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Doric Nimrod Air One Limited Half-year Report

10/12/2020 5:35pm

UK Regulatory (RNS & others)


Doric Nimrod Air One (LSE:DNA)
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TIDMDNA

RNS Number : 2924I

Doric Nimrod Air One Limited

10 December 2020

DORIC NIMROD AIR ONE LIMITED (the "Company")

(Legal Entity Identifier: 2138009FPM7EH4WDS168)

HALF-YEARLY FINANCIAL REPORT

The Board of the Company is pleased to announce its results for the period from 1 April 2020 to 30 September 2020

To view the Company's half-yearly financial report please follow the link below:

http://www.rns-pdf.londonstockexchange.com/rns/2924I_1-2020-12-10.pdf

In addition, to comply with DTR 6.3.5(1) please find below the full text of the half yearly financial report. The half-yearly financial report will also shortly be available on the Company's website www.dnairone.com .

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 performance

+44 (0) 20 7382 4565

OF ANNOUNCEMENT

E&OE - in transmission

Doric Nimrod Air One Limited

Half-Yearly Financial Report

For the period from 1 April 2020 to 30 September 2020

SU MM A RY I NF O R M A T ION

 
 Listing                         Specialist Fund Segment of the London 
                                  Stock Exchange's Main Market 
 Ticker                          DNA 
                                -------------------------------------------- 
 Share Price                     38.5 pence (as at 30 September 2020) 
                                  38.0 pence (as at 4 December 2020) 
                                -------------------------------------------- 
 Market Capitalisation           GBP 16.1 million (as at 4 December 2020) 
                                -------------------------------------------- 
 Current and Targeted Dividend   2.25 pence per quarter per share (9 
                                  pence per annum) 
                                -------------------------------------------- 
 Dividend Payment Dates          January, April, July, October 
                                -------------------------------------------- 
 Currency                        Sterling 
                                -------------------------------------------- 
 Launch Date/Price               13 December 2010 / 100p 
                                -------------------------------------------- 
 Incorporation and Domicile      Guernsey 
                                -------------------------------------------- 
 Aircraft Registration Number    A6 - EDC (16 December 2022) 
  (Lease Expiry Date) 
                                -------------------------------------------- 
 Asset Manager                   Doric GmbH 
                                -------------------------------------------- 
 Corporate and Shareholder       Nimrod Capital LLP 
  Advisor 
                                -------------------------------------------- 
 Administrator                   JTC Fund Solutions (Guernsey) Limited 
                                -------------------------------------------- 
 Auditor                         Deloitte LLP 
                                -------------------------------------------- 
 Market Makers                   finnCap Ltd, 
                                  Investec Bank, 
                                  Jefferies International Ltd, 
                                  Numis Securities Ltd, 
                                  Shore Capital Ltd, 
                                  Winterflood Securities Ltd 
                                -------------------------------------------- 
 SEDOL, ISIN, LEI                B4MF389, GG00B4MF3899, 2138009FPM7EH4WDS168 
                                -------------------------------------------- 
 Year End                        31 March 
                                -------------------------------------------- 
 Stocks & Shares ISA             Eligible 
                                -------------------------------------------- 
 Website                         www.dnairone.com 
                                -------------------------------------------- 
 

COMP A NY OVERVIEW

Doric Nimrod Air One Limited ("DNA" or the "Company") is a Guernsey company incorporated on 8 October 2010. Its shares were admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange's Main Market on 13 December 2010.

The Company's total issued share capital currently consists of 42,450,000 ordinary preference shares (the "Shares") which were admitted to trading at an issue price of 100 pence per share. As at 4 December 2020 , the latest practicable date prior to publication of this report, these Shares were trading at 38.0 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 a single aircraft. The Company purchased one Airbus A380-861 aircraft, manufacturer's serial number 016 (the "Asset" or the "Aircraft") in December 2010 for $179 million, which it leased (the "Lease") for twelve years to Emirates ("Emirates"), the national carrier owned by The Investment Corporation of Dubai based in Dubai, United Arab Emirates.

The operating lease is for an Airbus A380 aircraft. The term of the Lease is for 12 years ending December 2022 with reduced rental payments in the last two years and no extension option.

A t the end of the le ase term the lessee has the rig ht to e x ercise an option to purchase the Asset if the Company chooses to sell the Asset. If a purchase option e v ent occurs the Company and the lessee will be requir ed to arrange f or a current market v alue appraisal of the Asset to be carried out by three in dependent appraisers. T he purchase price will be equal to the a v erage v alu ation of those three appraisals.

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

Distribution Policy

The Company currently targets a distribution of 2.25 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 Board of Directors (the "Directors") to effect the payment of dividends.

Performance Ove rview

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

During the period under review, and in accordance with the Distribution Policy, the Company declared two interim dividends of 2.25 pence per Share each. One interim dividend of 2.25 pence per Share was declared after the reporting period. Further details of these dividend payments can be found on page 29.

Return of Capital

If and when the Company is wound up (pursuant to a shareholder resolution, including the liquidation resolution) the Company intends to return to Shareholders the net capital proceeds upon the eventual sale of the Asset 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 six months before the end of the term of the Lease where an ordinary resolution will be proposed that the Company proceed to an orderly wind-up at the end of the term of the Lease and the Directors will consider (and if necessary, propose to Shareholders) alternatives for the future of the Company, including re-leasing the Asset, or selling the Asset and reinvesting the capital received from the sale of the Asset in another aircraft.

CH A IR'S S T A TE M ENT

During the period from 1 April 2020 until 30 September 2020 (the "Period") the Company has declared and paid two quarterly dividends of 2.25 pence per share each, a rate of dividend payment equivalent to 9 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 a single aircraft. The Company purchased the Aircraft in December 2010 which it leased to Emirates. A senior secured finance facility provided by Westpac, in the amount of USD 122 million made up the monies along with the placing proceeds for the acquisition of the Asset. Upon the purchase of the Aircraft, the Company entered into a 12-year lease with Emirates with fixed lease rentals for the duration. The debt portion of the funding is designed to be fully amortised over the term of the lease, which would leave the Aircraft unencumbered on the conclusion of the lease. Emirates bears all costs (including maintenance, repair and insurance) relating to the Aircraft during the lifetime of the lease. At 4 December 2020, the latest practical date prior to this report, the Company had outstanding debt associated with the aircraft totalling USD 12.2 million (10% of the initial balance) as well as unencumbered cash resources of GBP 2.5 million. At the time of writing the share price is 38.0 pence, representing a market capitalisation of GBP 16.13 million based on the 42,450,000 shares in issue. The Company's lease expiry falls due in December 2022.

All payments by Emirates during the period and throughout the lease have been made in accordance with the terms of the lease.

Emirates, the sole lessee of the Company, has undertaken a number of measures since the onset of COVID-19 to support its business. These measures included the difficult decisions to cut jobs, reduce staff wages and offer voluntary unpaid leave in order to help reduce costs. The airline was also bolstered by its cargo operations in response to increased demand. Further, as a means to contain the outflow of cash, Emirates adopted the policy that no operation is allowed to go below the cash operating cost. Reassuringly, and according to Emirates' president Tim Clark, the Airbus A380 has proven economically viable in this regard, as solid load factors have led to profitable operations - although this is in the context of only 14 of Emirates' 115 A380s currently being in service at the time of writing. MSN 16, the serial number of the A380 held by the Company, has been stored since March 2020, at Dubai World Central International Airport (DWC). Perhaps the key development during the period is that Emirates had received 7.3 billion dirhams (USD 2 billion) from the Government of Dubai.

In its recent half-year results Emirates Airline reported that revenue fell by 75% resulting in a loss of USD 3.4 billion. Despite the significant drop in operations during the six months, Emirates' EBITDA was still positive at US 79 million with strong cargo business supporting revenue. Emirates reported a cash position of USD 4.25 billion as at 30 September 2020. His Highness Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates noted "No one can predict the future, but we expect a steep recovery in travel demand once a COVID-19 vaccine is available, and we are readying ourselves to serve that rebound."

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 par (100 cents) respectively, equivalent to USD running yields in the range of roughly 3.9% to 4.5%. Further details on Emirates and the A380 can be found in the Asset Manager's report by Doric GmbH ("Doric").

Since my statement accompanying the Annual Report the International Air Transport Association ("IATA") has forecast an airline industry-wide net loss of USD 84.3 billion for this year. Revenue passenger kilometres contracted by 73 per cent in the year to September 2020. The liquidity and creditworthiness of airlines, both large and small, continues to be in focus while a significant part of the global aircraft fleet remains grounded. IATA continues to see a recovery to 2019 levels of passenger traffic by 2024.

