>
                                                                   PERIOD FROM
                                                                JANUARY 1, 1999 TO
                                                                DECEMBER 15, 1999
                                                                ------------------
                                                                    U.S.$'000
<S>                                                             <C>
REVENUES
Aircraft leasing............................................          65,602
EXPENSES
Depreciation................................................         (23,408)
Net interest expense........................................         (30,277)
Other expenses..............................................          (4,863)
                                                                     -------
                                                                     (58,548)
                                                                     -------
NET PROFIT FROM OPERATIONS BEFORE PROVISION FOR TAXES.......           7,054
Provision for taxes.........................................          (1,975)
                                                                     -------
NET PROFIT FOR THE PERIOD...................................           5,079
                                                                     =======
</Table>

                                       F-69
<PAGE>   146
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5   AIRCRAFT

<Table>
<Caption>
                                                     JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                     U.S.$'000        U.S.$'000         U.S.$'000
<S>                                                  <C>              <C>               <C>
COST
Beginning of period..............................       679,644           46,418            46,418
Additions during the period......................        46,380          633,226                --
                                                        -------          -------           -------
End of period....................................       726,024          679,644            46,418
                                                        =======          =======           =======
DEPRECIATION
Beginning of period..............................       (26,308)         (16,222)          (14,862)
Charge for the period............................        (9,444)         (10,086)           (1,360)
                                                        -------          -------           -------
End of period....................................       (35,752)         (26,308)          (16,222)
                                                        =======          =======           =======
NET BOOK VALUE
Beginning of period..............................       653,336           30,196            31,556
                                                        =======          =======           =======
End of period....................................       690,272          653,336            30,196
                                                        =======          =======           =======
</Table>

6   OPERATING LEASES

     All the aircraft are held for operating lease. Rentals on certain of the
leases are variable in accordance with prevailing interest rates.

     The following is a schedule of contracted future rentals receivable, by
periods, on operating leases as of July 16, 2000. The interest rates prevailing
at July 16, 2000 have been applied in determining rentals that are variable in
accordance with prevailing interest rates.

<Table>
<Caption>
                                                              U.S.$'000
                                                              ---------
<S>                                                           <C>
Year ended July 16, 2001....................................    87,001
Year ended July 16, 2002....................................    78,316
Year ended July 16, 2003....................................    73,728
Year ended July 16, 2004....................................    63,786
Year ended July 16, 2005....................................    39,604
Thereafter..................................................    98,031
                                                               -------
                                                               440,466
                                                               =======
</Table>

                                       F-70
<PAGE>   147
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

7   ACCRUED EXPENSES AND OTHER LIABILITIES

<Table>
<Caption>
                                                     JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                       U.S.$'000      U.S.$'000         U.S.$'000
<S>                                                  <C>              <C>               <C>
ACCRUED EXPENSES AND OTHER LIABILITIES COMPRISE:
Aircraft maintenance reserves.....................      21,675            23,884              --
Deferred income...................................       4,686             5,422             249
Interest..........................................       1,661             2,434              --
Other accruals....................................         734             1,148             443
                                                        ------            ------             ---
                                                        28,756            32,888             692
                                                        ======            ======             ===
AIRCRAFT MAINTENANCE RESERVES:
Due within one year...............................       2,193             1,992              --
Due after one year................................      19,482            21,892              --
                                                        ------            ------             ---
                                                        21,675            23,884              --
                                                        ======            ======             ===
</Table>

8   INDEBTEDNESS

<Table>
<Caption>
                                               PERIOD FROM APRIL 1,       YEAR ENDED        YEAR ENDED
                                               2000 TO JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                               ---------------------    --------------    --------------
                                                     U.S.$'000          U.S.$'000         U.S.$'000
<S>                                            <C>                      <C>               <C>
debis AirFinance KfW debt (i)..............            16,937               17,655            20,527
debis AirFinance notes (ii)................            51,147               16,082                --
Indigo debt obligations (iii)..............           402,478              449,565                --
                                                      -------              -------            ------
                                                      470,562              483,302            20,527
                                                      =======              =======            ======
</Table>

     The basis and assumptions under which indebtedness has been reflected in
these financial statements is set out in note 1.

     (i) The debis AirFinance KfW debt is secured on the two aircraft which had
a net book value of $28.3 million at July 16, 2000 (March 31, 2000: $28.8
million). As part of the completion of the transaction these amounts were repaid
in full.

     (ii) As explained in note 1, it has been assumed that the two aircraft
purchased by the entity in December 1999 and April 2000 were financed with
indebtedness due to debis AirFinance.

     (iii) The entity's Indigo debt obligations are primarily collateralized by
the underlying aircraft and assignment of the attached leases. At July 16, 2000,
all of the entity's Indigo debt outstanding was at fixed interest rates with the
exception of $16.3 million with rates of 30 days Libor plus 1.2% and $123.5
million with rates of commercial paper plus 1.255%. As part of the completion of
the transaction these amounts were repaid in full.

     (iv) Repayments of principal during the period from April 1, 2000 to July
16, 2000 on the Indigo debt obligations and the debis AirFinance KfW debt were
in accordance with their respective contractual terms. The repayment of
principal on the two aircraft which are assumed to have been financed by debis
AirFinance was assumed to have been made in accordance with changes in debis
AirFinance's aircraft net book value to debt ratio during the period ended July
16, 2000.

     All of the above indebtedness was repaid following the refinancing
transaction entered into on July 17, 2000.

                                       F-71
<PAGE>   148
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9   SECURITY DEPOSITS

     Security deposits received from lessees of U.S.$7.075 million (March 31,
2000: U.S.$7.531 million and March 31, 1999: U.S.$0.8 million) are held as
security for obligations in accordance with the terms of certain leases.

10  REVENUES AND CONCENTRATION OF CREDIT RISK

     (A) DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA

<Table>
<Caption>
                                    PERIOD FROM APRIL 1,         YEAR ENDED             YEAR ENDED
                                    2000 TO JULY 16, 2000      MARCH 31, 2000         MARCH 31, 1999
                                    ---------------------    -------------------    -------------------
                                    U.S.$'000        %       U.S.$'000      %       U.S.$'000      %
<S>                                 <C>           <C>        <C>          <C>       <C>          <C>
Europe..........................      13,511       51.13      12,822       48.83         --          --
North America...................       7,371       27.90       5,572       21.22         --          --
South/Central America...........       1,973        7.47       4,390       16.72      3,292      100.00
Asia/Pacific....................       3,568       13.50       3,474       13.23         --          --
                                      ------      ------      ------      ------      -----      ------
                                      26,423      100.00      26,258      100.00      3,292      100.00
                                      ======      ======      ======      ======      =====      ======
</Table>

     All revenues are derived from aircraft leasing.

     In the period from April 1, 2000 to July 16, 2000, 28%, 20% and 10% of the
entity's lease revenues were derived from the United States, the United Kingdom
and China respectively. No other country accounted for greater than 10% of the
entity's lease revenues.

     In the year ended March 31, 2000, 21%, 17% and 12% of the entity's lease
revenues were derived from the United States, Brazil and the United Kingdom
respectively. No other country accounted for greater than 10% of the entity's
lease revenues.

     In the year ended March 31, 1999, 100% of the entity's lease revenues were
derived from Brazil.

     (B) CONCENTRATION OF CREDIT RISK

     Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.

     The entity manages its exposure to particular countries in part through
obtaining security from lessees by way of deposits, letters of credit and
guarantees.

     The entity 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.

     As of July 16, 2000, one lessee accounted for 10% of the entity's lease
revenues. No other lessee accounted for greater than 10% of the entity's lease
revenues for the period from April 1, 2000 to July 16, 2000.

     As at March 31, 2000, two lessees accounted for 13% and 10% of the entity's
lease revenues. No other lessee accounted for greater than 10% of the entity's
lease revenues for the year ended March 31, 2000.

     As at March 31, 1999, one lessee accounted for all of the entity's lease
revenues.

                                       F-72
<PAGE>   149
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11  NET INTEREST EXPENSE

<Table>
<Caption>
                                                     PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
<S>                                                <C>                 <C>               <C>
Interest payable on specific indebtedness......          9,411             11,426             1,578
Interest payable on debis AirFinance notes.....            869                340                --
Net interest income............................           (232)              (173)               --
                                                       -------            -------           -------
                                                        10,048             11,593             1,578
                                                       =======            =======           =======
</Table>

12  OTHER EXPENSES

<Table>
<Caption>
                                                     PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
<S>                                                <C>                 <C>               <C>
Servicer's fees................................          1,076              1,717               218
Aircraft leasing costs.........................             48                671               199
Administration expenses........................             30                 50                10
Legal and professional fees....................             10                 10                10
Cash manager's fees............................             50                 80                21
Audit and tax fees.............................             30                 50                 5
                                                       -------            -------           -------
                                                         1,244              2,578               463
                                                       =======            =======           =======
</Table>

13  (PROVISION)/BENEFIT FOR TAXES

<Table>
<Caption>
                                                     PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
<S>                                                <C>                 <C>               <C>
Tax (provision)/benefit of the New AerFi
  transferring aircraft consists of the
  following:
Deferred income tax (provision)/ benefit.......            (71)               (44)               11
                                                       -------            -------           -------
                                                           (71)               (44)               11
                                                       =======            =======           =======
</Table>

<Table>
<Caption>
                                                     PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
<S>                                                <C>                 <C>               <C>
Deferred tax assets and liabilities of the New
  AerFi transferring aircraft:
Deferred tax assets relating to losses.........            932                912               649
Deferred tax liability relating to aircraft....         (1,902)            (1,811)           (1,504)
                                                       -------            -------           -------
                                                          (970)              (899)             (855)
                                                       =======            =======           =======
</Table>

     The entity's income from approved activities in Ireland is taxable at a
rate of 10% until December 31, 2005. The tax rate applicable to the entity's
activities in Sweden following its acquisition of the Indigo transferring
aircraft in December 1999 is 28%.

                                       F-73
<PAGE>   150
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13  (PROVISION)/BENEFIT FOR TAXES (CONTINUED)

     The difference between the statutory tax rates and the tax provision for
the period ended July 16, 2000 arises as no deferred tax provision arises on
timing differences arising in Sweden in the period from December 16, 1999 to
July 16, 2000 due to the change in the tax basis of the Indigo transferring
aircraft as part of the transaction.

14  STAFF COSTS AND NUMBERS

     The entity has no employees.

15  CASH FLOW STATEMENT

     (A) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<Table>
<Caption>
                                                   PERIOD FROM
                                                 APRIL 1, 2000 TO       YEAR ENDED          YEAR ENDED
                                                  JULY 16, 2000       MARCH 31, 2000      MARCH 31, 1999
                                                 ----------------    -----------------    --------------
                                                    U.S.$'000            U.S.$'000          U.S.$'000
<S>                                              <C>                 <C>                  <C>
Cash paid in respect of:
Interest.....................................         11,053              11,521              1,578
                                                      ======              ======              =====
</Table>

     (B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

<Table>
<Caption>
                                                                U.S.$'000
                                                                ---------
<S>                                                             <C>
Decrease in cash in the period..............................      (1,960)
Cash outflow from decrease in debt..........................      12,740
                                                                --------
Change in net debt resulting from cash flows................      10,780
                                                                --------
Movement in net debt in the period..........................      10,780
Net debt at March 31, 2000..................................    (466,518)
                                                                --------
Net debt at July 16, 2000...................................    (455,738)
                                                                ========
</Table>

     (C) ANALYSIS OF NET DEBT

<Table>
<Caption>
                                                  MARCH 31, 2000         CASH FLOW        JULY 16, 2000
                                                 ----------------    -----------------    --------------
                                                    U.S.$'000            U.S.$'000          U.S.$'000
<S>                                              <C>                 <C>                  <C>
Cash.........................................          16,784             (1,960)              14,824
Indebtedness.................................        (483,302)            12,740             (470,562)
                                                     --------             ------             --------
                                                     (466,518)            10,780             (455,738)
                                                     ========             ======             ========
</Table>

16  COMMITMENTS

     The entity has no long-term contracts other than those with its service
providers (see Note 20).

17  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES

     The financial statements are prepared in accordance with generally accepted
accounting principles applicable in the United Kingdom ("U.K. GAAP") which
differ significantly in certain respects from those generally accepted in the
United States ("U.S. GAAP").

     For U.K. GAAP purposes cash, restricted is classified as cash in the cash
flow statement. Under U.S. GAAP cash, restricted would not meet the definition
of cash equivalents. Other than the above, there were no significant

                                       F-74
<PAGE>   151
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

17  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

differences between U.K. GAAP and U.S. GAAP arising in respect of the entity for
the period from April 1, 2000 to July 16, 2000 and for the years ended March 31,
2000 and March 31, 1999.

18  FAIR VALUE OF FINANCIAL INSTRUMENTS

     RECEIVABLES, PAYABLES AND CASH, RESTRICTED

     The fair value of the entity's receivables, payables and cash, restricted
at July 16, 2000 approximates to the amounts at which these items are reflected
in the entity's statement of net assets due to the relatively short-term nature
of the instruments and the frequency at which they reprice.

     INDEBTEDNESS

     The fair value of the entity's indebtedness at July 16, 2000 was $461
million.

19  FOREIGN CURRENCY TRANSACTIONS

     The entity's foreign currency transactions are not significant as all
revenues and most costs are denominated in U.S. dollars.

20  RELATED PARTY TRANSACTIONS

     GE CAPITAL AVIATION SERVICES LIMITED ("GECAS")

     During the period from April 1, 2000 to July 16, 2000 and for the two years
ended March 31, 2000 and March 31, 1999 GECAS acted as lease manager for the two
F100 aircraft owned by the entity. In addition to managing these two F100
aircraft GECAS also manages aircraft owned by GE Capital and its affiliates and
other third parties, including AerFi. GECAS may from time to time have had
conflicts of interest in performing its obligations to the two F100 aircraft and
other entities to which it provides management, marketing and other services.

     GECAS received an annual fee from debis AirFinance as lease manager of the
two F100 aircraft -- U.S.$ 221,131 for the year ended March 31, 2000 (March 31,
1999: U.S.$ 217,681).

                                       F-75
<PAGE>   152

                                 EXHIBIT INDEX

<Table>
<Caption>
                                                                               SEQUENTIALLY
                                                                                 NUMBERED
EXHIBIT NUMBER                     DESCRIPTION OF DOCUMENT                         PAGE
--------------                     -----------------------                     ------------
<C>              <S>                                                           <C>
      8.         List of significant subsidiaries                              E-1
    10.1         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from July 17, 2000 to          by reference
                 September 15, 2000.                                           to Form 6-K
                                                                               filed on
                                                                               October 31,
                                                                               2000
    10.2         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from September 15, 2000 to     by reference
                 December 15, 2000.                                            to Form 6-K
                                                                               filed on
                                                                               January 31,
                                                                               2001
    10.3         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from December 15, 2000 to      by reference
                 March 15, 2001.                                               to Form 6-K
                                                                               filed on
                                                                               April 30,
                                                                               2001
    10.4         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from March 15, 2001 to June    by reference
                 15, 2001.                                                     to Form 6-K
                                                                               filed on
                                                                               July 31,
                                                                               2001
      12         Statement re Computation of Ratios                            E-2
</Table>
[{"type": "20-F", "sequence": "1", "filename": "u44273e20-f.txt", "description": "AERCO LIMITED", "secsgml_size_bytes": 575690}]
{"company-data": {"conformed-name": "AERCO LTD", "cik": "0001072976", "assigned-sic": "7359"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "333-66973", "film-number": "1745265"}, "business-address": {"street1": "22 GRENVILLE ST", "street2": "ST HELIER JERSEY JE4 BPX", "city": "CHANNEL ISLANDS", "phone": "011441534809000"}, "mail-address": {"street1": "22 GRENVILLE ST", "street2": "ST HELIER JERSEY JE4 BPX", "city": "CHANNEL ISLANDS"}}
1

                                                      REGISTRATION NO. 333-66973
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 20-F
[ ]  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: March 31, 2001
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

    FOR THE TRANSITION PERIOD FROM
    ------------------------- TO
    -------------------------

                            Commission file number:
                             ---------------------
                                 AERCO LIMITED
             (Exact Name of Registrant as Specified in Its Charter)
                            JERSEY, CHANNEL ISLANDS
                (Jurisdiction of incorporation or organization)
                                 AERCO LIMITED
                              22 GRENVILLE STREET
                                   ST. HELIER
                                JERSEY, JE4 8PX
                                CHANNEL ISLANDS
                    (Address of principal executive offices)
     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:

               SUBCLASS A-2, B-1 AND C-1 NOTES DUE JULY 15, 2023
          SUBCLASS A-3, A-4, B-2, C-2 AND D-2 NOTES DUE JULY 15, 2025
                             (Title of each class)

The number of outstanding shares in the capital of AerCo Limited as of March 31,
                                     2001:
                          20 SHARES, U.S. $1 PAR VALUE

     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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2

                               TABLE OF CONTENTS
PAGE
                                                                                   ----
INTRODUCTION
            Forward-Looking Statements...........................................     1
            Certain Information..................................................     1
PART I      ITEM 1   Identity of Directors, Senior Management and Advisors.......     1
                     A.  Directors and Senior Management.........................     1
                     B.  Advisors................................................     1
                     C.  Auditors................................................     1
            ITEM 2   Offer Statistics and Expected Timetable.....................     1
            ITEM 3   Key Information.............................................     1
                     A.  Selected Consolidated Financial Data....................     1
                     B.  Capitalization and Indebtedness.........................     5
                     C.  Reasons for the Offer and Use of Proceeds...............     5
                     D.  Risk Factors............................................     5
            ITEM 4   Information on the Company..................................    16
                     A.  History and Development of AerCo Limited................    16
                     B.  Business Overview.......................................    18
                     C.  Organizational Structure................................    40
                     D.  Property, Plants and Equipment..........................    41
            ITEM 5   Operating and Financial Review and Prospects................    41
                     A.  Operating Results.......................................    41
                     B.  Liquidity and Capital Resources.........................    48
                     C.  Research and Development, Patents and Licenses..........    50
                     D.  Trend Information.......................................    50
            ITEM 6   Directors, Senior Management and Employees..................    51
                     A.  Directors and Senior Management.........................    51
                     B.  Compensation............................................    60
                     C.  Board Practices.........................................    60
                     D.  Employees...............................................    60
                     E.  Share Ownership.........................................    60
            ITEM 7   Major Shareholders and Related Party Transactions...........    60
                     A.  Major Shareholders......................................    60
                     B.  Related Party Transactions..............................    61
                     C.  Interests of Experts and Counsel........................    61
            ITEM 8   Financial Information.......................................    61
                     A.  Consolidated Statements and Other Financial                 61
                     Information.................................................
                     B.  Significant Changes.....................................    61
            ITEM 9   The Listing.................................................    61
                     A.  Listing Details.........................................    61
                     B.  Plan of Distribution....................................    61
                     C.  Markets.................................................    61
                     D.  Selling Shareholders....................................    61
                     E.  Dilution................................................    61
                     F.  Expenses of the Issue...................................    61
            ITEM 10  Additional Information......................................    61
                     A.  Share Capital...........................................    61
                     B.  Articles of Association.................................    62
                     C.  Material Contracts......................................    65
                     D.  Exchange Controls.......................................    65
                     E.  Taxation................................................    65
                     F.  Dividends and Paying Agents.............................    67
i
3
PAGE
                                                                                   ----
G.  Statement by Experts....................................    67
                     H.  Documents on Display....................................    67
                     I.   Subsidiary Information.................................    67
            ITEM 11  Quantitative and Qualitative Disclosures about Market           67
                     Risk........................................................
            ITEM 12  Description of Securities other than Equity Securities......    71
PART II     ITEM 13  Defaults, Dividend Arrearages and Delinquencies.............    71
            ITEM 14  Material Modifications to Rights of Security Holders and
                     Use of Proceeds.............................................    71
            ITEM 15  ............................................................    71
            ITEM 16  ............................................................    71
PART III    ITEM 17  ............................................................    71
            ITEM 18  Financial Statements........................................    71
            ITEM 19  Exhibits....................................................    72
                     Index to Financial Statements...............................   F-1
ii
4

                                  INTRODUCTION

FORWARD-LOOKING STATEMENTS

     This annual report on Form 20-F 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", "Item 5. Operating and
Financial Review and Prospects" and "Item 11. Quantitative and Qualitative
Disclosures About Market Risk.

CERTAIN INFORMATION

     AerCo Limited was incorporated in Jersey as a public limited company under
the laws of Jersey. As used in this annual report on Form 20-F, "we", "us",
"our", the "Company", "AerCo" and "AerCo Group" refer to AerCo Limited and its
subsidiaries, except where it is clear that such terms mean only AerCo, "debis"
means debis AirFinance B.V., "debis group" means debis and its subsidiaries,
"debis Ireland" means debis AirFinance Ireland plc (formerly known as AerFi
Group plc prior to its acquisition by debis in November 2000) and "debis Ireland
group" means debis Ireland and its subsidiaries. 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 "USD" 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.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3.  KEY INFORMATION

A. SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data set forth below have been
extracted from the audited consolidated financial statements of ALPS 94-1, for
each of the fiscal years ended June 30, 1997 and 1998, and the period from July
1, 1998 to July 14, 1998 and of AerCo, for the period from July 15, 1998 to
March 31, 1999 and for each of the fiscal years ended March 31, 2000 and 2001.

     Arthur Andersen, independent chartered accountants, audited the financial
statements of ALPS 94-1 for the year ended June 30, 1997. KPMG, independent
chartered accountants, audited the financial statements of ALPS 94-1 for the
year ended June 30, 1998 and the period from July 1, 1998 to July 14, 1998.
KPMG, independent

                                        1
5

chartered accountants, audited the financial statements of AerCo for the period
from July 15, 1998 to March 31, 1999 and for the years ended March 31, 2000 and
2001.

     The selected financial data of ALPS 94-1 include the results of operations
and financial condition of the 27 aircraft originally acquired by ALPS 94-1 from
the debis Ireland group in August 1994, including:

     - the Boeing 767-300ER aircraft that was purchased by the debis Ireland
       group from ALPS 94-1 prior to the closing of the initial offering of
       notes by AerCo on July 15, 1998 which was not one of the aircraft
       acquired by AerCo in July 1998; and

     - the A300-B4-200 aircraft up to April 28, 1998 when the debis Ireland
       group acquired this aircraft from ALPS 94-1. The debis Ireland group
       subsequently sold this aircraft to AerCo.

     Comparative financial information for ALPS 94-1 is presented because ALPS
94-1 is considered to be the predecessor business of AerCo. We believe that the
ALPS 94-1 selected financial data set forth below is an appropriate presentation
because:

     - AerCo was formed mainly for the purpose of refinancing the aircraft
       portfolio of ALPS 94-1;

     - our initial portfolio of 35 aircraft included 26 of the 27 aircraft that
       ALPS 94-1 originally acquired from debis Ireland;

     - the original ALPS 94-1 aircraft represented 79% of our initial portfolio
       by appraised value as at March 1, 1998; and

     - our ongoing aircraft leasing activities are largely the same as those
       conducted by ALPS 94-1.

     Such data, however, is not indicative of the financial results of AerCo
Group for the period from July 15, 1998 to March 31, 1999 and for the years
ended March 31, 2000 and 2001.

     The historical financial statements of AerCo Group and ALPS 94-1 have been
prepared in accordance with U.K. GAAP, which differ in certain significant
respects from U.S. GAAP. For a discussion of the principal differences and a
reconciliation from U.K. GAAP to U.S. GAAP of shareholders' deficit and net
income or loss for the year, see the notes to the relevant financial statements
included elsewhere in this annual report, "Item 3. Operating and Financial
Review and Prospects -- Results of Operations -- Year Ended March 31, 2001
Compared with Year Ended March 31, 2000 -- Differences between U.K. GAAP and
U.S. GAAP," and "-- Year Ended March 31, 2000 Compared with Eight and One half
Month Period from July 15, 1998 to March 31, 1999 -- Differences between U.K.
GAAP and U.S. GAAP."

                                        2
6

                   CONSOLIDATED STATEMENTS OF OPERATIONS DATA
ALPS 94-1                                  AERCO
                                              -------------------------------------    -------------------------------------
                                                                        PERIOD FROM    PERIOD FROM
                                                FISCAL       FISCAL       JULY 1,       JULY 15,       FISCAL       FISCAL
                                              YEAR ENDED   YEAR ENDED     1998 TO        1998 TO     YEAR ENDED   YEAR ENDED
                                               JUNE 30,     JUNE 30,     JULY 14,       MARCH 31,    MARCH 31,    MARCH 31,
                                                 1997         1998         1998           1999          2000         2001
                                              ----------   ----------   -----------    -----------   ----------   ----------
                                                                              (IN THOUSANDS)
U.K. GAAP
Revenues
 Aircraft leasing -- continuing
                  operations................  $ 101,434    $ 100,682     $  3,635       $  82,826    $ 109,146    $ 102,840
              -- acquisitions...............         --           --           --              --           --    $  62,094
Expenses
 Depreciation...............................    (38,062)     (37,826)      (1,519)        (33,821)     (46,998)     (69,063)
   Exceptional item --
   Additional depreciation..................    (34,385)          --           --              --           --           --
 Provision for impairment in aircraft
   value....................................         --       (8,720)          --              --      (13,079)      (3,794)
 Amortization of goodwill...................         --           --           --          (1,669)      (2,356)      (2,912)
 Net interest expense.......................    (71,037)     (69,785)      (2,757)        (54,108)     (78,818)    (137,942)
 Other expenses.............................     (5,053)      (6,599)        (646)         (8,311)     (15,742)     (11,444)
   Exceptional item --
   Termination fee..........................         --      (12,700)          --              --           --           --
                                              ---------    ---------     --------       ---------    ---------    ---------
Loss from operations -- continuing
                     operations.............    (47,103)     (34,948)      (1,287)        (15,083)     (47,847)     (32,639)
                -- acquisitions.............                                                                        (27,582)
Profit/(loss) on sale of aircraft...........         --        2,426           10              10         (941)          --
Reduction in indebtedness...................      5,258           --           --              --           --           --
                                              ---------    ---------     --------       ---------    ---------    ---------
Loss before provision for taxes.............    (41,845)     (32,522)      (1,277)        (15,073)     (48,788)     (60,221)
Taxes.......................................        143          (33)          --             (35)         (51)         (49)
Dividends...................................         --           --           --              --           --           --
                                              ---------    ---------     --------       ---------    ---------    ---------
Net loss....................................  $ (41,702)   $ (32,555)    $ (1,277)      $ (15,108)   $ (48,839)   $ (60,270)
                                              =========    =========     ========       =========    =========    =========
Loss from operations per ordinary share.....   (4,710.3)    (3,494.8)      (128.7)         (754.1)    (2,392.3)    (3,011.0)
Basic and diluted loss per ordinary share...   (4,170.2)    (3,255.5)      (127.7)         (755.4)      (2,442)    (3,013.5)
Weighted average number of ordinary shares
 Outstanding................................         10           10           10              20           20           20
                                              =========    =========     ========       =========    =========    =========
U.S. GAAP EXTRACT
Depreciation................................  $ (32,339)   $ (32,053)    $ (1,276)      $ (28,062)   $ (38,354)   $ (57,460)
Provision for impairment in aircraft
 value......................................  $      --    $    (520)    $     --       $      --    $  (6,100)   $  (5,325)
Reduction in indebtedness...................  $   5,258    $      --     $     --       $      --    $      --    $      --
Net (loss)/income...........................  $  (1,594)   $ (20,808)    $  5,973       $  19,760    $ (31,235)   $ (47,502)
3
7

                        CONSOLIDATED BALANCE SHEET DATA
ALPS 94-1                                   AERCO
                                          -------------------------------------    ---------------------------------------
                                            AS OF        AS OF         AS OF          AS OF         AS OF         AS OF
                                           JUNE 30,     JUNE 30,     JULY 14,       MARCH 31,     MARCH 31,     MARCH 31,
                                             1997         1998         1998           1999          2000          2001
                                          ----------   ----------   -----------    -----------   -----------   -----------
                                                                          (IN THOUSANDS)
U.K. GAAP EXTRACT
Aircraft, net of accumulated
  depreciation and provision for
  impairment in aircraft value..........  $ 854,596    $ 800,090     $ 732,905     $  904,253    $  829,194    $ 1,478,945
Total assets............................  $ 950,031    $ 890,873     $ 881,804     $1,019,328    $  943,457    $ 1,646,883
  Indebtedness..........................  $(919,157)   $(877,128)    $(875,015)    $ (949,217)   $ (901,198)   $(1,578,832)
  Provision for maintenance.............  $ (44,274)   $ (42,336)    $ (41,274)    $  (39,697)   $  (32,216)   $   (59,140)
Total liabilities.......................  $(994,722)   $(968,119)    $(960,327)    $(1,034,436)  $(1,007,404)  $(1,771,100)
Shareholders' deficit...................  $ (44,691)   $ (77,246)    $ (78,523)    $  (15,108)   $  (63,947)   $  (124,217)
U.S. GAAP EXTRACT
Aircraft, net of accumulated
  depreciation and provision for
  impairment in aircraft value..........  $ 734,472    $ 691,713     $ 631,778     $  767,820    $  708,009    $ 1,334,052
Indebtedness............................  $(919,157)   $(877,128)    $(875,015)    $ (953,908)   $ (904,991)   $(1,589,872)
Shareholders' deficit...................  $(184,375)   $(203,210)    $(197,237)    $ (169,238)   $ (200,473)   $  (291,534)
CONSOLIDATED STATEMENTS OF CASH FLOWS AND OTHER DATA
ALPS 94-1                                   AERCO
                                          -------------------------------------    ---------------------------------------
                                                                    PERIOD FROM    PERIOD FROM
                                            FISCAL       FISCAL       JULY 1,       JULY 15,       FISCAL        FISCAL
                                          YEAR ENDED   YEAR ENDED     1998 TO        1998 TO     YEAR ENDED    YEAR ENDED
                                           JUNE 30,     JUNE 30,     JULY 14,       MARCH 31,     MARCH 31,     MARCH 31,
                                             1997         1998         1998           1999          2000          2001
                                          ----------   ----------   -----------    -----------   -----------   -----------
                                                                       (IN THOUSANDS, EXCEPT RATIO DATA)
U.K. GAAP EXTRACT
Cash paid in respect of interest........  $ (59,872)   $ (54,815)    $  (3,872)    $  (39,013)   $  (56,150)   $   (95,624)
Net cash provided/(utilized) by
  operating activities (after payment of
  interest).............................  $  45,119    $  45,721     $  (4,077)    $   27,961    $   35,672         58,263
Net cash provided by investing
  activities............................  $      --    $  10,386     $  65,677     $   14,500    $   14,041          1,444
Net cash provided by/(used in) financing
  activities............................  $ (43,494)   $ (59,108)    $  (3,719)    $  948,544    $  (48,917)       684,881
Net movements in cash...................  $  (2,886)   $     134     $  94,567     $   25,618    $      795         13,248
U.K. GAAP(1)(2)
Ratio of Earnings to Fixed Charges......      0.411        0.534         0.537          0.721         0.381          0.563
U.S. GAAP(1)(2)
Ratio of Earnings to Fixed Charges......      0.976        0.702         3.166          1.366         0.604          0.656
In relation to "Ratio of Earnings to Fixed Charges" under both U.K. GAAP
and U.S. GAAP, you should note the following:

          (1) Earnings include pretax income from continuing operations plus
     fixed charges. Fixed charges are the total of (i) interest, whether
     expensed or capitalized, (ii) amortization of debt expense and discount or
     premium relating to any indebtedness, whether expensed or capitalized and
     (iii) the portion of rental expense that can be demonstrated to be
     representative of the interest factor in the particular case.

          (2) A ratio of less than one indicates that earnings are inadequate to
     cover fixed charges. The amount by which fixed charges exceeded earnings
     for ALPS 94-1 (i) for the years ended June 30, 1997 and 1998 and for the
     period July 1, 1998 to July 14, 1998 under U.K. GAAP was $41.9 million,
     $32.5 million and $1.3 million and (ii) for the years ended June 30, 1997
     and 1998 under U.S. GAAP was $1.7 million and $20.8 million. The amount by
     which fixed charges exceeded earnings for AerCo for the period from July
     15, 1998 to March 31, 1999 and for the years ended March 31, 2000 and 2001
     under U.K. GAAP was $15.1 million, $48.8 million and $60.2 million and for
     the years ended March 31, 2000 and 2001 under U.S. GAAP was $31.2 million
     and $47.4 million.

                                        4
8

     For a discussion of the differences between AerCo's and ALPS 94-1's results
of operations and financial position under U.S. GAAP compared with U.K. GAAP,
see notes 24, 25 and 26 to the AerCo audited consolidated financial statements
and "Item 3. Operating and Financial Review and Prospects -- Results of
Operations -- Year Ended March 31, 2001 Compared with Year Ended March 31,
2000 -- Differences between U.K. GAAP and U.S. GAAP," and -- Year Ended March
31, 2000 Compared with Eight and One-half Month Period from July 15, 1998 to
March 31, 1999 -- Differences between U.K. GAAP and U.S. GAAP."

B. CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.

D. RISK FACTORS

     The following summarizes certain risks which may materially affect the
ability of AerCo 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 us. 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

     POTENTIAL NEGATIVE CONSEQUENCES FOR THE AVIATION INDUSTRY OF RECENT
TERRORIST ATTACKS IN THE UNITED STATES COULD ADVERSELY AFFECT OUR LESSEES AND
THEREBY ADVERSELY AFFECT OUR CASH FLOW.

     On September 11, 2001, the United States was the subject of attacks by
terrorists who used the hijacked aircraft of certain airlines. The full effect
that these terrorist attacks may have for the aviation industry is not yet
known. However, the effects of these tragic events can be expected to include,
among other things, a reduction in demand for air travel due to fears regarding
additional acts of terrorism, an increase in the price of fuel, increased costs
and reduced operations by airlines due to new security directives adopted by the
relevant aviation authorities, and new insurance requirements. In particular,
airlines worldwide are currently experiencing significant difficulties in
maintaining war insurance cover in the amounts required under their leases with
us and other lessors. In the absence of satisfactory solutions on this matter,
it may be necessary for the relevant aircraft to be grounded.

     Such consequences, depending on their scope and duration, which we cannot
predict at this time, are likely to have a material adverse impact on the
financial condition of our lessees and their ability to perform under their
leases. They may also lead to reduced demand for our aircraft, which may impact
our ability to re-lease aircraft on a timely basis and at favorable rates, and
may reduce the value of our aircraft. These effects could cause a reduction in
our cash flow which would adversely affect our ability to make payments on the
notes and to refinance the notes as planned.

     On September 20, 2001, Fitch announced that it was putting all structured
aircraft bonds, including the AerCo notes, on ratings watch negative following
the recent terrorist attacks.

RISKS RELATING TO AERCO AND THIRD PARTIES

     THERE IS NO SECURITY INTEREST IN THE AIRCRAFT. NOTEHOLDERS CANNOT SELL THE
AIRCRAFT TO REPAY THE NOTES IF WE DO NOT MEET OUR OBLIGATIONS UNDER THE NOTES.

     Neither the trustee, the security trustee, Bankers Trust Company, nor any
noteholder has any security interest, mortgage, charge or other similar interest
in any aircraft. If there is an event of default, they will not be able to sell
the aircraft to repay the notes or exercise similar remedies on behalf of the
noteholders which they

                                        5
9

would have if they had a security interest in the aircraft. AerCo Group has,
however, pledged to the security trustee, Bankers Trust Company, as security for
AerCo's various obligations (including under the notes), 100% of AerCo's equity
in its subsidiaries, the interests of all AerCo Group members in the leases, any
intercompany loans from AerCo to its subsidiaries, any cash contained in the
accounts and investments made with the cash balances.

     OUR SUBSIDIARIES MAY HAVE CONTINGENT LIABILITIES THAT ARE UNKNOWN TO US. IF
WE HAVE TO PAY LIABILITIES OF THIS KIND, WE MAY BE UNABLE TO MAKE PAYMENTS ON
THE NOTES.

     There is a risk that our subsidiaries could have material contingent
liabilities that are unknown to us. For example, our subsidiaries could have
incurred liabilities to third parties from operating and leasing the aircraft
before we acquired them. debis Ireland agreed to indemnify us for breaches of
its representations and warranties relating to the debis transferred companies
and aircraft which it sold to us in 1998. These representations and warranties
survived until July 15, 2001 and we made no claims under them. In addition,
debis Ireland has agreed to indemnify us for breaches of its representations and
warranties relating to the new debis transferred companies and 30 additional
aircraft which were sold to us in connection with the offering of the notes on
July 17, 2000. These representations and warranties will survive for three years
from the date of transfer to AerCo of the relevant company. Our potential
recovery under these representations and warranties is limited to approximately
$175.0 million. If any contingent liability becomes known and we are called on
to pay it, we may be unable to recover the amount of the liability from the
debis Ireland group or any other person. If we have to pay any such liability,
we may be unable to make the required payments on the notes.

     WE RELY ON SWAP COUNTERPARTIES TO MANAGE INTEREST RATE RISK. IF WE ARE
UNABLE TO ENTER INTO APPROPRIATE SWAP ARRANGEMENTS WITH ELIGIBLE COUNTERPARTIES
OR IF SUCH COUNTERPARTIES DEFAULT ON THEIR OBLIGATIONS, WE MAY BE UNABLE TO MAKE
PAYMENTS ON THE NOTES.

     AerCo manages any interest rate risk arising from any mismatch in fixed and
floating rate lease rental payments and fixed and floating rate interest
obligations through swaps and other derivative instruments. This strategy relies
upon our ability to enter into interest rate swaps with eligible counterparties
and each swap counterparty fulfilling its obligations under the related interest
rate swap. If a counterparty were to default in its obligations, or we are
unable to enter into interest rate swaps with eligible counterparties, then a
mismatch in the fixed and floating rate interest obligations and fixed and
floating rate lease payments may arise, which could harm our ability to make
payments on the notes.

     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 we may not be able to repay the notes. 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. You
should refer to "Item 6. Directors, Senior Management and Employees -- Directors
and Senior Management -- The Servicer" and "-- Corporate Management" for
detailed information on the responsibilities delegated to service providers.

     THE DEBIS GROUP, AS SERVICER, ADMINISTRATIVE AGENT AND CASH MANAGER, MAY
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.

     The debis group owns other aircraft and may face conflicts of interest in
managing and marketing our aircraft for re-lease or sale. In addition, the debis
group provides administrative agency and cash management services to others,
including other aircraft securitization vehicles.

                                        6
10

     If the debis group cannot resolve a conflict of interest, the conflict
could have an adverse effect on our ability to manage, re-lease or sell the
aircraft. In that case, we may be unable to make the required payments on the
notes.

     OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST.

     From time to time the directors of AerCo 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 -- Directors" for a discussion of the directors of AerCo and their
other relationships.

     AERCO AND DEBIS IRELAND HAVE THE SAME LEGAL ADVISORS. IF NECESSARY, AERCO
MAY NEED TO RETAIN SEPARATE COUNSEL.

     AerCo and debis Ireland are represented by the same Jersey, Irish and
United States legal counsel, and it is anticipated that such multiple
representation will continue in the future. Because AerCo and debis Ireland do
not have independent legal representation, the terms of the agreements and other
arrangements negotiated between AerCo and debis Ireland could disproportionately
benefit one party over the other. Should a significant dispute arise in the
future between AerCo and debis Ireland or any of their respective affiliates,
AerCo anticipates that it will retain separate counsel to represent it in such
matter.

AIRCRAFT RISKS

     THE COMMERCIAL AIRCRAFT MARKET IS CYCLICAL. DECREASED DEMAND OR EXCESS
SUPPLY OF AIRCRAFT MAY DECREASE OUR CASH FLOWS.

     The market for commercial jet aircraft is very cyclical and can produce
sharp increases and decreases in aircraft values and lease rates. The aircraft
leasing market was experiencing a reduction in demand prior to September 11,
2001, particularly for older widebody aircraft. It is expected that this
reduction in demand will be exacerbated as a result of the terrorist attacks in
the United States on September 11, 2001. Decreases in aircraft values or lease
rates may cause a decrease in our cash flows. 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
can be expected to be adversely impacted by the terrorist attacks of September
11, 2001) 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;

     - 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;

                                        7
11

     - 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 G.I.E.
is also a threat to aircraft values. Boeing and Airbus have increased production
to an amount substantially above the long-term requirement implied by industry
forecasts. If production is maintained at this level the increased supply of new
aircraft may depress used aircraft values and lease rates. This development
could cause a decrease in our cash flow and adversely affect our ability to make
payments on the notes.

     THE APPRAISED VALUE OF THE AIRCRAFT MAY BE SIGNIFICANTLY HIGHER THAN THE
ACTUAL VALUE WE WOULD RECEIVE UPON A SALE OF THE AIRCRAFT. IN THAT CASE, OUR
ABILITY TO MAKE SCHEDULED PAYMENTS ON THE NOTES MAY SUFFER.

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

     Appraised values are based on the assumption that there is an "open,
unrestricted and stable market environment with a reasonable balance of supply
and demand." However, the aircraft market is not always stable and there may be
supply and demand imbalances at any given time, especially for specific aircraft
types. At the high point in the aircraft market cycle, the current market value
of some aircraft may be close to their appraised value while the current market
value of others, particularly older or widebody aircraft, may be significantly
less than their appraised values. At the low point in the aircraft market cycle,
the current market value of most aircraft types is likely to be less than
appraised values. Furthermore, as a result of the terrorist attacks of September
11, 2001, it is expected that airlines may reduce or scale back planned growth
of their fleets. This would reduce the value of our aircraft. As a result you
should not rely on aircraft appraised values as an indication of the market
value for the aircraft.

     IF THE APPRAISED VALUES OF OUR AIRCRAFT DECLINE AT A FASTER RATE THAN WE
HAVE ASSUMED, WE MAY BE REQUIRED TO SUSPEND PAYMENTS ON CLASS B AND CLASS C
NOTES.

     Due to various market factors, aircraft appraisers have recently reduced
appraised values for aircraft, especially older widebody aircraft. Under the
indenture, we must accelerate the scheduled principal payments on the class A
notes if the aircraft appraised values decline at a greater rate than we
assumed. In that case, payments on the class B and class C notes may be
suspended because of the increased principal amount that we must pay on the
class A notes. As a result of the terrorist attacks of September 11, 2001, it is
possible that aircraft appraisers may reduce aircraft appraised values at a
greater rate than previously assumed.

     NEW, 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, WE MAY BE UNABLE TO MAKE PAYMENTS ON THE NOTES.

     The availability of newer, 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. This risk is particularly
significant for us given our need to repay principal and interest on the notes
over a relatively long period. This will require us to lease or sell many of the
aircraft close to the end of their useful economic life. We expect that our
ability to manage these technological risks through modifications to aircraft
and sale of aircraft will be limited.

                                        8
12

     THE CONCENTRATION OF AIRCRAFT TYPES IN OUR PORTFOLIO COULD MAGNIFY THE
IMPACT OF DECLINES IN LEASE RATES OR AIRCRAFT VALUES AND ADVERSELY AFFECT OUR
CASH FLOW

     As of May 31, 2001, the MD-82, MD-83 and B767-300ER models of aircraft
comprised more than 17% of our portfolio by appraised value as of February 19,
2001. This concentration on particular models or types of aircraft could magnify
the adverse impact to our cash flow if there is a decline in lease rates or
aircraft values for these models or types of aircraft, or if significant costs
are required to be incurred with respect to these aircraft. The negative impact
can be especially severe (a) where there is a sharp decrease of lease rates or
aircraft values or (b) if specific governmental or technical regulations are
imposed on particular aircraft types, as we have seen with (x) the
discontinuation of production of MD-82s and MD-83s and the reduction in demand
for B767s including, in particular, B767s powered by Pratt and Whitney engines
and (y) the Airworthiness Directives with respect to the MD-80s and B737s, all
as described more fully below in "Item 4. Information on the Company -- Business
Overview -- The Leases". These events have caused, and could continue to cause,
our overall lease rates or the aircraft values to significantly decrease and may
cause us to incur significant costs which would reduce our cash flow.

ADDITIONAL AIRCRAFT RISKS

     IF WE ACQUIRE ADDITIONAL AIRCRAFT IN THE FUTURE THIS MAY INCREASE THE RISKS
WE ALREADY FACE OR EXPOSE US TO NEW RISKS.

     We expect to acquire additional aircraft and related additional leases in
the future. The cash flows derived from additional aircraft are expected to be,
together with the cash flows derived from the existing aircraft and existing
leases as well as any future leases, the principal source of payment of
interest, principal, and premium, if any, on the notes and related additional
notes. Depending on the extent to which we are able to acquire additional
aircraft, the cash flows derived from additional aircraft may become a more
important source of payment than the cash flows derived from the existing
aircraft.

     It is expected, however, that most, if not all, of the risks described
above will be relevant, and may be relevant to a significantly greater extent,
to any additional aircraft we may acquire in the future. Under the indenture,
the issuance of additional notes to finance the acquisition of other additional
aircraft is subject to conditions that are designed to protect our ability to
meet our obligations under the notes. Despite these protections, there can be no
assurance that the acquisition in the future of additional aircraft and
additional leases will not intensify some or all of the risks identified herein
or expose AerCo Group to other risks not so identified and that such intensified
or additional risks will not adversely affect our ability to make payments on
the notes.

     IF WE SELL AIRCRAFT-RELATED TAX BENEFITS, WE MAY BE UNABLE TO RECOVER LEGAL
OWNERSHIP OF THE AIRCRAFT. IN THAT CASE, WE MAY BE UNABLE TO RE-LEASE OR SELL
THE AIRCRAFT.

     In addition to selling aircraft outright, we may make more limited
transfers of aircraft ownership to investors who wish to acquire depreciation or
other tax benefits available to aircraft owners. If we enter into tax-related
dispositions, we will be exposed to the credit risk of the investor. This
includes the risk that we will not be able to recover legal title to the
aircraft or other aspects of ownership transferred to the investor if the
investor becomes insolvent. This would harm our ability to re-lease or sell the
aircraft. Because the terms of tax-related dispositions are not standardized, we
cannot identify with certainty the nature and the level of the risks we would
face if we entered into these transactions.

     RESTRICTIONS IN THE INDENTURE AND OUR GOVERNING CORPORATE DOCUMENTS MAY
IMPAIR OUR ABILITY TO COMPETE EFFECTIVELY IN THE AIRCRAFT LEASING MARKET.

     The indenture and our 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.

                                        9
13

     THE PURCHASE OPTION PRICES THAT WE HAVE GRANTED TO OUR LESSEES MAY BE LESS
THAN THE PROPORTION OF THE UNPAID PRINCIPAL OF THE NOTES ALLOCABLE TO THE
RELEVANT AIRCRAFT AND, THEREFORE, WE MAY BE UNABLE TO MAKE REQUIRED PAYMENTS ON
THE NOTES.

     As of May 31, 2001, two lessees have options to purchase a total of two
aircraft, representing 4.48% of the portfolio by appraised value as of February
19, 2001. There is a risk that the purchase prices may be less than the pro rata
portion of the unpaid principal of the notes allocable to the aircraft being
purchased. If those options are exercised, there could be a reduction in the
amount, or a delay in the timing, of required payments on the notes.

     IF LESSEES DO NOT DISCHARGE LIENS THAT ATTACH TO THE AIRCRAFT, WE MAY BE
UNABLE TO REPOSSESS, RE-LEASE OR SELL 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
which secure the payment of airport taxes, customs duties, air navigation
charges, landing charges, crew wages, repairer's charges or salvage attach to
the aircraft in the normal course of operation. The amounts which 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.

     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 which are or will be operated must be registered with
an appropriate aviation authority. If an aircraft is operated without a valid
registration, 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.

