Consolidated Annual Financial Report
From 1 April 2022 to 31 March 2023
CONTENTS
Page
1 Definitions
4 Summary Information
5 Company Overview
7 Chairās Statement
9 Asset Managerās Report
15 Directors
17 Service Providers
19 Management Report
23 Directorsā Report
34 Environmental, Social and Governance Report
38 Audit and Risk Committee Report
47 Independent Auditorās Report
51 Consolidated Statement of Comprehensive Income
52 Consolidated Statement of Financial Position
53 Consolidated Statement of Cash Flows
54 Consolidated Statement of Changes in Equity
55 Notes to the Consolidated Financial Statements
77 Key Advisers and Contact Information
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DEFINITIONS
āAdministrative Sharesā Subordinated administrative shares
āAEDā United Arab Emirates dirham
āAGMā Annual general meeting
āAmedeoā or āthe Asset Managerā Amedeo Management Limited
āAR Committeeā Audit and Risk Committee
āArticlesā Companyās Articles of Incorporation
āASKsā Available seat kilometers
āAsset(s)ā or the āAircraftā Airbus A380 Aircraft
āATAGā Air Transport Action Group
āBoardā Companyās Board of directors
āCertificatesā DNA Alpha Pass Through Certificates issued in August 2013
āChairā Chair of the Board
āCodeā The UK Corporate Governance Code
āCORSIAā Carbon Offsetting and Reduction Scheme for International Aviation
āDTRsā Disclosure Guidance and Transparency Rules
āDNA3ā or the āCompanyā Doric Nimrod Air Three Limited
āDNA Alphaā DNA Alpha Limited
āEETCā or āCertificatesā Enhanced equipment trust certificates
āEmiratesā or the āLesseeā Emirates Airline
āEPSā or āLPSā Earnings / loss per Share
āESGā Environmental, Social and Governance
āEUā European Union
āEU ETSā European Union Emissions Trading System
āFCAā Financial Conduct Authority
āFRCā Financial Reporting Council
āFVOCIā Fair value through other comprehensive income
āFVTPLā Fair value through profit or loss
āGBPā, āĀ£ā or āSterlingā Pound Sterling
āGTā Grant Thornton
āGFSCā Guernsey Financial Services Commission
āGHGā Greenhouse gas
āGroupā the Company and its subsidiary
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DEFINITIONS (continued)
āIAS 1ā International Accounting Standard 1 ā Presentation of financial statements
āIAS 8ā International Accounting Standard 8 ā Accounting policies
āIAS 16ā International Accounting Standard 16 ā Property, Plant and Equipment
āIAS 36ā International Accounting Standard 36 ā Impairment of Assets
āIASBā International Accounting Standards Board
āIATAā International Air Transport Association
āICAOā International Civil Aviation Organization
āIFRICā International Financial Reporting Interpretations Committee
āIFRSā International Financial Reporting Standards
āIFRS 16ā IFRS 16 ā Leases
āISAE 3402ā International Standard on Assurance Engagement 3402
āISTATā International Society of Transport Aircraft Trading
āJTCā or āSecretaryā or āAdministratorā JTC Fund Solutions (Guernsey) Limited
āRegistrarā JTC Registrars Limited
āLawā The Companies (Guernsey) Law, 2008, as amended
āLease(s)ā Lease of Aircraft to Emirates
āLoan(s)ā Borrowings obtained by the Group to part-finance the acquisition of Aircraft
āLSEā London Stock Exchange
āNBVā Net Book Value or Depreciated Cost
āNimrodā or āCorporate and
ShareholderīAdviserā
Nimrod Capital LLP
āPandemicā COVID-19 pandemic
āPeriodā 1 April 2022 until 31 March 2023
āPIEsā Public Interest Entities
āPLFā Passenger load factor
āRegistrarā JTC Registrars Limited
āRPKsā Revenue passenger kilometers
āSDGsā Sustainable Development Goals
āSFSā Specialist Fund Segment
āShareholdersā or āMembersā Shareholders of the Company
āSharesā Ordinary Preference Shares
āShare Capitalā Share capital of the Company
āSubsidiaryā DNA Alpha Limited
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DEFINITIONS (continued)
āUAEā United Arab Emirates
āUKā United Kingdom
āUSDā or ā$ā US dollars
āVIUā Value-in-use
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
SUMMARY INFORMATION
Listing Specialist Fund Segment of the London Stock Exchangeās Main Market
Ticker DNA3
Share Price 50.50 pence (as at 31 March 2023)
47.50 pence (as at 17 July 2023)
Market Capitalisation GBP104.50 million (as at 17 July 2023)
Current Dividend 2.0625 pence per quarter per share (8.25 pence per annum)
Dividend Payment Dates April, July, October, January
Currency Sterling
Launch Date / Share Price 2 July 2013 / 100 pence
Incorporation and Domicile Guernsey
Aircraft Registration Number
(Lease Expiry Dates including 2 year extension)
A6-EEK (29 August 2025)
A6-EEO (29 October 2025)
A6-EEM (14 November 2025)
A6-EEL (27 November 2025)
Asset Manager Amedeo Management Limited
Corporate and Shareholder
Adviser
Nimrod Capital LLP
Administrator JTC Fund Solutions (Guernsey) Limited
Auditor Grant Thornton Limited
Market Makers finnCap Ltd
Investec Bank Plc
Jefferies International Ltd
Numis Securities Ltd
Shore Capital Limited
Winterflood Securities Ltd
SEDOL, ISIN, LEI B92LHN5, GG00B92LHN58, 213800BMYMCBKT5W8M49
Year End 31 March
Website www.dnairthree.com
Please note that the Group has determined that the operating Leases on the Assets are for 12 years based on an initial term of 10 years
followed by an extension term of 2 years. Should the Lessee choose to exit a Lease at the end of the initial term of 10 years an early
termination payment equal to the present value of the sterling rent that would have been payable for the extension term of 2 years
would be due. For the purpose of this report the Leases are all referred to as 12 year leases.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
COMPANY OVERVIEW
DNA3 is a Guernsey company incorporated on 29 March 2012.
Pursuant to the Companyās Prospectus dated 20 June 2013, the Company, on 2 July 2013, offered its Shares for issue by means of a
placing and raised approximately Ā£211 million by the issue of Shares at an issue price of 100 pence per share. The Companyās Shares
were admitted to trading on the SFS on 2 July 2013.
As at 17 July 2023, the last practicable date prior to the publication of this report, the Companyās total issued Share capital consisted
of the Administrative Shares and 220,000,000 Shares. The Shares were trading at 47.50 pence per Share.
Investment Objectives and Policy
The Companyās investment objective is to obtain income returns and a capital return for its Shareholders by acquiring, leasing and
then selling aircraft. To pursue its investment objective, the Company has used the net proceeds of placings and other equity capital
raisings, together with debt facilities (or instruments), to initially acquire four Airbus A380 Aircraft which are leased to Emirates, the
national carrier owned by The Investment Corporation of Dubai based in Dubai, United Arab Emirates.
DNA Alpha
The Company has one wholly owned subsidiary: DNA Alpha which holds the Assets for the Company.
The first Asset was acquired by DNA Alpha on 29 August 2013 for a purchase price of $245 million. Upon delivery, DNA Alpha entered
into an operating Lease with Emirates, pursuant to which the first Asset has been leased to Emirates for an expected initial term of
10 years, ending August 2023, with an extension period of two years ending August 2025, in which rental payments reduce. The loan
terms for this Aircraft were arranged to match the contractual rental received during the initial lease term of 10 years including the
final rental prepayment in the event that the extension was not utilised.
The second Asset was acquired by DNA Alpha on 29 October 2013 for a purchase price of $245 million. Upon delivery, DNA Alpha
entered into an operating Lease with Emirates, pursuant to which the second Asset has been leased to Emirates for an expected initial
term of twelve years, with fixed lease rentals for the duration. The initial Lease is for 10 years ending October 2023, with an extension
period of two years ending October 2025, in which rental payments reduce. The loan terms for this Aircraft were arranged to match
the contractual rental received during the initial lease term of 10 years including the final rental prepayment in the event that the
extension was not utilised.
The third Asset was acquired by DNA Alpha on 14 November 2013 for a purchase price of $245 million. Upon delivery, DNA Alpha
entered into an operating Lease with Emirates, pursuant to which the third Asset has been leased to Emirates for an expected initial
term of twelve years, with fixed lease rentals for the duration. The initial Lease is for 10 years ending November 2023, with an
extension period of two years ending November 2025, in which rental payments reduce. The loan terms for this Aircraft were arranged
to match the contractual rental received during the initial lease term of 10 years including the final rental prepayment in the event
that the extension was not utilised.
The fourth Asset was acquired by DNA Alpha on 27 November 2013 for a purchase price of $245 million. Upon delivery, DNA Alpha
entered into an operating Lease with Emirates, pursuant to which the fourth Asset has been leased to Emirates for an expected
initial term of twelve years, with fixed Lease rentals for the duration. The initial Lease is for 10 years ending November 2023, with an
extension period of two years ending November 2025, in which rental payments reduce. The loan terms for this Aircraft were arranged
to match the contractual rental received during the initial lease term of 10 years including the final rental prepayment in the event
that the extension was not utilised.
DNA Alpha acquired the Assets, using a combination of a portion of the proceeds of the issue of the Ordinary Shares by the Company
together with the proceeds of the sale of equipment notes issued by DNA Alpha and the initial rent payment pursuant to the relevant
operating Leases. The equipment notes were acquired by two separate pass through trusts using the proceeds of their issue of EETCs
as detailed within the offering circular issued by DNA Alpha dated 10 July 2013.
Further information about the construction of these Leases is available in note 3 to the financial statements.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
COMPANY OVERVIEW (continued)
The EETCs, with an aggregate face amount of approximately $630 million, are admitted to the official list of the Euronext Dublin and
to trading on the Main Securities market thereof and will mature on 30 May 2025.
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 2.0625 pence per Share per quarter.
The payment of dividends to Shareholders cannot be guaranteed, and if dividends are indeed paid, there is uncertainty regarding the
timing and amount of such payments. Additionally, there is no assurance that the Company will consistently meet the solvency test
outlined in section 304 of the Law, which is necessary for the directors to authorise dividend payments.
Performance Overview
All payments by Emirates have, to date, been made in accordance with the terms of the respective Leases.
During the financial year under review and in accordance with the Distribution Policy the Company declared four interim dividends
of 2.0625 pence per Share. Two interim dividends of 2.0625 pence per Share have been declared after the reporting period. Further
details of dividend payments can be found on page 23.
Return of Capital
The Company intends to return to Shareholders the net capital proceeds if and when the Company is wound up (pursuant to a
Shareholder resolution, including the Liquidation Resolution), subject to compliance with the Articles and the applicable laws
(including any applicable requirements of the solvency test contained therein).
Liquidation Resolution
Although the Company does not have a fixed life, the Articles require that the directors convene a general meeting of the Company
in November 2026 where an ordinary resolution will be proposed that the Company proceed to an orderly wind-up at the end of the
term of the Leases. In the event that the liquidation resolution is not passed, the directors will consider alternatives for the future
of the Company, including re-leasing the Assets, or selling the Assets and reinvesting the capital received from the sale of the Assets
in other aircraft.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
CHAIRāS STATEMENT
I am delighted to deliver to you my first report as Chair of the Company.
During the Period the Company has declared and paid four quarterly dividends of 2.0625 pence per Share each, a rate of dividend
payment amounting to 8.25 pence per Share per annum.
The Companyās investment objective is to obtain income returns and a capital return for its Shareholders by acquiring, leasing and
then selling aircraft. The structures of the operating Leases relating to the Companyās four Aircraft are described on pages 64 and 68.
The debt portion of the funding was designed to be fully amortised over the term of the Leases, which would leave the Aircraft
unencumbered on the conclusion of the ultimate Lease. I am pleased to report that all debt associated with the Companyās Aircraft
has now been fully repaid. Emirates bears all costs (including maintenance, repair and insurance) relating to the Aircraft during the
lifetime of the Leases. At the time of writing the share price is 47.50īpence, representing a market capitalisation of GBP 104,500,000
based on the 220,000,000 Shares in issue. All payments by Emirates during the Period and throughout the Lease have been made in
accordance with the terms of the Lease. The Companyās first scheduled Lease expiry falls due in August 2025.
Market Conditions
Air passenger travel first gained momentum in 2022 and has recovered substantially according to IATA. In April 2023 industry-wide
RPKs stood 9.5% below the pre-pandemic level achieved in April 2019. Airlineās capacities, measured in ASKs, recovered to 92.5% of
the pre-pandemic value while the average PLF sits only 1.8 percentage points below the pre-pandemic level. IATA does sound a note
of caution however, describing the outlook as:īāā¦while the current stage in the business cycle is slowing but still holding up close to
the average, the world is facing high levels of uncertainty on multiple fronts, many of which might be rather structural in nature. This
skews the risks to the overall outlook decidedly to the downside, both in the near and in the longer term.ā
Emirates results for the year to 31 March 2023 reported an 81% increase in revenue and its most profitable year ever with a profit of
USD 2.9 billion compared with a USD 1.1 billion loss in the previous year. The airline reported a PLF of 79.5%. Emirates ended the
financial year with cash assets of USD 10.2 billion, 79% higher than 31 March 2022.
Whilst Emirates do not have a formal credit rating, they have previously issued unsecured USD bonds with maturities in 2025 and
2028. As at 17īJuly 2023 these instruments are trading at approximately 98.5 and 96.7 cents respectively, equivalent to USD running
yields in the range of roughly 3.9 to 4.6%. Further details on Emirates and the A380 can be found in the Asset Managerās Report on
pages 9 to 14.
Stakeholder Engagement
Our Asset Manager, Amedeo, continues to monitor the Leases, is in frequent contact with the Lessee and reports regularly to the
Board. Nimrod, our Corporate and Shareholder Adviser, continues to liaise with Shareholders alongside or on behalf of the Board and
has provided valuable feedback on the views of Shareholders.
The Board encourages Shareholders to read the Companyās quarterly fact sheets which we believe provide a great deal of interesting
information. 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.
Further information on stakeholder engagement section 172 of the UKās Companies Act 2006 can be found on pageī31.
The Board
As part of the Boardās succession planning arrangements, Charles Wilkinson will step down from his position as a non-executive
director of the Company with effect from 31 July 2023, having been a member of the Board since inception in 2011. Theresa Oldham
was appointed on 1 April 2023, allowing for an orderly transition and maintaining the Companyās focus on delivering value for its
Shareholders.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
CHAIRāS STATEMENT (continued)
On behalf of the Board, I would like to express our deep appreciation for Mr. Wilkinsonās dedication, service and commitment over the
years. Mr Wilkinsonās vast experience and unique perspective have been invaluable and he will be greatly missed by his fellow board
members. In addition, we are delighted to welcome Mrs Oldham who brings a wealth of experience from her background in aircraft
financing and leasing.
Lastly, I stepped down as Chair of the AR Committee with effect from 28 February 2023 and Mrs Le Poidevin was appointed as Chair of
the committee on 1 April 2023.
Accounting Treatment
Shareholders should note that although the underlying cash flows received and paid during the Period have been received and paid
as anticipated and in accordance with contractual obligations, it may not be obvious that this is so because of the application of the
accounting treatments for foreign exchange, rental income and finance costs mandated by IFRS.
For instance, the entirety of the rental income that is receivable under the 12-year Leases (including advance rental received as
part of the initial acquisition of the Assets) is credited evenly over each of the 144 months of the Leases. However rental income
has been received in advance of this uniform pattern in order to match and fund the accelerated payment down of debt. Thus, as
at 31īMarch 2023, some 97% of A Rent receivable under the Leases has been received, which has funded the payment down of
95% initial borrowings, whereas under the relevant accounting standard only some 79% may be recognised. All outstanding debt
associated with the Groupās Aircraft was repaid on 30 May 2023. This mismatch in timing between the receipt and recognition of
rental income results in a deferred income creditor of GBP 113 million or some 51 pence per Share in the 31 March 2023 Consolidated
Statement of Financial Position. This is an artificial accounting adjustment in the sense that it does not represent a liability to pay
GBP 113 million to third parties. The faster that income is received and debt repaid the larger the resultant creditor producing a
reduction in reported net asset value.