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 with Shareholders on behalf of the Board and has provided valuable feedback on the views of Shareholders in the current climate.

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 and deferred income creditor) 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 Board encourages Shareholders to read the Company's quarterly fact sheets which we believe provide a great deal of interesting information including a sensitivity analysis of the potential returns to Shareholders, after lease expiry, under different scenarios for A380 appraisal values. We hope these regular reports, in addition to the communication you receive from Nimrod, are useful and informative. The Directors 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 difficult times. I look forward to keeping all Shareholders up to date with further progress.

Charles Wilkinson

Chair

10 December 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 impact of the COVID-19 pandemic on the aviation sector has been significant with about a third of the global passenger aircraft fleet still 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. The Board notes the continuing market commentary regarding rental deferrals and confirms that it has received no formal request from Emirates to renegotiate its lease and that the lessee is currently servicing it in line with its obligations. The Board is in close contact with the Asset Manager and its other advisors and will continue to keep shareholders updated via quarterly fact sheets and ad-hoc announcements as required.

1. The Doric Nimrod Air One Airbus A380

The Airbus A380 is registered in the United Arab Emirates under the registration mark A6-EDC. Please note that the asset manager has not included any information regarding utilisation of the aircraft as included in previous financial statements as the aircraft were not in service during the period under review.

Due to the effects of COVID-19, the aircraft has been stored since March 2020 and is currently at Dubai World Central International Airport ("DWC").

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 Company 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 lease.

Inspections

Doric, the asset manager, conducted a records audit in May 2020. The condition of the aircraft's technical records was in compliance with the provisions of the lease agreement.

2. Market Overview

The impact of COVID-19 on the global economy has been severe and is expected to result in a 4 .9% to 5.2% contraction in global GDP for 2020, according to the International Monetary Fund and the World Bank. In its latest economic impact analysis, the International Civil Aviation Organization ("ICAO") estimated that the full year 2020 will see a reduction in seats offered by airlines of 48% to 51% compared with the previous baseline forecast for the year. Furthermore, ICAO anticipates this trend to continue into the first quarter of 2021 with airlines reducing seats offered by 23% to 43%. However, the actual impact of COVID-19 on the airline industry will depend on a number of factors, including the duration and magnitude of the outbreak and containment measures, the degree of consumer confidence in air travel as well as general economic conditions. The International Air Transport Association ("IATA") has forecast an airline in dustry-wide net loss of USD 84.3 billion for this year.

As of September 2020, air passenger demand has continued its gradual recovery from the low-point in April, with industry-wide revenue passenger kilometres ("RPKs") contracting by 73% year-on-year in September vs. an 75% fall in August. The load factor of 60.1 % was the lowest in history for September. Modest demand improvements were primarily being driven by some domestic markets including Russia and China while there was no clear recovery in international traffic in September. In the first nine months of 2020, RPKs were down 65% against the previous year. Similarly, industry-wide capacity, measured in available seat kilometres ("ASKs"), also decreased by 56% between January and September 2020 against the same period in 2019. This resulted in a 16.1 percentage point decrease in the worldwide passenger load factor ("PLF") to 66.7%.

In the first nine months of 2020, passenger traffic in the Middle East was down 69% against the previous year. Capacity also fell by 62%, resulting in a 13.7 percentage point decrease in PLF to 63.0%. Latest available data for September indicate an RPK contraction of 89% against the same month in the previous year, with ASKs 77% below its September 2019 levels. The PLF amounts to about 37%, a decline of 38.5 percentage points. IATA anticipates the losses of Middle Eastern airlines to rise to USD 4.8 billion in 2020 (from a loss of USD 1.5 billion in 2019).

Source: IATA, ICAO

(c) International Air Transport Association, 2020. Air Passenger Market Analysis September 2020. Economic Performance of the Airline Industry, Mid-Year Report June 2020 . All Rights Reserved. Available on the IATA Economics page .

(c) International Civil Aviation Organization, Effects of Novel Coronavirus (COVID-19) on Civil Aviation: Economic Impact Analysis, 9 September 2020.

3. Lessee - Emirates

Network

As of mid-August, over 150 destinations in Emirates' global network remained subject to COVID-19-related travel restrictions. Daily flights were around 230 - approximately 40% of pre-pandemic levels, with half of the frequencies operating as cargo-only services. As a means to contain the outflow of cash, Emirates has adopted the policy that no operation is allowed to go below the cash operating costs. According to Emirates' president Tim Clark, the Airbus A380 has proven economically viable in this regard, as solid load factors have led to profitable operations. The airline resumed its A380 services on 15 July with flights to London Heathrow and Paris.

In order to rebuild confidence in air travel, Emirates became the first airline to offer free COVID-19 insurance for all passengers on its own flights and those of its codeshare partners. The programme covers medical expenses of up to EUR 150,000 and quarantine costs of EUR 100 per day for 14 days, should passengers be diagnosed with COVID-19 during their travel. The programme is set to end on 31 December.

At the beginning of September, Emirates and flydubai announced that they have renewed their partnership, allowing customers to travel on codeshare flights to over 30 destinations on flydubai and over 70 destinations on Emirates. Both airlines have implemented safety measures, including enhanced sanitation of all touchpoints and advanced High Efficiency Particulate Air ("HEPA") filters fitted in aircraft cabins. Passengers on Emirates flights are also provided with a complimentary hygiene kit containing masks, gloves, hand sanitiser and anti-bacterial wipes.

Up until the end of September, Emirates' A380 fleet has resumed flights to six destinations, including Cairo, Guangzhou, London Heathrow, Moscow, Paris, and Toronto.

At the end of September, Emirates was operating passenger and cargo flights to 104 cities.

Fleet

While Emirates' operations had remained mainly cargo-only services through mid-August, the carrier has since announced plans to gradually increase its passenger network and plans to service 99 destinations in November. Prior to this, the vast majority of Emirates' 141 passenger Boeing 777 aircraft had returned to service, but many had been operating cargo-only flights. In fact, Emirates performed a partial retrofit on 14 Boeing 777-300ER passenger aircraft to transport freight in the cabin. At the same time, 13 of Emirates' 115 Airbus A380 aircraft have been returned to service.

The table below details the passenger fleet activity as of 30 September 2020, reflecting Emirates' recently increased operations:

 
 Aircraft Type   Grounded   In Service 
 A380            102        13 
                ---------  ----------- 
 777             4          137 
                ---------  ----------- 
 Total           106        150 
                ---------  ----------- 
 %               41%        59% 
                ---------  ----------- 
 

Source: Cirium as of 30 September 2020

In July, Boeing disclosed that the 777X programme was being delayed again, with deliveries now scheduled to begin in 2022. In response, Emirates, as the launch customer of the Boeing 777-9, is seeking additional clarity on the certification process as it negotiates a revised schedule for its Boeing 777-9 aircraft. However, Tim Clark noted that the delivery delay probably benefits Emirates in the short-term due to the ongoing global pandemic.

In November, Emirates announced that it had started to utilise the A380 on select cargo charter operations as a dedicated "Emirates A380 'mini-freighter'". As a first step it has optimised the cargo capacity "to safely transport around 50 tonnes of cargo per flight in the bellyhold of the aircraft". Emirates SkyCargo is working on further optimisations of the capacity through measures such as seat loading of cargo. Emirates SkyCargo has scheduled more dedicated A380 cargo flights for the month of November in response to the surge in demand for air cargo capacity, required for the urgent transportation of critical goods, including medical supplies for combatting COVID-19.

Key Financials

In the first half of the financial year ending 31 March 2021, Emirates recorded its first half-year loss in over 30 years. Revenues fell 75% to AED 13.7 billion (USD 3.7 billion) due to pandemic-related travel restrictions, including an eight-week suspension of scheduled passenger flights during April and May. These measures resulted in a net loss of AED 12.6 billion (USD 3.4 billion) compared to a profit of AED 863 million (USD 235 million) in the first half of the previous financial year.

Emirates reduced its ASKs by 91% in the first half of the 2020/21 financial year, while RPKS were down by 96%. During this period, Emirates' average PLF fell to 38.6%, compared to last year's pre-pandemic figure of 81.1%.

Emirates' operating costs decreased by 52%. Fuel, which had previously been the largest cost category for the airline, only accounted for 11% of total operating costs (compared to 32% in the first half of the previous financial year). Contributing factors were a 49% decrease in oil prices and a 76% lower fuel uplift from reduced flight operations. Despite this significant reduction in operations, Emirates' EBITDA remained positive at AED 290 million (USD 79 million).

While the number of passengers Emirates carried between 1 April and 30 September 2020 was down 95% to 1.5 million passengers compared to the same period last year, airfreight demand rose strongly. The volume of cargo uplifted decreased by 35% to 0.8 million tonnes during this period, but the yield more than doubled. This development reflects the extraordinary market situation during the global COVID-19 pandemic.

