TIDMDNA2

RNS Number : 6642U

Doric Nimrod Air Two Limited

30 July 2020

DORIC NIMROD AIR TWO LIMITED

(Legal Entity Identifier: 213800ENH57LLS7MEM48)

ANNUAL FINANCIAL REPORT

The Board of the Company is pleased to announce its results for the year ended 31 March 2020.

To view the Company's Annual Financial Report please follow the link below:

http://www.rns-pdf.londonstockexchange.com/rns/6642U_1-2020-7-30.pdf

In addition, to comply with DGTR 4.1 please find below the full text of the annual financial report. The report will also shortly be available on the Company's website www.dnairtwo.com .

ANNUAL GENERAL MEETING

Notice of the Annual General Meeting of the shareholders of the Company (the "AGM") will be published in due course.

For further information, please contact:

For administrative and Company information:

JTC Fund Solutions (Guernsey) Limited

+44 (0) 1481 702400

For shareholder information:

Nimrod Capital LLP

+44 (0) 20 7382 4565

OF ANNOUNCEMENT

E&OE - in transmission

Doric Nimrod Air Two Limited

Consolidated Annual Financial Report

From 1 April 2019 to

31 March 2020

SUMMARY INFORMATION

 
 Listing                          Specialist Fund Segment of the London 
                                   Stock Exchange's Main Market 
 Ticker                           DNA2 
                                 ------------------------------------------- 
 Share Price                      65.00 pence (as at 31 March 2020) 
                                   61.00 pence (as at 24 July 2020) 
                                 ------------------------------------------- 
 Market Capitalisation            GBP 105.38 million (as at 24 July 2020) 
                                 ------------------------------------------- 
 Current / Future Anticipated     Current dividends are 4.5 pence per 
  Dividend                         quarter per share (18 pence per annum) 
                                   and it is anticipated that this will 
                                   continue until the aircraft leases 
                                   begin to terminate in 2023 
                                 ------------------------------------------- 
 Dividend Payment Dates           April, July, October, January 
                                 ------------------------------------------- 
 Currency                         Sterling 
                                 ------------------------------------------- 
 Launch Date / Share Price        14 July 2011 / 200 pence 
                                 ------------------------------------------- 
 Incorporation and Domicile       Guernsey 
                                 ------------------------------------------- 
 Aircraft Registration            A6-EDP (14 October 2023), 
  Numbers                          A6-EDT (2 December 2023), 
  (Lease Expiry Dates including    A6-EDX (1 October 2024), 
  the 2 year extension)            A6-EDY (1 October 2024), 
                                   A6-EDZ (12 October 2024), 
                                   A6-EEB (9 November 2024), 
                                   A6-EEC (30 November 2024) 
                                 ------------------------------------------- 
 Asset Manager                    Doric GmbH 
                                 ------------------------------------------- 
 Corporate and Shareholder        Nimrod Capital LLP 
  Adviser 
                                 ------------------------------------------- 
 Administrator                    JTC Fund Solutions (Guernsey) Limited 
                                 ------------------------------------------- 
 Auditor                          Deloitte LLP 
                                 ------------------------------------------- 
 Market Makers                    finnCap Ltd 
                                   Investec Bank 
                                   Jefferies International Ltd 
                                   Numis Securities Ltd 
                                   Shore Capital Limited 
                                   Winterflood Securities Ltd 
                                 ------------------------------------------- 
 SEDOL, ISIN, LEI                 B3Z6252,GG00B3Z62522, 213800ENH57LLS7MEM48 
                                 ------------------------------------------- 
 Year End                         31 March 
                                 ------------------------------------------- 
 Stocks & Shares ISA              Eligible 
                                 ------------------------------------------- 
 Website                          www.dnairtwo.com 
                                 ------------------------------------------- 
 

Please note that the Group has determined that the operating leases on the Assets are for 12 years based on an initial term of 10 years followed by an extension term of two years. Should the lessee choose to exit a lease at the end of the initial term of 10 years an early termination payment equal to the present value of the Sterling rent that would have been payable for the extension term of 2 years would be due. For the purpose of this report the leases are all referred to as 12 year leases.

COMPANY OVERVIEW

Doric Nimrod Air Two Limited ("DNA2" or the "Company") is a Guernsey company incorporated on 31 January 2011.

Pursuant to the Company's prospectus dated 30 June 2011, the Company, on 14 July 2011, raised approximately GBP136 million by the issue of ordinary preference shares at an issue price of GBP2 each (the "Placing"). The Company's ordinary preference shares were admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange's Main Market on 14 July 2011.

The Company raised a further GBP188.5 million from a C share fundraising (the "C Shares"), which closed on 27 March 2012 with the admission of 100,250,000 convertible preference shares to trading on the SFS.

On 6 March 2013, the Company's C Shares converted into an additional 100,250,000 ordinary preference shares. These additional ordinary preference shares were admitted to trading on the SFS and rank pari passu with the ordinary preference shares already in issue.

As at 24 July 2020, the last practicable date prior to the publication of this report, the Company's total issued share capital consisted of 172,750,000 ordinary preference shares (the "Shares") and these Shares were trading at 61.00 pence per Share.

Investment Objectives and Policy

The Company's investment objective is to obtain income returns and a capital return for its shareholders (the "Shareholders") by acquiring, leasing and then selling aircraft (each an "Asset" or "Aircraft" and together the "Assets" or "Aircraft"). The Company receives income from the lease rentals paid to it by Emirates, the national carrier owned by the Investment Corporation of Dubai, based in Dubai, United Arab Emirates, pursuant to the leases.

Subsidiaries

The Company has four wholly-owned subsidiaries: MSN077 Limited, MSN090 Limited, MSN105 Limited and Doric Nimrod Air Finance Alpha Limited ("DNAFA") which collectively hold the Assets for the Company. Together the Company and the subsidiaries are known as the "Group".

The first Asset was acquired by MSN077 Limited on 14 October 2011 for a purchase price of $234 million and has been leased to Emirates for an expected initial term of 10 years to October 2021, with an extension period of 2 years ending October 2023, with fixed lease rentals for the duration.

The second Asset was acquired by MSN090 Limited on 2 December 2011 for a purchase price of $234 million and has been leased to Emirates for an expected initial term of 10 years to December 2021, with an extension period of 2 years ending December 2023, with fixed lease rentals for the duration.

The third Asset was acquired by MSN105 Limited on 1 October 2012 for a purchase price of $234 million and has been leased to Emirates for an expected initial term of 10 years to October 2022, w ith an extension period of 2 years ending October 2024, in which rental payments reduce.

The fourth Asset, MSN 106, was acquired by DNAFA on 1 October 2012 for a purchase price of $234 million and has been leased to Emirates for an expected initial term of 10 years ending October 2022, with an extension period of 2 years ending October 2024, in which rental payments reduce.

The fifth Asset, MSN 107, was acquired by DNAFA on 12 October 2012 for a purchase price of $234 million and has been leased to Emirates for an expected initial term of 10 years ending October 2022, with an extension period of 2 years ending October 2024, in which rental payments reduce.

The sixth Asset, MSN 109, was acquired by DNAFA on 9 November 2012 for a purchase price of $234 million and has been leased to Emirates for an expected initial term of 10 years ending November 2022, with an extension period of 2 years ending November 2024, in which rental payments reduce.

The seventh Asset, MSN 110, was acquired by DNAFA on 30 November 2012 for a purchase price of $234 million and has been leased to Emirates for an expected initial term of 10 years ending November 2022, with an extension period of 2 years ending November 2024, in which rental payments reduce.

The fourth, fifth, sixth and seventh Assets were acquired by DNAFA using the proceeds of the issue of the C Shares, together with the proceeds of Equipment Notes (the "Equipment Notes") issued by DNAFA. The Equipment Notes were acquired by two separate pass through trusts using the proceeds of their issue of EETCs. The EETCs, with an aggregate face amount of approximately $587.5 million were admitted to the Official List of the UK Listing Authority and to the London Stock Exchange on 12 July 2012. These four Assets were also leased to Emirates for an expected initial term of 12 years to the second half of 2024, with fixed lease rentals for the duration.

In order to complete the purchase of the related Assets, MSN077 Limited, MSN090 Limited and MSN105 Limited entered into separate loan agreements with a number of banks (see note 15), each of which will be fully amortised with quarterly repayments in arrears over 12 years (each of them a "Loan", together the "Loans"). A fixed rate of interest applies to the Loans except for 50 per cent. of the loan in MSN090 Limited which has a related interest rate swap entered into to fix the interest rate. MSN077 Limited drew down $151,047,059 under the terms of the first loan agreement to complete the purchase of the first Asset; MSN090 Limited drew down $146,865,575 in accordance with the second loan agreement to finance the acquisition of the second Asset; and MSN105 Limited drew down $145,751,153 in accordance with the third loan agreement to finance the acquisition of the third Asset. The first loan agreement, the second loan agreement and the third loan agreement are on materially the same terms.

Emirates bears all costs (including maintenance, repair, and insurance) relating to the Aircraft during the lifetime of the leases.

Further information about the construction of these leases is available in note 12 to the financial statements.

Distribution Policy

The Company currently targets a distribution of 4.50 pence per Share per quarter.

There can be no guarantee that dividends will be paid to Shareholders and, if dividends are paid, as to the timing and amount of any such dividend. There can also be no guarantee that the Company will, at all times, satisfy the solvency test required to be satisfied pursuant to section 304 of The Companies (Guernsey) Law, 2008, as amended (the "Law") enabling the Directors to effect the payment of dividends.

Performance Overview

All payments by Emirates have, to date, been made in accordance with the terms of the respective Leases.

During the financial year under review, and in accordance with the Distribution Policy, the Company declared four interim dividends of 4.50 pence per Share. Two interim dividends of 4.50 pence per Share have been declared after the reporting period. Further details of dividend payments can be found on page 21.

Return of Capital

In respect of any Asset, following a sale of that Asset, the Directors may, either (i) return to Shareholders the net proceeds, or (ii) re-invest such proceeds in accordance with the Company's investment policy.

The Company intends to return to Shareholders net capital proceeds if and when the Company is wound-up (pursuant to a Shareholder resolution, including the Liquidation Resolution below), subject to compliance with the Company's Articles of Incorporation (the "Articles") and the applicable laws (including any applicable requirements of the solvency test contained therein).

Liquidation Resolution

Although the Company does not have a fixed life, the Articles require that the Directors convene a general meeting of the Company in June 2025 where an ordinary resolution will be proposed that the Company proceed to an orderly wind-up (the "Liquidation Resolution"). In the event that the Liquidation Resolution is not passed, the Directors will consider alternatives for the future of the Company, including re-leasing the Assets, or selling the Assets and reinvesting the capital received from the sale of the Assets in other aircraft.

C H A I R M A N ' S S T A TE M ENT

During the year from 1 April 2019 until 31 March 2020 (the "Period") the Company has declared and paid four quarterly dividends of 4.50 pence per share, equivalent to 18 pence per share per annum.

The Company's investment objective is to obtain income returns and a capital return for its Shareholders by acquiring, leasing and then selling aircraft. The Company has four wholly-owned subsidiaries: MSN077 Limited, MSN090 Limited, MSN105 Limited and DNAFA. The Group owns seven Assets, funded by two equity issues, a note issue and bank debt in 2011 and 2012. Upon the purchase of each aircraft (the "Aircraft"), the relevant subsidiary entered into a 10 year lease with Emirates, with a two year extension option, with fixed lease rentals for the duration. The debt portion of the funding will be fully amortised over the term of the leases, which will leave the Aircraft unencumbered on the conclusion of the ultimate lease. Emirates bears all costs (including maintenance, repair and insurance) relating to the Aircraft during the lifetime of the leases. At 24 July 2020, the latest practical date prior to this report, the Company had outstanding debt associated with the aircraft totalling USD 258 million (29% of the initial balance) as well as unencumbered cash resources of GBP 14.8 million. The Company's first lease expiry falls due in October 2023.

All payments by Emirates have been made in accordance with the terms of the lease.

As a result of the COVID-19 pandemic the global aviation industry has faced widely reported and extreme pressures, which could have an impact and tenor that may exceed that of 9/11. The International Air Transport Association ("IATA") expect passenger revenues to be USD 314 billion below 2019 (-55%), having revised their initial estimate further to reflect a deeper decline. The liquidity and creditworthiness of airlines, both large and small, has come sharply into focus while a significant part of the global aircraft fleet remains grounded. In the face of such pressures it is very disappointing, but ultimately unsurprising, to note the significant fall in the Company's share price over the Period. At the start of 2020 the share price was trading at around 143 pence but had fallen to 65 pence by the Company's financial year end on 31 March. At the time of writing the share price is 61.00 pence, representing a market capitalisation of GBP 105.38 million based on the 172,750,000 shares in issue.

Emirates, the sole lessee of the Company, reported cash assets of USD 5.5 billion as at 31 March 2020. Further, Dubai's Crown Prince Sheikh Hamdan bin Mohammed highlighted that the Government is "fully committed to supporting Emirates in the current critical period" and "as a shareholder of Emirates, the Government will inject equity considering its strategic importance to the Dubai and UAE economy and the airline's key role in positioning Dubai as a major international aviation hub". Whilst Emirates do not have a formal credit rating they have previously issued unsecured USD bonds with maturities in 2023, 2025 and 2028, at the time of writing these instruments are trading at approximately 96 cents, 96 cents and 92 cents respectively, equivalent to USD running yields in the range of roughly 4.1% to 4.9%. Yields of this level are typically not representative of an entity that is not expected to service its obligations or is at significant risk of default.

Whilst some airlines have scaled back (Lufthansa) or even phased out (Air France) the A380 from their future fleet plans the Board takes comfort that Emirates continues to demonstrate support for the model which has formed a key part of the airlines strategy for over a decade. Emirates President, Sir Tim Clark, recently noted that he will not "bottle out on the big bird" because "the A380 has defined us. As demand returns, and given the slot availability at prime hubs, there will be a place for it. I'm hoping by April 2022, all our A380s will be flying again." Further, Emirates Chief Operating Officer, Adel Al Redha commented in July that he expects "60% to 70% of the current A380 fleet to be back in the air by December 2020" while "the airline plans to keep all 115 of the double-decker jets", limited to a potential change in fleet size due to COVID-19. Further details on Emirates and the A380 can be found in the Asset Manager's report by Doric GmbH ("Doric").

Following a thorough assessment with our Asset Manager and in light of both COVID-19 and the continued lack of secondary market development for the Airbus A380 aircraft, your Board has elected to change the valuation basis for the Company's Assets from the assumption that there would be a balanced market at lease expiry, where supply and demand for the A380 are in equilibrium (so called 'future base values') to one characterised by less favourable market conditions for the seller, including but not limited to an imbalance of supply and demand in the aircraft type. These values are called 'future soft values'. As a result of this change, and a general weakening in widebody value forecasts, which have been more pronounced with respect to the A380, the value of the Company's Assets, on a future soft value (uninflated) basis, has declined by GBP 244.5 million (approximately 48%) to GBP 270.0 million (from GBP 514.5 million last year) at the expiry of the lease. On a USD basis the decline is approximately 51.5%. This valuation would represent a potential capital return in excess of the current share price if realised and subject to the prevailing GBP/USD exchange rate. As part of this year's impairment review an impairment charge of approximately GBP 68.67 million has been recognised (further details on residual value and the impairment test can be found in notes 2(m), 3 and 10 of the accounts).

I am pleased to highlight that a comprehensive Environmental, Social and Governance ("ESG") Policy is now included within this report. This provides Shareholders with further detail on the Company's business model and matters such as the environmental and social considerations of the aviation industry and the importance of high standards of Corporate Governance. Your Board recognises the increasing importance of ESG matters in relation to shareholders' investment considerations and has sought to address the topic in a pragmatic fashion.

The operational risks as a result of the COVID-19 pandemic have been considered by the Board and updates on operational resilience were received from the Asset Manager and other key service providers. Your Board continued to operate effectively during the lock-down period utilising both telephone and video conferencing to maintain contact with our advisors and auditors. The Board were satisfied that the key service providers have the ability to continue to operate. Doric continues to monitor the lease and is in frequent contact with the lessee, and reports regularly to the Board. Nimrod Capital LLP ("Nimrod" or the "Corporate and Shareholder Adviser") continues to liaise between the Board and shareholders.

Shareholders should note that while the underlying cash flows received during the Period have been as anticipated, the financial statements do not, in the Board's view, properly convey this economic reality due to the accounting treatments for foreign exchange, rental income and finance costs, as required by International Financial Reporting Standards ("IFRS").

For instance the entirety of the rental income that is receivable under a 12 year lease is credited evenly over each of the 144 months of the lease. However rental income is not received in this uniform pattern, although it does closely match the similarly uneven pattern of debt servicing and other payments. The mismatch in timing between the receipt and recognition of rental income results in large deferred income or accrued income balances in the balance sheet.

Similarly, the relevant accounting standards require that transactions denominated in currencies other than the presentation currency (including, most importantly, the cost of the Aircraft) are translated into the presentation currency at the exchange rate ruling at the date of the transaction whilst monetary items (including also very significantly, the outstanding borrowings) are translated at the rate prevailing on the reporting date. The result is that the figures sometimes show large mismatches which are reported as unrealised foreign exchange differences - although the distortive effect becomes less pronounced over time as debt is paid down and as a result of the impairment adjustment.

On an on-going basis and assuming the lease rental is received and the loan payments are made as anticipated, such exchange differences do not reflect the commercial substance of the situation in the sense that the key transactions denominated in US dollars are in fact closely matched. Rental income received in US dollars is used to make loan repayments due which are likewise denominated in US dollars. Furthermore, the US dollar lease rentals and loan repayments are fixed at the inception of the lease and are very similar in amount and timing.

The notice of the next Annual General Meeting of the Shareholders of the Company will be published in due course.

The Board encourages Shareholders to read the Company's quarterly fact sheets which we believe provide a great deal of interesting information and we hope these regular reports, in addition to the communication you receive from Nimrod, are useful and informative. We welcome Shareholder engagement and feedback and encourage you to contact Nimrod to request a meeting or to relay any feedback.

Finally, on behalf of the Board, I would like to thank our service providers for all their help and, most importantly, all Shareholders for their continuing support of the Company during these turbulent times. I look forward to keeping all Shareholders up to date with further progress.

Geoffrey Hall

Chair

30 July 2020

ASSET MANAGER'S REPORT

At the request of the Directors of the Company, this commentary has been provided by the Asset Manager of the Company.

COVID-19

The coronavirus COVID-19 pandemic continues to impact private and economic life worldwide. The consequences of COVID-19 are far reaching and changing at a significant pace. The impact of this pandemic on the aviation sector has been significant with a large part of the global passenger aircraft fleet grounded. This Asset Manager's Report is exclusively based on known facts at the time of writing and does not seek to draw on any speculation about any possible future, long-term impacts of the pandemic on the aviation sector or the Company specifically and should be read in such context.

1. The Assets

The Company acquired a total of seven Airbus A380-861 aircraft between October 2011 and November 2012. Each aircraft is leased to Emirates - the national carrier owned by the Investment Corporation of Dubai, based in Dubai, United Arab Emirates - for an expected term of 12 years from the point of delivery, with fixed lease rentals for the duration. In order to complete the purchase of the first three aircraft, MSN077 Limited, MSN090 Limited and MSN105 Limited entered into three separate loans, each of which will be fully amortised with quarterly repayments in arrear over 12 years.

The net proceeds from the C Share issue (the "Equity") were used to partially fund the purchase of four of the seven Airbus A380s. In order to help fund the acquisition of these final four aircraft, DNAFA issued two tranches of enhanced equipment trust certificates (the "Certificates" or "EETC") - a form of debt security - in June 2012 in the aggregate face value of USD 587.5 million. The Certificates are admitted to the official list of the Euronext Dublin and to trading on the Main Securities market thereof. DNAFA used the proceeds from both the Equity and the Certificates to finance the acquisition of four new Airbus A380 aircraft leased to Emirates.

The seven Airbus A380 aircraft bear manufacturers' serial numbers (MSN) 077, 090, 105, 106, 107, 109, and 110.

The seven A380s owned by the Group have been parked at Dubai International Airport ("DXB") and Dubai World Central ("DWC") since the end of March 2020, due to the ongoing COVID-19 crisis.

Aircraft utilisation for the period from delivery of each Airbus A380 until the end of May 2020 was as follows:

 
 MSN   Delivery Date   Flight Hours   Flight Cycles   Average Flight 
                                                       Duration 
 077   14/10/2011      36,734         4,391           8 h 20 min 
      --------------  -------------  --------------  --------------- 
 090   02/12/2011      34,522         5,584           6 h 10 min 
      --------------  -------------  --------------  --------------- 
 105   01/10/2012      32,247         5,141           6 h 15 min 
      --------------  -------------  --------------  --------------- 
 106   01/10/2012      34,941         4,072           8 h 35 min 
      --------------  -------------  --------------  --------------- 
 107   12/10/2012      34,240         3,987           8 h 35 min 
      --------------  -------------  --------------  --------------- 
 109   09/11/2012      31,493         4,953           6 h 20 min 
      --------------  -------------  --------------  --------------- 
 110   30/11/2012      31,249         5,037           6 h 10 min 
      --------------  -------------  --------------  --------------- 
 

Maintenance Status

Emirates maintains its A380 aircraft fleet based on a maintenance programme according to which minor maintenance checks are performed every 1,500 flight hours, and more significant maintenance checks (C checks) at 36-month or 18,000-flight hour intervals, whichever occurs first.

Due to the continuing COVID-19 pandemic, Emirates has stored the aircraft owned by the Group in Dubai. The lessee has "a comprehensive aircraft parking and reactivation programme in place, that strictly follows manufacturer's guidelines and maintenance manuals". In addition, Emirates has enhanced standards and protocols of their own, to protect and preserve the Asset during the downtime. This includes the watertight sealing of all apertures and openings through which environmental factors - sand, water, birds, and insects - can find their way inside an aircraft. During parking, maintenance teams complete periodic checks at different intervals. Depending on the reactivation date of a specific aircraft, the lessee might defer due maintenance checks, which are calendar-based, until that time. This would allow the lessee to make use of the full maintenance interval once the operation of a specific aircraft resumes.

Emirates bears all costs (including for maintenance, repairs and insurance) relating to the aircraft during the lifetime of the respective leases.

Inspections

The Asset Manager, conducted physical inspections and records audits of the aircraft as per the below table. The condition of the aircraft and technical records were in compliance with the provisions of the respective lease agreements.

 
 MSN   Last Inspection   MSN   Last Inspection 
 077   03/2020           107   03/2020 
      ----------------  ----  ---------------- 
 090   03/2020           109   11/2019 
      ----------------  ----  ---------------- 
 105   08/2019           110   11/2019 
      ----------------  ----  ---------------- 
 106   08/2019 
      ---------------- 
 

2. Market Overview

Air passenger traffic worldwide is currently being affected by the COVID-19 virus. In response to the pandemic, governments have been imposing severe border restrictions and airlines have subsequently sharply reduced capacity due to the significant drop in passenger demand. IATA reported that markets that comprise 98% of all passenger revenue worldwide are subject to some form of severe restrictions, including outright border closures, partial travel bans, and mandatory quarantines for arriving passengers. Aerospace data provider, Cirium estimates that the number of aircraft parked due to the pandemic likely peaked at nearly 17,000 widebodies, narrowbodies and regional jets on 22 April 2020, representing approximately 64% of the total global fleet.

Given the pattern of previous epidemics, IATA anticipates that the impact on aviation will last a number of months (typically 6-7 months) with the greatest effects realised after 2-3 months. However, IATA also notes that an economic recession could delay any recovery past this six-month period seen in previous epidemics. Fiscal stimulus from governments is expected to lessen recessionary impacts. In April, IATA updated its initial assessment of the COVID-19 impact and now anticipates 2020 global revenue losses for the passenger business of USD 314 billion due to the broader spreading of COVID-19. This represents a 55% fall in global airline passenger revenues. IATA's latest impact assessment now points to air passenger volumes contracting by 48% year-on-year in 2020.

IATA did report that Chinese passenger numbers have begun to increase and that passenger yields have stabilized, with March domestic yields thus far slightly exceeding those in the same month during 2019. Further, it was encouraged by fiscal stimulus actions and intentions declared by governments around the world. The governments of many large economies with significant air travel markets are expected to provide stimulus packages falling in the range of 10-20% of GDP.

During the first quarter of 2020 revenue passenger kilometers ("RPKs") fell by 22.2% compared to the same period in the previous year, while capacity in available seat kilometers ("ASKs") declined by 14.7%, resulting in a Passenger Load Factor ("PLF") of 73.7%, a decline of 7.1 percentage points. With a rapid advance of COVID-19 in March, RPKs came in 52.9% lower than in March 2019 marking the largest decline since IATA started to collect data in 1990. The global load factor was only 60.6%. Once the travel restrictions and lockdowns are lifted, IATA expects the willingness of consumers to travel by air to remain limited initially, in particular on international markets. According to IATA, industry-wide passenger traffic, measured in RPKs, grew at a rate of 4.2% in the calendar year 2019, compared to the year before. At the same time, industry-wide capacity, measured in ASKs, increased by 3.4% against the previous year. This resulted in a 0.6 percentage point increase in the worldwide PLF to 82.6%.