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

LEASE RISKS

     WE MAY NOT HAVE ENOUGH CASH FLOW TO MAKE PAYMENTS ON THE NOTES 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. If we cannot re-lease the aircraft we
may not have enough cash flow 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
terrorist attacks of September 11, 2001, are expected to result in reduced
demand for aircraft generally, including aircraft on operating lease. Our
ability to re-lease aircraft and obtain acceptable lease payments and terms may
also 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 the indenture.

                                        10
14

     The leases for five of the aircraft, representing approximately 7% of the
portfolio by appraised value at February 19, 2001, are scheduled to expire
before December 31, 2001. The leases for 37 of the aircraft, representing 65% of
the portfolio by appraised value at February 19, 2001 are scheduled to expire
before December 31, 2004. Re-leasing may also affect the rental rates we are
able to obtain and may adversely affect our ability to make payments on the
notes, especially when there is less demand for aircraft on operating lease.

     WE MAY INCUR SUBSTANTIAL COSTS IF LESSEES DO NOT PERFORM REQUIRED
MAINTENANCE. THIS WOULD REDUCE THE AMOUNTS AVAILABLE TO MAKE PAYMENTS ON THE
NOTES.

     The standards of maintenance observed by our lessees and the condition of
the aircraft at the time of sale or lease may offset future values and rental
rates from our aircraft. Under the leases, the lessee has the main
responsibility to maintain the aircraft and to comply with all applicable
governmental requirements. Some lessees may experience periodic difficulties in
meeting their maintenance obligations resulting from adverse environmental
conditions or financial and labor difficulties. If a lessee fails to perform
required or recommended maintenance on an aircraft or comply with any
airworthiness directives during the term of such lease, the aircraft may be
grounded and we may incur substantial costs to restore the aircraft to an
acceptable maintenance condition before sale or re-lease. If our lessees do not
perform their obligation to maintain the aircraft, we may have to fund
maintenance work on the aircraft. Because our maintenance costs are expenses
that rank senior to payments on the notes, we may be unable to make payments on
the notes if our maintenance costs were to become sufficiently large. In some
cases, we may have an obligation to reimburse the lessee or pay some or all of
the cost of aircraft maintenance. Our cash resources may not be sufficient both
to fund maintenance requirements and make payments on the notes, especially as
the aircraft age.

     WE MAY BE UNABLE TO MAKE PAYMENTS ON THE NOTES IF AIRCRAFT INSURANCE IS NOT
ADEQUATE TO COVER ANY LOSSES OR LIABILITIES WE INCUR.

     Our lessees have an obligation 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 the 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.

     POTENTIAL INSURANCE ISSUES ARISING FROM THE RECENT TERRORIST ATTACKS IN THE
UNITED STATES COULD ADVERSELY AFFECT OUR LESSEES AND THEREBY ADVERSELY AFFECT
OUR CASH FLOW.

     As a consequence of the terrorist attacks in the United States on 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. In the absence of satisfactory solutions on this
matter, 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 cash flow 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 PAYMENTS ON THE NOTES.

     If we 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 cash flows may
be insufficient to make payments on the notes.

                                        11
15

     IF WITHHOLDING TAXES ARE IMPOSED ON LEASE RENTALS, THESE TAXES WOULD REDUCE
OUR CASH FLOW AVAILABLE FOR 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, these amounts will be
unavailable for note payments.

RISK OF LESSEE DEFAULT

     LESSEES IN WEAK FINANCIAL CONDITION COULD FAIL TO MAKE LEASE PAYMENTS. THIS
WOULD REDUCE THE CASH FLOW 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, we will be unable 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 or
Latin America that from time to time experience severe economic crises. You
should refer to "Item 4. Information on the Company -- Business Overview -- The
Lessees -- 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 condition.

     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. The environment for commercial aircraft operators in
most geographic regions has been generally favorable in the past few years.
Therefore, the current level of defaults and lessee arrears should not be seen
as representative of future defaults and arrears as economic conditions may
deteriorate, including as a result of the terrorist attacks in the United States
on September 11, 2001. We can give no assurance that defaults and amounts in
arrears will not increase as the market for aircraft on operating lease
experiences cyclical downturns. You should refer to "Item 4. Information on the
Company -- Business Overview -- The Lessees -- Payment History" for a detailed
discussion of the lessees that are having financial difficulties or are in
arrears on their lease obligations.

     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 right to terminate the lease and repossess the aircraft if
there is an event of default under a lease. However, we may be unable to
terminate the lease or 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, we may be unable to make
payments on the notes.

     Our ability to terminate the lease and repossess the aircraft may be
limited by the following factors:

     - a lessee contesting AerCo Group's 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.

                                        12
16

     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;

     - costs of obtaining a certificate of airworthiness for the aircraft; and

     - swap breakage costs incurred under our agreements with swap providers.

RISKS RELATING TO PAYMENTS ON THE NOTES

     IF OUR ASSUMPTIONS ABOUT CASH FLOW AND OPERATING COSTS DO NOT MATCH ACTUAL
EXPERIENCE, WE MAY BE UNABLE TO MAKE NOTE PAYMENTS ON TIME OR AT ALL.

     We have determined the expected final payment dates for the notes based on
assumptions made at the time of their issue about our future cash flows and
interest and operating costs and possible future economic conditions. The
purpose of these assumptions is to illustrate the payment provisions of the
notes. Many of these assumptions relate to future political, economic and market
conditions that are outside our control and are difficult or impossible to
predict. Market interest rates are an example of such an assumption. Other
assumptions relate to future events that depend on the actions of lessees or
others with whom we deal. Insurance recoveries and maintenance payments are
examples of such assumptions. For this reason, it is unlikely that our
experience in the future will be consistent with the assumptions we have made
relating to cash flow and operating costs. As a result, we may be unable to make
payments on the notes at the times and in the amounts that our assumptions
indicate. Further, our assumptions clearly did not anticipate events such as the
terrorist attacks of September 11, 2001, which are likely to impact cash flow
adversely in a manner not illustrated by the assumptions.

     NOTEHOLDERS' RIGHT TO RECEIVE PAYMENTS ON THE NOTES RANKS JUNIOR TO OUR
EXPENSES, CERTAIN OTHER PAYMENTS WE MAY MAKE AND ANY MORE SENIOR SUBCLASSES OF
NOTES.

     Our expenses 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, noteholders' right to receive payments of interest, principal
and any premium on your notes ranks junior to payments on more senior subclasses
of notes. If an event of default occurs, then the holders of a class of notes
may not exercise remedies under the indenture 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.

     THERE IS NO PUBLIC MARKET FOR THE NOTES. AS A RESULT NOTEHOLDERS MAY BE
UNABLE TO SELL THEIR NOTES OR THE PRICE OF THE NOTES MAY SUFFER.

     The notes have a limited trading market which may harm noteholders' ability
to sell the notes or the price at which they are sold. 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.

                                        13
17

     WE MAY BE UNABLE TO REFINANCE THE SUBCLASS A-3, SUBCLASS B-2 AND SUBCLASS
C-2 NOTES IN THE CAPITAL MARKETS. THIS MAY DELAY THE REPAYMENT OF PRINCIPAL AND
LOWER THE MARKET PRICE OF OUR OTHER SUBCLASSES OF NOTES.

     The subclass A-3, subclass B-2 and subclass C-2 notes may reach their
expected final payment date before we have received sufficient cash flows to
repay them. In that case, we plan to refinance the subclass A-3, subclass B-2
and subclass C-2 notes by issuing refinancing notes. The refinancing notes will
rank equally with the other class A, class B or class C notes, as the case may
be, but the interest rate, principal payment provisions and other terms will be
different. Our ability to refinance the subclass A-3, subclass B-2 and subclass
C-2 notes will depend on many factors outside our control. These factors include
general conditions in the capital markets and the markets' perception of the
commercial aviation industry, the aircraft leasing business generally or our own
company, all of which may be adversely affected by the terrorist attacks of
September 11, 2001. If we cannot refinance the subclass A-3, subclass B-2 and
subclass C-2 notes on acceptable terms, we may not be able to repay the subclass
A-3, subclass B-2 and subclass C-2 notes by their expected final payment date.
This may also further delay repayment of principal on the class B and class C
notes and may result in lower market prices for the notes.

     In the future, we may issue additional notes and refinancing notes that may
also require refinancing like the subclass A-3, subclass B-2 and subclass C-2
notes. These notes would present the same refinancing risk that we describe
above.

BANKRUPTCY RISKS

     IF DEBIS OR ANY OF ITS SUBSIDIARIES BECOMES BANKRUPT OR INSOLVENT, THE
AIRCRAFT AND OUR OTHER ASSETS MAY NOT BE AVAILABLE TO REPAY THE NOTES AND OUR
OTHER OBLIGATIONS.

     We have taken steps in the previous and present transaction to structure
our company, and the acquisition of our aircraft owning companies from AerFi
Group prior to its acquisition by debis group to ensure that our assets are not
consolidated with the debis group's assets and do not become available to the
debis group's creditors in any bankruptcy or insolvency proceeding involving the
debis group.

     If debis or any of its subsidiaries becomes bankrupt or insolvent, there is
a legal risk that a court or other authority could decide that these steps were
not effective to insulate our assets from the debis group's assets or that the
debis group's transfer of aircraft to us was improper. As a result, the aircraft
and our other assets could become available to repay both debis's creditors and
our creditors, including you. We could also lose all of our rights in the
aircraft and our other assets. In either case, it may be impossible to repay
amounts outstanding under the notes.

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 NOTEHOLDERS.

     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 E.U. 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 noteholders 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 members of AerCo Group and the lessees are organized, reside or
operate. You should refer to "Item 10. Additional Information -- Taxation -- Tax
Considerations" for a more detailed discussion of the possible tax consequences
of owning the notes.
                                        14
18

     OUR OPERATIONS MAY BECOME SUBJECT TO INCOME TAXES, WHICH WOULD REDUCE THE
CASH FLOW 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 members of AerCo Group to tax
liabilities outside Ireland. If our income is subject to taxation, the cash
flows available to make payments on the notes may be reduced.

     IF WE LOSE OUR IRISH TAX BENEFITS, THE RATING AGENCIES MAY DOWNGRADE THE
NOTES AND WE MAY BE UNABLE TO MAKE REQUIRED NOTE PAYMENTS.

     Our Irish-resident aircraft owning companies, including those we acquired
from the debis Ireland group, are entitled to certain corporate tax benefits for
Shannon, Ireland certified companies, including a preferential corporate
taxation rate of 10% through December 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.

     If, whether because of its acquisition by debis or otherwise, debis Ireland
were liquidated or were to cease to hold its 5% shareholding in AerCo, or if the
debis Ireland group were to reduce or relocate its operations for any reason
such that it failed to maintain, among other things, certain employment levels
at Shannon, Ireland, or if a member of the debis Ireland group were to resign or
be removed as servicer, administrative agent or cash manager of AerCo Group,
then our aircraft owning companies may become subject to Irish corporate
taxation at the general Irish statutory rate. That rate is currently 20%. Irish
tax law provides for a reduction of this rate to 16% for 2002 and 12.50% for
2003 and subsequent years. debis Ireland has agreed to use its best efforts to
maintain the Shannon corporate tax benefits for the benefit of AerCo Group.

     Upon the scheduled termination of the Irish preferential 10% tax rate on
December 31, 2005, AerCo and the other Irish tax-resident members of AerCo Group
will become subject to Irish corporate tax on their 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 to be
taxed at 25%. There can be no assurance that these tax rates will not be changed
in the future.

     You should refer to "Item 10. Additional Information -- Taxation -- Tax
Considerations -- Irish Tax Considerations -- Irish Income and Withholding Taxes
on Payments on the Notes" for additional discussions of the Irish tax benefits.

     THE ACTIVITIES OF OUR SERVICE PROVIDERS OR LOSS OF TREATY BENEFITS COULD
EXPOSE US TO U.S. FEDERAL INCOME TAXATION, WHICH COULD HARM OUR ABILITY TO MAKE
PAYMENTS ON THE NOTES.

     AerCo and its non-U.S. aircraft owning subsidiaries do not expect to have
any material U.S. federal income tax liability. However, this conclusion will
depend, in part, on:

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

     - in the case of AerCo and its Irish-resident subsidiary companies,
       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 AerCo and its
non-U.S. aircraft owning subsidiaries to U.S. federal income tax on part or all
of their income, which would reduce the cash flow available to make payments on
the notes.

     Following the acquisition of debis Ireland by debis, AerCo and its
Irish-resident aircraft owning subsidiaries may no longer qualify for the
benefits of the United States-Ireland income tax treaty, and as a result may be
subject to United States federal income tax on part or all of their income,
which would reduce the cash flow available to make payments on the notes.

                                        15
19

ITEM 4.  INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF AERCO LIMITED

  AerCo

     AerCo Limited is a special purpose limited liability company formed on June
4, 1998 under the laws of Jersey to purchase and own a portfolio of aircraft. It
is resident in Ireland for tax purposes and is entitled to certain corporate tax
benefits available to Shannon, Ireland certified companies.

     AerCo has an authorized share capital of 10,000 ordinary shares, $1 par
value per share, 20 of which are issued and outstanding. Nineteen shares are
held by Juris Limited and Lively Limited, each a Jersey limited liability
company (together, the "NOMINEES"), for the benefit of AerCo Holding Trust, a
charitable trust established under the laws of Jersey (the "CHARITABLE TRUST").
One share is held by debis Ireland.

     AerCo's registered and principal office is located at 22 Grenville Street,
St. Helier, Jersey, JE4 8PX, Channel Islands and its telephone number is
+44-1534-609000.

  The Initial Acquisition

     On July 15, 1998, we made an offering of subclass A-1, subclass A-2,
subclass B-1 and subclass C-1 notes in the aggregate principal amount of $800
million. We used these proceeds, together with the proceeds of an offering of
subclass D-1 and subclass E-1 notes (the subclass D-1 and subclass E-1 notes,
together with the subclass A-1, subclass A-2, subclass B-1 and subclass C-1
notes, the "OLD NOTES") to debis Ireland to purchase, in addition to the
purchases described below, all of the outstanding capital stock of ALPS 94-1,
another securitization vehicle, from the trustees of a charitable trust (the
"ALPS 94-1 TRUST") for a nominal amount. This purchase price reflected the very
limited economic entitlements of these trustees as shareholders of ALPS 94-1. On
July 15, 1998, ALPS 94-1 was the owner of 25 commercial jet aircraft.

     On July 15, 1998, we also purchased all of the capital stock of three
wholly-owned newly incorporated subsidiaries of debis Ireland, AerCo Ireland
Limited, AerCo Ireland II Limited and AerCo USA Inc. (together the "DEBIS
TRANSFERRED COMPANIES") for a net purchase price equal to $0.3 million. On July
15, 1998, the debis transferred companies were the owners of ten commercial jet
aircraft.

     On July 15, 1998, we loaned ALPS 94-1 a portion of the net cash proceeds
from the issuance of the old notes for the purpose of immediately redeeming or
repaying ALPS 94-1's existing financial indebtedness and paying fees and other
expenses payable by ALPS 94-1 in connection with the refinancing of ALPS 94-1
and the offering.

     On July 15, 1998, we loaned each debis transferred company a portion of the
net proceeds from the issuance of the old notes to immediately repay its
indebtedness to debis Ireland. All letters of credit, guarantees or similar
arrangements securing obligations of any lessee of the transferred aircraft were
transferred to, renewed, amended or reissued in the name of, a debis transferred
company.

     ALPS 94-1 and GECAS, the former servicer to ALPS 94-1 and currently
servicer to debis Ireland in respect of certain of its assets, also reached an
agreement to terminate the existing ALPS 94-1 servicing agreement on July 15,
1998 in exchange for a termination fee. ALPS 94-1 agreed, upon termination of
the ALPS 94-1 servicing agreement to waive all claims it might have against
GECAS, its affiliates and their representatives. ALPS 94-1 also agreed to
indemnify GECAS, its affiliates and their representatives for any losses they
might have incurred in connection with the termination of the ALPS 94-1
servicing agreement, the offering and the issuance of the old notes and the
refinancing of ALPS 94-1. The trustees of the ALPS 94-1 Trust made no
representations, warranties or indemnities in selling their shares to AerCo.
debis Ireland made customary representations and warranties in the share
purchase agreement for the acquisition of the debis transferred companies and
aircraft, including representations relating to solvency, undisclosed contingent
liabilities and insurance. debis Ireland agreed to indemnify AerCo Group for
breaches of its representations and warranties relating to the debis transferred
companies and the transferred aircraft. These representations and warranties
survived until July 15, 2001. AerCo did not make any claims for breaches of
these representations and warranties. AerCo Group's potential recovery under
them was limited to approximately $185 million.
                                        16
20

  The Refinancing and Additional Aircraft Acquisition

     On July 17, 2000, we made an additional offering of subclass A-3, subclass
A-4, subclass B-2 and subclass C-2 notes in the aggregate principal amount of
$960 million (the "NEW NOTES"). We used these proceeds, together with the
proceeds of an offering of subclass D-2 and subclass E-2 notes to debis Ireland,
to finance our acquisition of 30 additional aircraft (the "ADDITIONAL AIRCRAFT")
through the acquisition of all the outstanding capital stock of 18 aircraft
owning subsidiaries of debis Ireland (the "NEW DEBIS TRANSFERRED COMPANIES") and
to refinance our then existing subclass A-1 and subclass D-1 notes. The 30
additional aircraft had an appraised value of $724.1 million at April 30, 2000
and were on lease to 20 lessees in 13 countries as of July 17, 2000. Only six of
the 30 additional aircraft were delivered to AerCo as of the closing date
because the debis Ireland group needed additional time in order to obtain lessee
consents, necessary governmental authorizations, revised insurance certificates
and meet other requirements in order to transfer such aircraft. We deposited the
proceeds of this offering allocable to the 24 remaining aircraft into the
aircraft purchase account and we used these funds to purchase the remaining
aircraft as they became ready for delivery. A further eight of the additional
aircraft were purchased by AerCo on August 3, 2000, six on October 5, 2000, four
on November 2, 2000, one on November 15, 2000, one on December 8, 2000, two on
December 20, 2000 and two on January 31, 2001. See "Item 6. Directors, Senior
Management and Employees -- Directors and Senior Management" for a more detailed
description of debis and our servicing arrangements.

     Although we did not acquire all of the additional aircraft on the closing
date, we structured the purchase agreement to provide for net payments from
debis Ireland to AerCo designed to put AerCo in substantially the position it
would have been in if all 30 additional aircraft had been delivered on July 17,
2000. debis Ireland made customary representations and warranties in the share
purchase agreement for the acquisition of the additional aircraft including
representations relating to solvency, undisclosed contingent liabilities and
insurance. debis Ireland indemnified us for breaches of its representations and
warranties relating to the new debis transferred companies and additional
aircraft which it would be selling to us. The representations and warranties
with respect to each of the new debis transferred companies and its related
aircraft survive for three years from the date of transfer to AerCo of that new
debis transferred company. Our potential recovery under these representations
and warranties is limited to approximately $175.0 million.

     Because of the timing uncertainties of obtaining lessee consents that a
direct transfer of aircraft from the debis Ireland group to AerCo presented,
debis Ireland structured the acquisition of aircraft and associated leases as
the sale of the capital stock of wholly-owned, recently incorporated
subsidiaries to occur in a series of transactions on or following the closing of
the offering on July 17, 2000. Prior to each acquisition, debis Ireland
pre-positioned ownership of the additional aircraft in the appropriate new debis
transferred company. Each of the new debis transferred companies financed its
acquisition of the applicable additional aircraft with debt payable to the debis
Ireland group or third-party creditors. AerCo purchased all of the outstanding
capital stock of the appropriate new debis transferred companies from the debis
Ireland group and refinanced the indebtedness of those companies to the debis
Ireland group or third party creditors for an aggregate amount equal to
approximately $706.4 million, calculated as follows: (1) the aggregate appraised
value at April 30, 2000 of the 30 additional aircraft ($724.1 million); less the
sum of: (2) the amount of cash security deposits held in respect of those
aircraft (approximately $7.4 million for all 30 additional aircraft as of June
30, 2000); and (3) the amount of the transaction expenses of $10.3 million
inclusive of subscription discounts and commissions. The cumulative aggregate
net purchase price of the capital stock was paid in installments and the related
indebtedness was simultaneously repaid upon delivery of the shares of each of
the new debis transferred companies. All of the transaction expenses were paid
on July 17, 2000.

     AerCo loaned each of the new debis transferred companies a portion of the
net proceeds of the offering of the new notes to repay its indebtedness to the
debis group or third party creditors. All letters of credit, guarantees or
similar arrangements securing obligations of any lessee of the additional
aircraft were transferred to, renewed, amended or reissued in the name of, the
relevant new debis transferred company upon the purchase of each new debis
transferred company by AerCo.

     In consideration of AerCo agreeing to purchase the new debis transferred
companies and raising funds in anticipation of delivery of all the remaining
additional aircraft, debis Ireland paid to AerCo, for each remaining

                                        17
21

additional aircraft, an amount equal to gross lease rentals on the remaining
additional aircraft received by debis Ireland from the closing date. AerCo paid
to debis Ireland an amount equal to (a) any interest earned on the funds in the
aircraft purchase account allocable to the remaining aircraft, which funds would
have been transferred to debis Ireland had the remaining aircraft been delivered
to AerCo on the closing date, and (b) an amount equal to interest which would
have been payable to debis Ireland on the relevant principal amount of the
subclass D-2 notes and the subclass E-2 notes according to the priority of
payments had debis Ireland been issued such notes on the closing date. Such
amounts were paid monthly by debis Ireland to AerCo and deposited into the
collection account and, together with other cash amounts received under the
leases of aircraft already owned by AerCo Group, were paid to the noteholders on
each payment date.

     The purchase price paid by AerCo for each additional aircraft was adjusted
for the expenses relating to the management of the leases (not including
payments under the servicing agreement with debis Ireland) from the closing date
and maintenance expenses not paid under the servicing agreement as of the
closing date by the lessees directly or from supplemental rent paid by the
lessees for maintenance costs, which debis Ireland paid, net of any related
aircraft maintenance income received by debis Ireland since the closing date.
AerCo issued to debis Ireland the subclass D-2 notes and the subclass E-2 notes
allocable to the purchase price of the additional aircraft as they were
delivered.

  Additional Aircraft and Debt Issuances

     We intend to acquire further aircraft assets from various sellers, which
may include the debis group, in the future. Such additional aircraft may be
serviced by parties other than debis. We will finance acquisitions of such
aircraft with external funds, including issuing debt securities in up to five
classes which will rank equally in right of payment of principal and interest
with the corresponding classes of the then outstanding notes. Any acquisition of
further aircraft and related issuance of further notes or other debt securities
will be subject to various conditions under the indenture, including rating
agency confirmation that such acquisition will not result in the lowering or
withdrawal by the rating agencies of their current rating of any subclass of
notes then outstanding.

B. BUSINESS OVERVIEW

PORTFOLIO INFORMATION

     As of May 31, 2001, our total portfolio comprised 61 aircraft on lease to
33 lessees in 19 countries and excludes one B747-200B aircraft which is being
sold for scrap. One aircraft was off-lease at May 31, 2001. As of September 24,
2001, this aircraft was subject to a letter of intent for lease.

     As of May 31, 2001, the total appraised value of our 61 aircraft based upon
the appraised values as of February 19, 2001 was $1,411.3 million. As of May 31,
2001, the weighted average remaining contracted lease term of the portfolio (by
appraised values as of February 19, 2001 and without giving effect to purchase
options or extension options) was 35 months. The longest lease is scheduled to
expire in March 2008. Therefore, we will be required to re-lease each of the
aircraft one or more times prior to the final maturity date for the notes. See
"Risk Factors -- Lease Risks."

APPRAISERS' REPORT

     We obtained appraised values of our portfolio of aircraft at February 19,
2001. The values provided by the appraisers represent the base value in respect
of 61 of the aircraft (excluding the B757 aircraft sold in April 2001 and the
scrap value in respect of one aircraft, the B747-200B).

     The base value is equal to the average of the opinions of the appraisers as
to the value of each aircraft at normal utilization rates in an open,
unrestricted and stable market at February 19, 2001, adjusted to take account of
the reported maintenance standard of the aircraft. The appraisals were not based
on physical inspection of the aircraft and do not take into account the value of
the leases, maintenance reserves or security deposits. The scrap value is
determined by the appraisers based on the assumption that the aircraft will no
longer be utilized for flight operation and assumes that the aircraft will
ultimately be disassembled to a point where all economically viable assets,
including the engines, are sold individually.

                                        18
22

     On the basis of the three independent appraisals, the average base value
for 61 of the aircraft was approximately $1,411.3 million compared with an
average base value of $1,482.1 million (excluding the B757 aircraft sold in
April 2001 and the B747 aircraft which is being sold for scrap) on April 30,
2000, the date of the last appraisals. The reduction in value represents
utilization for the period. The aggregate base and scrap values calculated by
each of the three appraisers for the aircraft are $1,437.8 million in the case
of BK Associates, Inc., $1,446.4 million in the case of Aircraft Information
Services, Inc. and $1,349.9 million in the case of Airclaims Limited.

     You should not rely on the appraised value as a measure of the realizable
value of any aircraft. See "Key Information -- Risk Factors -- Aircraft Risks."

                                        19
23

     The following table lists the appraised values of the 61 aircraft at
February 19, 2001.
APPRAISAL OF
                                                       -----------------------------------------        AVERAGE
                                          DATE OF        AIRCRAFT                                      APPRAISED
                  ENGINE       SERIAL   MANUFACTURE/    INFORMATION    AIRCLAIMS                       VALUE AT
AIRCRAFT TYPE  CONFIGURATION   NUMBER    CONVERSION      SERVICES       LIMITED    BK ASSOCIATES   FEBRUARY 19, 2001
-------------  -------------   ------   ------------   -------------   ---------   -------------   -----------------
                                                                             (U.S.$'000S)
A300B4-200     CF6-50C2          240       May-83            8,560         5,550        11,677             8,596
A320-200       V2500-A1          354       Oct-92           26,310        30,310        28,449            28,356
A320-200       V2500-A1          411       Mar-93           27,670        31,220        29,242            29,377
A320-200       V2527-A5          934       Jan-99           40,290        38,190        39,171            39,217
A320-200       CFM56-5A1          85       Feb-90           24,830        24,000        22,827            23,886
A320-200       CFM56-5A3         299       Apr-92           26,860        28,300        29,247            28,136
A320-200       V2500-A1          362       Nov-92           25,840        28,280        29,334            27,818
A320-200       CFM56-5A3         391       Feb-93           28,920        28,150        30,816            29,295
A320-200       CFM56-5A1         403       Dec-93           28,520        29,460        30,656            29,545
A321-200       V2533-A5         1207       Apr-00           54,870        47,320        52,636            51,609
B737-300       CFM56-3B1       23345       Jul-85           16,060        12,320        12,080            13,487
B737-300       CFM56-3C1       24834       Jun-90           21,230        19,550        20,658            20,479
B737-300       CFM56-3C1       24856       Aug-90           21,500        19,530        21,256            20,762
B737-300       CFM56-3B2       25041       Mar-91           22,120        21,480        22,135            21,912
B737-300       CFM56-3C1       25604       Jan-93           22,510        19,940        22,789            21,746
B737-300       CFM56-3B2       26440       Mar-92           23,220        21,370        23,551            22,714
B737-300       CFM56-3B1       24465       Aug-89           19,490        17,190        18,920            18,533
B737-300       CFM56-3B1       24677       Mar-90           20,510        18,990        20,272            19,924
B737-300       CFM56-3C1       24908       Mar-91           22,550        22,020        22,284            22,285
B737-300       CFM56-3C1       24909       Apr-91           21,490        20,990        20,900            21,127
B737-300       CFM56-3C1       26068       Jun-92           23,680        21,930        24,309            23,306
B737-300       CFM56-3B2       26442       May-92           23,460        20,780        22,493            22,244
B737-300QC     CFM56-3B2       24021       Nov-88           21,020        22,420        18,360            20,600
B737-400       CFM56-3C1       24270       May-89           22,570        21,720        21,161            21,817
B737-400       CFM56-3C1       24271       Jun-89           22,790        21,940        21,619            22,116
B737-400       CFM56-3C1       24901       May-90           23,850        23,110        23,570            23,510
B737-400       CFM56-3C1       25594       May-92           25,850        24,930        25,002            25,261
B737-400       CFM56-3C1       27074       Apr-92           26,080        25,160        25,788            25,676
B737-400       CFM56-3C1       23868       Oct-88           21,660        17,950        20,660            20,090
B737-400       CFM56-3C1       23979       Jan-89           22,040        21,830        21,153            21,674
B737-400       CFM56-3C1       24685       May-90           23,640        22,480        23,338            23,153
B737-400       CFM56-3C1       24904       Feb-91           24,860        23,060        23,412            23,777
B737-400       CFM56-3C1       25764       Jun-92           24,560        20,440        25,067            23,356
B737-400       CFM56-3C1       25765       Jul-92           24,890        20,840        25,555            23,762
B737-400       CFM56-3C1       26066       Jun-92           26,020        23,260        25,767            25,016
B737-500       CFM56-3C1       24651       Apr-90           18,440        20,040        17,368            18,616
B737-500       CFM56-3C1       25768       May-95           22,710        22,940        21,833            22,494
B737-500       CFM56-3C1       25789       Feb-92           19,790        21,370        19,649            20,270
B737-500       CFM56-3C1       27153       Aug-93           20,160        21,120        20,080            20,453
B737-500       CFM56-3C1       27155       Mar-93           20,000        20,660        18,268            19,643
B737-500       CFM56-3C1       26067       Jun-92           20,130        21,720        19,913            20,588
B757-200       RB211-535E4     26152       Aug-92           38,050        31,570        36,471            35,364
B757-200       RB211-535E4     26153       Aug-92           40,070        33,550        38,496            37,372
B757-200       RB211-535E4     26158       Feb-93           41,270        34,670        39,279            38,406
B767-300ER     PW4060          24947       Mar-91           58,060        51,040        55,644            54,915
B767-300ER     PW4060          24999       Feb-91           56,790        49,640        52,027            52,819
DC8-71F        CFM56-2C1       46040       Mar-91           14,100        15,720        12,401            14,074
DC8-71F        CFM56-2C1       46064       Mar-92           12,970        12,140        10,998            12,036
F100           TAY650-15       11320       Apr-91           10,450        11,060        12,149            11,220
F100           TAY650-15       11322       Jun-91           10,560        10,670        12,236            11,155
F100           TAY650-15       11341       Aug-91           10,460        12,100        11,934            11,498
F100           TAY650-15       11350       Apr-92           11,240        11,390        13,525            12,052
F100           TAY650-15       11351       Sep-91           10,230        11,530        12,300            11,353
MD-82          JT8D-217C       49570       Feb-88           16,620        12,680        16,441            15,247
MD-82          JT8D-219        49905       Oct-90           17,880        15,010        19,322            17,404
MD-82          JT8D-219        49931       Aug-90           19,060        14,960        19,507            17,842
MD-82          JT8D-219        49932       Sep-90           19,070        14,750        19,676            17,832
MD-82          JT8D-219        53245       Apr-92           19,660        16,240        20,615            18,838
MD-83          JT8D-219        49627       Apr-89           19,250        15,540        19,621            18,137
MD-83          JT8D-219        49790       Oct-89           18,870        15,450        19,613            17,978
MD-83          JT8D-219        49952       Dec-91           20,150        16,310        22,285            19,581
                                                         ---------     ---------     ---------         ---------
                                                         1,446,360     1,349,880     1,437,805         1,411,349
                                                         =========     =========     =========         =========
20
24

THE AIRCRAFT

     All of the aircraft hold or are capable of holding, a noise certificate
issued under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago
Convention or have been shown to comply with the Stage 3 noise levels set out in
Section 36.5 of Appendix C of Part 36 of the United States Federal Aviation
Regulations.

     The following table lists the 61 aircraft by type and number as of May 31,
2001 and the percentage of appraised value of each aircraft at February 19,
2001.
TYPE OF     NUMBER OF      BODY      ENGINE   % OF PORTFOLIO BY
MANUFACTURER       AIRCRAFT     AIRCRAFT       TYPE      STAGE     APPRAISED VALUE
------------      -----------   ---------   ----------   ------   -----------------
Airbus
  (20.97%).....   A300-B4-200       1       Widebody       3             0.61%
                  A320-200          8       Narrowbody     3            16.70%
                  A321-200          1       Narrowbody     3             3.66%
Boeing
(74.97%).......   B737-300         12       Narrowbody     3            17.61%
                  B737-300QC        1       Narrowbody     3             1.46%
                  B737-400         12       Narrowbody     3            19.78%
                  B737-500          6       Narrowbody     3             8.64%
                  B757-200          3       Narrowbody     3             7.87%
                  B767-300ER        2       Widebody       3             7.63%
                  MD-82             5       Narrowbody     3             6.18%
                  MD-83             3       Narrowbody     3             3.95%
                  DC8-71F           2       Freighter      3             1.85%
Fokker
(4.04%)........   F100              5       Narrowbody     3             4.06%
                                   --                                  ------
                                   61                                  100.00%
                                   ==                                  ======
21
25

     The following table sets forth the exposure of our portfolio by lessee at
May 31, 2001 by reference to the appraised value at February 19, 2001.
% OF
                                                                NUMBER OF      AIRCRAFT BY
LESSEE(1)                                                       AIRCRAFT     APPRAISED VALUE
---------                                                       ---------    ---------------
BMI Limited.................................................        2              6.44%
Spanair S.A. ...............................................        4              7.38%
Air Canada..................................................        2              5.98%
Asiana Airlines Inc.........................................        3              4.93%
Frontier Airlines Inc.......................................        3              4.66%
TAM-Transportes Aereos Regionais S.A. ......................        5              4.06%
JMC Airlines................................................        2              4.09%
Airtours International Airways Limited......................        2              3.96%
Blue Panorama Airlines SpA..................................        2              3.49%
THY Turkish Airlines........................................        1              1.77%
China Southern Airlines Company Limited.....................        2              3.19%
Pegasus Hava Tasimaciligi A.S...............................        2              3.18%
Virgin Express S.A..........................................        3              4.67%
Air 2000 Limited............................................        1              2.72%
Xiamen Airlines Limited.....................................        2              2.84%
Philippine Airlines Inc.....................................        3              4.51%
Finnair Oy..................................................        2              2.57%
China Xinjiang Airlines.....................................        1              2.65%
Avianca.....................................................        1              2.51%
Reno Air Inc................................................        2              2.53%
Monarch Airlines Limited....................................        1              2.08%
Volare Airlines SpA.........................................        1              1.69%
Malev Hungarian Airlines....................................        2              3.18%
VARIG.......................................................        1              1.45%
Societe d'Exploitation Aeropostale..........................        1              1.46%
Far Eastern Air Transport Corporation (F.E.A.T.)............        1              1.39%
Nordeste Linhas Aereas Regionais S.A. ......................        1              1.46%
British Airways Plc.........................................        2              3.02%
Braathens ASA S.A.F.E. .....................................        1              1.32%
Delta Air Lines.............................................        1              0.96%
Aircraft International Leasing Limited (A.I.L.L.)...........        1              1.00%
BAX Global Inc..............................................        1              0.85%
Indian Airlines Limited.....................................        1              0.61%
Off-lease(2)................................................        1              1.42%
                                                                   --            ------
                                                                   61            100.00%
                                                                   ==            ======
---------------
(1) Total number of lessees as of May 31, 2001 = 33

(2) As of September 24, 2001, the off-lease aircraft was subject to a letter of
    intent for lease.

                                        22
26

     The following table lists the 61 aircraft by country at May 31, 2001
according to the number of aircraft and the percentage of the appraised value at
February 19, 2001.
% OF
                                                              NUMBER OF      AIRCRAFT BY
                         COUNTRY(1)                           AIRCRAFT     APPRAISED VALUE
                         ----------                           ---------    ---------------
United Kingdom..............................................     10             22.30%
United States...............................................      7              8.99%
China.......................................................      5              8.68%
Turkey......................................................      3              4.95%
Spain.......................................................      4              7.38%
Brazil......................................................      7              6.97%
Canada......................................................      2              5.98%
Italy.......................................................      3              5.18%
South Korea.................................................      3              4.93%
Belgium.....................................................      3              4.67%
Philippines.................................................      3              4.51%
Finland.....................................................      2              2.57%
Colombia....................................................      1              2.51%
Hungary.....................................................      2              3.18%
France......................................................      1              1.46%
Taiwan......................................................      1              1.39%
Norway......................................................      1              1.32%
Chile.......................................................      1              1.00%
India.......................................................      1              0.61%
Off-lease...................................................      1              1.42%
                                                                 --            ------
                                                                 61            100.00%
                                                                 ==            ======
---------------
(1) Total number of countries = 19

     The following table lists the 61 aircraft by region at May 31, 2001
according to the number of aircraft and to the percentage of the appraised value
at February 19, 2001.
% OF
                                                              NUMBER OF      AIRCRAFT BY
                           REGION                             AIRCRAFT     APPRAISED VALUE
                           ------                             ---------    ---------------
Developed Markets:
  Europe....................................................     24             44.87%
  North America.............................................      9             14.98%
Emerging:
  Asia......................................................     13             20.12%
  Europe and the Middle East................................      5              8.13%
  Latin America.............................................      9             10.48%
Off-lease(1)................................................      1              1.42%
                                                                 --            ------
                                                                 61            100.00%
                                                                 ==            ======
---------------

(1)  As of September 24, 2001, the off-lease aircraft was subject to a letter of
     intent for lease.

                                        23
27

     The following table lists the 61 aircraft by year of aircraft manufacture
or conversion to freighter at May 31, 2001 according to the number of aircraft
and to the percentage of the appraised value at February 19, 2001.
% OF
                                                              NUMBER OF      AIRCRAFT BY
             YEAR OF MANUFACTURE OR CONVERSION                AIRCRAFT     APPRAISED VALUE
             ---------------------------------                ---------    ---------------
1983........................................................      1              0.61%
1985........................................................      1              0.96%
1988........................................................      3              3.96%
1989........................................................      6              8.52%
1990........................................................     10             14.41%
1991........................................................     12             19.54%
1992........................................................     18             30.62%
1993........................................................      7             13.35%
1995........................................................      1              1.59%
1999........................................................      1              2.78%
2000........................................................      1              3.66%
                                                                 --            ------
                                                                 61            100.00%
                                                                 ==            ======
The following table lists the aircraft by seat category at May 31, 2001
calculated by reference to the number of aircraft and to the percentage of the
appraised value at February 19, 2001.
% OF
                                                                         NUMBER OF      AIRCRAFT BY
SEAT CATEGORY                        AIRCRAFT TYPE                       AIRCRAFT     APPRAISED VALUE
-------------                        -------------                       ---------    ---------------
91-120          B737-500, F-100........................................     11             12.71%
121-170         A320-200, B737-300, B737-300QC, B737-400, MD82, MD83...     41             65.67%
171-240         A321-200, B757-200.....................................      4             11.53%
241-350         A300-B4-200, B767-300ER................................      3              8.24%
Freighter       DC8-71F................................................      2              1.85%
                                                                            --            ------
                                                                            61            100.00%
                                                                            ==            ======
DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA

     The following table indicates the distribution of AerCo's revenues by
geographic area for fiscal periods indicated:
AERCO
                                                  AERCO               AERCO            PERIOD FROM
                                               YEAR ENDED          YEAR ENDED       JULY 15, 1998 TO
                                             MARCH 31, 2001      MARCH 31, 2000      MARCH 31, 1999
                                            -----------------   -----------------   -----------------
                                            U.S.$'000     %     U.S.$'000     %     U.S.$'000     %
Europe...................................     84,629     51.3     52,956     48.5    40,456      48.8
North America............................     26,657     16.2      9,186      8.4     7,009       8.5
South/Central America....................     21,615     13.1     21,366     19.6    14,318      17.3
Asia/Pacific.............................     32,033     19.4     25,638     23.5    21,043      25.4
                                             -------    -----    -------    -----    ------     -----
                                             164,934    100.0    109,146    100.0    82,826     100.0
                                             =======    =====    =======    =====    ======     =====
All revenues are derived from aircraft leasing.

     In the year ended March 31, 2001, 18% and 13% of AerCo's lease revenues was
derived from the United Kingdom and the United States, respectively. No other
country accounted for greater than 10% of AerCo's lease revenues.

                                        24
28

     In the year ended March 31, 2000, 17% and 11% of AerCo's lease revenues was
derived from the United Kingdom and Spain respectively. No other country
accounted for greater than 10% of AerCo's lease revenues.

     In the period from July 15, 1998 to March 31, 1999, 18% and 10% of AerCo's
lease revenues was derived from the United Kingdom and Spain, respectively. No
other country accounted for greater than 10% of AerCo's lease revenues.

                                        25
29

                            AERCO PORTFOLIO ANALYSIS
DATE OF          APPRAISED
                                                             AIRCRAFT        ENGINE       SERIAL   MANUFACTURE/       VALUE AT
     REGION          COUNTRY               LESSEE              TYPE       CONFIGURATION   NUMBER    CONVERSION    FEBRUARY 19, 2001
     ------          -------               ------           -----------   -------------   ------   ------------   -----------------
                                                                                                                    (U.S.$'000S)
Europe.......   Belgium          Virgin Express (1)       B737-400      CFM56-3C1       24270       May-89             21,817
  (Developed)     Belgium          Virgin Express           B737-400      CFM56-3C1       24271       Jun-89             22,116
                  Belgium          Virgin Express           B737-300      CFM56-3B2       25041       Mar-91             21,912
                  Finland          Finnair                  MD-82         JT8D-219        49905       Oct-90             17,404
                  Finland          Finnair                  MD-82         JT8D-219        53245       Apr-92             18,838
                  France           Europe Airpost           B737-300QC    CFM56-3B2       24021       Nov-88             20,600
                  Italy            Air Europa (2)           A320-200      CFM56-5A1          85       Feb-90             23,886
                  Italy            Blue Panorama            B737-400      CFM56-3C1       24901       May-90             23,510
                  Italy            Blue Panorama            B737-400      CFM56-3C1       27074       Apr-92             25,676
                  Norway           Braathens SAFE           B737-500      CFM56-3C1       24651       Apr-90             18,616
                  Spain            Spanair                  B767-300ER    PW4060          24999       Feb-91             52,819
                  Spain            Spanair                  MD-83         JT8D-219        49627       Apr-89             18,137
                  Spain            Spanair                  MD-83         JT8D-219        49790       Oct-89             17,978
                  Spain            Spanair                  MD-82         JT8D-217C       49570       Feb-88             15,247
                  United Kingdom   Air 2000                 B757-200      RB211-535E4     26158       Feb-93             38,406
                  United Kingdom   Airtours (3)             A320-200      CFM56-5A3         299       Apr-92             28,136
                  United Kingdom   Airtours                 A320-200      V2500-A1          362       Nov-92             27,818
                  United Kingdom   British Airways          B737-500      CFM56-3C1       25789       Feb-92             20,270
                  United Kingdom   British Airways          B737-300      CFM56-3C1       24908       Mar-91             22,285
                  United Kingdom   BMI                      A320-200      V2527-A5          934       Jan-99             39,217
                  United Kingdom   BMI                      A321-200      V2533-A5         1207       Apr-00             51,609
                  United Kingdom   JMC Airlines             A320-200      V2500-A1          354       Oct-92             28,356
                  United Kingdom   JMC Airlines             A320-200      V2500-A1          411       Mar-93             29,377
                  United Kingdom   Monarch                  A320-200      CFM56-5A3         391       Feb-93             29,295
  North
   America.....   Canada           Air Canada               A320-200      CFM56-5A1         403       Dec-93             29,545
  (Developed)     Canada           Air Canada               B767-300ER    PW4060          24947       Mar-91             54,915
                  United States    BAX Global               DC8-71F       CFM56-2C1       46064       Mar-92             12,036
                  United States    Delta                    B737-300      CFM56-3B1       23345       Jul-85             13,487
                  United States    Frontier                 B737-300      CFM56-3C1       24856       Aug-90             20,762
                  United States    Frontier                 B737-300      CFM56-3B2       26440       Mar-92             22,714
                  United States    Frontier                 B737-300      CFM56-3B2       26442       May-92             22,244
                  United States    Reno Air (4)             MD-82         JT8D-219        49931       Aug-90             17,842
                  United States    Reno Air (4)             MD-82         JT8D-219        49932       Sep-90             17,832
  Europe.......   Hungary          Malev                    B737-300      CFM56-3C1       24909       Apr-91             21,127
  (Emerging)      Hungary          Malev                    B737-400      CFM56-3C1       24904       Feb-91             23,777
                  Turkey           Pegasus                  B737-400      CFM56-3C1       23979       Jan-89             21,674
                  Turkey           Pegasus                  B737-400      CFM56-3C1       24685       May-90             23,153
                  Turkey           THY                      B737-400      CFM56-3C1       26066       Jun-92             25,016
  Asia.........   China            China Xinjiang           B757-200      RB211-535E4     26153       Aug-92             37,372
  (Emerging)      China            China Southern           B737-300      CFM56-3C1       26068       Jun-92             23,306
                  China            China Southern           B737-300      CFM56-3C1       25604       Jan-93             21,746
                  China            Xiamen Airlines          B737-500      CFM56-3C1       27153       Aug-93             20,453
                  China            Xiamen Airlines          B737-500      CFM56-3C1       27155       Mar-93             19,643
                  India            Indian Airlines          A300-B4-200   CF6-50C2          240       May-83              8,596
                  Philippines      PAL                      B737-300      CFM56-3B1       24465       Aug-89             18,533
                  Philippines      PAL                      B737-300      CFM56-3B1       24677       Mar-90             19,924
                  Philippines      PAL                      B737-400      CFM56-3C1       25594       May-92             25,261
                  South Korea      Asiana Airlines          B737-400      CFM56-3C1       25764       Jun-92             23,356
                  South Korea      Asiana Airlines          B737-400      CFM56-3C1       25765       Jul-92             23,762
                  South Korea      Asiana Airlines          B737-500      CFM56-3C1       25768       May-95             22,494
                  Taiwan           FEAT                     MD-83         JT8D-219        49952       Dec-91             19,581
  Latin
   America.....   Brazil           Nordeste                 B737-500      CFM56-3C1       26067       Jun-92             20,588
  (Emerging)      Brazil           TAM                      F100          TAY650-15       11341       Aug-91             11,498
                  Brazil           TAM                      F100          TAY650-15       11350       Apr-92             12,052
                  Brazil           TAM                      F100          TAY650-15       11351       Sep-91             11,353
                  Brazil           TAM                      F100          TAY650-15       11320       Apr-91             11,220
                  Brazil           TAM                      F100          TAY650-15       11322       Jun-91             11,155
                  Brazil           Varig                    B737-300      CFM56-3C1       24834       Jun-90             20,479
                  Chile            A.I.L.L. (5)             DC8-71F       CFM56-2C1       46040       Mar-91             14,074
                  Columbia         Avianca                  B757-200      RB211-535E4     26152       Aug-92             35,364
  Off-lease....   Off-lease (6)                             B737-400      CFM56-3C1       23868       Oct-88             20,090
                                                                                                                      ---------
                                                                                                                      1,411,349
                                                                                                                      =========
% OF PORTFOLIO BY
     REGION       APPRAISED VALUE
     ------      -----------------
Europe.......          1.5%
  (Developed)            1.6%
                         1.6%
                         1.2%
                         1.3%
                         1.7%
                         1.8%
                         1.7%
                         1.8%
                         1.3%
                         3.7%
                         1.3%
                         1.3%
                         1.1%
                         2.7%
                        2.09%
                         2.0%
                         1.4%
                         1.6%
                         2.8%
                         3.7%
                         2.0%
                         2.1%
                         2.1%
  North
   America.....          2.1%
  (Developed)            3.9%
                         0.9%
                         1.0%
                         1.5%
                         1.6%
                         1.6%
                         1.3%
                         1.3%
  Europe.......          1.5%
  (Emerging)             1.7%
                         1.5%
                         1.6%
                         1.8%
  Asia.........          2.6%
  (Emerging)             1.7%
                         1.5%
                         1.4%
                         1.4%
                         0.6%
                         1.3%
                         1.4%
                         1.8%
                         1.7%
                         1.7%
                         1.6%
                         1.4%
  Latin
   America.....          1.5%
  (Emerging)             0.8%
                         0.9%
                         0.8%
                         0.8%
                         0.8%
                         1.5%
                         1.0%
                         2.5%
  Off-lease....          1.4%
                      ------
                       100.0%
                      ======
---------------

(1) Subleased to Citybird from Virgin Express.