As a part of its cost-saving measures, Emirates Group reduced its combined employee base of Emirates Airline and air services provider Dnata by 24% during the first half of the current financial year.

As of 30 September, Emirates' total liabilities decreased by 8.3% to AED 136.1 billion (USD 37.1 billion USD) compared to the end of the previous financial year. Total equity decreased by 10.6% to AED 21.1 billion (USD 5.75 billion) with an equity ratio of 13.4%. Emirates' cash position amounted to AED 15.6 billion (USD 4.25 billion) at the end of the first half of the 2020/21 financial year. This compares to AED 20.2 billion (USD 5.5 billion) in cash assets as of 31 March 2020.

On the ongoing financial position of Emirates in light of the global COVID-19 pandemic, HH Sheikh Ahmed bin Saeed Al Maktoum, chairman and chief executive of Emirates Airline, stated: "We have been able to tap on our own strong cash reserves, and through our shareholder and the broader financial community, we continue to ensure we have access to sufficient funding to sustain the business and see us through this challenging period. In the first half of 2020-21, our shareholder injected USD 2 billion into Emirates by way of an equity investment and they will support us on our recovery path."

As at the end of September Emirates has outstanding US dollar debt issuances with maturities in 2023, 2025, and 2028. These respective bonds were trading at approximately par (100 cents) each and with running yields ranging from approximately 3.9% to 4.5% in US dollars there has also been no upward pressure on yields. This level of yields does not appear to indicate any significant financial stress to the issuer.

Source: Cirium, Emirates

4. Aircraft - A380

As at the end of September 2020, the global A380 fleet consisted of 237 planes with airline operators. Only 19 of these aircraft were in service, the remainder of the fleet is parked due to COVID-19. The fourteen operators are Emirates (115), Singapore Airlines (19), Deutsche Lufthansa (14), Qantas (12), British Airways (12), Korean Air Lines (10), Etihad Airways (10), Qatar Airways (10), Air France (9), Malaysia Airlines (6), Thai Airways (6), Asiana Airlines (6), China Southern Airlines (5), All Nippon Airways (2), and Hi Fly (1). Another three temporarily stored aircraft are lease returns.

Due to the COVID-19 pandemic, most A380 operators temporarily parked the aircraft type from March, with the number of parked A380s peaking at nearly the entire fleet. In fact, only China Southern and Hi Fly operated their A380s continuously. However, Emirates began to gradually restore A380 services in mid-July. In contrast, other A380 operators, such as Singapore Airlines, Qantas and Qatar Airways, are reviewing their fleets and have indicated that there will be no early return of A380 services. Air France does not plan a return to service for any of its remaining A380s.

Tim Clark expects the Airbus A380 to continue to play an important role once the travel demand begins recovering from the post-coronavirus crisis, provided a vaccine is available: "[It] would be folly to exclude large wide-bodied aircraft in the future. The A380 has proven to be a hugely successful aircraft and if fuel prices were forever to stay at today's levels, this aircraft is hugely potent." Clark also added that the first A380 aircraft equipped with Emirates' new premium-economy cabin has finished assembly in Toulouse, although he did not provide any further update as to the status of the airline's last eight A380s, which were scheduled to be delivered over the next year.

In spring 2020 Lufthansa disclosed that it intends to permanently decommission six A380s with immediate effect. They were originally earmarked to depart the fleet in 2022. In September the airline announced that the remaining eight aircraft, "which were previously intended for flight service, will be transferred to storage and removed from planning". "These aircraft will only be reactivated in the event of an unexpectedly rapid market recovery", according to a press release. Lufthansa no longer expects to achieve 50% of its pre-COVID-19 ASK levels by the end of 2021 and released a new estimate of 20-30%. The German airline group stated that the outlook for international air transport "has significantly worsened" in recent weeks.

Paul Griffiths, the chief executive of Dubai Airports, which owns and manages the operation and development of both Dubai's airports, has expressed confidence in the concept of international hubs in a post-COVID world, despite the trend towards more point-to-point traffic. With many countries facing an economic crisis Paul believes that "the efficiency of hubs and aggregation power of bringing together city pairs around the world, which will never likely have enough traffic to be justified to have a point-to-point service, will continue to be served and aggregated very efficiently through global hubs". Against this background he assumes that "777 and A380 are pretty well placed for several years to come as actually serving that role very well". Another COVID-related development could also help large airport hubs: He thinks that "it's going to be very difficult to persuade the environmental groups and general public actually to support airport expansions in the future". Due to COVID-19 lockdowns and the associated slowdown in industrial production, pollution was temporarily avoided in many regions around the world, resulting in clear skies.

Source: Cirium, Simple Flying

DIRECTORS

As at 30 September 2020 the Company had four directors all of whom were independent and non-executive.

Charles Edmund Wilkinson - Chair of the Company and Nomination Committee

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

Geoffrey Alan Hall - Chair of the Audit 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 the Chair of Doric Nimrod Air Two Limited and a director and Chair of the Audit Committee 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.

Suzanne Elaine Procter - Senior Independent Director ("SID")

Suzanne 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.

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

Andreas Josef Tautscher

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, and as a non-executive director of MJ Hudson Group plc, a Jersey company whose shares are traded on the AIM 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 Chair of the Audit Committee of Doric Nimrod Air Two Limited and a director of Doric Nimrod Air Three Limited. He is resident in Guernsey.

I N T ER IM M A N A GEMENT REPORT

A description of important events which have occurred during the period from 1 April 2020 until 30 September 2020 (the "Period") , their impact on the performance of the Company as shown in the financial statements and a description of the principal risks and uncertainties facing the Company are given in the Chair's Statement, Asset Manager's Report, and the Notes to the Financial Statements contained on pages 19 to 41 and are incorporated here by reference.

T h e re w ere no ma t erial r ela t ed pa r ty tra nsact ions w hich t ook place in t he Period, o t her t han t hose disclosed at no te 22 of t he No t es to t he F i n anci al St a t emen ts.

P ri nc i p al R i sks and U n certa i nti es

T h e principal risks and uncert ain t ies f aced by t he Company for the remaining six months of the financial year are un c han g ed from t ho se disclosed in t he C ompa ny 's Annual F inancial Rep o rt f or t he y ear ended 31 M arch 2020.

G o i n g Concern

The Company's principal activities are set out within the Company Overview on page 2 and 3. The financial position of the Company is set out on page 16. In addition, note 19 to the Financial Statements includes the Company'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 closely monitoring the effect of the COVID-19 pandemic generally on the aviation industry and specifically on the Company's aircraft value and the financial wellbeing of its lessee both now and in the future. The impact of the COVID-19 pandemic on the aviation sector has been significant with about a third of the global passenger aircraft fleet still grounded. The Company's future performance could potentially be impacted should this pandemic have a pervasive and prolonged impact on the economy. There have prevailed widespread 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 it falls due. These factors, together with wider economic uncertainty and disruption, are likely to have an adverse impact on the future value of the aircraft asset owned by the Company, as well as on the sale, re-lease, refinancing or other disposition of the aircraft.

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 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.

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

- Dubai's government has injected US$2 billion into Emirates so far since the COVID-19 pandemic brought global air travel to a near halt in March and is prepared to send more help to its flagship airline.

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

- The airline resumed its A380 services on 15 July 2020 with flights to a limited number of destinations.

- As at 4 December 2020, the Asset Manager was not aware of a formal request addressed to the Company 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 has paid all lease rentals in a timely manner. 

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 to the Company (ii) Emirates is presumed to have the financial backing to continue paying these rentals, the Directors believe that it is appropriate to prepare these half yearly financial statements under the going concern basis of preparation.

Respons i b i l i ty Stateme nt

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

(a) the financial statements, prepared in accordance with International Financial Reporting Standards ("IFRS") give a true and fair view of the assets, liabilities, financial position and profits of the Company and performance of the Company; and

   (b)     this Interim Management Report includes or incorporates by reference: 

i. an indication of important events that have occurred during the Period, and their impact on the financial statements;

ii. a description of the principal risks and uncertainties for the remaining six months of the financial year; and

iii. confirmation that there were no related party transactions in the Period under review that have materially affected the financial position or the performance of the Company during that Period.

Si g ne d on beha lf of t he Board of Dire c t ors of t he Company .