In 2019, passenger traffic in the Middle East has increased by 2.3% against the previous year. Capacity grew marginally by 0.1%, resulting in a 1.7 percentage point increase in PLF to 76.2%. During the first quarter of 2020 RPKs in this region fell by 13.2% compared to the same period in the previous year, while capacity in ASKs declined by 10.8%, resulting in a PLF of 71.6%, a decline of 1.9 percentage points.

Source: Cirium, IATA

(c) International Air Transport Association, 2019. Air Passenger Market Analysis January 2020. Air Passenger Market Analysis March 2020. Airlines Financial Monitor February 2020. COVID-19 Updated Impact Assessment 14 April 2020. All Rights Reserved. Available on the IATA Economics page .

3. Lessee - Emirates

Network

Due to COVID-19 and the resulting travel restrictions and entry requirements imposed by governments all around the world, Emirates temporarily suspended its passenger operations on 25 March. On the same day Dubai's two airports, DXB and DWC, closed to the travelling public, but continued to service emergency evacuation and cargo flights.

As from 21 May Emirates resumed scheduled passenger services to initially nine destinations and the carrier expects to bring its network gradually to over 50 cities in July. Starting from mid-July, the A380 will return to a scheduled service, initially to London and Paris. Emirates is "looking forward to gradually introduce our A380 into more destinations according to the travel demand on specific destinations", said Adel Al Redha, the airline's Chief Operating Officer in a company statement. Furthermore, new protocols will allow Dubai to re-open for business and leisure visitors from 7 July, allowing international travel for UAE citizens, residents, and tourists.

Emirates' president Sir Tim Clark has forecast that demand will recover over a period of time with Emirates' operating network returning to pre-COVID-19 levels by 2024. Ultimately, however, he believes the recovery to be dependent on the creation of a vaccine.

Fleet

Emirates received six new aircraft during the 2019/20 financial year, all Airbus A380s, while it phased out six older aircraft, comprising four Boeing 777-300ERs, one Boeing 777-300 and one Boeing 777 Freighter. This left Emirates' fleet count at 270 aircraft with an average fleet age of 6.8 years as of the end of March 2020. Deliveries of Emirates' latest orders for 50 Airbus A350 XWBs and 30 Boeing 787 Dreamliner aircraft are not expected to begin until 2023. The first Boeing 777X is now scheduled to arrive in 2022. Tim Clark hints that the airline will seek to renegotiate the size or schedule of these commitments, but not until it better understands the impact of COVID-19 on its business.

Emirates is the largest operator of the Airbus A380 and the aircraft type remains popular among Emirates' customers, as demonstrated by the previously high load factors on the aircraft type before COVID-19 hit the industry. Emirates has 115 Airbus A380s in its fleet, which served 53 destinations, or about 34% of Emirates' network in the 2019/20 financial year. In total, A380s carried 43% of Emirates' passengers and the lessee states in its annual financial report that the A380 will remain the cornerstone of its fleet mix and product offering well into the 2030s. Tim Clark recently noted he remains "a great believer in the qualities of the A380, and when fuel is at USD 30-40 a barrel, it a good cash producer and good for the bottom line, providing we can fill it and we don't have social distancing rules".

The table below details the passenger fleet activity as of 30 June 2020:

 
 Aircraft   Grounded   Active 
  Type 
 A380         115        0 
           ---------  ------- 
 777           39       104 
           ---------  ------- 
 Total        154       104 
           ---------  ------- 
 %            60%       40% 
           ---------  ------- 
 

Source: Cirium as of 30 June 2020

Tim Clark expects all Emirates A380s to return to the skies by April of 2022. Contrary to previous suggestions that the airline would decommission a large portion of its A380 fleet he noted: "We're not getting rid of any of them apart from I think three that are coming out ... this year." However, the lessee will reduce its fleet over time and indicated last year, that 80 to 100 A380 could remain in service, depending on the time horizon. Separately, Adel Al Redha, the lessee's chief operating officer, commented in early July, that he expects "60% to 70% of the current A380 fleet to be back in air by December [this year]".

Notwithstanding the unprecedented drop in demand for flight tickets due to COVID-19, the airline was quick in adapting its resources to benefit from a strong surge in air cargo demand: By the end of May 2020 the airline was able to build up substantial cargo-only operations with more than 80 Boeing 777-300ER passenger aircraft in the air, complemented by 11 Boeing 777 freighters. Tim Clark was pleased with the cash flow these services are able to generate in challenging times: "Cargo operations are never going to produce the kind of income you'll get from passenger operations, but they certainly kept the wolf from the door."

Key Financials

In the 2019/20 financial year, ended on 31 March 2020, Emirates recorded its 32(nd) consecutive year of profit despite negative impacts from the 45-day runway closure at DXB and the COVID-19 pandemic. Largely due to these external factors as well as a negative currency impact of AED 572 million (USD 156 million), total revenue declined by 6% to AED 92.0 billion (USD 25.1 billion) for the financial year. However, in the face of these pressures, Emirates recorded a profit of AED 1.1 billion (USD 288 million). This was a 21% increase over the results of the previous financial year. The profit margin amounted to 1.1%.

During the 2019/20 financial year, Emirates carried 56.2 million passengers, down 4% compared to the previous financial year. However, with a seat capacity reduction of 6%, the airline achieved a passenger seat load factor of 78.5%, an improvement over the load factor of 76.8% in the previous financial year.

Emirates' total operating costs decreased by 10% during the 2019/20 financial year. This was largely attributable to developments in Emirates' fuel costs. The decline in the average cost of fuel of 9% during the financial year, together with the capacity reduction, resulted in a 15% decrease in the airline's fuel bill to AED 26.3 billion (USD 7.2 billion). Fuel accounted for 31% of operating costs and remained the largest cost component for the airline.

While Emirates maintains that it has a strong balance sheet with a substantial cash position, the airline is taking additional measures to protect its cash flow through cost savings measures, reductions to discretionary capital expenditure, and engaging with business partners to improve working capital. To this end, Emirates also raised AED 4.4 billion (USD 1.2 billion) in additional liquidity in the last quarter of 2019/20 through term loans, revolving credit and short term trade facilities. As a result, Emirates ended the financial year 2019/20 with AED 20.2 billion (USD 5.5 billion) in cash assets. Emirates also stated that it intends to continue to tap the banking market for further liquidity in the first quarter of the 2020/21 financial year to provide a cushion against the impact of COVID-19 on its cash flows in the short term.

Emirates also reaffirmed that measures to support the airline include "obtaining committed support from the government of Dubai which has publicly confirmed that they will financially support Emirates during this period through a variety of measures including an additional equity injection if required."

Emirates noted that, as a result of COVID-19, its profits for the month of March 2020 were more than AED 1.5 billion ( USD 0.4 billion) worse than expected.

Emirates' total liabilities increased by 66% to AED 148.5 billion (USD 40.5 billion) primarily due to recognition of additional lease liabilities following the adoption of IFRS 16. This was offset to an extent by a reduction in forward sales liabilities due to the ongoing COVID-19 pandemic. Total equity decreased by 37.5% to AED 23.6 billion (USD 6.4 billion) primarily due to the adoption of IFRS 16. This resulted in an equity ratio of 13.7%.

Regarding the ongoing effects of the COVID-19 pandemic, Sheikh Ahmed bin Saeed Al Maktoum stated, that "The COVID-19 pandemic will have a huge impact on our 2020-21 performance, with Emirates' passenger operations temporarily suspended since 25 March ... We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption. We expect it will take 18 months at least, before travel demand returns to a semblance of normality. In the meantime, we are actively engaging with regulators and relevant stakeholders, as they work to define standards to ensure the health and safety of travelers and operators in a post-pandemic world. Emirates ... stand(s) to reactivate our operations to serve our customers, as soon as circumstances allow." The cost management measures include the layoff of an unspecified number of employees, which has already started. In the meantime, Emirates also adapted operations to minimise the risk of contamination by introducing cleaning regimes, protective clothing and masks as well as by using the airline's fleet to operate as "a mini United Parcel Service".

As at the end of June Emirates has outstanding US dollar debt issuances with maturities in 2023, 2025, and 2028. These bonds were trading at approximately 96 cents, 96 cents, and 92 cents, respectively, representing running yields ranging from approximately 4.1% to 4.9% in US dollars. This level of yields does not appear to indicate any significant financial stress to the issuer.

4. Aircraft - A380

The Emirates fleet consisted of 270 aircraft as of March 2020, including 115 A380s. In addition to its current fleet, Emirates has an order book with Airbus and Boeing.

Emirates expects to receive an additional eight units from their current 115 today, resulting in 123 A380 deliveries in total. Its senior management indicated that the A380 will remain a cornerstone part of their fleet well into the 2030s though the total number in fleet will decline over time. However, Emirates have not given any formal indication of numbers. In November 2019 press articles following interviews with Tim Clark and a podcast with the president of Emirates, mentioned ranges from 80 to 100 A380s to remain in service, depending on the time horizon. This scenario, if realised, may result in returns and possibly retirements of a number of Emirates A380s over the next few years, potentially 20 to 40 of the total deliveries Emirates will have received by the end of 2021. In addition, as a function of the number of A380 airframes returned or retired over time, from Emirates or other existing operators, there is limited visibility over the value of remaining green time on the engines and spare parts. This will be assessed over the coming years.

During February Etihad Airways PJSC ("Etihad") completed the purchase of two A380-800 aircraft less than three years into their fixed 12 year operating leases. Etihad also undertook to repay all of the outstanding financing arrangements and other associated costs with respect to both leases. It remains to be determined how such transactional data will be incorporated into appraisers' forecasts for the A380, particularly in the current very fluid operating environment.

Following the COVID-19 epidemic operators like Air France and Lufthansa (at least for six units) have publicized plans to phase out the A380 in the near term: Lufthansa is permanently decommissioning six A380s that were previously scheduled to depart the fleet in 2022. Air France announced in May its intention to retire its remaining nine A380s with immediate effect - ahead of its initial 2022 target.

Airbus entered into a new A380 maintenance, repair and overhaul facility joint venture with Singapore Airlines ("HMSS"), in February to address the cabin reconfiguration costs on the A380. Airbus plans to use HMSS to offer major upgrades on the A380 in a competitive way in order to assist in remarketing the aircraft on the second-hand market.

Emirates has signed a general terms agreement for Airbus A380 support with component maintenance provider Spairliners, a joint venture between Air France Industries KLM Engineering & Maintenance and Lufthansa Technik ("LHT") based in Hamburg, Germany. Emirates vice-president procurement aircraft Ammar Al-Zabe expects the deal to "strengthen the support, service and reliability for our A380s" and result in "optimised" operations of the type.

In May 2020, German maintenance specialist LHT announced that it is working on a conversion for an Airbus A380 as part of its effort to offer temporary passenger-to-cargo modification services. LHT did not identify the customer but stated that it has been awarded the technical and engineering task to support the "operational change". While the modification is intended to comply with temporary passenger-to-freight regulatory exemptions drawn up to meet demand during the COVID-19 crisis, LHT indicated that it will offer the conversion as a permanent solution.

Source: Cirium

D I R E C T O RS

As at 31 March 2020 the Company had four directors all of whom were independent and non-executive.

Geoffrey Alan Hall - Chair of the Company and of the Nomination Committee

Geoffrey Hall has extensive experience in asset management, having previously been Chief Investment Officer of Allianz Insurance plc, a major UK general insurance company and an investment manager at HSBC Asset Management, County Investment Management, and British Railways Pension Funds. Geoffrey is also a director and Chair of the Audit Committee of Doric Nimrod Air One Limited and of Doric Nimrod Air Three Limited.

Geoffrey earned his master's degree in Geography at the University of London and is an associate of the CFA Society of the UK. He is resident in the United Kingdom.

Charles Edmund Wilkinson

Charles Wilkinson is a solicitor who retired from Lawrence Graham LLP in March 2005. While at Lawrence Graham he specialised in corporate finance and commercial law, latterly concentrating on investment trust and fund work.

Charles is Chair of Doric Nimrod Air One Limited and of Doric Nimrod Air Three Limited and is a director of Landore Resources Ltd, a Guernsey based mining exploration company. He is resident in Guernsey.

Suzanne Elaine Procter (appointed 1 August 2019) - Senior Independent Director ("SID")

Suzie Procter brings over 38 years' experience in financial markets, with specific expertise in asset management. She was previously a non-executive director of TR Property Investment Trust plc, an investment company listed on the FTSE 250 index. Her executive roles included Partner and member of the Executive Management Committee at Cantillon Capital Management LLC, Managing Director of Lazard Asset Management, Head of Institutional Sales at INVESCO Asset Management, Director and Head of Fixed Income Business at Pictet International Management Ltd and Head of Fixed Income at Midland Montagu Asset Management.

Suzie is also the SID of Doric Nimrod Air One Limited and Doric Nimrod Air Three Limited. She is resident in the United Kingdom.

Andreas Josef Tautscher (appointed 1 August 2019) - Chair of the Audit Committee

Andreas Tautscher brings over 31 years' financial services experience. He serves as a non-executive director and member of the Audit Committee of BH Global Limited, a Guernsey closed-ended investment company whose shares are traded on the Main Market of the London Stock Exchange. He is also a director and CEO of Altair Group, a leading independent director services business in the Channel Islands. From 1994 to 2018 Andreas held various roles at Deutsche Bank and was most recently CEO of the Channel Islands and Head of Financial Intermediaries for EMEA. He was previously a non-executive director of the Virgin Group. Andreas qualified as a Chartered Accountant in 1994.

Andreas is also a director of Doric Nimrod Air One Limited and Doric Nimrod Air Three Limited. He is resident in Guernsey.

John Le Prevost (resigned 16 January 2020)

Mr Le Prevost resigned as a director of the Company with effect from 16 January 2020.

SERVICE PROVIDERS

Management and the Delegation of Functions

The Directors, whose details are set out on page 14 are responsible for reviewing the business affairs of the Group in accordance with the Articles and have overall responsibility for the Group's activities including all business decisions, review of performance and authorisation of distributions. The Company has delegated management of the Group's Aircraft to Doric, which is a company incorporated in Germany. Further details are outlined below under the heading Asset Manager. The Directors delegate secretarial and administrative functions to JTC Fund Solutions (Guernsey) Limited ("JTC" or the "Secretary" or the "Administrator") which is a company incorporated in Guernsey and licensed by the Guernsey Financial Services Commission (the "GFSC") for the provision of administration services. The Registrar function is delegated to JTC Registrars Limited (formerly known as Anson Registrars Limited) (the "Registrar"), which is licensed and regulated by the GFSC.

Asset Manager

Doric has been appointed by the Company to provide asset management services to the Group. Pursuant to the Asset Management Agreement, Doric will: (i) monitor Emirates' and any subsequent lessees' performance of its obligations under the leases and any subsequent leases respectively (which shall include the obligations relating to the maintenance of insurance cover); (ii) provide the Group with information regarding alternatives with respect to any potential sale or re-lease of the Assets; (iii) carry out mid-lease inspections of the Assets; (iv) provide the Group with asset monitoring reports describing the state and any material changes to the state of the Assets; and (v) liaise, as and when necessary, with lenders, on all matters relating to the loans and EETCs , as required.

Doric has further undertaken that it will dedicate sufficient time and resources as it reasonably believes is required from time to time to fulfil any contractual arrangements it enters into with the Company.

Doric Partners LLP ("Doric LLP"), a limited liability partnership incorporated in England and Wales and Amedeo Services (UK) Limited ("Amedeo") have been appointed by the Company, pursuant to the Amended Liaison Services Agreement to act as Liaison agents. Doric LLP has been appointed to (i) coordinate the provision of services by Doric to the Group under the Asset Management Agreement; and (ii) facilitate communication between the Group and Doric.

The Doric Group is also a member of the International Society of Transport Aircraft Trading ("ISTAT").

The Doric Group is a leading provider of products and services for investors in the fields of aviation, shipping, renewable energy and real estate. The Doric Group has an international presence, with offices in Germany, Hong Kong, the United Kingdom, and the United States, and a multinational team which offers access to extensive relationship networks and expert asset knowledge maintaining regulated financial institutions in the United States and Europe. One of the firm's core competencies is its asset management expertise, which is an integrated part of all Doric transactions and a cornerstone of the business. For further information about the Doric Group, please visit www.doric.com.

The aircraft portfolio currently managed by the Doric Group is valued at $7 billion and consists of forty two aircraft under management. These aircraft include commercial airliners ranging from ATR 72-500s and the Airbus A320 family, through the Boeing 737, 777, 787 and Airbus A330, up to the Boeing 747-8F and Airbus A380.

The Doric Group has twenty two Airbus A380 aircraft currently under management and is therefore considered well positioned to perform the technical asset management of this aircraft type.

Liaison Agent

Amedeo has been appointed by the Company, pursuant to the Liaison Services Agreement, to, when requested by the Board, participate in Board meetings, assist in the review of all asset management matters and provide advice in all asset management related matters. Amedeo is authorised by the Financial Conduct Authority and is part of the Amedeo group of companies.

Amedeo is a leading aircraft asset manager and principal investor in leasing transactions to customer airlines globally. The aircraft portfolio currently managed by the Amedeo group, includes thirty-nine aircraft under management and an additional 8 aircraft under oversight. The volume of assets under management is c. $7 billion, which include commercial airliners including A380, A350, A330 and Boeing 777 and 747-F. Amedeo is a member of ISTAT, and is a Strategic Partner of IATA.

Corporate and Shareholder Adviser

Nimrod, which is authorised by the Financial Conduct Authority, has been appointed as the Corporate and Shareholder Adviser by the Company.

Nimrod was founded in 2008 as an independent organisation which specialises in generating and sourcing interesting investment funds, themes and solutions managed by experts in their fields for the professional investor marketplace. It has launched nine listed investment companies since its formation and it also provides investment, marketing, distribution and advisory services to investment companies and their boards and managers.

Nimrod, together with Doric and Emirates, was awarded the "Innovative Deal of the Year 2010 award" by the international aviation magazine Airfinance Journal in recognition of the innovative financing of an Airbus A380 leased to Emirates by the first stock market listed aircraft investment vehicle, Doric Nimrod Air One Limited.

Secretary & Administrator

JTC is an independent provider of institutional and private client services to clients in numerous jurisdictions and is a member of the JTC Group. For further information about the JTC Group, please visit www.jtcgroup.com .

JTC is a Guernsey incorporated company and provides administration and secretarial services to the Group pursuant to an Administration and Secretarial Agreement. In such capacity, JTC is responsible for the general secretarial functions required by the Law and assists the Group in its compliance with its continuing legal and regulatory obligations, as well as providing advice on good corporate governance and best practice for a publicly traded company.

JTC is also responsible for the Group's general administrative functions and for the preparation of unaudited half-yearly and audited annual financial reports, subject to the direction and oversight of the Company's Board of directors ("Board").

Registrar

The Registrar is the Company's CREST compliant registrar. The Registrar is responsible for the maintenance of the Company's share register and for the processing of dividend payments and stock transfers. The Registrar is licensed and regulated by the GFSC and further information about The Registrar may be obtained from their website at www.jtcgroup.com .

Review

The Board keeps under review the performance of the Asset Manager, Liaison Agent, Corporate and Shareholder Adviser, the Secretary, Administrator and the Registrar and the powers delegated to each service provider. In the opinion of the Board, the continuing appointments of the service providers on the terms agreed is in the best interest of the Company's Shareholders as a whole.

A full list of the Company's service providers is set out on page 86.

MANAGEMENT REPORT

A description of important events which have occurred during the financial year under review, their impact on the performance of the Group as shown in the consolidated financial statements and a description of the principal risks and uncertainties facing the Group are given in the Chairman's Statement, Asset Manager's Report, Statement of Principal Risks and the notes to the consolidated financial statements contained on pages 57 to 85 and are incorporated here by reference.

Principal Risks and Uncertainties

The Board has undertaken a robust assessment of the principal risks facing the Group and has undertaken a detailed review of the effectiveness of its risk management and internal control systems. The Board is comfortable that the risks are being appropriately monitored on a regular basis.

The risks set out below are those which are considered to be the material risks relating to an investment in the Shares but are not the only risks relating to the Shares or the Group. Additional risks and uncertainties of which the Group is presently unaware or that the Group currently believes are immaterial may also adversely affect its business, financial condition, results of operations or the value of the Shares.

The principal risks associated with the Group are:

-- Operational risk: The Board is ultimately responsible for all operational facets of performance including cash management, asset management, regulatory and listing obligations. The Group has no employees and so enters into a series of contracts/legal agreements with a series of service providers to ensure both operational performance and the regulatory obligations are met. This risk has been mitigated by the Group using well established, reputable and experienced service providers and assessing service providers' continued appointment on at least an annual basis.

-- Investment risk: There are a number of risks associated with the Group's Assets in relation to the occurrence of technical faults with the Assets or actions by third parties causing both damage to the Assets and also damaging the demand for global air travel. This risk has been mitigated by the Lessee's contractual responsibility to insure, repair and maintain the Aircraft for the duration of the Leases.

-- Borrowings and financing risk: There is a risk that the Group is exposed to fluctuations in market interest rates and foreign exchange rates. This risk has been mitigated by ensuring that debt repayments are made from lease rental revenues received in the matching currency and by fixing the interest rates on debt and lease rentals.

-- Credit risk: Emirates is the sole lessee of the Assets and is headquartered in the Middle East. Should Emirates default on the rental payments due to domestic events, events in the wider airline industry or other reasons it is unlikely the Company will be able to meet its targeted dividends or, in the case of ongoing default, continue as a going concern. The risk of default is mitigated by the ability of the Group to sell or re-lease the Assets in the event of a single default.

-- Secondary market risk: There is a risk that the Group would not be able to achieve the projected resale value of the Assets due to changes in demand for second hand aircraft of the type owned by the Group. The Board monitors, and revises the residual value of the Aircraft on an annual basis.

-- Regulatory risk: The Group is required to comply with the Disclosure Guidance and Transparency Rules ("DGTRs") of the Financial Conduct Authority and the requirements imposed by the Law and the GFSC. Any failure to comply could lead to criminal or civil proceedings. Although responsibility ultimately lies with the Board, the Secretary also monitors compliance with regulatory requirements.

-- Global Pandemic: The emergence of a global pandemic may have a profound and negative impact on the operations and performance of the Group and may directly or indirectly affect some of the other risks mentioned in this table. The Board and its key service providers would all act to the best of their abilities to protect the welfare of the various teams involved in the affairs of the Group to ensure operations are maintained to the extent possible and to protect and support the Assets of the Group for as long as is required. Please refer to the Chairman's Statement, the Asset Managers Report and the going concern statement below for more information on how the Group is being affected by COVID-19.

Data Protection

The Company has implemented measures designed to ensure its compliance with the EU General Data Protection Regulation (EU) 2016/679 and associated legislation in Guernsey. The Company has also issued a privacy notice explaining the data it holds, how the data is processed and its procedures for processing this data. This notice is available for review and download at the Company's website.

Going Concern

The Group's principal activities are set out within the Company Overview on pages 2 to 4. The financial position of the Group is set out on page 54. In addition, note 19 to the consolidated financial statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives and its exposures to credit risk and liquidity risk.

The Directors in consultation with the Asset Manager are monitoring the effect of the COVID-19 pandemic generally on the aviation industry and specifically on the Group's aircraft values and the financial wellbeing of its lessee both now and in the future. The Group's future performance could potentially be impacted should this pandemic have a pervasive and prolonged impact on the economy. There have prevailed wide spread restrictions on the ability of people to travel which has had a material negative effect on the airline sector, and by extension the aircraft leasing sector. This may lead to the inability of airlines to pay rent as they fall due. These factors, together with wider economic uncertainty and disruption, are likely to have an adverse impact on the future value of the aircraft Assets owned by the Group, as well as on the sale, re-lease, refinancing or other disposition of the relevant aircraft.

An increase in lessee counterparty credit risk means that there is now more uncertainty over lease payments and depending on further developments with the lessee, there could be requests for lease rental deferrals. Reduced rents receivable under the leases may not be sufficient to meet the fixed loan or Equipment Note interest and regular capital repayments of debt scheduled during the life of each loan and may not provide surplus income to pay for the Group's expenses and permit the declaration of dividends.

The option to remarket the Aircraft following a potential event of default by the lessee has not been taken into account. The period of time necessary to successfully complete such a process is beyond the twelve months forecasting horizon of the going concern considerations. This applies in particular in times of COVID-19, as various restrictions are still in place to contain the pandemic

The Directors consider that the going concern basis of accounting remains appropriate. Based on current information the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, although the risk to this is clearly higher.

Whilst there is some uncertainty as to the airline industry in general, and specifically Emirates' financial position and credit risk profile, on the basis that (i) Emirates has shown no intention of failing to meet its obligations (ii) Emirates has the financial backing to continue paying these rentals, the Directors believe that it is appropriate to prepare these financial statements under the going concern basis of preparation.

The Directors have considered Emirates' ability to continue paying the lease rentals over the next 12 months and are satisfied that the Group can meet its liabilities as they fall due over this period. Further detail regarding the assumptions adopted when forming this conclusion can be found in the Viability Statement below.