(2) Subleased to Volare Airlines SpA from Air Europa.

(3) Subleased to Premiair from Airtours.

(4) Reno Air is a 100% subsidiary of American Airlines.

(5) A.I.L.L. is an indirect 100% subsidiary of Lan Chile.

(6) At September 24, 2001, the off-lease aircraft was subject to a letter of
    intent for lease.

                                        26
30

THE LEASES

  General

     All leases are managed by a subsidiary of debis under the servicing
agreement.

     The leases are all operating leases under which AerCo generally retains the
benefit, and bears the risk, of the residual value of the aircraft at the end of
the lease. The lessees have agreed to lease the aircraft for a fixed term.
However, AerCo has granted purchase, extension or early termination options on
certain aircraft to the lessee or an affiliate of the lessee. Although the lease
documentation is fairly standardized in many respects, significant variations do
exist as a result of lessee negotiation.

  Lease Payments and Security

     Each lease requires the lessee to pay periodic rentals during the lease
term. Certain of the leases require the lessee to pay periodic amounts as
maintenance reserves or to provide maintenance letters of credit or guarantees.

     The lessees must make payments to the lessor without set-off or
counterclaim, and must gross-up payments under the lease where payments are
subject to certain withholding and other taxes. However, in certain cases, such
payments will be limited to the amount that would have been payable had the
lease not been transferred from debis AirFinance to AerCo. The leases generally
contain indemnification of the lessor for certain taxation liabilities and
taxation of indemnity payments. Indemnification for taxation liabilities
typically includes value added and stamp duty taxes, but excludes income taxes
or their equivalent. The lessees must also pay default interest on any overdue
amounts.

     The lessees are liable through various operational indemnities for
operating expenses accrued or payable during the term of the lease. These
expenses include maintenance, operating, overhaul, airport and navigation
charges, certain taxes, licenses, consents and approvals, aircraft registration
and hull and liability insurance premiums. The lessees must remove liens on the
aircraft other than liens permitted under the leases.

     Under 53 of the leases, the lessee has provided security for its
obligations. Lessees have provided cash security deposits in the case of 31
leases, or 53.0% of the leases by appraised value at February 19, 2001.

     Lessees have provided letters of credit in the case of 25 leases
representing 39.45% of the leases by appraised value at February 19, 2001.
Lessees provided a combination of cash security deposits and letters of credit
in the case of six leases or 10.05% of the leases by appraised value at February
19, 2001.

     Under 14 of the leases, the lessor received general guarantees from third
parties for the lessee's payment obligations under the lease. In some cases, the
lessor also received guarantees of the lessee's performance obligations under
the lease. In the case of 11 of the leases, these guarantees were issued by the
lessee's shareholder or affiliate. In the case of the leases to Xiamen Airlines
and China Xinjiang, a guarantee for each lessee's payment obligations was issued
by the Bank of China. In each case, the guarantee was subject to a stipulated
maximum amount.

  Rentals

     Rentals under 52 of the leases, representing 84.35% of the leases by
appraised value at February 19, 2001, are payable monthly in advance. Rentals
under six of the leases, representing 9.38% of the leases by appraised value at
February 19, 2001, are payable quarterly or semi-annually in advance. Rentals
under the remaining two leases are payable monthly in arrears.

     Rental payments on the leases are calculated either on a fixed or floating
rate basis. The rental payment of a lease that is calculated on a floating rate
basis generally has a rental floor that is payable even if LIBOR is 0% per annum
plus an amount which varies with LIBOR or varies itself. The rental floor varies
from lease to lease. Lessees increasingly wish to negotiate fixed rate leases.

     The rentals under one lease, a B767-300ER aircraft, are determined on the
basis of a charge per flight hour for every hour that the aircraft is flown by
the lessee, Air Canada. There is no minimum monthly rental under this lease and
there can be no certainty that this aircraft will generate any lease revenue
during the course of the

                                        27
31

Air Canada lease which expires in May 2003. In addition, the maximum monthly
rental which Air Canada may be obliged to pay is approximately two-thirds of the
monthly rental received from the previous lessee. These lease terms are
generally reflective of the market at present for B767-300ER aircraft
particularly those which are powered by Pratt and Whitney engines.

  Operation of the Aircraft

     The lessees must operate the aircraft in compliance with all applicable
laws and regulations. Generally, the aircraft must remain in the possession of
the lessees, and the lessor must approve any subleases of the aircraft. In some
cases, the lessees may enter into charter or "wet lease" arrangements with the
aircraft, as long as the lessees do not relinquish possession or operational
control of the aircraft. A wet lease is a lease with crew and services provided
by the lessor.

     Under certain leases, the lessees may enter into subleases to specified
operators without the lessor's consent, if certain conditions are met.

     The lessees may subject the engines and other equipment or components to
removal or replacement and to pooling arrangements with permitted entities
without the lessor's consent but subject to conditions and criteria in the
relevant lease. The lessees may deliver possession of the aircraft, engines and
other equipment or components to the manufacturer for testing or similar
purposes, or to a third party for service, maintenance, repair or other work
required or permitted under the lease.

  Maintenance and Maintenance Reserves

     The leases contain detailed provisions specifying maintenance standards and
aircraft redelivery conditions. Lessees must provide monthly maintenance
reserves under approximately half of the leases. Under the balance of the
leases, the lessee or the lessor may be required to make certain adjustment
payments to each other if the aircraft or specified items at redelivery do not
meet the standards. During the term of each lease, the lessee must ensure that
the aircraft is maintained in accordance with an agreed maintenance program
designed to ensure that the aircraft meets applicable airworthiness and other
regulatory requirements. Generally, the lessee performs the agreed maintenance
program. If the lessee has paid maintenance reserves, the payments are used to
reimburse the lessee for significant maintenance charges, including major
airframe and engine overhauls.

     If the leases do not provide for maintenance reserve payments, the lessor
must rely on the lessee's credit and its ability to perform scheduled
maintenance throughout the lease term, return the aircraft in the condition
required by the lease, or make any payments required upon termination of the
lease.

     Because many of our aircraft are approximately the same age and have
similar usage patterns, a large portion of the portfolio came due for major
airframe and engine overhauls in the period from July 1998 to March 2001. This
trend is expected to reverse over the two year period from March 2001 to March
2003. However, due to the size and uncertainty of the incidence of maintenance
expenditures, the level of maintenance receipts, the timing of overhauls and the
level of maintenance already done by the lessee, completing such maintenance
overhauls could significantly impact the cashflows of AerCo in any note payment
period.

  Lessees' Options

     At May 31, 2001 purchase options for two of the aircraft or 4.48% of the
aircraft by appraised value at February 19, 2001 have been granted to lessees
under the lease or a separate purchase option agreement.

     All of the purchase options are currently exercisable. The duration of some
purchase options depends on whether the lessee exercises a separate option to
extend the lease. There is a risk that the option purchase prices may be less
than the proportional portion of the unpaid principal of the notes allocable to
the aircraft being purchased.

     Twenty-six of the leases or 42.67% of the leases by appraised value at
February 19, 2001 include options for the lessee to extend the lease term. The
rent payable during the extension period varies from lease to lease. Three

                                        28
32

of the leases or 4.18% of the leases by appraised value at February 19, 2001,
contain provisions allowing early termination of the lease.

COMPLIANCE WITH GOVERNMENTAL AND TECHNICAL REGULATION

     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. AerCo Group 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, AerCo Group 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 the 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. Chapters 2 and 3 of the
Chicago Convention establish two progressively restrictive noise level standards
that correspond to the requirements for Stage 2 and 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. Such regulations restrict the future operation of aircraft
that are not Stage 3 aircraft and are expected imminently to prohibit the
operation of such aircraft in the relevant jurisdictions. In the United States
such a prohibition went into effect at the end of 1999. Since AerCo Group has
the ability to acquire Stage 2 aircraft, these regulations may affect AerCo
adversely. 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 AerCo Group, 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 traffic collision avoidance systems,
automatic emergency locator transmitters and certain other systems. Depending on
whether the costs of complying with these regulations are borne by AerCo or the
lessees, installation of these systems could result in significant cash
expenditures by AerCo in the future.

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

     The U.S. Federal Aviation Administration has 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. AerCo has eight MD-80 series
aircraft representing 10% of our portfolio by appraised value at February 19,
2001. AerCo will incur significant costs in ensuring these aircraft comply with
these standards. We expect to complete the modification of three of the eight
aircraft by April 2002 at an estimated cost of approximately $1.7 million and to
modify the remaining five aircraft by April 2006 at an estimated cost of
approximately $2.1 million after lessee contributions.

                                        29
33

     The U.S. Federal Aviation Administration is expected to issue an AD by the
end of 2001 mandating the modification of affected lapjoints on Boeing 737
aircraft when the aircraft has completed 50,000 cycles. The estimated labor cost
to implement such modifications for each aircraft is approximately $230,000 per
aircraft. We have 31 Boeing 737 aircraft in our portfolio, representing 47% of
the portfolio by appraised value at February 19, 2001. 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 2008. However, AerCo could
incur significant costs in ensuring its Boeing 737 aircraft comply with these
standards, which could impact adversely on AerCo's results of operations

     The U.S. Federal Aviation Administration is also expected to issue an AD in
the near future mandating a re-design of the rudder systems of Boeing 737
aircraft. The average cost per aircraft of such modifications is expected to be
approximately $50,000. We have 31 Boeing 737 aircraft in our portfolio,
representing 47% of the portfolio by appraised value at February 19, 2001.
Depending on the time period within which such modifications are required to be
made, the costs may be the responsibility of existing lessees. However, if the
costs are not the responsibility of some or all existing lessees, AerCo could
incur significant costs in ensuring its Boeing 737 aircraft comply with such
modifications, which could impact adversely on AerCo's results of operations.

INDEMNIFICATION AND INSURANCE OF THE AIRCRAFT

  General

     The lessees will bear responsibility through an operational indemnity to
carry insurance for any liabilities arising out of the operation of the
aircraft. The indemnity includes liabilities for death or injury to persons and
damage to property that ordinarily would attach to the operator of the aircraft.
In addition, the lessees are required to carry further liability insurance that
is customary in the air transportation industry. The servicer monitors the
lessee's compliance with the insurance provisions of the leases. AerCo also has
its own contingent liability coverage. This will cover a liability that is in
excess of the coverage provided by a lessee's policy and where a lessee's policy
lapses. AerCo's contingent third party liability insurance will cover all of the
aircraft, and its contingent hull and war risk insurance covers certain of the
aircraft. The amount of the contingent liability policies may not be the same as
required under the lease. The amount of third party contingent liability
insurance is subject to certain limitations imposed by the air transportation
insurance industry.

     All insurance certificates contain a breach of warranty endorsement so that
an additional insured party remains protected even if the lessee violates any of
the terms, conditions or warranties of the insurance policies, provided that the
additional insured party has not caused, contributed to or knowingly condoned
the breach.

     As a consequence of the terrorist attacks in the United States on 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. In the absence of satisfactory solutions on this
matter, 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 cash flow which would adversely affect our ability to
make payments on the notes.

  Liability Insurance

     The lessees are required to have third party liability insurance for a
combined single limit in minimum amounts ranging between $350.0 million and
$850.0 million, depending on aircraft type, for each aircraft. In general,
liability coverage on each aircraft includes third party legal liability,
property damage legal liability, passenger legal liability, baggage legal
liability, cargo legal liability, mail and aviation general third party legal
liability.

     In some jurisdictions, liabilities for risks that the lessees insure may
attach to AerCo Group as owner of the aircraft regardless of whether AerCo Group
is in any way responsible for the loss for which liability is asserted. In
addition, claimants may assert claims against AerCo Group on the basis of
alleged responsibility for a loss, even if the claim is not sustained. Under the
leases, the lessees are obligated to indemnify the lessor against claims.
Covered claims include the costs of defending claims by third parties against
them for liabilities while the aircraft are owned by AerCo Group and under lease
to the lessees.

                                        30
34

     The indemnified losses include both operating costs relating to the actual
operation of the aircraft as well as losses to persons and property resulting
from the operation of the aircraft. The latter types of losses are generally
covered by the lessee's liability insurances.

  Aircraft Property Insurance

     The lessees must carry other types of insurance that are customary in the
air transportation industry, including hull, war risk and spares insurance. The
value of the hull and war risk insurance is usually stipulated in the lease.
Spares insurance is usually on a replacement cost basis. Both types of insurance
are subject to customary deductibles. In addition to the stipulated loss value
coverage obtained by the lessees, AerCo Group purchases declining "total loss
only" coverage with respect to certain aircraft. As of May 31, 2001, the sum of
the stipulated loss value and the additional coverage for the aircraft in place
for hull and war risk insurance was at least 105% of the appraised value of each
aircraft. On average, the sum of such coverages in place for each aircraft was
approximately 140% of the appraised value of each aircraft. In many cases, the
lessor can increase the insured value above the stipulated loss value consistent
with industry practice with the lessee paying any increased premium. Permitted
deductibles range from $250,000 to $1,000,000; however, the deductible generally
applies only in the case of a partial loss.

     The leases include provisions defining an event of loss or a casualty
occurrence so that where a total loss of the airframe occurs, with or without
loss of the engines installed on the airframe, the agreed value is payable by
the lessee. This payment is generally funded by insurance proceeds. However, the
air transportation insurance industry practice is to treat only a loss of
greater than 75% of the value of the aircraft, including the engines, as a total
loss. If insurance proceeds following a total loss exceed the amount due from
the lessee then most leases require the lessor to pay to the lessee the balance
of the insurance proceeds received under the hull or war risk policy after
deduction of all amounts payable by the lessee to the lessor under the lease.

  Political Risk Repossession Insurance

     Under certain leases, the lessor may arrange separate political risk
repossession insurance for its own benefit, covering confiscation,
nationalization and requisition of title of any aircraft by the government of
the country of registry and denegation and deprivation of legal title and
rights. The political risk repossession insurance also covers the failure of the
authorities in that country to allow de-registration and export of the aircraft,
subject to the conditions of the policies.

THE LESSEES

     As of May 31, 2001, our aircraft were leased to 33 lessees in 19 countries
throughout the world, with one aircraft off-lease which, at September 24, 2001,
was subject to a letter of intent for lease. On September 11, 2001, the United
States was the subject of attacks by terrorists who used the hijacked aircraft
of certain airlines. The full effect that these terrorist attacks may have for
the aviation industry is not yet known. However, they are likely to have a
material adverse impact on the financial condition of our lessees and their
ability to perform under their leases. They may also lead to reduced demand for
our aircraft. These effects could cause a reduction in our cash flow in which
event we may be unable to make payments on the notes. See "Item 3 D. Risk
Factors -- Recent Developments."

  Regional Concentrations

     Asia Concentration.  At May 31, 2001, 20.12% of the aircraft by appraised
value at February 19, 2001 were leased by operators in "emerging" markets in the
Asia Pacific region, including China, the Philippines, South Korea, Taiwan and
India. One lessee, Asiana, leased 4.93% of the aircraft by appraised value at
February 19, 2001.

     Trading conditions in Asia's civil aviation industry were adversely
affected by the severe economic and financial difficulties experienced in the
region in 1998 and 1999. The economies of the region experienced acute
difficulties resulting in many business failures, significant depreciation of
local currencies against the dollar, downgrading of sovereign and corporate
credit ratings and internationally organized financial stability measures.
                                        31
35

Since 1999, there has been some stabilization and recovery in the economies of
this region. One Asian lessee, PAL, which leases 4.51% of the aircraft by
appraised value at February 19, 2001 was adversely affected by the Asian
economic crisis such that it sought bankruptcy protection in 1998. As part of
its rehabilitation plan, certain of PAL's outstanding lease obligations were
rescheduled in 1999. Several other airlines in the region rescheduled their
aircraft purchase obligations, eliminated certain routes and reduced the number
of employees. A repeat of this downturn in the region's economies, including as
a consequence of the terrorist attacks in the United States on September 11,
2001, may further undermine business confidence, reduce demand for air travel
and adversely affect the Asian lessees' operations and their ability to meet
their obligations.

     Latin American Concentration.  At May 31, 2001, 10.48% of the aircraft by
appraised value at February 19, 2001 were leased by operators in emerging
markets in Latin America, principally Brazil, Chile and Colombia. The financial
prospects for lessees in Latin America depends on the level of political
stability and economic activity and policies in the region. Developments in the
United States, Europe and/or other emerging markets may also affect the
economies of Latin American countries and the entire region.

     Most significantly, in 1999 Brazil experienced significant downturns in its
economy and financial markets, with large decreases in financial asset prices
and dramatic decreases in the value of its currency. One of the lessees, TAM,
representing 4.06% of the aircraft by appraised value at February 19, 2001,
operates five of the aircraft in Brazil. Continued weakness in the value of the
Brazilian real, as well as any future general deterioration in the Brazilian
economy means that this lessee may be unable to generate sufficient revenues in
Brazilian currency to pay the dollar denominated rental payments under the
leases. More importantly, financial and economic problems in Brazil could spread
throughout Latin America and other "emerging" economies, having a similar effect
on many of AerCo Group's other lessees in this region.

     Colombia has recently suffered economically as a result of the
deterioration in the value of the Colombian Peso and the resulting negative
impact on the Colombian economy. AerCo Group leases one aircraft, representing
2.51% of the portfolio by appraised value at February 19, 2001, to a Colombian
lessee. Continued weakness in the value of the Colombian Peso, as well as
general deterioration in the Colombian economy, will mean that this lessee may
be unable to generate sufficient revenues in the Colombian currency to pay the
U.S. dollar denominated rental payments under the lease. See "-- Payment
History" for further information on this lessee.

     European Concentration.  At May 31, 2001, 53.00% of the aircraft by
appraised value at February 19, 2001 were leased by operators based in Europe.
Lessees of 44.66% of the aircraft are based in developed European markets,
principally the United Kingdom and Spain. Lessees of the remaining 8.13% of the
aircraft were based in emerging European markets, principally Turkey. One
lessee, Spanair, leased 7.38% of the aircraft by appraised value at February 19,
2001. As of May 31, 2001, 16.03% of the aircraft by appraised value at February
19, 2001 were leased to charter operators in the tourism industry, principally
in the United Kingdom.

     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 fuel prices and/or a weak euro,
may adversely affect the European lessees' ability to meet their financial and
other obligations. Most European currencies in which European airlines primarily
receive their revenues have fallen in value in the last number of months when
measured against the United States dollar adversely affecting the ability of
those airlines to meet dollar denominated lease rental and other operating
costs. 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.

     At May 31, 2001, 4.95% of the aircraft by appraised value at February 19,
2001 were on lease to Turkish lessees. Turkey was hit by a series of severe
earthquakes in 1999 and damage caused by the earthquakes and the consequent fall
off in tourist traffic adversely affected the ability of these airlines to
operate and meet their financial obligations under the leases. In addition, the
fall in value of the Deutsche Mark relative to the U.S. dollar, the principal
currency in which Turkish airlines receive their revenues, may affect these
airlines' ability to pay U.S. dollar denominated costs including lease rentals.
                                        32
36

     North American Concentration.  At May 31, 2001, 14.97% of the aircraft by
appraised value at February 19, 2001 were leased by operators 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 U.S. airlines have ceased operations. On September 11, 2001, the
United States was the subject of attacks by terrorists who used the hijacked
aircraft of certain airlines. The full effect that these terrorist attacks may
have for the aviation industry in the United States is not yet known. For a more
detailed analysis of possible consequences, see Item 3.D. "Risk Factors."

     Tower Air, the previous lessee of one Boeing 747-200B aircraft, filed for
Chapter 11 bankruptcy protection on February 29, 2000. The relevant U.S.
bankruptcy court issued an order terminating the lease on January 23, 2001. On
February 27, 2001, AerCo executed a sale agreement in respect of three engines
attached to the B747-200B aircraft for a sales price of $4.3 million. The three
engines have been sold as of September 24, 2001. The airframe has been
dismantled and is expected to be sold as spares over the next two years.

  Payment History

     Weakly capitalized airlines are more likely than well capitalized airlines
to seek operating leases. Therefore, many of the lessees are in a relatively
weak financial position and several of them have faced and continue to face
severe economic difficulties.

     As of May 31, 2001, amounts outstanding for more than 30 days for rental
payments, maintenance reserves and other amounts due under the leases equaled
$4.4 million for three lessees who had a total of four aircraft on lease. The
outstanding amounts are net of agreed deferrals or other restructurings, default
interest and cash in transit.

     As of May 31, 2001, a Colombian lessee representing 2.51% of the portfolio
by appraised value at February 19, 2001 owed $2.8 million, $2.7 million of which
was in arrears for more than 30 days. See "-- Latin American Concentration." The
servicer agreed not to exercise its remedies in respect of events of default
existing under the lease in order to permit the Colombian lessee to have a
stable business environment in which to develop, negotiate and commence
implementing a long-term business plan. During the period to May 31, 2001, we
received approximately 61% of amounts due under the lease in cash with the
remainder provided by way of secured and unsecured notes issued by the lessee.
The Colombian lessee's other aircraft lessors and major creditors agreed similar
forbearance arrangements. On June 19, 2001, the servicer signed a restructuring
agreement with the lessee which agreement was conditional on the fulfillment of
certain conditions precedent which were met as of July 11, 2001. The secured
notes have been paid in full as at the date of this filing. Under the terms of
the restructuring agreement, assuming satisfaction of all conditions subsequent,
payments of the unsecured notes are to be made over a seven-year period. In
addition, the lessee has agreed to extend the lease term by 66 months. However,
the monthly lease rental in respect of the aircraft will be reduced by
approximately 19%. The continued effectiveness of the restructuring agreement is
conditional on the completion of certain undertakings by the lessee's parent,
including the assumption by the parent of certain significant obligations of the
lessee. The servicer is actively monitoring the status, and likelihood, of
completion of these undertakings. In the absence of completion of these
undertakings, AerCo will have to consider all of its options in respect of its
aircraft, which would include early return of the aircraft.

     On January 10, 2001, TWA, one of our former lessees, filed for Chapter 11
bankruptcy protection in the U.S. TWA had leased one aircraft from AerCo Group.
Under these circumstances, AerCo became entitled to call on a rental support
agreement with a third party. Under the terms of this rental support agreement,
the third party had an option to purchase the aircraft from AerCo which it
elected to do on April 9, 2001 at its option price of $46.2 million.

     As of May 31, 2001, an Italian lessee representing 3.49% of the portfolio
by appraised value at February 19, 2001 owed $1.4 million, which was in arrears
for more than 30 days. See "-- European Concentration." The servicer has signed
a restructuring agreement with the lessee regarding the repayment of arrears and
future lease rentals.
                                        33
37

     As of May 31, 2001, an Italian lessee representing 1.69% of the portfolio
by appraised value at February 19, 2001 owed $0.7 million, $0.3 million of which
was in arrears for more than 30 days. See "-- European Concentration." The
lessee subsequently paid these arrears in full.

     PAL, the lessee of two B737-300 and one B737-400 aircraft representing
4.51% of the portfolio by appraised value at February 19, 2001, was adversely
affected by the Asian economic crisis such that in 1998 it sought bankruptcy
protection. As part of PAL's rehabilitation plan, the servicer has agreed with
PAL to a schedule covering the payment of arrearages over the period to December
31, 2003 and the extension of leases. At May 31, 2001, these arrearages amounted
to $1.4 million. All amounts have been paid in accordance with the scheduled
terms as of May 31, 2001.

     During the year to March 31, 2001, one Spanish lessee, representing 7.38%
of the portfolio by appraised value at February 19, 2001, restructured its
payment obligations under its leases with AerCo Group. The lessee extended the
lease terms of its two MD-83s, one MD-82 and one B767-300ER aircraft leased from
AerCo Group by 12 months, 18 months, 18 months and 18 months, respectively in
return for a reduction in its monthly lease rental obligations during the
extension period of 17% on the two MD-83s, 31% on the MD-82s and 34% on the
B767-300ER aircraft.

     AerCo expects to respond to the needs of lessees in financial difficulty
including restructuring the applicable leases or agreeing to rent deferrals. The
restructurings will typically involve the rescheduling of rental payments for a
specified period. In addition, certain restructurings may involve the voluntary
early termination of a lease, the replacement of aircraft with less expensive
aircraft and the arrangement of sub-leases from the lessee to another aircraft
operator. In certain cases, it may be necessary to repossess aircraft from
defaulting lessees and re-lease the aircraft to other lessees. The early
termination of leases may lead AerCo to incur swap breakage costs under its
agreements with swap providers which could be substantial. You should refer to
"Item 5. Operating and Financial Review and Prospects -- Interest Rate Risk and
Management" for additional information on swap breakage costs.

     Certain lessees have experienced periodic difficulties in meeting their
maintenance obligations under the leases. Such difficulties are caused by the
failure of the lessee to have in place a well established maintenance program,
adverse climate and other environmental conditions in the locations where the
aircraft are operated or financial and labor difficulties experienced by the
relevant lessee.

  Downtime

     There can be no assurance that AerCo's experience and debis Ireland's
experience will be indicative of AerCo Group's ability to keep the aircraft
on-lease in the future. AerCo Group may be unable to re-lease aircraft upon the
expiration of leases as a result of a deterioration in industry conditions,
decreased demand for specific types of aircraft or other factors.

     The table below shows the number and type of aircraft that we must re-lease
through December 31, 2005. The table assumes that no lease will terminate early
and that there are no sales of aircraft or purchases of additional aircraft. The
expiry date of the leases on two of the aircraft referred to in the table below
(scheduled to expire in 2001) is determined by reference to the timing of
certain maintenance events on these aircraft. More aircraft may need to be
re-leased if aircraft become available through early lease terminations or if
new leases or re-leases are for relatively short terms.

                                        34
38

            AERCO GROUP LEASE PLACEMENT REQUIREMENTS AT MAY 31, 2001
TO DECEMBER 31,
                                                        ------------------------------------
AIRCRAFT TYPE                                           2001    2002    2003    2004    2005
-------------                                           ----    ----    ----    ----    ----
A300..................................................    --      --       1      --      --
A320..................................................    --       2       2       2      --
B737..................................................     3       2       4      10      10
B757..................................................    --       1       1       1      --
B747..................................................    --      --      --      --      --
B767..................................................    --       1       1      --      --
DC8...................................................    --      --       2      --      --
MD80..................................................     2       1      --       1       3
Total.................................................     5       7      11      14      13
Description of the Lessees

     The table below lists certain available information with respect to the
country of domicile, government, airline or principal shareholders, operating
fleet size and composition and the first year of operation of each lessee. See
"Portfolio Information" above for additional tables detailing the exposure of
the portfolio as a percentage of appraised value at February 19, 2001 to each
lessee and the countries and geographic regions in which the lessees are
domiciled.
BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
AILL                 Bahamas                1998      Lan Chile (100%)                                        See Lan Chile

Air Canada           Canada                 1937      Institutions (70%)                                        36 A319-100
                                                      Retail (19%)                                              46 A320-200
                                                      Employees (11%)                                            8 A330-300
                                                                                                                12 A340-300
                                                                                                                17 DC9-32HK
                                                                                                                2 B737-200A
                                                                                                             34 B737-200AHK
                                                                                                             3 B737-200CAHK
                                                                                                                 4 B747-400
                                                                                                            3 B747-400Combi
                                                                                                                 7 B767-200
                                                                                                               7 B767-200EM
                                                                                                               7 B767-200ER
                                                                                                              30 B767-300ER
                                                                                                               25 CRJ-100ER

Airtours             United Kingdom         1990      Airtours Group (100%)                                     11 A320-200
                                                                                                                 4 A321-200
                                                                                                                 4 A330-200
                                                                                                                  3 DC-1010
                                                                                                                 6 B757-200
                                                                                                               3 B767-300ER

Air 2000             United Kingdom         1986      First Choice Holidays plc (100%)                           6 A320-200
                                                                                                                 6 A321-200
                                                                                                                16 B757-200
                                                                                                               4 B767-300ER
35
39
BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
American Airlines    United States          1934      AMR Corp. (100%)                                         35 A300-600R
                                                                                                             58 B727-200AHK
                                                                                                                 1 B737-300
                                                                                                                69 B737-800
                                                                                                               108 B757-200
                                                                                                                 8 B767-200
                                                                                                              22 B767-200ER
                                                                                                              49 B767-300ER
                                                                                                              36 B777-200ER
                                                                                                                    75 F100
                                                                                                                    6 MD-11
                                                                                                                  229 MD-82
                                                                                                                   40 MD-83
                                                                                                                    3 MD-87

Asiana               South Korea            1988      Kumho Group (47.1%)                                        2 A321-100
                                                      Unspecified Investors (43.9%)                              5 A321-200
                                                      Korean Development Bank (7.2%)                            22 B737-400
                                                      Korea Exchange Bank (1.2%)                                 3 B737-500
                                                      Cho-Hueng Bank (0.6%)                                      3 B747-400
                                                                                                            5 B747-400Combi
                                                                                                                4 B747-400F
                                                                                                                 9 B767-300
                                                                                                               3 B767-300ER
                                                                                                              1 B767-300ERF
                                                                                                               2 B777-200ER

Avianca              Colombia               1919      Grupo Valores Bavaria (62.5%)                              3 B757-200
                                                      Unspecified Investors (37.5%)                            4 B767-200ER
                                                                                                               2 B767-300ER
                                                                                                                 5 F50 High
                                                                                                                Performance
                                                                                                                   13 MD-83

                     United States          1972      Burlington Northern Air Freight (a subsidiary           3 B727-200FHK
BAX Global                                            of
                                                      Pittston Burlington Group) (100%)                      3 B727-200AFHK
                                                                                                                11 DC-8-71F

                     Italy                  1998      Antonio De Ponti, Sandro Giulianelli and                   4 B737-400
Blue Panorama                                         Franco
                                                      Pecci (100%)

Braathens SAFE       Norway                 1946      KLM (30%)                                                  5 B737-400
                                                      Braganza (33.4%)                                          16 B737-500
                                                      Bramora (5.4%)                                            11 B737-700
                                                      Unspecified Investors (31.2%)
                                                      (Braganza and Bramora are Braathens holding
                                                      companies)

British Airways      United Kingdom         1974      Publicly Listed Company                                   26 A319-130
                                                                                                                 5 A320-110
                                                                                                                 5 A320-210
                                                                                                                12 B737-300
                                                                                                                34 B737-400
                                                                                                                10 B737-500
                                                                                                               10 B747-200B
                                                                                                          1 B747-200B Combi
                                                                                                                55 B747-400
                                                                                                                1 B747-400F
                                                                                                                38 B757-200
                                                                                                              21 B767-300ER
                                                                                                                 5 B777-200
                                                                                                              38 B777-200ER
36
40
BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
bmi british midland  United Kingdom         1938      Airlines of Britain plc (100%)                             8 A320-230
                                                      Airlines of Britain is owned by the BBW                   10 A321-230
                                                      partnership of Sir Michael Bishop, John                    2 A330-200
                                                      Wolfe, Stuart Balmforth (60%), Lufthansa (20%)             6 B737-300
                                                      and SAS (20%)                                              2 B737-400
                                                                                                                 8 B737-500
                                                                                                                     6 F100
                                                                                                                      3 F70

China Southern       People's Republic      1991      SA Group (62.5%)                                          20 A320-230
                     of China                         Unspecified Investors (37.5%)                             25 B737-300
                                                                                                                11 B737-500
                                                                                                                18 B757-200
                                                                                                                 4 B777-200
                                                                                                               5 B777-200ER

China Xinjiang       People's Republic      1985      CAAC (50%)                                                5 ATR72-500
                     of China                         Xinjiang Province (50%)                                    2 B737-300
                                                                                                                 8 B757-200
                                                                                                            3 IlyushinII-86
                                                                                                          5 Tupolev Tu-154M

Delta Airlines       United States          1928      Publicly Quoted                                              15 MD-11
                                                      Swissair (4.6%)                                             120 MD-88
                                                                                                                16 MD-90-30
                                                                                                             73 B727-200AHK
                                                                                                                23 B737-300
                                                                                                             54 B737-200AHK
                                                                                                                50 B737-800
                                                                                                               121 B757-200
                                                                                                                15 B767-200
                                                                                                                28 B767-300
                                                                                                              58 B767-300ER
                                                                                                              17 B767-400ER
                                                                                                               7 B777-200ER
                                                                                                               1 L-1011-250

Europe Airpost       France                 1986      Sofipost (100%)                                        3 A300-B4-100F
                                                                                                              15 B737-300QC
                                                                                                                2 B737-300F
                                                                                                             1 B737-200QCHK

FEAT                 Taiwan                 1957      Unspecified Investors (67.05%)                                4 MD-82
                                                      China Development Corp (14%)                                  5 MD-83
                                                      China Airlines (10%)                                       7 B757-200
                                                      Taiwan Aerospace Corporation (4.95%)
                                                      Fubon Insurance (4%)

Finnair              Finland                1923      Government Owned (58.4%)                                  9 ATR72-200
                                                      Smaller Investors and other companies (20.3%)              4 A319-110
                                                      Odin Forvaltning (9.9%)                                    2 A320-210
                                                      Ilmarinen Pension Insurance Company (2.9%)                 4 A321-210
                                                      Local government pension companies (2.6%)                   9 DC-9-51
                                                      Tapiola Group (2.2%)                                      1 DC-9-51HK
                                                      Sampo Group (1.6%)                                            4 MD-11
                                                      Pohjola Life Assurance (1.1%)                                 9 MD-82
                                                      Suomi Mutual Life Assurance (1%)                             12 MD-83
                                                                                                                 4 B757-200

Frontier             United States          1994      Unspecified Investors (49%)                                2 A319-100
                                                      DDJ Capital Management (33%)                              17 B737-300
                                                      Wexford Management (10%)                                7 B737-200AHK
                                                      WR Hambrecht & Co (8%)
37
41
BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
Indian Airlines      India                  1953      Government of India (100%)                        3 Fairchild/Dornier
                                                                                                                    228-200
                                                                                                              6 A300-B2-100
                                                                                                              7 A300-B4-200
                                                                                                                32 A320-200

JMC Airlines         United Kingdom         1999      Thomas Cook (100%)                                        10 A320-200
                                                                                                                14 B757-200
                                                                                                                 2 B757-300
                                                                                                                  1 DC10-30

Lan Chile            Chile                  1929      Grupo Cueto (38.5%)                                        6 A320-200
                                                      Grupo Pifiera (33.1%)                                      2 A340-300
                                                      Grupo Eblen (8.1%)                                       14 B737-200A
                                                      Unspecified Investors (20.3%)                           12 B767-300ER
                                                                                                              4 B767-300ERF

Malev                Hungary                1946      Government (97%)                                           6 B737-300
                                                      Municipalities, Private Entities,                          6 B737-400
                                                      Organisations and employees (3%)                           2 B737-500
                                                                                                               2 B767-200ER
                                                                                                               1 B767-300ER
                                                                                                                      6 F70

Monarch              United Kingdom         1967      Cosmos Guide Holding                                      4 A300-600R
                                                      International NV (100%)                                    5 A320-200
                                                                                                                 7 B757-200
                                                                                                                  1 DC10-30
                                                                                                                 4 A321-230
                                                                                                                 2 A330-240

Nordeste             Brazil                 1976      Rio Sul Servicos Aereos Regionals (99%)                    4 B737-500
                                                      Unspecified Investors (1%)                                  1 EMB-120
                                                                                                                2 EMB-120ER
                                                                                                                      5 F50

PAL                  Philippines            1941      L T Group (57.7%)                                          3 A320-210
                                                      Top Wealth Enterprises, Maxell Holdings and                8 A330-300
                                                      Richmark Holdings (35.1%)                                  4 A340-310
                                                      Philippine Government (4.3%)                               6 B737-300
                                                      Airline Employees (2.6%)                                   3 B737-400
                                                      Unspecified Investors (0.3%)                               3 B747-400
                                                                                                           1 B747-400 Combi
                                                                                                                3 B747-200B

Pegasus              Turkey                 1990      Yapi Kredit Bank (49%)                                     2 A320-200
                                                      Alper Elchin (21%)                                         4 B737-400
                                                      Silkar and Net Holdings (30%)                              8 B737-800

                     United States          1990      American Airlines (100%)                                 See American
Reno Air                                                                                                           Airlines

Spanair              Spain                  1986      Tour operator Viajes Marsans (51%)                         3 A320-200
                                                      SAS Leisure AB (Vingresor) (49%)                           3 A321-200
                                                                                                                    5 MD-82
                                                                                                             6 MD-82 (SAIC)
                                                                                                                   20 MD-83
                                                                                                                    3 MD-87
                                                                                                               3 B767-300ER
38
42
BEGAN                 GOVERNMENT/COMMERCIAL
LESSEE                    DOMICILE        OPERATION           AIRLINE/PRINCIPAL SHAREHOLDERS                  FLEET
------               ------------------   ---------   ----------------------------------------------   --------------------
Brazil                 1986      Taxi Aereo Marilia (owned by the estate of the             6 A319-130
TAM                                                   late
                                                      Captain Rolim Amaro) (100%)                               15 A320-230
                                                                                                                 7 A330-200
                                                                                                                    49 F100
                                                                                                                      2 F50
                                                                                                        3 Cessna Citation V
                                                                                                       1 Cessna CitationJet

THY                  Turkey                 1933      Government of Turkey (98.17%)                              7 A310-300
                                                      Unspecified Investors (1.83%)                              7 A340-310
                                                                                                                    9 RJ100
                                                                                                                     3 RJ70
                                                                                                               1 B727-200FA
                                                                                                                15 B737-400
                                                                                                                 2 B737-500
                                                                                                                24 B737-800

Varig                Brazil                 1927      Ruben Berta Foundation (of employees and                  3 DC-10-30F
                                                      executives) (55.63%)                                        3 MD-11ER
                                                      Rio Grande do Sul State Government (0.43%)                   13 MD-11
                                                      Unspecified Investors (43.94%)                            1 B727-100C
                                                                                                                2 B727-100F
                                                                                                               2 B727-100QC
                                                                                                               2 B727-200FA
                                                                                                                34 B737-300
                                                                                                                 4 B737-400
                                                                                                               13 B737-200A
                                                                                                                 5 B737-700
                                                                                                               6 B767-200ER
                                                                                                               6 B767-300ER

Virgin Express       Belgium                1991      Virgin Group (59%)                                         9 B737-300
                                                      Unspecified Investors (41%)                                2 B737-400

Volare Airlines Spa  Italy                  1997      Volare Group (100%)                                       11 A320-200
                                                                                                                 1 A321-200
Xiamen Airlines      People's Republic      1984      China Southern (60%)                                       4 B737-300
                     of China                         Fujian Investment and Enterprise                           4 B737-500
                                                      Corporation (20%)                                         2 B737-200A
                                                      Xiamen Province (20%)                                      5 B737-700
                                                                                                                 5 B757-200
---------------
Source: Airclaims Limited CASE Database, July 13, 2001.

                                        39
43

C. ORGANIZATIONAL STRUCTURE

AERCO STRUCTURE AND PAYMENT FLOWS

     The following diagram illustrates the AerCo organizational structure and
the nature of payment flows:

                                    [Chart]

     - AerCo and its aircraft owning subsidiaries are owners of the aircraft
       that form the portfolio.

     - AerCo owns 100% of the equity in each of its aircraft owning
       subsidiaries.

     - The security trustee has a security interest in the leases, including all
       rental payments as well as a security interest in the equity of each of
       the aircraft owning subsidiaries.

     - The indenture contains a negative pledge covenant that prohibits AerCo
       and its aircraft owning subsidiaries from granting a security interest in
       the aircraft, the leases or the equity in the aircraft owning
       subsidiaries to any third party.

     - AerCo is owned 95% by AerCo Holding Trust, a Jersey charitable trust, and
       5% by debis Ireland. debis Ireland also holds 100% of the subclass E-1
       notes and 100% of the subclass D-2 and subclass E-2 notes.

                                        40
44

D. PROPERTY, PLANTS AND EQUIPMENT

     AerCo Group has no ownership or leasehold interest in any real property.
AerCo's registered and principal office is located at 22 Grenville Street, St.
Helier, Jersey JE4 8PX, Channel Islands. For a description of AerCo Group's
interest in other property, see "-- Business Overview -- Portfolio Information."

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The review of operating results set forth below is based on the aircraft
owned by AerCo Group at March 31, 2001 and March 31, 2000 and therefore is
limited to a discussion of historical financial data with respect to those
aircraft and the related leases from their date of acquisition. You should note,
however, that because the following discussion only covers historical data from
July 17, 2000 in respect of the additional aircraft which AerCo Group acquired
from debis Ireland on July 17, 2000, it will not be indicative of an analysis of
the consolidated financial results of AerCo in future periods.

A. OPERATING RESULTS

GENERAL

     AerCo was incorporated on June 4, 1998. However, it did not conduct any
business operations until it acquired its initial aircraft portfolio and issued
notes on July 15, 1998. On that date AerCo purchased all of the outstanding
capital stock of ALPS 94-1 and also purchased all of the capital stock of the
debis transferred companies from debis Ireland. The debis transferred companies
owned 10 aircraft at July 15, 1998.

     On July 17, 2000 AerCo acquired 30 additional aircraft and related leases
from debis Ireland and refinanced its existing subclass A-1 and D-1 notes. The
acquisition of the additional aircraft from debis was achieved through the
purchase of the capital stock of 18 100% owned subsidiaries of debis. AerCo
financed the acquisition of the additional aircraft from debis and refinanced
its subclass A-1 and D-1 notes through the issue of $960 million of new public
notes and the issue of new D-2 notes and E-2 notes which were acquired by debis.

     The following discussion of AerCo's results of operations for 2001 compared
to 2000 is based on the audited results of AerCo for the years ended March 31,
2001 and 2000.

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2001 COMPARED WITH YEAR ENDED
MARCH 31, 2000

  Overview

     AerCo Group's results for the year ended March 31, 2001 reflected a
continuation of difficult trading conditions for some of its lessees, along with
an unfavorable market for some of its aircraft, in particular widebody aircraft,
with a corresponding negative impact on aircraft values and lease rates and
increased levels of aircraft downtime. (For recent developments, see "Item 3. D.
Risk Factors -- Recent Developments" and "Item 5. D. Trend Information.") In
addition, AerCo's results for the year were adversely affected by financial
difficulties experienced by two North American lessees. On February 29, 2000,
one of the lessees, Tower Air filed for Chapter 11 bankruptcy protection in the
US in its attempts to restructure its operations. On January 23, 2001, the
relevant US bankruptcy court granted an order terminating the lease with Tower
Air. The second lessee, TWA, filed for Chapter 11 bankruptcy protection on
January 10, 2001 and reached agreement with American Airlines in March 2001 for
the sale of its business. As a result, an aircraft purchase option relating to
the aircraft leased by AerCo to TWA was exercised by a third party under the
terms of a rental support agreement which became effective on the filing by TWA
for Chapter 11 bankruptcy protection. See "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."
During the year, one Colombian lessee continued to experience difficulties in
meeting its contracted rental and other payments. See "Item 4. Information on
the Company -- Business Overview -- The Lessees -- Latin American
Concentration." Further slowdown in economic growth may result in AerCo Group
increasingly having to address the problems of lessees in financial difficulty
with lease reschedulings, rent deferrals and other restructuring arrangements.
In these circumstances, AerCo's ability to pay interest on, and repay principal
of, the notes may be adversely affected.

                                        41
45

  Revenues

     Revenues for AerCo Group in the year ended March 31, 2001 were $164.9
million, including revenue earned for an eight and one-half month period on
aircraft acquired on July 17, 2000 of $62.1 million, compared with $109.1
million in the year ended March 31, 2000. The decrease in lease revenues
(excluding the acquired aircraft) in the year ended March 31, 2001 is primarily
attributable to downtime incurred in the current year on lease expiries and also
a softening in lease rates achieved for operating lease rentals in the year.
Rentals from European and Asia Pacific carriers represented 51.3%
(2000 -- 48.5%) and 19.4% (2000 -- 23.5%), respectively, of AerCo's leasing
revenues in the year ended March 31, 2001. One lessee (Spanair) accounted for 9%
of AerCo's leasing revenues in the year ended March 31, 2001. The same lessee
accounted for 11% of AerCo's leasing revenues in the year ended March 31, 2000.
At March 31, 2001, AerCo had one aircraft off-lease and one aircraft held for
scrap. AerCo had no aircraft off-lease at March 31, 2000.

     Rental rates on 24 of the 32 new leases written by AerCo Group since July
1998, reflect the current softening in lease rates in the commercial aviation
market for operating lease rentals. These rates were on average 18% below the
previous lease rates for these aircraft. Rental rates on the remaining eight
leases written by AerCo Group in the period were on average 8% above previous
lease rates for these aircraft. AerCo Group entered into 10 new leases/lease
extensions (including three new leases/lease extensions on three of the aircraft
acquired in July 2000) in the year ended March 31, 2001 for the following
aircraft: two B737-300s (62 months and 54 months), three B737-400s (64 months,
36 months and 18 months), two MD 83's (18 months and 12 months), one MD 82 (18
months) and two B767-300ER's (30 months and 21 months). AerCo Group entered into
12 new leases/lease extensions in the year ended March 31, 2000 for the
following aircraft: one F100 (71 months), five B737-300s (65 months, 60 months,
12 months, 65 months and 36 months), two B737-400s (56 months and 48 months),
one B737-500 (42 months), two A320-200s (24 months and 36 months) and one
B767-300ER (1 month).

  Sale of Aircraft

     During the year ended March 31, 2001, one engine (from B747-200B MSN 22496)
was sold to IAI Bedek Aviation Group for a price of $1.4 million. The net book
value of this engine at the date of sale was $1.4 million. Sales proceeds of
$14.7 million from the sale of one aircraft, an F100 sold to an affiliate of
Portugalia, were received by AerCo Group in the year ended March 31, 2000. The
net book value of this aircraft at the date of sale was $15.6 million.

  Depreciation and Provision for Impairment in Aircraft Values

     The depreciation charge for AerCo Group for the year ended March 31, 2001
amounted to $69.1 million, including depreciation charged on aircraft acquired
during the year of $25.0 million, compared to $47.0 million for the year ended
March 31, 2000. The decrease in depreciation charged (excluding the acquired
aircraft) in the year ended March 31, 2001 is primarily due to a reduced
depreciation charge on the B747-200B aircraft in the current year as a result of
the impairment provision made on the aircraft in the year ended March 31, 2000.
AerCo Group has depreciated each aircraft at a rate calculated to write-off the
cost of the aircraft to its estimated residual value of generally 15% of its
initial appraised value, on a straight-line basis, over its estimated useful
economic life of 25 years from the date of manufacture.

     For the year ended March 31, 2001, the directors of AerCo determined to
make a provision of $3.8 million in respect of an impairment in the value of one
B757-200 aircraft in its fleet. The directors arrived at such determination
having consideration for a contract for the disposal of this aircraft entered
into prior to March 31, 2001, which was completed shortly after the year end.
For more information regarding this aircraft, you should refer to "Item 4.
Information on the Company -- Business Overview -- The Lessees -- North American
Concentration."