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 the
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 ā although the distortive effect becomes less
pronounced over time as debt is paid down.
On an ongoing basis and assuming the Lease rental is received, and the loan payments are made as anticipated, such foreign exchange
differences do not reflect the commercial substance of the situation in the sense that the key transactions denominated in USD are
in fact closely matched. Rental income received in USD is used to make debt repayments due which are likewise denominated in USD.
Furthermore, the USD lease rentals and debt repayments are fixed at the inception of the respective Leases and are very similar in
amount and timing.
On behalf of the Board, I would like to thank our service providers for their ongoing assistance and, most importantly, all Shareholders
for their continuing support.
Andreas Tautscher
Chair
21īJuly 2023
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ASSET MANAGERāS REPORT
At the request of the directors of the Company, this commentary has been provided by the Asset Manager of the Company. The report
reflects the information available at the end of June 2023 unless otherwise noted.
COVID-19 and other external factors affecting the Company
In May 2023 the UN World Health Organization (WHO) declared an end to COVID-19 as a public health emergency, stressing that
it does not mean the disease is no longer a global threat. WHO had declared COVID-19 a public health emergency of international
concern at the end of January 2020 and counted more than 765 million confirmed cases with nearly seven million deaths since then.
In a statement WHO noted the enormous damage inflicted on all aspects of global life by the virus, including enormous economic
upheaval, āerasing trillions from GDP, disrupting travel and trade, shuttering businesses, and plunging millions into poverty.ā
Aviation was one of the sectors hardest hit as pandemic-induced travel restrictions and safety measures in many regions around the
globe resulted in a historic slump in air passenger traffic. Highly effective vaccines increased immunity and allowed the reduction
of containment measures over time. This permitted air passenger traffic to start an unprecedented recovery in 2022, which is still
continuing. While industry-wide revenue kilometres reached more than 90% of its pre-pandemic levels in April 2023, domestic air
travel can be said to have fully recovered in April 2023.
However, the aviation sector continues to be exposed to risks due to the current economic and geopolitical environment. To support
economic growth during the pandemic, central banks had used quantitative easing which has triggered inflation across the globe.
Appropriate countermeasures to contain these unwanted side-effects have resulted in dislocations in the financial markets and
impacts on the real economy. Furthermore, airlines are directly impacted by continuing supply chain issues with aircraft and engine
manufacturers not always able to deliver new aircraft or spare parts to maintain existing fleets on time. A significant number of
airlines are also affected by an increased level of debt, taken out during the pandemic to finance the unprecedented corporate losses,
and the resulting debt service requirements, impacting their free cash flow.
Asset Managerās Comment
1. The Assets
The Company acquired four Airbus A380 Aircraft by the end of November 2013. Since delivery, each of the four Aircraft has been
leased to Emirates Airline (āEmiratesā) ā the national carrier owned by the Investment Corporation of Dubai, based in Dubai, United
Arab Emirates ā for a term of 12 years with fixed lease rentals for the duration. In order to complete the purchase of the Aircraft, DNA
Alpha Ltd (āDNA Alphaā), a wholly owned subsidiary of the Company, issued two tranches (Class A & Class B) of enhanced equipment
trust certificates (āthe Certificatesā or āEETCā) ā a form of debt security ā in July 2013 in the aggregate face amount of USD 630
million. The Certificates are admitted to the official list of the Euronext Dublin and to trading on the Main Securities market thereof.
DNA Alpha used the proceeds from both the Equity and the Certificates to finance the acquisition of the four new Airbus A380 Aircraft.
In May 2023 DNA Alpha has fully repaid all outstanding EETC obligations.
Due to the effects of COVID-19, all four Aircraft were put into storage in March 2020 and have returned to service in the meantime,
the last at the end of August 2022. Aircraft utilisation for the period from delivery of each Airbus A380 until the end of May 2023 was
as follows:
MSN Delivery Date Flight Hours Flight Cycles Average Flight Duration
132 29/08/2013 34,202 4,152 8h 14m
133 27/11/2013 35,253 3,994 8h 50m
134 14/11/2013 32,359 3,594 9h 0m
136 29/10/2013 34,661 3,841 9h 1m
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.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ASSET MANAGERāS REPORT (continued)
Emirates bears all costs relating to the Aircraft during the lifetime of the leases (including for maintenance, repairs and insurance).
In May 2023 the European Union Aviation Safety Agency (EASA) issued an airworthiness directive (AD) mandating the inspection of
wing rear spars between certain wing ribs. This is the latest action taken by the authority, which ā in a series of ADs starting in 2019īā
is addressing concerns of potential cracks in these areas. However, the Aircraft owned by the Company were not due for inspections
according to earlier ADs. Based on the data and evidence collected during the inspections over the last four years or so, contributing
factors in addition to the age of the wing were identified. The probability of a crack, for example, does also depend on the amount
of time an aircraft has spent on the ground (stored, parked) in severe environmental conditions. The phenomenon underlying this
relationship is called Hydrogen Environmental Assisted Cracking (HEAC). It affects specific aluminium alloys used in the A380. The
inputs to calculate the threshold for the inspection date are published by Airbus and shows that Emirates aircraft are more severely
affected than those of other A380 operators due mainly to the hot desert climate in the UAE and prolonged storage periods during
the pandemic in that environment.
Emirates schedules 60 days for the initial inspection. Repeat inspections are currently scheduled at an interval of 36 months. None of
the Aircraft owned by the Company has been inspected so far.
Inspection
The Asset Manager conducted physical inspections and records audits of the Aircraft as per the below table. Conditions of the
respective Aircraft and its technical records were in compliance with the provisions of the respective lease agreements.
MSN Last Inspection MSN Last Inspection
132 03/2023 134 05/2023
133 05/2023 136 05/2023
2. Market Overview
The impact of COVID-19 on the global economy was severe resulting in a 3.1% contraction in global GDP in 2020, followed by a
recovery of 6.0% and 3.1% in 2021 and 2022 respectively. According to its latest report on global economic prospects from June
2023, the World Bank expects moderated growth of 2.1% for the current year. In its latest economic impact analysis from April
2023, the International Civil Aviation Organization (ICAO) estimates that the full year 2022 experienced an overall reduction in
seats offered by airlines of 25% compared with pre-crisis 2019 levels. This translates into a 34% seat reduction in the international
passenger traffic segment, while domestic air passenger traffic was less affected by the pandemic with an overall reduction of only
19% of seats offered by airlines. ICAO has not yet provided guidance for this year.
According to its June 2023 estimates the International Air Transport Association (IATA) indicates an airline industry-wide net loss of
USDī3.6ībillion for 2022 following losses of approximately USDī41.9ībillion in the previous year. For the current year, IATA expects
the first surplus since 2019 with the combined net profit of airlines worldwide to reach USDī9.6ībillion. This would be a remarkable
turnaround from a net loss of nearly USDī138ībillion back in 2020. Nevertheless, the global economy is facing headwinds which
also impact aviation. IATA does not expect a global recession as a record number of persons are earning a regular income with
exceptionally low unemployment rates. But headwinds for the air transport sector result from a slowdown in GDP growth and the
central banksā rate tightening in response to a surge in global inflation. Overall, IATA describes the outlook as follows: āIn sum,
while the current stage in the business cycle is slowing but still holding up close to the average, the world is facing high levels
of uncertainty on multiple fronts, many of which might be rather structural in nature. This skews the risks to the overall outlook
decidedly to the downside, both in the near and in the longer term.ā
Air passenger travel first gained momentum in 2022 and has recovered substantially according to IATA. The rebound has continued
into 2023: In April 2023 industry-wide RPKs increased by 45.8% compared to the same period in the year before. This is 9.5% below
the pre-pandemic level achieved in April 2019. At the same time airlines boosted their capacities, measured in ASKs, from April 2022
by 39.7%, a recovery to 92.5% of the pre-pandemic value in April 2019. The average PLF improved by 3.4 percentage points from its
April 2022 levels to 81.3%, only 1.8 percentage points below the pre-pandemic PLF.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ASSET MANAGERāS REPORT (continued)
While international travel measured in RPKs is still 16.4% short of its volume before the sector was hit by COVID-19, global domestic
travel has fully recovered for the first time since the pandemic began, surpassing the 2019 benchmark levels by 2.9%. A slowing
annual RPK growth rate ācan be attributed to the industryās progress towards reaching 2019 while building up on the higher base
established in 2022ā, according to IATA.
The Middle East, where the lessee is located, recorded an RPK increase of 36.8% between April 2022 and April 2023. A less dynamic
increase in capacities, measured in ASKs, resulted in a nearly 6 percentage points improvement of the average PLF to 76.0%. This is
4.4 percentage points short of its pre-pandemic level.
Source: IATA, ICAO, World Bank
Ā© International Air Transport Association, 2023. Air Passenger Market Analysis April 2023. Global Outlook for Air Transport ā June 2023. Available on the IATA Economics page.
Ā© International Civil Aviation Organization. Effects of Novel Coronavirus (COVID-19) on Civil Aviation: Economic Impact Analysis, 27īApril 2023.
3. Lessee ā Emirates
Network
Emirates SkyCargo, the cargo division of Emirates, expects to double its capacity in the next decade and plans to add over 20 new
destinations to its freighter network. To address immediate capacity requirements, Emirates has wet-leased two Boeing 747-400F
aircraft, complementing SkyCargoās existing fleet of eleven dedicated freighters.
From early July Emirates will add Montreal as the carrierās second gateway into Canada. The daily flight will operate with a Boeing
777-300ER. The existing partnership between Emirates and Air Canada allows customers of both airlines to access an expansive
network of destinations, including 19 Canadian destinations Emirates passengers can use for their onward journey. Back in April 2023
Emirates upgraded its flights into Toronto to a daily service.
Due to restrictions imposed on their insurance policy Emirates has no longer operate leased aircraft in and out of Russia since May
2022. This includes the Companyās Aircraft. However, Emirates continues to operate their owned aircraft into this jurisdiction.
Fleet
In February 2022 Emiratesā President, Sir Tim Clark, provided insight into fleet operating considerations for the airline. Reporting
on recycling efforts of the first five A380s Emirates has retired, Clark pointed out that these will not continue with further A380s:
āCutting up the A380 fleet stops there, after these five are retired, all the other aircraft remain. In fact, where we started to drop
some, I just decided to bring them back into the program.ā With a looming aircraft shortage in Emiratesā fleet in 2024/25, Clark wants
to extend aircraft lives: āLife extension will affect about 120 aircraft [ā¦]. Their life will be extended by six to ten years each.ā
On 1 November 2022 Emirates kicked off its multi-billion dollar cabin retrofit programme that will upgrade the entire interior cabin
of 67 Airbus A380s and 53 Boeing 777-300ERs, including the installation of the airlineās latest premium economy seats. All A380s
earmarked for the retrofit programme are expected to be back in service by May 2024. By March 2023 the first six aircraft were
completely refurbished and returned to service. The Company is not aware that any of the DNA3 Aircraft is scheduled to be retrofitted.
One of the reasons for the comprehensive retrofit programme is Clarkās scepticism about the delivery timelines of the new aircraft
types the airline has ordered with Airbus and Boeing. He also stressed that new planes need to be āin the shape that the contract
requiresā.
Boeing 777X
Emirates expects its first 777-9s to be delivered between July and October 2025. In earlier statements Clark noted that āthe aircraft is
over five years late [when delivered in 2025] and, if it continues to be late, our patience will truly be testedā. He went on to say that
āwe have an aging fleet, which needs to be replaced.ā However, with the planned refurbishment of 777-300ER he feels prepared for
all eventualities: āWe can never be held at the mercy of the supply chain or manufacturer [ā¦]. So if the 777[-9] is late again we still
have something in the armoury to cover all eventualities.ā During the 2022/23 financial year the carrier extended the lease period
of 25 Boeing 777 aircraft.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ASSET MANAGERāS REPORT (continued)
With Airbus A380 and Boeing 747 no longer available for order, the Boeing 777X is the biggest aircraft in production.
Boeing 787
The aircraft were supposed to be delivered from May 2023 onwards. But Clark does not expect the 30 Boeing 787s to join his fleet
soon: Delivery of the 787 family paused for about 19 months between November 2020 and August 2022 after Boeing had identified
quality issues. It only resumed after the US Federal Aviation Authority (FAA) decided the airframer āhad made the necessary changes
to ensure that the 787 Dreamliner meets all certification standardsā. Deliveries paused for another few weeks in February/March 2023
over concerns connected to the aircraftās forward pressure bulkhead, which were then resolved. In June 2023 Boeing announced the
discovery of yet another production flaw that will require the manufacturer to inspect all 90 Boeing 787 aircraft in its inventory and
could affect the timing of near-term 787 deliveries.
In June 2022 Clark had suggested Boeing should focus on the 777X delivery and parking the Dreamliner order could result in ārelief
on both sidesā: āItās far more important for us that [Boeing] concentrate their activities on getting the 777[X] out of the door, than
worrying about if they are going to have a contractual problem with the [7]87s with Emirates.ā
Airbus A350
Emirates has also ordered 50 Airbus A350-900 widebody aircraft with the first deliveries starting in August 2024, according to Tim
Clark. The airline and the manufacturer agreed on a ācompressed delivery scheduleā with all 50 orders delivered within a 30-month
period. This should help āto pick up this big capacity hole that we can seeā, noted Emiratesā President last year.
Continuing delays in the delivery of new aircraft to Emirates may result in keeping the existing fleet of aircraft, including the A380,
for longer than originally planned. In May 2023 Clark confessed that there were still some issues getting its remaining A380s flying
after the pandemic-induced grounding. āWe had 86 flying last year and we need to get another 20-30 in the air as soon as we can.ā
However, the ongoing refurbishment process is reportedly impacted by supply chain issues.
In a June 2023 interview with Bloomberg, Clark refined the timeline about the future of its A380 fleet, noting that Emirates āwill keep
them flying until 2032ā before the airline starts to take them out of its fleet. Under the current circumstances their operation is āvery
profitableā for the carrier.
Speaking about the airlineās future capacity and aging fleet Tim Clark revealed that Emirates will āhave to buy new aircraftā and that
Emirates is āclose to doing somethingā, probably placing orders no later than at the Dubai Air Show in November this year. The lessee
is reportedly in discussions with Airbus and Boeing about orders for up to 150 additional aircraft with a delivery window from 2027/28
to 2033. This could include Boeing 777Xs and Airbus A350s as well as more Boeing 787s.
The table below details the passenger aircraft fleet activity as of 30 June 2023:
Passenger Aircraft Fleet Activity
Aircraft Type Grounded In Service
A380 27 94
777 2 131
Total 29 225
% 11% 89%
Source: Cirium as of 30 June 2023
Emirates expects to reach its pre-pandemic capacity by the second quarter of 2024, according to Adnan Kazim, Chief Commercial Officer
of Emirates. This will include up to 97 Airbus A380s with at least additional 12 spare aircraft to cover downtime for maintenance. In
total, Kazim expects that ānearly 110 Airbus A380ā will have returned to service by then.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ASSET MANAGERāS REPORT (continued)
Key Financials
In the 2022/23 financial year ending on 31 March 2023, Emirates recorded a net profit of AEDī10.6ībillion (USDī2.9ībillion), its most
profitable year in company history and a significant turnaround from a net loss of AEDī3.9ībillion (USDī1.1ībillion) in the previous
year. Nevertheless, currency fluctuations in some of the airlineās major markets significantly impacted the airlineās profitability
negatively by AEDī4.5ībillion (USDī1.2ībillion).