Viability Statement

In accordance with Provision 31 of The UK Corporate Governance Code, the Directors of the Company have considered the prospects of the Group over a period of four years from present until the Liquidation Resolution is put to Shareholders six months before the last lease is due to terminate in 2024. In choosing the period of viability for the Group the Board has considered the prospect of Emirates performing their obligations until the end of their leases.

The Board, in assessing the viability of the Group, has paid particular attention to the principal risks faced by the Group as disclosed in the Asset Manager's Report and the notes to the consolidated financial statements, reviewing on an ongoing basis the risks faced and ensuring that any mitigation measures in place are functioning correctly.

In addition, the Board has considered a detailed cash flow projection for the running costs of the Group and has assumed that Emirates is a going concern. The Board believe that it is reasonable to assume as of the date of the approval of the annual financial report that Emirates will continue with the contracted lease rental payments due to the following:

- Emirates is still a going concern as at the date of the lessee's latest signed annual financial report

- Emirates maintains and is considered to have a strong balance sheet with a substantial cash position

- The airline confirms that it could obtain committed support from the Government of Dubai which has publicly confirmed that they will financially support Emirates during this period

- As of the date of the annual financial report, the Board is not aware of a formal request to the Group for a lease deferral or any other efforts that would result in the restructuring of the existing transactions

- Emirates is staying with their current A380 fleet and are reinstating the Airbus to their route.

The Group retains sufficient cash to cover the forecast operating costs of the Group until the termination date of the Leases in 2024, assuming receipt of planned rental income.

The Directors believe that their assessment of the viability of the Group over the period chosen was sufficiently robust and encompassed the risks which would threaten the business model, future performance, solvency or liquidity of the Group.

As a result of their review, the Directors of the Company have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due until the last lease is due to terminate in 2024.

Responsibility Statement

The Directors jointly and severally confirm that to the best of their knowledge:

(a) the financial statements, prepared in accordance with IFRS give a true and fair view of the assets, liabilities, financial position and profits of the Group and performance of the Group;

(b) the Management Report includes or incorporates by reference a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and

(c) the annual report taken as a whole is fair, balanced and understandable and provides the information necessary for the Company's Shareholders to assess the Company's and the Group's position, performance, business model and strategy.

 
 Geoffrey Hall   Andreas Tautscher 
 Chair           Director 
 30 July 2020 
 

DIRECTORS' REPORT

The Directors present their annual report and audited financial statements of the Group for the financial year ended 31 March 2020.

Principal Activities and Business Review

The principal activity of the Group is to acquire, lease and then sell aircraft. The Directors do not envisage any change in these activities for the foreseeable future. A description of the activities of the Group in the year under review is given in the Chairman's Statement and the Asset Manager's Report respectively on pages 5 to 7 and 8 to 13.

Status

The Company is a Guernsey domiciled company the Shares of which are admitted to trading on the SFS of the London Stock Exchange's Main Market. Its registered number is 52985. The Company operates in accordance with the Law.

Results and Dividends

The results of the Group for the financial year are set out on page 53.

The Company declared dividends during the financial year under review as follows:

 
    Quarter End       Announcement Date      Payment Date     Dividend per Share 
                                                                    (pence) 
   31 March 2019        11 April 2019       30 April 2019            4.50 
                     -------------------  -----------------  ------------------- 
    30 June 2019         11 July 2019        31 July 2019            4.50 
                     -------------------  -----------------  ------------------- 
 30 September 2019     10 October 2019     31 October 2019           4.50 
                     -------------------  -----------------  ------------------- 
  31 December 2019     16 January 2020     31 January 2020           4.50 
                     -------------------  -----------------  ------------------- 
 

The Company declared the following dividends after the financial year end:

 
 Announcement Date         Payment Date         Dividend per Share (pence) 
   16 April 2020           30 April 2020                   4.50 
                     ------------------------  --------------------------- 
                      31 July 2020 (expected 
    16 July 2020           payment date)                   4.50 
                     ------------------------  --------------------------- 
 

The Company aims to continue to pay quarterly dividends of 4.50 pence per Share, in line with the Distribution Policy. There is no guarantee that any future dividends will be paid.

Directors

The Directors in office are shown on page 14 and all Directors remain in office as at the date of signing of these financial statements. Further details of the Directors' responsibilities are given on page 20.

No Director has a contract of service with the Group, nor are any such contracts proposed.

The following interests in Shares of the Company are held by persons discharging directorial responsibility and their persons closely associated:

 
                          Number of Shares      Number of Shares 
                       held as at 31 March    held as at 24 July 
                                      2020                  2020 
 Charles Wilkinson                  75,000                75,000 
 Geoffrey Hall                      75,000                75,000 
 Suzie Procter                           -                35,211 
 Andreas Tautscher                       -                 6,489 
 

John Le Prevost, who resigned as a director of the Company on 16 January 2020, was a director and controlling shareholder of Anson Registrars Limited until 28 February 2020, when that company was acquired by JTC Group Limited, the holding company of the Company's Administrator and Secretary.

Other than the above shareholdings, and Mr Le Prevost's prior interest in the Registrar, none of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements during the year and none of the Directors has or has had any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Company, and which was effected by the Company during the reporting year .

At the financial year end and as at the date of this report, there are no outstanding loans or guarantees between the Group and any Director.

There were no material related party transactions which took place in the financial year under review, other than those disclosed in the Directors' Report and at note 22 to the financial statements.

Substantial Controllers of Voting Rights

The Company has identified the following substantial controlling interests in voting rights attached to the Company's issued share capital in accordance with Chapter 5 of the DGTRs. These are based on notifications made to the Company since inception and may differ substantially from positions recorded on the Company's Share register.

There have been no material changes in the below list of substantial controlling interests between the end of the year under review and 24 July 2020, being the latest practicable date prior to the date of approval of this report.

 
 Name                                              % of Total Voting Rights   Number of Shares 
 City of Bradford Metropolitan District Council                      10.16%         17,550,000 
 Schroders plc                                                        7.68%         13,267,887 
 Insight Investment Management (Global) Limited                       7.67%         13,242,345 
 FIL Limited                                                          5.43%          9,388,030 
 Seneca IM Limited                                                    5.10%          8,810,883 
 Quilter Cheviot Limited                                              5.00%          8,641,973 
 

Corporate Governance

Statement of Compliance with The UK Corporate Governance Code, as published in July 2018 (the "Code")

As a Guernsey incorporated company and under the DGTRs, the Company was not, for the year under review, required to comply with the Code. The Company has, however, voluntarily committed to comply with the Code or explain any departure. A copy of the Code is available for download from the UK Financial Reporting Council's website (www.frc.org.uk).

Having reviewed the Code, the Board considers that it has maintained procedures during the year to ensure that it has complied with the Code, other than the following exceptions:

   (i)      Provision 2: The board should assess and monitor culture. 

Provision 5: The board should understand the views of the company's other key stakeholders and describe in the annual report how their interests and the matters set out in section 172 of the Companies Act 2006 have been considered in board discussions and decision-making. The board should keep engagement mechanisms under review so that they remain effective.

For engagement with the workforce, one or a combination of the following methods should be used:

   --    a director appointed from the workforce; 
   --    a formal workforce advisory panel; 
   --    a designated non-executive director. 

Provision 6: There should be a means for the workforce to raise concerns in confidence and - if they wish - anonymously.

Company Response: the Company does not assess and monitor culture as it has no employees and as such engagement with the workforce is not applicable;

(ii) Provision 10: The board should identify in the annual report each non-executive director it considers to be independent. Circumstances which are likely to impair, or could appear to impair, a non-executive director's independence include, but are not limited to, whether a director:

-- has, or has had within the last three years, a material business relationship with the company, either directly or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;

-- holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;

   --    has served on the board for more than nine years from the date of their first appointment. 

Where any of these or other relevant circumstances apply, and the board nonetheless considers that the non-executive director is independent, a clear explanation should be provided.

Provision 19: The chair should not remain in post beyond nine years from the date of their first appointment to the board. To facilitate effective succession planning and the development of a diverse board, this period can be extended for a limited time, particularly in those cases where the chair was an existing non-executive director on appointment. A clear explanation should be provided.

Company Response: the Chair was a director of Doric Nimrod Air One Limited on appointment. The Board considers the Directors to be independent however, it could be construed that they are not independent on the basis that the Directors of the Company are also directors of other DNA Companies. The Board have implemented measures to manage any conflicts which might arise as a result of these appointments. The current Chair and one other Director have been on the Board since incorporation of the Company in January 2011. The Group's Assets each have a fixed lease term of 12 years ending at different times and as such the Board remain of the opinion that continuity is paramount in the final years of the Company's life;

(iii) Provision 9: The chair should be independent on appointment when assessed against the circumstances set out in Provision 10. The roles of chair and chief executive should not be exercised by the same individual.

Company Response: there is no chief executive;

(iv) Provision 18: All directors should be subject to annual re-election. The board should set out in the papers accompanying the resolutions to elect each director the specific reasons why their contribution is, and continues to be, important to the company's long-term sustainable success.

Company Response: the Articles provide that directors shall retire by rotation at AGMs and be eligible for re-election at the same meeting. The Board considers that, for continuity purposes, retirement by rotation is best practice. After nine years directors come up for re-election every year;

(v) Provision 20: Open advertising and / or an external search consultancy should generally be used for the appointment of the chair and non-executive directors. If an external search consultancy is engaged it should be identified in the annual report alongside a statement about any other connection it has with the company or individual directors.

Company Response: due to the specific nature of the Company, it has thus far used a combination of industry contacts to identify a list of suitable candidates and undertakes a rigorous interview process;

(vi) Provision 13: Non-executive directors have a prime role in appointing and removing executive directors. Non-executive directors should scrutinise and hold to account the performance of management and individual executive directors against agreed performance objectives. The chair should hold meetings with the non-executive directors without the executive directors present.

Provision 32: The board should establish a remuneration committee of independent non-executive directors, with a minimum membership of three, or in the case of smaller companies [i.e. not in the FTSE 350], two.

Provision 33: The remuneration committee should have delegated responsibility for determining the policy for executive director remuneration and setting remuneration for the chair, executive directors and senior management.

Provision 35: Where a remuneration consultant is appointed, this should be the responsibility of the remuneration committee.

Provision 41: There should be a description of the work of the remuneration committee in the annual report.

Company Response: the Company has no executive directors, senior management or employees. It does not have a remuneration committee given the small size of the exclusively non-executive and independent board. Remuneration provision is set out in this Directors' Report.

Board Evaluation

In May 2019, the Board engaged the services of an external facilitator, Platinum Compliance (Guernsey) Limited, for the performance evaluation required by Provision 21 of the Code. At the conclusion of its evaluation, the external facilitator provided the Directors with a report on Board effectiveness and made minor suggestions for improvements thereon, which were considered further by the Board. The Board agreed that additional members should be appointed to bring diversity and new perspectives to the Board and as such Miss Procter and Mr Tautscher were appointed to the Board on 19 August 2019.

The Board is committed to ensuring that on an annual basis the strengths of the Board are recognised and any weaknesses are addressed. On 21 November 2019 the Board established a Nomination Committee whose functions include the performance of an annual performance evaluation. The Chair of the Nomination Committee will also consider an external facilitation of the performance evaluation on an annual basis.

Each director has undertaken to engage with the evaluation process and take appropriate action when development needs have been identified.

Board Responsibilities

The Board comprises four Directors and their biographies appear on page 14 demonstrating the wide range of skills and experience they each bring to the Board. All the Directors are non-executive and independent, with Geoffrey Hall acting as Chair and Suzie Procter acting as SID.

The Board regularly reviews the balance, knowledge and effectiveness of the Board, to identify if any additional experience or skills are needed and to ensure that the current Directors have sufficient available time to undertake the tasks required and remain independent. The Directors are able and encouraged to provide statements to the Board of their concerns and ensure that any items of concern are recorded in the Board minutes. When undertaking a search for a new director the Board would be mindful of diversity and meritocracy.

The other significant commitments of the current Chair are detailed in his biography on page 14. The Board was satisfied during the year and remains satisfied that the Chair's other commitments do not interfere with his day-to-day performance of his duties to the Company and that he has the commitment and time to make himself available at short notice should the need arise.

In accordance with the Articles the Directors shall determine the Directors' fees payable provided that the aggregate amount of such fees paid in respect of services rendered to the Company shall not exceed GBP250,000 per annum. All Directors receive an annual fee and there are no share options or other performance related benefits available to them. All Directors are paid a fee of GBP48,000 per annum. The Chair is paid an additional fee of GBP11,000 per annum and the Chair of the Audit Committee is paid an additional GBP9,000 per annum. The terms and conditions of appointment of non-executive directors are available for inspection at the Company's registered office by prior arrangement with the Secretary.

The Board usually meets in Guernsey at least four times per year to consider the business and affairs of the Group, at which meetings the Directors review the Group's Assets and all other important issues to ensure control is maintained. Due to travel restrictions imposed as a result of COVID-19 the UK resident Directors have been unable to travel to Guernsey. However, the Board continues to operate effectively utilizing both telephone and video conferencing to maintain contact with each other and with their advisors and auditors. The Directors hold either a Dividend Committee meeting in Guernsey each quarter to consider and if thought suitable, approve the payment of a dividend in accordance with the Company's Distribution Policy.

Between these regular meetings the Board keeps in contact by email and telephone as well as meeting to consider specific matters of a transactional nature. Additionally the Directors may hold strategy meetings with its relevant advisors as appropriate.

The Directors are kept fully informed by the Asset Manager and Secretary of all matters that are relevant to the business of the Group and should be brought to the attention of the Directors and/or the Shareholders. All Directors have direct access to the Secretary who is responsible for ensuring that Board procedures are followed and that there are effective information flows both within the Board and between the Committees and the Board.

The Directors also have access to the advice and services of the Asset Manager and Corporate and Shareholder Adviser and may also, in the furtherance of their duties, take independent professional advice at the Company's expense.

During the year under review the number of full Board meetings and committee meetings attended by the Directors was as follows:

 
 Director             Board Meetings   Audit Committee   Nomination   Dividend Committee 
                                           Meetings       Committee       Meetings*** 
                                                          Meetings 
 Geoffrey Hall            4 of 4           3 of 3          1 of 1           1 of 4 
                     ---------------  ----------------  -----------  ------------------- 
 Charles Wilkinson        4 of 4           3 of 3          1 of 1           1 of 4 
                     ---------------  ----------------  -----------  ------------------- 
 Suzie Procter*           2 of 4           2 of 3          1 of 1           1 of 4 
                     ---------------  ----------------  -----------  ------------------- 
 Andreas Tautscher*       2 of 4           2 of 3          1 of 1           1 of 4 
                     ---------------  ----------------  -----------  ------------------- 
 John Le Prevost**        3 of 4           3 of 3          0 of 1           3 of 4 
                     ---------------  ----------------  -----------  ------------------- 
 

* appointed August 2019

**resigned January 2020

*** refer to page 27 for the composition and function of the Dividend Committee.

Audit Committee

Mr Tautscher, Mr Wilkinson and Miss Procter are all members of the Audit Committee, with Mr Tautscher acting as Chair. The Audit Committee has regard to the Guidance on Audit Committees published by the Financial Reporting Council (the "FRC") in September 2012 and as updated in April 2016. The Audit Committee examines the effectiveness of the Group's, and its service providers' internal control systems as appropriate, the annual and half-yearly reports and financial statements, the auditor's remuneration and engagement, as well as the auditor's independence and any non-audit services provided by them.

The FRC published updated Ethical and Auditing Standards in December 2019, which further restrict the provision of non-audit services by audit firms to their clients. The previous list of prohibited non-audit services list has been replaced with a short list of permitted services. Auditors of "Public Interest Entities" ("PIES") can now only provide non-audit services which are closely linked to the audit itself or are required by law or regulation. Also, whereas PIES were previously limited to those entities incorporated in the EU, the FRC now defines PIES as all issuers whose transferable securities have been admitt ed to trading on a UK regulated market, which includes the London Stock Exchange but not AIM. The Crown Dependency rules were also changed so that Market Traded Companies incorporated in the Crown Dependencies are also included in this requirement.

The Audit Committee considers the nature, scope and results of the auditor's work and reviews it annually prior to providing a recommendation to the Board on the re-appointment or removal of the auditor. When evaluating the external auditor the Audit Committee has regard to a variety of criteria including industry experience, independence, reasonableness of audit plan, ability to deliver constructive criticism, effectiveness of communication with Board and the Group's service providers, quality control procedures, effectiveness of audit process and added value beyond assurance in audit opinion.

Auditor independence is maintained through limiting non-audit services to specific audit-related work that falls within defined categories; for example certain agreed upon procedures performed in respect of the Company's C share conversion, the provision of advice on the application of IFRS or formal reports for any stock exchange purposes. All engagements with the auditor are subject to pre-approval from the Audit Committee and fully disclosed within the annual financial report for the relevant period. A new lead audit partner is appointed every five years and the Audit Committee ensures the auditor has appropriate internal mechanisms in place to ensure its independence.

The Audit Committee has recommended to the Board that the re-appointment of Deloitte LLP ("Deloitte") as the Group's external auditor be proposed to Shareholders at the 2020 annual general meeting. The Audit Committee will consider arranging for the external audit contract to be tendered in 2022 (being ten years from the initial appointment) with the aim of ensuring a high quality and effective audit.

The Audit Committee usually meets in Guernsey at least twice per year, shortly before the Board meets to consider the Group's half-yearly and annual financial reports, and reports to the Board with its deliberations and recommendations and also has annual planning and final meetings with the auditor. In addition the Board also meets during the audit process with the auditors to discuss issues relating to the residual values of the Assets. The Audit Committee operates within clearly defined terms of reference based on the Institute of Chartered Secretaries and Administrators recommended terms and provides a forum through which the Group's external auditor reports to the Board. The Audit Committee can request information from the Group's service providers with the majority of information being directly sourced from the Asset Manager, the Secretary and Administrator and the external auditor. The terms of reference of the Audit Committee are available on the Company's website and on request from the Secretary.

Each year the Board examines the Audit Committee's performance and effectiveness, and ensures that its tasks and processes remain appropriate. Key areas covered included the clarity of the Audit Committee's role and responsibilities, the balance of skills among its members and the effectiveness of reporting its work to the Board. The Board is satisfied that all members of the Audit Committee have relevant financial experience and knowledge and ensure that such knowledge remains up to date. Overall the Board considers that the Audit Committee has the right composition in terms of expertise and has effectively undertaken its activities and reported them to the Board during the year under review.

During the financial year the Audit Committee met to consider the annual financial report for the year ended 31 March 2019 and the half-yearly financial report for the period ended 30 September 2019. The Audit Committee also met in January 2020, with the external auditor in attendance, to approve the 2020 audit plan.

Dividend Committee

The Dividend Committee consists of any one or more Director, who has been given full power and authority to consider and, if thought suitable, declare and approve the payment of a dividend in accordance with the Company's Distribution Policy, provided that all Directors had been provided with prior notice of the proposal to declare each dividend and no Director had raised any objection to the declaration of each dividend .

Nomination Committee

The Nomination Committee was established on 21 November 2019 and consists of all directors of the Company, with Mr Hall acting as Chair of the committee, except when the Nomination Committee considers any matter in relation to the chairmanship of the Company, in which case an alternative chair would be appointed.

The functions of the Nomination Committee include to regularly review the structure, size and composition (including the skills, knowledge, experience, diversity and how effectively members work together to achieve objectives) of the Board and make recommendations to the Board with regard to any changes, and to perform a formal and rigorous performance evaluation of the Board, its committees, the chair and individual directors, including the consideration of having a regular externally facilitated Board evaluation.

Internal Control and Financial Reporting

The Board is responsible for the Group's system of internal control and for reviewing its effectiveness. The Board confirms that there is an on-going process for identifying, evaluating and monitoring the significant risks faced by the Group.

The internal control systems are designed to meet the Group's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss.

The Board on an annual basis conducts a full review of the Group's risk management systems including consideration of a risk matrix which covers various areas of risk including corporate strategy, accuracy of published information, compliance with laws and regulations, relationships with service providers and business activities.

Asset Management services are provided to the Company by Doric. Corporate and shareholder advisory services are provided to the Company by Nimrod. Administration and secretarial duties for the Group are performed by JTC.

The Directors of the Group clearly define the duties and responsibilities of their agents and advisors. The appointment of agents and advisers is conducted by the Board after consideration of the quality of the parties involved and the Board monitors their on-going performance and contractual arrangements. The Board also specifies which matters are reserved for a decision by the Board and which matters may be delegated to its agents and advisers.

Management of Conflicts of Interest

The Group has adopted a formal conflict of interest policy and is committed to ensuring that all directors and service providers facilitate the Group conducting its business in a manner that is consistent with its reputation, conducive to maintaining high standard of integrity in all its business dealings, in the best interests of the Groups Shareholders.

The Board considers the directors conflicts of interest at each Board meeting by reviewing a schedule of each directors other directorships and other interests held. Each Director is required to notify the Secretary of any potential, or actual, conflict situations that would need to be considered by the Board.

No Director has a service contract with the Group, although Directors are issued with letters of appointment upon appointment, and, other than John Le Prevost who had an interest in Anson Registrars Limited as disclosed on page 22, nor did any Director have any interest in contracts with the Group during the financial year under review, or subsequently.

Anti Bribery Policy

The Directors have undertaken to operate the business in an honest and ethical manner and accordingly take a zero-tolerance approach to bribery and corruption. The key components of this approach are implemented as follows:

-- The Board is committed to acting professionally, fairly and with integrity in all its business dealings and relationships.

   --        The Group has implemented and enforces effective procedures to counter bribery. 

-- The Group requires all its service providers and advisors to adopt equivalent or similar principles.

Dialogue with Shareholders

All holders of Shares in the Company have the right to receive notice of, and attend, the general meetings of the Company, during which members of the Board will be available to discuss issues affecting the Group.

The primary responsibility for Shareholder relations lies with the Company's Corporate and Shareholder Adviser. The Corporate and Shareholder Adviser regularly meets with Shareholders to discuss the Company and seek feedback. The views of Shareholders are discussed by the Board at every Board meeting, and action would be taken to address any shareholder concerns. The Company provides regular updates to Shareholders through the annual and half-yearly financial reports and quarterly factsheets.

In addition the Directors are available to enter into dialogue with Shareholders and the Chair is willing to meet Shareholders as the Company believes such communication to be important. The Company's Directors can be contacted at the Company's registered office or via the Secretary.

Stakeholders and Section 172

The Code requires that the Company should understand the views of the Company's key stakeholders and describe in the annual report how their interests and the matters set out in section 172 of the UK's Companies Act 2006 have been considered in Board discussions and decision-making. Section 172 is not strictly applicable as this is a Guernsey Company. However its application is being done as part of the UK Corporate Governance requirements.

The Company has no employees and all of the directors are non-executive, so the Board considers that its key stakeholders are its shareholders, its service providers, society, the government and regulators.

The Board's engagement with Shareholders is described in the "dialogue with shareholders" section above. All Shareholders are treated equally and no shareholder receives preferential treatment. When making decisions of relevance to shareholders, the Board considers first and foremost the likely consequences of their decisions in light of their duty to act in the best interests of the Company. The Board also considers what is likely to be in the best interests of Shareholders as a whole, but does not consider individual shareholders' specific circumstances or desires when making its decisions.

In addition to the regular reporting provided by key service providers, the Board undertakes a review of the performance of these key service providers on an annual basis. The services provided by the key third party service providers are critical to the ongoing operational performance of the Company. The Board believes that fostering constructive and collaborative relationships with the Company's service providers will assist in their promotion of the success of the Company for the benefit of all shareholders.

As described in detail in the Company's viability statement, the Board considers the prospects of the Company for at least the next four years whenever it considers the Company's long-term sustainability. All strategic decisions are therefore taken with the success of the Company in mind and the Board would take external advice whenever it considered that such would be beneficial to its decision making process, primarily from its retained service providers (including legal counsel), but also from other external consultants.

The Board recognises that responsible investment and the associated ESG considerations can have a significant impact on investment activity in terms of raising funds, identifying investment opportunities and long-term value creation for Shareholders. Please see more information regarding ESG in the report on pages 31 to 34.

The Board ascribes to the highest standards of business conduct and has policies in place to ensure compliance with all applicable laws and regulations. In addition to the monitoring of the Company's compliance with its own obligations, the Board also monitors compliance by its service providers with their own obligations. The Board encourages openness and transparency and promotes proactive compliance with new regulation.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable Guernsey law and regulations. Under the Law the Directors are required to prepare financial statements for each financial year. The Directors have chosen to prepare the Group's financial statements in accordance with IFRS.

Under the Law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period.

In preparing these financial statements, International Accounting Standard 1 requires that Directors:

   --          properly select and apply accounting policies; 

-- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

-- provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

   --          make an assessment of the Group's ability to continue as a going concern. 

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Law. They are also responsible for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Disclosure of Information to the Auditor

The Directors who held office at the date of approval of this Directors' Report confirm in accordance with the provisions of Section 249 of the Law that, so far as they are each aware, there is no relevant audit information of which the Group's auditor is unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Group's auditor is aware of that information.

Auditor

Deloitte have expressed their willingness to continue in office as auditor and the Audit Committee has recommended their reappointment. A resolution proposing their reappointment will be submitted at the forthcoming annual general meeting to be held pursuant to section 199 of the Law.