     For the year ended March 31, 2000, the directors of AerCo determined to
make a provision of $13.1 million in respect of an impairment in the value of
AerCo Group's one B747-200B aircraft. The directors arrived at such
determination based on the financial condition of the aircraft's lessee, the
physical condition of the aircraft and the unfavorable market conditions for
this aircraft type. The carrying value of this aircraft at March 31, 2000 was
                                        42
46

$5.4 million net of maintenance provisions of $3.6 million and an amount of $3.5
million provided in respect of one engine on this aircraft. For more information
regarding this aircraft, you should refer to "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."

  Net Interest Expense

     Net interest expense for AerCo amounted to $137.9 million in the year ended
March 31, 2001, including net interest expense of $55.1 million incurred on new
debt raised to acquire the 30 additional aircraft during the year, compared to
$78.8 million in the year ended March 31, 2000. The increase in net interest
expense for AerCo of $59.1 million in the year ended March 31, 2001 was
primarily due to a combination of the new debt raised to acquire the 30
additional aircraft and a higher interest rate environment in the year ended
March 31, 2001 compared to the year ended March 31, 2000. The average
indebtedness outstanding for AerCo during the year ended March 31, 2001 was
$1,406.0 million compared to $925.2 million for the year ended March 31, 2000.

     Under the terms of the AerCo subclass E-1 and E-2 notes, interest accrues
at a rate of 20% per annum payable monthly in arrears. Except for the class E
note primary interest amount, which is payable at the rate of 15% per annum
multiplied by the initial outstanding principal balance of the subclass E-1
notes on July 15, 1998 and by the outstanding principal balance of the subclass
E-2 notes issued under the July 17, 2000 refinancing, no interest is payable on
the subclass E-1 and E-2 notes until all of the interest, principal and premium,
if any, on the other notes have been repaid in full. The class E note primary
interest amount is paid on each payment date only to the extent that AerCo has
available collections sufficient to make such payment after paying or providing
for each of the items ranking prior to such payment in the order of priority.
Approximately $48.3 million was accrued during the year ended March 31, 2001 in
respect of unpaid interest on the subclass E-1 and E-2 notes compared with $23.9
million on the subclass E-1 notes during the year ended March 31, 2000. Cash
paid in respect of interest amounted to $95.6 million (including $6.9 million
paid to debis which AerCo earned on the aircraft purchase account) in the year
ended March 31, 2001 compared with net interest expense of $137.9 million and
cash paid in respect of interest amounted to $56.2 million in the year ended
March 31, 2000 compared with net interest expense of $78.8 million, principally
reflecting subclass E-1 and E-2 note interest accrued but not paid in each year.

     Net interest expense also includes expenses incurred under AerCo's interest
rate swaps. AerCo has entered into interest rate swaps in order to correlate its
contracted fixed and floating rate rental payments to the fixed and floating
rate interest payments on the notes, resulting in a charge of $3.6 million ($3.1
million relating to the early termination of the TWA B757-200 lease) in the year
ended March 31, 2001 and a charge of $1.4 million in the year ended March 31,
2000.

     Net interest expense is stated after deducting interest income earned
during each year. In the year ended March 31, 2001, AerCo earned interest income
of $13.5 million (including $6.9 million earned on the cash raised to acquire
the 30 additional aircraft from debis) compared with $2.1 million in the year
ended March 31, 2000.

  Other Expenses

     Other expenses consist of servicer fees, administrative agency fees, cash
manager fees, insurance premiums (political risk and directors' liability
insurance), other service provider costs and miscellaneous expenditure items.
Other expenses for AerCo amounted to $11.4 million in the year ended March 31,
2001 compared to $15.7 million in the year ended March 31, 2000.

     In the year ended March 31, 2001, servicer, administrative agency and cash
manager fees payable by AerCo to Babcock & Brown and to debis totaled $8.7
million compared with $6.4 million in the year ended March 31, 2000. The
increase in servicer, administrative agency and cash manager fees in the current
year is primarily due to the increased fleet size from July 17, 2000 and a
termination fee paid to Babcock & Brown in the year ended March 31, 2001 on
termination of its servicing agreement with AerCo. Babcock & Brown acted as
lease manager to AerCo from July 15, 1998 to July 17, 2000. debis has acted as
lease manager to AerCo from July 17, 2000. Substantially all of the AerCo
servicer and administrative agency fees represent revenue based fees calculated
as a monthly percentage of lease rentals received on aircraft under management.

                                        43
47

     AerCo Group's practice is to provide specifically for any bad debt amounts
due but unpaid by lessees. Each provision is based primarily on the amount due
in excess of security held and also takes into account the financial strength
and condition of a lessee and the economic conditions existing in the lessee's
operating environment. A small number of AerCo Group's lessees failed to meet
their contractual obligations in the years ended March 31, 2001 and 2000,
resulting in the requirement for additional provisions in respect of bad and
doubtful debts in respect of these lessees. Overall, there was a net provision
of $2.24 million required in respect of bad and doubtful debts in the year ended
March 31, 2001, compared with a net provision of $2.15 million in the year ended
March 31, 2000, in both cases primarily in respect of Tower Air.

     In the year ended March 31, 2000, AerCo made a provision of $3.5 million in
respect of an engine on the B747-200B aircraft on lease to Tower Air.

  Goodwill

     On July 17, 2000 AerCo acquired 30 additional aircraft and related leases
from debis Ireland. The acquisition of the 30 aircraft from debis Ireland was
achieved through the purchase of the capital stock of 18 100% owned subsidiaries
of debis Ireland. The difference between the fair value of the net assets
acquired and the consideration paid by AerCo for these new debis transferred
companies, of $15.7 million, represents purchased goodwill, which is capitalized
on the balance sheet of AerCo. On July 15, 1998 AerCo acquired 100% of the
capital stock of ALPS 94-1, thus indirectly acquiring a portfolio of 25 aircraft
and the related leases, and purchased certain aircraft owning subsidiaries of
debis, which owned 10 aircraft and related leases. The difference between the
fair value of the net assets acquired and the consideration paid by AerCo for
the acquisition of ALPS 94-1 and these debis transferred companies, of $47.1
million, represents purchased goodwill, which is capitalized on the balance
sheet of AerCo. Purchased goodwill is amortized on a straight-line basis over
its estimated economic life.

     In the results of AerCo for the year ended March 31, 2001 goodwill of $2.9
million was amortized compared to $2.4 million in the year ended March 31, 2000
as a result of the additional goodwill described above.

  Operating Loss

     In the year ended March 31, 2001, AerCo recorded an operating loss of $60.2
million (including $27.6 million relating to the additional 30 aircraft acquired
from debis) compared with an operating loss of $48.8 million for the year ended
March 31, 2000.

  Taxes

     AerCo had a tax charge of approximately $0.05 million in the year ended
March 31, 2001, compared with a tax charge of approximately $0.05 million for
the year ended March 31, 2000.

  Net Loss

     As a result of the above factors, AerCo had a net loss of $60.3 million for
the year ended March 31, 2001 compared with a net loss of $48.8 million for the
year ended March 31, 2000.

  Differences between U.K. GAAP and U.S. GAAP

     The principal differences between U.S. GAAP and U.K. GAAP that have
affected the results of operations and financial position of AerCo and ALPS 94-1
relate to the accounting treatment of aircraft cost and related impairment and
depreciation, goodwill and debt issue costs.

     Aircraft are stated at purchase cost under U.K. GAAP. Under U.S. GAAP
aircraft are stated at debis's amortized cost at the date of delivery to, and
acquisition by, AerCo and ALPS 94-1, respectively. The difference between the
purchase cost and debis's amortized cost is treated as a distribution to debis.
The impact is to reduce the net book value of aircraft and shareholders' equity
under U.S. GAAP compared with U.K. GAAP. This difference in net book value
causes differences in depreciation expense, gain or loss on disposal and
impairment charges.
                                        44
48

     Under U.K. GAAP AerCo has depreciated each aircraft at a rate calculated to
write off the cost of the aircraft from the date of acquisition, on a
straight-line basis, to a residual value of generally 15% of cost over a period
of 25 years from the date of manufacture. Under U.S. GAAP aircraft are
depreciated on a straight-line basis at a rate designed to write off debis's
amortized cost at the date of delivery to AerCo to a residual value of generally
15% of cost over a period of 25 years from the date of manufacture.

     Under U.K. GAAP the difference between the fair value of the net assets of
ALPS 94-1 and the debis transferred aircraft, and the purchase consideration
paid by AerCo to acquire these entities in July 1998 gave rise to goodwill of
$47.1 million and the difference between the fair value of the net assets of the
new debis transferred companies, and the purchase consideration paid by AerCo to
acquire these entities in July 2000 gave rise to goodwill of $15.7 million. This
purchased goodwill is capitalized and amortized over a period of 20 years. No
goodwill arises under U.S. GAAP as these transactions are accounted for on a
predecessor cost basis as transactions between entities under common control.

     Goodwill of $6.1 million representing the difference between the fair value
of the net assets acquired and the consideration paid by the new debis
transferred companies in respect of their acquisition of aircraft from Indigo,
is eliminated under acquisition accounting in U.K. GAAP. Under U.S. GAAP this
goodwill will continue to be recognized in the consolidated financial statements
of AerCo.

     Under U.K. GAAP the costs of debt issuance arising on the completion of the
refinancing transactions in July 1998 and July 2000 are disclosed as a reduction
of the related indebtedness. Under U.S. GAAP the costs of issuance are disclosed
separately as deferred financing costs.

     For a discussion of these and other differences between U.K. GAAP and U.S.
GAAP, including certain income recognition and depreciation differences relating
to AerCo's acquisition of the capital stock of ALPS 94-1 and the debis
transferred companies in July 1998 and the capital stock of the new debis
transferred companies acquired in July 2000, see notes 23, 24, 25 and 26 to the
AerCo audited consolidated financial statements.

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2000 COMPARED WITH THE EIGHT AND
ONE-HALF MONTH PERIOD FROM JULY 15, 1998 TO MARCH 31, 1999

  Overview

     AerCo Group's results for the year ended March 31, 2000 were adversely
affected by the significant increase in the number of aircraft available for
lease or sale in the period, with a corresponding negative impact on aircraft
values and lease rates particularly for older widebody aircraft. Although growth
in air travel increased in 1999, reflecting a measure of economic recovery in
the Asia Pacific region and strong performance in the rest of the world,
aircraft lease rates generally declined. In addition, AerCo's results for the
year were significantly adversely affected by financial difficulties experienced
by one North American lessee in meeting its contracted lease payments. The
lessee, Tower Air, has filed for Chapter 11 bankruptcy protection and AerCo has
petitioned the relevant U.S. bankruptcy court to terminate the lease to Tower
Air. As a result, AerCo may have to take redelivery of one B747-200B aircraft on
lease to that lessee in the near term. See "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."
During the year, as a result of the deterioration in the value of the Colombian
currency and negative impact on the Colombian economy, one Colombian lessee
continued to experience difficulties in meeting its contracted rental and other
payments. See "Item 4. Information on the Company -- Business Overview -- The
Lessees -- Latin American Concentration." Excess supply of aircraft in the
operating lease market is continuing. This gave rise to a softening of lease
rates and more limited placement prospects for aircraft which came off-lease
during the year. In addition, any slowdown in economic growth may result in
AerCo Group increasingly having to address the problems of lessees in financial
difficulty with lease reschedulings, rent deferrals and other restructuring
arrangements. In these circumstances, AerCo's ability to pay interest on, and
repay principal of, the notes may be adversely affected.

  Revenues

     Revenues for AerCo Group in the year ended March 31, 2000 were $109.1
million compared with $82.8 million in the period from July 15, 1998 to March
31, 1999. Rentals from European and Asia Pacific

                                        45
49

carriers represented 48.5% (1999 -- 48.8%) and 23.5% (1999 -- 25.4%), of AerCo's
leasing revenues in the year ended March 31, 2000. One lessee accounted for more
than 10% of AerCo's leasing revenues (Spanair: 11.1%). The same lessee accounted
for more than 10% of AerCo's leasing revenues in the period from July 15, 1998
to March 31, 1999, (Spanair: 10.5%). At March 31, 2000 and March 31, 1999, AerCo
had no aircraft off-lease.

     Rental rates on 14 of the 22 new leases written by AerCo Group since July
1998, reflect the current softening in lease rates in the commercial aviation
market for operating lease rentals. These rates were on average 15% below the
previous lease rates for these aircraft. Rental rates on the remaining eight
leases written by AerCo Group in the period were on average 8% above previous
lease rates for these aircraft. AerCo Group entered into 12 new leases/lease
extensions in the year ended March 31, 2000 for the following aircraft: one F100
(71 months), five B737-300s (65 months, 60 months, 12 months, 65 months and 36
months), two B737-400s (56 months and 48 months), one B737-500 (42 months), two
A320-200s (24 months and 36 months) and one B767-200ER (1 month). AerCo Group
entered into 10 new leases/lease extensions in the year ending March 31, 1999
with respect to one B757-200 (72 months), three MD-83s (60 months, 60 months and
40 months), two A320-200s (60 months and 11 months), one B737-400 (57 months),
one F100 (35 months), one B737-300 (24 months) and one B737-500 (2 months).

  Sale of Aircraft

     Two aircraft have been sold. Sales proceeds of $14.7 million from the sale
of one aircraft, an F100 sold to an affiliate of Portugalia, were received by
AerCo Group in the year ended March 31, 2000. The net book value of this
aircraft at the date of sale was $15.6 million. Sales proceeds of $14.5 million
from the sale of another F100 also sold to an affiliate of Portugalia, were
received by AerCo Group in the period from July 15, 1998 to March 31, 1999. The
net book value of this second aircraft at the date of sale was $13.9 million and
other sales costs were $0.6 million.

  Depreciation and Provision for Impairment in Aircraft Values

     The depreciation charge for AerCo Group for the year ended March 31, 2000
amounted to $47.0 million compared to $33.8 million in the period from July 15,
1998 to March 31, 1999. AerCo Group has depreciated each aircraft at a rate
calculated to write-off the cost of the aircraft to its estimated residual value
of generally 15% of its initial appraised value, on a straight-line basis, over
its estimated useful economic life of 25 years from the date of manufacture.

     For the year ended March 31, 2000, the directors of AerCo determined to
make a provision of $13.1 million in respect of an impairment in the value of
AerCo Group's one B747-200B aircraft. The directors arrived at such
determination based on the financial condition of the aircraft's current lessee,
the physical condition of the aircraft and the unfavorable market conditions for
this aircraft type. The carrying value of this aircraft at March 31, 2000 was
$5.4 million net of maintenance provisions of $3.6 million and an amount of $3.5
million provided in respect of one engine on this aircraft. For more information
regarding this aircraft, you should refer to "Item 4. Information on the
Company -- Business Overview -- The Lessees -- North American Concentration."

  Net Interest Expense

     Net interest expense for AerCo amounted to $78.8 million in the year ended
March 31, 2000 compared to $54.1 million in the period from July 15, 1998 to
March 31, 1999. The increase in net interest expense for AerCo of $24.7 million
in the year ended March 31, 2000 was primarily due to a combination of the
longer accounting period and a higher interest rate environment in the year
ended March 31, 2000 compared to the period from July 15, 1998 to March 31,
1999. The average indebtedness outstanding for AerCo during the year ended March
31, 2000 was $925.2 million compared to $973.8 million for the period from July
15, 1998 to March 31, 1999.

     Under the terms of the AerCo subclass E-1 notes, interest accrues at a rate
of 20% per annum payable monthly in arrears. Except for the subclass E-1 note
primary interest amount, which is payable at the rate of 15% per annum
multiplied by the initial outstanding principal balance of the subclass E-1
notes, no interest is payable
                                        46
50

on the subclass E-1 notes until all of the interest, principal and premium, if
any, on the notes have been repaid in full. The subclass E-1 note primary
interest amount is paid on each payment date only to the extent that AerCo has
available collections sufficient to make such payment after paying or providing
for each of the items ranking prior to such payment in the order of priority.
Approximately $23.9 million was accrued during the year ended March 31, 2000 in
respect of unpaid interest on the subclass E-1 notes compared with $14.1 million
during the period from July 15, 1998 to March 31, 1999. Cash paid in respect of
interest amounted to $56.2 million in the year ended March 31, 2000 compared
with net interest expense of $78.8 million and cash paid in respect of interest
amounted to $39.0 million in the period from July 15, 1998 to March 31, 1999
compared with net interest expense of $54.1 million, principally reflecting
subclass E-1 note interest accrued but not paid in each period.

     Net interest expense also includes expenses incurred under AerCo's interest
rate swaps. AerCo has entered into interest rate swaps in order to correlate its
contracted fixed and floating rate rental payments to the fixed and floating
rate interest payments on the notes, resulting in a charge of $1.4 million in
the year ended March 31, 2000 and a charge of $1.2 million in the period from
July 15, 1998 to March 31, 1999.

     Net interest expense is stated after deducting interest income earned
during the relevant period. In the year ended March 31, 2000, AerCo earned
interest income of $2.1 million compared with $1.9 million in the period from
July 15, 1998 to March 31, 1999.

  Other Expenses

     Other expenses consist of servicer fees, administrative agency fees, cash
manager fees, insurance premiums (political risk and directors' liability
insurance), other service provider costs and miscellaneous expenditure items.
Other expenses for AerCo amounted to $15.7 million in the year ended March 31,
2000 compared to $8.3 million in the period from July 15, 1998 to March 31,
1999.

     In the year ended March 31, 2000, servicer, administrative agency and cash
manager fees payable by AerCo to Babcock & Brown and the debis group totaled
$6.4 million compared with $4.4 million in the period from July 15, 1998 to
March 31, 1999. Substantially all of the AerCo fees represent revenue based fees
calculated as a monthly percentage of lease rentals received on aircraft under
management.

     AerCo Group's practice is to provide specifically for any bad debt amounts
due but unpaid by lessees. Each provision is based primarily on the amount due
in excess of security held and also takes into account the financial strength
and condition of a lessee and the economic conditions existing in the lessee's
operating environment. A small number of AerCo Group's lessees failed to meet
their contractual obligations in the year ended March 31, 2000, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these lessees. Overall, there was a net provision of $2.15 million
required in respect of bad and doubtful debts in the year ended March 31, 2000
primarily in respect of Tower Air, compared with a net provision of $0.55
million in the period from July 15, 1998 to March 31, 1999 primarily in respect
of PAL.

     In the year ended March 31, 2000, AerCo made a provision of $3.5 million in
respect of an engine on the B747-200B aircraft on lease to Tower Air.

  Goodwill

     On July 15, 1998 AerCo acquired 100% of the capital stock of ALPS 94-1,
thus indirectly acquired a portfolio of 25 aircraft and the related leases, and
purchased certain aircraft owning subsidiaries of debis, which owned 10 aircraft
and related leases. The difference between the fair value of the net assets
acquired and the consideration paid by AerCo for the acquisition of ALPS 94-1
and the debis aircraft owning companies of $47.1 million represents purchased
goodwill, which is capitalized on the balance sheet of AerCo and amortized on a
straight-line basis over its estimated economic life. In the results of AerCo
for the year ended March 31, 2000, goodwill of $2.4 million was amortized
compared with $1.7 million in the period from July 15, 1998 to March 31, 1999.

                                        47
51

  Operating Loss

     In the year ended March 31, 2000, AerCo recorded an operating loss of $48.8
million compared with an operating loss of $15.1 million for the period from
July 15, 1998 to March 31, 1999.

  Taxes

     AerCo had a tax charge of approximately $0.05 million in the year ended
March 31, 2000, compared with a tax charge of approximately $0.03 million for
the period from July 15, 1998 to March 31, 1999.

  Net Loss

     As a result of the above factors, AerCo had a net loss of $48.8 million for
the year ended March 31, 2000 compared with a net loss of $15.1 million in the
period from July 15, 1998 to March 31, 1999.

  Differences between U.K. GAAP and U.S. GAAP

     The principal differences between U.S. GAAP and U.K. GAAP that have
affected the results of operations and financial position of AerCo and ALPS 94-1
relate to the accounting treatment of aircraft cost and related impairment and
depreciation, goodwill and issue costs.

     Aircraft are stated at purchase cost under U.K. GAAP. Under U.S. GAAP
aircraft are stated at debis's amortized cost at the date of delivery to, and
acquisition by, AerCo and ALPS 94-1, respectively. The difference between the
purchase cost and debis's amortized cost is treated as a distribution to debis.
The impact is to reduce the net book value of aircraft and shareholders' equity
under U.S. GAAP compared with U.K. GAAP.

     Under U.K. GAAP AerCo has depreciated each aircraft at a rate calculated to
write off the cost of the aircraft from the date of acquisition, on a
straight-line basis, to a residual value of generally 15% of cost over a period
of 25 years from the date of manufacture. Under U.S. GAAP aircraft are
depreciated on a straight-line basis at a rate designed to write off debis's
amortized cost at the date of delivery to AerCo to a residual value of generally
15% of cost over a period of 25 years from the date of manufacture.

     Under U.K. GAAP the difference between the fair value of the net assets of
ALPS 94-1 and the debis transferred aircraft, and the purchase consideration
paid by AerCo to acquire these entities gave rise to goodwill of $47.1 million
which is capitalized and amortized over a period of 20 years. No goodwill arises
under U.S. GAAP as these transactions are accounted for on a predecessor cost
basis as transactions between entities under common control.

     Under U.K. GAAP the costs of issuance arising on the completion of the
refinancing transaction are disclosed a reduction of the related indebtedness.
Under U.S. GAAP the costs of issuance are disclosed separately as deferred
financing costs.

     For a discussion of these and other differences between U.K. GAAP and U.S.
GAAP, including certain income recognition and depreciation differences relating
to AerCo's acquisition of the capital stock of ALPS 94-1 and the debis aircraft
owning companies, see notes 24, 25 and 26 to the AerCo audited consolidated
financial statements.

B. LIQUIDITY AND CAPITAL RESOURCES

  Liquidity

     AerCo's primary source of liquidity is rental payments made by lessees
under the lease agreements. The principal uses of cash rental payments are
expenses related to the aircraft and their servicing, corporate expenses and the
payment of interest on and principal of indebtedness. Such indebtedness consists
of the additional notes offered in the additional notes offering, AerCo's
previously outstanding notes that were not refinanced in that offering and the
subclass E-1 notes which are held by debis and the subclass D-2 and subclass E-2
notes which were taken up by debis in the additional notes offering.

                                        48
52

     The cash balances (including short-term investments in commercial paper) at
March 31, 2001 amounted to $104.7 million compared to $66.4 million at March 31,
2000. Under the terms of its indebtedness, AerCo is required to maintain cash
balances in an amount equal to (1) the amount of lessee security deposits ($20.9
million at March 31, 2001), and (2) the "liquidity reserve amount" ($65.0
million at March 31, 2001).

     The terms of AerCo's indebtedness restrict the use of such cash so that it
is generally not available to service debt. The liquidity reserve amount has
been determined largely based on an analysis of historical experience,
assumptions regarding AerCo Group's future experience and the frequency and cost
of certain contingencies in respect of the aircraft. It is intended to provide
liquidity for meeting the cost of maintenance obligations and non-maintenance,
aircraft-related contingencies such as removing regulatory liens, complying with
ADs and repossessing and re-leasing aircraft. In analyzing the future impact of
these costs, assumptions have been made regarding their frequency and amount
based upon historical experience. There can be no assurance, however, that
historical experience will prove to be relevant or that actual cash received by
AerCo Group will not be significantly less than that assumed. Any significant
variation may materially adversely affect AerCo's ability to make payments of
interest and principal on the notes.

     During the next two years, AerCo may have to incur unusually high cash
expenditures for the purpose of airframe and engine overhauls and complying with
new regulatory requirements for aircraft operating in Europe and North America.
These payments could adversely affect AerCo's ability to make certain principal
payments on the notes, depending on their level and timing.

     Arising from the acquisition by debis of AerFi, the rating agencies
requested that AerCo have additional liquidity available to it as its servicer
and its standby servicer were now the same entity. On June 28, 2001, AerCo
entered into a Liquidity Facility Agreement (the "AGREEMENT") with Kreditanstalt
fur Wiederaufbau ("KFW") to provide additional funds to AerCo for the payment of
certain liabilities if and to the extent that insufficient funds are available
in the form of periodic revenues.

     Under the terms of the Agreement, KfW has made available to AerCo a
revolving facility of up to $35 million for a period of 364 days, with the
option to extend the facility for further periods of up to 364 days prior to the
expiry of the previous 364 day period. Under the terms of the Agreement, KfW is
not obliged to extend the facility, and, in the event that KfW does not grant an
extension of the facility, AerCo may choose to make a one-off drawing of an
amount up to the Minimum Liquidity Reserve at the time, providing always that
the aggregate amount of drawings does not exceed $35 million. AerCo paid KfW an
upfront fee of $50,000 and has also agreed to pay a commitment fee of $100,000
per annum payable quarterly in arrears.

     The revolving facility has a maturity date of August 15, 2025 or the date
of repayment of the outstanding principal balance of the class A notes, if
earlier. However, AerCo may cancel the whole or any part of the facility at any
time by giving 10 days prior written notice to KfW.

     If AerCo defaults on any of its obligations under the Agreement, KfW may
prevent further drawings and cancel the facility. In such circumstances, all
outstanding amounts payable under the facility would become immediately due and
payable, notwithstanding any other provision of the Agreement. If such
circumstances were to arise, AerCo's ability to make certain payments on the
notes may be adversely affected, depending on their level in the order of
priority of payments and timing.

     As of September 24, 2001, the liquidity reserve amount includes the amount
of $65 million held at March 31, 2001 and the additional facility amount of $35
million provided by KfW under the Agreement.

  Operating Activities

     Net cash provided by AerCo's operating activities in the year ended March
31, 2001 amounted to $58.3 million compared with $35.7 million for the year
ended March 31, 2000 reflecting the additional aircraft acquired during the
year. These amounts are net of cash paid in respect of interest of $95.6 million
(March 31, 2000: $56.2 million), net maintenance cash inflows of $6.0 million
(March 31, 2000: $7.5 million cash outflow) and security deposits refunded of
$2.5 million (March 31, 2000: $1.5 million received). The potential maintenance
and regulatory compliance expenditures described above may have an adverse
impact on AerCo's net operating cash flow in future periods.
                                        49
53

  Investing and Financing Activities

     Cash flows from financing activities for the year ended March 31, 2001
reflect the issue by AerCo of its subclass A-3, A-4, B-2, C-2, D-2 and E-2 notes
on July 17, 2000 of $1,169.1 million and the repayment of $484.2 million of
principal on the AerCo subclass A-1, A-2, B-1, C-1, D-1, A-4, B-2 and C-2 notes
in the year. Cash flows used in financing activities in the year ended March 31,
2000 reflect the repayment of $48.9 million of principal on the subclass A-2,
subclass B-1 and subclass C-1 notes.

  Indebtedness

     At May 15, 2001, the outstanding principal amount of the notes we issued on
July 15, 1998 and July 17, 2000 was as follows:
OUTSTANDING
                          PRINCIPAL AMOUNT AT   ANNUAL INTEREST RATE    EXPECTED FINAL
SUBCLASS OF NOTES            MAY 15, 2001        (PAYABLE MONTHLY)       PAYMENT DATE      FINAL MATURITY DATE
-----------------         -------------------   --------------------   -----------------   -------------------
Subclass A-2............         161.2          LIBOR + 0.32    %      December 15, 2005      July 15, 2023
Subclass A-3............         565.0          LIBOR + 0.46    %          June 15, 2002      July 15, 2025
Subclass A-4............         180.7          LIBOR + 0.52    %           May 15, 2011      July 15, 2025
Subclass B-1............          68.9          LIBOR + 0.60    %          July 15, 2013      July 15, 2023
Subclass B-2............          73.7          LIBOR + 1.05    %          June 15, 2008      July 15, 2025
Subclass C-1............          83.3          LIBOR + 1.35    %          July 15, 2013      July 15, 2023
Subclass C-2............          79.7          LIBOR + 2.05    %          June 15, 2008      July 15, 2025
Subclass D-2............         100.0          8.50%                       May 15, 2014      July 15, 2025
Subclass E-1............         112.0          20.00%                     July 15, 2023      July 15, 2023
Subclass E-2............         109.1          20.00%                     July 15, 2025      July 15, 2025
We used part of the proceeds of the additional notes offering on July 17,
2000 and the issuance of the subclass D-2 notes to refinance all of the then
outstanding subclass A-1 notes and subclass D-1 notes.

     Interest on any subclass of floating rate notes is calculated on the basis
of a 360-day year and the actual number of days elapsed in the interest accrual
period. Interest on any subclass of fixed rate notes is calculated on the basis
of a 360-day year consisting of twelve 30-day months.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

     Not applicable

D. TREND INFORMATION

     In the period prior to September 11, 2001, the airline industry was
experiencing a continuation of the difficult trading conditions which had become
increasingly evident in the year to March 31, 2001. These conditions led to a
continuing unfavorable market for some aircraft types, in particular widebody
aircraft, with a corresponding negative impact on aircraft values and lease
rates and increased levels of aircraft downtime. In addition, volatility in jet
fuel prices, together with the continued weakness of the euro against the U.S.
dollar had led to significant increases in operating costs for many airlines
based in the Euro-zone.

     On September 11, 2001, the United States was the subject of attacks by
terrorists who used the hijacked aircraft of certain airlines. The full effect
that the terrorist attacks may have for the aviation industry is not yet known.
However, the effects of these tragic events can be expected to exacerbate the
difficult trading conditions already being experienced by airlines worldwide.
These conditions are likely to adversely impact the ability of such airlines to
perform their lease obligations to us and have other adverse consequences as
further detailed in "Item 3.D. Recent Developments."

                                        50
54

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

     AerCo's board of directors will have no more than five members at any time.
The holder or holders of a majority in aggregate principal amount of AerCo's
class E notes have the right to appoint two directors while the class E notes
are outstanding. The remaining directors must be independent directors. The
current independent directors are Mr. Frederick W. Bradley, Jr., Chairman of
AerCo, Mr. Kenneth N. Peters and Mr. G. Adrian Robinson. The succeeding
independent directors will be appointed by a majority of the then standing
directors. If no independent directors are serving on the board at any time,
three new independent directors will be appointed in accordance with AerCo's
Articles of Association. Mr. Edward Hansom and Ms. Rose Hynes were appointed
directors by debis Ireland as holder of the majority of the subclass E-1 notes.
Any resolution of the board of directors will require the affirmative vote of a
majority of the independent directors. Transactions and proceedings that relate
to certain insolvency proceedings, amendments to AerCo's Memorandum or Articles
of Association, acquisition of additional aircraft, mergers or the sale of all
or substantially all of AerCo's assets may only be approved by a unanimous vote
of all directors. The servicing, administrative agency and cash management
agreements between AerCo and the debis group provide that certain actions shall
be taken by AerCo by a special board resolution. A special board resolution will
require the affirmative vote of a majority of the independent directors and, at
any time at which the servicer and its affiliates hold the majority of AerCo's
class E notes, the two directors appointed by the holder of AerCo's class E
notes will not have the right to vote in respect of a special board resolution.

     The directors, their ages and principal activities are as follows:
NAME                                                  AGE    OFFICES HELD WITH THE REGISTRANT
----                                                  ---    --------------------------------
Frederick W. Bradley, Jr............................  74     Director and Chairman
Kenneth N. Peters...................................  65     Director
G. Adrian Robinson..................................  51     Director
Edward Hansom.......................................  42     Director
Rose Hynes..........................................  42     Director
Frederick W. Bradley, Jr. -- 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 has served as a
director and Chairman of ALPS 94-1 since 1994. Mr. Bradley also serves as a
director and Chairman of Aircraft Lease Portfolio Securitisation 92-1 Limited.
Mr. Bradley retired as a director of America West Airlines, Inc. in 1999, after
serving seven years on its board. 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.

     Kenneth N. Peters -- Mr. Peters was Assistant Treasurer of The Boeing
Company from 1985 to 1995 and was Vice President, Customer Financing at The
Boeing Company from 1995 until his retirement from The Boeing Company in 1997.
From 1960 to 1985, Mr. Peters held various positions with The Boeing Company
including the positions of Manager and Director of Customer Financing within the
Corporate Treasurer's Organization.

     G. Adrian Robinson -- 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 also serves as a director
of ALPS 94-1 and its subsidiaries and Aircraft Lease Portfolio Securitisation
92-1 Limited and its subsidiaries. Mr. Robinson also provides consulting
services from time to time to Air 2000 and JMC Airlines, two of the lessees.

     Edward Hansom -- Mr. Hansom is Chief Financial Officer and a member of the
Board of Management of debis. He joined debis Ireland in 1988 from the treasury
division of Schroders. Prior to taking up his current position, Mr. Hansom was
Chief Financial Officer and a director of debis Ireland.

                                        51
55

     Rose Hynes -- Ms. Hynes is Executive Vice President, Commercial at debis.
She joined debis Ireland in 1988, having previously been a partner in an Irish
law firm. Prior to taking up her current position with debis in January 2001,
she was General Counsel of debis Ireland. Ms. Hynes also serves as a director of
Aer Lingus and certain of its subsidiaries.

     AerCo's directors are non-executive and AerCo does not and will not have
any employees or executive officers. Accordingly, the board of directors relies
upon debis, as servicer, the administrative agent, and 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 AerCo.

     All directors are compensated for travel and other expenses incurred by
them in the performance of their duties. AerCo Group pays each independent
director an aggregate fee of $75,000 per annum for their services. The directors
appointed by the holder of a majority in aggregate principal amount of the class
E notes do not and will not receive remuneration from AerCo for their services.

     Mr. Bradley, Mr. Peters and Mr. Robinson also act as directors of certain
AerCo Group subsidiaries. Mr. Bradley, Mr. Peters and Mr. Robinson each receive
$1,000 for each day, or portion of a day, which they are required to devote to
the activities of those subsidiaries and AerCo, excluding board meetings of
AerCo and ALPS 94-1.

BENEFICIAL OWNERSHIP OF AERCO
NUMBER OF      PERCENTAGE
TITLE OF CLASS                     NAME AND ADDRESS                      SHARES         OF CLASS
--------------                     ----------------                     ---------      ----------
Ordinary Shares      Mourant & Co. Trustees Limited,                    19 Shares          95%
                     as trustee of AerCo Holding Trust
                     22 Grenville Street
                     St. Helier
                     Jersey, Channel Islands
                     debis AirFinance Ireland plc                       1 Share             5%
                     debis AirFinance House
                     Shannon
                     Ireland
Under the shareholders undertaking entered into on July 15, 1998 by Mourant
& Co. Trustees Limited as trustee of the charitable trust (the "CHARITABLE TRUST
TRUSTEE"), the nominees, debis Ireland, AerCo and the trustee, the charitable
trust trustee and debis Ireland agreed that, as long as the notes are
outstanding, they will not, without the prior written approval of the trustee
and all the directors, transfer any part of the ordinary shares held by them or
any interest therein unless the transferee:

          (1) in the case of the ordinary shares held by the nominees for the
     charitable trust trustee, is a trustee of a trust formed for charitable
     purposes substantially identical to those for which the charitable trust is
     established; and

          (2) enters into an agreement substantially identical to the
     shareholders undertaking in favor of the trustee.

     In consideration for the undertakings given by the charitable trust trustee
in the shareholders undertaking, the charitable trust trustee is entitled to
receive from AerCo an undertaking fee equal to $1,500 per annum. Under the
instrument of trust establishing the charitable trust, a certificate given by
the directors to the charitable trust trustee that its voting of the ordinary
shares in a specified manner is in the best commercial interests of AerCo shall,
for the purposes of the exercise of the charitable trust trustee's discretion,
be conclusive that any such action is in AerCo's best commercial interests.

                                        52
56

THE SERVICER

     debis Ireland provides various aircraft related services to us as servicer
under the servicing agreement dated as of July 17, 2000. debis Ireland is a
wholly-owned indirect subsidiary of debis, a major participant in the global
commercial aviation industry. debis, directly and through debis Ireland and
other subsidiaries, owns and manages aircraft both for its own account and for
third parties. Including the AerCo fleet, at March 31, 2001, debis managed a
portfolio consisting of 194 aircraft on lease to 75 lessees in 34 countries and,
through debis Ireland managed a portfolio of 103 aircraft on lease to 52 lessees
in 25 countries. debis Ireland is also the holder of all of our subclass D-2,
E-1 and E-2 notes. As the holder of the majority of the class E notes, debis
Ireland has the right to appoint two directors to the Board of AerCo Limited.
debis Ireland also holds 5% of the ordinary share capital of AerCo Limited.
Subsidiaries of debis act as administrative agent and cash manager to Airplanes
Group, another aircraft securitization vehicle, and GPA-ATR Limited, a turboprop
aircraft joint venture company in which debis AirFinance Jetprop Limited holds
50% of the share capital.

     At March 31, 2001, the debis group employed 105 people worldwide, with 32
people employed in Shannon, Ireland by debis Ireland. debis has its headquarters
in Amsterdam, the Netherlands and it also has a U.S. subsidiary with an office
in Fort Lauderdale, Florida.

     debis and its affiliates cannot be held responsible for any liabilities of
AerCo or its affiliates, including any payments due to noteholders on the notes.

  Operating Guidelines

     debis Ireland provides services to AerCo Group under the servicing
agreement dated as of July 17, 2000. debis Ireland does not have any fiduciary
or other implied duties to noteholders or AerCo, and its obligations are limited
to the express terms of the servicing agreement. debis Ireland is obliged to act
in accordance with applicable law and with AerCo's directions.

     debis Ireland must also comply with the following two contractual standards
in performing its services:

          (1) It must perform its services with reasonable care and diligence at
     all times as if it were the owner of the aircraft consistent with the
     customary commercial practice of a prudent international aircraft lessor in
     the management, servicing and marketing of commercial jet aircraft and
     related assets. We refer to this as the "DEBIS SERVICES STANDARD."

          (2) If a conflict of interest arises regarding debis Ireland's
     management, servicing or marketing of: (a) any two aircraft or (b) any
     aircraft and any other assets owned, managed, serviced or marketed by the
     debis group, debis Ireland is required to notify AerCo and perform the
     services in good faith. If (x) the two aircraft or (y) the aircraft and
     other assets owned, managed, serviced or marketed by the debis group are
     substantially similar in terms of objectively identifiable characteristics
     that are relevant for the particular services to be performed, debis
     Ireland will not discriminate among the aircraft or between any of the
     aircraft and any other aircraft then owned, managed, serviced or marketed
     by the debis group on an unreasonable basis. We refer to this as the "DEBIS
     CONFLICTS STANDARD."

     All transactions to be entered into by debis on behalf of AerCo Group,
other than with other persons within AerCo Group, must be at arm's length and on
fair market value terms unless otherwise agreed or directed by AerCo. The
following transactions or matters with respect to the aircraft require AerCo's
specific written approval:

     - sales of or agreements to sell aircraft or any related aircraft engine
       unless required by the lease;

     - entering into new leases that do not comply with the operating covenants
       or any express direction of AerCo;

     - entering into amendments, renewals or extensions of existing leases that
       do not comply with the operating covenants or any express direction of
       AerCo;

     - terminating any lease or leases with any single lessee or related lessees
       with respect to any aircraft having an aggregate depreciated net book
       value over $100.0 million;
                                        53
57

     - entering into any contract for modification or maintenance of the
       aircraft not provided for in the AerCo budget if:

      -- the cost to AerCo is more than the estimated cost of a heavy
         maintenance check for the airframe and the engines and the available
         maintenance reserves or other collateral under the related lease,
         whichever is greater, or

      -- the modification or maintenance is outside the ordinary course of AerCo
         Group's business;

     - entering into any capital commitment or confirming any order or
       commitment to acquire aircraft or engines;

     - issuing any guarantee on behalf of any person within AerCo Group other
       than guarantees:

      -- by one AerCo Group member of the lease obligations of another, or

      -- for trade payables incurred in the ordinary course of AerCo Group's
         business;

     - entering into any agreements for services costing more than $50,000 to be
       provided by third parties at AerCo Group's cost, unless this is an
       expense provided for in the budget;

     - entering into or amending or granting a waiver in any transaction with
       debis or any of its affiliates on behalf of any person within AerCo
       Group; and

     - entering into any agreement or commitment which is inconsistent with any
       express direction of AerCo.

     debis Ireland has agreed not to (1) execute any letter of intent, new lease
agreement, amendment to an existing lease or any agreement in respect of a sale
of any AerCo Group aircraft or aircraft assets outside Ireland (except pursuant
to a specific power of attorney issued on a case-by-case basis in Ireland), or
(2) make any material operational decision in respect of any AerCo Group
aircraft or aircraft assets outside Ireland.

  Limitation on Liability

     debis Ireland is not liable to any person, other than AerCo Group to the
limited extent described below, for any losses relating to:

     - the sale, lease or purchase of our aircraft on less favorable terms than
       might have been achieved at any time, so long as the transactions were
       entered into on the basis of a commercial decision or recommendation of
       debis Ireland in accordance with the debis services standard;

     - debis Ireland's obligation to apply the debis conflicts standard in
       performing its services, except where the losses are finally adjudicated
       to have been caused directly by the negligence, recklessness, willful
       misconduct or fraud of debis Ireland or its representatives;

     - the ownership, operation, maintenance, acquisition, leasing, financing,
       refinancing or sale of any of our aircraft, or any action, or failure to
       act on the part of any person at any time prior to the effective date of
       the servicing agreement;

     - any action that AerCo instructs debis Ireland to take, limit or terminate
       despite debis Ireland's contrary recommendation;

     - AerCo Group's refusal to take any action that debis Ireland recommends;

     - circumstances where any person within AerCo Group has received amounts
       sufficient to cover such losses; or

     - the gross negligence, recklessness, fraud or willful misconduct of any
       person within AerCo Group.

                                        54
58

INDEMNIFICATION

     AerCo Group will indemnify debis Ireland and its representatives on an
after-tax basis for any losses that may be asserted against them relating to:

     - debis Ireland's performance under the servicing agreement, except where
       the losses are finally adjudicated to have been caused by debis Ireland's
       negligence, recklessness, fraud or willful misconduct in performing its
       obligations;

     - errors in judgment or omissions by debis Ireland or any action taken,
       limited or terminated in accordance with AerCo's instructions, except
       where the losses are finally adjudicated to have been caused by debis
       Ireland's negligence, recklessness, fraud or willful misconduct in
       performing its obligations; or

     - any of the circumstances under which debis Ireland would not be liable to
       AerCo as described above.

     debis Ireland will indemnify AerCo Group on an after-tax basis for losses
arising from the performance of its services, where the losses are finally
adjudicated to have:

     - been caused directly by the negligence, recklessness, fraud or willful
       misconduct of debis Ireland or any of its delegates in respect of its
       obligations to apply the debis services standard or the debis conflicts
       standard in connection with the performance of its services; or

     - directly resulted from a breach by debis Ireland of the express terms and
       conditions of the servicing agreement.

     debis Ireland's obligation to indemnify AerCo excludes circumstances where
any person within AerCo Group has already received an amount sufficient to cover
such losses.

  Aircraft Services

     debis Ireland provides a wide range of services to AerCo Group, including:

     - lease marketing, such as remarketing, lease drafting, negotiation and
       execution;

     - aircraft management, such as rent collection, aircraft maintenance,
       insurance, contract compliance and enforcement against current lessees,
       and accepting delivery and redelivery of aircraft;

     - aircraft sales;

     - arranging valuations and monitoring and advising AerCo on regulatory
       developments;

     - assisting AerCo Group to stay in compliance with certain covenants under
       the indenture;

     - providing AerCo Group with data and information relating to our aircraft
       and the commercial aviation industry;

     - assistance with any public or private offerings and sale of refinancing
       notes or additional notes;

     - assistance with permitted tax-related dispositions or other permissible
       tax-based financings;

     - legal and other professional services relating to the lease, sale or
       financing of our aircraft, and the amendment modification or enforcement
       of our aircraft leases; and

     - periodic reporting of operational, financial and other information on our
       aircraft and leases.

     debis Ireland has agreed to:

     - engage and maintain the necessary staff and supporting resources required
       to perform its services;

     - grant AerCo Group and its agents, access to its information, programs,
       records and personnel to enable AerCo Group to monitor its compliance
       with the servicing agreement and for general AerCo Group business; and

     - separate its own funds from the funds of any person within AerCo Group.

                                        55
59

  Budgets

     AerCo adopts an annual and a three-year budget each year for all aircraft.
debis Ireland has agreed to use reasonable commercial efforts to achieve the
annual budget.

  Management Fees

     debis Ireland is paid an annual retainer fee of approximately 0.10% of the
initial appraised value of each aircraft in our fleet. The retainer fee is
payable monthly in arrears in equal installments and subject to pro-rata
reduction for any month in which we do not own all the aircraft currently in our
fleet. In calculating the retainer fee, the initial appraised value may not be
reduced below $250.0 million until all of the aircraft are sold. debis Ireland
also receive a monthly fee, equal to 1% of the aggregate rent paid for that
month or portion of a month that AerCo Group owns the related aircraft which are
subject to debis Ireland servicing.

     debis Ireland also will be reimbursed for certain expenses incurred in
connection with its performance of the services which in the aggregate may
constitute a significant additional component of AerCo's total overhead costs.

     Additionally, debis Ireland will be paid a fee at any time during the term
of the servicing agreement on the actual date of sale of any of our aircraft in
the amount of 1.25% multiplied by 90% of the initial appraised value of the
relevant aircraft, net of transaction expenses, subject to certain conditions.

  Term and Termination

     The servicing agreement is for a term commencing on July 17, 2000 and
expiring on the date of payment in full of all amounts outstanding to be paid on
the notes and the other securities issued by AerCo as relating to additional
aircraft owned by AerCo Group.

     debis Ireland may terminate the servicing agreement if:

     - AerCo does not pay:

      -- any servicing fees within five business days of a written delinquency
         notice, or

      -- any other amount payable by any person within AerCo Group within 10
         business days of a delinquency notice;

     - any person within AerCo Group violates any material term, covenant,
       condition or agreement under the servicing agreement or any other
       operative document;

     - an involuntary proceeding under applicable bankruptcy, insolvency,
       receivership or similar law against AerCo, any of its subsidiaries or a
       substantial part of the property or assets of any person within AerCo
       Group, continues undismissed for 100 days or an order or decree approving
       any of the foregoing shall be entered or any such person goes into
       liquidation, suffers a receiver or mortgagee to take possession of all or
       substantially all of its assets or have an examiner appointed over it, or
       a petition or proceeding is presented for any of the foregoing and not
       discharged within 100 days;

     - a voluntary proceeding is commenced under bankruptcy, insolvency,
       receivership or similar law against AerCo or any of its subsidiaries,
       AerCo or any of its subsidiaries consents to the institution of, or fails
       to contest the filing of, any petition described above, or files an
       answer admitting the material allegations of any such petition, or makes
       a general assignment for the benefit of its creditors;

     - debis Ireland becomes liable for taxes, except certain income and
       employment taxes, arising from its performing services to AerCo, if:

      -- debis Ireland cannot avoid the taxes using reasonable commercial
         efforts, and

      -- AerCo does not indemnify debis Ireland for the taxes;

     - directions given by AerCo or any of its subsidiaries are, or if carried
       out would be, unlawful under applicable law.
                                        56
60

     AerCo may terminate the servicing agreement if:

     - debis Ireland materially breaches any of its obligations under the
       servicing agreement, including its obligation not to execute lease
       documents or make other operational decisions outside Ireland as
       described above, and fails to cure the breach after written notice from
       AerCo;

     - debis Ireland ceases or gives notice that it will cease to be actively
       involved in the aircraft advisory and management business;

     - AerCo repays, refinances or defeases all of its public or private debt
       securities in full;

     - debis Ireland undergoes, or may undergo, a change of control or
       transfers, or intends to transfer, more than 50% of the outstanding class
       E notes to one or more non-affiliates and, in either case, any credit
       rating agency which rates the notes (other than the class E notes)
       notifies or confirms to AerCo that it intends to downgrade, is
       downgrading or has downgraded the rating of any of the notes (other than
       the class E notes). debis Ireland will inform AerCo of any change of
       control of which it has actual knowledge or if it proposes to sell more
       than 50% of the outstanding class E notes to one or more non-affiliates;

     - an involuntary proceeding under bankruptcy, insolvency, receivership or
       similar law, against debis Ireland or a substantial part of its property
       or assets, continues undismissed for 100 days or an order or decree
       approving any of the foregoing shall be entered or debis Ireland goes
       into liquidation, suffers a receiver or mortgagee to take possession of
       all or substantially all of its assets or has an examiner appointed over
       it, or a petition or proceeding for any of the foregoing is presented and
       not discharged within 100 days;

     - a voluntary proceeding is commenced against debis Ireland under
       bankruptcy, insolvency, receivership or similar law upon consent by debis
       Ireland to the institution of, or failure by debis Ireland to contest the
       filing of, any petition described above, or filing of an answer admitting
       the material allegations of any such petition, or the making of a general
       assignment for the benefit of its creditors; or

     - debis Ireland and AerCo fail to resolve a conflict as provided in the
       servicing agreement.