After nearly all pandemic-related restrictions around the world were removed Emirates accelerated its global network recovery by
relaunching flights to six destinations and increasing operations to 62 cities across its network throughout the year. On 31 March
2023 the airline was flying to 141 passenger destinations. This record performance was achieved despite being faced with various
challenges, including rising fuel costs, unfavourable currency swings, high inflation in many markets, increased interest rates, and
ongoing geopolitical uncertainty. Commenting on the turnaround performance, Sheikh Ahmed bin Saeed Al Maktoum, Chairman and
Chief Executive of Emirates Airline said: āWe had anticipated the strong return of travel, and as the last travel restrictions lifted and
triggered a tide of demand, we were ready to expand our operations quickly [ā¦] to serve our customers.ā
The airlineās total revenue, including other operating income, was up 81% from last year and reached AEDī 107.4ī billion
(USDī29.3ībillion), crossing the AEDī100ī billion mark for the first time in the companyās history. Emirates attributes the strong
turnaround performance to āforward planning, business agility, customer confidence in our product and offerings, on time delivery
of service [ā¦], and ongoing investments in technologyā.
Between April 2022 and March 2023 Emirates carried 43.6 million passengers, more than doubling the number from the year before.
Cargo uplift came in 14% lower, as Emirates reallocated capacities temporarily used for Emiratesā SkyCargo operations back to
passenger operations. The lessee increased its capacity, measured in ASKs, by 78% and reached 77% of pre-COVID levels. At the
same time its passenger traffic, measured in RPKs, increased by 141%. This results in an average passenger load factor of 79.5%, an
improvement of 20.9 percentage points from last year. The airline expects the rebound to pre-pandemic levels to continue into next
year āas customer demand remains strongā.
Given the substantial increase in flight operations, Emiratesā total operating costs increased by 57% from last year. The carrierās
fuel costs increased by 143%, primarily due to a 49% higher fuel uplift in line with increasing flight operations as well as a fuel price
increase of 48%. Fuel, which had been the largest component of Emiratesā operating costs prior to the pandemic, accounted for 36%
of operating costs in the 2022/23 financial year. The recovery in Emiratesā operations during the 2022/23 financial year led to an
improved EBITDA of AEDī33.3ībillion (USDī9.1ībillion) compared to AEDī17.7ībillion (USDī4.8ībillion) from the previous year.
As of 31 March 2023, Emiratesā total liabilities were nearly flat at AEDī129.8 billion (USDī35.4 billion) compared to the end of
the previous financial year. Amongst other things, the airline repaid AEDī11.1ībillion (USDī3.0 billion) in bonds and term loans.
Total equity came in at AEDī27.9 billion (USDī7.6 billion), an improvement of 37.4%. Emiratesā equity ratio stood at 17.7% and its
cash position, including short-term bank deposits, amounted to AEDī37.4 billion (USDī10.2 billion) at the end of March 2023, the
strongest ever cash asset balance in company history. In comparison, the carrier had AEDī20.9ībillion (USDī5.7 billion) in cash assets
and short-term bank deposits at the end of the 2021/22 financial year. The net cash flow from operating activities came in at AEDī44.3
billion (USDī12.1 billion), the highest ever achieved in a financial year.
Due to the companyās strong cash flow generation in the period ending March 2023, which ultimately resulted in a positive net
change in cash and cash equivalents, and a solid liquidity position, the carrier did not require additional support from its ultimate
shareholder, the Government of Dubai. Since the beginning of the pandemic, the airline had received support via equity injections
from its shareholder. For the past financial year, the company declared a dividend payable to the Owners of Emirates in the amount
of AEDī3.5 billion (USDī954 million). In addition, the lessee has already repaid AEDī7.5 billion (USDī2.0 billion) from the AEDī17.5
billion (USDī4.8 billion) in debt instruments raised during the pandemic.
As at the end of June 2023, Emirates has outstanding US dollar debt issuances with maturities in 2025 and 2028. These bonds were
trading close to par and with running yields of approximately 4.6% in US dollars. There has also been no significant upward pressure
on yields. This level of yields does not appear to indicate any significant financial stress to the issuer. In its most recent annual
financial report, the auditor PricewaterhouseCoopers issued an unqualified audit report.
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Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ASSET MANAGERāS REPORT (continued)
In line with its growing business activities Emirates Airline grew its employee base, including in subsidiary companies, within a
twelve-month period till the end of March 2023 by 23% to 56,379 people.
The management of the Emirates Group, the combined businesses of Emirates Airline and dnata, has a āstrong positive outlookā for
the current 2023/24 financial year and expects to āremain profitableā, according to Sheikh Ahmed. Inflation, high fuel prices, and
political and economic uncertainty were flagged as challenges the management will have an eye on.
The number of A380 departures during the last financial year increased by 118% with Emirates deploying its flagship to 43
destinations, serving around 30% of the Emiratesā passenger network. āThis aircraft is expected to remain the cornerstone of our
fleet mix and product offering for many years to comeā, according to Emiratesā 2022/23 annual report.
About the prospects for the current financial year ending on 31 March 2024 Tim Clark recently noted that āwe are looking towards a
very good year coming upā.
Sustainability
Emirates Airline and dnata have joined the United Nations Global Compact (UNGC), a voluntary global initiative that promotes
responsible business practices and the advancement of the Sustainable Development Goals (SDGs). Both companies commit to
implementing the Ten Principles of the UNGC in the areas of human rights, labour, environment, and anti-corruption.
In May 2023 Emirates reportedly made the biggest single commitment by an airline on sustainability. An investment of USDī200īmillion
is earmarked to fund research and development projects focussed on reducing the impact of fossil fuel in commercial aviation over
a period of three years. Emirates will identify partnerships with leading organizations working on solutions in advanced fuel and
energy technology.
Source: AeroTelegraph, Bloomberg, Cirium, Emirates, Reuters
4. Aircraft ā A380
As of the end of June 2023, the global A380 fleet consisted of 221 planes with 12 airline operators. 145 of these aircraft were
in service. The remainder of the fleet is currently parked. The 12 operators are Emirates (121), Singapore Airlines (14), Deutsche
Lufthansa (14), British Airways (12), Qantas (10), Korean Air Lines (10), Etihad Airways (10), Qatar Airways (10), Thai Airways (6),
Asiana Airlines (6), Air France (5), and All Nippon Airways (3).
UK-based startup airline Global Airlines is reportedly in negotiations to purchase an Airbus A380 previously leased by Portuguese
wet-lease specialist Hi Fly and another three from an undisclosed party.
While Lufthansa is in the process of returning a number of A380s to service, the carrier has said it will operate the jets at least until
2027 and possibly longer.
Designated Qantas CEO Vanessa Hudson revealed that all A380s of the Australian flag carrier will be replaced over the next decade.
After a pandemic-induced halt of A380 operations Qantas is in the process of returning them to service.
While the post-pandemic rebound in air travel triggered demand for aircraft and resulted in an uptick of market values for some
aircraft types, the A380 has not yet benefitted to the same extent. Due to the significant number of A380s still in storage it is less
likely that this would change soon.
Source: Cirium, Simple Flying
15
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORS
As at 31 March 2023, the Company had four directors, all of whom were independent and non-executive. As part of the Boardās ongoing
succession plan, Theresa Oldham was appointed to the Board on 1īApril 2023 and, as previously announced, Charles Wilkinson will be
stepping down from the Board on 31īJuly 2023.
Andreas Josef Tautscher ā Chair of the Company and of the Nomination Committee and Chair of the Management
Engagement Committee
Andreas Tautscher brings over 34 yearsā financial services experience. He is also a non-executive director of Globalworth PLC which
is an AIM listed Central European property Group. He is an independent director of Northern Trust Guernsey Limited, Condor Ferries
Limited and a number of private investment companies. Andreas is a director of Arolla Partners, an 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
Deutsche Bank International and Head of Financial Intermediaries for EMEA and LATAM. 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 AR Committee of Doric Nimrod Air Two Limited, Chair of its Management Engagement Committee and a
director of Doric Nimrod Air One Limited. He is resident in Guernsey.
Charles Edmund Wilkinson ā Chair of the 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. He is resident in Guernsey.
As part of the Companyās Succession Planning it was announced that Charles would stepping down as Chair of the Company with effect
from 1 March 2023. Furthermore, on 18 April 2023, the company announced that Charles Wilkinsonās intention to resign as director
of the Company on 31 July 2023.
Geoffrey Alan Hall
Geoffrey Hall has extensive experience in asset management, having previously been Chief Investment Officer of Allianz Insurance
plc, a major UK general insurance company and an investment manager at HSBC Asset Management, County Investment Management,
and British Railways Pension Funds. Geoffrey is also a director and Chair of the Nomination Committee of Doric Nimrod Air Two Limited.
Geoffrey Hall stepped down as Chair of Doric Nimrod Air Two with effect from 1 March 2023.
Geoffrey earned his masterās 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.
Fiona Le Poidevin ā Chair of the AR Committee
A Chartered Director, Fellow of the Institute of Directors and Chartered Accountant (FCA), Fiona is a non-executive director with
25īyearsā experience working in financial services in both London and the Channel Islands across the accounting and tax professions
with experience in strategy, marketing, PR and the regulatory and listed company environments. Among her appointments, Fiona is
director of Sequoia Economic Infrastructure Income Fund Limited, a FTSE 250 company, and director and Audit Chair of ICG-Longbow
Senior Secured UK Property Debt Investments Limited, both premium listed companies with shares admitted to trading on the Main
Market of the LSE. In addition to her appointment with the Company, Fiona is also a director of Doric Nimrod Air Two Limited, a
company admitted to trading on the Specialist Fund Segment of the LSE.
Until the end of July 2020, Fiona was Chief Executive Officer of The International Stock Exchange Group Limited where she was
responsible for the commercial aspects of the listed exchange groupās operation. Previously Fiona was Chief Executive of Guernsey
Finance, the promotional body for Guernseyās finance industry internationally, and prior to this she was an auditor and latterly tax
adviser at PwC (London and Channel Islands) and KPMG (Channel Islands) for over 13 years. Fiona is a member of the AIC Channel
Islands Committee and Chair of a local Sea Scouts group. She is resident in Guernsey.
16
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORS (continued)
Theresa Amanda Oldham
Theresa is a non-executive director with over 30 yearsā experience in the aircraft finance and leasing industry. Having trained and
spent her early career as a solicitor in the City of London, Theresa moved into the industry where she held a number of senior positions,
most recently and until 2019, as Group Director of Aircraft Finance and Leasing for Thomas Cook Group plc where she was responsible
for all related activities for the Groupās international fleet of aircraft.
Since 2020, Theresa has been providing aviation consultancy services and maintains a practicing certificate as a solicitor in England
and Wales. She is resident in the United Kingdom.
Theresa was appointed as non-executive Director of the Company effective 1 April 2023.
17
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
SERVICE PROVIDERS
Management and the Delegation of Functions
The directors, whose details are set out on page 15 are responsible for reviewing the business affairs of the Group in accordance
with the Articles and have overall responsibility for the Groupās activities including all business decisions, review of performance
and authorisation of distributions. The Company has delegated management of the Groupās Aircraft to Amedeo, which is a company
incorporated in Ireland. Further details are outlined below under the heading Asset Manager. The Board has appointed Nimrod,
which is authorised by the FCA, to act as the Corporate and Shareholder Adviser of the Company. The directors delegate secretarial
and administrative functions to JTC which is a company incorporated in Guernsey and licenced by the GFSC for the provision of
administration services. The registrar function is delegated to the Registrar, which is licensed and regulated by the GFSC.
Asset Manager and Lease and Debt Arranger
Amedeo has been appointed by the Company to provide asset management services to the Group. Pursuant to the Asset Management
Agreement, Amedeo will: (i) monitor Emiratesā and any subsequent lesseesā performance of its obligations under the respective
operating Leases and any subsequent lease respectively (which shall include the obligations relating to the maintenance of insurance
cover); (ii) provide the Group with information regarding alternatives with respect to any potential sale or re-lease of the Assets;
(iii) carry out mid-lease inspections of the Assets; (iv) provide the Group with asset monitoring reports describing the state and any
material changes to the state of the Assets; and (v) liaise, as and when necessary, with lenders, on all matters relating to the loans,
as required. Amedeo has further undertaken that it will dedicate sufficient time and resources as it reasonably believes is required
from time to time to fulfil any contractual arrangements it enters into with the Company.
Amedeo has also been appointed by the Company, pursuant to the Agency Agreement, to assist the Group, and act as the Groupās
agent, in relation to the arrangement, negotiation, review, approval, execution and management on behalf of the Group of the
acquisition of the Assets, the borrowings of the Group relating to the acquisition of the Assets, and the operating Leases. Amedeo is
a subsidiary of Amedeo Capital Limited, a Cayman company engaged in the business of aircraft operating leasing and management.
Amedeo Services (UK) Limited has been appointed by the Group, pursuant to the Liaison Services Agreement, to: (i) coordinate the
provision of services by Amedeo to the Group under the Asset Management Agreement and the Agency Agreement, as relevant; and
(ii) facilitate communication between the Group and Amedeo. Amedeo Services (UK) Limited is authorised by the FCA and is part of
the Amedeo Group of companies.
Amedeo is a recognised aircraft asset manager and principal investor in leasing transactions to customer airlines globally. The
aircraft portfolio currently managed by the Amedeo group, includes twenty-one aircraft under management. The volume of assets
under management is c. $5 billion, which includes commercial airliners including A380, A350, A330 and Boeing 777. Amedeo is a
member of the ISTAT.
Corporate and Shareholder Adviser
Nimrod, which is authorised by the FCA, has been appointed as the Corporate and Shareholder Adviser by the Company.
Nimrod was founded in 2008 as an independent organisation which specialises in generating and sourcing interesting investment
funds, themes and solutions managed by experts in their fields for the professional investor marketplace. It has launched nine
listed investment companies since its formation and it also provides investment, marketing, distribution and advisory services to
investment companies and their boards and managers.
Secretary & Administrator
JTC is an independent provider of institutional and private client services to clients in numerous jurisdictions and is a member of the
JTC Group. For further information about the JTC Group, please visit www.jtcgroup.com.
JTC is a Guernsey incorporated company and provides administration and secretarial services to the Group pursuant to an
Administration and Secretarial Agreement. In such capacity, JTC is responsible for the general secretarial functions required by the
Law and assists the Group in its compliance with its continuing legal and regulatory obligations, as well as providing advice on good
corporate governance and best practice for a publicly traded company.
18
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
SERVICE PROVIDERS (continued)
JTC is also responsible for the Groupās general administrative functions and for the preparation of unaudited half-yearly and audited
annual financial reports, subject to the direction and oversight of the Board.
Registrar
The Registrar, is the Companyās CREST compliant registrar. The Registrar is responsible for the maintenance of the Companyās Share
register and for the processing of dividend payments and stock transfers. The Registrar is licensed and regulated by the GFSC and
further information about Registrar may be found at www.jtcgroup.com.
Review
The Board keeps under review the performance of the Asset Manager, Corporate and Shareholder Adviser, Secretary, Administrator
and the Registrar and the powers delegated to each service provider. In the opinion of the Board, the continuing appointments of the
service providers on the terms agreed are in the interests of the Companyās Shareholders as a whole.
A full list of the Companyās service providers is set out on page 17.
19
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
MANAGEMENT REPORT
A description of important events which have occurred during the financial year under review, their impact on the performance of the
Group as shown in the Consolidated Financial Statements and a description of the principal risks and uncertainties facing the Group
are given in the Chairās Statement, Asset Managerās Report, Statement of Principal Risks and the notes to the Consolidated Financial
Statements contained on pages 55 to 76 and are incorporated here by reference.