   Charles Wilkinson                                                                Geoffrey Hall 

Chair Director

10 December 2020

STATEMENT OF COMPREHENSIVE INCOME

For the period from 1 April 2 020 to 30 Septe mber 2 020

 
                                               1 Apr 2020             1 Apr 2019 to 
                                                       to 
                                      Notes   30 Sep 2020               30 Sep 2019 
                                                      GBP                       GBP 
 
 INCOME 
 A rent income                          4       5,354,671                 5,426,194 
 B rent income                          4       2,260,370                 2,260,370 
                                             ------------  ------------------------ 
 
                                                7,615,041                 7,686,564 
 
 EXPENSES 
 Operating expenses                     5       (326,080)                 (312,921) 
 Depreciation of Asset                 10     (3,937,984)               (1,901,824) 
                                             ------------  ------------------------ 
 
                                              (4,264,064)               (2,214,745) 
 Net profit for the period 
  before finance costs and 
  foreign exchange gains/(losses)               3,350,977                 5,471,819 
 
 Finance costs                         11       (406,633)                 (722,129) 
                                             ------------ 
 
 Net profit for the period 
  after finance costs before 
  foreign exchange gains/(losses)               2,944,344                 4,749,690 
 
 Unrealised foreign exchange 
  gains/(losses)                        7       1,021,077               (2,101,034) 
                                             ------------  ------------------------ 
 
 Profit for the period                          3,965,421                 2,648,656 
                                             ------------  ------------------------ 
 
 Other Comprehensive Income                             -                         - 
                                             ------------  ------------------------ 
 
 Total Comprehensive Income 
  for the period                                3,965,421                 2,648,656 
                                             ------------  ------------------------ 
 
                                                    Pence                     Pence 
 Earnings per Share for the 
  period - Basic and Diluted            9            9.34                      6.24 
 

In arriving at the results f or the fin ancial perio d, all amounts abo ve relate to c ontinuing operations.

   T h e  notes  on  pages  19 to 41   f orm  an integral  part  of  these  fin ancial st atements 

STATEMENT OF FINANCIAL POSITION

As at 30 September 2020

 
 
                                                       3 0 Sep 2020              3 1 Mar 2020 
                                        Notes                     G BP                   G BP 
 
  NON-CURRENT A SSETS 
A ircra ft                                 10               53,847,054             57,785,038 
                                               -----------------------  --------------------- 
 
CURRENT ASSETS 
Accrued income                                                 953,531                953,531 
Cash and c ash equiv ale nts               17                3,576,049              3,770,813 
Receiv ables                               13                    3,197                 13,687 
                                               -----------------------  --------------------- 
                                                             4,532,777              4,738,031 
                                               -----------------------  --------------------- 
 
  TOTAL A SSETS                                             58,379,831             62,523,069 
                                               -----------------------  --------------------- 
 
  CURRENT LI ABILITIES 
B o rrowin gs                              15                5,234,147              9,578,401 
De f erred income                                                    -                 99,554 
P a y ab les - due within one y ear        14                   32,761                 34,547 
                                               -----------------------  --------------------- 
                                                             5,266,908              9,712,502 
 
  NON-CURRENT LI ABILITIES 
B o rrowin gs                              15                4,072,436              5,877,968 
De f erred income                                           15,185,181             15,132,464 
                                               -----------------------  --------------------- 
                                                            19,257,617             21,010,432 
                                               -----------------------  --------------------- 
 
  TOTAL LI ABILITIES                                        24,524,525             30,722,934 
                                               -----------------------  --------------------- 
 
  TOTAL NET A SSETS                                         33,855,306             31,800,135 
                                               -----------------------  --------------------- 
 
  EQ UITY 
S ha re c apital                           16               39,016,728             39,016,728 
Retain ed earnin gs                                        (5,161,422)            (7,216,593) 
                                               -----------------------  --------------------- 
                                                            33,855,306             31,800,135 
                                               -----------------------  --------------------- 
 
                                                               P e nce                P e nce 
Net asset v alue per S hare based 
 o n 42,450,000 (Mar 2020: 42,450,000) s 
 hares in issue                                                  79.75                    74.91 
 

The financial statements were approved by the Board of Directors and authorised for issue on 10 December 2020 and are signed on its behalf by:

   Charles Wilkinson                                                   Geoffrey Hall 
   Chair                                                                         Director 
   T h e  notes  on  pages  19 to 41   f o rm  an integral  part  of  these  fin ancial st atements. 
 
STATEMENT OF CASH FLOWS 
 For the period from 1 April 2020 to 30 September 2020 
                                                                                   1 Apr 2019 
                                           Notes          1 Apr 2020 to                    to 
                                                            30 Sep 2020           30 Sep 2019 
                                                                   G BP                  G BP 
OPE RATING ACTIVITIES 
P ro fit f or the period                                      3,965,421             2,648,656 
Mo v ement in accrued and de f 
 erred income                                                   552,745               560,284 
De preciation of Asset                     10                 3,937,984             1,901,824 
Loa n interest payable                     11                   376,273               691,769 
Decrease in pa y ables                                          (1,786)             (148,844) 
Decrease in receiv ables                                         10,490                 9,214 
A mortisation of debt arrangement 
 costs                                     11                    30,360                30,360 
Foreign e xchange mo v ement                7               (1,021,077)             2,101,034 
                                                  ---------------------  -------------------- 
 
NET CA SH FROM O PERATING ACTIVITIES                          7,850,410             7,794,297 
                                                  ---------------------  -------------------- 
 
  FINANCING ACTIVITIES 
Divid ends paid                               8             (1,910,250)           (1,910,250) 
Re pa yments of c apital on borrowin 
 gs                                          20             (5,641,918)           (5,440,053) 
Re pa yments of interest on borrowin 
 gs                                          20               (372,790)             (689,989) 
 
NET CA SH USED IN FINANCING ACTIVITIES                      (7,924,958)           (8,040,292) 
                                                  ---------------------  -------------------- 
 
CA SH AND CA SH EQUIV ALENTS AT 
 BEGINNING OF P ERIOD                                         3,770,813             4,009,908 
De crease in c ash and c ash equiv 
 ale nts                                                       (74,548)             (245,995) 
E ff e cts of f oreign e xchange 
 rates                                      7                 (120,216)               149,058 
 
CA SH AND CA SH EQUIV ALENTS AT OF PE RIOD                              17                3,576,049             3,912,971 
                                                  ---------------------  -------------------- 
 
   T h e  notes  on  pages 19 to 41   f o rm  an integral  part  of  these  fin ancial st atements. 

STATEMENT OF CHANGES IN EQUITY

For the period from 1 April 2 020 to 30 Septe mber 2 020

 
                               Notes                Share       Retained 
                                                  Capital       Earnings          Total 
                                                      GBP            GBP            GBP 
 
 Balance as at 1 April 2020                    39,016,728    (7,216,593)     31,800,135 
 
 Total Comprehensive Income 
  for the period                                        -      3,965,421      3,965,421 
 Dividends paid                  8                      -    (1,910,250)    (1,910,250) 
                                      -------------------  -------------  ------------- 
 
 Balance as at 30 September 
  2020                                 39,016,728            (5,161,422)     33,855,306 
                                      -------------------  -------------  ------------- 
 
 
                               Notes                Share       Retained 
                                                  Capital       Earnings          Total 
                                                      GBP            GBP            GBP 
 
 Balance as at 1 April 2019                    39,016,728     10,357,880     49,374,608 
 
 Total Comprehensive Income 
  for the period                                        -      2,648,656      2,648,656 
 Dividends paid                  8                      -    (1,910,250)    (1,910,250) 
                                      -------------------  -------------  ------------- 
 
 Balance as at 30 September 
  2019                                  39,016,728            11,096,286     50,113,014 
                                      -------------------  -------------  ------------- 
 
   T h e  notes  on  pages 19 to 41   f o rm  an integral  part  of  these  fin ancial st atements. 

NO TES TO THE FINANCIAL ST A TEMENTS

For the period from 1 April 2020 to 30 September 2020

   1   GE NERAL  INFORM ATION 

Doric Nimrod Air One Limited (the "Company") was incorporated in Guernsey on 8 October 2010 with registered number 52484. The address of the registered office is given on page 42.

Its share capital consists of one class of Ordinary Preference Shares ("Shares") and one class of Subordinated Administrative Shares ("Administrative Shares"). The Company's Shares have been admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange's Main Market (the "LSE").

The Company's investment objective is to obtain income returns and a capital return for its shareholders by acquiring, leasing and then selling a single aircraft. The principal activities of the Company are set out in the Chair's Statement and Management Report on pages 4 and 12 respectively.

   2   A CCOUNTING  POLICIES 

T h e sig nificant accounting policies adopted by the Company are as f ollows:

(a) Ba sis of Preparation

The financial statements have been prepared in conformity with the International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union ("EU") and applicable Guernsey law. The financial statements have been prepared on a historical cost basis.

This report is to be read in conjunction with the annual financial report for the year ended 31 March 2020 which is prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the EU and any public announcements made by the Company during the interim reporting period from 1 April 2020 to 30 September 2020 (the "Period").