     AerCo may terminate the servicing agreement for any aircraft to which any
of the following conditions apply:

     - in the case of marketing for re-lease of an aircraft, such aircraft has
       been off-lease and is reasonably available for re-lease for more than 180
       days after expiry of the agreed lease marketing period; or

     - debis Ireland fails, within a reasonable period of time not to exceed 180
       days, to submit to AerCo a bona fide third party offer to purchase an
       aircraft after written direction from AerCo to arrange such a sale; or

     - debis Ireland recommends a course of action for an aircraft or lease to
       AerCo which AerCo does not approve and, after negotiation in good faith,
       debis Ireland refuses to amend, withdraw or replace such recommendation
       with one that is consistent with its obligations.

     The servicing agreement will terminate automatically if either of the
administrative agency or cash management agreement is terminated.

     In no event will the servicing agreement terminate unless and until a
successor servicer shall have been appointed and have accepted the appointment.

  Assignment of Servicing Agreement

     debis Ireland and AerCo may not assign their rights and obligations under
the servicing agreement without each other's prior written consent.

  Priority of Payment of Servicing Fees and Reimbursable Expenditures

     debis Ireland's fees and expenses rank senior in priority of payment to all
payments on the notes.

                                        57
61

  Additional Servicers

     AerCo may appoint debis Ireland to service additional aircraft under the
terms of the servicing agreement.

CORPORATE MANAGEMENT

  Administrative Agent

     The administrative agent, which is debis AirFinance Administrative Services
Limited (a subsidiary of debis and formerly known as AerFi Administrative
Services Limited), provides administrative and accounting services to the board
of directors including:

     - acting as liaison with the rating agencies;

     - establishing and maintaining AerCo Group's accounting ledgers;

     - providing quarterly and annual draft accounts for AerCo Group and
       individual companies within AerCo Group;

     - preparing annual and three year budgets;

     - authorizing payment of certain expenses;

     - coordinating any amendments to the transaction agreements, other than the
       leases;

     - procuring, supervising and coordinating AerCo Group's outside legal
       counsel, accounting, tax and other professional advisors;

     - preparing and coordinating reports to investors and the Commission;

     - assisting AerCo Group's tax advisors with the preparation and filing of
       all required tax returns;

     - assisting AerCo Group in developing and implementing its interest rate
       management policy and developing financial models, cash flow projections
       and forecasts and in making aircraft lease, sale and capital investment
       decisions;

     - advising AerCo Group on the appropriate levels of the liquidity reserve
       amount; and

     - assisting AerCo Group with the public or private offerings of refinancing
       notes.

     AerCo's board of directors may ask the administrative agent to provide
additional administrative services. However, the administrative agent is not
obligated to perform any additional services that could reasonably result in the
business of AerCo or any of its subsidiaries ceasing to be separate and readily
identifiable from, and independent of, the administrative agent, debis or any of
their respective affiliates.

     The administrative agent receives a monthly administrative fee equal to 2%
of the rental payments for each month. The administrative fee must be at least a
minimum of $200,000 per year and will be adjusted for inflation. The
administrative agent will receive an additional fee for services provided in
connection with the public or private offering of securities by AerCo equal to
0.025% of the net proceeds of the offering. The administrative agent is
reimbursed for certain expenses incurred in performing its services under the
administrative agency agreement.

     In certain circumstances, AerCo may terminate the administrative agency
agreement and, in certain other circumstances, the administrative agent may
terminate it. The administrative agency agreement will terminate automatically
if either of the servicing agreement or the cash management agreement is
terminated.

     In no event will the administrative agency agreement terminate unless and
until a successor administrative agent shall have been appointed and have
accepted the appointment.

     The administrative agent is obligated to devote the same amount of time and
attention and is required to exercise the same level of skill, care and
diligence in the performance of its services as it would if it were
administering such services on its own behalf. We refer to this as the
"ADMINISTRATIVE AGENT'S SERVICES STANDARD."
                                        58
62

     In addition, if any conflicts of interest arise with respect to the
administrative agent's role and its other interests, the administrative agent
must report such conflict promptly to AerCo and must act in a manner that treats
AerCo equally with the entities giving rise to the conflict of interest, does
not violate the administrative agent's services standard or any of its covenants
under the administrative agency agreement and would not be reasonably likely to
have a material adverse effect on AerCo. We refer to this as the "ADMINISTRATIVE
AGENT'S CONFLICT DUTIES."

  Cash Manager

     The cash manager, which is debis AirFinance Cash Manager II Limited (a
subsidiary of debis and formerly known as AerFi Cash Manager II Limited),
provides cash management and related services to AerCo Group. The cash manager's
duties include informing the servicer and the administrative agent of the
aggregate deposits in the accounts and any other information that is required
about the accounts. The cash manager is authorized to invest funds held by AerCo
Group in the accounts other than the tax defeasance account in certain
prescribed investments on permitted terms.

     The cash manager also calculates certain monthly payments and makes all
other calculations as required under the cash management agreement based on data
provided by the servicer on the aircraft and the leases. The cash manager also
provides information required by the trustee to provide reports to the
noteholders.

     The cash manager receives a fee of $250,000 per year for its services to
AerCo Group. The fee is subject to adjustment for inflation. The cash manager
will not be liable to AerCo Group for any losses or taxes payable by AerCo Group
unless the losses or taxes arise from the cash manager's own gross negligence,
simple negligence in the handling of funds, willful misconduct, deceit or fraud
or that of its officers, directors, agents or employees. The cash manager will
be indemnified by the members of AerCo Group for any loss, liability or tax
incurred by the cash manager, its officers, directors, agents and employees as a
result of the performance of services under the cash management agreement. AerCo
Group will not indemnify the cash manager for losses caused by its own deceit,
fraud, willful default or negligence or that of its officers, directors, agents
and employees.

     In certain circumstances, AerCo or the cash manager may terminate the cash
management agreement. The cash management agreement will terminate automatically
if either of the servicing agreement or administrative agency agreement is
terminated.

     In no event will the cash management agreement terminate unless and until a
successor cash manager shall have been appointed and have accepted the
appointment.

  Company Secretary

     The company secretary 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 in the
relevant jurisdictions.

     Mourant & Co. Secretaries Limited acts as company secretary for members of
AerCo Group that are incorporated in Jersey.

  Standby Servicer, Cash Manager and Administrative Agent

     debis Aircraft Leasing Limited, the standby servicer, acts as standby
servicer, cash manager and administrative agent with respect to the aircraft
pursuant to the terms of the standby servicing, administrative agency and cash
management agreement dated as of July 17, 2000 between AerCo, debis and the
standby servicer. In the event the standby servicer is called upon to provide
services, such services will be provided for all leases and aircraft and will be
performed under substantially the same terms and conditions as the debis group
performs its services under the servicing, administrative agency and cash
management agreements. Following the acquisition by debis of 100% of the
ordinary share capital of AerFi, debis Aircraft Leasing Limited no longer
receives any fees as standby servicer, cash manager or administrative agent. In
addition, it is proposed to terminate these standby servicing, administrative
agency and cash management agreements in due course.

                                        59
63

B. COMPENSATION

     See "Item 6. Directors, Senior Management and Employees -- Directors and
Senior Management -- Directors" for details of compensation received by AerCo
directors.

C. BOARD PRACTICES

     See "Item 6. Directors, Senior Management and Employees -- Directors and
Senior Management -- Directors" for a description of AerCo's board practices.

     AerCo's existing directors have an indefinite term of office on the board
of directors. None of the directors' service contracts provide for benefits on
termination of their employment. AerCo does not have an audit or remuneration
committee.

D. EMPLOYEES

     AerCo's directors are non-executive and AerCo does 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.

E. SHARE OWNERSHIP

     None of the directors of AerCo own any shares of AerCo nor do they have
options to purchase shares of AerCo.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

     The ordinary shares of AerCo 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.

     Under the shareholders' undertaking entered into on July 15, 1998 by
Mourant & Co. Trustees Limited as trustee of the charitable trust, the nominees,
debis Ireland, AerCo and the trustee, the charitable trust trustee and debis
Ireland agreed that, as long as the notes are outstanding, they will not,
without the prior written approval of the trustee and all the directors,
transfer any part of the ordinary shares held by them or any interest therein
unless the transferee:

          (1) in the case of the ordinary shares held by the nominees for the
     charitable trust trustee, is a trustee of a trust formed for charitable
     purposes substantially identical to those for which the charitable trust is
     established; and

          (2) enters into an agreement substantially identical to the
     shareholders undertaking in favor of the trustee.

     In consideration for the undertakings given by the charitable trust trustee
in the shareholders' undertaking, the charitable trust trustee is entitled to
receive from AerCo an undertaking fee equal to $1,500 per annum. Under the
instrument of trust establishing the charitable trust, a certificate given by
the directors to the charitable trust trustee that its voting of the ordinary
shares in a specified manner is in the best commercial interest of AerCo shall,
for the purposes of the exercise of the charitable trust trustee's discretion,
be conclusive that any such action is in AerCo's best commercial interests. See
"Item 10. Additional Information -- Articles of Association" for a description
of the voting rights available to holders of AerCo ordinary shares.

                                        60
64

B. RELATED PARTY TRANSACTIONS

     AerCo Group has had and currently maintains various relationships with
debis. First, debis Ireland acted as promoter in establishing the entities that
comprise AerCo Group. Second, AerCo Group purchased substantially all of its
assets from debis Ireland and ALPS 94-1. See "Item 4. Information on the
Company -- History and Development of AerCo Limited." Third, debis Ireland is a
holder of 5% of the ordinary share capital of AerCo. Fourth, subsidiaries of
debis act as servicer, administrative agent and cash manager for AerCo Group.
See "Item 6. Directors, Senior Management and Employees -- Directors and Senior
Management -- Corporate Management." Fifth, Mr. Hansom, Ms. Hynes and Mr.
Redmond, employees of debis, hold certain directorships in AerCo and ALPS 94-1.
Sixth, debis Ireland holds all of the AerCo subclass D-2, E-1 and E-2 notes.

C. INTERESTS OF EXPERTS AND COUNSEL

     Not applicable.

ITEM 8.  FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     Consolidated financial statements are included in Item 18.

B. SIGNIFICANT CHANGES

     See "Item 4. Information on the Company -- History and Development of AerCo
Limited -- The Additional Acquisition" for a description of significant changes
which have occurred since the date of the annual financial statements.

ITEM 9.  THE LISTING

A. LISTING DETAILS

     Not applicable.

B. PLAN OF DISTRIBUTION

     Not applicable.

C. MARKETS

     Not applicable.

D. SELLING SHAREHOLDERS

     Not applicable.

E. DILUTION

     Not applicable.

F. EXPENSES OF THE ISSUE

     Not applicable.

ITEM 10.  ADDITIONAL INFORMATION

A. SHARE CAPITAL

     Not applicable.

                                        61
65

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 were filed as Exhibit 1 to the annual report on Form 20-F filed on
September 29, 2000.

  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 71839 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 include the following:

     - the purchase of aircraft and related leases and the management,
       operation, lease, re-lease and sale of aircraft or any interest therein
       and the entry into of all contracts and activities incidental thereto;

     - the financing or refinancing of the foregoing activities through the
       issue of debt securities and the granting of security over the Company's
       property to secure the repayment of such debt securities;

     - the provision of loans to, and guarantees of the Company's subsidiaries;
       and

     - engaging in currency and interest rate exchange transactions for hedging
       purposes.

  DIRECTORS

     We are managed by a board of directors which will consist of no more than
five persons at any time. See "Item 6. Directors, Senior Management and
Employees."

  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 such director's material interests, such
director:

     - may be a party to, or otherwise interested in, any transaction or
       arrangement with AerCo or in which AerCo is otherwise interested;

     - other than, in the case of an independent director, to the extent limited
       by the definition of that term in our Articles (which provides that a
       person acting as an independent director must not at any time during such
       director's service as a director or during the 24 months prior to such
       director's appointment be or have been an employee, consultant, officer
       or director of debis, any holder of the class E notes or any affiliate of
       any such person), 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 AerCo or in which AerCo is
       otherwise interested or which engages in transactions similar to those
       engaged in by AerCo and might present a conflict of interest for such
       director in discharging such director's duties;

     - shall not, by reason of such director's office, be accountable to AerCo
       for any benefit which such director 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.

     The servicing, administrative agency and cash management agreements between
AerCo and the debis group provide that certain actions shall be taken by AerCo
by a special board resolution. These actions relate to certain matters in which
a director appointed by the holder of AerCo's class E notes may have a potential
conflict of interest, for example the exercise by AerCo of its rights to
terminate any such agreement. Our Articles provide that a special board
resolution will require the affirmative vote of a majority of the independent
directors and, at

                                        62
66

any time at which the servicer and its affiliates hold the majority of AerCo's
class E notes, the directors appointed by the holder of AerCo's class E notes
will not have the right to vote in respect of a special board resolution.

  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 $75,000 per annum for his
services. Our Articles provide that the class E note directors are not entitled
to remuneration for their 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 indenture.

  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 AerCo 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 10,000 ordinary shares of
$1 nominal value per share of which 20 have been issued and are fully paid. The
rights, preferences and restrictions attaching to the shares are as follows:

  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, dividends not claimed within 10 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
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.

                                        63
67

  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 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

     AerCo 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
Finance and Economics Committee of the States (government) of Jersey 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 21 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 95% of the shares giving 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
                                        64
68

involving AerCo or any of our subsidiaries. See, however, "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.

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

IRISH TAX CONSIDERATIONS

     The following is a summary of principles of Irish taxation law in relation
to Irish income tax and withholding tax on payments on the notes. These
principles depend on interpretation of current law, regulations, rulings and
decisions and Irish Revenue practice, and reliance on Irish Revenue
confirmations obtained prior to the issue of and in connection with the notes,
all of which are subject to change. Any such change may be applied retroactively
and may adversely affect the principles of Irish tax described below. This
summary does not address all Irish tax principles that may apply to all
categories of potential investors, some of which may be subject to special
rules.

  Irish Income and Withholding Taxes on Payments on the Notes

     There will be no withholding or deduction for Irish taxes on principal and
interest paid by AerCo on the global notes or any payment of the principal and
interest on the book-entry interests. The foregoing, insofar as it relates to
interest (the "EUROBOND EXEMPTION"), is based on certain assumptions, including
that the notes, including the global notes, are listed on the Luxembourg Stock
Exchange or on another stock exchange which is recognized for relevant purposes
of Irish law and that interest on the global and book-entry notes is paid by a
paying agent outside of Ireland.

     The issuance of definitive notes may cause interest payments to be subject
to Irish withholding tax at the standard income tax rate which is currently 20%.
If any Irish withholding tax is imposed, noteholders and holders of book-entry
interests should note that AerCo will not make any additional payments for any
withholding tax. In this regard, Ireland has tax treaties with a number of
jurisdictions which, under certain circumstances, reduce the rate of Irish
withholding tax on payments of interest to persons resident in those
jurisdictions. A holder of a definitive note who is entitled to the benefit of
Article 11 of the income tax treaty between the United States and Ireland (the
"TREATY") (such a holder a "U.S. HOLDER") will normally be eligible to recover
in full any Irish tax withheld from payments of interest to which such U.S.
Holder is beneficially entitled by making a claim under the Treaty on the
appropriate form. Alternatively, a claim may be made by a U.S. Holder in advance
of a payment of interest. If the claim is accepted by the Irish Revenue, it will
normally authorize subsequent payments to that U.S. Holder to be made without
withholding for Irish tax.

                                        65
69

     Noteholders who are not ordinarily resident in Ireland will not be subject
to Irish income tax on interest paid by AerCo on the notes so long as the
interest payments are made by AerCo in the course of carrying on relevant
trading operations under its Shannon certificate. After December 2005 or on
earlier termination of AerCo's Shannon certified operations, the exemption from
Irish tax described above currently enjoyed by noteholders who are not
ordinarily resident in Ireland will terminate, absent a change in law in the
intervening period.

     Irish domestic law also provides that a person will be exempt from Irish
tax where there is no withholding tax or deduction from the interest by virtue
of the Eurobond exemption detailed above and the interest is paid to a resident
of a Member State of the European Union other than Ireland or to a resident of a
country with which Ireland has a double taxation treaty.

     Interest payments made by AerCo have an Irish source and whether or not
paid gross are, under existing Irish tax law, chargeable to Irish income tax by
self-assessment, subject, however, to such relief as may be afforded by the
provisions of any applicable double tax treaty. However, as a matter of
practice, the Irish tax authorities do not pursue collection of any such
liability for Irish tax for persons who are not resident in Ireland except where
such persons:

     - receive payments of interest through a person (including a trustee) or in
       the name of an agent or branch in Ireland having the management and
       control of the interest; or

     - seek to claim relief and/or repayment of tax deducted at source in
       respect of taxed income from Irish sources; or

     - are chargeable to Irish corporation tax on the income of an Irish branch
       or agency or to income tax on the profits of a trade carried on in
       Ireland to which the interest is attributable.

     The termination of the legislative provisions dealing with Shannon
certified operations on December 31, 2005 will not affect the exemption from
Irish withholding tax described above.

CERTAIN JERSEY TAX CONSIDERATIONS

     The following is a summary of the tax treatment under Jersey law of AerCo
and the tax treatment under Jersey law for 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. Unless otherwise noted, the term
"note" refers to both the actual global notes and the interest in the global
notes held indirectly through DTC, Clearstream, Luxembourg or Euroclear.

  Income Taxes

     AerCo currently qualifies as an "exempt company" under Article 123A of the
Income Tax (Jersey) Law 1961 as amended. As an exempt company, AerCo 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 long standing
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. For purposes of the 1961 Law the Comptroller of Income Tax in Jersey,
among other things, has granted certain concessions and given certain
confirmations to AerCo, the effect of which is that AerCo will not be subject to
Jersey income tax.

  Withholding Taxes

     In general, Jersey imposes a withholding tax at the rate of 20% on interest
and other amounts paid to non-residents of Jersey with respect to a debt
obligation of a company resident in Jersey. However, no such withholding tax is
imposed with respect to an exempt company. Accordingly, based upon AerCo's
qualification

                                        66
70

as an exempt company, no Jersey withholding tax will be deducted from interest
and other amounts paid on the notes on account of Jersey taxes.

     In the event that any Jersey withholding tax is imposed, noteholders should
note that there is no income tax treaty between the United States and Jersey
that would apply to reduce or eliminate such withholding.

     Noteholders should note further that AerCo will not be obligated under the
terms of the notes to make any additional payments in respect of any such
withholding tax. Accordingly, in the event that withholding were to be required
on account of Jersey taxes, distributions to noteholders may be less than those
which would be made on the notes in the absence of any such withholding tax.

  Other Taxes

     In the event that on the death of a sole individual holder of notes who is
a non-resident of Jersey, such notes are situated in Jersey (by virtue of their
being held on a register in Jersey or in bearer form and held in Jersey at the
date of death or otherwise deemed to be situated under applicable rules of
private international law), a grant of probate or letters of administration
would have to be obtained in Jersey and a duty of up to 1% of the value of the
assets of the deceased situated in Jersey would be payable.

F. DIVIDENDS AND PAYING AGENTS

     Not applicable.

G. STATEMENT BY EXPERTS

     Not applicable.

H. DOCUMENTS ON DISPLAY

     The documents concerning the Company which are referred to herein may be
inspected at the Securities and Exchange Commission, or at the registered
offices of the Company at 22 Grenville Street, St Helier, Jersey, JE4 8PX,
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.

I. SUBSIDIARY INFORMATION

     Not applicable.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The following quantitative and qualitative information is provided about
financial instruments to which AerCo was a party as of March 31, 2001.

     The quantitative disclosure and other statements in this section are
forward-looking statements that involve risks and uncertainties. Although our
policy is to limit our exposure to changes in interest rates, we could suffer
higher cash flow losses than described above as a result of actual future
changes in interest rates. You should also note that our future exposure to
interest rate movements will change as the composition of our lease portfolio
changes or if we issue new subclasses of additional notes or refinancing notes
with different interest rate provisions from the notes. You should also refer to
"Item 3. Key Information -- Risk Factors" for more information about risks,
especially lessee credit risk, that could intensify our exposure to changes in
interest rates.

                                        67
71

  Interest Rate Sensitivity

     AerCo Group's principal market risk exposure is to changes in interest
rates. This exposure arises from its notes and the derivative instruments used
by AerCo Group to manage interest rate risk. The basic terms of each subclass of
notes, including the outstanding principal amount and estimated fair value as of
March 31, 2001, are as follows:
PRINCIPAL                                          ESTIMATED
                        ANNUAL           AMOUNT                                          FAIR VALUE AT
                     INTEREST RATE     AT YEAR END    EXPECTED FINAL         FINAL       MARCH 31, 2001
SUBCLASS OF NOTES  (PAYABLE MONTHLY)    $MILLION       PAYMENT DATE*     MATURITY DATE      $MILLION
-----------------  -----------------   -----------   -----------------   -------------   --------------
Subclass A-2           LIBOR+0.32%          184      December 15, 2005   July 15, 2023          184
Subclass A-3           LIBOR+0.46%          565        June 15, 2002     July 15, 2025          565
Subclass A-4           LIBOR+0.52%          207        May 15, 2011      July 15, 2025          207
Subclass B-1           LIBOR+0.60%           72        July 15, 2013     July 15, 2023           71
Subclass B-2           LIBOR+1.05%           77        June 15, 2008     July 15, 2025           77
Subclass C-1           LIBOR+1.35%           84        July 15, 2013     July 15, 2023           80
Subclass C-2           LIBOR+2.05%           80        June 15, 2008     July 15, 2025           80
Subclass D-2         8.5% -- Fixed          100        May 15, 2014      July 15, 2025           70
Subclass E-1          20% -- Fixed          112        July 15, 2023     July 15, 2023           22
Subclass E-2          20% -- Fixed          109        July 15, 2025     July 15, 2025           22
                                          -----                                              ------
                                          1,590                                               1,378
                                          =====                                              ======
---------------
* As determined at date of issue.

  Interest Rate Risk and Management

     The leasing revenues of AerCo are generated primarily from lease rental
payments which are either fixed or floating. In some cases, leases carry fixed
and floating rental payments for different rental periods. In the case of
floating rate leases, an element of the rental varies in line with changes in
LIBOR, generally six-month LIBOR. See "Item 4. Information on the
Company -- Business Overview -- The Leases" for more information regarding the
terms of our leases. As of March 31, 2001, leases with respect to approximately
78% of the aircraft by appraised value at February 19, 2001 provided for fixed
rate rental payments and approximately 20% provided for floating rate payments
(excluding the aircraft off-lease and held for scrap).

     In general, an exposure to interest rate risk arises when AerCo's fixed and
floating interest obligations do not correlate to the mix of fixed and floating
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. The mix of fixed and floating rental payments contains a
higher percentage of fixed rate payments than the percentage of fixed rate
interest payments on the notes. In part, this reflects the fact that the reset
periods on floating rental payments are generally longer than the monthly reset
periods on the floating rate notes. AerCo enters into interest rate swaps in
order to correlate the contracted fixed and floating rental payments to the
fixed and floating interest rate payments on the notes.

     Under the swaps, AerCo generally pays fixed amounts and receives floating
amounts on a monthly basis. The swaps amortize on the basis of the expected
paydown schedule of the class A, class B and class C notes, the expiry dates of
the leases under which lessees are contracted to make fixed rate rental payments
and the LIBOR reset dates under the floating rate leases. At least every three
months, and in practice more frequently, the administrative agent seeks to enter
into additional swaps or sell at market value or unwind part or all of the swaps
and any future swaps in order to rebalance the fixed and floating mix of
interest obligations and the fixed and floating mix of rental payments. As of
March 31, 2001, none of AerCo's existing swaps had a maturity date extending
beyond January 2008. The fair value of the swaps at March 31, 2001 was negative
$41.8 million.

     Additional interest rate exposure will arise to the extent that lessees
owing fixed rate rental payments default and interest rates have declined
between the contract date of the lease and the date of default. This exposure
can
                                        68
72

be managed through the purchase of options on interest rate swaps. Because of
the credit quality of the lessees and the current interest rate environment,
AerCo does not currently intend to acquire any options on interest rate swaps.
If the credit quality of the lessees changes materially, or if the interest rate
environment warrants it, AerCo may decide to purchase options on interest rate
swaps, or enter into other derivative transactions such as credit derivatives as
a means of managing such risk.

     Through the use of interest rate swaps and other interest rate hedging
instruments, it is AerCo's policy not to be adversely exposed to material
movements in interest rates. We cannot assure you, however, that AerCo's
interest rate risk management strategies will be effective in this regard. Any
change to AerCo's policy with regard to its dealing in interest rate hedging
products is subject to periodic review by the rating agencies.

     The directors of AerCo are responsible for reviewing and approving the
overall interest rate management policies and transaction authority limits. As
described below, the administrative agent, acting within the overall policies
and limits, approves specific hedging instruments. Counterparty risk is
monitored on an ongoing basis. Counterparties are subject to the prior approval
of the directors of AerCo. AerCo's counterparties consist primarily of the
affiliates of major U.S. and European financial institutions (which may include
special purpose derivative vehicles) whose credit ratings are consistent with
maintaining the ratings of the most senior class of notes then outstanding. At
March 31, 2001, AerCo had five swap counterparties.

     In implementing its interest rate management policy described above, AerCo
seeks to manage its exposure to adverse changes in interest rates based on
regular reviews of its interest rate risk. Typically, before each payment date,
the administrative agent, on behalf of AerCo, estimates future principal
payments on the notes based on a model of its cash flows. The fixed and floating
rate components of our lease portfolio are then estimated. The administrative
agent reviews this estimate whenever lease rentals (whether fixed or floating
rate) are reset under the terms of the leases. This analysis invariably
indicates that AerCo is "short" floating rate revenues and thus is adversely
exposed to increases in LIBOR, the benchmark interest rate for the notes and the
floating rate leases. After taking into account its available cash balance and
its swap portfolio, AerCo then enters into additional interest rate swaps to
hedge against the estimated amount of this shortfall. This interest rate swap
portfolio is reviewed regularly on the basis described above.

     As an example, on January 23, 2001, AerCo entered into an interest rate
swap. With respect to the monthly period from February 15, 2001, to March 15,
2001 the estimated note balances (classes A through C) were $1,270 million,
leases maturing or rolling over amounted to $35.0 million, and relevant cash
deposits amounted to $65.0 million. As the swaps which had been previously
entered into carried a notional principal balance of $1,114 million, the new
swap has a notional principal balance in that particular one month period of $60
million.

     The following table sets forth terms of AerCo's swap portfolio as of March
31, 2001. In its swaps, AerCo generally pays a fixed monthly coupon and receives
one month LIBOR on the notional principal balance.
CURRENT NOTIONAL                                             FIXED MONTHLY
BALANCE ($000S)      EFFECTIVE DATE       MATURITY DATE       PAY RATE %
----------------   ------------------   ------------------   -------------
40,000         July 15, 1998         May 15, 2001        5.6690%
     125,000         July 15, 1998      September 15, 2004     5.7530%
      40,000        August 17, 1998      August 15, 2004       5.8240%
      20,000       September 28, 1998    January 15, 2004      5.0810%
      20,000        January 15, 1999      April 15, 2004       5.2140%
      15,000       February 23, 1999      March 15, 2004       5.3675%
      10,000         July 15, 1999        March 15, 2005       6.2650%
      60,000         July 27, 1999        March 15, 2006       6.3650%
      20,000       November 15, 2000      March 15, 2004       7.1925%
           0*         May 15, 2001        March 15, 2005       7.1200%
      80,000         July 17, 2000      November 15, 2004      6.9530%
      80,000         July 17, 2000        June 15, 2007        7.0000%
      28,000         July 17, 2000       January 15, 2006      7.0000%
69
73
CURRENT NOTIONAL                                             FIXED MONTHLY
BALANCE ($000S)      EFFECTIVE DATE       MATURITY DATE       PAY RATE %
----------------   ------------------   ------------------   -------------
36,000         July 17, 2000        April 15, 2007       7.0100%
      14,000         July 17, 2000      November 15, 2001      6.9100%
      15,000         July 17, 2000        April 15, 2004       6.9700%
      15,000         July 17, 2000       October 15, 2005      6.9900%
      15,000         July 17, 2000        June 15, 2005        6.9900%
      16,000         July 17, 2000      December 15, 2003      6.9600%
      14,000         July 17, 2000        March 15, 2006       7.0000%
      14,000         July 17, 2000       October 15, 2005      6.9900%
      35,000         July 17, 2000       January 15, 2008      7.0200%
      11,000         July 17, 2000      November 15, 2003      6.9600%
      13,000         July 17, 2000        June 15, 2002        6.9400%
      13,000         July 17, 2000        June 15, 2002        6.9400%
      20,000         July 17, 2000      November 15, 2004      6.9550%
      15,000         July 17, 2000        April 15, 2004       6.9490%
      15,000         July 17, 2000         May 15, 2004        6.9500%
      16,000         July 17, 2000       October 15, 2004      6.9560%
      16,000         July 17, 2000        March 15, 2005       6.9610%
      13,000         July 17, 2000      February 15, 2005      6.9590%
      14,000         July 17, 2000        July 15, 2004        6.9560%
      35,000       September 15, 2000      May 15, 2006        6.6930%
      90,000        October 16, 2000    February 15, 2006      6.5370%
      25,000       November 15, 2000    November 15, 2002      6.5100%
      10,000        January 16, 2001      June 15, 2001        6.0750%
           0*        March 15, 2002     September 15, 2002     5.5600%
      60,000       February 15, 2001      July 15, 2001        5.2675%
           0*        April 17, 2001     September 15, 2001     4.5475%
--------------
   1,078,000
--------------
--------------
---------------
* These are forward starting swaps which will become effective on the date shown
  on the "Effective Date" column.

  Derivative Instruments and Hedging Activities

     In June 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities." In June 2000 the FASB
issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138
require that, under U.S. GAAP, all derivative instruments be recorded on the
balance sheet at their respective fair values. SFAS No. 133 and SFAS No. 138 are
effective for all fiscal quarters of all fiscal years beginning after June 30,
2000. We adopted SFAS No. 133 and SFAS No. 138 on April 1, 2001.

     Following the adoption of the standards, in respect of all future financial
statements, all derivatives will be recognized on the balance sheet at their
fair value. All derivatives will be designated as either a hedge of the fair
value of a recognized asset or liability or of an unrecognized firm commitment
("FAIR VALUE" hedge) or a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability ("CASH FLOW" hedge). We expect that all of our interest rate swaps
will be designed as cash flow hedges.

     AerCo has a detailed hedging policy, which has been approved by the Board
of Directors and the rating agencies, which rate certain of the notes issued by
AerCo. This policy has been employed by the administrative agent since the
inception of AerCo in 1998. As part of this hedging policy, AerCo has formally
documented all

                                        70
74

relationships between hedging instruments and hedged items in the context of the
requirements of SFAS No. 133 and SFAS No. 138. This includes linking all
derivatives that are designated as cash-flow hedges to specific liabilities on
the balance sheet. Since April 1, 2001, AerCo Group formally assesses, both at
the hedge's inception and on an ongoing basis, whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in cash
flows of hedged items.

     At April 1, 2001 all of AerCo's derivatives were deemed highly effective.
Subsequent changes in the fair value of a derivative that is highly effective
and that is designated and qualifies as a cash-flow hedge will be recorded in
Other Comprehensive Income until earnings are affected by the variability in
cash flows of the designated hedged item.

     We will discontinue hedge accounting prospectively when it is determined
that the derivative is no longer highly effective in offsetting changes in the
cash flows of the hedged item, the derivative expires or is sold, terminated, or
exercised, or management determines that designation of the derivative as a
hedging instrument is no longer appropriate.

     In all situations in which hedge accounting is discontinued, we will
continue to carry the derivative at its fair value on the balance sheet, and
recognize any changes in its fair value in earnings.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

                                    PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None.

ITEM 14.  MATERIAL MODIFICATIONS TO 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-75.

                                        71
75

ITEM 19.  EXHIBITS
8      List of significant subsidiaries
10.1    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from July 17, 2000 to
        September 15, 2000. (Incorporated by reference to Form 6-K
        filed on October 31, 2000)
10.2    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from September 15, 2000 to
        December 15, 2000. (Incorporated by reference to Form 6-K
        filed on January 31, 2001)
10.3    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from December 15, 2000 to
        March 15, 2001. (Incorporated by reference to Form 6-K filed
        on April 30, 2001)
10.4    Cash Analysis of Financial Condition and Results of
        Operations, Three Month Period from March 15, 2001 to June
        15, 2001. (Incorporated by reference to Form 6-K filed on
        July 31, 2001)
 12     Statement re Computation of Ratios
72
76

                                   SIGNATURE

     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.

                                          By:   /s/ Frederick W. Bradley Jr.
                                            ------------------------------------
                                            Name: Frederick W. Bradley Jr.
                                            Title: Director

Dated: September 26, 2001

                                        73
77

                         INDEX TO FINANCIAL STATEMENTS
PAGE
                                                                ----
A.  HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS FOR AERCO
  AND ALPS 94-1
     Independent auditors' report...........................     F-5
     Consolidated balance sheets............................     F-6
     Consolidated statements of operations..................     F-7
     Consolidated statements of cash flows..................     F-8
     Statements of changes in shareholders' deficit.........     F-9
     Statement of accounting policies.......................    F-10
     Notes to the consolidated financial statements.........    F-14
B.  HISTORICAL FINANCIAL STATEMENTS FOR AERFI TRANSFERRED
  AIRCRAFT
     Independent auditors' report...........................    F-45
     Statement of operations................................    F-46
     Statement of cash flows................................    F-47
     Statement of changes in net assets.....................    F-48
     Statement of accounting policies.......................    F-49
     Notes to the financial statements......................    F-51
C.  HISTORICAL FINANCIAL STATEMENTS FOR NEW AERFI
  TRANSFERRED AIRCRAFT
     Independent auditors' report...........................    F-59
     Statements of net assets...............................    F-60
     Statements of operations...............................    F-61
     Statements of cash flows...............................    F-62
     Statements of changes in net assets....................    F-63
     Statement of accounting policies.......................    F-64
     Notes to the financial statements......................    F-67
COMPANY DEFINITIONS

     "AERCO LIMITED"         AerCo Limited, a special purpose limited liability
                             company incorporated under the laws of Jersey with
                             its registered office located at 22 Grenville
                             Street, St. Helier, Jersey, JE4 8PX, Channel
                             Islands.

     "AERCO"                 AerCo Limited and its consolidated subsidiaries.

     "AERFI"                 AerFi Group plc and its subsidiary undertakings.

     "DEBIS AIRFINANCE"      debis AirFinance Ireland plc (formerly AerFi Group
                             plc) and its subsidiary undertakings.

     "ALPS 94-1 LIMITED"     Aircraft Lease Portfolio Securitization 94-1
                             Limited, a special purpose limited liability
                             company incorporated under the laws of Jersey in
                             1994 to purchase 27 aircraft from debis AirFinance.

     "ALPS 94-1"             ALPS 94-1 Limited and its consolidated
                             subsidiaries.

     "INDIGO"                Indigo Aviation AB, a Swedish company with its
                             registered office located at Sodra Forstadsgatan 4,
                             S-211 43, Malmo, Sweden.

                                       F-1
78

                        CONTENTS OF FINANCIAL STATEMENTS

     AerCo has included the following audited historical financial statements in
pages F-4 to F-75 of this Form 20-F.

A.  U.K. GAAP AERCO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH
31, 2001 AND 2000 AND FOR THE PERIOD FROM JULY 15, 1998 TO MARCH 31, 1999 AND
COMPARATIVE ALPS 94-1 FINANCIAL INFORMATION FOR THE PERIOD FROM JULY 1, 1998 TO
JULY 14, 1998.

     The AerCo financial statements include the results of operations and
financial condition of the 30 aircraft and related leases acquired by AerCo
through the acquisition of all the outstanding capital stock of 18 aircraft
owning subsidiaries of debis AirFinance in July 2000 and reflect the sale of one
engine during the year ended March 31, 2001.

     The AerCo financial statements also include the results of operations and
financial condition of the 25 aircraft and related leases acquired by AerCo
through the acquisition of all the outstanding capital stock of ALPS 94-1
Limited and the ten aircraft and related leases acquired by AerCo through the
acquisition of all the outstanding capital stock of certain aircraft owning
subsidiaries of debis AirFinance in July 1998, and reflect the sale of one F100
aircraft during the period from July 15, 1998 to March 31, 1999 and the sale of
one F100 aircraft during the year ended March 31, 2000.

     Comparative financial information for ALPS 94-1 is presented as ALPS 94-1
is considered to be the predecessor business of AerCo. We believe this is an
appropriate presentation because:

     - AerCo was formed mainly for the purpose of refinancing the aircraft
       portfolio of ALPS 94-1;

     - AerCo's initial portfolio of 35 aircraft included 26 of the 27 aircraft
       that ALPS 94-1 originally acquired from debis AirFinance;

     - The original ALPS 94-1 aircraft represented 79% of AerCo's initial
       portfolio by appraised value as at March 1, 1998; and

     - AerCo's ongoing aircraft leasing activities are largely the same as those
       conducted by ALPS 94-1.

     The financial statements of ALPS 94-1 include the results of operations and
financial condition of the 27 aircraft originally acquired by ALPS 94-1 from
debis AirFinance in August 1994, including:

     - the Boeing 767-300ER aircraft that was purchased by debis AirFinance from
       ALPS 94-1 immediately prior to the closing of the offering of notes by
       AerCo in July 1998 and which was not one of the aircraft acquired by
       AerCo on July 15, 1998; and

     - the A300-B4-200 aircraft up to April 28, 1998 when debis AirFinance
       acquired this aircraft from ALPS 94-1. debis AirFinance subsequently sold
       this aircraft to AerCo.

B.  U.K. GAAP AERFI TRANSFERRED AIRCRAFT FINANCIAL STATEMENTS FOR THE PERIOD
FROM JULY 1, 1998 TO JULY 14, 1998.

     These financial statements include historical financial information on the
ten aircraft acquired by AerCo from debis AirFinance in July 1998 and include
the A300-B4-200 aircraft only from April 28, 1998, the date debis AirFinance
acquired it from ALPS 94-1. These financial statements are prepared as if the
AerFi transferred aircraft were operated separately from debis AirFinance for
the periods presented.

                                       F-2
79

C.  U.K. GAAP NEW AERFI TRANSFERRED AIRCRAFT FINANCIAL STATEMENTS FOR THE PERIOD
FROM APRIL 1, 2000 TO JULY 16, 2000 AND FOR THE TWO YEARS ENDED MARCH 31, 2000
AND 1999.

     These financial statements include historical financial information on the
two F100, one B737-300 and one A321 aircraft acquired by AerCo from debis
AirFinance under the refinancing and additional aircraft acquisition in July
2000, for the period from April 1, 2000 to July 16, 2000 and the years ended
March 31, 2000 and 1999 and on 26 of the Indigo transferring aircraft for the
period from December 16, 1999 (the date Indigo was acquired by debis AirFinance)
to March 31, 2000 and the period from April 1, 2000 to July 16, 2000. These
financial statements are prepared as if the New AerFi transferred aircraft were
operated separately from debis AirFinance for the periods presented.

                                       F-3
80

                              FINANCIAL STATEMENTS

                                     AERCO

                                       F-4
81

                                     AERCO

                          INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF AERCO LIMITED

     We have audited the accompanying consolidated balance sheets of AerCo as of
March 31, 2001 and March 31, 2000 and the related consolidated statements of
operations, cash flows and changes in shareholders' deficit for AerCo for the
years ended March 31, 2001 and 2000 and the period from July 15, 1998 to March
31, 1999 and for ALPS 94-1 for the period from July 1, 1998 to July 14, 1998.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AerCo as at
March 31, 2001 and March 31, 2000 and the results of operations and cash flows
of AerCo for the years ended March 31, 2001 and 2000 and for the period from
July 15, 1998 to March 31, 1999 and ALPS 94-1 for the period from July 1, 1998
to July 14, 1998 in conformity with generally accepted accounting principles in
the United Kingdom.

     Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations of AerCo for the
years ended March 31, 2001 and 2000 and the period from July 15, 1998 to March
31, 1999 and of ALPS 94-1 for the period from July 1, 1998 to July 14, 1998 and
the shareholders' deficit of AerCo as of March 31, 2001 and March 31, 2000 to
the extent summarized in notes 24, 25 and 26 to the consolidated financial
statements.

KPMG
Chartered Accountants
Dublin, Ireland
July 25, 2001, except note 30 which is as of September 26, 2001

                                       F-5
82

                                     AERCO

                          CONSOLIDATED BALANCE SHEETS
NOTES    MARCH 31, 2001    MARCH 31, 2000
                                                          -----    --------------    --------------
                                                                     U.S.$'000         U.S.$'000
ASSETS
CURRENT ASSETS
Cash..................................................        1         39,661            26,413
Commercial paper......................................        1         65,000            39,998
Accounts receivable, net..............................        2          7,388             4,752
                                                                     ---------         ---------
TOTAL CURRENT ASSETS..................................                 112,049            71,163
INTANGIBLE ASSETS
Goodwill, net.........................................        3         55,889            43,100
FIXED ASSETS
Aircraft, net.........................................        5      1,478,945           829,194
                                                                     ---------         ---------
TOTAL ASSETS..........................................               1,646,883           943,457
                                                                     =========         =========
LIABILITIES & SHAREHOLDERS' DEFICIT
LIABILITIES
Accrued expenses and other liabilities................        7        171,388            89,902
Indebtedness..........................................        9      1,578,832           901,198
Security deposits.....................................       10         20,880            16,304
                                                                     ---------         ---------
TOTAL LIABILITIES.....................................               1,771,100         1,007,404
SHAREHOLDERS' DEFICIT
Share capital.........................................       11             --                --
Accumulated deficit...................................                (124,217)          (63,947)
                                                                     ---------         ---------
TOTAL SHAREHOLDERS' DEFICIT...........................                (124,217)          (63,947)
                                                                     ---------         ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT...........               1,646,883           943,457
                                                                     =========         =========
The accompanying notes, including the statement of accounting policies, on
pages F-10 to F-13 are an integral part of the consolidated financial
statements.

                                       F-6
83

                                     AERCO

                     CONSOLIDATED STATEMENTS OF OPERATIONS
AERCO                             ALPS 94-1
                                                         --------------------------------------------------   ---------------
                                                                                             PERIOD FROM        PERIOD FROM
                                                           YEAR ENDED       YEAR ENDED     JULY 15, 1998 TO   JULY 1, 1998 TO
                                                 NOTES   MARCH 31, 2001   MARCH 31, 2000    MARCH 31, 1999     JULY 14, 1998
                                                 -----   --------------   --------------   ----------------   ---------------
                                                           U.S.$'000        U.S.$'000         U.S.$'000          U.S.$'000
REVENUES
Aircraft leasing -- continuing operations......   12          102,840         109,146             82,826              3,635
             -- acquisitions...................                62,094              --                 --                 --
EXPENSES
Depreciation...................................    5          (69,063)        (46,998)           (33,821)            (1,519)
Provision for impairment in aircraft value.....   13           (3,794)        (13,079)                --                 --
Amortization of goodwill.......................    3           (2,912)         (2,356)            (1,669)                --
Net interest expense...........................   14         (137,942)        (78,818)           (54,108)            (2,757)
Other expenses.................................   15          (11,444)        (15,742)            (8,311)              (646)
                                                          -----------        --------        -----------        -----------
Total expenses.................................               (225,15)       (156,993)           (97,909)            (4,922)
                                                          -----------        --------        -----------        -----------
NET LOSS FROM OPERATIONS -- CONTINUING
                         OPERATIONS............               (32,639)        (47,847)           (15,083)            (1,287)
                      -- ACQUISITIONS..........               (27,582)             --                 --                 --
Profit/(loss) on sale of aircraft..............    5               --            (941)                10                 10
                                                          -----------        --------        -----------        -----------
NET LOSS BEFORE PROVISION FOR TAXES............   16          (60,221)        (48,788)           (15,073)            (1,277)
Provision for taxes............................   17              (49)            (51)               (35)                --
                                                          -----------        --------        -----------        -----------
NET LOSS FOR THE PERIOD........................               (60,270)        (48,839)           (15,108)            (1,277)
RETAINED LOSS BROUGHT FORWARD..................               (63,947)        (15,108)                --            (77,246)
                                                          -----------        --------        -----------        -----------
RETAINED LOSS CARRIED FORWARD..................              (124,217)        (63,947)           (15,108)           (78,523)
BASIC AND DILUTED LOSS PER ORDINARY SHARE......   18         (3,013.5)         (2,442)            (755.4)            (127.7)
                                                          -----------        --------        -----------        -----------
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
  OUTSTANDING..................................   18               20              20                 20                 10
                                                          ===========        ========        ===========        ===========
All recognized gains and losses are included in the consolidated statements
of operations above.

     There is no material difference between the net income for AerCo or ALPS
94-1 for any of the periods set out above, and the historical cost equivalent.

     The results for all periods up to and including the year ended March 31,
2000 are derived from continuing operations. The results for the year ended
March 31, 2001 are derived from continuing operations and the acquisition of an
additional 30 aircraft on July 17, 2000. The revenues and expenses attributable
to this acquired business for the period from July 17, 2000 to March 31, 2001
are disclosed in note 4(b) to the consolidated financial statements.

     The accompanying notes, including the statement of accounting policies on
pages F-10 to F-13, are an integral part of the consolidated financial
statements.