   Geoffrey Hall                                                 Andreas Tautscher 
   Chair of the Board                                        Director 

Signed on behalf of the Board

On 30 July 2020

ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT

The Board recognises that Responsible Investment and the associated ESG considerations can have a significant impact on investment activity in terms of raising funds, identifying investment opportunities and long-term value creation for Shareholders. This report sets out our policy and approach to ensuring that the level of engagement on ESG matters is commensurate to the size, nature and complexity of the business.

This policy seeks to address ESG matters on two levels; firstly, with regard to the Company itself and secondly, in relation to the Assets which the Group owns. The direct and practical management of the Company seeks to uphold ESG standards where possible and applicable. This is greatly influenced by the nature of the Group's activities and the legal structure of the associated leases.

The Company

DNA2 is a self-managed Guernsey company incorporated on 31 January 2011. Its shares were initially admitted to trading on the SFS of the London Stock Exchange's Main Market on 14 July 2011. Following the closing of a C share fundraising on 27 March 2012, these C shares were converted to additional ordinary preference shares which were admitted to trading on the SFS on 6 March 2013.

The Company is under the control of its Board of Directors on behalf of shareholders. All Directors are independent and non-executive. The Board are responsible for reviewing the business affairs of the Company in accordance with the Articles and have overall responsibility for the Company's activities including all business decisions, review of performance and authorisation of distributions.

The Company has delegated the following activities to its appointed service providers;

   --    Asset Management - Doric 
   --    Liaison Agents - Amedeo / Doric LLP 
   --    Corporate and Shareholder Adviser - Nimrod 
   --    Secretary and Administrator - JTC 
   --    Registrar - JTC Registrars Limited (formerly Anson Registrars Limited) 

The Company has no executive directors or employees and no physical office premises. The Company's business is carried out in a series of meetings held in the offices of its administrator JTC, in Guernsey, the Company's place of incorporation.

Subject to any travel restrictions imposed, the Directors are required to travel in the fulfilment of their duties. Where circumstances allow, travel is kept to a minimum. The Directors are required to travel to Guernsey on at least a quarterly basis for Board and other committee meetings, and to the UK to visit Shareholders and service providers as and when required. Regular dialogue with the Asset Lessee is maintained via the Asset Manager.

The Company consequently has a limited physical footprint and therefore its environmental impact is considered to be low.

The Modern Slavery Act

Due to the nature of the Company's business, being a company that does not offer goods or services to customers, the Board considers there are no relevant disclosures with regard to modern slavery in relation to the Company's own operations. The Board considers the Company's supply chains, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in this regard.

The Assets

The principal activity of the Company is to acquire, lease and then sell aircraft. The Company has four wholly-owned subsidiaries; MSN077 Limited, MSN090 Limited, MSN105 Limited and DNAFA. The Group owns seven Airbus A380-861 aircraft which are leased for twelve years to Emirates (the "Lessee"), the national carrier owned by The Investment Corporation of Dubai based in Dubai, United Arab Emirates.

The Group's own operational influence in the fields of climate change, air quality, and resource efficiency is minimal. The nature of the lease with the Lessee means that control over the usage of the Asset rests with the Lessee. The Group has leased the Assets for a term of twelve years, with fixed lease rentals for the duration, to the Lessee. The Lessee bears all costs (including for maintenance, repairs and insurance) relating to the aircraft during the lifetime of the lease. This would include any modifications or modernisations related to ESG requirements as mandated by regulatory agencies. However, in all other respects, the influence of the Group over the Lessee with regard to voluntary ESG concerns is limited due to existing quiet enjoyment arrangements between the Group and the Lessee.

The Airbus A380 is the world's largest commercial passenger aircraft. It is the first and only aircraft with two full-length passenger decks, giving it a maximum capacity of up to 853 passengers. In a typical three-class configuration (First, Business and Economy Class), the Airbus A380 has capacity for approximately 525 passengers. Additionally, developments with respect to the aircraft's aerodynamics, control elements and flight systems, coupled with the use of advanced, lightweight composite materials make the A380 an attractive and efficient aircraft. In comparison with other modern long-range passenger aircraft of the same category (the so-called Very Large Aircraft segment), the Airbus A380 consumes less fuel per passenger, using approx. three litres of kerosene per 100 passenger kilometers, when equipped with Engine Alliance engines. Furthermore, the A380 offers an efficient way to capture traffic at the most concentrated airports and times by giving airlines the ability to consolidate routes, thereby increasing seat capacity while creating economies of scale.

The most critical environmental issue related to aircraft operations is greenhouse gas ("GHG") emissions generated from fossil energy consumption. Air transportation is one of the most energy and carbon dioxide intensive modes of transport, whether measured per passenger kilometer or per hour in transit. According to the United Nations' Intergovernmental Panel on Climate Change ("IPCC"), the aviation industry currently produces approx. 2 - 2.5 per cent of all carbon dioxide emissions and is forecast to increase its share of global man-made carbon dioxide emissions to approx. 3 per cent by 2050 given the rapid growth of aviation in recent years.

The Aviation Industry

Despite aviation's important role in local and global economic development, the aviation industry faces the challenge of meeting long term strong growth in passenger demand while simultaneously reducing its environmental impacts. In addition to GHG emissions, these environmental impacts could also include noise and nuisance, as well as water pollution (due to aircraft de-icing, cleaning, and other chemical-heavy aircraft operations).

To address these growing environmental concerns, IATA has defined environmental goals, namely:

   1.   to improve fuel efficiency by 1.5 per cent per annum by 2020; 
   2.   to cap emissions from aviation at the 2020 levels through carbon-neutral growth; and 

3. to reduce net carbon dioxide emissions from aviation by 50 per cent by 2050, relative to 2005 figures.

In pursuit of these goals, IATA has defined a strategy based on a four-pillar approach:

   1.   improved technology, including sustainable low-carbon dioxide fuels; 
   2.   more efficient aircraft operations; 
   3.   infrastructure improvements, including air traffic management systems; and 
   4.   a single global market-based measure, to fill the remaining emissions gap. 

Further information can be found on the IATA website: https://www.iata.org/en/policy/environment/ .

There are a number of technological developments in the aviation industry aimed at both increasing aircraft efficiency and reducing carbon dioxide emissions. Some developments, such as drop-in power fuels like biofuels that can be used in today's aircraft and engines without modification, are already commercially available and are expected to increase in prominence once initial costs can be reduced through scale. Evolutionary concepts, such as the second-generation geared turbo fan engine could become widely commercially available in the medium-term. Revolutionary concepts, such as piston compressors, steam injection and electric propulsion, represent the greatest potential improvements, but will most likely not be commercially available until the 2050s, based on current forecasts.

As these technological developments progress, the aviation industry is taking additional measures to curb its environmental impact while maintaining its commitment to local and global economic development. Initiatives, such as the Carbon Offsetting and Reduction Scheme for International Aviation ("CORSIA"), as established by the International Civil Aviation Organization ("ICAO") in October 2016, aim to offset airline carbon dioxide emissions and allow for carbon-neutral growth from 2020. Additionally, the aviation industry is able to participate in other carbon dioxide emissions trading markets, such as the European Union Emission Trading Scheme ("EU ETS").

Furthermore, a number of states currently levy passenger taxes on air tickets over and above infrastructure charges and there are a number of proposals for additional environmental taxes to be imposed on the aviation industry. However, as IATA notes, the income generated from an environmental tax is usually seen as general revenue by governments, thus it can be used to fund any variety of public sector programs and initiatives. As such, IATA takes the position that, while the overall goal of an environmental tax is laudable, it has distortionary effects on jobs and the economy, while at the same time not effectively incentivising the development or use of newer and greener technology. The effects of any newly introduced environmental taxes on the aviation industry will have to be monitored. The aviation industry plays a critical role in local and global economic development, contributing to approx. 72 million jobs worldwide according to IATA estimates for 2020.

ICAO have used the United Nations' Sustainable Development Goals ("SDG") as a basis to identify the contributions the aviation industry is making to sustainable development. For further information and the full working paper on aviation's contributions towards the United Nations' 2030 agenda for sustainable development from ICAO's 40(th) session please refer to the ICAO website: https://www.icao.int/Meetings/A40/Documents/WP/wp_189_en.pdf

Concerning the role of aircraft in sustainable development, aircraft Assets are likely to contribute to at least five of the SDG. Specifically, airlines are able to utilize aircraft in a manner consistent with the achievement of the following targets:

1. SDG 5: Aviation is working to achieve gender balance across the sector. In Europe, aviation is the most gender-balanced of all transport modes with 41 per cent female employees. More work is still needed to encourage balance in technical and executive roles;

2. SDG 8.1: Devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products;

3. SDG 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including regional and trans-border infrastructure, to support economic development and human wellbeing, with a focus on affordable and equitable access for all;

4. SDG 12.2: Achieve sustainable management and efficient use of natural resources productions; and

5. SDG 13: Invest in the transition to net-zero carbon dioxide energy, energy efficiency and the reduction of GHG emissions from transport operations.

Detailed information on the SDG can be found on the United Nations website: https://sustainabledevelopment.un.org/ .

Emirates, the Lessee, is committed to efforts to reduce resource consumption while also investing in wildlife conservation and protection. This includes participation in CORSIA as well as internal initiatives.

For further information on Emirates' environmental policy and initiatives, please visit the Emirates website where annual environmental reports are also available:

https://www.emirates.com/english/about-us/our-planet/

In the context of the Assets and the associated lease, the Board are committed to responsible decision making throughout the lifecycle of the Group. The Board is in continuous dialogue with its service providers and regularly reviews processes to guarantee transparency and accountability. The Board will continue to monitor the sustainability efforts of the industry and the Lessee and keep Shareholders abreast of developments.

AUDIT COMMITTEE REPORT

Membership

Andreas Tautscher - Chair of the Audit Committee

Charles Wilkinson - Non-executive Director

Suzie Procter - Senior Independent Director

Key Objective

The provision of effective governance over (i) the appropriateness of the Group's financial reporting including the adequacy of related disclosures, (ii) the performance of the Group's external auditor, (iii) monitoring of the systems of internal controls operated by the Company and (iv) the Group's principal service providers and the management of the Company's regulatory compliance activities.

Responsibilities

The key duties of the Audit committee (the "Committee") are as follows:

-- reviewing the Group's financial results announcements and financial statements and monitoring compliance with relevant statutory and listing requirements;

-- reporting to the Board on the appropriateness of the Group's accounting policies and practices including critical accounting policies and practices;

-- advising the Board on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position, performance, business model and strategy;

-- overseeing the relationship with the external auditor and reviewing the effectiveness of the external audit process; and

-- monitoring the systems of internal controls operated by the Group and by the Group's principal service providers.

Committee Meetings

The Committee usually meets in Guernsey at least twice a year. The Committee reports to the Board as part of a separate agenda item, on its activities and on matters of particular relevance to the Board in the conduct of its work. During the financial year under review the Committee formally reported to the Board on two occasions.

Main Activities of the Committee during the financial year

The Committee assisted the Board in carrying out its responsibilities in relation to financial reporting requirements, compliance and the assessment of internal controls. The Committee also managed the Group's relationship with the external auditor.

Fair, Balanced and Understandable

In order to comply with The UK Corporate Governance Code, the Board requested that the Committee advises them on whether it believes the annual financial report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group's performance, business model and strategy.

The Committee engaged with the Group's auditor and the Group's administrator in order to ensure that the financial statements were fair, balanced and understandable.

Financial Reporting and Significant Issues

The Committee's primary role in relation to financial reporting is to review, with its service providers and the external auditor, the appropriateness of the half-year and annual financial statements, the significant financial reporting issues and accounting policies and disclosures in the financial statements. The Committee has considered the key risks identified as being significant to these accounts and the most appropriate treatment and disclosure of any new significant issues identified during the audit and half-year reviews as well as any recommendations or observations made by the external auditor, Deloitte. To aid its review the Committee considered reports prepared by external service providers, including Doric and Nimrod, and reports from Deloitte on the outcome of their annual audit. The significant issues considered by the Committee in relation to the 2020 accounts and how these were addressed are detailed below:

 
 Significant issues for the            How the Committee addressed these significant 
  year under review                     issues 
 Residual value of aircraft            The Group has engaged three internationally 
  Assets                                recognised expert appraisers to provide 
                                        the Group with third party consultancy 
  The non-current assets of             valuation services. In the absence of 
  the Group comprise of seven           sales data for similar used assets, appraisers 
  Airbus A380 aircraft. An              are heavily reliant on databases containing 
  annual review is required             historical data points of aircraft sales 
  of the residual value of              relating to large commercial aircraft. 
  the Assets as per IAS 16              Interpretation of historical data is the 
  Property, Plant and Equipment,        basis for the current market value and 
  which defines residual value          provides, together with the expected developments 
  as "the estimated amount              in the future, the foundation for their 
  that an entity would currently        opinions on future values. Furthermore, 
  obtain from disposal of the           the appraisers' valuations take into account 
  asset, after deducting the            specific technical and economic developments 
  estimated costs of disposal,          as well as general future trends in the 
  if the asset were already             aviation industry and the macro-economic 
  of an age and in the condition        outlook. The Group has historically used 
  expected at the end of its            the average Future Base Values of the 
  useful life."                         three independent appraisers, excluding 
                                        inflation as a guide to determine the 
  The Group's estimation technique      residual values . One of the key assumptions 
  is to make reference to the           in this concept is a market in a theoretical 
  most recently produced forecast       constant equilibrium, characterized by 
  soft values (excluding inflation),    a balance in supply and demand. 
  not an estimate of the amount 
  that would currently be achieved,     In the aftermath of Airbus' February 2019 
  and so this is not a direct           decision to discontinue the A380 production 
  application of the IAS 16             in 2021, a number of A380 operators disclosed 
  definition. This approach             plans to withdraw at least parts of their 
  has been taken because current        A380 fleets earlier than originally anticipated. 
  market values in today's              Furthermore, it became obvious that A380s 
  prices for comparable twelve          returned following the expiration of operating 
  year old A380s were not available     lease agreements could not be placed with 
  at the reporting date.                a new operator within a reasonable period 
                                        of time and owners were forced to explore 
                                        alternative scenarios for revenue generation 
                                        like engine lease. This also includes 
                                        part-out activities for the first few 
                                        A380s returned from HMSS. 
 
                                        The spread of COVID-19 and comprehensive 
                                        travel restrictions around the world came 
                                        along with an unprecedented drop in air 
                                        travel. In the second half of April 2020 
                                        about two out of three commercial airliners 
                                        worldwide were temporarily on the ground. 
                                        At the time of writing nearly all A380s 
                                        worldwide are in (temporary) storage. 
                                        The financial difficulties most of the 
                                        airlines currently experience, result 
                                        in various measures to weather the consequences 
                                        of the COVID-19 pandemic, as many expect 
                                        the recovery to pre-pandemic passenger 
                                        flows take much longer than in previous 
                                        situations, where demand was negatively 
                                        affected, like 9/11. 
 
                                        Due to the A380-specific developments 
                                        during the last financial year of the 
                                        Group and the generally dimmed market 
                                        sentiment in the aviation sector since 
                                        the COVID-19 outbreak, which is not over 
                                        yet, there is an increasing risk that 
                                        the underlying assumptions of the Base 
                                        Value concept might not be met at the 
                                        time of the leases expire. For this reason 
                                        the Asset Manager recommended to make 
                                        use of a more conservative approach in 
                                        deploying future 
                                        Soft Values instead of Base Values. Soft 
                                        Values are more conservative, also applicable 
                                        under "abnormal conditions" and do not 
                                        necessarily require a balanced market 
                                        as the Base Value concept does. 
 
                                        The Group now believes that the use of 
                                        Future Soft Values excluding inflation 
                                        best approximates residual value as required 
                                        per IAS 16 Property, Plant and Equipment. 
                                        A significant decrease in USD terms in 
                                        the residual values of the aircraft from 
                                        the prior year, has resulted in an adjustment 
                                        made to depreciation in the current year, 
                                        details of which have been disclosed in 
                                        note 10. 
 
                                        As updated investment valuations of all 
                                        Assets as at the year end were commissioned 
                                        and received from third party professional 
                                        valuers and analysed by the Asset Manager 
                                        and the directors, the Committee believes 
                                        that those valuations are appropriate 
                                        for use in preparing the financial statements. 
                                        Therefore, the average residual values 
                                        excluding inflation used in the accounts 
                                        are based on these appraisals. 
 
                                        Upon review of the advice they have received 
                                        from Doric and the appraisers, the Committee 
                                        is of the opinion that, the current estimate 
                                        of the residual soft values excluding 
                                        inflation of the Assets is a reasonable 
                                        approximation of the residual value of 
                                        the aircraft within the IAS 16 definition. 
 
                                        The estimation of residual values remains 
                                        inherent to estimation uncertainty. This 
                                        is disclosed in note 3 and has been highlighted 
                                        by the auditor in their key observations 
                                        section of the valuation and ownership 
                                        of aircraft key audit matter. 
                                      ---------------------------------------------------- 
 Recording foreign exchange            In assessing foreign exchange, the Committee 
  gains/losses                          has considered the issue at length and 
                                        is of the opinion that, on an on-going 
  IFRS require that certain             basis and assuming the lease and debt 
  transactions denominated              payments are made as anticipated, such 
  in currencies other than              exchange differences do not reflect the 
  the presentation currency             commercial substance of the situation 
  (including, most importantly,         in the sense that the key transactions 
  the cost of the Assets) be            denominated in US dollars are in fact 
  translated into the presentation      closely matched. Rental income received 
  currency at the exchange              in US dollars is used to pay debt repayments 
  rate ruling transaction date          due which are likewise denominated in 
  whilst monetary balances              US dollars. Furthermore, US dollar lease 
  (principally the outstanding          rentals and debt repayments are fixed 
  borrowings) are translated            at the outset of the Group's life and 
  at the rate prevailing on             are very similar in amount and timing. 
  the reporting date. The resultant 
  figures sometimes show very           The Committee concluded that the matching 
  large mismatches which are            of the lease rentals to settle debt repayments 
  reported as unrealised foreign        therefore mitigates risks of foreign exchange 
  exchange differences.                 fluctuations. 
 
  During the year under review          The Committee carefully considered the 
  the Group recorded a significant      disclosure in note 19(b) to the Consolidated 
  foreign exchange rate loss            Financial Statements to ensure that the 
  due to the depreciation of            reality of the Group's foreign exchange 
  Sterling against US dollars           risk exposure is properly explained. 
  and the consequent increase 
  in the Sterling value of 
  the US dollar denominated 
  debt. 
                                      ---------------------------------------------------- 
 Going concern risk                    The Committee received quarterly reports 
                                        from Doric during the year which comment 
  Emirates are the sole lessee          on the performance of Emirates. Doric 
  of the Assets. Should Emirates        has advised that Emirates has continued 
  default on the rental payments,       to perform well in its 2019-20 financial 
  it will result in the Group           year, which ended on 31 March 2020. The 
  failing to service debt and           Lessee recorded its 32nd consecutive year 
  it is unlikely the Group              of profit, despite negative impacts form 
  will be able to meeting its           the 45-day runway closure at its home 
  targeted dividend or, in              base and the COVID-19 pandemic. The net 
  the case of ongoing default,          profit increased by 21% over the results 
  continue as a going concern.          of the previous financial year. For the 
                                        2020-21 financial year, the airline expects 
                                        "a huge impact" on its performance, according 
                                        to Sheikh Ahmed bin Saeed Al Maktoum, 
                                        CEO and chairman of the Emirates Group. 
 
                                        While Emirates maintains that it has a 
                                        strong balance sheet with a substantial 
                                        cash position, the airline is taking additional 
                                        measures to protect its cash flow through 
                                        cost savings measures, reductions to discretionary 
                                        capital expenditure, and engaging with 
                                        business partners to improve working capital. 
                                        To this end, Emirates also raised AED 
                                        4.4 billion (USD 1.2 billion) in additional 
                                        liquidity in the Q1/2020 through term 
                                        loans, revolving credit and short term 
                                        trade facilities. As a result, Emirates 
                                        ended the financial year 2019/20 on March 
                                        31, 2020 with AED 20.2 billion (USD 5.5 
                                        billion) in cash assets. Emirates also 
                                        stated that it intends to continue to 
                                        tap the bank market for further liquidity 
                                        in Q2/2020 to provide a cushion against 
                                        the impact of COVID-19 on its cash flows 
                                        in the short term. Hence, Emirates is 
                                        mindful of its reputation and is continuously 
                                        working on measures to maintain is ability 
                                        to pay all of its obligations in full 
                                        and on time. 
 
                                        In line with IFRS 16 Emirates is recording 
                                        its future lease payment liabilities (including 
                                        its right-of-use asset) in its latest 
                                        annual financial statements. Furthermore, 
                                        the management of the airline came to 
                                        the conclusion that the company is a going 
                                        concern. The auditors did not raise a 
                                        material uncertainty on going concern 
                                        in its independent auditor's report, which 
                                        is dated May 7, 2020 - and hence should 
                                        take COVID-19 and the potentially negative 
                                        effects on the lessee's (future) financial 
                                        position into consideration. 
 
                                        The airline confirms in its annual report 
                                        that it could obtain "committed support 
                                        from the Government of Dubai which has 
                                        publicly confirmed that they will financially 
                                        support Emirates during this period through 
                                        a variety of measures including an additional 
                                        equity injection, if required". In an 
                                        official statement on Twitter Sheikh Hamdan 
                                        bin Mohammed al-Maktoum, the Crown Prince 
                                        of Dubai, confirmed that "The Government 
                                        of Dubai is committed to fully supporting 
                                        @Emirates at this critical time and will 
                                        inject equity into the company". He added: 
                                        "@Emirates, our national carrier, positioned 
                                        Dubai as a global travel hub and has great 
                                        strategic value as one of the main pillars 
                                        of Dubai's economy, as well as the wider 
                                        economy of the UAE (United Arab Emirates)". 
 
                                        By the end of May 2020 the airline was 
                                        able to build up substantial cargo-only 
                                        operations with more than 80 Boeing 777-300ER 
                                        passenger aircraft in the air, complemented 
                                        by 11 Boeing 777 freighters, in order 
                                        to generate cash flow with the majority 
                                        of its fleet still sitting on the ground. 
                                        According to Tim Clark, the airline's 
                                        president: "[Cargo operations] are never 
                                        going to produce the kind of income you'll 
                                        get from passenger operations, but they 
                                        certainly kept the wolf from the door." 
 
                                        The Asset Manager is not aware of a formal 
                                        request addressed to the Group for a lease 
                                        deferral or any other efforts that would 
                                        result in the restructuring of the existing 
                                        transactions and could potentially have 
                                        an impact on the committed future lease 
                                        rental receipts. There is indication that 
                                        if the lessee would approach the lessor 
                                        community for some sort of support (such 
                                        as temporary deferral of lease rate components) 
                                        while Emirates is working through this 
                                        pandemic, transactions backed by capital 
                                        market products could be less affected. 
                                        The Company made use of EETCs to partially 
                                        finance the purchase of some of the aircraft. 
                                        Any sort of restructuring that would require 
                                        the security holders' consent could trigger 
                                        the dissemination of sensitive information 
                                        the lessee usually might not inclined 
                                        to share with a wider audience. These 
                                        circumstances could reduce the likelihood 
                                        of being approached for financial concessions. 
 
                                        Emirates is owned by the Investment Corporation 
                                        of Dubai, a state-owned holding company 
                                        that can be characterized as a sovereign 
                                        wealth fund owned by the Government of 
                                        Dubai. It is neither listed nor carry 
                                        its bond issuances an issuer rating. However, 
                                        Emirates' senior unsecured USD bonds with 
                                        maturities in 2023, 2025 and 2028 are 
                                        trading and the markets' pricing for such 
                                        instruments provide proxies for the credit 
                                        risk of the lessee. As the operating lease 
                                        agreements between Emirates and the Group 
                                        include a hell or high water clause, the 
                                        lease rental stream and any other contractual 
                                        payment primarily depends to Emirates' 
                                        ability to meet its financial obligations 
                                        whenever they fall due. In mid-July 2020, 
                                        Emirates' bonds are trading at around 
                                        96 cents (maturities in 2023 and 2025) 
                                        and 92 cents (2028 maturity), representing 
                                        USD running yields from approximately 
                                        4.1% to 4.9%. This level of yields certainly 
                                        does not appear to indicate any significant 
                                        financial stress to the issuer. Another 
                                        readily available indicator for the lessee's 
                                        financial health are Credit Default Swaps 
                                        on Emirates bonds. The quote informs about 
                                        the annual cost in basis points of insuring 
                                        against an Emirates credit event for a 
                                        five year period. In mid-July 2020 the 
                                        annual insurance premium on one USD face 
                                        value in Emirates bonds is 353bps, which 
                                        is elevated versus the longer term average 
                                        of around 150bps. However, taking into 
                                        consideration that aviation is one of 
                                        the hardest hit sectors by COVID-19, the 
                                        Credit Default Swap still indicates that 
                                        the market perceives Emirates as a trustworthy 
                                        company, which is very likely able to 
                                        meet its obligations in the next five 
                                        years. 
 
                                        The Committee concluded that it would 
                                        continue to receive regular updates from 
                                        Doric on the performance of Emirates and 
                                        would continue to monitor Emirates' overall 
                                        performance. 
 