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards as set out below:

   (b)     Adoption of new and revised Standards 

New and amended IFRS Standards that are effective for the current period

The following Standard and Interpretation issued by the International Accounting Standards Board ("IASB") and International Financial Reporting Standards Interpretations Committee ("IFRIC") has been adopted in the current period. The adoption has not had any impact on the amounts reported in these financial statements and is not expected to have any impact on future financial periods:

-- IAS 1'Presentation of financial statements' and IAS 8 'Accounting policies, changes in accounting estimates and error' on definition of material - These amendments to IAS 1, IAS 8 and consequential amendments to other IFRSs: use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting; clarify the explanation of the definition of material; and incorporate some of the guidance in IAS 1 about immateriality information. The effective date is for annual periods beginning on or after 1 January 2020. The standard has not had a material impact on the financial statements or performance of the Company.

New and Revised Standards in issue but not yet effective

IFRS 16 'Leases' - Covid-19 related rent concessions. As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees. Such concessions might take a variety of forms, including payment holidays and deferral of lease payments. Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs. The standard is not expected to have a material impact on the financial statements or performance of the Company as it is applicable to lessees. The effective date is for annual periods beginning on or after June 2020. The standard is not expected to have a material impact on the financial statements or performance of the Company and is not endorsed by the EU.

IAS 1 'Presentation of financial statements' Classification of Liabilities as Current or Non-current. The IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The effective date is for annual periods beginning on or after 1 January 2023. The standard is not expected to have a material impact on the financial statements or performance of the Company and is not endorsed by the EU.

   (c)     Taxation 

The Company has been assessed for tax at the Guernsey standard rate of 0 per cent.

   (d)     Share Capital 

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

   (e)     Expenses 

All expenses are accounted for on an accruals basis.

   (f)      Interest  Income 

Interest income is accounted f or on an accruals basis.

   (g)     Foreign Currency Translation 

The currency of the primary economic environment in which the Company operates (the functional currency) is Pounds 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 Statement of Comprehensive Income.

   (h)     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.

   (i)      Segmental Reporting 

The Directors are of the opinion that the Company is engaged in a single segment of business, being the acquiring, leasing and selling of one Airbus A380-861 aircraft (the "Asset" or the "Aircraft").

   (j)      Going Concern 

The Directors have prepared these half yearly financial statements for the period ended 30 September 2020 on the going concern basis.

The Directors in consultation with the Asset Manager are closely monitoring the effect of the COVID-19 pandemic generally on the aviation industry and specifically on the Company's aircraft value and financial wellbeing of its lessee both now and in the future. The impact of the COVID-19 pandemic on the aviation sector has been significant with about a third of the global passenger aircraft fleet still grounded. The Company'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 airline to pay rent as it falls due. These factors, together with wider economic uncertainty and disruption, are likely to have an adverse impact on the future value of the aircraft asset owned by the Company, as well as on the sale, re-lease, refinancing or other disposition of the relevant aircraft.

The Directors consider that the going concern basis of accounting remains appropriate. Based on current information the Directors have 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 resultant from the evolving position with its aircraft lessee and lender whilst bearing in mind its fiduciary obligations and the requirements of Guernsey law which determine the ability of the Company to pay dividends and make other distributions.

Note 15 ('Borrowings') describes the borrowings obtained by the Company to part-finance the acquisition of its aircraft. The Company has obligations under the loan to make scheduled repayments of principal and interest, which are serviced by the receipt of lease payments from Emirates. The loan has been fixed and the fixed rental income under the operating lease means that the rents should be sufficient to repay the debt and provide surplus income to pay for the Company's expenses and permit payment of dividends.

The Company's aircraft with a carrying value of GBP53,847,054 are pledged as security for the Company's borrowings (see note 15).

The Company is in a 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 the half yearly financial statements that Emirates will continue with the contracted lease rental payments due to the following:

- Dubai's government has injected US$2 billion into Emirates so far since the COVID-19 pandemic brought global air travel to a near halt in March and is prepared to send more help to its flagship airline.

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

- The airline resumed its A380 services on 15 July 2020 with flights to a limited number of destinations.

- As at 4 December 2020, the Asset Manager was not aware of a formal request addressed to the Company for a lease deferral or any other efforts that would result in the restructuring of the existing transaction and which could potentially have an impact on the committed future lease rental receipts.

   -      Emirates has paid all lease rentals in a timely manner. 

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 to the Company (ii) Emirates is presumed to have the financial backing to continue paying these rentals, the Directors believe that it is appropriate to prepare these half yearly financial statements under the going concern basis of preparation.

   k)    Leasing and Rental Income 

The lease relating to the Asset has been classified as an operating lease as the terms of the lease do not transfer substantially all the risks and rewards of ownership to the lessee. The Asset is shown as a non-current asset in the Statement of Financial Position. Further details of the lease are given in note 12.

Rental income and advance lease payments from the operating lease are recognized on a straight-line basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized in profit or loss on a straight-line basis over the lease term.

   l)     Property, Plant and Equipment - Aircraft 

In line with IAS 16 Property Plant and Equipment, the 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 costs to the Company. Accumulated depreciation and any recognised impairment loss are deducted from cost to calculate the carrying amount of the Asset.

Depreciation is recognised so as to write off the cost of the Asset less the estimated residual value of GBP36.6 million (2019: GBP69.3 million) over the estimated useful life of the Asset of 12 years, using the straight line method. 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. During the annual financial report 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 Company 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 the 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 Aircraft since 31 March 2019 when the residual value was based on Base Value.

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

At each audited Statement of Financial Position date, the Company reviews the carrying amounts of the Asset to determine whether there is any indication that the Asset has 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 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 the 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.

   (m)    Financial instruments 

A financial instrument is recognised when the Company becomes a party to the contractual provisions of the instrument. Financial liabilities are derecognised if the Company's obligations, specified in the contract, expire or are discharged or cancelled. Financial assets are derecognised if the Company's contractual rights to the cash flows from the financial assets expire, are extinguished, or if the Company transfers the financial assets to a third party and transfers all the risks and rewards of ownership of the asset, or if the Company 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 Company 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 Company's financial assets held at amortised cost include trade and other receivables and cash and cash equivalents.

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

   3   SIGNIFICANT JUDGEMENTS AND ESTIMATES 

In the application of the Company'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.

T h e f ollowing are the critical judgements and estim ates, that the Direct ors ha ve made in the process of applying the Compan y 's accounting policies and that ha ve the most significant e ff ect on the amounts recognised in fin ancial st atements.

Estimates

Re sidual V alue and Useful Life of the A sset

As described in note 2 (l), the Company depreciates the Asset on a straight line basis over the estimated useful life of the Asset 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 Company would currently obtain from the 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 is currently not sufficient data available for a comparable 12 year old A380 for the Directors to make a direct market comparison in making this estimation. During the annual financial report 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 Company 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 expiry. 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 (j), refer to going concern on page 21) which has resulted in the use of Soft Values in determining the residual value of the Asset. This was reflected as a change in the estimation basis in the annual financial report.

In estimating residual value for the year ended 31 March 2020, the Directors referred 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 residual value of the Aircraft since 31 March 2019 when residual values were based on Base Value; details of which have been disclosed in note 10.

The estimation of residual value remains subject to inherent uncertainty. If the estimate of residual value used in the calculation of depreciation had decreased by 20 per cent. with effect from the beginning of the Period, the net profit for the Period and closing Shareholders' equity would have decreased by approximately GBP1.4 million (30 September 2019: GBP1.5 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 useful life of the Asset, for the purpose of depreciation of the Asset under IAS 16, is estimated based on the expected period for which the Company will own and lease the Aircraft.

Judgements

O perating Le ase Commitments - Company as Lessor

T h e Company has entered into a le ase on the Asset. T he Company has determin ed, based on an e v alu ation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of this asset and accounts f or the c ontract as an operating lease.

The Company has determined that the operating lease on the Asset is for 12 years based on an initial 10 year term followed by an exercised extension term of 2 years.

Functional Currency

The currency of the primary economic environment in which the Company 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 Company due to the following:

   --    the Company's share capital was issued in GBP; 

-- its dividends are paid to shareholders in GBP, and that certain of the Company's significant operating expenses as well as portion of the Company's rental income are incurred/earned in GBP.

In addition, the set-up of the leasing structure was designed to offer a GBP return to GBP investors.

Impairment

As described in note 2(l), 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 current fair value less costs to sell and its value-in-use.

The Directors review the carrying amount of its Asset at each audited Statement of Financial Position date and monitor the Asset for any indications of impairment as required by IAS 16 Property, Plant and Equipment and IAS 36 Impairment of Assets.