                                       F-7
84

                                     AERCO

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
AERCO                             ALPS 94-1
                                                     --------------------------------------------------   ----------------
                                                                                         PERIOD FROM        PERIOD FROM
                                                       YEAR ENDED       YEAR ENDED     JULY 15, 1998 TO   JULY 1, 1998 TO
                                                     MARCH 31, 2001   MARCH 31, 2000    MARCH 31, 1999     JULY 14, 1998
                                                     --------------   --------------   ----------------   ----------------
                                                       U.S.$'000        U.S.$'000         U.S.$'000          U.S.$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period............................      (60,270)        (48,839)            (15,108)          (1,277)
ADJUSTMENTS TO RECONCILE NET LOSS FROM OPERATIONS
  TO CASH PROVIDED/(UTILIZED) BY OPERATING
  ACTIVITIES
Depreciation.......................................       69,063          46,998              33,821            1,519
Amortization of goodwill...........................        2,912           2,356               1,669               --
Amortization of debt issue costs...................        2,414             898                 673               --
Provision for impairment in aircraft value.........        3,794          13,079                  --               --
Changes in operating assets and liabilities
  Accounts receivable..............................       (2,276)           (748)             (1,077)            (252)
  Accrued expenses and other liabilities...........       39,111          27,888              14,080           (3,005)
Net maintenance receipts/(expenditure).............        6,014          (7,481)             (4,675)          (1,062)
Net security deposits (repaid)/received............       (2,499)          1,521              (1,422)              --
                                                       ---------         -------          ----------          -------
NET CASH PROVIDED/(UTILIZED) BY OPERATING
  ACTIVITIES.......................................       58,263          35,672              27,961           (4,077)
                                                       ---------         -------          ----------          -------
CAPITAL EXPENDITURE
Purchase of aircraft...............................           --            (622)                 --               --
Sale of aircraft...................................        1,444          14,663              14,500           65,677
                                                       ---------         -------          ----------          -------
                                                           1,444          14,041              14,500           65,677
ACQUISITIONS
Purchase of subsidiary undertakings................     (706,349)             --          (1,071,565)              --
Cash acquired with subsidiaries....................           11              --             146,175               --
                                                       ---------         -------          ----------          -------
                                                        (706,338)             --            (925,390)              --
MANAGEMENT OF LIQUID RESOURCES
Net (purchase)/sale of commercial paper............      (25,002)             (1)            (39,997)          36,686
                                                       ---------         -------          ----------          -------
FINANCING ACTIVITIES
Debt issued........................................    1,169,052              --             986,609               --
Indebtedness repaid................................     (484,171)        (48,917)            (38,065)          (3,719)
                                                       ---------         -------          ----------          -------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING
  ACTIVITIES.......................................      684,881         (48,917)            948,544           (3,719)
                                                       ---------         -------          ----------          -------
NET INCREASE IN CASH...............................       13,248             795              25,618           94,567
CASH AT BEGINNING OF PERIOD........................       26,413          25,618                  --           51,608
                                                       ---------         -------          ----------          -------
CASH AT END OF PERIOD..............................       39,661          26,413              25,618          146,175
                                                       =========         =======          ==========          =======
Disclosure of cash flow information is set out in Note 21.

     The accompanying notes, including the statement of accounting policies on
pages F-10 to F-13, are an integral part of the consolidated financial
statements.

                                       F-8
85

                                     AERCO

                 STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
TOTAL
                                                   NUMBER                     RETAINED    SHAREHOLDERS'
                                                  OF SHARES   SHARE CAPITAL     LOSS         DEFICIT
                                                  ---------   -------------   ---------   -------------
                                                                U.S.$'000     U.S.$'000     U.S.$'000
ALPS 94-1:
Balance at June 30, 1998.......................       10              --       (77,246)      (77,246)
Net loss for the period........................       --              --        (1,277)       (1,277)
                                                     ---         -------      --------      --------
BALANCE AT JULY 14, 1998.......................       10              --       (78,523)      (78,523)
                                                     ===         =======      ========      ========
-------------------------------------------------------------------------------------------------------
AERCO:
Balance at July 15, 1998.......................       20                            --            --
Net loss for the period........................       --              --       (15,108)      (15,108)
                                                     ---         -------      --------      --------
Balance at March 31, 1999......................       20              --       (15,108)      (15,108)
Net loss for the year..........................       --              --       (48,839)      (48,839)
                                                     ---         -------      --------      --------
Balance at March 31, 2000......................       20              --       (63,947)      (63,947)
Net loss for the year..........................       --              --       (60,270)      (60,270)
                                                     ---         -------      --------      --------
BALANCE AT MARCH 31, 2001......................       20              --      (124,217)     (124,217)
                                                     ===         =======      ========      ========
The accompanying notes, including the statement of accounting policies on
pages F-10 to F-13, are an integral part of the consolidated financial
statements.

                                       F-9
86

                                     AERCO

                        STATEMENT OF ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

     AerCo Limited was incorporated in Jersey, Channel Islands on June 4, 1998
for the purpose of refinancing ALPS 94-1 and the acquisition of 10 aircraft from
debis AirFinance. AerCo did not conduct any business prior to July 15, 1998.

     This transaction, which occurred on July 15, 1998, involved the purchase by
AerCo Limited of 100% of the capital stock of ALPS 94-1 Limited and thereby a
portfolio of 25 aircraft and related leases and the purchase of 10 aircraft and
related leases from debis AirFinance. The acquisition of the 10 aircraft from
debis AirFinance was achieved through the purchase of the capital stock in a
number of aircraft owning subsidiaries of debis AirFinance. AerCo Limited
financed the acquisition of the capital stock of ALPS 94-1 Limited and the 10
aircraft from debis AirFinance through the issue of five classes of notes. All
of the three most senior classes of notes (the "A to C notes") were sold in a
U.S.$800 million underwritten global public offering. debis AirFinance
subscribed for all of the fourth and fifth classes of notes (the "D and E
notes").

     On the refinancing, AerCo Limited advanced ALPS 94-1 Limited a portion of
net cash proceeds from the offering which enabled ALPS 94-1 Limited to
immediately redeem or repay its existing financial indebtedness.

     On July 17, 2000, AerCo issued a further $960 million of notes in four
subclasses, subclass A-3, subclass A-4, subclass B-2 and subclass C-2 (the "2000
notes"). The Company also issued two additional subclasses of notes, the D-2
notes and E-2 notes which were purchased by debis AirFinance. The Company used
the proceeds from the issuance of the 2000 notes, the subclass D-2 notes and
subclass E-2 notes (i) to refinance the subclass A-1 notes, (ii) to refinance
the subclass D-1 notes and (iii) to acquire 30 additional aircraft (the
"additional aircraft") with an appraised fair market value of $724.1 million,
and associated leases through the acquisition of certain aircraft owning
subsidiaries, and one associated conduit leasing company, of debis AirFinance.
Certain of the additional aircraft were delivered to AerCo on July 17, 2000. As
of March 31, 2001, all of the additional aircraft had been delivered to AerCo.

     Comparative financial information for ALPS 94-1 is presented in these
financial statements as ALPS 94-1 is considered to be the predecessor business
of AerCo.

     The activities of AerCo and ALPS 94-1 include the sale, procurement and
leasing of aircraft together with associated support services.

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 Kingdom and comply with Financial Reporting Standards
of the Accounting Standards Board in the United Kingdom as promulgated by The
Institute of Chartered Accountants in England and Wales. Generally accepted
accounting principles in the United Kingdom differ in certain significant
respects from generally accepted accounting principles in the United States. A
summary of these differences are set out in notes 24, 25 and 26.

     The consolidated financial statements are prepared on the going concern
basis and under the historic cost convention and are stated in U.S. dollars,
which is the principal operating currency of AerCo, ALPS 94-1 and of the
aviation industry.

                                       F-10
87
                                     AERCO

                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires the directors of AerCo Limited and ALPS
94-1 Limited to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. While the directors of AerCo Limited and
ALPS 94-1 Limited believe that the estimates and related assumptions used in the
preparation of these financial statements are appropriate, actual results could
differ from those estimates.

BASIS OF CONSOLIDATION

     The consolidated financial statements include the results of AerCo Limited
and all its subsidiaries (including ALPS 94-1). All intercompany profits,
transactions and account balances have been eliminated.

GOODWILL

     Purchased goodwill arising on the acquisition of a business represents the
excess of acquisition cost over the fair value of the identifiable net assets
when they were acquired. Purchased goodwill arising on acquisitions is
capitalized on the balance sheet and amortized on a straight line basis over the
estimated economic life of the goodwill.

     In accordance with Financial Reporting Standard No. 10 "Goodwill and
Intangible Assets", goodwill is subject to a mandatory impairment test at the
end of the first full financial year following the acquisition. Thereafter
goodwill is reviewed for impairment in any other period where events or changes
in circumstances indicate that the carrying value may not be recoverable.

REVENUE RECOGNITION

     Revenue from aircraft on operating leases is recognized as income on a
straight line basis over the period of the leases. Where rentals are adjusted to
reflect increases or decreases in prevailing interest rates such adjustments are
accounted for as they arise. This includes rental income earned on aircraft for
the period prior to delivery (see "-- Aircraft"). Lease rentals received in
advance are deferred and recognized over the period to which they relate.

INTEREST INCOME

     Interest is credited to the statement of operations as it is earned.

MAINTENANCE

     In most lease contracts the lessee has the obligation to pay for
maintenance costs on airframes and engines which arise during the term of the
lease and in many lease contracts the lessee makes a full or partial prepayment,
calculated at an hourly rate, into a maintenance reserve fund paid to AerCo and
ALPS 94-1 from which the lessee can draw in respect of maintenance expenditures
for major checks. Amounts held in respect of aircraft maintenance are recorded
as accrued expenses and other liabilities. Any surplus amounts held in the fund
on termination of a lease, to which the next lessee has no access, are recorded
as income at that time.

     Maintenance costs borne directly by AerCo and ALPS 94-1 and which are not
paid for by lessees are expensed as incurred.

                                       F-11
88
                                     AERCO

                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

TAXATION

     AerCo Limited has been granted exempt company status by the Jersey taxation
authorities. It pays an exempt company fee of STG L600 per annum. AerCo Limited
and its Irish subsidiaries are subject to Irish corporation tax on qualifying
trading operations at a rate of 10% until December 31, 2005. Thereafter the
corporate tax rate is due to revert to 12.5%. Taxation is provided on the
profits of the foreign subsidiaries at the current rates. ALPS 94-1 Limited has
been granted exempt company status by the Jersey taxation authorities. It pays
an exempt company fee of STG L600 per annum. Taxation is provided on the profits
of its subsidiaries at the current rates.

AIRCRAFT

     In the period ended June 30, 1995 ALPS 94-1 agreed to purchase 27 aircraft
on operating leases from debis AirFinance.

     On July 15, 1998 AerCo completed a transaction resulting in a refinancing
and restructuring of ALPS 94-1 and the acquisition of an additional 10 aircraft
from debis AirFinance. The refinancing involved the purchase of aircraft at an
aggregate appraised fair market value of U.S.$951.97 million.

     On July 17, 2000 AerCo completed a refinancing of its subclass A-1 and D-1
notes and the acquisition of an additional 30 aircraft from debis AirFinance at
an aggregate appraised fair market value of U.S.$724.1 million.

     Aircraft are stated at cost less accumulated depreciation and are
depreciated at rates 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 current estimates of residual values and useful economic
lives are generally 15% of cost, and 25 years from date of manufacture,
respectively.

     Additional charges are made to reduce the book value of specific assets to
the recoverable amount where an impairment in value is considered to have
occurred in accordance with Financial Reporting Standard No. 11 "Impairment of
Tangible Fixed Assets and Goodwill." An impairment review is carried out when
there has been an indication of impairment, usually on the basis of independent
market appraisals and indications of market demand. An impairment is measured by
comparing the carrying value of the aircraft and engines with the recoverable
amount. Recoverable amount is the higher of the net realizable value and the
value in use on an after tax basis. Value in use is based on the anticipated
future cash flows from the aircraft, discounted at a market rate of return.

CASH AND LIQUID RESOURCES

     Substantially all of the cash and commercial paper balances are held for
specific purposes under the terms of the Trust Indenture. For the purposes of
the cash flow statements cash represents amounts available on demand and liquid
resources comprise other cash and commercial paper. While the cash balances are
held for specific purposes they may be applied for these purposes on demand and
are classified as cash in the cash flow statement.

INDEBTEDNESS

     Repayment of the principal amount of the class E notes in AerCo and accrued
interest thereon is dependent upon funds being available to meet such
liabilities as they fall due. Repayment of the principal amount of the class E
note in ALPS 94-1 and accrued interest thereon was dependent upon funds being
available to meet such liabilities as they fell due. Under the terms of the ALPS
94-1 class E note, the recognition by the directors of a permanent diminution in
the value of aircraft resulted in certain circumstances in a legal reduction in
the principal balance on the class E note.

                                       F-12
89
                                     AERCO

                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

     AerCo manages its interest rate exposure through the use of interest rate
swaps. Under these swap arrangements AerCo will pay fixed interest and receive
floating interest on a monthly basis. The objective of AerCo's interest rate
risk management policy is to correlate the contracted fixed and floating rental
payments in its portfolio to the floating interest payments on the A, B and C
notes, taking account of expected amortization on these notes. Net receipts and
payments arising in respect of these swaps are recognized as adjustments to
interest expense on an accruals basis.

     AerCo is also exposed to losses in the event of non-performance by
counterparties on interest rate swaps or in the event of defaults by lessees
where income streams have been hedged. However, AerCo does not anticipate
non-performance by the counterparties and losses or gains related to hedging
instruments which result from lessee defaults are accounted for as they are
incurred.

     ALPS 94-1 did not use any interest rate swaps to manage its interest rate
exposure for any period for which the financial statements are presented.

                                       F-13
90

                                     AERCO

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1   CASH AND COMMERCIAL PAPER
MARCH 31, 2001    MARCH 31, 2000
                                                                  --------------    --------------
                                                                  U.S.$'000         U.S.$'000
Cash......................................................        39,661            26,413
    Commercial paper..........................................        65,000            39,998
                                                                     -------           -------
                                                                     104,661            66,411
                                                                     =======           =======
Substantially all of the cash and commercial paper balances of AerCo at
March 31, 2001 and March 31, 2000 are held for specific purposes under the terms
of the AerCo Trust Indenture.

2   ACCOUNTS RECEIVABLE, NET
MARCH 31, 2001    MARCH 31, 2000
                                                                  --------------    --------------
                                                                  U.S.$'000         U.S.$'000
Trade receivables, net....................................         7,053             4,508
    Non-trade receivables.....................................           335               244
                                                                     -------           -------
                                                                       7,388             4,752
                                                                     =======           =======
Trade receivables comprise amounts in respect of rent and maintenance
payments due from lessees and are stated net of provisions for doubtful debt.

     As at March 31, 2001 four lessees accounted for 40%, 20%, 16% and 15%
respectively of trade receivables of AerCo. Trade receivables at March 31, 2001
are shown net of a bad debt provision of U.S.$0.2m.

     As at March 31, 2000 three lessees accounted for 36%, 32% and 20%
respectively of trade receivables of AerCo. Trade receivables at March 31, 2000
are shown net of a bad debt provision of U.S.$3.5m.

     Activity in the allowance for doubtful accounts was as follows:
MARCH 31, 2001    MARCH 31, 2000    MARCH 31, 1999
                                                   --------------    --------------    --------------
                                                   U.S.$'000         U.S.$'000         U.S.$'000
Balance, beginning of period...............         3,512             1,366               819
    Provision for doubtful account.............         2,237             2,146               547
    Bad debts written off......................        (5,585)               --                --
                                                       ------            ------            ------
    Balance, end of period.....................           164             3,512             1,366
                                                       ======            ======            ======
F-14
91
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3   GOODWILL, NET
MARCH 31, 2001    MARCH 31, 2000    MARCH 31, 1999
                                                   --------------    --------------    --------------
                                                   U.S.$'000         U.S.$'000         U.S.$'000
COST
    At beginning of period.....................        47,125            47,125                --
    Addition in period.........................        15,701                --            47,125
                                                       ------            ------            ------
    End of period..............................        62,826            47,125            47,125
                                                       ======            ======            ======
    AMORTIZATION
    Beginning of period........................        (4,025)           (1,669)               --
    Amortization in period.....................        (2,912)           (2,356)           (1,669)
                                                       ------            ------            ------
    End of period..............................        (6,937)           (4,025)           (1,669)
                                                       ======            ======            ======
    NET BOOK VALUE
    Beginning of period........................        43,100            45,456                --
                                                       ------            ------            ------
    End of period..............................        55,889            43,100            45,456
                                                       ======            ======            ======
Goodwill of U.S.$47.125 million represents the difference between the fair
value of the net assets acquired and the consideration paid by AerCo Limited in
respect of its acquisition of ALPS 94-1 and the AerFi transferred aircraft in
July 1998. Goodwill of U.S.$15.701 million represents the difference between the
fair value of the net assets acquired and the consideration paid by AerCo
Limited in respect of its acquisition of the New AerFi transferred aircraft in
July 2000. Goodwill is amortized over a 20 year period which is the period over
which the directors of AerCo Limited estimate that the value of the underlying
businesses acquired is expected to exceed the values of its identifiable net
assets. Further information in relation to the calculation of goodwill is set
out in note 4.

4   ACQUISITIONS

     (A)  ACQUISITION OF ALPS 94-1 AND THE AERFI TRANSFERRED AIRCRAFT -- JULY
1998

     On July 15, 1998 AerCo Limited acquired 100% of the capital stock of ALPS
94-1 Limited and thereby a portfolio of 25 aircraft and the related leases and
purchased 10 aircraft and related leases from debis AirFinance. The acquisition
of the 10 aircraft from debis AirFinance was achieved through the purchase of
the capital stock in a number of aircraft owning subsidiaries of debis
AirFinance. AerCo Limited financed the acquisition of the capital stock of ALPS
94-1 Limited and the 10 aircraft from debis AirFinance through the issue of five
classes of notes and also used the proceeds from the issue of these notes to
repay the third party indebtedness of ALPS 94-1 and the intercompany
indebtedness to debis AirFinance of the aircraft owning companies in respect of
the 10 aircraft acquired from debis AirFinance.

                                       F-15
92
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (A)  ACQUISITION OF ALPS 94-1 AND THE AERFI TRANSFERRED AIRCRAFT -- JULY
1998 (CONTINUED)

     The fair value of the net assets acquired and the consideration given on
the acquisition of ALPS 94-1 and the AerFi transferred aircraft is summarized as
follows:
FAIR VALUE ADJUSTMENTS
                                                AERFI TRANSFERRED   -------------------------
                                   ALPS 94-1        AIRCRAFT         VALUATION       OTHER       FAIR VALUE OF
                                   BOOK VALUE      BOOK VALUE       ADJUSTMENTS   ADJUSTMENTS   ASSETS ACQUIRED
                                   ----------   -----------------   -----------   -----------   ---------------
                                   U.S.$'000     U.S.$'000          U.S.$'000     U.S.$'000      U.S.$'000
Current assets...................    148,899             609               --          (406)        149,102
Fixed assets -- aircraft.........    732,905         178,756           40,312            --         951,973
Accrued liabilities & other
  liabilities....................    (72,057)         (5,799)              --       (11,603)        (89,459)
Security deposits................    (13,255)         (2,950)              --            --         (16,205)
Indebtedness (A to D notes)......   (680,701)             --               --            --        (680,701)
Indebtedness to debis
  AirFinance.....................   (194,314)        (48,435)              --      (118,776)       (361,525)
Deferred income tax..............         --          (5,148)           5,148            --              --
                                   ---------         -------          -------      --------        --------
NET ASSETS ACQUIRED..............    (78,523)        117,033           45,460      (130,785)        (46,815)
                                   =========         =======          =======      ========        ========
Consideration paid...........................................................................          (310)
                                                                                                   --------
GOODWILL ON ACQUISITION......................................................................       (47,125)
                                                                                                   ========
The fair value adjustments in respect of the aircraft arise as a result of
a valuation of these assets to reflect the directors' estimate of their current
market value at the date of acquisition. This valuation of the ALPS 94-1
aircraft and the AerFi transferred aircraft exceeded the book values in these
entities by $6 million and $34 million respectively. The fair value adjustment
in respect of deferred taxation arises on the AerFi transferred aircraft as a
result of the change in the tax basis of these aircraft on their acquisition by
AerCo Limited.

     The other adjustments in respect of current assets and accrued liabilities
and other expenses relate to current assets of the AerFi transferred aircraft
not acquired by AerCo Limited and the liability in respect of the make whole
premium payable by ALPS 94-1 on the refinancing of its A to D note indebtedness.

     The adjustment to indebtedness is comprised of (i) an amount of $37 million
in respect of indebtedness in the acquired entities which was forgiven as part
of the transaction whereby AerCo Limited acquired ALPS 94-1 and the AerFi
transferred aircraft and (ii) additional indebtedness to debis AirFinance of
U.S.$156 million representing the difference between the historic third party
indebtedness of debis AirFinance in respect of the AerFi transferred aircraft
and the intercompany indebtedness to debis AirFinance which arose on the
acquisition of the aircraft owning companies which held these aircraft at the
date they were acquired by AerCo Limited.

                                       F-16
93
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (A)  ACQUISITION OF ALPS 94-1 AND THE AERFI TRANSFERRED AIRCRAFT -- JULY
1998 (CONTINUED)

     The historical financial information for ALPS 94-1 is shown in the
consolidated statements of operations as comparatives. The summarized statement
of operations information for the AerFi transferred aircraft for the 14 day
period immediately prior to the acquisition by AerCo Limited is set out below:
PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
REVENUES
Aircraft leasing............................................           983
EXPENSES
Depreciation................................................          (464)
Net interest expense........................................        (1,392)
Other expenses..............................................           355
                                                                    ------
                                                                    (1,501)
                                                                    ------
Net loss from operations before taxes.......................          (518)
Benefit for taxes...........................................             5
                                                                    ------
Net loss for the period.....................................          (513)
                                                                    ======
(B) ACQUISITION OF NEW AERFI TRANSFERRED AIRCRAFT -- JULY 2000

     On July 17, 2000 AerCo Limited acquired 30 additional aircraft and related
leases from debis AirFinance. The acquisition of the 30 aircraft from debis
AirFinance was achieved through the purchase of the capital stock of 18 100%
owned subsidiaries of debis AirFinance. AerCo Limited financed the acquisition
of the 30 aircraft from debis AirFinance through the issue of $960 million of
notes in four subclasses, subclass A-3, subclass A-4, subclass B-2 and subclass
C-2 and two additional subclasses of notes, the D-2 notes and E-2 notes, which
were purchased by debis AirFinance.

                                       F-17
94
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (B)  ACQUISITION OF NEW AERFI TRANSFERRED AIRCRAFT -- JULY 2000 (CONTINUED)

     The fair value of the net assets acquired and the consideration given on
the acquisition of the New AerFi transferred aircraft is summarized as follows:
NEW AERFI       FAIR VALUE ADJUSTMENTS
                                           TRANSFERRED    --------------------------
                                            AIRCRAFT       VALUATION        OTHER        FAIR VALUE OF
                                           BOOK VALUE     ADJUSTMENTS    ADJUSTMENTS    ASSETS ACQUIRED
                                           -----------    -----------    -----------    ---------------
                                            U.S.$'000      U.S.$'000      U.S.$'000        U.S.$'000
Cash, restricted.......................       14,824            --         (14,813)              11
Accounts receivable, net...............        1,475            --          (1,115)             360
Fixed assets -- aircraft...............      690,272        33,780              --          724,052
Goodwill...............................        5,922            --          (5,922)              --
Accrued liabilities & other
  liabilities..........................      (28,756)           --           2,056          (26,700)
Security deposits......................       (7,075)           --              --           (7,075)
Indebtedness...........................     (470,562)           --        (137,622)        (608,184)
Deferred income tax....................         (970)          970              --               --
                                            --------        ------        --------         --------
Net assets acquired....................      205,130        34,750        (157,416)          82,464
                                            ========        ======        ========         ========
Consideration paid.....................                                                     (98,165)
                                                                                           --------
Goodwill on acquisition................                                                     (15,701)
                                                                                           ========
The fair value adjustments in respect of the aircraft arise as a result of
a valuation of these assets to reflect the directors' estimate of their current
market value at the date of acquisition. This valuation of the New AerFi
transferred aircraft exceeded their existing book value by U.S.$33.8 million.
The fair value adjustment in respect of deferred taxation arises as a result of
the change in the tax basis of the New AerFi transferred aircraft on their
acquisition by AerCo Limited.

     The fair value adjustment to Indebtedness represents the difference between
the historic third party indebtedness of debis AirFinance in respect of the New
AerFi transferred aircraft and the intercompany indebtedness to debis AirFinance
which arose on the acquisition of the aircraft owning companies which held these
aircraft at the date they were acquired by AerCo Limited.

     The other adjustments in respect of cash, current assets and accrued
liabilities relate to the cash balances, current assets and liabilities of the
New AerFi transferred aircraft not acquired by AerCo Limited.

                                       F-18
95
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITIONS (CONTINUED)

     (B)  ACQUISITION OF NEW AERFI TRANSFERRED AIRCRAFT -- JULY 2000 (CONTINUED)

     The revenues and expenses attributable to this acquired business for the
period from July 17, 2000 to March 31, 2001 were as follows:
PERIOD FROM
                                                                JULY 17, 2000 TO
                                                                 MARCH 31, 2001
                                                                -----------------
                                                                    U.S.$000
REVENUES
  Aircraft leasing..........................................          62,094
EXPENSES
  Depreciation..............................................         (24,980)
  Impairment provision......................................          (3,794)
  Net interest expense......................................         (55,129)
  Other expenses............................................          (5,773)
                                                                     -------
Total expenses..............................................         (89,676)
                                                                     -------
NET LOSS FROM OPERATIONS....................................         (27,582)
                                                                     =======
Aircraft leasing revenues, depreciation and impairment provision charges
represent the actual income and related charges for these aircraft in the
period. The net interest expense is an allocation of the cost of the net debt
raised to fund the acquisition transaction completed in July 2000 of U.S.$706.3
million. Other expenses have been allocated based on AerCo's estimate of the
percentage of such costs incurred in managing the additional fleet of aircraft
for the period. Management believes that the basis for these allocations is
reasonable.

     Unaudited proforma results of operations for the years ended March 31, 2001
and 2000 as if AerCo and the New AerFi transferred aircraft had been combined
from April 1, 1999 are as follows:
YEAR ENDED        YEAR ENDED
                                                                MARCH 31, 2001    MARCH 31, 2000
                                                                --------------    --------------
                                                                    U.S.$M            U.S.$M
Revenues -- Aircraft leasing................................         191                188
Net loss....................................................         (60)               (78)
Basic and diluted loss per ordinary share...................          (3)              (3.9)
The proforma results of operations reflect the acquisition of one of the
New AerFi transferred aircraft during the year ended March 31, 2001 and of eight
of the New AerFi transferred aircraft during the year ended March 31, 2000 and
therefore only include the results of operations of such aircraft from their
date of acquisition.

     The proforma results of operations reflect the net interest expense which
would have been incurred had the acquisition occurred on April 1, 1999.

     The proforma results of operations are not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
as of April 1, 1999, nor are they necessarily indicative of future operating
results.

                                       F-19
96
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5   AIRCRAFT, NET
AERCO                           ALPS 94-1
                                         MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999   JULY 14, 1998
                                         --------------   --------------   --------------   -------------
                                           U.S.$'000        U.S.$'000        U.S.$'000        U.S.$'000
COST
Beginning of period....................      922,045         937,766               --          949,288
Additions..............................      724,052             622          951,973               --
Disposals..............................       (1,444)        (16,343)         (14,207)         (76,897)
                                           ---------         -------          -------         --------
End of period..........................    1,644,653         922,045          937,766          872,391
                                           =========         =======          =======         ========
DEPRECIATION
Beginning of period....................      (79,772)        (33,513)              --         (140,478)
Charge for the period..................      (69,063)        (46,998)         (33,821)          (1,519)
Disposal...............................           --             739              308           11,231
                                           ---------         -------          -------         --------
End of period..........................     (148,835)        (79,772)         (33,513)        (130,766)
                                           =========         =======          =======         ========
IMPAIRMENT PROVISIONS
Beginning of period....................      (13,079)             --               --           (8,720)
Charge for the period..................       (3,794)        (13,079)              --               --
Disposal...............................           --              --               --               --
                                           ---------         -------          -------         --------
End of period..........................      (16,873)        (13,079)              --           (8,720)
                                           =========         =======          =======         ========
NET BOOK VALUE
Beginning of period....................      829,194         904,253               --          800,090
                                           =========         =======          =======         ========
End of period..........................     1478,945         829,194          904,253          732,905
                                           =========         =======          =======         ========
Cost for AerCo represents the fair value of aircraft acquired by AerCo as
part of the AerCo transactions on July 17, 2000 and July 15, 1998 which was
based on the independent appraised values of the portfolios. Cost for ALPS 94-1
represents the purchase price of aircraft acquired by ALPS 94-1 which was based
on the independent appraised values of the portfolio of aircraft at August 24,
1994.

     In the year ended March 30, 2001, the directors of AerCo made a provision
of U.S.$3.794 million to reflect an impairment in the value of one B757-200
aircraft in its fleet. The directors arrived at such determination having
consideration for a contract for the disposal of this aircraft entered into
prior to March 31, 2001, which was completed shortly after the year end.

     In the year ended March 31, 2000, the directors of AerCo made a provision
of U.S.$13.1 million to reflect an impairment in the value of one B747 aircraft
in its fleet. The directors arrived at such determination based on the financial
condition of the aircraft's lessee, the physical condition of the aircraft and
the unfavorable market conditions for this aircraft type.

     During the year ended March 31, 2000, AerCo disposed of one aircraft to a
third party to whom the aircraft had been on lease giving rise to a loss on
disposal of U.S.$0.94 million.

     During the period from July 1, 1998 to July 14, 1998 ALPS 94-1 Limited
disposed of one aircraft to debis AirFinance. This disposal resulted in a profit
of U.S.$10,000 in the period.

                                       F-20
97
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6   OPERATING LEASES

     61 of 63 aircraft owned by AerCo are leased on operating leases to 34
lessees as at March 31, 2001. Rentals on certain of the leases are variable in
accordance with prevailing interest rates. Two aircraft were off-lease at March
31, 2001.

     The following is a schedule of contracted future rentals receivable, by
year, on operating leases as of March 31, 2001. The interest rates prevailing at
March 31, 2001 have been applied in determining rentals which are variable in
accordance with prevailing interest rates.
YEAR ENDING MARCH 31,                                           U.S.$'000
---------------------                                           ---------
2002........................................................     167,813
2003........................................................     143,146
2004........................................................     107,201
2005........................................................      61,270
2006........................................................      25,512
Thereafter..................................................      20,850
                                                                 -------
                                                                 525,792
                                                                 =======
There are no contingent rentals.

     The leases have charges attached to them such that they represent security
for the notes issued.

7   ACCRUED EXPENSES AND OTHER LIABILITIES
MARCH 31, 2001   MARCH 31, 2000
                                                               --------------   --------------
                                                                 U.S.$'000      U.S.$'000
ACCRUED EXPENSES AND OTHER LIABILITIES COMPRISE:
Aircraft maintenance reserves...............................       59,140           32,216
Deferred income.............................................        7,195            3,014
Interest on A to D notes....................................        7,396            2,270
Interest on E notes.........................................       86,332           38,000
Taxation....................................................           47               46
Other accruals..............................................       11,278           14,356
                                                                  -------          -------
                                                                  171,388           89,902
                                                                  =======          =======
All accrued expenses and other liabilities fall due within one year with
the exception of the entire amount of the accrued interest on the E notes and
aircraft maintenance reserves which are split as follows:
MARCH 31, 2001   MARCH 31, 2000
                                                               --------------   --------------
                                                                 U.S.$'000      U.S.$'000
AIRCRAFT MAINTENANCE RESERVES:
Due within one year.........................................       10,716            6,342
Due after one year..........................................       48,424           25,874
                                                                  -------          -------
                                                                   59,140           32,216
                                                                  =======          =======
8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

     AerCo's financial instruments comprise its A through E note indebtedness,
cash and liquid resources and interest rate swaps. These financial instruments
are denominated in U.S. dollars and are used in connection with

                                       F-21
98
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

AerCo's leasing operations. These financial instruments comprise a mixture of
fixed and floating items and AerCo has also contracted both fixed and floating
rental streams with its lessees.

     AerCo manages its interest rate exposure through the use of interest rate
swaps under which it will pay fixed and receive floating on a monthly basis. The
objective of AerCo's interest rate risk management policy is to correlate the
contracted fixed and floating rental payments on its aircraft to the interest
payments on the A, B and C notes taking into account the interest received on
its cash deposits. Thus, all of AerCo's interest rate swaps are for hedging
purposes.

     AerCo seeks to manage its liquidity risk through maintaining a liquidity
reserve amount of U.S.$65 million (U.S.$40 million at March 31, 2000) and
through the application of available collections from lessees to meet its debt
and other obligations in accordance with a predetermined priority of payments as
set out in the Trust Indenture.

     (I) INTEREST RATE PROFILE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

     The following tables depict the interest rate profile of AerCo's financial
assets and financial liabilities at March 31, 2001 after taking into account the
derivatives used by AerCo. In accordance with FRS 13 "Derivatives and Other
Financial Instruments." The tables do not include interests in associate
undertakings and short term debtors and creditors.

     Financial Assets

     After taking account of the interest rate swaps entered into by AerCo, the
interest rate profile of AerCo's assets at March 31, 2001 was:
FLOATING RATE    FIXED RATE
                                                              TOTAL          ASSETS          ASSETS
                                                            ----------    -------------    ----------
                                                            U.S.$'000     U.S.$'000        U.S.$'000
Financial Assets
Cash....................................................      39,661          39,661             --
Commercial Paper........................................      65,000          65,000             --
                                                             -------         -------        -------
                                                             104,661         104,661             --
                                                             =======         =======        =======
The cash bears interest at rates based on daily U.S.$ LIBOR. The commercial
paper bears interest based on rates available for A1+/P1 U.S. commercial paper.

                                       F-22
99
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

     (I) INTEREST RATE PROFILE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(CONTINUED)

     Financial Liabilities

     The interest rate profile of AerCo's financial liabilities at March 31,
2001 was:
FLOATING RATE    FIXED RATE
                                                                           FINANCIAL       FINANCIAL
                                                             TOTAL        LIABILITIES     LIABILITIES
                                                           ----------    -------------    -----------
                                                           U.S.$'000      U.S.$'000       U.S.$'000
Financial Liabilities
    Indebtedness
      A-2 notes........................................      184,347         184,347             --
      A-3 notes........................................      565,000         565,000             --
      A-4 notes........................................      206,595         206,595             --
      B-1 notes........................................       72,250          72,250             --
      B-2 notes........................................       77,254          77,254             --
      C-1 notes........................................       83,594          83,594             --
      C-2 notes........................................       79,807          79,807             --
      D-2 notes........................................      100,000              --        100,000
      E-1 notes........................................      111,973              --        111,973
      E-2 notes........................................      109,052              --        109,052
    Aircraft maintenance reserves due after one year...        7,436           7,436             --
    Security deposits due after one year...............        6,304           6,304             --
                                                           ---------       ---------        -------
    TOTAL..............................................    1,603,612       1,282,587        321,025
                                                           =========       =========        =======
A-2, A-3, A-4, B-1, B-2, C-1 and C-2 note indebtedness bear interest at
rates based on one month U.S.$ LIBOR plus a specified margin of 0.32%, 0.46%,
0.52%, 0.60%, 1.05%, 1.35% and 2.05% respectively.

     Aircraft maintenance reserves and security deposits bear interest at six
month U.S.$ LIBOR rates.

     The interest rate on the D-2, E-1 and E-2 notes is 8.5%, 20% and 20%
respectively. The weighted average period for which the D-2, E-1 and E-2 notes
are fixed is 11.1 years, 22 years and 24 years respectively.

     (II) MATURITY OF FINANCIAL LIABILITIES

     Information relating to the maturity profile of indebtedness is set out in
Note 9. The estimated maturity profile of aircraft maintenance reserves and
security deposits which are classified as financial liabilities is as follows:
DUE:                                                          U.S.$'000
----                                                          ---------
In more than one year but not more than two years...........     4,217
In more than two years but not more than five years.........     5,239
In more than five years.....................................     4,284
                                                               -------
                                                                13,740
                                                               =======
(III) BORROWING FACILITIES

     AerCo had no undrawn committed borrowing facilities at March 31, 2001.

                                       F-23
100
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

     (IV) FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

     The book values and fair values of AerCo's financial assets and liabilities
as at March 31, 2001 and March 31, 2000 by category are set out below:
PRIMARY FINANCIAL INSTRUMENTS HELD OR    BOOK VALUE       FAIR VALUE       BOOK VALUE       FAIR VALUE
ISSUED TO FINANCE AERCO'S OPERATIONS   MARCH 31, 2001   MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 2000
-------------------------------------  --------------   --------------   --------------   --------------
                                         U.S.$'000        U.S.$'000        U.S.$'000        U.S.$'000
Financial Assets
Cash...............................         39,661           39,661          26,413           26,413
Commercial paper...................         65,000           65,000          39,998           39,998
                                         ---------        ---------         -------          -------
Total..............................        104,661          104,661          66,411           66,411
                                         =========        =========         =======          =======
Financial Liabilities
Indebtedness
A-1 notes..........................             --               --         340,000          339,841
A-2 notes..........................        184,347          183,886         212,281          210,996
A-3 notes..........................        565,000          565,265              --               --
A-4 notes..........................        206,595          206,756              --               --
B-1 notes..........................         72,250           70,647          76,293           74,591
B-2 notes..........................         77,254           77,170              --               --
C-1 notes..........................         83,594           80,159          84,444           80,337
C-2 notes..........................         79,807           79,807              --               --
D-1 notes..........................             --               --          80,000           67,200
D-2 notes..........................        100,000           70,000              --               --
E-1 notes..........................        111,973           22,395         111,973           22,395
E-2 notes..........................        109,052           21,810              --               --
Aircraft maintenance reserves due
  after one year...................          7,436            7,436           5,844            5,844
Security deposits due after one
  year.............................          6,304            6,304              --               --
                                         ---------        ---------         -------          -------
Total..............................      1,603,612        1,391,635         910,835          801,204
                                         =========        =========         =======          =======
Derivative financial instruments:
Interest rate swaps (notional
  principal March 31, 2001 U.S.$1,078
  million; March 31, 2000 U.S.$565
  million).........................             --          (41,836)             --           11,673
                                         =========        =========         =======          =======
The fair values of notes outstanding have been determined by reference to
prices available from the markets in which these notes are traded. The fair
value of aircraft maintenance reserves and security deposits which are subject
to floating rates is their par value. All the other fair values shown have been
calculated by discounting future estimated cash flows at prevailing interest
rates.

     In accordance with the objectives of AerCo's hedging policies the fair
value loss arising in respect of AerCo's interest rate swaps at March 31, 2001
is offset to a significant extent by fair value gains inherent in the contracted
fixed rate leases entered into by AerCo.

                                       F-24
101
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8   DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)

     (V) GAINS AND LOSSES ON HEDGES

     AerCo enters into interest rate swaps to manage its interest rate profile.
Changes in the fair value of instruments used as hedges are not recognized in
the financial statements. An analysis of these unrecognized gains and losses is
as follows:
TOTAL NET
                                                                 GAINS         LOSSES        GAINS
                                                               ----------    ----------    ----------
                                                               U.S.$'000     U.S.$'000     U.S.$'000
Unrecognized gains and (losses) on hedges at March 31,
  2000.....................................................      11,703           (30)       11,673
Gains at the start of the year in a loss position at the
  end of year..............................................     (10,411)       10,411            --
                                                                -------       -------       -------
Unrecognized gains at March 31, 2000.......................       1,292        10,381        11,673
Losses arising in previous periods that were recognized in
  the year to March 31, 2001...............................        (200)       (2,246)       (2,446)
                                                                -------       -------       -------
Gains arising before March 31, 2000 that were not
  recognized in the year ended March 31, 2001..............       1,092         8,135         9,227
Gains on swaps entered into after March 31, 2000 recognized
  in the year ended March 31, 2001.........................          --         2,267         2,267
Losses arising in the current year that were not recognized
  in the year ended March 31, 2001.........................        (913)      (52,417)      (53,330)
                                                                -------       -------       -------
Unrecognized gains and (losses) on hedges at March 31,
  2001.....................................................         179       (42,015)      (41,836)
                                                                =======       =======       =======
of which:
Gains expected to be recognized in 2002....................         179        (8,554)       (8,375)
Gains and (losses) expected to be recognized in 2003 or
  later....................................................          --       (33,461)      (33,461)
9   INDEBTEDNESS

     (A) PRINCIPAL

     The purchase during the year by AerCo Limited of the capital stock of 18
100% owned subsidiaries of debis AirFinance and thereby a portfolio of 30
aircraft and related leases and the refinancing of the existing subclass A-1 and
D-1 notes was funded by the issue of new subclass A-3, A-4, B-2, C-2, D-2 and
E-2 notes by AerCo Limited.

     The notes issued by AerCo Limited in July 1998 and July 2000 constitute
direct obligations of AerCo Limited. None of the Security Trustee (as defined
below) or the noteholders have any security interest, mortgage, charge or
similar interest in any of the aircraft.

     Pursuant to the Security Trust Agreement, Bankers Trust Company (the
"Security Trustee") has been granted an interest in the capital stock of certain
of the direct and indirect subsidiaries of AerCo Limited. The Security Trustee
has been granted a security interest, directly or indirectly, in the respective
interests of each AerCo Group member in the leases and leases within AerCo Group
relating to the aircraft, in any loans extended by AerCo Limited to its
subsidiaries and certain cash deposits.

                                       F-25
102
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9   INDEBTEDNESS (CONTINUED)

     (A) PRINCIPAL (CONTINUED)
AERCO                          AERCO
                                          MARCH 31, 2001    AT ISSUE     MARCH 31, 2000           AT ISSUE
                                          --------------    ---------    --------------           ---------
                                            U.S.$'000       U.S.$'000      U.S.$'000              U.S.$'000
Subclass A-1 notes................             --              --        340,000                340,000
    Subclass A-2 notes................        184,347         290,000        212,281                290,000
    Subclass B-1 notes................         72,250          85,000         76,293                 85,000
    Subclass C-1 notes................         83,594          85,000         84,444                 85,000
    Subclass D-1 notes................             --              --         80,000                 80,000
    Subclass E-1 notes................        111,973         111,973        111,973                111,973
    Subclass A-3 notes................        565,000         565,000             --                     --
    Subclass A-4 notes................        206,595         235,000             --                     --
    Subclass B-2 notes................         77,254          80,000             --                     --
    Subclass C-2 notes................         79,807          80,000             --                     --
    Subclass D-2 notes................        100,000         100,000             --                     --
    Subclass E-2 notes................        109,052         109,052             --                     --
    Deferred financing costs..........        (11,040)         (9,661)        (3,793)                (5,364)
                                            ---------       ---------      ---------              ---------
                                            1,578,832       1,731,364        901,198                986,609
                                            =========       =========      =========              =========
Repayments of principal on the A, B, C and D notes are made monthly and
commenced in August 1998. The repayment of principal on the A to D notes is
dependent upon the cash available at each monthly payment date and is governed
by the Priority of Payments set out in the Trust Indenture entered into by AerCo
Limited on July 15, 1998.

     The repayment of class E note principal is not due until the class A to D
notes have been fully repaid. Repayment of the principal amount of the class E
notes and accrued interest thereon are dependent upon funds being available to
meet such liabilities as they fall due.

     (B) INTEREST

     Subclass A-1 notes bore interest at LIBOR plus 0.19%, payable monthly in
arrears The subclass A-1 notes were fully repaid in July 2000.

     Subclass A-2 notes bear interest at LIBOR plus 0.32%, payable monthly in
arrears.

     Subclass A-3 notes bear interest at LIBOR plus 0.46%, payable monthly in
arrears.

     Subclass A-4 notes bear interest at LIBOR plus 0.52%, payable monthly in
arrears.

     Subclass B-1 notes bear interest at LIBOR plus 0.60%, payable monthly in
arrears.

     Subclass B-2 notes bear interest at LIBOR plus 1.05%, payable monthly in
arrears.

     Subclass C-1 notes bear interest at LIBOR plus 1.35%, payable monthly in
arrears.

     Subclass C-2 notes bear interest at LIBOR plus 2.05%, payable monthly in
arrears.

     The subclass D-1 notes bore interest at 8.50%. Interest was payable monthly
in arrears and commenced in August 1998, subject to available cash. The subclass
D-1 notes were fully repaid in July 2000.

                                       F-26
103
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9   INDEBTEDNESS (CONTINUED)

     (B) INTEREST (CONTINUED)

     The subclass D-2 notes bear interest at 8.50%. Interest is payable monthly
in arrears and commenced in August 2000 subject to available cash. Interest
accrued but not paid will be added to the principal outstanding and will accrue
interest until paid.

     The subclass E-1 and E-2 notes bear interest at 20% per annum accruing
monthly in arrears. Except for the class E Note Primary Interest Amount which
will be paid at a rate of 15.0% per annum multiplied by the Initial Outstanding
Principal Balance of the subclass E-1 notes on July 15, 1998 and by the
Outstanding Principal Balance of the subclass E-2 notes issued on July 17, 2000,
no interest is payable on subclass E-1 and E-2 notes until all of the interest,
principal and premium, if any, on the other notes have been repaid in full. The
class E note Primary Interest Amount will be paid on each Payment Date only to
the extent that AerCo has available collections sufficient to make such payment
after paying or providing for each of the items ranking prior to such payment in
order of priority under the Trust Indenture.

     (C) DEBT MATURITY

     The repayment terms of the class A, B, C and D notes are such that certain
principal amounts are expected to be repaid on certain dates based on certain
assumptions (the "Expected Final Payment Dates") or refinanced through the issue
of new notes by specified Expected Final Payment Dates but in any event are
ultimately due for repayment on specified final maturity dates (the "Final
Maturity Dates"). In the event that the A, B and C notes are not repaid or
refinanced by the Expected Final Payment Dates the interest rates applicable to
those notes may increase. The Expected Final Payment Dates, Final Maturity
Dates, Principal Amount and interest rates applicable to each class of notes
outstanding at March 31, 2001 are set out below:
PRINCIPAL AMOUNT    EXPECTED FINAL
CLASS OF NOTES             INTEREST RATES    MARCH 31, 2000      PAYMENT DATE      FINAL MATURITY DATE
--------------             --------------   ----------------   -----------------   -------------------
                                            U.S.$ MILLION
Class A-2................  LIBOR + 0.32%           184         December 15, 2005      July 15, 2023
Class A-3................  LIBOR + 0.46%           565             June 15, 2002      July 15, 2025
Class A-4................  LIBOR + 0.52%           207              May 15, 2011      July 15, 2025
Class B-1................  LIBOR + 0.60%            72             July 15, 2013      July 15, 2023
Class B-2................  LIBOR + 1.05%            77             June 15, 2008      July 15, 2025
Class C-1................  LIBOR + 1.35%            84             July 15, 2013      July 15, 2023
Class C-2................  LIBOR + 2.05%            80             June 15, 2008      July 15, 2025
Class D-2................           8.5%           100              May 15, 2014      July 15, 2025
Class E-1................            20%           112             July 15, 2023      July 15, 2023
Class E-2................            20%           109             July 15, 2025      July 15, 2025
                                                 -----
                                                 1,590
                                                 =====
The repayment dates and amounts of the notes shown in the table below are
not fixed contractual obligations but are the amounts AerCo will pay if cash
flows are in accordance with targets. To the extent that cash flows exceed, or
do not meet, the targets then these amounts will vary in accordance with the
Trust Indenture. The targets assume that the minimum future rentals as
summarized in Note 6 are received after making adjustments for the anticipated
performance of the lessees.