                                        The Committee carefully considered the 
                                        disclosure in note 19(c) to the consolidated 
                                        financial statements to ensure that this 
                                        concentration of credit risk is properly 
                                        reflected, 
                                      ---------------------------------------------------- 
 Consideration of any triggers         The Committee has considered the issue 
  for impairment                        at length and accordingly an impairment 
                                        review has been undertaken as at 31 March 
  IAS 36 Impairment of Assets           2020. Refer to note 3 for further detail 
  requires that a review for            on the factors triggering the review and 
  impairment be carried out             the sensitivity analysis performed on 
  by the Company when there             the discount rates and residual value 
  is an indication of impairment        inputs. As a result of the current year 
  of an asset and if events             review, an impairment loss of GBP68,465,211 
  or changes in circumstances           was booked in the accounts as disclosed 
  indicate that the carrying            in note 3. 
  amount of an asset may not 
  be recoverable. The review            Contributing factors, which triggered 
  will compare the carrying             the Committee's decision to perform an 
  amount of the Asset with              impairment review, included the COVID-19 
  its recoverable amount, which         pandemic and the global travel restrictions 
  is the higher of its value            leading to a temporary halt of A380 operations 
  if sold (if known) and its            worldwide. It was also necessary as the 
  value-in-use.                         Group decided to adhere to the concept 
                                        of Future Soft Values for measuring the 
                                        residual value of the aircraft. In the 
                                        previous years the Group relied on Base 
                                        Values. 
                                      ---------------------------------------------------- 
 Global Pandemic Risk                  COVID-19 has spread globally and resulted 
                                        in widespread restrictions on people socialising 
  The emergence of a global             and travelling, which is having a significant 
  pandemic may have a profound          effect on many industries and in particular 
  and negative impact on the            the airline industry. 
  operations and performance 
  of the Group and may directly         Due to restriction on travel imposed by 
  or indirectly affect some             many countries, the majority of passenger 
  of the other risks mentioned          aircraft remain grounded. The consequent 
  in this table.                        lack of income for airlines may cause 
                                        bankruptcy and, in a worse case, repossession 
                                        of aircraft which would need to be stored 
                                        pending remarketing when restrictions 
                                        are eased. 
 
                                        The Board and its key service providers 
                                        have all acted to the best of their abilities 
                                        to protect the welfare of the various 
                                        teams involved in the affairs of the Group 
                                        to ensure operations are maintained to 
                                        the extent possible and to protect and 
                                        support the Assets of the Group for as 
                                        long as is required. 
 
                                        More information of COVID-19 is set out 
                                        in the Chairman's Statement on pages 5 
                                        to 7 and the Asset Manager Report on pages 
                                        8 to 13. 
                                      ---------------------------------------------------- 
 

We note that the auditor also considers the recognition of rental income and the accounting for debt within their key audit matters. These items have been considered by the Committee in the current year, but, as there have been no changes in respect of these risks they have not been a primary area of focus of the Committee in the current year.

Going Concern

The Directors in consultation with the Asset Manager are monitoring the effect of the COVID-19 pandemic generally on the aviation industry and specifically on the Group's aircraft values and financial wellbeing of its lessee both now and in the future. The Group's future performance can potentially be impacted should this pandemic have a pervasive and prolonged impact on the economy. There has prevailed widespread restrictions on the ability of people to travel and such has had a material negative effect on the airline sector, and by extension the aircraft leasing sector. This may lead to the inability of airlines to pay rent as they fall due. These factors, together with wider economic uncertainty and disruption, are likely to have an adverse impact on the future value of the aircraft Assets owned by the Group, as well as on the sale, re-lease, refinancing or other disposition of the relevant aircraft.

An increase in lessee counterparty credit risk means that there is now more uncertainty over lease payments and depending on further developments with the lessee, there could be requests for lease rental deferrals. Reduced rents receivable under the leases may end up not being sufficient to meet the fixed loan or Equipment Note interest and regular capital repayments of debt scheduled during the life of each loan and may not provide surplus income to pay for the Group's expenses and permit the declaration of dividends.

The option to remarket the Aircraft following a potential event of default by the lessee has not been taken into account. The period of time necessary to successfully complete such a process is beyond the twelve months forecasting horizon of the going concern considerations. This applies in particular in times of COVID-19, as various restrictions are still in place to contain the pandemic.

The Directors consider that the going concern basis of accounting remains appropriate. Based on current information the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, although the risk to this is clearly higher.

Whilst there is some uncertainty as to the airline industry in general, and specifically Emirates' financial position and credit risk profile, on the basis that (i) Emirates has shown no intention of failing to meet its obligations (ii) Emirates has the financial backing to continue paying these rentals, the Directors believe that it is appropriate to prepare these financial statements under the going concern basis of preparation.

Internal Controls

The Committee has made due enquiry of the internal controls of the Administrator. The Committee is satisfied with the controls currently implemented by the Administrator. However, it has requested that the Administrator keeps the Committee informed of any developments and improved internal control procedures.

The most recent report on the internal control of JTC's administration services, prepared in accordance with the International Standard on Assurance Engagement 3402 ("ISAE 3402"), for the period from 1 April 2019 to 31 March 2020, has been provided to the Committee.

Internal Audit

The Group has no employees and operates no systems of its own, relying instead on the employees and systems of its external service providers. Following a recommendation from the Committee, the Board has therefore taken the decision that it would be of insufficient benefit for the Group to engage an internal auditor.

External Audit

The effectiveness of the external audit process is dependent on appropriate audit risk identification at the start of the audit cycle . The Committee received from the Deloitte a detailed audit plan identifying their assessment of the key risks. For the financial year under review, the primary risks identified were in respect of valuation and ownership of the Group's Assets, the recording of lease rental income and accounting for fixed rate debt using the effective interest rate method.

Using its collective skills, the Committee evaluates the effectiveness of the audit process in addressing the matters raised through the reporting it received from Deloitte at the conclusion of the audit. In particular the Committee formally appraise Deloitte against the following criteria:

   --        Independence 
   --        Ethics and conflicts 
   --        Knowledge and experience 
   --        Challenge 
   --        Promptness 
   --        Cost 
   --        Overall quality of service 

In addition the Committee also seeks feedback from the Administrator on the effectiveness of the audit process.

For the financial year under review, the Committee was satisfied that there had been appropriate focus on the primary areas of audit risk and assessed the quality of the audit process to be good. The Committee discussed their findings with Deloitte and agreed how future external audits could be improved.

The Committee holds meetings with the external auditor to provide additional opportunity for open dialogue and feedback from the auditor. Should it be necessary, Committee members meet with the external auditor without the Administrator and Asset Manager being present. Matters typically discussed include the auditor's assessment of business risks and management activity thereon, the transparency and openness of interactions with the Administrator, confirmation that there has been no restriction in scope placed on them by the Administrator on the independence of their audit and how they have exercised professional scepticism.

Appointment and Independence

The Committee considers the reappointment of the external auditor, including the rotation of the audit partner, each year and also evaluates their independence on an on-going basis.

The external auditor is required to rotate the audit partner responsible for the audit every five years. The current lead audit partner has been in place since January 2020 with his first audit reporting period being the year to 31 March 2020. This is his first year of involvement .

Deloitte has been the Group's external auditor since June 2011, with the first audit being carried out for the year ended 31 March 2012.The Committee has provided the Board with its recommendation to the Company's Shareholders on the reappointment of Deloitte as external auditor for the year ending 31 March 2022. Accordingly a resolution proposing the reappointment of Deloitte as the Company's auditor will be put to the Company's Shareholders at the 2020 annual general meeting.

There are no contractual obligations restricting the Committee's choice of external auditor. The Committee continues to consider the audit tendering provisions outlined in the revised Code, of which it is very supportive. The Committee will consider arranging for the external audit contract to be tendered in 2021 (being ten years from the date of initial appointment of Deloitte) with the aim of ensuring a high quality and effective audit.

Non-Audit Services

To further safeguard the objectivity and independence of the external auditor from becoming compromised, the Committee has a formal policy governing the engagement of the external auditor to provide non-audit services. No changes have been made to this policy during the year. This policy specifies that Deloitte should only be engaged for non-audit services where there is considered to be a very low threat to auditor independence. No non-audit services have been provided by Deloitte during the year or to date.

Deloitte is prohibited from providing any other services without the Committee's prior approval. In reaching such a determination the Committee will take into consideration whether it is in the best interests of the Group that such services should be supplied by the Group's external auditor (rather than another service provider) and, if so whether any safeguards regarding auditor objectivity and independence in the conduct of the audit should be put in place, whether these would be effective and how such safeguards should be disclosed.

Committee Evaluation

The Committee's activities formed part of the review of Board effectiveness performed in the year under review.

An internal evaluation of the Committee's effectiveness will be carried out in 2020.

Andreas Tautscher

Chair of the Audit Committee

30 July 2020

INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF DORIC NIMROD AIR TWO LIMITED

Report on the audit of the financial statements

1. Opinion

In our opinion the financial statements of Doric Nimrod Air Two Limited (the 'parent company') and its subsidiaries (the 'group'):

-- give a true and fair view of the state of the Group's affairs as at 31 March 2020 and of its loss for the year then ended;

-- have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

-- have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

We have audited the financial statements which comprise:

   --           the consolidated statement of comprehensive income; 
   --           the consolidated statement of financial position; 
   --           the consolidated statement of changes in equity; 
   --           the consolidated statement of cash flows; and 
   --           the related notes 1 to 23. 

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

2. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.

We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (the 'FRC's') Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

3. Summary of our audit approach

 
Key audit matters        The key audit matters ("KAMs") that we identified 
                          in the current year were: 
                           *    Valuation and ownership of aircraft; 
 
 
                           *    Recognition of lease rental income; 
 
 
                           *    Accounting for debt using the effective interest 
                                method; and 
 
 
                           *    Impact of Covid-19 on the going concern assumption. 
 
 
 
                          Within this report, key audit matters are identified 
                          as follows: 
                            Newly identified 
                            Increased level of risk 
                            Similar level of risk 
                            Decreased level of risk 
-------------------  -------------------------------------------------------------- 
Materiality          The materiality that we used in the current year 
                      was GBP4,560,000 which was determined on the basis 
                      of 2% of shareholders' equity. This is consistent 
                      with the prior year. 
-------------------  -------------------------------------------------------------- 
Scoping              The consolidated financial statements of the Group 
                      incorporate its special purpose subsidiaries through 
                      which aircraft assets are held and through which 
                      debt finance has been obtained. Whilst statutory 
                      audits of the financial statements of each of these 
                      subsidiaries are not required, they are included 
                      within the scope of our audit of the consolidated 
                      financial statements. Audit work to respond to the 
                      risks of material misstatement was performed by the 
                      same audit engagement team. 
-------------------  -------------------------------------------------------------- 
Significant changes  We have added a new KAM "Impact of covid-19 on the 
 in our approach      going concern assumption". Covid-19 has had a significant 
                      impact on the travel industry resulting in many of 
                      the world's aircraft being grounded since the pandemic 
                      took hold. The Group leases its aircraft to Emirates, 
                      which currently, has grounded all its A380's including 
                      the ones leased from the Group. This therefore raises 
                      new going concern considerations on whether Emirates 
                      will continue to meet its lease obligations. 
-------------------  -------------------------------------------------------------- 
 

4. Conclusions relating to going concern, principal risks and viability statement

 
      4.1. Going concern                                      Going concern is the basis of preparation of the 
      We have reviewed the directors' statement in note       financial statements that assumes an entity 
      2(k) to the financial statements about whether          will remain in operation for a period of at least 12 
      they considered it appropriate to adopt the going       months from the date of approval of the 
      concern basis of accounting in preparing                financial statements. 
      them and their identification of any material 
      uncertainties to the Group's ability to continue        We confirm that we have nothing material to report, add 
      to do so over a period of at least twelve months        or draw attention to in respect of 
      from the date of approval of the financial              these matters. 
      statements. 
 
      We considered as part of our risk assessment the 
      nature of the Group, its business model and 
      related risks including where relevant the impact of 
      the Covid-19 pandemic and Brexit, the 
      requirements of the applicable financial reporting 
      framework and the system of internal control. 
      We evaluated the directors' assessment of the 
      Group's ability to continue as a going concern, 
      including challenging the underlying data and key 
      assumptions used to make the assessment, 
      and evaluated the directors' plans for future 
      actions in relation to their going concern 
      assessment. 
 
      We state whether we have anything material to add or 
      draw attention to in relation to that 
      statement that would be required by Listing Rule 
      9.8.6R(3) if the company had a premium listing 
      and report if the statement is materially 
      inconsistent with our knowledge obtained in the 
      audit. 
 
 
            4.2. Principal risks and viability statement                   Viability means the ability of the Group to 
            Based solely on reading the directors' statements and          continue over the time horizon considered 
            considering whether they were consistent                       appropriate 
            with the knowledge we obtained in the course of the audit,     by the directors. 
            including the knowledge obtained                               We confirm that we have nothing material to 
            in the evaluation of the directors' assessment of the          report, add or draw attention to in respect 
            Group's ability to continue as a going                         of 
            concern, we are required to state whether we have anything     these matters. 
            material to add or draw attention 
            to in relation to: 
             *    the disclosures on pages 17-18 that describe the 
                  principal risks, procedures to identify emerging 
                  risks, and an explanation of how these are being 
                  managed or mitigated; 
 
 
             *    the directors' confirmation on page 19 that they have 
                  carried out a robust assessment of the principal and 
                  emerging risks facing the Group, including those that 
                  would threaten its business model, future performance 
            , 
                  solvency or liquidity; or 
 
 
             *    the directors' explanation on pages 18-19 as to how 
                  they have assessed the prospects of the Group, over 
                  what period they have done so and why they consider 
                  that period to be appropriate, and their statement as 
                  to whether they have a reasonable expectation that 
                  the Group will be able to continue in operation and 
                  meet its liabilities as they fall due over the period 
                  of their assessment, including any related 
                  disclosures drawing attention to any necessary 
                  qualifications or assumptions. 
 
 
 
            We also report whether the directors' statement relating to 
            the prospects of the company that 
            would be required by Listing Rule 9.8.6R(3), if the company 
            had a premium listing, is materially 
            inconsistent with our knowledge obtained in the audit. 
 

5. Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1. Valuation and ownership of aircraft

 
Key audit matter               Included on the Group's statement of financial position 
 description                    as at 31 March 2020 is aircraft assets amounting 
                                to GBP597 million (2019: GBP759 million) as disclosed 
                                in note 10 to the financial statements. 
 
                                As explained in note 2(m), the Group's accounting 
                                policy is to measure its aircraft asset at depreciated 
                                historic cost less impairment. The asset is being 
                                depreciated on a straight-line basis over the term 
                                of the lease to an estimated residual value at the 
                                end of that period. Notes 2(k) and 3, describe the 
                                effects of the uncertainties created by the coronavirus 
                                (COVID-19) pandemic on the residual values of the 
                                Group's Assets. The outbreak has caused extensive 
                                disruptions to businesses and economic activities 
                                and, in particular, the airline industry and the 
                                uncertainties created have increased the estimation 
                                uncertainty over the residual values of the Assets 
                                at the balance sheet date. As stated in note 3, estimation 
                                of aircraft residual value is a significant source 
                                of uncertainty and is a key determinant in preparing 
                                the financial statements. A number of factors, including 
                                but not limited to, Airbus' decision to discontinue 
                                the delivery of new A380s and the impact of Covid-19 
                                has resulted in a change of estimation basis to use 
                                soft values in the current year. Further, a significant 
                                impairment of GBP68.4m has been recognised. 
                                Refer to the considerations by the audit committee 
                                on residual value and impairment as discussed on 
                                pages 36 and 40. 
 
                                The valuation and ownership of aircraft was deemed 
                                to be a key audit matter as: 
                                 *    the selected useful life or residual values used in 
                                      determining depreciation might not be appropriate, as 
                                      they may not be consistent with; available market 
                                      information, impact of Covid-19 on the Group and its 
                                      assets, forecast valuations obtained by the Group 
                                      from expert aircraft valuers and the terms of the 
                                      aircraft lease agreements. The estimation of aircraft 
                                      useful life and residual value is a key judgement 
                                      area; 
 
 
                                 *    an indicator of impairment of the assets might arise 
                                      in which case an impairment review should be 
                                      performed and the value of the asset written down to 
                                      recoverable amount if less than carrying value. 
                                      Judgement is required in assessing whether an 
                                      indicator of impairment exists and estimation is 
                                      required on key inputs of the impairment review model 
                                      such as the terminal value, discount rate and the 
                                      inflation rate used; and 
 
 
                                 *    the economic substance of the original aircrarft 
                                      acquisition transaction might not have been fully 
                                      considered, such that the asset might be recognised 
                                      in the financial statements when it does not belong 
                                      to the Group. In addition, the aircraft might be 
                                      recognised when the Group does not have proper legal 
                                      title. 
-----------------------  ------------------------------------------------------------------ 
How the scope                  Our procedures included: 
 of our audit responded          *    obtaining an understanding of the key business 
 to the key audit                     processes and controls associated with the valuation 
 matter                               of aircraft assets; 
 
 
                                 *    reviewing and challenging management's considerations 
                                      of the impact of Covid-19 on the Group and its 
                                      aircraft assets; 
 
 
                                (a) critically assessing the conclusions reached 
                                by the Board of Directors ("Board") on the appropriateness 
                                of the selected residual values and evaluating their 
                                consistency with available market information, including 
                                forecast valuations obtained by the Group from expert 
                                aircraft valuers and the terms of the aircraft lease 
                                agreement. We evaluated the competence, capability 
                                and objectivity of the valuers engaged by management. 
                                We also considered the adequacy of the disclosure 
                                related to this estimation uncertainty set out in 
                                note 3; 
                                (b) engaging with our internal aircraft valuation 
                                specialists in reviewing the Board and asset manager's 
                                conclusions on the assessments made on residual values 
                                used at year end; 
                                (c) engaging with our internal aircraft valuation 
                                specialists in assessing the reasonableness of assumptions 
                                and methodology used by a sample of expert appraisers, 
                                in their estimation of forecast residual values and 
                                current market value estimates; 
                                 *    reviewing and challenging the reasonableness of key 
                                      inputs, assumptions and methodology used in the 
                                      assessment of impairment. This was achieved through 
                                      our inspection of supporting evidence and through our 
                                      consideration of internal and external factors which 
                                      affect the impairment review process on the aircraft; 
                                      and 
 
 
                                 *    reviewing the original purchase agreement for 
                                      consistency with the asset owned and obtaining 
                                      certificate of registration directly from 'The 
                                      International Registry for International Interests in 
                                      Mobile Equipment' to confirm ownership. In addition, 
                                      we reassessed our evaluation of the economic 
                                      substance of the original purchase transaction in 
                                      order to evaluate if the asset was appropriately 
                                      recognised. 
-----------------------  ------------------------------------------------------------------ 
Key observations         While we note the significantly increased estimation 
                          uncertainty as a result of Covid-19 in relation to 
                          the residual values of the Company's assets we consider 
                          the assumptions used to be appropriate. In addition 
                          we concluded that the inputs used in the impairment 
                          review including these residual values, the resulting 
                          impairment adjustment of GBP68.5m and the disclosures 
                          of the resulting sensitivities in note 3 are appropriate. 
 
                          Having considered both the economic substance of 
                          transaction and the legal form, we concluded that 
                          the aircraft assets recorded in the financial statements 
                          are owned by the Group. 
-----------------------  ------------------------------------------------------------------ 
 

5.2. Recognition of lease rental income

 
Key audit matter                      The Group's leases have been classified as operating 
 description                           leases and as such rental income which amounts to 
                                       GBP133 million (2019: GBP129 million) should be recognised 
                                       on a straight-line basis over the lease term, which 
                                       differs from the profile of actual rental payments. 
                                       As set out in note 4 of the financial statements, 
                                       a significant portion of the lease rentals is receivable 
                                       in US Dollars and must be appropriately translated 
                                       into the Sterling functional and presentation currency. 
                                       The recognition of revenue also requires consideration 
                                       of all terms of the signed lease contracts. As stated 
                                       in note 3, classification of leases as operating 
                                       leases is a key source of uncertainty in preparing 
                                       the financial statements. 
 
                                       The recognition of revenue was deemed to be a key 
                                       audit matter as: 
                                        *    revenue might not be properly recorded in accordance 
                                             with requirements of the lease contracts and in 
                                             accordance with the straight-line basis; 
 
 
                                        *    related deferred or accrued income might not be 
                                             recognised appropriately; and 
 
 
                                        *    revenue transactions and related amortisation of 
                                             deferred income are significant to the Group's 
                                             financial performance, hence any material 
                                             misstatements in revenue will have a direct impact on 
                                             reported comprehensive income. 
-----------------------  ------------------------------------------------------------------------- 
How the scope                        Our procedures included: 
 of our audit responded                *    obtaining an understanding of the key business 
 to the key audit                           processes and controls on recognition of lease 
 matter                                     income; 
 
 
                                       *    consideration on whether the classification of the 
                                            leases as operating is appropriate with reference to 
                                            the lease terms and the nature of the asset and the 
                                            requirements of IFRS 16: Leases; 
 
 
                                       *    developing independent expectations of lease income 
                                            for the year based on total lease rentals receivable, 
                                            the lease terms and the applicable foreign exchange 
                                            rates during the year. We also traced a sample of 
                                            rental income receipts to bank statements; 
 
 
                                       *    recalculating deferred and accrued rental income 
                                            recognised in the Consolidated Statement of Financial 
                                            Position and testing accuracy of related translation 
                                            differences; and 
 
 
                                       *    tracing all rental income receipts to bank 
                                            statements. 
-----------------------  ------------------------------------------------------------------------- 
Key observations         Having performed the procedures above, we concluded 
                          that classification of the leases is appropriate 
                          and that revenue recognition is in line with the 
                          terms of the signed lease contracts and is in line 
                          with IFRS 16:Leases. 
 
                          We also concluded that deferred and accrued income 
                          balances recorded were appropriate as they were not 
                          materially different from results of our recalculations. 
-----------------------  ------------------------------------------------------------------------- 
 

5.3. Accounting for debt using the effective interest method

 
Key audit matter         In order to part-finance the acquisition of the aircraft 
 description              asset, the Group obtained a fixed rate debt. As at 
                          31 March 2020 the value of total debt held by the 
                          Group was GBP244 million (2019: GBP312 million) as 
                          disclosed in note 15 to the financial statements. 
                          The debt is amortising over the lease term. As set 
                          out in note 2(n) to the financial statements, the 
                          debt instruments are carried at amortised cost with 
                          interest expense recognised at the effective interest 
                          rate. The debt might not be properly accounted for 
                          using the effective interest rate method or adequate 
                          disclosures might not made in the financial statements. 
 
                          The Group has a floating rate loan and a related 
                          interest rate swap contract to hedge the cash flow 
                          interest rate risk. The interest rate swap contract 
                          might not be appropriately accounted for at fair 
                          value in the consolidated financial statements. 
-----------------------  ------------------------------------------------------------------ 
How the scope                  Our procedures included: 
 of our audit responded          *    obtaining an understanding of the key business 
 to the key audit                     processes and controls on accounting for and 
 matter                               recording of debt; 
 
 
                                 *    reviewing the debt amortisation schedules prepared by 
                                      management to recalculate the effective interest 
                                      rates on the loans and checked whether they are 
                                      consistent with the repayment schedules; 
 
 
                                 *    obtaining direct confirmation of the principal 
                                      balances outstanding and recalculating accrued 
                                      interest using the effective interest rate; 
 
 
                                 *    developing an expectation of the interest charges for 
                                      the period using the average outstanding principal 
                                      balances during the period and the effective interest 
                                      rates; and 
 
 
                                 *    involving our internal financial instruments 
                                      valuation specialists to perform an independent 
                                      valuation of the swap on the floating rate loan to 
                                      determine if management's valuation fell within a 
                                      reasonable range. 
-----------------------  ------------------------------------------------------------------ 
Key observations         Having carried out the procedures, we concluded that 
                          the debt was appropriately valued in line with the 
                          effective interest rate method and related interest 
                          calculation was within our expectation. 
-----------------------  ------------------------------------------------------------------ 
 

5.4. Impact of covid-19 on the going concern assumption

 
Key audit matter         Covid-19 has had a significant impact on the travel 
 description              industry resulting in many of the world's aircraft 
                          being grounded since the pandemic took hold. The 
                          Group leased its aircraft to Emirates Airlines ("Emirates") 
                          and the financial wellbeing of this entity and its 
                          ability to continue to meet lease rentals as they 
                          fall due are a key factor is assessing whether the 
                          Group is able to continue as a going concern. 
 
                          Any default in the rentals receivable from Emirates 
                          would result in a default on the loan obligations 
                          of the Company which could ultimately result in the 
                          sale of the aircraft to meet those obligations. 
 