Principal Risks and Uncertainties
The Board has undertaken a robust assessment of the principal risks facing the Group and have undertaken a detailed review of the
effectiveness of the risk management and internal control systems. The Board is comfortable that the risks are being appropriately
monitored on a regular basis.
The risks set out below are those which are considered to be the material risks relating to an investment in the Shares but are not the
only risks relating to the Shares or the Group. Additional risks and uncertainties of which the Group is presently unaware or that the
Group currently believes are immaterial may also adversely affect its business, financial condition, results of operations or the value
of the Shares.
The principal risks associated with the Group are:
ā¢ Operational risk: The Board is ultimately responsible for all operational facets of performance including cash management,
asset management, regulatory and listing obligations. The Group has no employees and so enters into a series of contracts/legal
agreements with a series of service providers to ensure both operational performance and the regulatory obligations are met.
This risk has been mitigated by the Group using well established, reputable and experienced service providers and assessing
service providersā continued appointment on at least an annual basis.
ā¢ Investment risk: There are a number of risks associated with the Groupās Assets in relation to the occurrence of technical faults
with the Assets or actions by third parties causing both damage to the Assets and also damaging the demand for global air travel.
This risk has been mitigated by the Lesseeās contractual responsibility to insure, repair and maintain the Aircraft for the duration
of the Leases.
ā¢ Borrowings and financing risk: There is a risk that the Group is exposed to fluctuations in market interest rates and foreign
exchange rates. This risk has been mitigated by ensuring that debt repayments are made from lease rental revenues received in
the matching currency and by fixing the interest rates on debt and lease rentals.
ā¢ Credit risk: Emirates is the sole lessee of the Assets and is headquartered in the Middle East. Should Emirates default on the
rental payments due to domestic events, events in the wider airline industry or other reasons it is unlikely the Company will
be able to meet its targeted dividends or, in the case of ongoing default, continue as a going concern. The risk of default is
potentially mitigated by the ability of the Group to sell or re-lease the Assets in the event of a single default, together with
the financial position of Emirates. However, this could be impacted by market conditions at the time. The Board monitors the
financial performance of Emirates on an ongoing basis.
ā¢ Secondary market risk: There is a risk that the Group would not be able to achieve the projected resale value of the Assets due
to i) changes in demand for second hand aircraft of the type owned by the Group, ii) the limited number of airlines operating
the aircraft type, and iii) an increasing trend for airlines to operate newer generation aircraft that are more efficient and whose
engine costs are substantially less. Therefore, the Board monitors and revises the residual value of the Aircraft on an annual
basis based on reports received from three independent appraisers, who consider these market trends in their aircraft valuations.
ā¢ Aircraft preservation risk: In the case that the aircraft are returned and there are not yet secondary leases in place or an
agreement to sell immediately, there is a risk that the Company would need to utilise financial resources to cover storage costs,
preservation of the aircraft whilst in storage, and maintain insurance on the aircraft though this would be a smaller cost as the
aircraft would not be flying. The risk is mitigated by ensuring proactive engagement with the Groupās lessee so that the end of
lease situation is known and planned for well in advance of the expiry date. The Board also maintains a healthy cash position
from rentals received which is not paid out as regular dividend in order to facilitate end of lease planning.
20
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
MANAGEMENT REPORT (continued)
ā¢ Regulatory risk: The Group is required to comply with the DTRs of the FCA and the requirements imposed by the Law and any
other legislation and regulations as applicable. Any failure to comply could lead to criminal or civil proceedings. Although
responsibility ultimately lies with the Board, the Board is assisted by the Secretary which also monitors compliance with
regulatory requirements.
ā¢ Valuation risk: There is a risk that the useful life or residual value used in determining depreciation are not appropriate or
accurately calculated. The Board assess, based on the latest forecast valuations, whether the selected residual values remains as
an appropriate basis of valuation and with consideration to the range of estimates provided by the external valuers. The Group
has a robust audit process. Additionally, the Group has engaged external experts (two out of those three being ISTAT accredited)
to provide residual values of Aircraft. The Asset Manager is up to date regarding the Aircraft/Aviation industry giving insight to
the Board regarding the current and future outlook for the industry and appropriate life/residual values. JTC annually completes
impairment testing in line with IAS 36.
Emerging Risks
The Board has developed and continues to maintain a risk matrix for the Group which is reviewed regularly. The Board continually
monitors emerging risk areas relevant to the performance of the Group including those that would threaten its business model, future
performance, solvency and liquidity on an ongoing basis. The Board receives from the Companyās Asset Manager bi-annual reporting
confirming the Asset Managerās obligations and highlighting key issues and risks to be brought to the Groupās attention.
Additional risks and uncertainties of which the Board is presently unaware may also adversely affect its business, financial condition,
results of operations or the value of shares.
Data Protection
The Company has implemented measures designed to ensure its compliance with the EU General Data Protection Regulation (EU)
2016/679 and associated legislation in Guernsey. The Company has also issued a privacy notice explaining the data it holds, how the
data is used and its procedures for processing this data. This notice is available for review and download at the Companyās website.
Going Concern
The Groupās principal activities are set out within the Company Overview on page 5. The financial position of the Group is set out on
page 52. In addition, note 20 to the Consolidated Financial Statements includes the Groupās objectives, policies and processes for
managing its capital, its financial risk management objectives and its exposure to credit risk and liquidity risk.
The directors, in consultation with the Asset Manager, are monitoring the residual effects of the Pandemic generally on the aviation
industry and specifically on the Groupās Aircraft values and the financial wellbeing of its Lessee both now and in the future. During
the Companyās financial year ended on 31 March 2023, global air passenger traffic experienced a very strong recovery. Tight capacity
management by airlines resulted in the highest PLF on record for the month of March, achieved in March 2023. Overall, global
air passenger traffic in March 2023 was 12% below its pre-pandemic levels compared with March 2019. Emirates reported its most
profitable year ever with a net profit of 10.6 billion AED (2.9 billion USD), a significant turnaround from a net loss of 3.9 billion AED
(1.1 billion USD) in the previous financial year, ended in March 2022.
Reduced rents receivable under the Leases may not be sufficient to meet the debt interest and regular repayments of debt scheduled
during the life of the EETC, and may not provide surplus income to pay for the Groupās expenses and permit the declaration of
dividends. However, this would only apply if the Lessee became unable to meet its debt repayment obligations or insisted on a rent
holiday, and the Lessee has given no indication of either scenario.
The directors consider that the going concern basis of accounting remains appropriate. Based on current information the directors
have reasonable expectation that the Group has sufficient financial resources, including cash and cash equivalents and expected rent
receipts to continue in operational existence for at least twelve months from the date of this report.
21
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
MANAGEMENT REPORT (continued)
The Board will continue to actively monitor the financial impact on the Group from the evolving position with its Lessee and debt
providers whilst bearing in mind its fiduciary obligations and the requirements of Guernsey law which determine the ability of the
Group 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 Consolidated
Financial Statements that Emirates will continue with the contracted lease rental payments due to the following:
ā Emirates continues to be a going concern as at the date of the Lesseeās latest signed annual financial report for the financial year
ended on March 31, 2023.
ā During the last financial year, Emirates accelerated its global network recovery by relaunching flights to six destinations and
increased operations to 62 cities across its network throughout the year. The number of passengers increased by 123% compared
to the year before to 43.6 million, while the airlineās capacity for passenger services, measured in ASKs, increased by 78%
compared to the previous year and reached 77% of the pre-COVID levels. The passenger seat factor averaged at 79.5%, an
improvement of 20.9 percentage points compared to the previous year.
ā Emirates reported its most profitable year ever with a net profit of 10.6 billion AED (2.9 billion USD), a significant turnaround
from a net loss of 3.9 billion AED (1.1 billion USD) in the previous financial year, ended in March 2022.
ā Emiratesā Credit Default Swap is trading below its multi-year average indicating a low default risk.
ā As of the date of the Consolidated Financial Statements, the Board is not aware of a formal request to the Group for a lease
deferral or any other efforts that would result in the restructuring of the existing transaction.
ā Emirates has paid all the lease rentals to the Group in a timely manner.
The directors have considered Emiratesā ability to continue paying the lease rentals over the next 12 months and are satisfied that the
Group can meet its liabilities as they fall due over this period. Further detail regarding the assumptions adopted when forming this
conclusion can be found in the Viability Statement on page 21. Refer to note 12 for expiry dates of the leases.
Viability Statement
In accordance with Provision 31 of the Code, the directors of the Company have considered the prospects of the Group over the period
from present until the liquidation resolution is put to Shareholders six months before the last Lease is due to terminate in 2025, a
period of approximately two years from the date of approval of the financial statements. In choosing the period of viability for the
Group the Board has considered the prospect of Emirates performing their obligations until the end of their Leases.
The Board, in assessing the viability of the Group, has paid particular attention to the principal risks faced by the Company as disclosed
in the Management Report and the notes to the Consolidated Financial Statements, reviewing on an ongoing basis the risks faced and
ensuring that any mitigation measures in place are functioning correctly.
The directors, with the support of its Asset Manager, believe that it is reasonable to assume as of date of approval of the Consolidated
Financial Statements that Emirates will continue with the contracted lease rental payments due to the following:
ā Emirates continues to be a going concern as at the date of the Lesseeās latest signed annual financial report for the financial year
ended on 31 March 2023.
ā During the last financial year, Emirates accelerated its global network recovery by relaunching flights to six destinations and
increased operations to 62 cities across its network throughout the year. The number of passengers increased by 123% compared
to the year before to 43.6 million, while the airlineās capacity for passenger services, measured in ASKs, increased by 78%
compared to the previous year and reached 77% of the pre-COVID levels. The passenger seat factor averaged at 79.5%, an
improvement of 20.9 percentage points compared to the previous year. Emirates reported its most profitable year ever with a net
profit of 10.6 billion AED (2.9 billion USD), a significant turnaround from a net loss of 3.9 billion AED (1.1 billion USD) in the
22
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
MANAGEMENT REPORT (continued)
previous financial year, ended in March 2022. Emiratesā Credit Default Swap is trading below its multi-year average indicating a
low default risk.
ā As of the date of the Consolidated Financial Statements, the Board is not aware of a formal request to the Group for a lease
deferral or any other efforts that would result in the restructuring of the existing transaction.
ā Emirates has paid all the lease rentals to the Group in a timely manner.
The Group retains sufficient cash to cover the forecast operating costs of the Group until the termination date of the Leases in 2025,
assuming receipt of planned rental income.
The directors believe that their assessment of the viability of the Company over the period chosen was sufficiently robust and
encompassed the risks which would threaten the business model, future performance, solvency or liquidity of the Group, together
with ongoing work to forecast future expenditure in various possible scenarios.
As a result of their review, the directors of the Group have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due until the Leases are due to terminate in 2025.
Responsibility Statement
The directors jointly and severally confirm that to the best of their knowledge:
(a) the financial statements, prepared in accordance with IFRS give a true and fair view of the assets, liabilities, financial position
and profits of the Group and performance of the Group;
(b) this Management Report includes or incorporates by reference a fair review of the development and performance of the business
and the position of the Group, together with a description of the principal risks and uncertainties that it faces; and
(c) the annual report taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders
to assess the Groupās position, performance, business model and strategy.
Andreas Tautscher Fiona Le Poidevin
Chair Director
21 July 2023
23
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT
The directors present their annual report and audited financial statements of the Group for the financial year ended 31 March 2023.
Principal Activities and Business Review
activities for the foreseeable future. A description of the activities of the Group in the year under review is given in the Chairās
Statement and the Asset Managerās Report respectively on pages 7 to 8 and 9 to 14.
Status
The Company is a Guernsey domiciled company, the Shares of which are admitted to trading on the SFS. Its registered number is
54908. The Company operates in accordance with the Law.
Results and Dividends
The results of the Group for the financial year are set out on page 51.
The Company declared dividends during the financial year under review as follows:
Quarter End
Announcement
Date Payment Date
Dividend per
Share (pence)
31 March 2022 12 April 2022 29 April 2022 2.0625
30 June 2022 14 July 2022 29 July 2022 2.0625
30 September 2022 13 October 2022 31 October 2022 2.0625
31 December 2022 12 January 2023 31 January 2023 2.0625
The Company declared the following dividends after the financial year end:
Announcement Date Payment Date
Dividend per
Share (pence)
12 April 2023 28 April 2023 2.0625
14 July 2023 31 July 2023
(expected payment date)
2.0625
The Company aims to continue to pay quarterly dividends of 2.0625 pence per Share, in line with the distribution policy. There is no
guarantee that any future dividends will be paid.
Directors
The directors in office are shown on page 15 and all directors remain in office as at the date of signing of these financial statements.
Further details of the directorsā responsibilities are given on page 32.
No director has a contract of service with the Company, nor are any such contracts proposed.
24
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
Substantial Controllers of Voting Rights
The Company has identified the following substantial controlling interests in voting rights attached to the Companyās issued Share
capital in accordance with Chapter 5 of the DTRs. These are based on notifications made to the Company since inception and may
differ substantially from positions recorded on the Companyās Share register.
There have been no material changes in the below list of substantial controlling interests between the end of the year under review
and 17īJuly 2023, being the latest practicable date prior to the date of approval of this report.
Name
% of Total
VotingīRights
Number of
Shares
Elliott Management 14.08% 30,981,000
East Riding of Yorkshire Council 9.56% 21,040,008
Momentum Global Investment Management 7.38% 16,233,600
Quilter Cheviot Investment Management 7.22% 15,878,578
Hargreaves Lansdown, stockbrokers (EO) 5.01% 11,015,981
25
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
Corporate Governance
Statement of Compliance with the Code, as published in July 2018
As a Guernsey incorporated company and under the DTRs, the Company was not required to comply with the Code for the reporting
period. The Company has, however, voluntarily committed to comply with the Code or explain any departure. A copy of the Code is
available for download from the FRCās website (www.frc.org.uk).
Having reviewed the Code, the Board considers that it has maintained procedures during the year to ensure that it has complied with
the Code, other than the following exceptions:
(i) Provision 2: The board should assess and monitor culture.
Provision 5: The board should understand the views of the companyās other key stakeholders and describe in the annual report
how their interests and the matters set out in section 172 of the Companies Act 2006 have been considered in board discussions
and decision-making. The board should keep engagement mechanisms under review so that they remain effective.
For engagement with the workforce, one or a combination of the following methods should be used:
ā¢ a director appointed from the workforce;
ā¢ a formal workforce advisory panel;
ā¢ a designated non-executive director.
Provision 6: There should be a means for the workforce to raise concerns in confidence and ā if they wish ā anonymously.
Company Response: Although the Company does not have employees, the Board recognises that it, together with the service
providers of the Company, contributes to the overall culture of the Company. Therefore, the Board assesses and monitors this
culture. It also explores effective engagement mechanisms for key stakeholders.
(ii) Provision 10: The board should identify in the annual report each non-executive director it considers to be independent.
Circumstances which are likely to impair, or could appear to impair, a non-executive directorās independence include, but are
not limited to, whether a director:
ā¢ has, or has had within the last three years, a material business relationship with the company, either directly or as a partner,
shareholder, director or senior employee of a body that has such a relationship with the company;
ā¢ holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
ā¢ has served on the board for more than nine years from the date of their first appointment.
Where any of these or other relevant circumstances apply, and the board nonetheless considers that the non-executive director
is independent, a clear explanation should be provided.
Provision 19: The chair should not remain in post beyond nine years from the date of their first appointment to the board. To
facilitate effective succession planning and the development of a diverse board, this period can be extended for a limited time,
particularly in those cases where the chair was an existing non-executive director on appointment. A clear explanation should
be provided.
Company Response: Charles Wilkinson was Chair of the Company for over nine years. However, following careful review, the
Board has been implementing an effective succession plan over the last few years and, as part of that exercise, Mr Wilkinson
stepped down as Chair of the Company on 1 March 2023, succeeded by Andreas Tautscher.