                                       F-27
104
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9   INDEBTEDNESS (CONTINUED)

     (C) DEBT MATURITY (CONTINUED)

     The target principal balances repayable analyzed by year of repayment are
as follows (all amounts are in U.S.$'000):
SUBCLASS
YEAR ENDING               ---------------------------------------------------------------------------------------------
MARCH 31                    A-2        A-3        A-4       B-1       B-2       C-1       C-2        D-2        TOTAL
-----------               -------    -------    -------    ------    ------    ------    ------    -------    ---------
2002..................     81,576         --     30,042     7,221     7,311     2,194     1,072         --      129,416
2003..................     21,574    565,000     37,062     3,947     4,823     2,815     2,619         --      637,840
2004..................     21,564         --     37,045     4,636     5,227     3,645     3,759         --       75,876
2005..................     19,990         --     34,342     5,078     5,726     4,646     4,629         --       74,411
2006..................     32,456         --     22,388     5,475     5,934     5,627     5,421         --       77,301
Thereafter............      7,187         --     45,716    45,893    48,233    64,667    62,307    100,000      374,003
                          -------    -------    -------    ------    ------    ------    ------    -------    ---------
Total.................    184,347    565,000    206,595    72,250    77,254    83,594    79,807    100,000    1,368,847
                          =======    =======    =======    ======    ======    ======    ======    =======    =========
The principal of the subclass E-1 and E-2 notes is not payable until the
outstanding principal balance of the class A to D notes is reduced to zero.

10  SECURITY DEPOSITS

     Security deposits of U.S.$20,880,000 in AerCo as at March 31, 2001
(U.S.$16,304,000 at March 31, 2000) are held as security for obligations in
accordance with the terms of certain leases. The deposits are held as cash and
commercial paper by AerCo (see Note 1).

11  SHARE CAPITAL

     Called up share capital comprises:
MARCH 31, 2001    MARCH 31, 2000
                                                                --------------    --------------
                                                                    U.S.$             U.S.$
AUTHORIZED
10,000 ordinary shares of U.S.$1 each.......................        10,000            10,000
                                                                    ======            ======
ISSUED AND FULLY PAID
20 ordinary shares of U.S.$1 each...........................            20                20
                                                                    ======            ======
AerCo Limited issued 20 ordinary shares at U.S.$1 each on June 4, 1998.

                                       F-28
105
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12  REVENUES AND CONCENTRATION OF CREDIT RISK

     (A) DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA
AERCO             ALPS 94-1
                                  AERCO               AERCO            PERIOD FROM         PERIOD FROM
                               YEAR ENDED          YEAR ENDED       JULY 15, 1998 TO     JULY 1, 1998 TO
                             MARCH 31, 2001      MARCH 31, 2000      MARCH 31, 1999       JULY 14, 1998
                            -----------------   -----------------   -----------------   -----------------
                            U.S.$'000     %     U.S.$'000     %     U.S.$'000     %     U.S.$'000     %
                            ---------   -----   ---------   -----   ---------   -----   ---------   -----
Europe...............     84,629     51.3     52,956     48.5    40,456      48.8       1,508    41.5
    North America........     26,657     16.2      9,186      8.4     7,009       8.5         144     4.0
    South/Central
      America............     21,615     13.1     21,366     19.6    14,318      17.3         716    19.7
    Asia/Pacific.........     32,033     19.4     25,638     23.5    21,043      25.4       1,267    34.8
                             -------    -----    -------    -----    ------     -----   ---------   -----
                             164,934    100.0    109,146    100.0    82,826     100.0       3,635   100.0
                             =======    =====    =======    =====    ======     =====   =========   =====
All revenues are derived from aircraft leasing.

     In the year ended March 31, 2001 18% and 13% of AerCo's lease revenues was
derived from the United Kingdom and the United States respectively. No other
country accounted for greater than 10% of AerCo's lease revenues.

     In the year ended March 31, 2000, 17% and 11% of AerCo's lease revenues was
derived from the United Kingdom and Spain respectively. No other country
accounted for greater than 10% of AerCo's lease revenues.

     In the period from July 15, 1998 to March 31, 1999, 18% and 10% of AerCo's
lease revenues was derived from the United Kingdom and Spain respectively. No
other country accounted for greater than 10% of AerCo's lease revenues.

     In the period from July 1, 1998 to July 14, 1998, 15%, 15%, 14% and 10% of
ALPS 94-1's lease revenues was derived from Chile, Hungary, Spain and the United
Kingdom respectively. No other country accounted for greater than 10% of ALPS
94-1's lease revenues.

     (B) CONCENTRATION OF CREDIT RISK

     Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.

     AerCo and ALPS 94-1 manage their exposures to particular countries through
obtaining security from lessees by way of deposits, letters of credit and
guarantees. In addition AerCo [and ALPS 94-1] maintain Political Risk Insurance
in respect of certain lessees.

     AerCo and ALPS 94-1 continually evaluate the financial position of lessees
and, based on this evaluation, the amounts outstanding and the available
security, make an appropriate provision for doubtful debts.

     As at March 31, 2001 one lessee accounted for 9% of AerCo's lease revenues.
No other lessee accounted for greater than 9% of AerCo's lease revenues for the
year ended March 31, 2001.

     As at March 31, 2000 one lessee accounted for 11% of AerCo's lease
revenues. No other lessee accounted for greater than 10% of AerCo's lease
revenues for the year ended March 31, 2000.

     As at March 31, 1999, one lessee accounted for 10% of AerCo's lease
revenues. No other lessee accounted for greater than 10% of AerCo's lease
revenues for the period from July 15, 1998 to March 31, 1999.

     At July 14, 1998 no lessee accounted for greater than 10% of ALPS 94-1's
lease revenues.

                                       F-29
106
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13  EXCEPTIONAL ITEMS
AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
Provision for impairment in
  aircraft value (note 5).......         3,794            13,079                 --                  --
                                       =======           =======            =======             =======
14  NET INTEREST EXPENSE
AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
Interest payable on notes.......       151,496            80,957             56,047               2,977
Net interest income.............       (13,554)           (2,139)            (1,939)               (220)
                                       -------           -------            -------             -------
                                       137,942            78,818             54,108               2,757
                                       =======           =======            =======             =======
15  OTHER EXPENSES
AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
Servicer's fees.................         5,168             4,023              2,637                 108
Political risk insurance........            --               292                247                  54
Hull war risks insurance........           485               363                329                  --
Administration fees.............         3,257             2,102              1,561                  20
Cash managers' fees.............           250               251                177                  --
Technical & leasing costs.......        (1,280)            5,021              1,521                  --
Provision for doubtful costs....         2,237             2,146                547                 174
Legal & professional fees.......           303               736                657                 260
Directors' & Officer's
  insurance.....................           271               352                282                  12
Directors' fees and expenses....           371               344                278                  18
Audit, accounting and tax
  fees..........................           382               112                 75                  --
                                       -------           -------            -------             -------
                                        11,444            15,742              8,311                 646
                                       =======           =======            =======             =======
16  NET LOSS BEFORE PROVISION FOR TAXES

     (A) NET LOSS BEFORE PROVISION FOR TAXES IS STATED AFTER CHARGING:
AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                    U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
Directors' remuneration.........           371               344                278                  18
                                       =======           =======            =======             =======
F-30
107
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16  NET LOSS BEFORE PROVISION FOR TAXES (CONTINUED)

     (B) DIRECTORS' AND OFFICERS' INSURANCE

     Directors' and Officers' Insurance has been implemented for AerCo and ALPS
94-1. Directors of AerCo Limited and ALPS 94-1 Limited also have the protection
of an unsecured indemnity from AerCo Limited and ALPS 94-1 Limited in respect of
claims relating to them in their capacity as directors.

17  PROVISION FOR TAXES
AERCO             ALPS 94-1
                                        AERCO             AERCO           PERIOD FROM         PERIOD FROM
                                      YEAR ENDED        YEAR ENDED      JULY 15, 1998 TO    JULY 1, 1998 TO
                                    MARCH 31, 2001    MARCH 31, 2000     MARCH 31, 1999      JULY 14, 1998
                                    --------------    --------------    ----------------    ---------------
                                      U.S.$'000         U.S.$'000          U.S.$'000           U.S.$'000
Corporation tax provision.....          49                51                 35                  --
                                       =======           =======            =======             =======
Taxation provisions for AerCo and ALPS 94-1 relate to taxes levied in local
jurisdictions in respect of the activities of subsidiaries.

     AerCo's income from approved activities in Ireland is taxable at a rate of
10% until December 31, 2005.

18  BASIC AND DILUTED LOSS PER ORDINARY SHARE

     The calculation of basic and diluted loss per ordinary share for AerCo
Limited for the years ended March 31, 2001 and 2000 and the period from July 15,
1998 to March 31, 1999 has been computed by dividing the losses of
U.S.$60,270,000, U.S.$48,839,000 and U.S.$15,108,000 respectively by the
weighted average number of ordinary shares outstanding during these periods of
20 shares.

     The calculation of basic and diluted loss per ordinary share for ALPS 94-1
Limited from July 1, 1998 to July 14, 1998 has been computed by dividing the
loss of U.S.$1,277,000 by the weighted average number of ordinary shares
outstanding during the period of 10 shares.

     No adjustments have been made to the basic or diluted loss per ordinary
share for ALPS 94-1 Limited for the period from July 1, 1998 to July 14, 1998 as
a result of the change in capital structure and the fair value adjustments
arising out of the refinancing and acquisition of ALPS 94-1 and the AerFi
transferred aircraft and therefore, the earnings per share figures for AerCo
Limited and ALPS 94-1 Limited are not directly comparable.

19  STAFF COSTS AND NUMBERS

     AerCo and ALPS 94-1 have no employees.

20  SUBSIDIARY COMPANIES

     AerCo Limited has the following subsidiary companies as at March 31, 2001:
COUNTRY OF
NAME                                 INCORPORATION                BUSINESS                % OF SHARES HELD
----                                 -------------    --------------------------------    ----------------
AerCo Ireland Limited..............  Ireland          Aircraft leasing and sub-leasing          100%
AerCo Ireland II Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing I Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing II Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing III Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing IV Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
F-31
108
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20  SUBSIDIARY COMPANIES (CONTINUED)
COUNTRY OF
NAME                                 INCORPORATION                BUSINESS                % OF SHARES HELD
----                                 -------------    --------------------------------    ----------------
Gustav Leasing V Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing VI Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing VII Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing VIII Limited........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing IX Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing X Limited...........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XI Limited..........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XII Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XIII Limited........  Ireland          Aircraft leasing and sub-leasing          100%
Gustav Leasing XIV Limited.........  Ireland          Aircraft leasing and sub-leasing          100%
Pergola Limited....................  Ireland          Aircraft leasing and sub-leasing          100%
Baltic Airlease II LLC.............  Isle of Man      Aircraft leasing and sub-leasing          100%
Baltic Airlease III LLC............  Isle of Man      Aircraft leasing and sub-leasing          100%
AerCo POL Inc......................  USA              Aircraft leasing and sub-leasing          100%
AerCo USA Inc......................  USA              Aircraft leasing and sub-leasing          100%
ALPS 94-1 Limited..................  Jersey           Aircraft leasing and sub-leasing          100%
ALPS 94-1 (Belgium) N.V............  Belgium          Aircraft leasing and sub-leasing          100%
AerCom (Belgium) N.V...............  Belgium          Aircraft leasing and sub-leasing          100%
AerCo Sverige Leasing AB...........  Sweden           Aircraft leasing and sub-leasing          100%
ALPS 94-1 (France) S.A.R.L.........  France           Dormant                                   100%
As at July 14, 1998 and all previous periods, ALPS 94-1 was comprised of
ALPS 94-1 Limited and its 100% owned subsidiaries, Pergola Limited, ALPS 94-1
(Belgium) N.V. and ALPS 94-1 (France) S.A.R.L.

21  CASH FLOW STATEMENT

     (A) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
ALPS 94-1
                                            AERCO            AERCO            AERCO          PERIOD FROM
                                          YEAR ENDED       YEAR ENDED      PERIOD ENDED    JULY 1, 1998 TO
                                        MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999    JULY 14, 1998
                                        --------------   --------------   --------------   ---------------
                                          U.S.$'000        U.S.$'000        U.S.$'000         U.S.$'000
Cash paid in respect of:
Interest: A-C notes...................      77,743           43,585           30,694            3,872
Interest: D-E notes...................      11,120           10,999            7,332               --
Interest on aircraft purchase
  account.............................       6,940               --               --               --
Interest rate swaps...................        (179)           1,566              987               --
                                            ------           ------           ------            -----
                                            95,624           56,150           39,013            3,872
                                            ======           ======           ======            =====
F-32
109
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21  CASH FLOW STATEMENT (CONTINUED)

     (B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT -- AERCO
U.S.$'000
                                                                ----------
Increase in cash in the year................................        13,248
Cash inflow from increase in debt...........................      (684,881)
Increase in liquid resources in year........................        25,002
                                                                ----------
Change in net debt resulting from cash flows................      (646,631)
Capitalization of issue costs...............................         9,661
Amortization of issue costs.................................        (2,414)
                                                                ----------
Movement in net debt in the year............................      (639,384)
Net debt at March 31, 2000..................................      (834,787)
                                                                ----------
Net debt at March 31, 2001..................................    (1,474,171)
                                                                ==========
(C) ANALYSIS OF NET DEBT -- AERCO
OTHER NON
                                         MARCH 31, 2000    CASH FLOW    CASH CHARGES    MARCH 31, 2001
                                         --------------    ---------    ------------    --------------
                                           U.S.$'000       U.S.$'000     U.S.$'000        U.S.$'000
Cash.................................         26,413         13,248           --              39,661
Liquid resources.....................         39,998         25,002           --              65,000
Indebtedness.........................       (901,198)      (684,881)       7,247          (1,578,832)
                                            --------       --------        -----          ----------
                                            (834,787)      (646,631)       7,247          (1,474,171)
                                            ========       ========        =====          ==========
(D) PURCHASE OF SUBSIDIARY UNDERTAKINGS
NET ASSETS ACQUIRED -- JULY 1998                                U.S.$'000
--------------------------------                                ---------
Aircraft....................................................      951,973
Accounts receivable.........................................        2,927
Cash........................................................      146,175
Accrued expenses and other liabilities......................      (60,430)
Security deposits...........................................      (16,205)
                                                                ---------
                                                                1,024,440
Goodwill....................................................       47,125
                                                                ---------
                                                                1,071,565
                                                                =========
Satisfied by cash...........................................    1,071,565
                                                                =========
F-33
110
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21  CASH FLOW STATEMENT (CONTINUED)
NET ASSETS ACQUIRED -- JULY 2000                                U.S.$'000
--------------------------------                                ---------
Aircraft....................................................      724,052
Accounts receivable.........................................          360
Cash........................................................           11
Accrued expenses and other liabilities......................      (26,700)
Security deposits...........................................       (7,075)
                                                                ---------
                                                                  690,648
Goodwill....................................................       15,701
                                                                ---------
                                                                  706,349
                                                                =========
Satisfied by cash...........................................      706,349
                                                                =========
22  COMMITMENTS

     AerCo Limited and its consolidated subsidiaries have no long-term contracts
other than those with their service providers (see note 29) and lessees (see
note 6).

     FOREIGN TAXATION

     The international character of AerCo's operations give rise to some
uncertainties with regard to the impact of taxation in certain countries. The
position is kept under continuous review and AerCo provides for all known
liabilities.

                                       F-34
111
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES

     The consolidated financial statements are prepared in accordance with U.K.
GAAP which differ significantly in certain respects from U.S. GAAP. These
significant differences are described below:

     (A) BASIS OF ACCOUNTING FOR TRANSACTIONS BETWEEN AERCO, ALPS 94-1 AND DEBIS
AIRFINANCE

     Under U.K. GAAP the transactions whereby AerCo Limited acquired ALPS 94-1
Limited, the AerFi transferred aircraft and the New AerFi transferred aircraft
are accounted for using acquisition accounting. Under U.S. GAAP the transactions
between AerCo, ALPS 94-1 and debis AirFinance are transactions between entities
under common control as these entities are all part of a single consolidated
group. The U.S. GAAP historical financial information is presented for ALPS 94-1
and has not been retroactively restated using the "AS-IF-POOLING-OF
INTEREST-METHOD" in respect of the AerFi transferred aircraft because of the
restricted nature of the vehicles.

     (B) AIRCRAFT

     Under U.K. GAAP the aircraft acquired by ALPS 94-1 from debis AirFinance
and those acquired by AerCo as part of the transactions whereby AerCo acquired
ALPS 94-1, the AerFi transferred aircraft and the New AerFi transferred
aircraft, are recorded at their fair value on the acquisition date. Under U.S.
GAAP transfers of assets between AerCo, ALPS 94-1 and debis AirFinance are
accounted for on a historical cost basis as transactions between entities under
the common control of debis AirFinance.

     For U.S. GAAP purposes, AerCo and ALPS 94-1 have adopted FASB Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of." FASB Statement No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. 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 amount of the asset, an impairment loss is recognized.

     The differences between income recorded for U.K. GAAP and U.S. GAAP
therefore relate to (i) depreciation expense arising from the difference between
the historical cost of the aircraft under U.S. GAAP and the initial appraised
value under U.K. GAAP, (ii) the difference in the cost of aircraft disposed
under U.S. GAAP and U.K. GAAP, (iii) different impairment provisions because of
the different cost base for the aircraft.

     (C) CASH FLOWS

     In accordance with U.K. GAAP AerCo and ALPS 94-1 comply with Financial
Reporting Standard No. 1 (Revised) -- "Cash Flow Statements" ("FRS 1"). Its
objective and principles are similar to those set out in SFAS No. 95 "Statement
of Cash Flows." The principal difference between the standards is in respect of
classification. Under FRS 1, AerCo and ALPS 94-1 present their cash flows for:
(a) operating activities; (b) return on investments and servicing of finance;
(c) taxation; (d) capital expenditure and financial investment; (e) acquisitions
and disposals; (f) management of liquid resources and (g) financing activities.
SFAS No. 95 requires only three categories of cash flow activity; (a) operating;
(b) investing; and (c) financing.

     Cash flows arising from taxation and returns on investments and servicing
of finance under FRS 1 are included as operating activities under SFAS No. 95.
Cash flows arising from capital expenditure under FRS 1 are included as
investing activities under SFAS No. 95.

                                       F-35
112
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

     (C) CASH FLOWS (CONTINUED)

     For the purposes of cash flows under U.S. GAAP, AerCo and ALPS 94-1
consider all highly liquid deposits with a maturity of three months or less to
be cash equivalents. Under U.K. GAAP, cash represents amounts available on
demand and liquid resources comprise other cash and commercial paper.

     Substantially all of the cash balances of AerCo at March 31, 2001 and March
31, 2000 are held for specific purposes under the terms of the AerCo Trust
Indenture.

     (D) GOODWILL

     Under U.K. GAAP the difference between the fair value of the net assets of
ALPS 94-1 and the AerFi transferred aircraft, and the purchase consideration
paid by AerCo Limited to acquire these entities gave rise to goodwill of U.S.$47
million which is capitalized and amortized over a period of 20 years. Under U.K.
GAAP the difference between the fair value of the net assets of the New AerFi
transferred aircraft, and the purchase consideration paid by AerCo Limited to
acquire this entity gave rise to goodwill of U.S.$15.7 million which is
capitalized and amortized over a period of 20 years. No goodwill arises under
U.S. GAAP as these transactions are accounted for on an historical cost basis as
transactions between entities under common control.

     Goodwill of U.S.$6.1 million representing the difference between the fair
value of the net assets acquired and the consideration paid by the New AerFi
transferred aircraft in respect of its acquisition of aircraft from Indigo, is
eliminated under acquisition accounting in U.K. GAAP. Under U.S. GAAP this
goodwill will continue to be recognized in the consolidated financial statements
of AerCo.

     (E) ISSUE COSTS

     Under U.K. GAAP issue costs arising on the completion of the refinancing
transactions in July 1998 and July 2000 are disclosed as a reduction of the
related indebtedness. Under U.S. GAAP issue costs are disclosed separately as
deferred financing costs.

     (F) MAINTENANCE

     AerCo's accounting policy for aircraft maintenance reflects its adoption of
FRS 12 "Provisions, Contingent Liabilities and Contingent Assets" ("FRS 12").
The historic U.K. GAAP financial information for ALPS 94-1 has been restated to
reflect the application of the AerCo accounting policy for all periods. For U.S.
GAAP the cumulative effect of this change in accounting policy has been
reflected in the results for the period ended March 31, 1999.

     (G) GAIN ON EXTINGUISHMENT OF DEBT

     Under U.K. GAAP the make whole premium payable by ALPS 94-1 on the
settlement of its A to D note indebtedness and the indebtedness to debis
AirFinance which was forgiven as part of the AerCo transaction are fair value
adjustments to the net assets of ALPS 94-1 and the AerFi transferred aircraft
acquired by AerCo (see Note 4). Under U.S. GAAP the make whole premium and the
indebtedness forgiven by debis AirFinance are accounted for as an extraordinary
gain on the extinguishment of indebtedness.

                                       F-36
113
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

     (H) FUTURE DEVELOPMENTS

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities." In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative instruments and Certain
Hedging Activity, an Amendment of SFAS No. 133." SFAS No. 133 and SFAS No. 138
require that all derivative instruments be recorded on the balance sheet at
their respective fair values. SFAS No. 133 and SFAS No. 138 are effective for
all fiscal quarters of all fiscal years beginning after June 30, 2000. AerCo
adopted SFAS No. 133 and SFAS No. 138 with effect from April 1, 2001.

     Following the adoption of these standards, in respect of all future
financial statements, all derivatives will be recognized on the balance sheet at
their fair value. All derivatives will be designated as either a hedge of the
fair value of a recognized asset or liability or of an unrecognized firm
commitment ("FAIR VALUE HEDGE") or a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability ("CASH FLOW HEDGE"). AerCo has designated all of its interest rate
swaps as cash flow hedges.

     AerCo has a detailed hedging policy, which has been approved by the Board
of Directors and the rating agencies, which rate certain of the notes issued by
AerCo. This policy has been employed by AerCo's Administrative Agent since the
inception of AerCo in 1998. As part of this hedging policy, AerCo has formally
documented all relationships between hedging instruments and hedged items in the
context of the requirements of SFAS No. 133 and SFAS No. 138.

     This process includes linking all derivatives that are designated as
cash-flow hedges to specific liabilities on the balance sheet. Since April 1,
2001, AerCo formally assesses, both at the hedge's inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged items.

     At April 1, 2001 all of AerCo's derivatives were deemed highly effective.
Subsequent changes in the fair value of derivatives that are highly effective
and that are designated and qualify as cash-flow hedges will be recorded in
Other Comprehensive Income, until earnings are affected by the variability in
cash flows of the designated hedged items.

     AerCo will discontinue hedge accounting prospectively when it is determined
that the derivative is no longer highly effective in offsetting changes in the
cash flows of the hedged item, the derivative expires or is sold, terminated or
exercised, or it is determined that designation of the derivative as a hedging
instrument is no longer appropriate.

     In all situations in which hedge accounting is discontinued, AerCo will
continue to carry the derivative at its fair value on the balance sheet, and
will recognize any changes in its fair value in earnings.

     SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities -- a replacement of FASB Statement No. 125"
("SFAS 140") is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. The adoption of
SFAS 140 has not had any effect on AerCo's financial position and results of
operations.

     In July 2001 the FASB announced it had voted to issue two new statements:
SFAS No. 141, "Business Combinations," ("SFAS 141") and SFAS No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142").

     Those Statements will change the accounting for business combinations and
goodwill in two significant ways. First, SFAS 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. Use of the pooling-of-interests method will be prohibited. Secondly,
SFAS 142
                                       F-37
114
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

     (H) FUTURE DEVELOPMENTS (CONTINUED)

changes the accounting for goodwill from an amortization method to an
impairment-only approach. Thus, amortization of goodwill, including goodwill
recorded in past business combinations, will cease upon adoption of SFAS 142,
which for AerCo can be adopted early with effect from 1 April, 2002 or must be
adopted on 1 April, 2003. AerCo has not decided when it will adopt SFAS 142 and
is currently assessing the impact on its US GAAP financial position and results
of operations.

     In July 2001 the FASB announced it had voted to issue SFAS 143, "Accounting
for Asset Retirement Obligations." SFAS 143, which is effective for fiscal years
beginning after 15 June, 2002, requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. AerCo has not decided
when it will adopt this new standard and is currently assessing the impact on
its US GAAP financial position and results of operations.

     UK GAAP accounting standards issued but not yet adopted.

     In December 2000, the ASB issued FRS 18, "Accounting Policies" ("FRS 18").
FRS 18 overhauls and replaces SSAP2. The FRS redefines accounting policies and
distinguishes them from estimation techniques for measuring items in the
financial statements. There is an explicit requirement for each company to
select accounting policies that it judges to be "most appropriate." AerCo is
required to comply with FRS 18 in its financial statements for the year ending
31 March 2002. AerCo is currently assessing the impact of FRS 18 on its
financial position and results of operations and does not believe the financial
statements will be materially impacted by its adoption.

     In December 2000, the ASB issued FRS 19, "Deferred Tax" ("FRS 19"). FRS 19
introduces a form of full provision for deferred taxation. Deferred tax should
be provided on timing differences that have originated but not reversed by the
balance sheet date, but only when there is an obligation to pay more tax in the
future as a result of the reversal of those timing differences. AerCo is
required to comply with FRS 19 in its financial statements for the year ending
31 March 2002. AerCo is currently assessing the impact of FRS 19 on its
financial position and results of operations and does not believe the financial
statements will be materially impacted by its adoption.

                                       F-38
115
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

24 RECONCILIATION OF NET INCOME AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET
   INCOME IN ACCORDANCE WITH U.S. GAAP
ALPS 94-1
                                                           AERCO            AERCO            AERCO          PERIOD FROM
                                                         YEAR ENDED       YEAR ENDED      PERIOD ENDED    JULY 1, 1998 TO
                                                       MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999    JULY 14, 1998
                                                       --------------   --------------   --------------   ---------------
                                                         U.S.$'000        U.S.$'000        U.S.$'000         U.S.$'000
Retained loss in accordance with U.K. GAAP...........      (60,270)         (48,839)          (15,108)         (1,277)
Goodwill amortization................................        2,696            2,356             1,669              --
Difference in depreciation of aircraft...............       11,603            8,644             5,759             243
Difference in provision for impairment of aircraft
  value..............................................       (1,531)           6,979                --              --
Difference in book value of aircraft sold............           --             (375)             (319)          7,007
                                                         ---------        ---------        ----------        --------
NET (LOSS)/INCOME IN ACCORDANCE WITH U.S. GAAP BEFORE
  EXTRAORDINARY ITEM.................................      (47,502)         (31,235)           (7,999)          5,973
                                                         ---------        ---------        ----------        --------
Cumulative effect of change in accounting policy for
  maintenance........................................           --               --             1,973              --
EXTRAORDINARY ITEM -- NET GAIN ON EXTINGUISHMENT OF
  DEBT:
Gain on forgiveness of indebtedness to debis
  AirFinance arising as part of the refinancing
  transaction........................................           --               --            37,389              --
Make whole premium arising on refinancing............           --               --           (11,603)             --
                                                         ---------        ---------        ----------        --------
                                                                --               --            25,786              --
                                                         ---------        ---------        ----------        --------
NET (LOSS)/INCOME IN ACCORDANCE WITH U.S. GAAP.......      (47,502)         (31,235)           19,760           5,973
                                                         =========        =========        ==========        ========
Weighted average number of ordinary Shares
  outstanding........................................           20               20                20              10
                                                         =========        =========        ==========        ========
BASIC AND DILUTED (LOSS)/PROFIT PER ORDINARY SHARE
  FOR THE PERIOD AS SO ADJUSTED, BEFORE CUMULATIVE
  EFFECT OF CHANGE IN ACCOUNTING POLICY FOR
  MAINTENANCE AND
  EXTRAORDINARY ITEM.................................       (2,375)          (1,562)             (400)            597
Cumulative effect of change in accounting policy for
  maintenance........................................           --               --                99              --
Extraordinary item...................................           --               --             1,289              --
                                                         ---------        ---------        ----------        --------
BASIC AND DILUTED PROFIT/(LOSS) PER ORDINARY SHARE
  FOR THE PERIOD AS SO ADJUSTED......................       (2,375)          (1,562)              988             597
                                                         =========        =========        ==========        ========
F-39
116
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

25  RECONCILIATION OF SHAREHOLDERS' DEFICIT AS STATED IN ACCORDANCE WITH U.K.
    GAAP TO SHAREHOLDERS' DEFICIT IN ACCORDANCE WITH U.S. GAAP
AERCO            AERCO            AERCO
                                                         AS AT            AS AT            AS AT
                                                     MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 1999
                                                     --------------   --------------   --------------
                                                       U.S.$'000        U.S.$'000        U.S.$'000
SHAREHOLDERS' DEFICIT IN ACCORDANCE WITH U.K.
  GAAP.............................................     (124,217)         (63,947)         (15,108)
ITEMS HAVING THE EFFECT OF AMENDING SHAREHOLDERS'
  DEFICIT
Difference between the fair value of the assets
  acquired by AerCo and their predecessor cost.....     (175,653)        (141,873)        (141,873)
Goodwill arising on acquisitions...................      (56,904)         (47,125)         (47,125)
Amortization of goodwill...........................        6,721            4,025            1,669
Effect of extraordinary item differences between
  U.K. GAAP and U.S. GAAP (see note 24)............       25,786           25,786           25,786
Cumulative effect of change in accounting policy
  for maintenance..................................        1,973            1,973            1,973
Cumulative effect of other differences in net
  income between U.K. GAAP and U.S. GAAP (see note
  24)..............................................       30,760           20,688            5,440
                                                        --------         --------         --------
SHAREHOLDERS' DEFICIT IN ACCORDANCE WITH U.S.
  GAAP.............................................     (291,534)        (200,473)        (169,238)
                                                        ========         ========         ========
F-40
117
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

26  RECONCILIATION OF AIRCRAFT AS STATED IN ACCORDANCE WITH U.K. GAAP TO
    AIRCRAFT AS STATED IN ACCORDANCE WITH U.S. GAAP
U.K. GAAP                         U.S. GAAP
                                          -------------------------------   -------------------------------
                                              AERCO            AERCO            AERCO            AERCO
                                          MARCH 31, 2001   MARCH 31, 2000   MARCH 31, 2001   MARCH 31, 2000
                                          --------------   --------------   --------------   --------------
                                            U.S.$'000        U.S.$'000        U.S.$'000        U.S.$'000
COST
Cost....................................      922,045         937,766           922,045          937,766
Step up cost............................           --              --          (142,528)        (142,185)
                                            ---------         -------         ---------         --------
Beginning of period.....................      922,045         937,776           779,517          795,581
Additions...............................      724,052             622           724,052              622
Step up cost............................           --              --           (33,780)              --
Disposals...............................       (1,444)        (16,343)           (1,444)         (16,686)
                                            ---------         -------         ---------         --------
End of period...........................    1,644,653         922,045         1,468,345          779,517
                                            =========         =======         =========         ========
DEPRECIATION
Beginning of period.....................      (79,772)        (33,513)          (65,408)         (27,761)
Charge for the period...................      (69,063)        (46,998)          (57,460)         (38,354)
Disposal................................           --             739                --              707
                                            ---------         -------         ---------         --------
End of period...........................     (148,835)        (79,772)         (122,868)         (65,408)
                                            =========         =======         =========         ========
PROVISION FOR PERMANENT DIMINUTION IN
  VALUE
Beginning of period.....................      (13,079)             --            (6,100)              --
Charge for the period...................       (3,794)        (13,079)           (5,325)          (6,100)
Disposal................................           --              --                --               --
                                            ---------         -------         ---------         --------
End of period...........................      (16,873)        (13,079)          (11,425)          (6,100)
                                            =========         =======         =========         ========
NET BOOK VALUE
Beginning of period.....................      829,194         904,253           708,009          767,820
                                            =========         =======         =========         ========
End of period...........................    1,478,945         829,194         1,334,052          708,009
                                            =========         =======         =========         ========
27  FAIR VALUE OF FINANCIAL INSTRUMENTS

     AerCo Limited estimates that the fair value of its cash and cash
equivalents and other receivables and payables at March 31, 2001 and March 31,
2000 approximate to the amounts at which these items are reflected in AerCo's
balance sheet. This is due to the relatively short-term nature of the
instruments and the frequency at which they reprice.

28  FOREIGN CURRENCY TRANSACTIONS

     AerCo's and ALPS 94-1's foreign currency transactions are not significant
as all revenues and most costs are denominated in U.S. dollars.

29  RELATED PARTY TRANSACTIONS

     (A) DEBIS AIRFINANCE ACTS AS CASH MANAGER AND ADMINISTRATIVE AGENT TO AERCO
FROM JULY 15, 1998

     debis AirFinance received a fee as cash manager and administrative agent to
AerCo for the years ended March 31, 2001 and March 31, 2000 of U.S.$3,507,000
and U.S.$2,353,000 respectively and for the period from July 15, 1998 to March
31, 1999 of U.S.$1,738,000.

                                       F-41
118
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

29  RELATED PARTY TRANSACTIONS (CONTINUED)

     (A) DEBIS AIRFINANCE ACTS AS CASH MANAGER AND ADMINISTRATIVE AGENT TO AERCO

FROM JULY 15, 1998 (CONTINUED)
     On July 15, 1998 AerCo Limited acquired a portfolio of 10 aircraft and
related leases from debis AirFinance and the capital stock of ALPS 94-1 Limited,
a vehicle in which debis AirFinance was the E noteholder, as explained in
"Statement of Accounting Policies -- Description of Business."

     On July 17, 2000 AerCo Limited acquired a second portfolio of 30 aircraft
and related leases from debis AirFinance through the acquisition of 100% of the
capital stock of 18 subsidiary companies of debis AirFinance.

     (B) DEBIS AIRFINANCE ACTS AS LEASE MANAGER TO AERCO FROM JULY 17, 2000

     debis AirFinance has acted as lease manager to AerCo from July 17, 2000. In
addition to managing AerCo's aircraft, debis AirFinance also manages aircraft
owned by itself. debis AirFinance may from time to time have conflicts of
interest in performing its obligations to AerCo and in respect of its owned
aircraft.

     debis AirFinance received a fee as lease manager which amounted to
U.S.$2,402,000 for the period from July 17, 2000 to March 31, 2001.

     (C) BABCOCK & BROWN LIMITED ("BABCOCK")

     Babcock acted as lease manager to AerCo from July 15, 1998 to July 17,
2000. In addition to managing AerCo's aircraft, Babcock also managed aircraft
owned by its affiliates and other third parties. Babcock may from time to time
have had conflicts of interest in performing its obligations to AerCo and other
entities to which it provides management, marketing and other services.

     Babcock received a fee as lease manager which amounted to U.S.$2,766,000
for the period from April 1, 2000 to July 16, 2000, U.S.$4,023,000 for the year
ended March 31, 2000 and U.S.$2,637,000 for the period from July 15, 1998 to
March 31, 1999.

     (D) GE CAPITAL AVIATION SERVICES LIMITED ("GECAS")

     GECAS acted as lease manager to ALPS 94-1 until July 14, 1998. In addition
to managing the ALPS 94-1 aircraft GECAS also managed aircraft owned by GE
Capital and its affiliates and other third parties, including debis AirFinance
from whom ALPS 94-1's aircraft were purchased. GECAS may from time to time have
had conflicts of interest in performing its obligations to ALPS 94-1 and other
entities to which it provides management, marketing and other services.

     GECAS received a fee as lease manager which amounted to U.S.$108,000 for
the period from July 1, 1998 to July 14, 1998.

     GECAS is an affiliate of GE Capital which held the Class D note of ALPS
94-1 Limited and had the right to appoint a representative to the board of ALPS
94-1 Limited.

     (E) MR. E. J. HANSOM (DIRECTOR)

     Mr. E. J. Hansom is the Chief Financial Officer and a member of the
management board of debis AirFinance B.V., the parent of debis AirFinance, and
is a representative on the board of AerCo Limited appointed by debis AirFinance,
as holder of the Class E notes of AerCo Limited. Mr. E. J. Hansom is also a
director of ALPS 94-1 Limited. ALPS 94-1 Limited purchased its aircraft from
debis AirFinance and AerCo Limited purchased the AerFi transferred aircraft and
the New AerFi transferred aircraft from debis AirFinance.

                                       F-42
119
                                     AERCO

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

29  RELATED PARTY TRANSACTIONS (CONTINUED)

     (F) MS. R. HYNES (DIRECTOR)

     Ms. R. Hynes is Executive Vice President, Commercial at debis AirFinance
B.V., the parent of debis AirFinance, and is a representative on the board of
AerCo Limited appointed by debis AirFinance as holder of the Class E notes of
AerCo Limited. Ms. R. Hynes was also a director of ALPS 94-1 Limited until
January 19, 2000. ALPS 94-1 Limited purchased its aircraft from debis AirFinance
and AerCo Limited purchased the AerFi transferred aircraft and the New AerFi
transferred aircraft from debis AirFinance.

     (G) MR. G. A. ROBINSON (DIRECTOR)

     Mr. G. A. Robinson performs consulting services from time to time for Air
2000 and JMC Airlines, two of the lessees of AerCo. Included in aircraft leasing
revenue in respect of Air 2000 is an amount of U.S.$5,491,000 for the year ended
March 31, 2001 (March 31, 2000: U.S.$5,168,000, March 31, 1999: U.S.$3,588,000,
July 14, 1998: U.S.$202,000). Included in aircraft leasing revenue in respect of
JMC Airlines is an amount of U.S.$4,910,000 for the year ended March 31, 2001.

30  POST BALANCE SHEET EVENT

     On September 11, 2001, the United States was the subject of attacks by
terrorists who used the hijacked aircraft of certain airlines. The full effects
that these terrorist attacks may have for the aviation industry are not yet
known. However, the near term effects of these events can be expected to
include, among other things, a reduction in demand for air travel due to fears
regarding additional acts of terrorism, a cutback in the number of routes
serviced by airlines in response to the reduction of air travel resulting in a
decrease in demand for aircraft, an increase in the price of fuel, increased
costs and reduced operations by airlines due to new security directives adopted
by the relevant aviation authorities, and new insurance requirements.

     The possible impact of these events on AerCo may include a deterioration in
the financial condition of AerCo's lessees and consequently their ability to
perform under their leases, an oversupply in the aviation industry market
resulting in an inability to re-lease aircraft when they become available or at
rates similar to those currently obtained in the market and valuation issues in
relation to AerCo's aircraft portfolio. While the full impact of these events on
AerCo is difficult to determine at this time they could have a material adverse
effect on the cash flow available to AerCo to make payments on its Notes and on
the ability of AerCo to refinance the Notes as they become due.

                                       F-43
120

                              FINANCIAL STATEMENTS

                           AERFI TRANSFERRED AIRCRAFT

                                       F-44
121

                           AERFI TRANSFERRED AIRCRAFT

                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF AERCO LIMITED

     We have audited the accompanying statements of operations, cash flows and
changes in net assets for the period from July 1, 1998 to July 14, 1998. These
financial statements are the responsibility of the directors of AerCo Limited.
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 Kingdom and the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the directors as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of the AerFi
transferred aircraft for the period from July 1, 1998 to July 14, 1998 in
conformity with generally accepted accounting principles in the United Kingdom.

     As discussed in note 11 to the financial statements, AerCo has adopted the
provisions of Financial Reporting Standard 12, "Provisions, Contingent
Liabilities and Contingent Assets." As a result, the accounting policy used to
record maintenance for the AerFi transferred aircraft has been amended to
reflect the adoption of the AerCo accounting policy.

     Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations of the AerFi
transferred aircraft for the period from July 1, 1998 to July 14, 1998 to the
extent summarized in note 12 to the financial statements.

KPMG
Chartered Accountants
Dublin, Ireland
August 9, 1999

                                       F-45
122

                           AERFI TRANSFERRED AIRCRAFT

                            STATEMENT OF OPERATIONS
PERIOD FROM
                                                                         JULY 1, 1998 TO
                                                                NOTES     JULY 14, 1998
                                                                -----    ---------------
                                                                            U.S.$'000
REVENUES
Aircraft leasing............................................      4             983
EXPENSES
Depreciation................................................      2            (464)
Net interest expense........................................      5          (1,392)
Other expenses..............................................      6             355
                                                                             ------
                                                                             (1,501)
                                                                             ------
NET LOSS FROM OPERATIONS BEFORE PROVISION FOR TAXES.........                   (518)
Benefit for taxes...........................................      7               5
                                                                             ------
NET LOSS FOR THE PERIOD.....................................                   (513)
                                                                             ======
All recognized gains and losses are included in the statements of
operations above.

     There is no material difference between the net loss for the period, and
its historical cost equivalent.

     The results for the period are derived from continuing operations.

     The accompanying notes, including the statement of accounting policies on
pages F-49 to F-50, are an integral part of the financial statements.

                                       F-46
123

                           AERFI TRANSFERRED AIRCRAFT

                            STATEMENT OF CASH FLOWS
PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period.....................................           (513)
ADJUSTMENTS TO RECONCILE NET LOSS FROM OPERATIONS TO NET
  CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation charge for the period..........................            464
Deferred income tax.........................................             (5)
Changes in operating assets and liabilities
  Accounts receivable and due from debis AirFinance.........         24,539
  Accrued expenses and other liabilities....................           (970)
  Net maintenance expenditure...............................           (448)
  Net security deposits received............................             50
                                                                    -------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................         23,117
                                                                    -------
CAPITAL EXPENDITURE
Purchase of aircraft........................................             --
                                                                    -------
FINANCING ACTIVITIES
Contributions from debis AirFinance.........................         16,793
Indebtedness repaid.........................................        (39,910)
                                                                    -------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES.........        (23,117)
                                                                    -------
NET INCREASE IN CASH........................................             --
CASH AT BEGINNING OF PERIOD.................................             --
                                                                    -------
CASH AT END OF PERIOD.......................................             --
                                                                    =======
Disclosure of cash flow information is set out in note 9.

     The accompanying notes, including the statement of accounting policies on
pages F-49 to F-50, are an integral part of the financial statements.

                                       F-47
124

                           AERFI TRANSFERRED AIRCRAFT

                       STATEMENT OF CHANGES IN NET ASSETS
TOTAL
                                                                ---------
                                                                U.S.$'000
                                                                ---------
Balance at June 30, 1998....................................     100,753
Net contribution from AerFi.................................      16,793
Net loss for the period.....................................        (513)
                                                                 -------
Balance at July 14, 1998....................................     117,033
                                                                 =======
The accompanying notes, including the statement of accounting policies on
pages F-49 to F-50 are an integral part of the financial statements.

                                       F-48
125

                           AERFI TRANSFERRED AIRCRAFT

                        STATEMENT OF ACCOUNTING POLICIES

INTRODUCTION AND BASIS OF PREPARATION

     These financial statements present the statement of operations and the cash
flows for the period from July 1, 1998 to July 14, 1998 and the statement of net
assets at July 14, 1998 of the aircraft (the "AERFI TRANSFERRED AIRCRAFT")
acquired by AerCo Limited from debis AirFinance pursuant to a secured financing
transaction on July 15, 1998.

     Under the transaction AerCo Limited acquired all of the capital stock of
ALPS 94-1 Limited, a company which owned 25 aircraft and related leases, and
also acquired 10 aircraft and related leases from debis AirFinance. The further
details of the transaction and of the basis of preparation of these financial
statements for the AerFi transferred aircraft are set out in Note 1.

     The accounting policies followed in the preparation of the accompanying
financial statements conform with generally accepted accounting principles in
the United Kingdom and comply with financial reporting standards of the
Accounting Standards Board in the United Kingdom as promulgated by The Institute
of Chartered Accountants in England and Wales.

     The financial statements are prepared on the going concern basis and under
the historic cost convention and are stated in U.S. dollars, which is the
principal operating currency of the entity and of the aviation industry.

REVENUE RECOGNITION

     Revenue from aircraft on operating leases is recognized as income on a
straight-line basis over the period of the leases. Where rentals are adjusted to
reflect increases or decreases in prevailing interest rates such adjustments are
accounted for as they arise. Lease rentals received in advance are deferred and
recognized over the period to which they relate.

INTEREST INCOME

     Interest earned during the period has been credited to the statement of
operations.

MAINTENANCE

     In most lease contracts the lessee has the obligation to pay for
maintenance costs on airframes and engines which arise during the term of the
lease and in many lease contracts the lessee makes a full or partial prepayment,
calculated at an hourly rate, into a maintenance reserve fund paid to the AerFi
transferred aircraft from which the lessee can draw in respect of maintenance
expenditures for major checks. Amounts held in respect of aircraft maintenance
are recorded as accrued expenses and other liabilities. Any surplus amounts held
in the fund on termination of a lease, to which the next lessee has no access,
are recorded as income at that time.

     Maintenance costs borne directly by the AerFi transferred aircraft and
which are not paid for by lessees are expensed as incurred.

TAXATION

     Corporation tax is provided based on the results for the period. Deferred
income tax assets and liabilities recognize the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets
and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.

                                       F-49
126
                           AERFI TRANSFERRED AIRCRAFT
                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

AIRCRAFT

     Aircraft are stated at cost less accumulated depreciation less impairments
in value. Cost comprises the net purchase price of the aircraft when originally
acquired by debis AirFinance.

     Cost comprises the invoiced cost net of manufacturer's discounts.
Depreciation is calculated on a straight-line basis. The estimates of useful
economic lives and residual values are reviewed periodically. The current
estimates for residual values are generally 15% of cost and for useful economic
lives are as follows:
YEARS          FROM
                                                                -----          ----
Refurbished and upgraded aircraft -- converted to
  freighters................................................     20      Conversion Date
All other aircraft..........................................     25      Manufacture Date
Additional charges are made to reduce the book value of specific assets to
the recoverable amount where an impairment in value is considered to have
occurred in accordance with Financial Reporting Standard No. 11 "Impairment of
Tangible Fixed Assets and Goodwill." An impairment review is only required where
there has been an indication of impairment, usually on the basis of independent
market appraisals and indications of market demand. An impairment is measured by
comparing the carrying value of the aircraft and engines with the recoverable
amount. Recoverable amount is the higher of the net realizable value and the
value in use on an after tax basis. Value in use is based on the anticipated
future cash flows from the aircraft, discounted by a market rate of return.

     debis AirFinance adopted FASB Statement No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be disposed of" as
of July 1, 1996. FASB Statement No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the directors' estimated 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 amount of the asset, an impairment loss is recognized. This
statement did not materially change the carrying value of the entity's assets in
the period when it was first applied or in previous periods.

                                       F-50
127

                           AERFI TRANSFERRED AIRCRAFT

                       NOTES TO THE FINANCIAL STATEMENTS

1   BASIS OF PREPARATION

     Under a refinancing transaction of July 15, 1998, AerCo Limited acquired
100% of the capital stock of ALPS 94-1 Limited and thereby acquired 25 aircraft
and related leases and acquired directly or indirectly 10 aircraft and related
leases from debis AirFinance. The transaction was effected by transferring ALPS
94-1 Limited and subsidiaries and the existing debis AirFinance subsidiaries
that own the AerFi transferred aircraft to AerCo Limited.

     Simultaneously with such transfers, AerCo Limited issued approximately
U.S.$800 million in aggregate principal amount of notes in four subclasses:
subclass A-1, subclass A-2, subclass B-1 and subclass C-1 (the "NOTES"). AerCo
Limited also issued two additional subclasses of notes, the subclass D-1 notes
and the subclass E-1 notes, which were initially and continue to be held by
debis AirFinance. In addition, as part of the transaction a subsidiary of debis
AirFinance surrendered its existing class E note issued by ALPS 94-1 Limited.
AerCo Limited used the proceeds of the issuance of the notes, the subclass D-1
notes and subclass E-1 notes to finance the repayment of all of ALPS 94-1's
existing financial indebtedness and to acquire or to finance the acquisition of
the AerFi transferred aircraft from debis AirFinance.

     These financial statements present, on the bases and assumptions set out
below, the results of operations, assets and liabilities relating to the
aircraft transferred to AerCo from debis AirFinance, reflecting the nine
aircraft owned by debis AirFinance during the year ended June 30, 1998 and the
acquisition in April 1998 of an A300-B4-200 aircraft by debis AirFinance from
ALPS 94-1 Limited. The financial statements have been prepared by debis
AirFinance Administrative Services Limited on behalf of the directors of AerCo
Limited.