                          Note 2(k) of the financial statements provides further 
                          disclosures on considerations on Going Concern. 
-----------------------  ------------------------------------------------------------------------ 
How the scope                        Our procedures included: 
 of our audit responded                *    Consideration of the ability of Emirates to meet the 
 to the key audit                           lease obligations as they fall due through the 
 matter                                     consideration of publicly available financial 
                                            information and through our own independent 
                                            investigations; 
 
 
                                       *    Discussions with the Directors and Investment Manager 
                                            as to whether any rental restructuring has been 
                                            requested by Emirates; 
 
 
                                       *    Consideration of whether there have been any lease 
                                            payment defaults since the year end by comparing 
                                            scheduled lease payments against amounts received on 
                                            bank statements; 
 
 
                                       *    Consideration of the credit rating of Emirates; and 
 
 
                                      Consideration of the financial support available 
                                      to Emirates through its main investor and our independent 
                                      assessment on the main investor's ability to provide 
                                      support. 
-----------------------  ------------------------------------------------------------------------ 
Key observations         Having carried out the procedures, we concluded that 
                          the adoption of going concern basis of accounting 
                          is appropriate. 
-----------------------  ------------------------------------------------------------------------ 
 

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

 
Materiality                          GBP4,560,000 (2019: GBP6,429,000) 
-----------------------------------  --------------------------------------------------------------------------------- 
Basis for determining materiality    2% (2019: 2%) of shareholders' equity. 
-----------------------------------  --------------------------------------------------------------------------------- 
Rationale for the benchmark applied  Our materiality is based on shareholders' equity of the Group. Comprehensive 
                                     income is significantly 
                                     influenced by fluctuations in exchange rates, hence it will not be a stable 
                                     benchmark to use 
                                     in our determination of materiality. We consider shareholders' equity to be the 
                                     most important 
                                     balance on which the shareholders would judge the performance of the Group. 
-----------------------------------  --------------------------------------------------------------------------------- 
 

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality was set at 70% of materiality for the 2020 audit (2019: 70%). In determining performance materiality, we considered the following factors:

(a) the quality of the control environment , and we were able to rely on controls on over a number of business processes, including; Debt, Cash, Expenses and Revenue, and

(b) Our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior periods'

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of GBP0.22m (2019: GBP0.32m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Scoping

Our audit was scoped by obtaining an understanding of the Group and its environment, including internal control, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.

The Group is administered by a third party Guernsey regulated service provider, as part of our audit we reviewed ISAE 3402 report of the service organisations and the relevant controls for over a number of business processes, including; Debt, Cash, Expenses and Revenue.

The consolidated financial statements of the Group incorporate its special purpose subsidiaries through which aircraft are held and through which debt finance has been obtained. Whilst statutory audits of the financial statements of each of these subsidiaries are not required, they are included within the scope of our audit of the consolidated financial statements conducted using the Group materiality set out above. Audit work on each entity within the Group was performed by the same audit team. The Group is treated as a single entity for financial reporting purposes hence component materiality was not used.

8. Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that:

-- Fair, balanced and understandable - the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

   --      Audit committee reporting - the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or 

-- Directors' statement of compliance with the UK Corporate Governance Code - the parts of the directors' statement that would be required, if the company had a premium listing, relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R (2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

We have nothing to report in respect of these matters.

9. Responsibilities of directors

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

10. Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor's report.

Report on other legal and regulatory requirements

11. Matters on which we are required to report by exception

   11.1.         Adequacy of explanations received and accounting records 

Under the Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

   --      we have not received all the information and explanations we require for our audit; or 
   --      proper accounting records have not been kept by the parent company, or 
   --      the financial statements are not in agreement with the accounting records. 

We have nothing to report in respect of these matters.

12. Use of our report

This report is made solely to the company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

David Becker, ACA

For and on behalf of Deloitte LLP

Recognised Auditor

St Peter Port, Guernsey

30 July 2020

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2020

 
                                                 Year ended     Year ended 
                                      Notes     31 Mar 2020    31 Mar 2019 
                                                        GBP            GBP 
 
 INCOME 
 A rent income                          4        96,076,197     92,400,342 
 B rent income                          4        36,509,141     36,434,140 
 Bank interest received                             102,336        115,696 
                                             --------------  ------------- 
                                                132,687,674    128,950,178 
 
 EXPENSES 
 Operating expenses                     5       (3,537,779)    (3,451,480) 
 Depreciation of Aircraft              10      (93,037,582)   (46,153,816) 
 Impairment of Aircraft                10      (68,465,211)              - 
                                             --------------  ------------- 
                                              (165,040,572)   (49,605,296) 
 
 Net (loss)/profit for the year 
  before finance costs and foreign 
  exchange losses                              (32,352,898)     79,344,882 
 
 Finance costs                         11      (15,853,585)   (19,492,939) 
 
 Net (loss)/profit for the year 
  after finance costs and before 
  foreign exchange losses                      (48,206,483)     59,851,943 
 
 Unrealised foreign exchange loss       7      (19,386,570)   (33,147,366) 
                                             --------------  ------------- 
 
 (Loss)/profit for the year                    (67,593,053)     26,704,577 
 
 Other Comprehensive Income                               -              - 
                                             --------------  ------------- 
 
 Total Comprehensive (Loss)/Income 
  for the year                                 (67,593,053)     26,704,577 
                                             --------------  ------------- 
 
                                                      Pence          Pence 
 (Loss) / earnings per Ordinary 
  Share for the year - Basic and 
  Diluted                               9           (39.13)          15.46 
 

In arriving at the results for the financial year, all amounts above relate to continuing operations.

The notes on pages 57 to 85 form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2020

 
                                                  31 Mar 2020                           31 Mar 2019 
                                        Notes             GBP                                   GBP 
 
 NON-CURRENT ASSETS 
 Aircraft                                 10      596,960,140                           758,462,933 
 Financial assets at fair value 
  through profit and loss                 19                -                               176,039 
                                                -------------  ------------------------------------ 
                                                  596,960,140                           758,638,972 
 
 CURRENT ASSETS 
 Accrued income                                     4,940,074                                 7,771 
 Receivables                              13           53,262                                52,497 
 Cash and cash equivalents                17       30,016,771                            28,236,268 
                                                   35,010,107                            28,296,536 
 
 TOTAL ASSETS                                     631,970,247                           786,935,508 
                                                =============  ==================================== 
 
 CURRENT LIABILITIES 
 Borrowings                               15       85,703,367                            80,363,628 
 Deferred income                                    7,840,789                             7,840,789 
 Payables - due within one year           14           72,928                                64,522 
                                                -------------  ------------------------------------ 
                                                   93,617,084                            88,268,939 
 
 NON-CURRENT LIABILITIES 
 Borrowings                               15      158,380,240                           231,338,802 
 Financial liabilities at fair 
  value through profit and loss           19          255,930                                     - 
 Deferred income                                  151,414,304                           140,337,025 
                                                -------------  ------------------------------------ 
                                                  310,050,474                           371,675,827 
 
 TOTAL LIABILITIES                                403,667,558                           459,944,766 
                                                =============  ==================================== 
 
 TOTAL NET ASSETS                                 228,302,689                           326,990,742 
                                                -------------  ------------------------------------ 
 
 EQUITY 
 Share capital                            16      319,836,770                           319,836,770 
 Retained (loss)/earnings                        (91,534,081)                             7,153,972 
                                                -------------  ------------------------------------ 
 
                                                  228,302,689                           326,990,742 
                                                -------------  ------------------------------------ 
 
                                                        Pence                                 Pence 
 Net Asset Value per Ordinary Share based 
  on 172,750,000 (31 March 2019: 172,750,000) 
  shares in issue                                      132.16                                189.29   189.29 
 

The consolidated financial statements were approved by the Board of Directors and authorised for issue on 30 July 2020 and are signed on its behalf by:

Geoffrey Hall Andreas Tautscher

   Director                                                                      Director 

The notes on pages 57 to 85 form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2020

 
 
                                                      Year ended      Year ended 
                                                     31 Mar 2020     31 Mar 2019 
                                           Notes             GBP             GBP 
 OPERATING ACTIVITIES 
 (Loss)/profit for the year                         (67,593,053)      26,704,577 
 Movement in accrued and deferred 
  income                                               (776,994)       3,438,752 
 Movement in rental income received 
  in advance                                                   -     (1,069,187) 
 Interest received                                     (102,336)       (115,696) 
 Accrued interest                                          7,771         (7,771) 
 Depreciation of Aircraft                   10        93,037,582      46,153,816 
 Impairment of Aircraft                     10        68,465,211               - 
 Loan interest payable                      11        14,399,273      18,270,616 
 Movement in interest rate swap             11           431,969         202,774 
 Increase / (decrease) in payables          14             8,406       (202,620) 
 Increase in receivables                    13             (765)         (6,419) 
 Foreign exchange movement                   7        19,386,570      33,147,366 
 Amortisation of debt arrangement 
  costs                                     11         1,022,343       1,019,549 
 
 NET CASH FROM OPERATING ACTIVITIES                  128,285,977     127,535,757 
                                                  --------------  -------------- 
 
 INVESTING ACTIVITIES 
 Interest received                                       102,336         115,696 
 Decrease in short-term investments                            -       3,026,711 
                                                  --------------  -------------- 
 NET CASH FROM INVESTING ACTIVITIES                      102,336       3,142,407 
                                                  --------------  -------------- 
 
 FINANCING ACTIVITIES 
 Dividends paid                              8      (31,095,000)    (31,095,000) 
 Repayments of capital on borrowings        20      (81,852,226)    (78,223,949) 
 Repayments of interest on borrowings       20      (14,123,129)    (18,041,712) 
 
 NET CASH USED IN FINANCING ACTIVITIES             (127,070,355)   (127,360,661) 
                                                  --------------  -------------- 
 
 CASH AND CASH EQUIVALENTS AT BEGINNING 
  OF YEAR                                             28,236,268      24,440,324 
 
 Increase in cash and cash equivalents                 1,317,958       3,317,503 
 Effects of foreign exchange rates                       462,545         478,441 
 
 CASH AND CASH EQUIVALENTS AT 
  OF YEAR                                    17       30,016,771      28,236,268 
                                                  --------------  -------------- 
 

The notes on pages 57 to 85 form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2020

 
                           Notes             Share          Retained          Total 
                                           Capital   Earnings/(Loss) 
                                               GBP               GBP            GBP 
 
 Balance as at 1 April 
  2019                                 319,836,770         7,153,972    326,990,742 
 
 Total Comprehensive 
  Loss for the year                              -      (67,593,053)   (67,593,053) 
 Dividends paid              8                   -      (31,095,000)   (31,095,000) 
                                      ------------  ----------------  ------------- 
 
 Balance as at 31 March 
  2020                                 319,836,770      (91,534,081)    228,302,689 
                                      ------------  ----------------  ------------- 
 
                                             Share          Retained          Total 
                                           Capital          Earnings 
                                               GBP               GBP            GBP 
 
 Balance as at 1 April 
  2018                                 319,836,770        11,544,395    331,381,165 
 
 Total Comprehensive 
  Income for the year                            -        26,704,577     26,704,577 
 Dividends paid              8                   -      (31,095,000)   (31,095,000) 
                                      ------------  ----------------  ------------- 
 
 Balance as at 31 March 
  2019                                 319,836,770         7,153,972    326,990,742 
                                      ------------  ----------------  ------------- 
 
 

The notes on pages 57 to 85 form an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 March 2020

   1          GENERAL INFORMATION 

The consolidated financial statements incorporate the results of the Company, MSN077 Limited, MSN090 Limited, MSN105 Limited and DNAFA (together "Subsidiaries").

The Company was incorporated in Guernsey on 31 January 2011 with registered number 52985. The address of the registered office is given on page 86. Its share capital consists of one class of the Shares and one class of Subordinated Administrative Shares ("Administrative Shares"). The Company's Shares have been admitted to trading on the SFS of the London Stock Exchange's Main Market.

The Company's investment objective is to obtain income returns and a capital return for its Shareholders by acquiring, leasing and then selling aircraft. The principal activities of the Group are set out in the Chairman's Statement and Management Report on pages 5 to 7 and pages 17 to 20 respectively.

   2          ACCOUNTING POLICIES 

The significant accounting policies adopted by the Group are as follows:

   (a)       Basis of Preparation 

The consolidated financial statements have been prepared in conformity with IFRS, as adopted by the EU, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC") as adopted by the EU and applicable Guernsey law. The consolidated financial statements have been prepared on a historical cost basis modified for the revaluation value on the interest rate swap.

The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of the new and amended standards set out below.

   (b)       Adoption of new and revised Standards 

New and amended IFRS Standards that are effective for current year

The following Standard and Interpretations have been adopted in the current year. Their adoption has not had a material impact on the amounts reported in these consolidated financial statements and is not expected to have any impact on future financial periods except where stated otherwise:

IFRS 16 Leases - specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17. This standard is effective for annual periods beginning on or after 1 January 2019 and is endorsed by the EU. The Directors ha ve assessed the leases as operating leases under IFRS 16 and there ha ve been no material adjustments as a result of the adoption of IFRS 16.

IFRIC 23 Uncertainty over Income Tax Treatments - clarifies the accounting for uncertainties in income taxes. This standard is effective for annual periods beginning on or after 1 January 2019 and is endorsed by the EU. Guernsey has a 0 per cent tax rate.

Some annual improvements on existing standards became effective in the current year.

Their adoption has not had a material impact on the amounts and disclosures presented in these financial statements and is not expected to impact amounts and disclosure for future periods.

New and Revised Standards in issue but not yet effective

There have been no Standards or Interpretations which are not yet effective and expected to have a material impact on the Group's consolidated financial statements, except for the presentation of additional disclosures and changes to the presentation of components of the financial statements. These items will be applied in the first financial period for which they are required.

   (c)       Basis of Consolidation 

The consolidated financial statements incorporate the results of the Company and its Subsidiaries.

The Company owns 100 per cent. of all the shares in the Subsidiaries, and has the power to govern the financial and operating policies of the Subsidiaries so as to obtain benefits from their activities. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

   (d)       Taxation 

The Company and its Subsidiaries have been assessed for tax at the Guernsey standard rate of 0 per cent.

   (e)       Share Capital 

Shares are classified as equity. Incremental costs directly attributable to the issue of Shares are recognised as a deduction from equity.

   (f)        Expenses 

All expenses are accounted for on an accruals basis.

   (g)       Interest Income 

Interest income is accounted for on an accruals basis.

   (h)       Foreign Currency Translation 

The currency of the primary economic environment in which the Group operates (the functional currency) is Pound Sterling ("GBP", "GBP" or "Sterling"), which is also the presentation currency.

Transactions denominated in foreign currencies are translated into Sterling at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Consolidated Statement of Comprehensive Income.

   (i)        Cash and Cash Equivalents 

Cash at bank and short term deposits which are held to maturity are carried at cost. Cash and cash equivalents are defined as call deposits, short term deposits with a term of no more than three months from the start of the deposit and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

   (j)        Segmental Reporting 

The Directors are of the opinion that the Group is engaged in a single segment of business, being acquiring, leasing and selling various Airbus A380-861 aircraft (together the "Assets" and each an "Asset").

   (k)       Going Concern 

The Directors have prepared these financial statements for the year ended 31 March 2020 on the going concern basis.

The Directors in consultation with the Asset Manager are monitoring the effect of the COVID-19 pandemic generally on the aviation industry and specifically on the Group's aircraft values and financial wellbeing of its lessees both now and in the future. The Group's future performance can potentially be impacted should this pandemic have a pervasive and prolonged impact on the economy. There has prevailed widespread restrictions on the ability of people to travel and this has had a material negative effect on the airline sector, and by extension the aircraft leasing sector. This may lead to the inability of the airlines to pay rent as they fall due. These factors, together with wider economic uncertainty and disruption, are likely to have an adverse impact on the future value of the aircraft Assets owned by the Group, as well as on the sale, re-lease, refinancing or other disposition of the relevant aircraft.

An increase in lessee counterparty credit risk means that there is now more uncertainty over lease payments and depending on further developments with the lessee, there could be requests for lease rental deferrals. Reduced rents receivable under the leases may not be sufficient to meet the loan interest and regular capital repayments of debt scheduled during the life of each loan and may not provide surplus income to pay for the Group's expenses and permit the declaration of dividends.

The option to remarket the Aircraft following a potential event of default by the lessee has not been taken into account. The period of time necessary to successfully complete such a process is beyond the twelve months forecasting horizon of the going concern considerations. This applies in particular in times of COVID-19, as various restrictions are still in place to contain the pandemic.

The Directors consider that the going concern basis of accounting remains appropriate. Based on current information the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, although the risk to this is clearly higher.

The Board will continue to actively monitor the financial impact on the Company and its Group resultant from the evolving position with its aircraft lessee and lenders whilst bearing in mind its fiduciary obligations and the requirements of Guernsey law which determine the ability of the Company to make dividends and other distributions.

Note 15 ('Borrowings') describes the borrowings obtained by the Group to part-finance the acquisition of its aircraft. The Group has obligations under the loans to make scheduled repayments of principal and interest, which are serviced by the receipt of lease payments from Emirates.

The loans have been largely fixed and the fixed rental income under the operating leases means that the rents should be sufficient to repay the debt and provide surplus income to pay for the Group's expenses and permit payment of dividends.

The Group's aircraft with carrying values of GBP596,960,140 are pledged as security for the Group's borrowings (see note 15).

The Group is in a current net asset position and generates strong positive operating cash flows.

The Directors, with the support of its Asset Manager, believe that it is reasonable to assume as of date of approval of annual financial statements that Emirates will continue with the contracted lease rental payments due to the following:

- As stipulated by Emirates in its most recent audited annual report, it maintains and is considered to have a strong balance sheet with a substantial cash position, and the airline is taking additional measures to protect its cash flow through cost savings measures, reductions to discretionary capital expenditure, and engaging with business partners to improve working capital.

- Emirates is recording its future lease payment liabilities in its latest audited annual financial statements and the Company is still a going concern as at the date of its signed audit report being 7 May 2020, and hence would have taken COVID-19 and the negative effects on its (future) financial position into consideration.

- The airline confirms in its annual report that it has received committed support via the various pronouncements.

- Emirates' listed debt and Credit Default Swaps (CDS's) are trading at investment grade or non-distressed levels.

   -           All of the aircraft are funded by EETCs. 

- In May 2020, the airline rebuilt its airfreight services with a dedicated network and also reintroduced passenger flights between its hub and a limited number of destinations.

- As of the end of July 2020, the Asset Manager was not aware of a formal request addressed to the Group for a lease deferral or any other efforts that would result in the restructuring of the existing transactions and which could potentially have an impact on the committed future lease rental receipts. Emirates is considered to have substantial liquidity and has not requested deferral of rent.

Whilst there is some uncertainty as to the airline industry in general, and specifically Emirates' financial position and credit risk profile, on the basis that (i) Emirates has shown no intention of failing to meet its obligations (ii) Emirates has the financial backing to continue paying these rentals, the Directors believe that it is appropriate to prepare these financial statements under the going concern basis of preparation.

The Directors have considered Emirates' ability to continue paying the lease rentals over the next 12 months and are satisfied that the Group can meet its liabilities as they fall due over this period. Further detail regarding the assumptions adopted when forming this conclusion can be found in the Viability Statement on page 19.

   (l)        Leasing and Rental Income 

The leases relating to the Assets have been classified as operating leases as the terms of the leases do not transfer substantially all the risks and rewards of ownership to the Lessee. The Assets are shown as non-current assets in the Consolidated Statement of Financial Position. Further details of the leases are given in note 12.

Rental income and advance lease payments from operating leases are recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased Asset and amortised on a straight-line basis over the lease term.

   (m)      Property, Plant and Equipment - Aircraft 

In line with IAS 16 Property Plant and Equipment, each Asset is initially recorded at the fair value of the consideration paid. The cost of the Asset is made up of the purchase price of the Asset plus any costs directly attributable to bringing it into working condition for its intended use. Costs incurred by the lessee in maintaining, repairing or enhancing the Aircraft are not recognised as they do not form part of the cost to the Group. Accumulated depreciation and any recognised impairment losses are deducted from cost to calculate the carrying amount of the Asset.

Depreciation is recognised so as to write off the cost of the each Asset less the estimated residual value over the estimated useful life of the Asset of 12 years, using the straight line method. As at 31 March 2020, the estimated residual value of the seven planes ranges from GBP37.7 million to GBP40.1 million (31 March 2019: GBP72.3 million to GBP75.5 million). Residual values have been arrived at by taking the average amount of three independent external valuers and after taking into account disposition fees where applicable. In the prior year, the residual values of the A380 Aircraft were determined using base values excluding inflation. However, following discussions between the Directors and the Company's advisors for the year ended 31 March 2020, it was determined that the use of soft values excluding inflation best approximates residual values as required by IAS 16 Property, Plant and Equipment.

Due to the A380-specific developments during the last financial year of the Group and the generally dimmed market sentiment in the aviation sector since the COVID-19 outbreak, which is not over yet, there is an increasing risk that the underlying assumptions of the Base Value concept might not be met at the time of the leases expire. For this reason the Asset Manager recommended to make use of a more conservative approach in deploying future Soft Values instead of Base Values. Soft Values are more conservative, also applicable under "abnormal conditions" and do not necessarily require a balanced market as the Base Value concept does.

This has resulted in a significant reduction in the residual value of the Assets since the prior financial year. Due to a change in estimate of residual value for the Assets in the current year, there has been a GBP46,757,323 increase which is the combined depreciation and foreign exchange impact in the annual depreciation for the current year.

The depreciation method reflects the pattern of benefit consumption. The residual value is reviewed annually and is an estimate of the fair amount the entity would receive today if the Asset were already of the age and condition expected at the end of their useful life. Useful life is also reviewed annually and for the purposes of the financial statements represents the likely period of the Group's ownership of these Assets. Depreciation starts when the Asset is available for use.

At each audited Statement of Financial Position date, the Group reviews the carrying amounts of its Aircraft to determine whether there is any indication that those Assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the Asset is estimated to determine the extent of the impairment loss (if any). Further details are given in note 3.

Recoverable amount is the higher of fair value less costs to sell and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the Asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an Asset is estimated to be less than its carrying amount, the carrying amount of the Asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the Asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the Asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

   (n)       Financial instruments 

A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities are derecognised if the Group's obligations, specified in the contract, expire or are discharged or cancelled. Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire, are extinguished, or if the Group transfers the financial assets to a third party and transfers all the risks and rewards of ownership of the Asset, or if the Group does not retain control of the Asset and transfers substantially all the risk and rewards of ownership of the Asset.

Under IFRS 9, on initial recognition, a financial asset is classified as measured at:

   -        Amortised cost; 
   -        Fair value through other comprehensive income ("FVOCI"); or 
   -        Fair value through profit or loss ("FVTPL"). 

The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The Group only has financial assets that are classified as amortised cost.

i) Financial assets held at amortised cost

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost.

These assets are subsequently measured at amortised cost using the effective interest method. The effective interest method calculates the amortised cost of financial instruments and allocates the interest over the period of the instrument.

The Group's financial assets held at amortised cost include trade and other receivables and cash and cash equivalents.

The Group assesses on a forward looking basis the expected credit losses associated with its financial assets held at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

ii) Financial liabilities held at amortised cost

Financial liabilities consist of payables and borrowings. The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics. All financial liabilities are initially measured at fair value, net of transaction costs. All financial liabilities are recorded on the date on which the Group becomes party to the contractual requirements of the financial liability. Financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of the financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

iii) Financial Assets and Financial Liabilities at fair value through profit or loss

(a) Classification

The Group classifies its derivative i.e. the interest rate swap, as financial assets or financial liabilities at fair value through profit or loss. These financial assets and financial liabilities are designated by the Board of Directors at fair value through profit or loss. The Group does not classify any derivatives as hedges in a hedging relationship.

(b) Recognition/derecognition

Financial assets or liabilities are recognised on the trade date - the date on which the Group commits to enter into the transactions. Financial assets or liabilities are derecognised when the rights to receive cash flows from the investments have expired or the Group has transferred substantially all risks and rewards of ownership.

(c) Measurement

Financial assets and financial liabilities at FVTPL are initially recognised at fair value. Transaction costs are expensed in the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets and financial liabilities at FVTPL are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets or financial liabilities at fair value through profit or loss' category are presented in the Statement of Comprehensive Income in the year in which they arise.

 
  3     SIGNIFICANT JUDGEMENTS AND ESTIMATES 
        In the application of the Group's accounting policies, which 
         are described in note 2, the Directors are required to make 
         judgements, estimates and assumptions about the carrying amounts 
         of assets and liabilities that are not readily apparent from 
         other sources. The estimates and associated assumptions are 
         based on historical experience and other factors that are considered 
         to be relevant. Actual results may differ from these estimates. 
 
         The estimates and underlying assumptions are reviewed on an 
         ongoing basis. Revisions to accounting estimates are recognised 
         in the period in which the estimate is revised if the revision 
         affects only that period or in the period of the revision and 
         future periods if the revision affects both current and future 
         periods. 
        Following are the critical judgements and estimates that the 
         Directors have made in the process of applying the Group's accounting 
         policies and that have the most significant effect on the amounts 
         recognised in the consolidated financial statements. 
        Estimates 
        Residual Value and Useful Life of Aircraft 
        As described in note 2 (m), the Group depreciates the Assets 
         on a straight line basis over the estimated useful life of the 
         Assets after taking into consideration the estimated residual 
         value. IAS 16 Property, Plant and Equipment requires residual 
         value to be determined as an estimate of the amount that the 
         Group would currently obtain from disposal of the Asset, after 
         deducting the estimated costs of disposal, if the Asset were 
         of the age and condition expected at the end of its useful life. 
         However, there are currently no aircraft of a similar type of 
         sufficient age for the Directors to make a direct market comparison 
         in making this estimation. In the prior year, the residual values 
         of the A380 Aircraft were determined using base values excluding 
         inflation. However, following discussions between the Directors 
         and the Company's advisors for the year ended 31 March 2020, 
         it was determined that the use of soft values excluding inflation 
         best approximates residual value as required by IAS 16 Property, 
         Plant and Equipment. 
 