26
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
The Board considers that, following the appointment of Mr Tautscher, the Company now complies with provision 19.
Provision 12: The Board should appoint one of the independent non-executive directors to be the senior independent director to
provide a sounding board for the chair and serve as an intermediary for the other directors and shareholders. Led by the senior
independent director, the non-executive directors should meet without the chair present at least annually to appraise the chairās
performance, and on other occasions as necessary.
Company Response: The Board have formed the view that, given the size of the Board it is not immediately necessary to fill this
vacancy. However, such an appointment remains a matter of ongoing consideration for the Board.
(iii) Provision 9: The chair should be independent on appointment when assessed against the circumstances set out in Provision 10.
The roles of chair and chief executive should not be exercised by the same individual.
Company Response: There is no chief executive. The Nomination Committee will meet in Q4 2023 to continue discussions around
effective succession planning and board composition, mindful of the tenure of Board members and the remaining life of the
Company.
(iv) Provision 13: Non-executive directors have a prime role in appointing and removing executive directors. Non-executive
directors should scrutinise and hold to account the performance of management and individual executive directors against
agreed performance objectives. The chair should hold meetings with the non-executive directors without the executive directors
present.
Provision 32: The board should establish a remuneration committee of independent non-executive directors, with a minimum
membership of three, or in the case of smaller companies [
i.e. not in the FTSE 350
], two.
Provision 33: The remuneration committee should have delegated responsibility for determining the policy for executive director
remuneration and setting remuneration for the chair, executive directors and senior management.
Provision 35: Where a remuneration consultant is appointed, this should be the responsibility of the remuneration committee.
Provision 41: There should be a description of the work of the remuneration committee in the annual report.
Company Response: The Company has no executive directors, senior management or employees. It does not have a remuneration
committee given the small size of the exclusively non-executive and independent board, but has established a Nomination
Committee where the Remuneration of the Board is considered. Remuneration provision is set out in this Directorsā Report.
Board Evaluation
The Board is committed to ensuring that on an annual basis the strengths of the Board are recognised and any weaknesses are
addressed. Each director has undertaken to engage with the evaluation process and take appropriate action when development needs
have been identified. An external facilitation of the performance evaluation is considered by the Chair of the Nomination Committee
on an annual basis.
For the financial year under review, the Nomination Committee agreed that an external facilitation of the performance evaluation
required by provision 21 of the Code was not required and instead the evaluation was performed by the Nomination Committee.
Directors were asked to complete individual questionnaires on the performance of the Board and its committees on an anonymous
basis and the completed questionnaires were considered at a meeting of the Nomination Committee. At the conclusion of its
evaluation, the Nomination Committee made minor suggestions for improvements and also concluded that the Board generally
operated well given its compact size.
27
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
Board Responsibilities
The Board is currently comprised of five directors, and their biographies appear on page 15 demonstrating the wide range of skills
and experience they each bring to the Board. All the directors are non-executive and independent, with Andreas Tautscher acting as
Chair.
The other significant commitments of the current Chair are detailed in his biography on page 15. The Board was satisfied during the
year and remains satisfied that the Chairās other commitments do not interfere with the day-to-day performance of his duties to the
Company and that he has the commitment and time to make himself available at short notice should the need arise.
The Nomination Committee regularly reviews the balance, knowledge and effectiveness of the Board, to identify if any additional
experience or skills are needed and to ensure that the current directors have sufficient available time to undertake the tasks required
and remain independent. The directors are able and encouraged to provide statements to the Board of their concerns and ensure
that any items of concern are recorded in the Board minutes. When undertaking a search for a new director the Board is mindful of
diversity and meritocracy.
In accordance with the Articles the directors shall determine the directorsā fees payable provided that the aggregate amount of
such fees paid in respect of services rendered to the Company shall not exceed Ā£150,000 per annum. All directors receive an annual
fee and there are no share options or other performance related benefits available to them. All directors are currently paid a fee of
Ā£30,000 per annum. The Chair is paid an additional fee of Ā£7,000 per annum and the chair of the AR Committee is entitled to be paid
an additional Ā£4,500 per annum. The terms and conditions of appointment of non-executive directors are available for inspection at
the Companyās registered office by prior arrangement with the Companyās Secretary.
The Board usually meets in Guernsey at least four times per year to consider the business and affairs of the Company, at which
meetings the directors review the Groupās Assets and all other important issues to ensure control is maintained. The directors hold
a Dividend Committee meeting in Guernsey each quarter to consider and, if thought suitable, approve the payment of a dividend in
accordance with the Companyās distribution policy.
Between these regular meetings the Board keeps in contact by email and telephone as well as meeting to consider specific matters of
a transactional nature. Additionally the directors may hold strategy meetings with its relevant advisors as appropriate.
The directors are kept fully informed by the Asset Manager and Secretary of all matters that are relevant to the business of the Group
and should be brought to the attention of the directors and / or the Shareholders. All directors have direct access to the Secretary
who is responsible for ensuring that Board procedures are followed and that there are effective information flows both within the
Board and between the committees and the Board.
The directors also have access to the advice and services of the Asset Manager and Corporate and Shareholder Adviser and may also,
in the furtherance of their duties, take independent professional advice at the Companyās expense.
During the year the number of full Board meetings and committee meetings attended by the directors were as follows:
Director Board Meetings
Audit and Risk
Committee
Meetings
Nomination
Committee
Meetings
Management
Engagement
Committee
Meetings
Dividend
Committee
Meetings***
Charles Wilkinson* 5 of 6 0 of 1 2 of 3 2 of 3 1 of 4
Geoffrey Hall 6 of 6 6 of 6 3 of 3 3 of 3 3 of 4
Fiona Le Poidevin 6 of 6 6 of 6 3 of 3 3 of 3 4 of 4
Andreas Tautscher** 6 of 6 5 of 5 3 of 3 3 of 3 2 of 4
* Charles Wilkinson resigned as Chair of the Board and was subsequently appointed as a member of the Audit and Risk Committee effective 1 March 2023.
** Andreas Tautscher was appointed as Chair of the Board effective 1 March 2023 and ceased in his role as a member of the Audit and Risk Committee.
*** refer to page 29 for the composition and function of the Dividend Committee.
28
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
Audit and Risk Committee
Mr Hall, Mr Wilkinson and Mrs Le Poidevin are all members of the AR Committee, with Mrs Le Poidevin acting as Chair. The AR Committee
has regard to the Guidance on Audit and Risk Committees published by the FRC in September 2012 and as updated in April 2016. The
AR Committee examines the effectiveness of the Groupās and its service providersā internal control systems as appropriate, the annual
and half-yearly reports and financial statements, the auditorās remuneration and engagement, as well as the auditorās independence
and any non-audit services provided by them.
The FRC published updated Ethical and Auditing Standards in December 2019, which further restrict the provision of non-audit
services by audit firms to their clients. The previous list of prohibited non-audit services list has been replaced with a short list of
permitted services. Auditors of PIEs can now only provide non-audit services which are closely linked to the audit itself or are required
by law or regulation. Also, whereas PIEs were previously limited to those entities incorporated in the EU, the FRC now defines PIEs
as all issuers whose transferable securities have been admitted to trading on a UK regulated market, which includes the LSE but not
AIM. The Crown Dependency rules were also changed so that Market Traded Companies incorporated in the Crown Dependencies are
also included in this requirement.
The AR Committee considers the nature, scope and results of the auditorās work and reviews annually prior to providing a
recommendation to the Board on the re-appointment or removal of the auditor. When evaluating the external auditor the AR
Committee has regard to a variety of criteria including industry experience, independence, reasonableness of audit plan, ability
to deliver constructive criticism, effectiveness of communication with Board and the Groupās service providers, quality control
procedures, effectiveness of audit process and added value beyond assurance in audit opinion.
Auditor independence is maintained through limiting non-audit services to specific audit-related work that falls within defined
categories. All engagements with the auditor are subject to pre-approval from the AR Committee and fully disclosed within the
annual financial report for the relevant period. A new lead audit partner is appointed every five years and the AR Committee ensures
the auditor has appropriate internal mechanisms in place to ensure its independence.
The AR Committee usually meets in Guernsey at least twice per year, shortly before the Board meets to consider the Groupās half-
yearly and annual financial reports, and reports to the Board with its deliberations and recommendations and also holds annual
planning and final meetings with the auditor. In addition, the Board also meets during the audit process with the auditors to discuss
issues relating to the residual values of the Assets. The AR Committee operates within clearly defined terms of reference based on The
Chartered Governance Institute UK & Ireland recommended terms and provides a forum through which the Groupās external auditor
report to the Board.
The AR Committee can request information from the Groupās service providers with the majority of information being directly sourced
from the Asset Manager, the Secretary, the Administrator and the external auditor. The terms of reference of the AR Committee are
available on the Companyās website and on request from the Secretary.
Each year the Board examines the AR Committeeās performance and effectiveness and ensures that its tasks and processes remain
appropriate. Key areas covered included the clarity of the AR Committeeās role and responsibilities, the balance of skills among its
members and the effectiveness of reporting its work to the Board. The Board is satisfied that all members of the AR Committee have
relevant financial experience and knowledge and ensure that such knowledge remains up to date. Overall the Board considers that
the AR Committee has the right composition in terms of expertise and has effectively undertaken its activities and reported them to
the Board during the year under review.
During the financial year the AR Committee met six times. The AR Committee considered the annual financial report for the year ended
31 March 2022 and the half-yearly financial report for the period ended 30 September 2022. The AR Committee also met in February
2023, with the external auditor in attendance, to approve the 2023 audit plan. The AR Committee furthermore met in March 2023 to
consider the Companyās Business Risk Matrix. The AR Committee also undertook a review of the Companyās auditor during the year.
Following a query raised by the FRC on 10 February 2023 wherein the FRC raised queries about the Companyās disclosure on impairment
triggers, the Company provided a comprehensive response explaining the process for valuing Airbus A380 aircraft in the current
market. The Board undertook to include a clear statement on impairment assessments in future interim reports and provide examples
29
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
of indicators considered. On 9 May 2023, the FRC expressed their satisfaction with the response provided and confirmed that their
enquiry had been closed.
Dividend Committee
The Dividend Committee consists of any one or more director, who has been given full power and authority to consider and, if
thought suitable, declare and approve the payment of a dividend in accordance with the Companyās distribution policy, provided all
directors had been provided with prior notice of the proposal to declare each dividend and no director had raised any objection to the
declaration of each dividend. In practice, a majority of directors of the Board are usually present.
Nomination Committee
The Nomination Committee consists of all directors of the Company, with Mr Wilkinson acting as Chair of the committee.
The functions of the Nomination Committee include to regularly review the structure, size and composition of the Board (including the
skills, knowledge, experience, diversity and how effectively members work together to achieve objectives) and make recommendations
to the Board with regard to any changes, and to perform a formal and rigorous performance evaluation of the Board, its committees,
the Chair and individual directors, including the consideration of having a regular externally facilitated Board evaluation. A full
description of the Board evaluation is included on page 26, above.
During the financial year the Nomination Committee met three times, to consider the appointment of a new non-executive director
and to undertake the annual performance evaluation of the Board and its committees. The Company utilised the services of Fletcher
Jones Limited, an independent recruiting agency specialising in the recruitment of directors, to provide the board with a shortlist of
diverse qualified candidates. Subsequently, the board conducted interviews in order to select the most suitable candidate based on
their experience, industry knowledge and qualifications.
The Nomination Committee is responsible for identifying and nominating for the approval of the Board candidates to fill Board
vacancies as and when they arise. Prior to any appointment made by the Board, the Nomination Committee will evaluate the balance
of skills, knowledge, experience and diversity on the Board, and, in the light of this evaluation, prepare a description of the role and
capabilities required for a particular appointment. In identifying suitable candidates the Nomination Committee shall:
ā¢ generally use open advertising or the services of external advisers to facilitate the search, unless there is a valid reason for not
doing so in which case justification for this decision would be disclosed;
ā¢ consider candidates from a wide range of backgrounds; and
ā¢ consider candidates on merit and against objective criteria and with due regard for the benefits of diversity on the Board,
including gender, taking care that appointees have enough time available to devote to the position.
The Nomination Committee prepares a job specification for the appointment of a director, including the time commitment expected.
A proposed directorās other significant commitments should be disclosed to the Board before their appointment and any significant
changes to the directorās commitments should be reported to the Board as they arise.
Prior to the appointment of a director, the Nomination Committee requires any proposed appointee to disclose any other business
interests that may result in a conflict of interest.
The Nomination Committee ensures that, on appointment to the Board, a new non-executive director receives a formal letter of
appointment, setting out clearly what is expected of them in terms of time commitment, committee service and involvement outside
Board meetings.
Succession planning is performed based on the results of the Nomination Committeeās evaluation of the structure, size and
composition of the Board as well as the results of the Board evaluation. In giving full consideration to succession planning for
directors, the Nomination Committee takes into account the challenges and opportunities facing the Company and the skills and
30
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
expertise needed on the Board in the future. The Nomination Committee keeps under review the leadership needs of the Company
with a view to ensuring the continued ability of the Company to operate effectively in the marketplace. The Board has a succession
plan in place which commenced with the appointment of Andreas Tautscher in August 2019, continuing with the appointment of
Fiona Le Poidevin in March 2022 and with the more recent appointment (post period) of Theresa Oldham. These new directors have
brought a diverse set of skills and knowledge to the Board from their prior experience and the appointments of Mrs Le Poidevin and
Ms Oldham demonstrate the Boardās commitment to gender diversity. A Board Evaluation was carried out during the year.
Management Engagement Committee
The Management Engagement Committee was established on 15 October 2020 and consists of all directors of the Company, with
Andreas Tautscher acting as Chair. The Management Engagement Committee meets at least once a year and the principal duties of the
Management Engagement Committee are to review the terms of the agreements between the Company and its key service providers
to ensure that they are competitive, fair and reasonable for Shareholders, to review and make recommendations on any proposed
amendment or material breach of those agreements and to monitor and evaluate the performance of the key service providers
including the ongoing suitability of the key service providers to provide advice to the Company.
During the period the Management Engagement Committee met on three occasions, the first in October 2022 to report on the August
2022 site visit to Amedeo. The committee met again in February 2023 reconvened to March 2023, to perform a review of the Companyās
service providers. Additionally, the committee met with Nimrod in May 2023.
Internal Control and Financial Reporting
The Board is responsible for the Groupās system of internal control and for reviewing its effectiveness. The Board confirms that there
is an ongoing process for identifying, evaluating and monitoring the significant risks faced by the Group.
The internal control systems are designed to meet the Groupās particular needs and the risks to which it is exposed. Accordingly, the
internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their
nature can only provide reasonable and not absolute assurance against misstatement and loss.
The Board reviews its risk matrix on a quarterly basis, which covers various areas of risk including corporate strategy, accuracy of
published information, compliance with laws and regulations, relationships with service providers and business activities.
Asset management services are provided to the Company by Amedeo. Corporate and shareholder advisory services are provided to the
Company by Nimrod. Administration and secretarial duties for the Group are performed by JTC.
The Board clearly defines the duties and responsibilities of their agents and advisors. The appointment of agents and advisers is
conducted by the Board after consideration of the quality of the parties involved and the Board monitors their ongoing performance
and contractual arrangements. The Board also specifies which matters are reserved for a decision by the Board and which matters may
be delegated to its agents and advisers.
Management of Conflicts of Interest
The Company has adopted a formal conflicts of interest policy and is committed to ensuring that all directors and service providers
facilitate the Company conducting its business in a manner that is consistent with its reputation, conducive to maintaining high
standard of integrity in all its business dealings, in the best interests of the Companyās Shareholders.