     (i) The financial statements are presented on a historical cost basis as if
the AerFi transferred aircraft had been organized as single economic entity for
the period from July 1, 1998 to July 14, 1998.

     (ii) The transaction was approved as planned and was completed such that
AerCo was a going concern with adequate capital and finance in place.

     (iii) For the purposes of these financial statements, an allocation of
certain costs such as selling, general and administrative expenses of debis
AirFinance to the AerFi transferred aircraft has been made. The most significant
element of these costs relate to aircraft management fees, substantially all of
which are asset based fees calculated as an annual percentage of a reference net
book value of aircraft under management. The balance of such costs have been
calculated based on debis AirFinance's estimate of the other overhead costs
incurred in managing the fleet of aircraft for the year. Management believes
that the basis for these allocations are reasonable.

     (iv) During the period from July 1, 1998 to July 14, 1998 two of the
aircraft were financed by finance leases to debis AirFinance and one aircraft
was financed by notes issued by debis AirFinance. For these aircraft the
financial lease obligations, the liabilities under the notes and related cash
flows and interest costs are reflected in these financial statements.

     During the period from July 1, 1998 to July 14, 1998 the financial lease
obligations and the liabilities under the notes were repaid.

     In the case of the remaining aircraft, no separate identifiable financing
was in place. These aircraft are assumed to have been financed by intercompany
indebtedness to debis AirFinance at levels based on the ratio of debis
AirFinance's overall net debt to aircraft net book value of 42.06% at June 30,
1998 and 42.06% at July 14, 1998 and repayments to debis AirFinance are assumed
to have been made accordingly during the period.

     (v) The interest charged on the assumed indebtedness to debis AirFinance is
based on debis AirFinance's average cost of debt of 9.59% for the period from
July 1, 1998 to July 14, 1998.

                                       F-51
128
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1   BASIS OF PREPARATION (CONTINUED)

     (vi) Cash generated from or absorbed by the activities of the entity during
the period is reflected through the intercompany account as distributions to or
transfers from debis AirFinance. This includes restricted cash held by debis
AirFinance with respect to the entity. No separate cash balances existed for the
entity.

     (vii) The tax provisions and deferred income tax assets and liabilities of
the entity have been determined as if the aircraft had been owned by taxable
entities separate from debis AirFinance.

2   AIRCRAFT
JULY 14, 1998
                                                                -------------
                                                                  U.S.$'000
COST
Beginning of period.........................................       283,713
Additions during the period.................................            --
                                                                  --------
End of period...............................................       283,713
                                                                  ========
DEPRECIATION
Beginning of period.........................................      (100,493)
Charge for the period.......................................          (464)
                                                                  --------
End of period...............................................      (100,957)
                                                                  ========
Impairment provision........................................        (4,000)
                                                                  ========
NET BOOK VALUE
Beginning of period.........................................       179,220
                                                                  ========
End of period...............................................       178,756
                                                                  ========
Cost represents the net purchase price of the aircraft when originally
acquired by debis AirFinance.

     The directors of AerCo Limited determine on an annual basis whether an
impairment in value of the AerFi transferred aircraft has occurred. Where an
impairment in value is considered to have occurred provision is made based upon
market appraisals of the individual aircraft prepared by three professional
appraisal firms, together with other factors such as maintenance reserves held
by the entity, the creditworthiness of particular lessees, current rental values
compared to open market and the length of remaining lease term.

3   OPERATING LEASES

     All the aircraft are held for operating lease. Rentals on certain of the
leases are variable in accordance with prevailing interest rates.

     The following is a schedule of contracted future rentals, by years, on
operating leases as of July 14, 1998. The interest rates prevailing at July 14,
1998 have been applied in determining rentals that are variable in accordance
with prevailing interest rates.

                                       F-52
129
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3   OPERATING LEASES (CONTINUED)
U.S.$'000
                                                                ---------
Period July 15, 1998 to June 30, 1999.......................      22,595
Year ended June 30, 2000....................................      26,153
Year ended June 30, 2001....................................      17,439
Year ended June 30, 2002....................................      13,191
Year ended June 30, 2003....................................      15,181
Thereafter..................................................       9,458
                                                                 -------
                                                                 104,017
                                                                 =======
4   REVENUES AND CONCENTRATION OF CREDIT RISK

     (A) DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA
PERIOD FROM
                                                                 JULY 1, 1998 TO
                                                                  JULY 14, 1998
                                                                ------------------
                                                                U.S.$'000      %
Europe......................................................       543        55.3
North America...............................................       231        23.5
South/Central America.......................................       137        13.9
Asia/Pacific................................................        72         7.3
                                                                   ---       -----
                                                                   983       100.0
                                                                   ===       =====
All revenues are derived from aircraft leasing.

     In the period from July 1, 1998 to July 14, 1998, 27%, 24%, 15%, 14% and
14% of the entity's lease revenues were derived from Turkey, the United States,
the United Kingdom, Brazil and France respectively.

     (B) CONCENTRATION OF CREDIT RISK

     Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.

     The entity manages its exposure to particular countries in part through
obtaining security from lessees by way of deposits, letters of credit and
guarantees. In addition the entity maintains Political Risk Insurance in respect
of certain lessees.

     The entity 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.

     As at July 14, 1998, five lessees accounted for 15%, 15%, 14%, 14% and 13%
of the entity's lease revenues. No other lessee accounted for greater than 10%
of the entity's lease revenues for the period from July 1, 1998 to July 14,
1998.

                                       F-53
130
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5   NET INTEREST EXPENSE
PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
Interest payable on finance lease obligations...............         1,125
Interest payable on debis AirFinance notes..................            55
Interest payable on indebtedness due to debis AirFinance....           212
                                                                     -----
                                                                     1,392
                                                                     =====
6   OTHER EXPENSES
PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
Servicer's fees.............................................           52
Aircraft leasing costs......................................         (424)
Administration fees.........................................            2
Legal and professional fees.................................            4
Cash manager's fees.........................................            9
Audit and tax fees..........................................            2
                                                                     ----
                                                                     (355)
                                                                     ====
Aircraft leasing costs include costs relating to the repair and return to
re-leasable condition of aircraft following return from lessees.

7   BENEFIT FOR TAXES
PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
Tax benefit of the AerFi transferred aircraft consists of
  the following:
Deferred income tax benefit.................................            5
                                                                     ----
                                                                        5
                                                                     ====
PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
Deferred tax assets and liabilities of the AerFi transferred
  aircraft:
Deferred tax assets relating to losses......................        (5,515)
Deferred tax liability relating to aircraft.................        10,663
                                                                    ------
                                                                     5,148
                                                                    ======
The entity's income from approved activities in Ireland is taxable at a
rate of 10% until December 31, 2005. U.S. Federal and State tax is provided at a
rate of 35%.

     Two aircraft, for tax purposes, are treated as being leased from third
parties under U.S. "SAFE HARBOR LEASE" tax rules. Under existing laws, certain
events could reverse the cumulative effect of this tax treatment, in which case
the entity would be required to make payments to third parties under the tax
indemnification clauses

                                       F-54
131
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

7   BENEFIT FOR TAXES (CONTINUED)

included in the lease agreements. As of July 14, 1998 the maximum potential
exposure under this provision is U.S.$0.9 million (June 30, 1998: U.S.$0.9
million). The directors of AerCo Limited believe that no events have taken place
which would cause such payments to become due.

8   STAFF COSTS AND NUMBERS

     The entity has no employees.

9   CASH FLOW STATEMENT

     (A) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
PERIOD FROM
                                                                JULY 1, 1998 TO
                                                                 JULY 14, 1998
                                                                ---------------
                                                                   U.S.$'000
Cash paid in respect of:
Interest -- Individual financings...........................            212
Interest -- AerFi notes.....................................             55
Interest -- Indebtedness to AerFi...........................          1,175
                                                                    -------
                                                                      1,442
                                                                    =======
(B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
U.S.$'000
                                                              ----------
Increase in cash in the period..............................        --
Cashflow from increase in debt..............................   (39,910)
Increase in liquid resources in period......................        --
Change in net debt resulting from cashflows.................   (39,910)
                                                               -------
Movement in net debt in the period..........................   (39,910)
Net debt at June 30, 1998...................................    88,345
                                                               -------
Net debt at July 14, 1998...................................    48,435
                                                               =======
(C) ANALYSIS OF NET DEBT
JUNE 30, 1998    CASHFLOW     JULY 14, 1998
                                                          -------------    ---------    -------------
                                                            U.S.$'000      U.S.$'000      U.S.$'000
Cash..................................................            --             --             --
Liquid resources......................................            --             --             --
Indebtedness..........................................        88,345        (39,910)        48,435
                                                             -------        -------        -------
                                                              88,345        (39,910)        48,435
                                                             =======        =======        =======
10  COMMITMENTS

     The entity has no long-term contracts other than those with its service
providers (see Note 14).

11  NEW ACCOUNTING STANDARDS IMPLEMENTED

     FRS 12 "Provisions, Contingent Liabilities and Contingent Assets" was
effective for AerCo for its first trading accounting period ended March 31,
1999.
                                       F-55
132
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11  NEW ACCOUNTING STANDARDS IMPLEMENTED (CONTINUED)

     Under the accounting policy previously adopted by the entity all aircraft
maintenance reserves collected from lessees in respect of major aircraft and
engine overhauls were held as provisions. Under FRS 12 the pre-accrual of
maintenance costs is not permitted and accordingly the entity has changed its
accounting policy to reflect the adoption of the AerCo accounting policy for
maintenance. The effect of this change in accounting policy is that maintenance
reserves collected from lessees which cannot be drawn down by current lessees
are no longer provided. Such reserves only arose prior to June 30, 1996 and the
adjustment therefore has no effect on reported results. The balance sheet effect
of this change in accounting policy is to reduce maintenance provisions and to
increase net assets of the entity by U.S.$2.923 million at each balance sheet
date.

12  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES

     The financial statements are prepared in accordance with generally accepted
accounting principles applicable in the United Kingdom ("U.K. GAAP") which
differ significantly in certain respects from those generally accepted in the
United States ("U.S. GAAP").

     AerCo's accounting policy for aircraft maintenance reflects its adoption of
FRS 12 as explained in note 11. The historic U.K. GAAP financial information for
the AerFi transferred aircraft has been restated to reflect the application of
the AerCo accounting policy for all periods. For U.S. GAAP the cumulative effect
of this change in accounting policy has been reflected in the results for the
period ended July 14, 1998.

RECONCILIATION OF NET LOSS AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET LOSS IN
ACCORDANCE WITH U.S. GAAP.
PERIOD FROM
                                                                  JULY 1, 1998
                                                                TO JULY 14, 1998
                                                                ----------------
                                                                   U.S.$'000
NET LOSS IN ACCORDANCE WITH U.K. GAAP.......................          (513)
Cumulative effect of change in accounting policy for
  maintenance...............................................         2,923
                                                                     -----
NET INCOME/(LOSS) IN ACCORDANCE WITH U.S. GAAP..............         2,410
                                                                     =====
RECONCILIATION OF NET ASSETS AS STATED IN ACCORDANCE WITH U.K. GAAP TO NET
ASSETS IN ACCORDANCE WITH U.S. GAAP.
PERIOD FROM
                                                                  JULY 1, 1998
                                                                TO JULY 14, 1998
                                                                ----------------
                                                                   U.S.$'000
NET ASSETS IN ACCORDANCE WITH U.K. GAAP.....................        117,033
Cumulative effect of change in accounting policy for
  maintenance                                                            --
                                                                    -------
NET ASSETS IN ACCORDANCE WITH U.S. GAAP.....................        117,033
                                                                    =======
There were no other significant differences between U.K. GAAP and U.S. GAAP
arising in respect of the entity for the period from July 1, 1998 to July 14,
1998.

13  FOREIGN CURRENCY TRANSACTIONS

     The entity's foreign currency transactions are not significant as all
revenues and most costs are denominated in U.S. dollars.

                                       F-56
133
                           AERFI TRANSFERRED AIRCRAFT

                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14  RELATED PARTY TRANSACTIONS

     GE CAPITAL AVIATION SERVICES LIMITED ("GECAS")

     During the period from July 1, 1998 to July 14, 1998 GECAS acted as lease
manager for the entity. In addition to managing the entity's aircraft GECAS also
manages aircraft owned by GE Capital and its affiliates and other third parties,
including debis AirFinance. GECAS may from time to time have had conflicts of
interest in performing its obligations to the entity and other entities to which
it provides management, marketing and other services.

     GECAS receives an annual fee from debis AirFinance as lease manager of
certain of its aircraft -- U.S.$52,075 of this fee is attributed to the entity
for the period from July 1, 1998 to July 14, 1998.

                                       F-57
134

                              FINANCIAL STATEMENTS

                         NEW AERFI TRANSFERRED AIRCRAFT

                                       F-58
135

                         NEW AERFI TRANSFERRED AIRCRAFT

                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF AERCO LIMITED

     We have audited the accompanying statements of net assets of the New AerFi
Transferred Aircraft as of July 16, 2000, March 31, 2000 and March 31, 1999 and
the statements of operations, cash flows and changes in net assets for the
period from April 1, 2000 to July 16, 2000 and the years ended March 31, 2000
and 1999. These financial statements are the responsibility of the directors of
AerCo Limited. 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 Kingdom and the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the directors as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the New AerFi Transferred
Aircraft as of July 16, 2000, March 31, 2000 and March 31, 1999 and its results
of operation and cash flows for the period from April 1, 2000 to July 16, 2000
and the years ended March 31, 2000 and 1999 in conformity with generally
accepted accounting principles in the United Kingdom.

     Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have no significant effect on the results of operations
for the period from April 1, 2000 to July 16, 2000 and the years ended March 31,
2000 and 1999 and the statements of net assets as of July 16, 2000, March 31,
2000 and March 31, 1999.

KPMG
Chartered Accountants
Dublin, Ireland
July 25, 2001

                                       F-59
136

                         NEW AERFI TRANSFERRED AIRCRAFT

                            STATEMENTS OF NET ASSETS
NOTES    JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                              -----    -------------    --------------    --------------
                                                         U.S.$'000        U.S.$'000         U.S.$'000
ASSETS
CURRENT ASSETS
Cash, restricted............................               14,824           16,784                --
Accounts receivable, net....................    2           1,475            2,349               786
                                                          -------          -------           -------
TOTAL CURRENT ASSETS........................               16,299           19,133               786
INTANGIBLE ASSETS
Goodwill, net...............................    3           5,922            6,011                --
FIXED ASSETS
Aircraft....................................    5         690,272          653,336            30,196
                                                          -------          -------           -------
TOTAL ASSETS................................              712,493          678,480            30,982
                                                          =======          =======           =======
LIABILITIES
Accrued expenses and other liabilities......    7          28,756           32,888               692
Indebtedness................................    8         470,562          483,302            20,527
Security deposits...........................    9           7,075            7,531               834
Deferred income tax.........................   13             970              899               855
                                                          -------          -------           -------
TOTAL LIABILITIES...........................              507,363          524,620            22,908
NET ASSETS..................................              205,130          153,860             8,074
                                                          =======          =======           =======
The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66, are an integral part of the financial statements.

                                       F-60
137

                         NEW AERFI TRANSFERRED AIRCRAFT

                            STATEMENTS OF OPERATIONS
PERIOD FROM
                                                     APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                            NOTES     JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                            -----    ----------------    --------------    --------------
                                                        U.S.$'000          U.S.$'000         U.S.$'000
REVENUES
Aircraft leasing..........................   10           26,423             26,258             3,292
EXPENSES
Depreciation..............................    5           (9,444)           (10,086)           (1,360)
Amortization of goodwill..................    3              (89)               (89)               --
Net interest expense......................   11          (10,048)           (11,593)           (1,578)
Other expenses............................   12           (1,244)            (2,578)             (463)
                                                         -------            -------            ------
                                                         (20,825)           (24,346)           (3,401)
                                                         -------            -------            ------
NET PROFIT / (LOSS) FROM OPERATIONS BEFORE
  TAXES...................................                 5,598              1,912              (109)
(Provision) / benefit for taxes...........   13              (71)               (44)               11
                                                         -------            -------            ------
NET PROFIT / (LOSS) FOR THE PERIOD........                 5,527              1,868               (98)
                                                         =======            =======            ======
All recognized gains and losses are included in the statements of
operations above.

     There is no material difference between the net profit/(loss) for the
period, and its historical cost equivalent.

     The results for the period are derived from continuing operations.

     The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66, are an integral part of the financial statements.

                                       F-61
138

                         NEW AERFI TRANSFERRED AIRCRAFT

                            STATEMENTS OF CASH FLOWS
PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit/(loss) for the period...............          5,527               1,868              (98)
ADJUSTMENTS TO RECONCILE NET PROFIT/(LOSS) FROM
  OPERATIONS TO NET CASH PROVIDED BY OPERATING
  ACTIVITIES
Depreciation charge for the period.............          9,444              10,086            1,360
Amortization of goodwill.......................             89                  89               --
Deferred income tax............................             71                  44              (11)
Changes in operating assets and liabilities
  Accounts receivable..........................            874                 718             (785)
  Accrued expenses and other liabilities.......         (1,923)               (220)             171
  Net maintenance expenditure..................         (2,209)              3,158               --
  Net security deposits repaid)/received.......           (456)                144               --
                                                       -------            --------           ------
NET CASH PROVIDED BY OPERATING ACTIVITIES......         11,417              15,887              637
                                                       -------            --------           ------
CAPITAL EXPENDITURE
Purchase of aircraft...........................        (46,380)            (21,191)              --
                                                       -------            --------           ------
ACQUISITION
Purchase of Indigo transferring Aircraft.......             --            (102,529)              --
Cash acquired with Indigo transferring
  Aircraft.....................................             --              14,424               --
                                                       -------            --------           ------
                                                            --             (88,105)              --
FINANCING ACTIVITIES
Contributions from debis AirFinance............         45,743             143,918            2,235
Net indebtedness repaid........................        (12,740)            (33,725)          (2,872)
                                                       -------            --------           ------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING
  ACTIVITIES...................................         33,003             110,193             (637)
                                                       -------            --------           ------
NET (DECREASE)/INCREASE IN CASH................         (1,960)             16,784               --
CASH AT BEGINNING OF PERIOD....................         16,784                  --               --
                                                       -------            --------           ------
CASH AT END OF PERIOD..........................         14,824              16,784               --
                                                       =======            ========           ======
Supplemental disclosure of cash flow information is set out in note 15.

     The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66, are an integral part of the financial statements.

                                       F-62
139

                         NEW AERFI TRANSFERRED AIRCRAFT

                      STATEMENTS OF CHANGES IN NET ASSETS
TOTAL
                                                                ---------
                                                                U.S.$'000
Balance at March 31, 1998...................................        5,937
Net contribution from debis AirFinance......................        2,235
Net loss for the year.......................................          (98)
                                                                ---------
Balance at March 31, 1999...................................        8,074
Net contribution from debis AirFinance......................      143,918
Net profit for the year.....................................        1,868
                                                                ---------
Balance at March 31, 2000...................................      153,860
Net contribution from debis AirFinance......................       45,743
Net profit for the period...................................        5,527
                                                                ---------
Balance at July 16, 2000....................................      205,130
                                                                =========
The accompanying notes, including the statement of accounting policies on
pages F-64 to F-66 are an integral part of the financial statements.

                                       F-63
140

                         NEW AERFI TRANSFERRED AIRCRAFT
                        STATEMENT OF ACCOUNTING POLICIES

INTRODUCTION AND BASIS OF PREPARATION

     Under the refinancing transaction entered into on July 17, 2000, AerCo
Limited acquired 30 additional aircraft and related leases from debis
AirFinance. On December 16, 1999 debis AirFinance tendered for 100% of the share
capital of Indigo who at that date owned 26 of the 30 aircraft purchased from
debis AirFinance by AerCo Limited (the "INDIGO TRANSFERRING AIRCRAFT"). At
December 16, 1999 debis AirFinance owned three of the aircraft transferred to
AerCo as part of the refinancing transaction in July 2000. debis AirFinance
acquired the final aircraft in April 2000 which was transferred to AerCo in July
2000. Further details of the transaction and of the basis of preparation of
these financial statements for the entity are set out in note 1.

     These financial statements present the statements of operations and the
cash flows for the period from April 1, 2000 to July 16, 2000 and for the years
ended March 31, 2000 and March 31, 1999 and the statements of net assets at July
16, 2000, March 31, 2000 and March 31, 1999 of the four debis AirFinance owned
aircraft and the Indigo transferring aircraft from December 16, 1999 (the date
of acquisition of Indigo by debis AirFinance) acquired by AerCo Limited from
debis AirFinance pursuant to a securitization and refinancing transaction
(together the "NEW AERFI TRANSFERRED AIRCRAFT").

     The accounting policies followed in the preparation of the accompanying
financial statements conform with generally accepted accounting principles in
the United Kingdom and comply with financial reporting standards of the
Accounting Standards Board in the Kingdom as promulgated by The Institute of
Chartered Accountants in England and Wales.

     The financial statements are prepared on the going concern basis and under
the historic cost convention and are stated in U.S. dollars, which is the
principal operating currency of the entity and of the aviation industry.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires the directors of AerCo Limited to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. While the directors of AerCo Limited believe that the
estimates and related assumptions used in the preparation of these financial
statements are appropriate, actual results could differ from those estimates.
Estimates are made in the assessment of collectibility of receivables, the
recoverable amounts in respect of aircraft and the related estimated lives of
such assets.

REVENUE RECOGNITION

     Revenue from aircraft on operating leases is recognized as income on a
straight-line basis over the period of the leases. Where rentals are adjusted to
reflect increases or decreases in prevailing interest rates such adjustments are
accounted for as they arise. Lease rentals received in advance are deferred and
recognized over the period to which they relate.

INTEREST INCOME

     Interest earned during the period has been credited to the statement of
operations.

MAINTENANCE

     In most lease contracts the lessee has the obligation to pay for
maintenance costs on airframes and engines which arise during the term of the
lease and in many lease contracts the lessee makes a full or partial prepayment,
calculated at an hourly rate, into a maintenance reserve fund paid to the entity
from which the lessee can draw in respect of maintenance expenditures for major
checks. Amounts held in respect of aircraft maintenance are

                                       F-64
141
                         NEW AERFI TRANSFERRED AIRCRAFT
                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

MAINTENANCE (CONTINUED)

recorded as accrued expenses and other liabilities. Any surplus amounts held in
the fund on termination of a lease, to which the next lessee has no access, are
recorded as income at that time.

     Maintenance costs borne directly by the entity and which are not paid for
by lessees are expensed as incurred.

TAXATION

     Corporation tax is provided based on the results for the period. Deferred
income tax assets and liabilities recognize the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets
and liabilities of a change in tax rates is recognized in the year that includes
the enactment date.

AIRCRAFT

     On December 16, 1999, debis AirFinance tendered for 100% of the share
capital of Indigo. These financial statements reflect the acquisition by the
entity on December 16, 1999 of the Indigo transferring aircraft (the "STARTING
DATE OF PERIOD OF COMMON CONTROL") which transferred to AerCo as part of the
refinancing in July 2000. Aircraft are stated at cost less accumulated
depreciation less impairments in value and are depreciated at rates calculated
to write off the cost of the assets to their estimated residual value.

     Depreciation is calculated on a straight-line basis over their estimated
useful economic lives. The estimates of useful economic lives and residual
values are reviewed periodically. The current estimates for residual values and
useful economic lives are generally 15% of cost and 25 years from date of
manufacture respectively.

     Additional charges are made to reduce the book value of specific assets to
the recoverable amount where an impairment in value is considered to have
occurred in accordance with Financial Reporting Standard No. 11 "Impairment of
Tangible Fixed Assets and Goodwill." An impairment review is only required where
there has been an indication of impairment, usually on the basis of independent
market appraisals and indications of market demand. An impairment is measured by
comparing the carrying value of the aircraft and engines with the recoverable
amount. Recoverable amount is the higher of the net realizable value and the
value in use on an after tax basis. Value in use is based on the anticipated
future cash flows from the aircraft, discounted by a market rate of return.

     debis AirFinance adopted FASB Statement No. 121 "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be disposed of" as
of July 1, 1996. FASB Statement No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the directors estimated 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 amount of the asset, an impairment loss is recognized. This
statement did not materially change the carrying value of the entity's assets in
the year when it was first applied or in previous years.

                                       F-65
142
                         NEW AERFI TRANSFERRED AIRCRAFT
                  STATEMENT OF ACCOUNTING POLICIES (CONTINUED)

CASH RESTRICTED

     The cash held by the entity is restricted and is held in interest bearing
accounts by certain lenders to the entity. These cash balances are held in
respect of the entity's maintenance obligations under certain of its leases and
may be applied on demand to meet these obligations. Cash restricted is
classified as cash in the statement of cash flows.

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

     The entity manages its interest rate exposure through the use of interest
rate swaps. Under these swap arrangements the entity will pay fixed interest and
receive floating interest on monthly basis. The objective of the entity's
interest rate risk management policy is to correlate the contracted fixed rental
payments in its portfolio to the floating interest payments on the related debt
facility, taking account of expected amortization on the debt. Net receipts and
payments arising in respect of these swaps are recognized as adjustments to
interest expense on an accruals basis.

     The entity is also exposed to losses in the event of non-performance by
counterparties on interest rate swaps or in the event of defaults by lessees
where income streams have been hedged. However, the entity does not anticipate
non-performance by the counterparties and losses or gains related to hedging
instruments which result from lessee defaults are accounted for as they are
incurred.

                                       F-66
143

                         NEW AERFI TRANSFERRED AIRCRAFT
                       NOTES TO THE FINANCIAL STATEMENTS

1   BASIS OF PREPARATION

     Under the refinancing and securitization transaction entered into on July
17, 2000, AerCo Limited acquired directly or indirectly an additional 30
aircraft and related leases from debis AirFinance.

     On July 17, 2000, AerCo Limited issued approximately U.S.$960 million in
aggregate principal amount of notes in four subclasses: subclass A-3, subclass
A-4, subclass B-2 and subclass C-2. AerCo Limited also issued two additional
subclasses of notes, the subclass D-2 notes and the subclass E-2 notes, which
are held by debis AirFinance. AerCo Limited used substantially all of the
proceeds of the issuance of the offered notes, the subclass D-2 notes and
subclass E-2 notes to refinance all of AerCo's subclass A-1 notes and subclass
D-1 notes and to finance the acquisition of the additional 30 aircraft from
debis AirFinance.

     These financial statements present, on the bases and assumptions set out
below, the results of operations, assets and liabilities relating to the entity
transferred to AerCo from debis AirFinance, comprising two aircraft owned by
debis AirFinance during the two years ended March 31, 2000, one aircraft
acquired by debis AirFinance in December 1999, one aircraft acquired by debis
AirFinance in April 2000 and the 26 aircraft owned by Indigo which was acquired
by debis AirFinance on December 16, 1999. The financial statements have been
prepared by debis AirFinance Administrative Services Limited on behalf of the
directors of AerCo Limited.

     (i) The financial statements are presented on a historical cost basis as if
the entity had been organized as a single economic entity for the period from
April 1, 2000 to July 16, 2000 and the two years ended March 31, 2000 and March
31, 1999.

     (ii) For the purposes of these financial statements, an allocation of
certain costs such as selling, general and administrative expenses of debis
AirFinance to the entity has been made. These costs have been allocated to the
entity based on debis AirFinance's estimate of the percentage of such costs
incurred in managing the fleet of aircraft for each period. Management believes
that the basis for these allocations is reasonable.

     (iii) During the period from April 1, 2000 to July 16, 2000 and the two
years ended March 31, 2000 and March 31, 1999, two of the aircraft were financed
by debis AirFinance under a facility entered into between debis AirFinance and
KfW. The liabilities under the KfW facility and related cash flows and interest
costs are reflected in these financial statements.

     In the case of the one aircraft purchased in December 1999 and one aircraft
purchased in April 2000, no separate identifiable financing was in place. These
aircraft are assumed to have been financed by intercompany indebtedness to debis
AirFinance based on the ratio of debis AirFinance's overall debt to aircraft net
book value of 77% in this period and repayments to debis AirFinance are assumed
to have been made accordingly during the period. The interest charged on the
assumed indebtedness to debis AirFinance is based on debis AirFinance's average
cost of debt of 72% for the period between December 1999 and July 2000.

     (iv) During the period from acquisition to July 16, 2000 all of the Indigo
transferring aircraft were financed by debt secured on specific aircraft. For
these aircraft the specific debt obligations, related cash flows and interest
costs related to aircraft owned by the entity are reflected in these financial
statements.

     (v) Cash generated from or absorbed by the activities of the entity during
the period from April 1, 2000 to July 16, 2000 and the two years ended March 31,
2000 is reflected through the intercompany account as distributions to or
contributions from debis AirFinance.

     (vi) The tax provisions and deferred income tax assets and liabilities of
the entity have been determined as if the aircraft had been owned by taxable
entities separate from debis AirFinance and Indigo.

                                       F-67
144
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2   ACCOUNTS RECEIVABLE, NET
JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                       U.S.$'000        U.S.$'000         U.S.$'000
Trade receivables, net...........................        1,315            2,226              786
Prepayments......................................          160              123               --
                                                         -----            -----              ---
                                                         1,475            2,349              786
                                                         =====            =====              ===
Trade receivables are stated net of a bad debt provision of $0.3 million
(March 31, 2000: $0.3 million and March 31, 1999: $nil) and comprise amounts in
respect of rent and maintenance payments due from lessees. As at March 31, 1999
one lessee accounted for 100% of trade receivables. As at March 31, 2000 four
lessees accounted for 43%, 24%, 13% and 10% respectively of trade receivables.
As at July 16, 2000, two lessees accounted for 72% and 27% respectively of trade
receivables.

3   GOODWILL, NET
JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                       U.S.$'000        U.S.$'000         U.S.$'000
COST
Goodwill on acquisition..........................        6,100            6,100               --
                                                         -----            -----              ---
AMORTIZATION
Opening Balance..................................           89)              --               --
Amortization in period...........................          (89)             (89)              --
                                                         -----            -----              ---
Closing Balance..................................         (178)             (89)              --
                                                         -----            -----              ---
NET BOOK VALUE
Beginning of period..............................        6,011               --               --
                                                         -----            -----              ---
End of period....................................        5,922            6,011               --
                                                         =====            =====              ===
Goodwill of $6.1 million represents the difference between the fair value
of the net assets and the consideration paid by the entity in respect of its
acquisition of the Indigo transferring aircraft. Goodwill is amortized over a 20
year period which is the period over which the directors of debis AirFinance
estimate that the value of the underlying business acquired is expected to
exceed the values of its identifiable net assets. Further information in
relation to the calculation of goodwill is set out in note 4 below.

4   ACQUISITION OF THE INDIGO TRANSFERRING AIRCRAFT

     On December 16, 1999 debis AirFinance tendered for 100% of the share
capital of Indigo whose registered office is Sodra Forstadsgatan 4, S-211 48
Malmo, Sweden. The acquisition was achieved through a combination of a cash
purchase and share exchange agreement.

                                       F-68
145
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4   ACQUISITION OF THE INDIGO TRANSFERRING AIRCRAFT (CONTINUED)

     The fair value of the net assets acquired and the consideration given on
the acquisition of the Indigo transferring aircraft is summarized as follows:
INDIGO         FAIR VALUE ADJUSTMENTS
                                               TRANSFERRING    --------------------------    FAIR VALUE
                                                 AIRCRAFT       VALUATION        OTHER       OF ASSETS
                                                BOOK VALUE     ADJUSTMENTS    ADJUSTMENTS     ACQUIRED
                                               ------------    -----------    -----------    ----------
                                                U.S.$'000       U.S.$'000      U.S.$'000     U.S.$'000
Cash, restricted...........................        14,424            --              --         14,424
Accounts receivable, net...................         2,281            --              --          2,281
Fixed assets -- aircraft...................       587,631        24,404(i)           --        612,035
Accrued liabilities & other liabilities....       (29,258)           --              --        (29,258)
Security deposits..........................        (6,553)           --              --         (6,553)
Indebtedness...............................      (492,960)           --          (3,040)(ii)  (496,000)
Derivatives................................            --            --            (500)(iii)      (500)
Deferred income tax........................        (2,580)           --           2,580(iv)         --
                                                 --------        ------        --------       --------
Net assets acquired........................        72,985        24,404            (960)        96,429
                                                 ========        ======        ========       ========
Consideration paid.........................                                                   (102,529)
                                                                                              --------
Goodwill on acquisition....................                                                     (6,100)
                                                                                              ========
(i) The fair value adjustments in respect of the aircraft arise as a result
of a valuation of these assets to reflect debis AirFinance's estimate of their
current market value at the date of acquisition. This valuation of the Indigo
transferring aircraft exceeded their existing book value by U.S.$24.4 million.

     (ii) The fair value adjustment to Indebtedness is based on prevailing
interest rates at the acquisition date.

     (iii) The fair value adjustment to Derivatives is based on prevailing
interest rates at the acquisition date.

     (iv) The fair value adjustment in respect of deferred taxation arises as a
result of the planned change in the tax basis of the Indigo aircraft following
the acquisition of Indigo by debis AirFinance.

     The summarized statement of operations information for the Indigo
transferring aircraft for the period from January 1, 1999 to December 15, 1999
is set out below.
PERIOD FROM
                                                                JANUARY 1, 1999 TO
                                                                DECEMBER 15, 1999
                                                                ------------------
                                                                    U.S.$'000
REVENUES
Aircraft leasing............................................          65,602
EXPENSES
Depreciation................................................         (23,408)
Net interest expense........................................         (30,277)
Other expenses..............................................          (4,863)
                                                                     -------
                                                                     (58,548)
                                                                     -------
NET PROFIT FROM OPERATIONS BEFORE PROVISION FOR TAXES.......           7,054
Provision for taxes.........................................          (1,975)
                                                                     -------
NET PROFIT FOR THE PERIOD...................................           5,079
                                                                     =======
F-69
146
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5   AIRCRAFT
JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                     U.S.$'000        U.S.$'000         U.S.$'000
COST
Beginning of period..............................       679,644           46,418            46,418
Additions during the period......................        46,380          633,226                --
                                                        -------          -------           -------
End of period....................................       726,024          679,644            46,418
                                                        =======          =======           =======
DEPRECIATION
Beginning of period..............................       (26,308)         (16,222)          (14,862)
Charge for the period............................        (9,444)         (10,086)           (1,360)
                                                        -------          -------           -------
End of period....................................       (35,752)         (26,308)          (16,222)
                                                        =======          =======           =======
NET BOOK VALUE
Beginning of period..............................       653,336           30,196            31,556
                                                        =======          =======           =======
End of period....................................       690,272          653,336            30,196
                                                        =======          =======           =======
6   OPERATING LEASES

     All the aircraft are held for operating lease. Rentals on certain of the
leases are variable in accordance with prevailing interest rates.

     The following is a schedule of contracted future rentals receivable, by
periods, on operating leases as of July 16, 2000. The interest rates prevailing
at July 16, 2000 have been applied in determining rentals that are variable in
accordance with prevailing interest rates.
U.S.$'000
                                                              ---------
Year ended July 16, 2001....................................    87,001
Year ended July 16, 2002....................................    78,316
Year ended July 16, 2003....................................    73,728
Year ended July 16, 2004....................................    63,786
Year ended July 16, 2005....................................    39,604
Thereafter..................................................    98,031
                                                               -------
                                                               440,466
                                                               =======
F-70
147
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

7   ACCRUED EXPENSES AND OTHER LIABILITIES
JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                                     -------------    --------------    --------------
                                                       U.S.$'000      U.S.$'000         U.S.$'000
ACCRUED EXPENSES AND OTHER LIABILITIES COMPRISE:
Aircraft maintenance reserves.....................      21,675            23,884              --
Deferred income...................................       4,686             5,422             249
Interest..........................................       1,661             2,434              --
Other accruals....................................         734             1,148             443
                                                        ------            ------             ---
                                                        28,756            32,888             692
                                                        ======            ======             ===
AIRCRAFT MAINTENANCE RESERVES:
Due within one year...............................       2,193             1,992              --
Due after one year................................      19,482            21,892              --
                                                        ------            ------             ---
                                                        21,675            23,884              --
                                                        ======            ======             ===
8   INDEBTEDNESS
PERIOD FROM APRIL 1,       YEAR ENDED        YEAR ENDED
                                               2000 TO JULY 16, 2000    MARCH 31, 2000    MARCH 31, 1999
                                               ---------------------    --------------    --------------
                                                     U.S.$'000          U.S.$'000         U.S.$'000
debis AirFinance KfW debt (i)..............            16,937               17,655            20,527
debis AirFinance notes (ii)................            51,147               16,082                --
Indigo debt obligations (iii)..............           402,478              449,565                --
                                                      -------              -------            ------
                                                      470,562              483,302            20,527
                                                      =======              =======            ======
The basis and assumptions under which indebtedness has been reflected in
these financial statements is set out in note 1.

     (i) The debis AirFinance KfW debt is secured on the two aircraft which had
a net book value of $28.3 million at July 16, 2000 (March 31, 2000: $28.8
million). As part of the completion of the transaction these amounts were repaid
in full.

     (ii) As explained in note 1, it has been assumed that the two aircraft
purchased by the entity in December 1999 and April 2000 were financed with
indebtedness due to debis AirFinance.

     (iii) The entity's Indigo debt obligations are primarily collateralized by
the underlying aircraft and assignment of the attached leases. At July 16, 2000,
all of the entity's Indigo debt outstanding was at fixed interest rates with the
exception of $16.3 million with rates of 30 days Libor plus 1.2% and $123.5
million with rates of commercial paper plus 1.255%. As part of the completion of
the transaction these amounts were repaid in full.

     (iv) Repayments of principal during the period from April 1, 2000 to July
16, 2000 on the Indigo debt obligations and the debis AirFinance KfW debt were
in accordance with their respective contractual terms. The repayment of
principal on the two aircraft which are assumed to have been financed by debis
AirFinance was assumed to have been made in accordance with changes in debis
AirFinance's aircraft net book value to debt ratio during the period ended July
16, 2000.

     All of the above indebtedness was repaid following the refinancing
transaction entered into on July 17, 2000.

                                       F-71
148
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9   SECURITY DEPOSITS

     Security deposits received from lessees of U.S.$7.075 million (March 31,
2000: U.S.$7.531 million and March 31, 1999: U.S.$0.8 million) are held as
security for obligations in accordance with the terms of certain leases.

10  REVENUES AND CONCENTRATION OF CREDIT RISK

     (A) DISTRIBUTION OF REVENUES BY GEOGRAPHIC AREA
PERIOD FROM APRIL 1,         YEAR ENDED             YEAR ENDED
                                    2000 TO JULY 16, 2000      MARCH 31, 2000         MARCH 31, 1999
                                    ---------------------    -------------------    -------------------
                                    U.S.$'000        %       U.S.$'000      %       U.S.$'000      %
Europe..........................      13,511       51.13      12,822       48.83         --          --
North America...................       7,371       27.90       5,572       21.22         --          --
South/Central America...........       1,973        7.47       4,390       16.72      3,292      100.00
Asia/Pacific....................       3,568       13.50       3,474       13.23         --          --
                                      ------      ------      ------      ------      -----      ------
                                      26,423      100.00      26,258      100.00      3,292      100.00
                                      ======      ======      ======      ======      =====      ======
All revenues are derived from aircraft leasing.

     In the period from April 1, 2000 to July 16, 2000, 28%, 20% and 10% of the
entity's lease revenues were derived from the United States, the United Kingdom
and China respectively. No other country accounted for greater than 10% of the
entity's lease revenues.

     In the year ended March 31, 2000, 21%, 17% and 12% of the entity's lease
revenues were derived from the United States, Brazil and the United Kingdom
respectively. No other country accounted for greater than 10% of the entity's
lease revenues.

     In the year ended March 31, 1999, 100% of the entity's lease revenues were
derived from Brazil.

     (B) CONCENTRATION OF CREDIT RISK

     Credit risk with respect to trade accounts receivable is generally
mitigated due to the number of lessees and their dispersal across different
geographic areas.

     The entity manages its exposure to particular countries in part through
obtaining security from lessees by way of deposits, letters of credit and
guarantees.

     The entity 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.

     As of July 16, 2000, one lessee accounted for 10% of the entity's lease
revenues. No other lessee accounted for greater than 10% of the entity's lease
revenues for the period from April 1, 2000 to July 16, 2000.

     As at March 31, 2000, two lessees accounted for 13% and 10% of the entity's
lease revenues. No other lessee accounted for greater than 10% of the entity's
lease revenues for the year ended March 31, 2000.

     As at March 31, 1999, one lessee accounted for all of the entity's lease
revenues.

                                       F-72
149
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11  NET INTEREST EXPENSE
PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
Interest payable on specific indebtedness......          9,411             11,426             1,578
Interest payable on debis AirFinance notes.....            869                340                --
Net interest income............................           (232)              (173)               --
                                                       -------            -------           -------
                                                        10,048             11,593             1,578
                                                       =======            =======           =======
12  OTHER EXPENSES
PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
Servicer's fees................................          1,076              1,717               218
Aircraft leasing costs.........................             48                671               199
Administration expenses........................             30                 50                10
Legal and professional fees....................             10                 10                10
Cash manager's fees............................             50                 80                21
Audit and tax fees.............................             30                 50                 5
                                                       -------            -------           -------
                                                         1,244              2,578               463
                                                       =======            =======           =======
13  (PROVISION)/BENEFIT FOR TAXES
PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
Tax (provision)/benefit of the New AerFi
  transferring aircraft consists of the
  following:
Deferred income tax (provision)/ benefit.......            (71)               (44)               11
                                                       -------            -------           -------
                                                           (71)               (44)               11
                                                       =======            =======           =======
PERIOD FROM
                                                   APRIL 1, 2000 TO      YEAR ENDED        YEAR ENDED
                                                    JULY 16, 2000      MARCH 31, 2000    MARCH 31, 1999
                                                   ----------------    --------------    --------------
                                                      U.S.$'000          U.S.$'000         U.S.$'000
Deferred tax assets and liabilities of the New
  AerFi transferring aircraft:
Deferred tax assets relating to losses.........            932                912               649
Deferred tax liability relating to aircraft....         (1,902)            (1,811)           (1,504)
                                                       -------            -------           -------
                                                          (970)              (899)             (855)
                                                       =======            =======           =======
The entity's income from approved activities in Ireland is taxable at a
rate of 10% until December 31, 2005. The tax rate applicable to the entity's
activities in Sweden following its acquisition of the Indigo transferring
aircraft in December 1999 is 28%.

                                       F-73
150
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13  (PROVISION)/BENEFIT FOR TAXES (CONTINUED)

     The difference between the statutory tax rates and the tax provision for
the period ended July 16, 2000 arises as no deferred tax provision arises on
timing differences arising in Sweden in the period from December 16, 1999 to
July 16, 2000 due to the change in the tax basis of the Indigo transferring
aircraft as part of the transaction.

14  STAFF COSTS AND NUMBERS

     The entity has no employees.

15  CASH FLOW STATEMENT

     (A) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
PERIOD FROM
                                                 APRIL 1, 2000 TO       YEAR ENDED          YEAR ENDED
                                                  JULY 16, 2000       MARCH 31, 2000      MARCH 31, 1999
                                                 ----------------    -----------------    --------------
                                                    U.S.$'000            U.S.$'000          U.S.$'000
Cash paid in respect of:
Interest.....................................         11,053              11,521              1,578
                                                      ======              ======              =====
(B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
U.S.$'000
                                                                ---------
Decrease in cash in the period..............................      (1,960)
Cash outflow from decrease in debt..........................      12,740
                                                                --------
Change in net debt resulting from cash flows................      10,780
                                                                --------
Movement in net debt in the period..........................      10,780
Net debt at March 31, 2000..................................    (466,518)
                                                                --------
Net debt at July 16, 2000...................................    (455,738)
                                                                ========
(C) ANALYSIS OF NET DEBT
MARCH 31, 2000         CASH FLOW        JULY 16, 2000
                                                 ----------------    -----------------    --------------
                                                    U.S.$'000            U.S.$'000          U.S.$'000
Cash.........................................          16,784             (1,960)              14,824
Indebtedness.................................        (483,302)            12,740             (470,562)
                                                     --------             ------             --------
                                                     (466,518)            10,780             (455,738)
                                                     ========             ======             ========
16  COMMITMENTS

     The entity has no long-term contracts other than those with its service
providers (see Note 20).

17  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES

     The financial statements are prepared in accordance with generally accepted
accounting principles applicable in the United Kingdom ("U.K. GAAP") which
differ significantly in certain respects from those generally accepted in the
United States ("U.S. GAAP").

     For U.K. GAAP purposes cash, restricted is classified as cash in the cash
flow statement. Under U.S. GAAP cash, restricted would not meet the definition
of cash equivalents. Other than the above, there were no significant

                                       F-74
151
                         NEW AERFI TRANSFERRED AIRCRAFT
                 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

17  SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
    ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)

differences between U.K. GAAP and U.S. GAAP arising in respect of the entity for
the period from April 1, 2000 to July 16, 2000 and for the years ended March 31,
2000 and March 31, 1999.

18  FAIR VALUE OF FINANCIAL INSTRUMENTS

     RECEIVABLES, PAYABLES AND CASH, RESTRICTED

     The fair value of the entity's receivables, payables and cash, restricted
at July 16, 2000 approximates to the amounts at which these items are reflected
in the entity's statement of net assets due to the relatively short-term nature
of the instruments and the frequency at which they reprice.

     INDEBTEDNESS

     The fair value of the entity's indebtedness at July 16, 2000 was $461
million.

19  FOREIGN CURRENCY TRANSACTIONS

     The entity's foreign currency transactions are not significant as all
revenues and most costs are denominated in U.S. dollars.

20  RELATED PARTY TRANSACTIONS

     GE CAPITAL AVIATION SERVICES LIMITED ("GECAS")

     During the period from April 1, 2000 to July 16, 2000 and for the two years
ended March 31, 2000 and March 31, 1999 GECAS acted as lease manager for the two
F100 aircraft owned by the entity. In addition to managing these two F100
aircraft GECAS also manages aircraft owned by GE Capital and its affiliates and
other third parties, including AerFi. GECAS may from time to time have had
conflicts of interest in performing its obligations to the two F100 aircraft and
other entities to which it provides management, marketing and other services.

     GECAS received an annual fee from debis AirFinance as lease manager of the
two F100 aircraft -- U.S.$ 221,131 for the year ended March 31, 2000 (March 31,
1999: U.S.$ 217,681).

                                       F-75
152

                                 EXHIBIT INDEX
SEQUENTIALLY
                                                                                 NUMBERED
EXHIBIT NUMBER                     DESCRIPTION OF DOCUMENT                         PAGE
--------------                     -----------------------                     ------------
8.         List of significant subsidiaries                              E-1
    10.1         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from July 17, 2000 to          by reference
                 September 15, 2000.                                           to Form 6-K
                                                                               filed on
                                                                               October 31,
                                                                               2000
    10.2         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from September 15, 2000 to     by reference
                 December 15, 2000.                                            to Form 6-K
                                                                               filed on
                                                                               January 31,
                                                                               2001
    10.3         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from December 15, 2000 to      by reference
                 March 15, 2001.                                               to Form 6-K
                                                                               filed on
                                                                               April 30,
                                                                               2001
    10.4         Cash Analysis of Financial Condition and Results of           Incorporated
                 Operations, Three Month Period from March 15, 2001 to June    by reference
                 15, 2001.                                                     to Form 6-K
                                                                               filed on
                                                                               July 31,
                                                                               2001
      12         Statement re Computation of Ratios                            E-2