         Due to the A380-specific developments during the last financial 
         year of the Group and the generally dimmed market sentiment 
         in the aviation sector since the COVID-19 outbreak, which is 
         not over yet, there is an increasing risk that the underlying 
         assumptions of the Base Value concept might not be met at the 
         time of the leases expire. For this reason the Asset Manager 
         recommended to make use of a more conservative approach in deploying 
         future Soft Values instead of Base Values. 
        Soft Values are more conservative, also applicable under "abnormal 
         conditions" and do not necessarily require a balanced market 
         as the Base Value concept does. There is additional uncertainty 
         caused by COVID-19 (the directors have described their response 
         to this uncertainty in note 2 (k)), refer to going concern on 
         page 59) which has resulted in the use of soft market values 
         in determining the residual value of the Asset. This reflects 
         as a change in the estimation basis in the current year. 
 
         In estimating residual value for the year, the Directors refer 
         to future soft values (excluding inflationary effects) for the 
         Asset obtained from three independent expert aircraft valuers. 
         This has resulted in a significant reduction in the anticipated 
         residual value of the Aircrafts since the prior financial year 
         details of which have been disclosed in note 10. 
 
         The estimation of residual value remains subject to uncertainty. 
         If the estimate of residual value had been decreased by 20 per 
         cent. with effect from the beginning of this year, the net profit 
         for the year and closing shareholders' equity would have been 
         decreased by approximately GBP10.3 million (31 March 2019: GBP16.5 
         million). An increase in residual value by 20 per cent. would 
         have had an equal but opposite effect. This reflects the range 
         of estimates of residual value that the Directors believe would 
         be reasonable at this time. The estimated useful lives of the 
         Assets are based on the expected period for which the Group 
         will own and lease the Aircraft. The Board of Directors expects 
         that the Aircraft will have a working life in excess of this 
         period. 
        Judgements 
         Operating Lease Commitments - Group as Lessor 
        The Group has entered into operating leases on seven (31 March 
         2019: seven) Assets. The Group has determined, based on an evaluation 
         of the terms and conditions of the arrangements, that it retains 
         all the significant risks and rewards of ownership of these 
         Assets and accounts for the contracts as operating leases. 
             The Group has determined that the operating leases on the Assets 
              are for 12 years based on an initial term of 10 years followed 
              by an extension term of 2 years. Should the Lessee choose to 
              exit a lease at the end of the initial term of 10 years a penalty 
              equal to the remaining 2 years would be due. 
 
              Functional Currency 
              The currency of the primary economic environment in which the 
              Group operates (the functional currency) is GBP, which is also 
              the presentation currency. 
 
              This judgement is made on the basis that this is representative 
              of the operations of the Group due to the following: 
               *    the Company's share capital was issued in GBP; 
 
 
               *    its investments were made in GBP; and 
 
 
               *    its dividends are paid to Shareholders in GBP, and 
                    that certain of the Group's significant operating 
                    expenses as well as portion of the Groups' rental 
                    income are incurred/earned in GBP. 
 
 
 
              In addition, the set-up of the leasing structures was designed 
              to offer a GBP return to GBP investors. 
             Impairment 
              As described in note 2(m), an impairment loss exists when the 
              carrying value of an asset or cash generating unit exceeds its 
              recoverable amount, which is the higher of its fair value less 
              costs to sell and its value-in-use. 
 
              The Directors review the carrying amount of its Assets at each 
              audited Statement of Financial Position date and monitor the 
              Assets for any indications of impairment as required by IAS 
              16 Property, Plant and Equipment and IAS 36 Impairment of Assets. 
 
              In assessing value-in-use, the estimated future cash flows expected 
              to be generated by the Assets (i.e. the income streams associated 
              with the lease and the expected future market value of the Aircraft 
              at the end of the lease) are discounted to their present value 
              using a pre-tax discount rate that reflects current market assessments 
              of the time value of money and the risks specific to the Assets 
              and the credit risk profile of the lessee. 
 
              In determining fair value less costs of disposal, recent market 
              transactions are taken into account, if available. If no such 
              transactions can be identified, an appropriate valuation model 
              is used. Such valuation reflects the current use given the fact 
              that the Aircraft are held for use in a leasing business. 
 
              Factors that are considered important which could trigger an 
              impairment review include, but are not limited to, significant 
              decline in the market value beyond that which would be expected 
              from the passage of time or normal use, significant changes 
              in the technology and regulatory environments, evidence from 
              internal reporting which indicates that the economic performance 
              of the Assets are, or will be, worse than expected. 
 
              The Board together with the Asset Manager have conducted an 
              impairment review in the current year as the below items may 
              result in pricing changes for the Aircraft: 
               *    As further Airbus A380 aircraft reached the expiry of 
                    their first lease agreements further market data will 
                    be available to Doric and the appraiser community. 
 
 
               *    The announcement to discontinue the A380 program in 
                    2021 may impact prices in the secondary market. 
 
 
               *    The impact of COVID-19 on the business of airlines 
                    and indirectly aircraft values, as well as on the 
                    credit risk profile of the Company's lessee could 
                    indicate the need for impairment. 
 
 
 
              The assessment was performed by comparing the net book value 
              of the Aircraft to its value-in-use (being higher than its respective 
              fair value less costs to sell). Rental cash flows to the end 
              of the contracts have been used in the calculation of value-in-use 
              as the cash flows are contractual. Any assumptions with regards 
              to issues in counterparty credit risk would be reflected in 
              the discount rate used to calculate the net present value of 
              future cash flows. In determining the value-in-use, the gross 
              value of future contractual cash flows including a residual 
              value assumption was discounted to present value using the companies 
              WACC (weighted average costs of capital (6.5 per cent.)). The 
              Gross value is higher than the current value, therefore the 
              discounted cash flows (or Value-in-use, "VIU") is used as the 
              Recoverable Amount for the impairment test. 
 
              Residual values for the purpose of the test are determined to 
              be the soft values (at an inflation rate of 1.5 per cent. at 
              the end of the aircraft's useful life)), being considered the 
              most appropriate. 
 
              A Soft Market is considered where the world's principal traffic 
              generating regions are in the middle of a recession or a period 
              of economic stagnation, which historically have a negative impact 
              on aircraft values. This is when airlines experience low growth 
              or even traffic reductions, make losses, cut their fleets and 
              staff or reduce fleet growth plans. The market becomes imbalanced, 
              with supply outstripping demand, resulting in more parked aircraft 
              and lower utilisation rates, which in turn, increase aircraft 
              availability. 
 
              Additionally, these values have been tested with regards its 
              sensitivity to the Discount Rates. Discount rates at a -0.5 
              per cent. and +0.5 per cent. interval have been tested on either 
              side of the WACC (6.5 per cent.) initially, with -1 per cent. 
              and +1 per cent. intervals used for the analysis thereafter. 
 
              The Asset Manager considers that the inflated future soft value 
              is the most appropriate measures to use for the Residual Value 
              for the following reasons: 
               *    The Residual Value is discounted at the WACC which 
                    would include a return for the time value of money 
                    (inflation). The inflated values (1.5 per cent. p.a. 
                    inflation assumed) are therefore used to avoid double 
                    counting when producing the discounted future cash 
                    flow value. 
 
 
               *    The calculation of cash flow is an assumption on the 
                    Group's best estimation of a) contracted cash flows 
                    and b) residual. Pricing increases of 1.5 per cent. 
                    p.a. is considered to be the best estimation as to 
                    what the Group would receive for residual value in 
                    future years on a like for like basis, taking the 
                    current economic climate into account. 
 
 
 
              Rental cash flows to the end of the contract has been used in 
              the calculation of the Future Cash Flow as the cash flows are 
              contractual. Any assumptions with regards issues in counterparty 
              credit risk would be reflected in the Discount Rate used to 
              calculate the net present value of future cash flows. The Directors, 
              with the support of its Asset Manager believe that for the Group 
              it is reasonable to assume as of date of approval of annual 
              financial statements that Emirates will continue with the contracted 
              lease rental payments and there is no evidence at this time 
              that either Emirates will default. The marketability of the 
              aircraft post lease will depend on how demand for air travel 
              will bounce back in a post COVID-19-crisis environment. 
 
              The Directors on the advice of the Asset Manager considers that 
              6.5 per cent. is the most appropriate WACC for the following 
              reasons: 
               *    the discount rate should be a rate commensurate with 
                    what a normal market participant would consider to be 
                    the risk inherent in the assets. 
 
 
               *    The risk profile of Emirates. Emirates unsecured USD 
                    bonds indicate a running USD yield of 4.1 per cent. 
                    to 4.9 per cent., depending on the maturity . 
 
 
               *    By using soft values to approximate residual values 
                    (and 1.5 per cent. p.a. inflation), the discount rate 
                    is considered appropriate to avoid double counting of 
                    risk. 
 
 
 
              Based on the impairment review performed, an impairment loss 
              of GBP68,465,211 was recognised in the current year (3 March 
              2019: GBPnil), with the impairment test resulting in an updated 
              carrying value of the Aircraft in total to GBP596,960,140 at 
              year end, as reflected in note 10. 
 
              If the discount rates had been decreased by 0.5 per cent. with 
              effect from the beginning of this year, the net profit for the 
              year and closing shareholders' equity would have been increased 
              by approximately GBP7 million. An increase in the discount rates 
              by 0.5 per cent. would have had an equal but opposite effect. 
 
              If the latest residual value estimates had been decreased by 
              20%, the net profit for the year and closing shareholders equity 
              would have decreased by GBP43.6million as a result of the additional 
              impairment that would arise. An increase in residual value estimates 
              would have an equal and opposite effect. 
 
  4    RENTAL INCOME 
 
                                                               Year ended        Year ended 
                                                              31 Mar 2020       31 Mar 2019 
                                                                      GBP               GBP 
   A rent income                                               96,145,220        96,610,111 
   Revenue received but not yet 
    earned                                                   (33,887,353)      (36,557,688) 
   Revenue earned but not yet 
    received                                                   25,961,400        24,507,130 
   Amortisation of advance rental 
   income                                                       7,856,930         7,840,789 
                                                               96,076,197        92,400,342 
 
   B rent income                                               35,663,124        35,663,124 
   Revenue earned but not yet 
    received                                                      856,207           791,433 
   Revenue received but not yet 
    earned                                                       (10,190)          (20,417) 
                                                               36,509,141        36,434,140 
 
 
   Total rental income                                        132,585,338       128,834,482 
 
     Rental income is derived from the leasing of the Assets. Rent 
     is split into A rent, which is received in US dollars ("$") 
     and B rent, which is received in Sterling. Rental income received 
     in US dollars is translated into the functional currency (Sterling) 
     at the date of the transaction. 
 
     An adjustment has been made to spread the actual total income 
     receivable over the term of the lease on an annual basis. 
     In addition, advance rentals received have also been spread 
     over the full term of the leases. 
 
 
 
 5    OPERATING EXPENSES 
                                              Year ended    Year ended 
                                             31 Mar 2020   31 Mar 2019 
                                                     GBP           GBP 
  Corporate shareholder and advisor 
   fee (note 22)                                 850,485       831,769 
  Asset management fee (note 22)               2,056,446     2,011,194 
  Liaison agency fee (note 22)                    11,630        11,390 
  Administration fees                            189,025       193,080 
  Bank interest and charges                        1,327         1,385 
  Accountancy fees                                32,514        31,845 
  Registrars fee (note 22)                        15,389        14,321 
  Audit fee                                       46,850        47,650 
  Directors' remuneration (note 6)               213,327       164,143 
  Directors' and officers' insurance              29,478        37,245 
  Legal and professional expenses                 56,255        67,841 
  Annual fees                                     15,877        12,910 
  Travel costs                                         -         6,230 
  Other operating expenses                        19,176        20,477 
 
                                               3,537,779     3,451,480 
 
 
 6   DIRECTORS' REMUNERATION 
 
       Under their terms of appointment, each Director is paid a fee 
       for their services as a director of the Company at a fee of GBP48,000 
       per annum, except for the Chair, who receives GBP59,000 per annum 
       and the Chair of Audit, who received GBP57,000 per annum. 
 7   UNREALISED FOREIGN EXCHANGE LOSSES                                              Year ended      Year ended 
                                                   31 Mar 2020     31 Mar 2019 
                                                          G BP            G BP 
      Cash at bank                                     462,545         478,441 
      Deferred income                              (6,914,198)     (6,784,090) 
      Borrowings                                  (12,934,917)    (26,841,717) 
                                                  ------------   ------------- 
 
                                                  (19,386,570)    (33,147,366) 
                                                  ------------   ------------- 
 8   DIVIDS IN RESPECT OF EQUITY SHARES 
 
                                                                                                                   Year ended 
                                                                                                                   31 Mar 2020 
 
 
 
                                             GBP         Pence per 
                                                             share 
  First interim dividend               7,773,750              4.50 
  Second interim dividend              7,773,750              4.50 
  Third interim dividend               7,773,750              4.50 
  Fourth interim dividend              7,773,750              4.50 
 
                                      31,095,000             18.00 
 
 
         Year ended 
         31 Mar 2019 
 
 
 
                                                     GBP           Pence per 
                                                                       share 
  First interim dividend                       7,773,750                4.50 
  Second interim dividend                      7,773,750                4.50 
  Third interim dividend                       7,773,750                4.50 
  Fourth interim dividend                      7,773,750                4.50 
 
                                              31,095,000               18.00 
 
 
  Refer to the Subsequent Events in note 23 in relation to dividends 
   declared and paid in April and July 2020. 
 
 
 9   LOSS / EARNINGS PER SHARE 
     Loss / earnings per Share ("EPS") is based on the net loss for 
      the year attributable to holders of Shares of the Company ("Shareholders") 
      of GBP67,593,053 (31 March 2019: profit GBP26,704,577) and 172,750,000 
      (31 March 2019: 172,750,000) Shares being the weighted average 
      number of Shares in issue during the year. 
 
     There are no dilutive instruments and therefore basic and diluted 
      EPS are identical. 
 
   10    PROPERTY, PLANT AND EQUIPMENT - AIRCRAFT 
 
                            Aircraft 
                               GBP 
  COST 
  As at 1 Apr 2019        1,039,148,193 
                         -------------- 
 
  As at 31 Mar 2020       1,039,148,193 
                         ============== 
 

ACCUMULATED DEPRECIATION AND IMPAIRMENT

 
  As at 1 Apr 2019                                 280,685,260 
                                                  ------------ 
  Depreciation charge based on previous 
   residual values                                  46,280,259 
  Adjustment due to change in US dollar 
   residual values                                  50,293,354 
  Adjustment due to FX movements on residual 
   values                                          (3,536,031) 
                                                  ------------ 
  Depreciation charge for the year                  93,037,582 
  Adjustment due to Impairment                      68,465,211 
                                                  ------------ 
 
  As at 31 Mar 2020                                442,188,053 
                                                  ============ 
 
 

CARRYING AMOUNT

 
  As at 31 Mar 2020       596,960,140 
                         ------------ 
 
  As at 31 Mar 2019       758,462,933 
                         ------------ 
 
 
     The Group believes that the use of forecast soft values excluding 
      inflation best approximates residual value as required per IAS 
      16 Property, Plant and Equipment (refer to note 3). The residual 
      values used is a change from the prior year due to current market 
      conditions arising mainly as a result of COVID-19 and is further 
      discussed in note 3. The combined effect of translating residual 
      values at the Sterling / US Dollar exchange rate prevailing at 
      31 March 2020 of 1.2420 (31 March 2019: 1.3035) and a 51.5 per 
      cent. decrease in average appraised residual values in US Dollar 
      terms, resulted in a GBP46,757,323 increase which is the combined 
      depreciation and foreign exchange impact in the annual depreciation 
      charge for the current year. 
 
     The Group can sell the Assets during the term of the leases (with 
      the lease attached and in accordance with the terms of the transfer 
      provisions contained therein). 
 
     Under IFRS 16 the direct costs attributed in negotiating and arranging 
      the operating leases have been added to the carrying amount of 
      the leased Asset and therefore are being recognised as an expense 
      over the lease term. The costs have been allocated to each Aircraft 
      based on the proportional cost of the Asset. 
 
     Refer to note 3 for details on the impairment review and sensitivities 
      conducted. 
 
 
 11    FINANCE COSTS 
                                                    Year ended     Year ended 
                                                   31 Mar 2020    31 Mar 2019 
                                                           GBP            GBP 
  Amortisation of debt arrangements 
   costs                                             1,022,343      1,019,549 
  Loan interest                                     14,399,273     18,270,616 
  Fair value adjustment on financial 
   assets at fair value through profit 
   and loss                                            431,969        202,774 
                                                 -------------  ------------- 
 
                                                    15,853,585     19,492,939 
                                                 -------------  ------------- 
 
 
 
 12     OPERATING LEASES 
 
      The amounts of minimum future lease receipts at the reporting 
       date under non-cancellable operating leases are detailed below: 
 
 
  31 March 2020            Next 12   1 to 5 years   After 5 years         Total 
                            months 
                               GBP            GBP             GBP           GBP 
  Aircraft - A 
   rental receipts      96,174,936    162,754,125               -   258,929,061 
  Aircraft - B 
   rental receipts      35,663,124    125,651,372               -   161,314,496 
                      ------------  -------------  --------------  ------------ 
 
                       131,838,060    288,405,497               -   420,243,557 
                      ------------  -------------  --------------  ------------ 
 
  31 March 2019            Next 12   1 to 5 years   After 5 years         Total 
                            months 
                               GBP            GBP             GBP           GBP 
  Aircraft - A 
   rental receipts      94,493,629    245,193,774       1,518,840   341,206,243 
  Aircraft - B 
   rental receipts      35,663,124    145,593,346      15,721,150   196,977,620 
                      ------------  -------------  --------------  ------------ 
 
                       130,156,753    390,787,120      17,239,990   538,183,863 
                      ------------  -------------  --------------  ------------ 
 
 
   The operating leases are for seven Airbus A380-861 aircraft. 
    The terms of the leases are as follows: 
 
   MSN077 - term of the lease is for 12 years ending October 2023. 
    The initial lease is for 10 years ending October 2021, with 
    an extension period of 2 years ending October 2023, in which 
    rental payments reduce. The lease extension option was confirmed 
    on 17 October 2019 and therefore extended by 2 years to the 
    expiry date of October 2023. 
 
     MSN090 - term of the lease is for 12 years ending December 2023. 
     The initial lease was for 10 years ending December 2021, with 
     an extension period of 2 years, in which rental payments reduce. 
     The lease extension option was confirmed on 5 December 2019 
     and therefore extended by 2 years to the expiry date of December 
     2023. 
 
 
   MSN105 - term of the lease is for 12 years ending October 2024. 
   The initial lease is for 10 years ending October 2022, with 
   an extension period of 2 years ending October 2024, in which 
   rental payments reduce. The lease extension option was confirmed 
   on 16 January 2020 and therefore extended by 2 years to the 
   expiry date of October 2024. 
 
   MSN106 - term of the lease is for 12 years ending October 2024. 
   The initial lease is for 10 years ending October 2022, with 
   an extension period of 2 years ending October 2024, in which 
   rental payments reduce. The lease extension option was confirmed 
   on 16 January 2020 and therefore extended by 2 years to the 
   expiry date of October 2024. 
 
   MSN107 - term of the lease is for 12 years ending October 2024. 
   The initial lease is for 10 years ending October 2022, with 
   an extension period of 2 years ending October 2024, in which 
   rental payments reduce. The lease extension option was confirmed 
   on 16 January 2020 and therefore extended by 2 years to the 
   expiry date of October 2024. 
 
   MSN109 - term of the lease is for 12 years ending November 2024. 
   The initial lease is for 10 years ending November 2022, with 
   an extension period of 2 years ending November 2024, in which 
   rental payments reduce. The lease extension option was confirmed 
   on 16 January 2020 and therefore extended by 2 years to the 
   expiry date of November 2024. 
 
   MSN110 - term of the lease is for 12 years ending November 2024. 
   The initial lease is for 10 years ending November 2022, with 
   an extension period of 2 years ending November 2024, in which 
   rental payments reduce. The lease extension option was confirmed 
   on 16 January 2020 and therefore extended by 2 years to the 
   expiry date of November 2024. 
 
   At the end of each lease the Lessee has the right to exercise 
    an option to purchase the Asset if the Group chooses to sell 
    the Asset. If a purchase option event occurs the Group and the 
    Lessee will be required to arrange for a current market value 
    appraisal of the Asset to be carried out by three independent 
    appraisers. The purchase price will be equal to the average 
    valuation of those three appraisals. 
 
 
 13    RECEIVABLES 
                            31 Mar 2020   31 Mar 2019 
                                    GBP           GBP 
  Prepayments                    14,294        16,585 
  Sundry debtors                 38,968        35,912 
 
                                 53,262        52,497 
                           ------------  ------------ 
 

The above carrying value of receivables is equivalent to fair value.

 
 14    PAYABLES (amounts falling due within one year) 
                                         31 Mar 2020   31 Mar 2019 
                                                 GBP           GBP 
  Accrued administration fees                 18,257        18,456 
  Accrued audit fee                           28,110        28,110 
  Other accrued expenses                      26,561        17,956 
 
                                              72,928        64,522 
                                        ------------  ------------ 
 

The above carrying value of payables is equivalent to the fair value.

 
 15    BORROWINGS 
                                                   31 Mar 2020          31 Mar 2019 
                                                           GBP                  GBP 
  Bank loans                                       103,024,411          134,276,763 
  Equipment Notes                                  145,434,612          182,823,428 
                                           -------------------  ------------------- 
                                                   248,459,023          317,100,191 
  Associated costs                                 (4,375,416)          (5,397,761) 
                                           -------------------  ------------------- 
 
                                                   244,083,607          311,702,430 
                                           -------------------  ------------------- 
 
  Current portion                                   85,703,367           80,363,628 
                                           ===================  =================== 
 
  Non-current portion                              158,380,240          231,338,802 
                                           ===================  =================== 
 
  Notwithstanding the fact that GBP81.9 million (31 March 2019: 
   GBP78.2 million) capital was repaid during the year, as per 
   the Consolidated Statement of Cash Flows, the value of the borrowings 
   has decreased by GBP67.6 million (31 March 2019: GBP50.1 million) 
   due to the 4.9 per cent. decrease in the Sterling / US dollar 
   exchange rate for the year ended 31 March 2020. See note 19. 
 
  The amounts below detail the future contractual undiscounted 
   cash flows in respect of the loans and equipment notes, including 
   both the principal and interest payments, and will not agree 
   directly to the amounts recognised in the Consolidated Statement 
   of Financial Position: 
 
 
                                        31 Mar 2020   31 Mar 2019 
                                                GBP           GBP 
  Amount due for settlement within 
   12 months                             96,011,173    94,337,592 
                                       ============  ============ 
 
  Amount due for settlement after 
   12 months                            170,819,676   254,241,591 
                                       ============  ============ 
 
 
 
 
   The loan to MSN077 Limited was arranged with Westpac Banking 
    Corporation ("Westpac") for $151,047,509 and runs for 12 years 
    until October 2023 and has an effective interest rate of 4.590 
    per cent. 
 
   The loan to MSN090 Limited was arranged with The Australia and 
    New Zealand Banking Group Limited ("ANZ") for $146,865,575 and 
    runs for 12 years until December 2023 and has an effective interest 
    rate of 4.558 per cent. 
 
   The loan to MSN105 Limited was arranged with ICBC, BoC and Commerzbank 
    for $145,751,153 and runs for 12 years until October 2024 and 
    has an effective interest rate of 4.780 per cent. 
 
   Each loan is secured on one Asset. No significant breaches or 
    defaults occurred in the year. The loans are either fixed rate 
    over the term of the loan or have an associated interest rate 
    swap contract issued by the lender in effect fixing the loan 
    interest over the term of the loan. Transaction costs of arranging 
    the loans have been deducted from the carrying amount of the 
    loans and will be amortised over their respective lives. 
 
 
   In order to finance the acquisition of the fourth, fifth, sixth 
    and seventh Assets, DNAFA used the proceeds of the May 2012 
    offering of Pass Through Certificates (the "Certificates"). 
    The Certificates have an aggregate face amount of approximately 
    $587.5 million, made up of "Class A" certificates and "Class 
    B" certificates. The Class A certificates in aggregate have 
    a face amount of $433,772,000 with an interest rate of 5.125 
    per cent. and a final expected distribution date of 30 November 
    2022. The Class B certificates in aggregate had a face amount 
    of $153,728,000 with an interest rate of 6.5 per cent. and were 
    repaid on 30 May 2019. There is a separate trust for each class 
    of Certificate. The trusts used the funds from the Certificates 
    to acquire Equipment Notes. The Equipment Notes were issued 
    to Wilmington Trust, National Association as pass through trustee 
    in exchange for the consideration paid by the purchasers of 
    the Certificates. The Equipment Notes were issued by DNAFA and 
    the proceeds from the sale of the Equipment Notes financed a 
    portion of the purchase price of the four Airbus A380-861 aircraft, 
    with the remaining portion being financed through contribution 
    from the Company of the C Share issue proceeds. The holders 
    of the Equipment Notes issued for each aircraft will have the 
    benefit of a security interest in such aircraft. The remaining 
    balance is being repaid by continuing to amortise borrowings 
    that pays both principal and interest through periodic payments. 
 