The Board considers the directorās conflicts of interest at each Board meeting by reviewing a schedule of each directorās other
directorships and other interests held. Each director is required to notify the Secretary of any potential, or actual, conflict situations
that would need to be considered by the Board.
No director has a service contract with the Company, although directors are issued with letters of appointment, nor did any director
have any interest in contracts with the Company during the financial year under review, or subsequently.
31
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
Anti-Bribery Policy
The directors have undertaken to operate the business in an honest and ethical manner and accordingly take a zero-tolerance
approach to bribery and corruption. The key components of this approach are implemented as follows:
ā¢ The Board is committed to acting professionally, fairly and with integrity in all its business dealings and relationships.
ā¢ The Group has implemented an anti-bribery policy and enforces effective procedures to counter bribery.
ā¢ The Group requires all its service providers and advisors to adopt equivalent or similar principles.
Criminal Facilitation of Tax Evasion
The Board has a zero tolerance appetite for the criminal facilitation of tax evasion.
Dialogue with Shareholders
All holders of Shares in the Company have the right to receive notice of, and attend, the general meetings of the Company, during
which members of the Board will be available to discuss issues affecting the Group.
The primary responsibility for shareholder relations lies with the Companyās Corporate and Shareholder Adviser. The Corporate
and Shareholder Adviser regularly meets with Shareholders to discuss the Company and seek feedback. The views of Shareholders
are discussed by the Board at every Board meeting, and action would be taken to address any shareholder concerns. The Group
provides regular updates to Shareholders through the annual report and accounts, the unaudited half-yearly financial reports and
the quarterly factsheets. Further communications are made to the market as and if required.
In addition, the directors are available to enter into dialogue with Shareholders and the Chair is willing to meet Shareholders as the
Company believes such communication to be important. The Companyās directors can be contacted at the Companyās registered office
or via the Secretary.
Stakeholders and Section 172
The Code requires that the Company should understand the views of the Companyās key stakeholders and describe in the annual
report how their interests and the matters set out in section 172 of the UKās Companies Act 2006 have been considered in Board
discussions and decision-making. Section 172 is not strictly applicable as this is a Guernsey company. However, its application is
being considered as part of the Code requirements.
The Company has no employees and all of the directors are non-executive, so the Board considers that its key stakeholders are its
Shareholders, its lessee, its service providers, society, the government and regulators.
As the Companyās sole lessee, the Board recognises Emirates as an important stakeholder and maintains a regular dialogue with
Emirates through the Asset Manager. The activities of Emirates are more fully considered within the Asset Managerās Report.
The Boardās engagement with Shareholders is described in the āDialogue with Shareholdersā section above. All Shareholders are
treated equally and no Shareholder receives preferential treatment. When making decisions of relevance to Shareholders, the
Board considers first and foremost the likely consequences of their decisions in light of their duty to act in the best interests of
the Company. The Board also considers what is likely to be in the best interests of Shareholders as a whole, but does not consider
individual Shareholdersā specific circumstances or desires when making its decisions.
In addition to the regular reporting provided by key service providers, the Management Engagement Committee undertakes a review
of the performance of these key service providers on an annual basis. The services provided by the key third party service providers
are critical to the ongoing operational performance of the Company. The Board believes that fostering constructive and collaborative
relationships with the Companyās service providers will assist in their promotion of the success of the Company for the benefit of all
Shareholders.
32
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
As described in detail in the Companyās viability statement, the Board considers the prospects of the Company for at least the
next four years whenever it considers the Companyās long-term sustainability. All strategic decisions are therefore taken with the
success of the Company in mind and the Board would take external advice whenever it considered that such would be beneficial to
its decision-making process, primarily from its retained service providers (including legal counsel), but also from other external
consultants.
The Board recognises that responsible investment and the associated ESG considerations can have a significant impact on investment
activity in terms of raising funds, identifying investment opportunities and long-term value creation for Shareholders. Please see
more information regarding ESG in the report on pages 34 to 37.
The Board ascribes to the highest standards of business conduct and has policies in place to ensure compliance with all applicable
laws and regulations. In addition to the monitoring of the Companyās compliance with its own obligations, the Board also monitors
compliance by its service providers with their own obligations. The Board encourages openness and transparency and promotes
proactive compliance with new regulation.
Statement of Directorsā Responsibilities
The directors are responsible for preparing the annual report and the Consolidated Financial Statements in accordance with applicable
Guernsey law and regulations. Under the Law the directors are required to prepare financial statements for each financial year. The
directors have chosen to prepare the Group financial statements in accordance with IFRS.
Under the Law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and of the profit or loss of the Group for that period.
In preparing these Consolidated Financial Statements, International Accounting Standard 1 requires that directors:
ā¢ properly select and apply accounting policies;
ā¢ present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
ā¢ provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entityās financial position and financial
performance; and
ā¢ make an assessment of the Groupās ability to continue as a going concern.
The directors are responsible for keeping proper accounting records that are sufficient to show and explain the Groupās transactions
and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Consolidated
Financial Statements comply with the Law. They are also responsible for safeguarding the Assets of the Group and for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Companyās
website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
Disclosure of Information to the Auditor
The directors who held office at the date of approval of this Directorsā Report confirm in accordance with the provisions of Section
249 of the Law that, so far as they are each aware, there is no relevant audit information of which the Groupās auditor is unaware;
and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit
information and to establish that the Groupās auditor is aware of that information.
33
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
DIRECTORSā REPORT (continued)
Auditor
Grant Thornton Limited has expressed its willingness to continue in office as auditor and the AR Committee has recommended
re-appointment. Pursuant to section 199 of the Law, the Shareholders of the Company approved the re-appointment of Grant
Thornton at the annual general meeting of the Company held on 9 December 2022 in respect of the 31 March 2023 year end.
Andreas Tautscher Fiona Le Poidevin
Chair Director
Signed on behalf of the Board
on 21 July 2023
34
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE REPORT
The Board recognises that responsible investment and the associated ESG considerations can have a significant impact on investment
activity in terms of raising funds, identifying investment opportunities and long-term value creation for Shareholders. This report
sets out our policy and approach to ensuring that the level of engagement on ESG matters is commensurate to the size, nature and
complexity of the business.
This policy seeks to address ESG matters on two levels; firstly, with regard to the Company itself and secondly, in relation to the
Assets which the Group owns. The direct and practical management of the Company seeks to uphold ESG standards where possible and
applicable. This is greatly influenced by the nature of the Groupās activities and the legal structure of the associated Leases.
The Company
The Company is a self-managed Guernsey company incorporated on 29 March 2012. Its Shares were admitted to trading on the SFS
on 2 July 2013.
The Company is under the control of its Board of directors on behalf of Shareholders. All directors are independent and non-
executive. The Board is responsible for reviewing the business affairs of the Company in accordance with the Articles and has overall
responsibility for the Companyās activities including all business decisions, review of performance and authorisation of distributions.
The Company has delegated the following activities to its appointed service providers;
ā¢ Asset Management ā Amedeo
ā¢ Liaison Agents ā Amedeo Services (UK) Limited
ā¢ Corporate and Shareholder Adviser ā Nimrod
ā¢ Secretary and Administrator ā JTC
ā¢ Registrar ā JTC Registrars Limited
The Company has no executive directors or employees and no physical office premises. The Companyās business is carried out in a
series of meetings held in the offices of its administrator JTC, in Guernsey, the Companyās place of incorporation.
Subject to any travel restrictions imposed, the directors are required to travel in the fulfilment of their duties. Where circumstances
allow, travel is kept to a minimum. The directors are required to travel to Guernsey on at least a quarterly basis for Board and other
committee meetings, and to other destinations to visit Shareholders and service providers as and when required. Regular dialogue
with the Lessee is maintained via the Asset Manager.
The Company consequently has a limited physical footprint and therefore its direct environmental impact is considered to be low.
The Modern Slavery Act
Due to the nature of the Companyās business, being a company that does not offer goods or services to customers, the Board considers
there are no relevant disclosures with regard to modern slavery in relation to the Companyās own operations. The Board considers the
Companyās supply chains, dealing predominantly with professional advisers and service providers in the financial services industry,
to be low risk in this regard.
Emiratesā statement on modern slavery is available on the Website (www.emirates.com).
The Assets
The principal activity of the Company is to acquire, lease and then sell aircraft. The Company has a wholly-owned subsidiary, DNA
Alpha. The Group owns four Airbus A380 Aircraft which are leased for twelve years to the Lessee, the national carrier owned by The
Investment Corporation of Dubai based in Dubai, United Arab Emirates.
35
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE REPORT (continued)
The Groupās own operational influence in the fields of climate change, air quality, and resource efficiency is minimal. The nature of
the Lease with the Lessee means that control over the usage of the Asset rests with the Lessee. The Group has leased the Assets for a
term of twelve years, with fixed Lease rentals for the duration, to the Lessee. The Lessee bears all costs (including for maintenance,
repairs and insurance) relating to the Aircraft during the lifetime of the Lease. This would include any modifications or modernisations
related to ESG requirements as mandated by regulatory agencies. However, in all other respects, the influence of the Group over the
Lessee with regard to voluntary ESG concerns is limited due to existing quiet enjoyment arrangements between the Group and the
Lessee.
The Airbus A380 is the worldās largest commercial passenger aircraft. It is the first and only aircraft with two full-length passenger
decks, giving it a maximum capacity of up to 853 passengers. In a typical three-class configuration (First, Business and Economy
Class), the Airbus A380 has capacity for approximately 525 passengers. Additionally, developments with respect to the aircraftās
aerodynamics, control elements and flight systems, coupled with the use of advanced, lightweight composite materials make the
A380 an attractive and efficient aircraft. In comparison with other modern long-range passenger aircraft of the same category (the
so-called Very Large Aircraft segment), the Airbus A380 consumes less fuel per passenger, using approx. three litres of kerosene per
100 passenger kilometers, when equipped with Engine Alliance engines. Furthermore, the A380 offers an efficient way to capture
traffic at the most concentrated airports and times by giving airlines the ability to consolidate routes, thereby increasing seat capacity
while creating economies of scale.
The most critical environmental issue related to aircraft operations is GHG emissions generated from fossil energy consumption.
Air transportation is one of the most energy and carbon dioxide intensive modes of transport, whether measured per passenger
kilometre or per hour in transit. According to Oxford University, the global aviation industry (including domestic and international;
passenger and freight) accounts for:
ā¢ 1.9% of GHG emissions (e.g. all greenhouse gases, not only CO2);
ā¢ 2.5% of carbon emissions; and
ā¢ 3.5% of āeffective radiative forcingā ā a measure of impact on global warming.
The first figure refers to 2016, while the latter two refer to 2018, each being the latest year for which such data are available.
Source:
https://ourworldindata.org/co2-emissions-from-aviation
The Aviation Industry
Despite aviationās important role in local and global economic development, the aviation industry faces the challenge of meeting long
term strong, growth in passenger demand while simultaneously reducing its environmental impacts. In addition to GHG emissions,
these environmental impacts could also include noise and nuisance, as well as water pollution (due to aircraft de-icing, cleaning, and
other chemical-heavy aircraft operations).
To address these growing environmental concerns, the cross-industry ATAG developed the āWaypoint 2050ā action plan in line with
the Paris Agreement on climate change. The blueprint builds on IATAās 2009 commitment to (1) increase fuel efficiency by 1.5%
every year between 2010-20, (2) to cap carbon emissions (carbon neutral growth) from 2020, and (3) to achieve the 50% emissions
reduction by the middle of the century, as the first two goals have already been accomplished. Annual fuel efficiency gains have
exceeded expectations with annual improvements greater than 2%. The mechanism for ensuring carbon neutral growth, known as
CORSIA, started as a pilot scheme in 2021 with approx. 100 countries participating and the remaining scheduled to join by 2027.
36
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE REPORT (continued)
In pursuit of the final goal, Waypoint 2050 has identified three key technological developments to accelerate the reduction of carbon
emissions:
1. Improved aircraft and engine designs for lighter, more efficient aircraft;
2. Hydrogen and electric powered aircraft; and
3. SAF.
The analysis performed for Waypoint 2050 revealed that SAF will play a key role, driving between 50% and 75% of the emissionsā
reductions. SAFs, such as drop-in power fuels like biofuels that can be used in todayās aircraft and engines without modification,
are already commercially available and are expected to increase in prominence once initial costs can be reduced through scale.
Evolutionary concepts, such as the second-generation geared turbo fan engine, could become widely commercially available
in the medium-term. Revolutionary concepts, such as hydrogen and electric powered aircraft, represent the greatest potential
improvements, but will most likely not be commercially available until the 2050s, based on current forecasts.
As these technological developments progress, the aviation industry is taking additional measures to curb its environmental impact,
while maintaining its commitment to local and global economic development. For example, alongside CORSIA, the aviation industry
is able to participate in other carbon dioxide emissions trading markets, such as the EU ETS.
Furthermore, a number of countries currently levy passenger taxes on air tickets over and above infrastructure charges and there
are a number of proposals for additional environmental taxes to be imposed on the aviation industry. However, as IATA notes, the
income generated from an environmental tax is usually seen as general revenue by governments, thus it can be used to fund any
variety of public sector programs and initiatives. As such, IATA takes the position that, while the overall goal of an environmental tax
is laudable, it has distortionary effects on jobs and the economy, while at the same time not effectively incentivising the development
or use of newer and greener technology. The effects of any newly introduced environmental taxes on the aviation industry will have
to be monitored. The aviation industry plays a critical role in local and global economic development, contributing 4.1% to global
gross GDP and supporting 87.7 million jobs worldwide.
Source:
https://aviationbenefits.org/economic-growth
The Waypoint 2050 plan can be found here: https://aviationbenefits.org/media/167187/w2050_full.pdf
Further environmental information can be found on the IATA website: https://www.iata.org/en/policy/environment/.
ICAO have used the United Nationsā Sustainable Development Goals (āSDGsā) as a basis to identify the contributions the aviation
industry is making to sustainable development. For further information and the full working paper on aviationās contributions
towards the United Nationsā 2030 agenda for sustainable development from ICAOās 40
th
session please refer to the ICAO website:
https://www.icao.int/Meetings/A40/Documents/WP/wp_189_en.pdf
Concerning the role of aircraft in sustainable development, Aircraft Assets are likely to contribute to at least five of the SDGs.
Specifically, airlines are able to utilize aircraft in a manner consistent with the achievement of the following targets:
1. SDG 5: Aviation is working to achieve gender balance across the sector. In Europe, aviation is the most gender-balanced of all
transport modes with 41 percent female employees. More work is still needed to encourage balance in technical and executive
roles;
2. SDG 8.1: Devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and
products;
37
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE REPORT (continued)
3. SDG 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including regional and trans-border infrastructure,
to support economic development and human wellbeing, with a focus on affordable and equitable access for all;
4. SDG 12.2: Achieve sustainable management and efficient use of natural resources productions; and
5. SDG 13: Invest in the transition to net-zero carbon dioxide energy, energy efficiency and the reduction of GHG emissions from
transport operations.
Detailed information on the SDGs can be found on the United Nations website: https://sdgs.un.org/
The Lessee
Emirates, the Lessee, is committed to efforts to reduce resource consumption while also investing in wildlife conservation and
protection. This includes participation in CORSIA as well as internal initiatives.
Most recently, Emirates Airline and dnata have joined the United Nations Global Compact (UNGC), a voluntary global initiative that
promotes responsible business practices and the advancement of the Sustainable Development Goals (SDGs). Both companies commit
to implementing the Ten Principles of the UNGC in the areas of human rights, labour, environment, and anticorruption.
In May 2023 Emirates reportedly made the biggest single commitment by an airline on sustainability. An investment of USDī200īmillion
is earmarked to fund research and development projects focused on reducing the impact of fossil fuel in commercial aviation over
a period of three years. Emirates will identify partnerships with leading organizations working on solutions in advanced fuel and
energy technology.