The Board together with the Asset Manager believed that it was prudent to conduct an impairment test as at the 31 March 2020 year end as the below items resulted in pricing changes for the current 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.

Based on the impairment review performed, an impairment loss of GBP12,847,569 was recognised in the 31 March 2020 year, with the impairment test resulting in an updated carrying value of the Aircraft in total to GBP57,785,038 at that year end, as reflected in Note 10.

For the current period 1 April 2020 to 30 September 2020, the Board has considered if there are any further impairment triggers as set out under IAS 36 Impairment of Assets and concluded that an interim impairment review at the 30 September 2020 period end was not practicable. The Company will again be carrying out a full and thorough appraisal of residual values come the next March financial year end.

   4     RENTAL  INCOME 
 
                                           1 Apr 2020    1 Apr 2019 
                                                   to            to 
                                          30 Sep 2020   30 Sep 2019 
                                                  GBP           GBP 
 A rent income                              6,006,970     6,086,032 
 Revenue received but not yet earned        (652,299)     (659,838) 
                                         ------------  ------------ 
 
                                            5,354,671     5,426,194 
 
 B rent income                              2,160,816     2,160,816 
 Revenue earned but not yet received           99,554        99,554 
                                         ------------  ------------ 
 
                                            2,260,370     2,260,370 
 
 
 Total rental income                        7,615,041     7,686,564 
                                         ------------  ------------ 
 

Rental income is derived from the leasing of the Asset. 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.

   5   OPE RATING  EXPENSES 
 
                                            1 Apr 2020     1 Apr 2019 
                                                    to             to 
                                          3 0 Sep 2020   3 0 Sep 2019 
                                                  G BP           G BP 
Corporate shareholder and advisor fee 
(note 22)                                       61,086         59,742 
A sset management f ee (note 22)               152,714        149,353 
Liaison agency fees (note 22)                    5,925          5,852 
A d ministration f ees                          30,762         30,934 
A ccountancy f ees                               5,692          5,692 
Re gistrars f ee (note 22)                       5,362          4,802 
A ud it f ee                                    11,426         11,426 
Direct ors' remuneration (note 6)               34,000         31,154 
Direct ors' and o fficers' insurance             3,961          3,961 
Lega l and pro f essional e x penses             4,057          5,391 
A nnua l f ees                                   3,377          1,123 
Marketing expenses (note 22)                     1,615              - 
Other operating expenses                         6,103          3,491 
                                         -------------  ------------- 
 
                                               326,080        312,921 
                                         -------------  ------------- 
 
 
   6   DIRECTORS' REMUNERATION 

Under their terms of appointment, each Director is paid a fee of GBP15,000 per annum by the Company, except for the Chair, who receives GBP20,000 per annum and the Chair of Audit, who receives GBP18,000 per annum. The rate of remuneration per director has remained unchanged.

   7   UNREALISED FOREIGN EXCHANGE GAINS/(LOSSES) 
 
                      1 Apr 2020     1 Apr 2019 
                              to             to 
                    3 0 Sep 2020   3 0 Sep 2019 
                            G BP           G BP 
Cash at bank           (120,216)        149,058 
Deferred income          599,581      (809,702) 
Borrowings               541,712    (1,440,390) 
 
                       1,021,077    (2,101,034) 
                   -------------  ------------- 
 
 

The foreign exchange gain in the Period reflects the 4.0 per cent. movement in the Sterling/US dollar exchange rate from 1.242 as at 31 March 2020 to 1.292 as at 30 September 2020.

   8   DIVIDS  IN RES PECT  OF  E QUITY  SHARES 
 
     1 Apr 2020 to 
      30 Sep 2020 
 
 
                                   GBP    Pence per 
                                              Share 
 First interim dividend        955,125         2.25 
 Second interim dividend       955,125         2.25 
                            ----------  ----------- 
 
                             1,910,250         4.50 
                            ----------  ----------- 
 
 
     1 Apr 2019 to 
      30 Sep 2019 
 
 
                                            GBP    Pence per 
                                                       Share 
 First interim dividend                 955,125         2.25 
 Second interim dividend                955,125         2.25 
                            -------------------  ----------- 
 
                                      1,910,250         4.50 
                            -------------------  ----------- 
 

Refer to the Subsequent Events in note 23 in relation to dividends declared in October 2020.

   9   E A RNIN G S P E R   S H A RE 

Earnings per Share ("EPS") is based on the net profit for the Period attributable to holders of Shares in the Company ("Shareholders") of GBP3,965,421 (30 Sep 2019: net profit for the Period of GBP2,648,656) and 42,450,000 Shares (30 Sep 2019: 42,450,000) being the weighted average number of Shares in issue during the Period. There are no dilutive instruments and therefore basic and diluted EPS are identical.

10 P ROPERTY, PLANT AND E QUIPMENT - AIRCRAFT

 
                                                           A ir craft 
  COST                                                           G BP 
A s at 1 Apr 2020                                        114 ,532,547 
                                                       -------------- 
 
  A s at 30 Sep 2020                                     114 ,532,547 
                                                       -------------- 
 
 
  A CCUMULATED DEPRECIATION 
  A s at 1 Apr 2020                                        43,899,940 
Depreciation ch arge f or the period                        3,937,984 
                                                       -------------- 
 
  A s at 30 Sep 2020                                       47,837,924 
                                                       -------------- 
 
 
  A CCUMULATED IMPAIRMENT 
  A s at 1 Apr 2020                                        12,847,569 
                                                       -------------- 
Impairment loss f or the period                                     - 
                                                       -------------- 
 
  A s at 30 Sep 2020                                       12,847,569 
 
 
  CARRYING AMOUNT 
  A s at 30 Sep 2020                                       53,847,054 
                                                       -------------- 
 
  A s at 31 Mar 2020                                       57,785,038 
                                                       -------------- 
 
  T h e c ost in US dollars and the e xchange rates 
  at acquisition f or the Aircra ft was as f ollows: 
 
  Cost in US dollars                                     178 ,549,805 
GBP /US dollars e xchange rate                                1 .5502 
 

The Company is depreciating its Aircraft so as to ensure that the carrying value of its Aircraft at the termination of its lease equals the uninflated residual dollar value determined at 31 March 2020 in accordance with methodology set out in note 3, translated into Sterling at the exchange rate prevailing at 31 March 2020.

The Company can sell the Asset during the term of the lease (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 lease have been added to the carrying amount of the Asset and are being recognised as an expense over the lease term.

Refer to note 3 for details on the impairment review conducted by the Company as at the 31 March 2020 year end.

1 1 FINANCE COSTS

 
                                       1 Apr 2020    1 Apr 2019 
                                               to            to 
                                      30 Sep 2020   30 Sep 2019 
                                              GBP           GBP 
 
 Amortisation of debt arrangement 
  costs                                    30,360        30,360 
 Loan interest                            376,273       691,769 
                                     ------------  ------------ 
 
                                          406,633       722,129 
                                     ------------  ------------ 
 

12 OPE RATING LE A SES

T h e amounts of minim um f uture le ase receipts at the reporting date under non cancellable operating le ases are detailed belo w:

 
 30 September 2020         Next 12       1 to 5   After 5 
                            months        years     years        Total 
                               GBP          GBP       GBP          GBP 
 
 Aircraft - A rental 
  payments               4,026,458    4,026,458         -    8,052,916 
 Aircraft - B rental 
  payments               5,460,696    5,460,696         -   10,921,392 
                       -----------  -----------  --------  ----------- 
 
                         9,487,154    9,487,154         -   18,974,308 
                       -----------  -----------  --------  ----------- 
 
 31 March 2020             Next 12       1 to 5   After 5 
                            months        years     years        Total 
                               GBP          GBP       GBP          GBP 
 
 Aircraft - A rental 
  payments               8,240,061    6,282,831         -   14,522,892 
 Aircraft - B rental 
  payments               4,891,164    8,191,044         -   13,082,208 
                       -----------  -----------  --------  ----------- 
 
                        13,131,225   14,473,875         -   27,605,100 
                       -----------  -----------  --------  ----------- 
 

The operating lease is for an Airbus A380-861 aircraft. The term of the lease is for 12 years ending December 2022 with reduced rental payments in the last two years and no extension option.

A t the end of the le ase term the Lessee has the rig ht to e x ercise an option to purchase the Asset if the Company chooses to sell the Asset. If a purchase option e v ent occurs the Company and the Lessee will be requir ed to arrange f or a current market v alue appraisal of the Asset to be carried out by three in dependent appraisers. T he purchase price will be equal to the a v erage v alu ation of those three appraisals.