   In the Directors' opinion and with reference to the terms mentioned, 
    the above carrying values of the bank loans and Equipment Notes 
    are approximate to their fair value. 
 
 
 16   SHARE CAPITAL 
 
      The Share Capital of the Group is represented by an unlimited 
       number of shares of no par value being issued or reclassified 
       by the Group as Shares, C Shares or Administrative Shares (together 
       the "Share Capital"). 
 
 
  Issued                              Administrative 
                                              Shares        Shares                C Shares 
 
  Issued shares as at 31 
  March 2020 and 31 March 
  2019                                             2   172,750,000                       - 
                                  ------------------  ------------  ---------------------- 
 
 
 
 
                              Administrative 
                                      Shares          Shares                   C Shares            Total 
                                         GBP             GBP                        GBP              GBP 
  Issued Shares 
 
  Total Share Capital 
   as at 31 March 
   2020 and as at 
   31 March 2019                            -    319,836,770                          -      319,836,770 
                        ---------------------  -------------  -------------------------  --------------- 
 
 
 
 
         Members holding Shares are entitled to receive and participate 
         in any dividends out of income attributable to the Shares; other 
         distributions of the Group available for such purposes and resolved 
         to be distributed in respect of any accounting period; or other 
         income or right to participate therein. 
 
   Upon winding up, Shareholders are entitled to the surplus assets 
    attributable to the Share class remaining after payment of all 
    the creditors of the Group. Members have the right to receive 
    notice of and to attend, speak and vote at general meetings 
    of the Group. 
 
   On 6 March 2013, 100,250,000 C Shares were converted into Shares 
    with a conversion of 1:1. 
 
   The holders of Administrative Shares are not entitled to receive, 
   and participate in, any dividends out of income; other distributions 
   of the Group available for such purposes and resolved to be 
   distributed in respect of any accounting period; or other income 
   or right to participate therein. On a winding up, holders are 
   entitled to a return of capital paid up on them after the Shares 
   have received a return of their capital paid up but ahead of 
   the return of all additional capital to the holders of Shares. 
 
   The holders of Administrative Shares shall not have the right 
    to receive notice of and no right to attend, speak and vote 
    at general meetings of the Group, except for the Liquidation 
    Proposal Meeting (general meeting convened six months before 
    the end term of the Leases where the Liquidation Resolution 
    will be proposed) or if there are no Shares in existence. 
 
 
 
  17    CASH AND CASH EQUIVALENTS 
                                                                        31 Mar 2020    31 Mar 2019 
                                                                                GBP            GBP 
        Cash at bank                                                     16,916,567     15,383,001 
        Cash deposits                                                    13,100,204     12,853,267 
                                           ----------------------------------------  ------------- 
 
                                                                         30,016,771     28,236,268 
                                           ----------------------------------------  ------------- 
 
        Cash and cash equivalents are highly liquid, readily convertible 
         and are subject to insignificant risk of changes in value. 
 18    FINANCIAL INSTRUMENTS 
 
  The Group's main financial instruments comprise: 
 
 
 
       Cash and cash equivalents that arise directly from the Group's 
 (a)    operations; 
 (b)   Loans secured on non-current assets; and 
 (c)   Interest rate swap 
 
 
 19    FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 
 
         The Group's objective is to obtain income returns and a capital 
         return for its Shareholders by acquiring, leasing and then selling 
         aircraft. 
 
       The following table details the categories of financial assets 
        and liabilities held by the Group at the reporting date: 
                                                                           31 Mar 2020   31 Mar 2019 
                                                                                   GBP           GBP 
       Financial assets 
  Interest rate swap                                                                 -       176,039 
 
  Financial assets at fair value through 
   profit or loss                                                                    -       176,039 
 
  Cash and cash equivalents                                                 30,016,771    28,236,268 
  Receivables (excluding prepayments)                                           38,968        35,912 
 
  Financial assets at amortised cost                                        30,055,739    28,272,180 
 
       Financial liabilities 
       Interest rate swap                                                      255,930             - 
 
       Financial liabilities at fair value through 
        profit or loss                                                         255,930             - 
 
  Payables                                                                      72,928        64,522 
  Borrowings                                                               248,459,023   317,100,191 
 
  Financial liabilities measured at amortised 
   cost                                                                    248,531,951   317,164,713 
 
   In accordance with IFRS 13, 'Fair value measurement' this standard 
    requires the Group to price its financial assets and liabilities 
    using the price in the bid-ask spread that is most representative 
    of fair value for both financial assets and financial liabilities. 
    An active market is a market in which transactions for the asset 
    or liability take place with sufficient frequency and volume 
    to provide pricing information on an ongoing basis. 
 
    The level of the fair value hierarchy of an instrument is determined 
    considering the inputs that are significant to the entire measurement 
    of such instrument and the level of the fair value hierarchy 
    within those inputs are categorised. 
 
    The hierarchy is broken down into three levels based on the observability 
    of inputs as follows: 
 
    Level 1: Quoted price (unadjusted) in an active market for an 
    identical instrument. 
 
    Level 2: Valuation techniques based on observable inputs, either 
    directly (i.e. as prices) or indirectly (i.e. derived from prices). 
 
    Level 3: Valuation techniques using significant unobservable 
    inputs. 
 
    The interest rate swap is considered to be level 2 in the Fair 
    Value Hierarchy. The following tables show the Group's financial 
    assets and liabilities as at 31 March 2020 and 31 March 2019 
    based on hierarchy set out in IFRS: 
 
 
 
                                  Level 
  31 March 2020                       1   Level 2   Level 3     Total 
                                    GBP       GBP       GBP       GBP 
  Financial assets at fair 
   value through profit and 
   loss 
  Interest rate swap                  -         -         -         - 
                                -------  --------  --------  -------- 
  Financial liabilities at 
   fair value through profit 
   and loss 
  Interest rate swap                  -   255,930         -   255,930 
                                 ------  --------  --------  -------- 
 
 
                                  Level 
  31 March 2019                       1   Level 2   Level 3     Total 
                                    GBP       GBP       GBP       GBP 
  Financial assets at fair 
   value through profit and 
   loss 
  Interest rate swap                  -   176,039         -   176,039 
                                 ------  --------  --------  -------- 
  Financial liabilities at 
   fair value through profit 
   and loss 
  Interest rate swap                  -         -         -         - 
                                 ------  --------  --------  -------- 
 

Derivative financial instruments

The following tables show the Group's derivative position as at 31 March 2020 and 31 March 2019:

 
                           Financial 
                           liability 
                             at fair     Notional 
  31 March 2020                value       amount     Maturity 
  Interest Rate Swap             GBP    US dollar 
 
  MSN090 Loan                255,930   18,363,118   4 Dec 2023 
                         -----------  ----------- 
 
 
                            Financial 
                             asset at     Notional 
  31 March 2019            fair value       amount     Maturity 
  Interest Rate Swap              GBP    US dollar 
 
  MSN090 Loan                 176,039   26,206,638   4 Dec 2023 
                         ------------  ----------- 
 
 
          The main risks arising from the Group's financial instruments are 
           capital management risk, foreign currency risk, credit risk, liquidity 
           risk and interest rate risk. The Board regularly reviews and agrees 
           policies for managing each of these risks and these are summarised 
           below: 
          (a) Capital Management 
          The Group manages its capital to ensure that the Group will be 
           able to continue as a going concern while maximising the return 
           to Shareholders through the optimisation of the debt and equity 
           balance. 
 
          The capital structure of the Group consists of debt, which includes 
           the borrowings disclosed in note 15, cash and cash equivalents 
           disclosed in note 17 and equity attributable to equity holders, 
           comprising issued capital and retained earnings. 
          The Group's Board reviews the capital structure on a bi-annual 
           basis. 
 
          Equity includes all capital and reserves of the Group that are 
           managed as capital. 
 
           No changes were made in the objectives, policies or processes 
           for managing capital during the years ended 31 March 2020 and 
           2019. 
 (b)    Foreign Currency Risk 
        The Group's accounting policy under IFRS requires the use of 
         a Sterling historic cost of the assets and the value of the 
         US dollar debt as translated at the spot exchange rate on every 
         Statement of Financial Position date. In addition US dollar 
         operating lease receivables are not immediately recognised 
         in the Consolidated Statement of Financial Position and are 
         accrued over the period of the leases. The Directors consider 
         that this introduces an artificial variance due to the movement 
         over time of foreign exchange rates. In actuality, the US dollar 
         operating leases should offset the US dollar payables on amortising 
         loans. The foreign exchange exposure in relation to the loans 
         is thus almost entirely hedged. 
 
        Lease rentals (as detailed in notes 4 and 12) are received 
         in US dollar and Sterling. Those lease rentals received in 
         US dollar are used to pay the debt repayments due, also in 
         US dollar (as detailed in note 15). Both US dollar lease rentals 
         and debt repayments are fixed and are for similar sums and 
         similar timings. The matching of lease rentals to settle debt 
         repayments therefore minimises risks caused by foreign exchange 
         fluctuations. 
 
        The carrying amounts of the Group's foreign currency denominated 
         monetary assets and liabilities at the reporting date are as 
         follows: 
 
 
                                        31 Mar 2020     31 Mar 2019 
                                                GBP             GBP 
 
  Debt (US dollar) - Liabilities      (248,459,023)   (317,100,191) 
  Financial (liabilities) assets 
   at fair value through profit 
   and loss                               (255,930)         176,039 
  Cash and cash equivalents (US 
   dollar) - Asset                       10,223,979       9,572,709 
                                     --------------  -------------- 
 
 
  The following table details the Group's sensitivity to a 25 
   per cent. (31 March 2019: 25 per cent.) appreciation and depreciation 
   in Sterling against the US dollar. 25 per cent. (31 March 2019: 
   25 per cent.) represents the Directors' assessment of the reasonably 
   possible change in foreign exchange rates. The sensitivity analysis 
   includes only outstanding foreign currency denominated monetary 
   items and adjusts their translation at the period end for a 
   25 per cent. (31 March 2019: 25 per cent.) change in foreign 
   currency rates. A positive number below indicates an increase 
   in profit and other equity where Sterling strengthens 25 per 
   cent. (31 March 2019: 25 per cent.) against the US dollar. For 
   a 25 per cent. (31 March 2019: 25 per cent.) weakening of Sterling 
   against the US dollar, there would be a comparable but opposite 
   impact on the profit and other equity: 
 
                                                31 Mar 2020              31 Mar 2019 
                                                        GBP                      GBP 
  Profit or 
   loss                                          47,698,195               61,470,289 
  Assets                                        (1,993,610)              (1,949,749) 
  Liabilities                                    49,691,805               63,420,038 
 
 
   On the eventual sale of the Assets, the Company may be subject 
    to foreign currency risk if settled in a currency other than 
    GBP. Transactions in similar assets are typically priced in 
    US dollars. 
 
 
 (c)   Credit Risk 
       Credit risk refers to the risk that a counterparty will default 
        on its contractual obligations resulting in financial loss to 
        the Group. 
 
             Refer to the going concern section on page 59 where an assessment 
              of Emirates is made. 
       The credit risk on cash transactions are mitigated by transacting 
        with counterparties that are regulated entities subject to prudential 
        supervision, or with high credit ratings assigned by international 
        credit rating agencies. 
 
       The Group's financial assets exposed to credit risk are as follows: 
 
 
                                            31 Mar 2020   31 Mar 2019 
                                                    GBP           GBP 
 
  Interest rate swap                                  -       176,039 
  Receivables (excluding prepayments)            38,968        35,912 
  Cash and cash equivalents                  30,016,771    28,236,268 
 
                                             30,055,739    28,448,219 
                                           ------------  ------------ 
 
 
 
   Surplus cash in the Company is held in Barclays. Surplus cash 
    in the Subsidiaries is held in accounts with Barclays, Westpac 
    and ANZ, which have credit ratings given by Moody's of A1, Aa3 
    and A1 respectively. Moody's considers the outlook of the banks 
    current ratings to be stable. 
 
   There is a contractual credit risk arising from the possibility 
    that the Lessee may default on the lease payments. This risk 
    is mitigated, as under the terms of the lease agreements between 
    the Lessee and the Group, any non-payment of the lease rentals 
    constitutes a "Special Termination Event", under which the lease 
    terminates and the Group may either choose to sell the Asset 
    or lease the Assets to another party. 
 
   At the inception of each lease, the Group selected a lessee 
    with a strong statement of financial position and financial 
    outlook. The financial strength of Emirates is regularly reviewed 
    by the Board and the Asset Manager. 
 
 
 (d)   Liquidity Risk 
       Liquidity risk is the risk that the Group will encounter difficulty 
        in realising assets or otherwise raising funds to meet financial 
        commitments. The Group's main financial commitments are its 
        ongoing operating expenses, loan repayments to Westpac, ANZ, 
        ICBC, BoC and Commerzbank, and repayments on equipment notes. 
 
       Ultimate responsibility for liquidity risk management rests 
        with the Board of Directors, which established an appropriate 
        liquidity management framework at the incorporation of the Group, 
        through the timings of lease rentals and debt repayments. The 
        Group manages liquidity risk by maintaining adequate reserves, 
        banking facilities and borrowing facilities, by monitoring forecast 
        and actual cash flows, and by matching profiles of financial 
        assets and liabilities. 
 
 
   The table below details the residual contractual maturities 
    of financial liabilities, including estimated interest payments. 
    The amounts below are contractual undiscounted cash flows, including 
    both the principal and interest payments, and will not agree 
    directly to the amounts recognised in the consolidated statement 
    of financial position: 
 
 
  31 Mar 
   2020         1-3     3-12   1-2 years   2-5 years   Over 5 
             months   months                            years 
                GBP      GBP         GBP         GBP      GBP 
 

Financial liabilities

 
  Payables 
   - due within 
   one year             72,928            -            -            -              - 
  Interest 
   rate swap                 -            -            -      255,930              - 
  Bank loans        10,891,253   32,673,760   37,885,837   28,390,079              - 
  Equipment 
   Notes            26,237,012   26,209,148   52,331,901   52,211,859              - 
                   -----------  -----------  -----------  -----------      --------- 
                    37,201,193   58,882,908   90,217,738   80,857,868              - 
                   -----------  -----------  -----------  -----------      --------- 
 
  31 Mar 
   2019                    1-3         3-12    1-2 years    2-5 years       Over 5 
                        months       months                                  years 
                           GBP          GBP          GBP          GBP          GBP 
 
 

Financial liabilities

 
  Payables 
   - due within 
   one year                  64,522                 -                 -                -           - 
  Bank loans             10,377,397        31,132,190        41,509,587       60,891,851   2,257,123 
  Equipment 
   Notes                 27,802,972        25,025,033        49,971,715       99,611,315           - 
                    ---------------  ----------------  ----------------  ---------------  ---------- 
                         38,244,891        56,157,223        91,481,302      160,503,166   2,257,123 
                    ---------------  ----------------  ----------------  ---------------  ---------- 
 
       (e)         Interest Rate Risk 
                   Interest rate risk arises from the possibility that changes 
                    in interest rates will affect future cash flows. It is the risk 
                    that fluctuations in market interest rates will result in a 
                    reduction in deposit interest earned on bank deposits held by 
                    the Group. The MSN090 loan which is at a variable rate, has 
                    an associated interest rate swap contract issued by the lender 
                    in effect fixing the loan interest over the term of the loan. 
 
                   The Group mitigates interest rate risk by fixing the interest 
                    rate on its debts with the exception of MSN090, which has an 
                    associated interest rate swap as mentioned above. The lease 
                    rentals are also fixed. 
 
                   The following table details the Group's exposure to interest 
                    rate risks: 
 
 
 
                                     Variable              Fixed            Non-interest         Total 
                                     interest           interest                 Bearing 
                                          GBP                GBP                     GBP           GBP 
  31 Mar 2020 
  Financial assets 
  Interest rate 
   swap                                     -                  -                       -             - 
  Receivables (excluding 
   prepayments)                             -                  -                  38,968        38,968 
  Cash and cash 
   equivalents                     30,016,771                  -                       -    30,016,771 
  Total Financial 
   Assets                          30,016,771                  -                  38,968    30,055,739 
                            -----------------  -----------------  ----------------------  ------------ 
 
  Financial liabilities 
  Interest rate 
   swap                               255,930                  -                       -       255,930 
  Payables                                  -                  -                  72,928        72,928 
  Bank loans                                -        103,024,411                       -   103,024,411 
  Equipment Notes                           -        145,434,612                       -   145,434,612 
  Total Financial 
   Liabilities                        255,930        248,459,023                  72,928   248,787,881 
                            -----------------  -----------------  ----------------------  ------------ 
 
  Total interest 
   sensitivity gap                 29,760,841        248,459,023 
                            -----------------  ----------------- 
 
 
 
                                       Variable              Fixed            Non-interest         Total 
                                       interest           interest                 Bearing 
                                            GBP                GBP                     GBP           GBP 
  31 Mar 2019 
  Financial assets 
  Interest rate 
   swap                                 176,039                  -                       -       176,039 
  Receivables (excluding 
   prepayments)                               -                  -                  35,912        35,912 
  Cash and cash 
   equivalents                       28,236,268                  -                       -    28,236,268 
  Total Financial 
   Assets                            28,412,307                  -                  35,912    28,448,219 
                            -------------------  -----------------  ----------------------  ------------ 
 
  Financial liabilities 
  Payables                                    -                  -                  64,522        64,522 
  Bank loans                                  -        134,276,763                       -   134,276,763 
  Equipment Notes                             -        182,823,428                       -   182,823,428 
  Total Financial 
   Liabilities                                -        317,100,191                  64,522   317,164,713 
                            -------------------  -----------------  ----------------------  ------------ 
 
  Total interest 
   sensitivity gap                   28,412,307        317,100,191 
                            -------------------  ----------------- 
 
 
 
   If interest rates had been 50 basis points higher throughout 
    the period and all other variables were held constant, the Group's 
    net assets attributable to Shareholders as at 31 March 2020 
    would have been GBP148,804 (31 March 2019: GBP142,062) greater 
    due to an increase in the amount of interest receivable on the 
    bank balances. 
 
   If interest rates had been 50 basis points lower throughout 
    the period and all other variables were held constant, the Group's 
    net assets attributable to Shareholders as at 31 March 2020 
    would have been GBP148,804 (31 March 2019: GBP142,062) lower 
    due to a decrease in the amount of interest receivable on the 
    bank balances. 
 
 
 20   CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES 
 
        The following table discloses the effects of the amendments 
        to IAS 7 Statement of Cash Flows which requires additional disclosures 
        that enable users of financial statements to evaluate changes 
        in liabilities arising from financing activities, including 
        both changes arising from cash flows and non-cash flows. The 
        table below excludes non-cash flows arising from the amortisation 
        of associated costs (see note 15). 
 
 
                                             31 Mar 2020    31 Mar 2019 
                                                     GBP            GBP 
 
  Opening Balance                            317,100,191    368,253,519 
  Cash flows paid - capital                 (81,852,226)   (78,223,949) 
  Cash flows paid - interest                (14,123,129)   (18,041,712) 
  Non-cash flows 
 
     *    Interest accrued                    14,399,273     18,270,616 
 
     *    Effects of foreign exchange         12,934,917     26,841,717 
 
  Closing Balance                            248,459,026    317,100,191 
                                           -------------  ------------- 
 
 
 21   ULTIMATE CONTROLLING PARTY 
      In the opinion of the Directors, the Group has no ultimate 
       controlling party. 
 
 
  22     RELATED PARTY TRANSACTIONS AND MATERIAL CONTRACTS 
         Under the Asset Management Agreement, the Company will pay Doric 
          a management and advisory fee of GBP250,000 per annum per Asset 
          (adjusted annually for inflation from 2013 onwards, at 2.25 
          per cent. per annum), payable quarterly in arrears (the "Annual 
          Fee"). 
 
          During the year, the Group incurred GBP2,068,076 (31 March 
           2019: GBP2,022,584) of expenses with Doric of which GBP2,056,446 
           (31 March 2019: GBP2,011,194) related to asset management fees 
           of as shown in note 5, GBP11,630 (31 March 2019: GBP11,390) 
           was liaison agent fees and GBPnil (31 March 2019: GBPnil) was 
           reimbursed expenses. At 31 March 2020, GBP7,767 (31 March 2019: 
           GBP7,580) was prepaid to this related party. 
 
           Nimrod is the Company's Corporate and Shareholder Advisor. 
 
           During the year, the Group incurred GBP850,485 (31 March 2019: 
           GBP831,769) of expenses with Nimrod, of which GBPnil (31 March 
           2019: GBP nil) was reimbursed expenses and GBP850,485 (31 March 
           2019: GBP831,769) related to corporate shareholder and advisor 
           fees as shown in note 5. As at 31 March 2020, GBPnil (31 March 
           2019: GBP nil) was owing to this related party. 
         Anson Registrars Limited (and now called JTC Registrars Limited) 
          was the Group's registrar, transfer agent and paying agent 
          during the prior year. During the year, the Group incurred 
          GBP15,389 (31 March 2019: GBP14,321) of expenses with JTC Registrars 
          as shown in note 5. As at 31 March 2020, GBP1,269 (31 March 
          2019: GBP1,445) was owing to this related party. 
 
 23    SUBSEQUENT EVENTS 
 
         On 16 April 2020, a further dividend of 4.5 pence per Share was 
         declared and this was paid on 30 April 2020. 
 
         On 16 July 2020, a further dividend of 4.5 pence per Share was 
         declared and this will be paid on 31 July 2020. 
 
         The COVID-19 pandemic has been discussed throughout the financial 
         statements including detail relating to post year end. This information 
         is set out in the Chairman's Statement on pages 5 to 7, the Asset 
         Manager's Report on pages 8 to 13, Management Report pages 17 
         to 20 and the significant issues section in the Audit Committee 
         Report on pages 36 to 43. 
 
 

KEY A DVISERS AND CON T ACT IN FOR M A TION

K E Y I N F O R M A T ION

 
 E x chan ge: Special ist Fund S e gme nt of t he London S t o 
  ck E xchan g e's M a in M ark et 
 T i c k e r: DN A2 
 Li st ing Da te: 14 July 2011 
 Fi nancial Year End: 31 M arch 
 Ba se Curre ncy: Pound Sterling 
 I S I N: GG 00B3Z62522 
 SED O L: B3Z6252 
  LEI: 213800ENH57LLS7MEM48 
 Coun t ry of I ncorpora t ion: 
  G uernsey 
 Re g i s t ra t ion number: 52985 
 
 M A N A G E ME NT A ND A DMI 
  N I S T R A T ION 
 
                                     Co mpa ny Secretary a nd A dmi 
 Reg i s tered Off i ce               n i s trator 
 D o ric Nimrod A ir T wo Limi       JTC Fund Solutions ( G uernse 
  t ed                                y) Limi t ed 
 G round Floor                       G round Floor 
 Do rey Court                        Do rey Court 
 Ad miral Pa rk                      Ad miral Pa rk 
 S t Pe t er P ort                   S t Pe t er P ort 
 G ue rnsey G Y1 2 HT                G ue rnsey G Y1 2 HT 
 
 A s se t Manager                    L i a i so n A gent 
                                     A medeo Serv ices (UK) L imi 
 D o ric GmbH                         t ed 
 Be rliner S t r asse 114            29 -30 Cornhill 
 6306 5 O ff enb ach am M a in       Londo n 
 G e r many                          E C 3 V 3 NF 
 
 Co rporate and Shareho l d er       Leas e and Debt Arran g er 
  Advisor 
                                     Do ric Asset Finance Gm bH & 
 Ni mrod Capi t al LLP                Co. KG 
 New Derwent House                   Be rliner S t r asse 114 
  69-73 Theobalds Road                6306 5 O ff enb ach am M a in 
 Londo n, England                    G e r many 
 WC1X 8TA 
 
 So li c i tors to the Comp a        A d voca tes to the Co m pa 
  ny (as to Eng l i sh L a w)         ny (as to G u ernsey Law) 
 He rbert Smi th Freehills LLP       M ou rant O z annes 
 E x chan ge House                   1 Le M archant S tre et 
 P rimrose S treet                   S t Pe t er P ort 
 Londo n, England                    G ue rnsey G Y1 4 HP 
 EC2 A 2EG 
 
 Reg i s trar                        A u d i tor 
 JTC Registrars Limited (formerly    Deloi tt e LLP 
  Anson Registrars Limited) 
 G round Floor                       Re g en cy Cou rt 
 Do rey Court                        G la t e g n y Esplanade 
 Ad miral Pa rk                      S t Pe t er P ort 
 S t Pe t er P ort                   G ue rnsey G Y1 3 HW 
 G ue rnsey G Y1 2 HT 
 

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END

FR FLFLEDAIIVII

(END) Dow Jones Newswires

July 30, 2020 11:30 ET (15:30 GMT)

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