For further information on Emiratesā environmental policy and initiatives, please visit the Emirates website where annual
environmental reports are also available:
https://www.emirates.com/english/about-us/our-planet/
In the context of the Assets and the associated Lease, the Board is committed to responsible decision making and strong governance
throughout the lifecycle of the Group. The Board is in continuous dialogue with its service providers and regularly reviews processes
to guarantee transparency and accountability. The Board will continue to monitor the sustainability efforts of the industry and the
Lessee and keep Shareholders abreast of any relevant developments.
38
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT
Membership
Fiona Le Poidevin ā Non-executive Director and Chair of the AR Committee (Appointed on 1 March 2023)
Geoffrey Hall ā Non-executive Director (Chair of the AR Committee until 1 March 2023)
Charles Wilkinson ā Non-executive Director
Andreas Tautscher ā Non-executive Director (Resigned from AR Committee on 1 March 2023 in recognition of his appointment as
Chair of the Company)
Key Objective
The provision of effective governance over (i) the appropriateness of the Groupās financial reporting including the adequacy of related
disclosures, (ii) the performance of the Companyās external auditor, (iii) monitoring of the systems of internal controls operated
by the Company and (iv) the Companyās principal service providers and the management of the Companyās regulatory compliance
activities.
Responsibilities
The key duties of the AR Committee are as follows:
ā¢ reviewing the Companyās financial results announcements and financial statements and monitoring compliance with relevant
statutory and listing requirements;
ā¢ reporting to the Board on the appropriateness of the Companyās accounting policies and practices including critical accounting
policies and practices;
ā¢ advising the Board on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for Shareholders to assess the Companyās position, performance, business model and
strategy;
ā¢ overseeing the relationship with the external auditor and reviewing the effectiveness of the external audit process; and
ā¢ Monitoring the systems of internal controls operated by the Company and by the Companyās principal service providers.
AR Committee Meetings
The AR Committee usually meets in Guernsey at least twice a year. The AR Committee reports to the Board as part of a separate agenda
item, on its activities and on matters of particular relevance to the Board in the conduct of its work. During the financial year under
review the AR Committee formally reported to the Board on three occasions.
Main Activities of the AR Committee during the Financial Year
The AR Committee assisted the Board in carrying out its responsibilities in relation to financial reporting requirements, compliance
and the assessment of internal controls. The AR Committee also managed the Groupās relationship with the external auditor.
Fair, Balanced and Understandable
In order to comply with the Code, the Board requested that the AR Committee advises them on whether it believes the annual report
and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to
assess the Groupās performance, business model and strategy.
The AR Committee engaged with the Groupās auditor and the Administrator in order to ensure that the financial statements were fair,
balanced and understandable.
39
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Financial Reporting and Significant Issues
The AR Committeeās primary role in relation to financial reporting is to review, with its service providers and the external auditor,
the appropriateness of the half-year and annual financial statements, the significant financial reporting issues and accounting
policies and disclosures in the financial statements. The AR Committee has considered the key risks identified as being significant
to these accounts and the most appropriate treatment and disclosure of any new significant issues identified during the audit and
half-year reviews as well as any recommendations or observations made by the external auditor, Grant Thornton Limited. To aid its
review the AR Committee considered reports prepared by external service providers, including Amedeo and Nimrod, and reports from
Grant Thornton on the outcome of their annual audit. The significant issues considered by the AR Committee in relation to the 2022
accounts and how these were addressed are detailed below:
Significant issues for the year under review How the AR Committee addressed these significant issues
Residual value of aircraft assets
The non-current Assets of the Group comprises of four Airbus
A380 aircraft. An annual review is required of the residual value
of the Assets as per IAS 16, which defines residual value as
āthe
estimated amount that an entity would currently obtain from
disposal of the Asset, after deducting the estimated costs of
disposal, if the Asset were already of an age and in the condition
expected at the end of its useful life.ā
The Group has engaged three internationally recognised expert
appraisers to provide the Group with independent third party
consultancy valuation services. In the absence of sales data for
similar used Assets, appraisers are heavily reliant on databases
containing historical data points of aircraft sales relating to large
commercial aircraft. Interpretation of historical data, as well as
the landscape within the aviation industry is the basis for the
current market value and provides, together with the expected
developments in the future, the foundation for their opinions on
future values. Furthermore, the appraisersā valuations take into
account specific technical and economic developments as well
as general future trends in the aviation industry and the macro-
economic outlook.
In the aftermath of Airbusā February 2019 decision to
discontinue the A380 production in 2021, a number of A380
operators disclosed plans to withdraw at least parts of their
A380 fleets earlier than originally anticipated. Furthermore, it
became obvious that A380s returned following the expiration of
operating lease agreements would be difficult to be placed with a
new operator within a reasonable period of time and owners were
forced to explore alternative scenarios for revenue generation
like engine lease. This also includes part-out activities for the
first few A380s returned from Singapore Airlines.
With the lasting effects of the Pandemic still impacting air travel,
the global passenger air traffic continued its strong recovery
during the Period, but has not yet reached its pre-Pandemic
levels on a global level. About three years into the Pandemic,
around 40% of all A380s with operators worldwide were still on
the ground at the end of the first quarter of 2023.
40
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Significant issues for the year under review How the AR Committee addressed these significant issues
Due to the A380-specific developments over the last few years
there is an increasing risk that the underlying assumptions of
the Base Value concept might not be met at the time when the
Leases expire. For this reason the Asset Manager recommended
continuing with making use of a more conservative approach
by deploying Future Soft Values instead of Base Values. Soft
Values are more conservative, also applicable under āabnormal
conditionsā and do not necessarily require a balanced market as
the Base Value concept does.
The Groupās estimation technique is to make reference to the
most recently produced forecast soft value (excluding inflation),
not an estimate of the amount that would currently be achieved
and which therefore could be different, and so this is not a direct
application of the IAS 16 definition. This approach has been taken
because current market values in todayās prices for comparable
twelve year old A380s were not available at the reporting date.
A decrease in USD terms in the residual value of the Aircraft from
the prior year has resulted in an adjustment made to depreciation
in the current year, details of which have been disclosed in
noteī10.
As updated valuations of all Assets as at the financial year end
were commissioned and received from third party professional
valuers and analysed by the Asset Manager and the directors,
the AR Committee believes that those valuations are appropriate
for use in preparing the financial statements. Therefore, the
average residual values excluding inflation used in the accounts
are based on these appraisals.
Upon review of the advice they have received from Amedeo and
the appraisers, the AR Committee is of the opinion that, the
latest estimate of the residual soft values excluding inflation of
the Assets is a reasonable approximation of the residual value of
the Aircraft within the IAS 16 definition.
Residual values remain exposed to estimation uncertainty. This
is disclosed in note 3 and has been highlighted by the auditor in
their key observations section of the valuation and ownership of
aircraft key audit matter.
41
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Significant issues for the year under review How the AR Committee addressed these significant issues
Recording foreign exchange gains/losses
IFRS require that certain transactions denominated in
currencies other than the presentation currency (including,
most importantly, the cost of the Assets) be translated into
presentation currency at the exchange rate ruling at transaction
date, whilst monetary balances (principally the outstanding
borrowings) are translated at the rate prevailing on the
reporting date. The resultant figures sometimes show very large
mismatches which are reported as unrealised foreign exchange
differences.
In assessing foreign exchange, the AR Committee has considered
the issue at length and is of the opinion that, on an ongoing
basis and assuming the lease and 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 pay loan
repayments due which are likewise denominated in US dollars.
US dollar lease rentals and loan repayments are furthermore
fixed at the outset of the Groupās life and are very similar in
amount and timing.
The AR Committee concluded that the matching of the lease
rentals to settle loan repayments therefore mitigates risks of
foreign exchange fluctuations.
The AR Committee carefully considered the disclosure in note 20
(b) to the Consolidated Financial Statements to ensure that the
reality of the Groupās foreign exchange risk exposure is properly
explained.
Going concern risk
Emirates are the sole Lessee of the Assets. Should Emirates
default on the rental payments, it will result in the Group failing
to service debt and it is unlikely the Group will be able to meet
its targeted dividend or, in the case of ongoing default, continue
as a going concern.
The AR Committee received quarterly reports from Amedeo
during the year which comment on the performance of Emirates.
For the financial year ending 31 March 2023, Emirates reported
its most profitable year ever with a net profit of 10.6 billion AED
(2.9 billion USD), a significant turnaround from a net loss of 3.9
billion AED (1.1 billion USD) in the previous financial year, ended
in March 2022.
The recovery in Emiratesā operations during the 2022/23
financial year led to an improved EBITDA of 33.3 billion AED
(9.1 billion USD) compared to 17.7 AED billion (4.8 billionīUSD)
in the previous year. Demand for air freight weakened due
to macro-economic and geopolitical uncertainties, high
inflation, the consequential supply related issues and the end
of the inventory restocking cycle. However, Emirates SkyCargo
continued to produce a robust yield per Flight Tonne Kilometre
(FTK), which increased by 3%.
The airline repaid 11.1 billion AED (3.0 billion USD) in bonds
and term loans (principal). The carrierās cash position, including
short-term bank deposits, amounted to 37.4 billionī AED (10.2
billion USD) at the end of March 2023, 79% higher compared to
the beginning of the year. The cash flow from operating activities
came in at 24.4 billion AED (6.7 billion USD) in 2022/23, the
highest in the companyās history.
42
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Significant issues for the year under review How the AR Committee addressed these significant issues
The management of the airline concluded that the company
is a going concern. The auditors, PwC did not raise a material
uncertainty on going concern in its unqualified audit report,
which is dated 5 May 2023.
Emiratesā senior management is upbeat about the future: āWe go
into 2023-24 with a strong positive outlook and except the Group
[Emirates Airline and dnata] to remain profitable. We will work
hard to hit our targets while keeping a close watch on inflation,
high fuel prices, and political and economic uncertaintyā, said
Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief
Executive of Emirates Airline and Group.
Emirates is owned by the Investment Corporation of Dubai, a
state-owned holding company that can be characterized as a
sovereign wealth fund owned by the Government of Dubai. It
is neither listed, nor carry its bond issuances an issuer rating.
However, Emiratesā senior unsecured US Dollar bonds with
maturities in 2025 and 2028 are trading and the marketsā pricing
for such instruments provide proxies for the credit risk of the
Lessee. As the operating lease agreement between Emirates and
the Company include a hell or high-water clause, the lease rental
stream and any other contractual payment primarily depend on
Emiratesā ability to meet its financial obligations, whenever they
fall due. As at the end of May 2023, Emirates has outstanding US
dollar debt issuances with maturities in 2025, and 2028. These
bonds were all trading close to par and with running yields of
approximately 4.6% in US dollars. There has also been no upward
pressure on yields other than due to the general increased
interest rate level globally. This level of yields certainly does not
appear to indicate any significant financial stress to the issuer.
The AR Committee concluded that it would continue to receive
regular updates from Amedeo on the performance of Emirates
and would continue to monitor Emiratesā overall performance.
The AR Committee carefully considered the disclosure in
note 20(c) to the financial statements to ensure that this
concentration of credit risk is properly reflected.
43
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Significant issues for the year under review How the Committee addressed these significant issues
Consideration of any triggers for impairment
IAS 36 Impairment of Assets requires that a review for impairment
be carried out by the Group when there is an indication of
impairment of an asset and if events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. The review will compare the carrying amount of the
Asset with its recoverable amount, being the higher of fair value
less costs to sell and the assetās value in use.
The directors consider that fair value less costs to sell is a valid
measure given recent secondary market transactions relating to
the A380 and the fact that third party independent valuers have
provided valuations to permit the computation of fair value less
costs to sell.
The AR Committee has considered the issue at length and
accordingly an impairment review has been undertaken as at
31 March 2023. Refer to note 3 for further detail on the factors
triggering the review and the sensitivity analysis performed
on the discount rates and residual value inputs. As a result of
the current year review, an impairment loss of Ā£7,576,007 was
booked in the accounts as disclosed in note 3.
Contributing factors, which triggered the AR Committeeās
decision to perform an impairment review, included the Pandemic
and the global travel restrictions leading to a temporary halt of
A380 operations worldwide. It was also necessary as the Group
continued to adhere to the concept of Future Soft Values for
measuring the residual value of the Aircraft.
Global Pandemic Risk
The emergence of a Global Pandemic may have a profound and
negative impact on the operations and performance of the
Group and may directly or indirectly affect some of the other
risks mentioned in this table.
Although the airline industry continues to recover, an elevated
share of passenger aircraft remain grounded. The consequent
lack of income for airlines may cause bankruptcy and, in a worse
case, repossession of aircraft which would need to be stored
pending remarketing when restrictions are eased.
The Board and its key service providers have all acted to the
best of their abilities to protect the welfare of the various teams
involved in the affairs of the Group to ensure operations are
maintained to the extent possible and to protect and support the
Assets of the Group for as long as is required.
The impact of the Pandemic on financial reporting has been
considered in respect of other risks such as residual value,
impairment and going concern.
More information of the Pandemic is set out in the Chairās
Statement on pages 7 to 8 and the Asset Managerās Report on
pages 9 to 14.
We note that the auditor also considers the recognition of rental income (as highlighted in the Chairās Statement at pageī7) within
their key audit matters. This item has been considered by the AR Committee in the current year, but, as there have been no changes
in respect of this risk, it has not been a primary area of focus of the AR Committee in the current year.
Going Concern
The Groupās principal activities are set out within the Company Overview on pageī5. The financial position of the Group is set out on
pageī52. In addition, noteī20 to the Consolidated Financial Statements includes the Groupās objectives, policies and processes for
managing its capital, its financial risk management objectives and its exposure to credit risk and liquidity risk.
The directors, in consultation with the Asset Manager, are monitoring the continuous effect of the Pandemic generally on the aviation
industry and specifically on the Groupās Aircraft values and the financial wellbeing of its Lessee both now and in the future. The
Pandemic continues to have an impact on the global economy, and it remains possible that the Groupās future performance could be
impacted in this prolonged period of uncertainty. During the Companyās financial year ended on 31 March 2023, global air passenger
traffic experienced a very strong recovery. Tight capacity management by airlines resulted in the highest PLF on record for the
month of March, achieved in March 2023. Overall, global air passenger traffic in March 2023 was 12% below its pre-pandemic levels
compared with March 2019. Emirates reported its most profitable year ever with a net profit of 10.6 billion AED (2.9ībillion USD), a
significant turnaround from a net loss of 3.9 billion AED (1.1 billion USD) in the previous financial year, ended in March 2022. The
44
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Pandemic, together with wider economic uncertainty and disruption, have had an adverse impact on the future value of the Aircraft
owned by the Group and could also negatively impact the sale, re-lease or other disposition of the relevant Aircraft.
Reduced rents receivable under the Leases may not be sufficient to meet the debt interest and regular repayments of debt scheduled
during the life of the EETC, and may not provide surplus income to pay for the Groupās expenses and permit the declaration of
dividends. However, this would only apply if the Lessee became unable to meet its debt repayment obligations or insisted on a rent
holiday, and the Lessee has given no indication of either scenario.
The directors consider that the going concern basis of accounting remains appropriate. Based on current information the directors
have reasonable expectation that the Group has sufficient financial resources, including cash and cash equivalents and expected rent
receipts to continue in operational existence for at least twelve months from the date of this report.
The Board will continue to actively monitor the financial impact on the Group from the evolving position with its Lessee and debt
providers whilst bearing in mind its fiduciary obligations and the requirements of Guernsey law which determine the ability of the
Group 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 Consolidated
Financial Statements that Emirates will continue with the contracted lease rental payments due to the following:
ā Emirates continues to be a going concern as at the date of the Lesseeās latest signed annual financial report for the financial year
ended on March 31, 2023.