13 RECEIV ABLES

 
                      30 Sep 2020   31 Mar 2020 
                              GBP           GBP 
 Prepayments                3,186        13,676 
 Sundry debtors                11            11 
 
                            3,197        13,687 
                     ------------  ------------ 
 

T h e abo ve c arrying v alue of receiv ables is equiv ale nt to its f air v alu e.

14 P A Y A BLES (amounts falling due within one y ear)

 
                                30 Sep 2020   31 Mar 2020 
                                        GBP           GBP 
 Accrued administration fees          6,174         6,079 
 Accrued audit fee                   10,150        13,085 
 Other accrued expenses              16,437        15,383 
 
                                     32,761        34,547 
                               ------------  ------------ 
 

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

15 BORRO WINGS

 
                        30 Sep 2020   31 Mar 2020 
                                GBP           GBP 
 Bank loan                9,439,967    15,620,114 
 Transaction costs         (43,384)     (163,745) 
                       ------------  ------------ 
 
                          9,396,583    15,456,369 
                       ------------  ------------ 
 
 Current portion          5,324,147     9,578,401 
                       ------------  ------------ 
 
 Non-current portion      4,072,436     5,877,968 
                       ------------  ------------ 
 
 

Notwithstanding the fact that GBP5.6 million of capital was repaid during the Period, as per the Statement of Cash Flows, the closing value of the borrowings decreased by GBP6.1 million due to the 4.0 per cent. movement in the Sterling/US dollar exchange rate from 1.242 at 31 March 2020 to 1.292 at 30 September 2020.

The amounts below detail the future contractual undiscounted cash flows in respect of the Loan, including both the principal and interest payments, and will not agree directly to the amounts recognised in the Statement of Financial Position:

 
                                      30 Sep 2020  31 Mar 2020 
                                              GBP          GBP 
A mount due f or s ettlement within 
 12 mo nths                             5,595,812   10,184,006 
                                      -----------  ----------- 
 
A mount due f or s ettlement a fter 
 12 mo nths                             4,373,467    6,369,346 
                                      -----------  ----------- 
 

The loan was arranged with Westpac Banking Corporation ("Westpac") for $122,000,000, runs for 12 years until December 2022 and has an effective interest rate of 5.4950 per cent., which is the same as the contractual fixed interest rate. The Loan is secured on the Asset. No breaches or defaults occurred in the Period. Transaction costs of arranging the Loan have been deducted from the carrying amount of the Loan and are being amortised over its life.

In the Directors' opinion, the above carrying value of the bank loan is approximate to its fair value.

   16      S HARE CA PITAL 

T h e S hare Ca pital of the Company is represented by an unlimited number of shares of no par v alue being issued or reclassified by the Company as Ordin ary S hares or Administrative Shares (together the "Share Capital").

 
 Issued                                             Administrative        Ordinary 
                                                            Shares          Shares 
 
 Issued shares as at 30 September 2020 
  and as at 31 March 2020                                        2      42,450,000 
                                          ------------------------  -------------- 
 
 Issued Share                                                                  GBP 
 
 Total Share Capital as at 30 September 
  2020 and as at 31 March 2020                                          39,016,728 
                                                                    -------------- 
 

Members holding Shares are entitled to receive and participate in any dividends out of income attributable to the Shares; other distributions of the Company 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 remaining after payment of all the creditors of the Company. Members have the right to receive notice of and to attend, speak and vote at general meetings of the Company. However the Board has considered the potential impact of the COVID-19 pandemic (the "Pandemic") on the arrangements for the AGM. The Company is required by The Companies (Guernsey) Law, 2008, as amended, to hold an AGM. Measures taken by the States of Guernsey in response to the Pandemic mean that attendance at the AGM by shareholders who are not residents of Guernsey is not reasonably practicable.

Of those measures, the most relevant to the AGM is the legal requirement that anyone arriving in Guernsey from anywhere in the world including, for the avoidance of doubt, the United Kingdom, will be required to self-isolate for up to 14 days upon their arrival.

Due to the Pandemic there will be no opportunity to interact with the directors. However, the Board considers it important that all shareholders have the opportunity to make their views known and to exercise their voting rights at the AGM. The Company has therefore strongly encouraged all shareholders to exercise their votes in respect of the meeting in advance and to submit any questions they may have to either the Secretary or the Corporate and Shareholder Adviser.

The holders of Administrative Shares are not entitled to receive, and participate in, any dividends out of income; other distributions of the Company 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 shall have no right to attend, speak and vote at general meetings of the Company, except for the Liquidation Proposal Meeting (general meeting convened six months before the end term of the lease where the Liquidation Resolution will be proposed) or if there are no Shares in existence.

17 CASH AND CASH EQUIVALENTS

 
                   30 Sep 2020   31 Mar 2020 
                           GBP           GBP 
 Cash at bank        3,576,049     3,770,813 
                  ------------  ------------ 
 
 

18 FINANCIAL INSTRUMENTS

T h e Compan y's main fin ancial instruments c omprise:

(a) Cash and cash equivalents that arise directly from the Company's operations; and

(b) Loan secured on non-current asset.

19 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

T h e Compan y 's objective is to obtain income returns and a capital return f or its S harehold ers by acquirin g, le asing and then s elling a sin gle aircra ft.

T h e f ollowing table details the categories of fin ancial assets and liabilities held by the Company at the re porting date:

 
                                        30 Sep 2020   31 Mar 2020 
                                                GBP           GBP 
 Financial assets 
 Cash and cash equivalents                3,576,049     3,770,813 
 Receivables (excluding prepayments)             11            11 
                                       ------------  ------------ 
 
 Financial assets at amortised cost       3,576,060     3,770,824 
                                       ------------  ------------ 
 
 Financial liabilities 
 Payables                                    32,761        34,547 
 Borrowings                               9,396,583    15,456,369 
                                       ------------  ------------ 
 Financial liabilities measured 
  at amortised cost                       9,429,344    15,490,916 
                                       ------------  ------------ 
 

The main risks arising from the Company'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 Company manages its capital to ensure that the Company 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 Company is not subject to any externally imposed capital requirements.

The capital structure of the Company 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 Company's Board reviews the capital structure on a bi-annual basis.

Equity includes all capital and reserves of the Company that are managed as capital.

No changes were made in the objectives, policies or processes for managing capital during the Period.

(b) Foreign Currency Risk

The Company's accounting policy under IFRS requires the use of a Sterling historic cost of the Asset and the value of the US dollar loan 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 Statement of Financial Position and are accrued over the period of the lease. The Directors consider that this introduces artificial variance due to the movement over time of foreign exchange rates. In actuality, the US dollar operating lease receivables should offset the US dollar payables on amortising loans. The foreign exchange exposure in relation to the Loan is thus largely naturally hedged.

Lease rentals (as detailed in notes 4 and 12) are received in US dollars and Sterling. Those lease rentals received in US dollars are used to pay the loan repayments due, also in US dollars. Both US dollar lease rentals and loan repayments are fixed and are for similar sums and similar timings. The matching of lease rentals to settle loan repayments therefore minimises risks caused by foreign exchange fluctuations.

The carrying amounts of the Company's foreign currency denominated monetary assets and liabilities at the reporting date are as follows:

 
                                          30 Sep 2020    31 Mar 2020 
                                                  GBP            GBP 
 Bank loan (US dollar) - liabilities      (9,439,967)   (15,620,114) 
 Cash and cash equivalents (US dollar) 
  - assets                                  2,451,260      2,388,396 
                                         ------------  ------------- 
 

The following table details the Company's sensitivity to a 25 per cent. (31 March 2020: 25 per cent) appreciation of Sterling against the US dollar. 25 per cent. (31 March 2020: 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 2020: 25 per cent.) change in foreign currency rates. A positive number below indicates an increase in profit and equity where Sterling strengthens 25 per cent. (31 March 2020: 25 per cent.) against the US dollar. For a 25 per cent. (31 March 2020: 25 per cent.) weakening of Sterling against the US dollar, there would be a comparable but opposite impact on the profit and equity .

 
                   30 Sep 2020   31 Mar 2020 
                    USD impact    USD impact 
                           GBP           GBP 
 Profit or loss      1,397,741     2,646,344 
 Assets              (490,252)     (477,679) 
 Liabilities         1,887,993     3,124,023 
                  ------------  ------------ 
 

On the eventual sale of the Asset, the Company will be subject to foreign currency risk if settled in a currency other than Sterling. Transactions in similar assets are typically priced in US dollars.

   (c)   Credit Ri sk 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.

Refer to the going concern section on page 21 where an assessment of Emirates is made.

The credit risk on cash transactions is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, or with high credit ratings assigned by international credit rating agencies.

T h e Compan y 's fin ancial assets e x posed to credit risk are as f ollows:

 
                                          30 Sep 2020   31 Mar 2020 
                                                  GBP           GBP 
 Receivables (excluding prepayments)               11            11 
 Cash and cash equivalents                  3,576,049     3,770,813 
 
                                            3,576,060     3,770,824 
                                         ------------  ------------ 
 

Surplus cash is held in accounts with Barclays Bank PLC and Westpac, which have credit ratings given by Moody's of P-1 and P-1 respectively.

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 agreement between the Lessee and the Company, any non-payment of the lease rentals constitutes a "Special Termination Event", under which the lease terminates and the Company may either choose to sell the Asset or lease it to another party.

At the inception of the lease, the Company selected a Lessee with a strong balance sheet 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 Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments. The Company's main financial commitments are its ongoing operating expenses and loan repayments to Westpac.

Ultimate responsibility for liquidity risk management rests with the Board, which established an appropriate liquidity management framework at the incorporation of the Company, through the timings of lease rentals and loan repayments. The Company manages liquidity risk by maintaining adequate reserves 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 principal and interest payments, and will not agree directly to the amounts recognised in the Statement of Financial Position.

 
 30 Sep 2020                                                         over 5 
                  1-3 months   3-12 months   1-2 years   2-5 years    years 
                         GBP           GBP         GBP         GBP      GBP 
 Financial 
  liabilities 
 Payables 
  - due within 
  one year            32,761             -           -           -        - 
 Loans payable     2,971,732     2,624,080   3,498,774     874,693        - 
 
                   3,004,493     2,624,080   3,498,774     874,693        - 
                 -----------  ------------  ----------  ----------  ------- 
 
 31 Mar 2020                                                         over 5 
                  1-3 months   3-12 months   1-2 years   2-5 years    years 
                         GBP           GBP         GBP         GBP      GBP 
 Financial 
  liabilities 
 Payables 
  - due within 
  one year            34,547             -           -           -        - 
 Loans payable     3,091,367     7,092,640   3,639,625   2,729,720        - 
 
                   3,125,914     7,092,640   3,639,625   2,729,720        - 
                 -----------  ------------  ----------  ----------  ------- 
 
   (e)   Interest Rate Ri sk 

Interest rate risk arises from the possibility that changes in interest rates will a ff ect f uture cash flo ws. It is the risk that fluct uations in market interest rates will result in a reduction in deposit interest earned on bank deposits held by the Compan y.

T h e Company mitigates interest rate risk by fixing the interest rate on the Loan and the lease re ntals.

T h e f ollowing table details the Compan y 's e x posure to interest rate risks, by interest rate re fin ancing perio d:

 
3 0 September 2020            V a ri          Fixed       Non-interest 
                               able            interest    bearing        Total 
                               interest        GBP         GBP            GBP 
                               G BP 
Financial assets 
 Receiv ables (excluding 
 prepayments)                              -           -            11          11 
Cash and c ash equiv 
 ale nts                           3,576,049           -             -   3,576,049 
                              --------------  ----------  ------------  ---------- 
Total financial assets             3,576,049           -            11   3,576,060 
                              --------------  ----------  ------------  ---------- 
 
  Financial liabilities 
  P a y ab les                             -           -        32,761      32,761 
Loan s pa y able                           -   9,439,967             -   9,439,967 
                              --------------  ----------  ------------  ---------- 
Total financial liabilities                -   9,439,967        32,761   9,472,728 
                              --------------  ----------  ------------  ---------- 
 
Total interest sensitivity 
 gap                               3,576,049   9,439,967 
                              --------------  ---------- 
 
3 1 March 2020                V a ri          Fixed       Non-interest 
                               able interest   interest    be aring       Total 
                               G BP            G BP        G BP           GBP 
 
  Financial assets 
  Receiv ables (excluding 
  prepayments)                             -           -            11          11 
Cash and c ash equiv 
 ale nts                           3,770,813           -             -   3,770,813 
                              --------------  ----------  ------------  ---------- 
 
Total financial assets             3,770,813           -            11   3,770,813 
                              --------------  ----------  ------------  ---------- 
 
  Financial liabilities 
  P a y ab les                             -           -        34,547      34,547 
Loan s pa y able                           -  15,620,114             -  15,620,114 
                              --------------  ----------  ------------  ---------- 
Total financial liabilities                -  15,620,114        34,547  15,654,661 
                              --------------  ----------  ------------  ---------- 
 
Total interest sensitivity 
 gap                               3,770,813  15,620,114 
                              --------------  ---------- 
 

I f interest rates had been 50 basis points hig her throughout the Period and all other v aria bles were held const ant, the Compan y 's pro fit f or the Period and net assets attrib utable to S harehold ers as at 30 S eptember 2020 would ha ve been GBP17,880 (31 March 2020: GBP18,854 ) greater due to an increase in the amount of interest receiv able on the bank bala nces.

I f interest rates had been 50 basis points lo wer and all other v aria bles were held const ant, the Compan y 's pro fit f or the Period and net assets attrib utable to S harehold ers as at 30 S eptember 2020 would ha ve been GBP17,880 (31 March 2020: GBP18,854 ) lo wer due to an decrease in the amount of interest receiv able on the bank bala nces.

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). 
 
 
                                          30 Sep 2020   30 Sep 2019 
                                                  GBP           GBP 
 
 Opening Balance                           15,620,114    25,486,481 
 Cash flows paid - capital                (5,641,918)   (5,440,053) 
 Cash flows paid - interest                 (372,790)     (689,989) 
 Non-cash flows 
 
   *    Interest accrued                      376,273       691,769 
 
   *    Effects of foreign exchange         (541,712)     1,440,390 
 
 Closing Balance                            9,439,967    21,488,598 
                                         ------------  ------------ 
 

21 ULTIMATE CONTROLLING P ARTY

In the opinion of the Direct ors, the Company has no ultimate c ontrolling party.

22 RELATED PARTY TRANSACITONS AND MATERIAL CONTRACTS

Nimrod Capital LLP (Nimrod) is the Company's Corporate and Shareholder Advisor.

During the Period, the Company incurred GBP63,223 (30 September 2019: GBP59,742) of expenses with Nimrod, of which GBPnil (31 March 2020: GBPnil) was outstanding to this related party at 30 September 2020. GBP61,608 (30 September 2019: GBP59,742) related to corporate shareholder and advisor fees as shown in note 5 and GBP1,615 (30 September 2019: GBPnil) have been incurred as cancellation costs in relation to the Farnborough Airshow.

Doric GmbH (Doric) is the Company's Asset Manager.

During the Period, the Company incurred GBP158,639 (30 September 2019: GBP155,205) of expenses with Doric, which consisted of asset management fees of GBP152,714 (30 September 2019: GBP149,353) and liaison agency fees of GBP2,930 (30 September 2019: GBP5,852). GBP1,826 (31 March 2020: GBPnil) was prepaid to this related party at 30 September 2020.

JTC Registrars Limited ("JTC Registrars") is the Company's registrar, transfer agent and paying agent. During the Period, the Company incurred GBP5,362 (30 September 2019: GBP4,802) of expenses with JTC Registrars as shown in note 5. As at 30 September 2020, GBP923 (31 March 2020: GBP1,611) was owing to this related party.

23 S UBSEQUENT EVENTS

O n 15 Oct ober 2020, a f urther divid end of 2.25 pence per Ordin ary S hare was declared and this w as paid on 30 Oct ober 2020.

 
 KEY ADVISERS AND CONTACT INFORMATION 
  KEY INFORMATION 
 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 A1 
 Li st ing Da te: 13 Decemb er 
  2010 
 Fi nancial Year End: 31 M arch 
 Ba se Curre ncy: Pound Sterling 
 I S I N: GG 00B4 M F3899 
 SED O L: B4 M F389 
 LEI: 2138009FPM7EH4WDS168 
 Coun t ry of I ncorpora t ion: 
  G uernsey 
 Re g i s t ra t ion number: 52484 
 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 One Limi t      JTC Fund Solutions ( G uernse y) 
  ed                                  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 
 D o ric GmbH                        A medeo Serv ices (UK) L imi 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 & Co. 
 Nimrod Capital LLP                   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 
 London, 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 
  ny (as to Eng l i sh L a w)         (as to G u ernsey Law) 
 He rbert Smi th Freehills LLP       Ca rey O lsen 
 E x chan ge House                   Ca rey House 
 P rimrose S treet                   Le s Ba n q ues 
 Londo n, England                    S t Pe t er P ort 
 EC2 A 2EG                           G ue rnsey G Y1 4 HP 
 Reg i s trar                        A u d i tor 
 JTC Re g i s trars L imi t ed       Deloi tt e LLP 
 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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December 10, 2020 12:35 ET (17:35 GMT)

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