ā During the last financial year, Emirates accelerated its global network recovery by relaunching flights to six destinations and
increased operations to 62 cities across its network throughout the year. The number of passengers increased by 123% compared
to the year before to 43.6 million, while the airlineās capacity for passenger services, measured in ASKs, increased by 78%
compared to the previous year and reached 77% of the pre-pandemic levels. The passenger seat factor averaged at 79.5%, an
improvement of 20.9 percentage points compared to the previous year.
ā Emirates reported its most profitable year ever with a net profit of 10.6 billion AED (2.9 billion USD), a significant turnaround
from a net loss of 3.9 billion AED (1.1 billion USD) in the previous financial year, ended in March 2022.
ā Emiratesā Credit Default Swap is trading below its multi-year average indicating a low default risk.
ā As of the date of the Consolidated Financial Statements, the Board is not aware of a formal request to the Group for a lease
deferral or any other efforts that would result in the restructuring of the existing transaction.
ā Emirates has paid all the lease rentals to the Group in a timely manner.
The directors have considered Emiratesā ability to continue paying the lease rentals over the next 12 months and are satisfied that the
Group can meet its liabilities as they fall due over this period. Further detail regarding the assumptions adopted when forming this
conclusion can be found in the Viability Statement on page 21. Refer to note 12 for expiry dates of the leases.
Internal Controls
The AR Committee has made due enquiry of the internal controls of the Administrator. The AR Committee is satisfied with the controls
currently implemented by the Administrator. However, it has requested that the Administrator keeps the Committee informed of any
developments and improved internal control procedures.
The most recent report on the internal controls of JTCās administration services, prepared in accordance with the ISAE 3402, for the
period from 1 April 2022 to 31 March 2023, has been provided, confirming no major deficiencies.
During the period the Management Engagement Committee conducted a site visit to Amedeo (in August 2022). Additionally, the
committee met with Nimrod in May 2023.
45
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Internal Audit
The Group has no employees and operates no systems of its own, relying instead on the employees and systems of its external service
providers. Following a recommendation from the AR Committee, the Board has therefore taken the decision that it would be of
insufficient benefit for the Group to engage an internal auditor.
External Audit
The effectiveness of the external audit process is dependent on appropriate audit risk identification at the start of the audit cycle. The
AR Committee receives from Grant Thornton a detailed audit plan identifying their assessment of the key risks. For the financial year
under review, the primary risks identified were in respect of valuation of the Groupās Assets, the recognition of lease rental income
and the presumed risk on management override of controls.
Using its collective skills the AR Committee evaluates the effectiveness of the audit process in addressing the matters raised through
the reporting it received from Grant Thornton at the conclusion of the audit. In particular the AR Committee formally appraise Grant
Thornton against the following criteria:
ā¢ Independence
ā¢ Ethics and conflicts
ā¢ Knowledge and experience
ā¢ Challenge
ā¢ Promptness
ā¢ Cost
ā¢ Overall quality of service
In addition the AR Committee also seek feedback from the Administrator on the effectiveness of the audit process.
For the financial year under review, the AR Committee was satisfied that there had been appropriate focus on the primary areas of
audit risk and assessed the quality of the audit process to be good.
The AR Committee holds meetings with the external auditor to provide additional opportunity for open dialogue and feedback from
the auditor. Should it be necessary, the AR Committee members meet with the external auditor without the Administrator and Asset
Manager being present. Matters typically discussed include the auditorās assessment of business risks and management activity
thereon, the transparency and openness of interactions with the Administrator, confirmation that there has been no restriction in
scope placed on them by the Administrator on the independence of their audit and how they have exercised professional scepticism.
Appointment and Independence
Grant Thornton provided audit services to the Company for the financial year under review. This has been the second audit of the
Company carried out by Grant Thornton, following its appointment on 2 August 2021.
The AR Committee considers Grant Thornton Limited, the Companyās auditor, to be independent of the Company. The AR Committee
provided the Board with its recommendation to Shareholders on the re-appointment of Grant Thornton Limited as external auditor
for the year ending 31 March 2023 at the AGM held on 9 December 2022.
46
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
AUDIT AND RISK COMMITTEE REPORT (continued)
Non-Audit Services
To further safeguard the objectivity and independence of the external auditor from becoming compromised, the AR Committee has a
formal policy governing the engagement of the external auditor to provide non-audit services. No changes have been made to this
policy during the year. This policy specifies that the external auditor should only be engaged for non-audit services where there is
considered to be a very low threat to auditor independence. No non-audit services had been provided by Grant Thornton during the
year.
The external auditor is prohibited from providing any other services without the AR Committeeās prior approval. In reaching such a
determination the AR Committee will take into consideration whether it is in the best interests of the Group that such services should
be supplied by the Groupās external auditor (rather than another service provider) and, if so whether any safeguards regarding
auditor objectivity and independence in the conduct of the audit should be put in place, whether these would be effective and how
such safeguards should be disclosed.
Committee Evaluation
The AR Committeeās activities formed part of the review of Board effectiveness performed in the year under review.
An internal evaluation of the AR Committeeās effectiveness will be carried out later in 2023.
Fiona Le Poidevin
Chair of the Audit and Risk Committee
21 July 2023
47
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
INDEPENDENT AUDITORāS REPORT TO THE MEMBERS OF
DORIC NIMROD AIR THREE LIMITED
Opinion
We have audited the consolidated financial statements of Doric Nimrod Air Three Limited and its subsidiary (the āGroupā) for the
year ended 31 March 2023, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Cash Flows and the Consolidated Statement of Changes in Equity, and Notes to the
consolidated financial statements, including a summary of significant accounting policies. The financial reporting framework that
has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
In our opinion, the consolidated financial statements:
ā¢ give a true and fair view of the state of the Groupās affairs as at 31 March 2023 and of its profit for the year then ended;
ā¢ are in accordance with IFRSs as adopted by the European Union; and
ā¢ comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and applicable law. Our responsibilities
under those standards are further described in the āAuditorās responsibilities for the audit of the consolidated financial statementsā
section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountantsā
International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), together
with the ethical requirements that are relevant to our audit of the consolidated financial statements in Guernsey, and we have
fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The Key Audit Matter How the matter was addressed in our audit
Valuation of aircraft
(2023: Ā£192.1m, and 2022: Ā£232.0m)
We identified the valuation of aircraft as one of the most
significant assessed risks of material misstatement due
to error.
As explained in Note 2(m), the Groupās accounting policy
is to measure its aircraft asset at depreciated historic
cost less impairment. The asset is being depreciated
on a straight-line basis over the term of the lease to an
estimated residual value at the end of that period.
As stated in Note 3, estimation of the aircraftās residual
value is a significant source of estimation uncertainty.
The Group uses external appraisers who provide an
estimate of the residual value which is determined
based on significant judgement and assumptions about
current and future market conditions.
In responding to the key audit matter, we performed the following
audit procedures:
ā¢ We have assessed that the Groupās accounting policies regarding
the valuation of aircraft is in accordance with International
Accounting Standard (IAS) 16 ā Property, Plant and Equipment;
ā¢ We held detailed discussions with management, including
directors and obtained an understanding of the processes and
controls in place regarding the valuation of aircraft. We have
also obtained understanding of the supporting documentation or
papers prepared and approved by management;
ā¢ We have obtained and assessed detailed supporting documentation
from management for key inputs, assumptions and methodology
used from which the valuation of aircraft are derived;
48
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
INDEPENDENT AUDITORāS REPORT TO THE MEMBERS OF
DORIC NIMROD AIR THREE LIMITED (continued)
The Key Audit Matter How the matter was addressed in our audit
Note 3 further describes that the Groupās future
performance is potentially subject to wider economic
uncertainty and disruption caused in part by the
continuing war in Ukraine. This together with the illiquid
market for the A380, may have an adverse impact on the
future value of the aircraft assets owned by the Group, as
well as on the sale, re-lease, or other disposition of the
relevant aircraft
As disclosed in Note 3, if the assumptions used in
determining the valuation of aircraft prove to be false,
actual results of operations and the realisation of the
Groupās aircraft asset could differ from estimates set
forth in the consolidated financial statements, and the
difference could be material.
ā¢ We have assessed and documented the competence, capability and
objectivity of the external valuers that management have engaged
in the process;
ā¢ We have assessed all information provided including all appraiserās
report, lease agreement, amendment to such agreement, redelivery
condition side letter and valuation report from asset manager. We
have challenged management on their method selection and why
alternative methods, assumptions and data that could have been
used were not used;
ā¢ We have engaged our internal aircraft asset valuation expert to
assist in performing the testing of the valuation of aircraft which
included the following:
ā¢ ā¢ Assisted in determining whether the valuation methodologies
used to estimate the residual values of the aircraft are
consistent with methods usually used by similar companies;
ā¢ ā¢ Used their knowledge of the market to assess and corroborate
valuation inputs by reference to comparable transactions, and
independently compiled databases/indices;
ā¢ ā¢ Assisted in determining whether the appraisers were
appropriate, qualified, and independent.
ā¢ We performed independent research to check for references of
secondary market options for A380 aircraft;
ā¢ We performed independent research to assess the reasonableness
of discount and inflation rate changes and to assist in identifying
macro-economic uncertainties (such as the conflict in Ukraine and
post-Covid recovery) as contributing factor to such updates; and
ā¢ We have assessed the sufficiency of related disclosures in the
consolidated financial statements in accordance with IAS 16 ā
Property, Plant and Equipment and IAS 36 ā Impairment of Assets.
Our results
Based on the audit work performed, we have not identified any
indication of material misstatement in relation to the valuation of
aircraft.
49
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
INDEPENDENT AUDITORāS REPORT TO THE MEMBERS OF
DORIC NIMROD AIR THREE LIMITED (continued)
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual
Report and Audited Consolidated Financial Statements, but does not include the consolidated financial statements and our auditorās
report thereon. Our opinion on the consolidated financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the consolidated financial statements, or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law, 2008 requires us
to report to you if, in our opinion:
ā¢ proper accounting records have not been kept by the Company; or
ā¢ the Companyās financial statements are not in agreement with the accounting records; or
ā¢ we have not obtained all the information and explanations, which to the best of our knowledge and belief, are necessary for the
purposes of our audit.
Responsibilities of the directors for the consolidated financial statements
As explained more fully in the Statement of Directorsā Responsibilities set out on page 32, the Directors are responsible for the
preparation of the consolidated financial statements which give a true and fair view in accordance with IFRSs as issued by the
International Accounting Standards Board (IASB), and for such internal control as the Directors determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Groupās ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditorās responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditorās report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the
audit. We also:
ā¢ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
50
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
INDEPENDENT AUDITORāS REPORT TO THE MEMBERS OF
DORIC NIMROD AIR THREE LIMITED (continued)
ā¢ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Groupās internal control.
ā¢ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the Directors.
ā¢ Conclude on the appropriateness of the Directorsā use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Groupās
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditorās report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditorās report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
ā¢ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
ā¢ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditorās report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
Use of our report
This report is made solely to the Companyās members, as a body, in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to the Companyās members those matters we are required to state to
them in an auditorās report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Companyās members as a body, for our audit work, for this report, or for the opinions we
have formed.
Cyril Swale
For and on behalf of Grant Thornton Limited
Chartered Accountants
St Peter Port
Guernsey
Date: 24īJuly 2023
51
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2023
Notes
Year ended
31 Mar 2023
GBP
Year ended
31 Mar 2022
GBP
INCOME
A rent income 4 57,118,471 52,577,701
B rent income 4 20,430,241 20,458,592
EXPENSES
Operating expenses 5 (1,856,772 ) (1,803,109 )
Depreciation of Aircraft 10 (30,170,114 ) (37,522,717 )
Impairment of Aircraft 10 (7,576,007 ) (23,108,481 )
(39,602,893 ) (62,434,307 )
Net profit for the year before finance costs and foreign exchange losses 37,945,819 10,601,986
Finance income 54,634 11,811
Finance costs 11 (3,789,590 ) (4,914,671 )
Net profit for the year after finance costs before foreign exchange losses 34,210,863 5,699,126
Net foreign exchange losses 7 (4,639,507 ) (3,047,970 )
Profit for the year 29,571,356 2,651,156
Total Comprehensive Profit for the year 29,571,356 2,651,156
Pence Pence
Earnings per Share for the year ā Basic and Diluted 9 13.44 1.21
In arriving at the results for the financial year, all amounts above relate to continuing operations.
The notes on pages 55 to 76 form an integral part of these Consolidated Financial Statements.
52
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2023
Notes
31 Mar 2023
GBP
31 Mar 2022
GBP
NON-CURRENT ASSETS
Property, Plant and Equipment ā Aircraft 10 194,257,571 232,003,692
CURRENT ASSETS
Receivables 13 147,823 147,027
Cash and cash equivalents 18 13,692,410 13,976,504
Short-term Investments 474,385 ā
TOTAL ASSETS 208,572,189 246,127,223
CURRENT LIABILITIES
Borrowings 15 24,136,245 42,224,604
Deferred income 30,128,010 7,680,455
Rebates 16 189,818 356,487
Payables ā due within one year 14 88,894 107,245
NON-CURRENT LIABILITIES
Borrowings 15 ā 23,039,678
Deferred income 82,792,574 112,725,220
Rebates 16 ā 178,243
TOTAL LIABILITIES 137,335,541 186,311,932
TOTAL NET ASSETS 71,236,648 59,815,291
EQUITY
Share capital 17 208,953,833 208,953,833
Retained loss (137,717,185 ) (149,138,542 )
Pence Pence
Net Asset Value per Share based on 220,000,000
(31 March 2022: 220,000,000 ) shares in issue 32.38 27.19
The notes on pages 55 to 76 form an integral part of these Consolidated Financial Statements.
53
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2023
Notes
Year ended
31 Mar 2023
GBP
Year ended
31 Mar 2022
GBP
OPERATING ACTIVITIES
Profit for the year 29,571,356 2,651,156
Movement in deferred income (7,485,089 ) (8,148,415 )
Interest received (54,634 ) (11,811 )
Depreciation of Aircraft 10 30,170,114 37,522,717
Impairment of Aircraft 10 7,576,007 23,108,481
Loan interest payable 11 2,488,567 4,527,333
(Decrease) / Increase in payables (18,351 ) 8,036
Increase in receivables (796 ) (22,463 )
Foreign exchange movement 7 4,639,507 3,047,970
Amortisation of debt arrangement costs 11 1,301,023 387,338
NET CASH GENERATED FROM OPERATING ACTIVITIES 68,187,704 63,070,342
INVESTING ACTIVITIES
Interest received 54,634 11,811
Short-term Investments (474,385 ) ā
NET CASH GENERATED FROM INVESTING ACTIVITIES (419,751 ) 11,811
FINANCING ACTIVITIES
Dividends paid 8 (18,150,000 ) (18,150,000 )
Repayments of capital on borrowings 21 (47,563,386 ) (40,335,982 )
Interest on borrowings 21 (2,398,145 ) (4,420,370 )
NET CASH USED IN FINANCING ACTIVITIES (68,111,531 ) (62,906,352 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13,976,504 13,749,583
Increase in cash and cash equivalents (343,578 ) 175,801
Effects of foreign exchange rates 59,484 51,120
CASH AND CASH EQUIVALENTS AT END OF YEAR
18 13,692,410 13,976,504
The notes on pages 55 to 76 form an integral part of these Consolidated Financial Statements.
54
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 31 March 2023
Notes
Share
Capital
GBP
Retained
Loss
GBP
Total
GBP
Balance as at 1 April 2022 208,953,833 (149,138,541 ) 59,815,292
Total Comprehensive Profit for the year ā 29,571,356 29,571,356
Dividends paid 8 ā (18,150,000 ) (18,150,000 )
Balance as at 31 March 2023 208,953,833 (137,717,185 ) 71,236,648
Share
Capital
GBP
Retained
Loss
GBP
Total
GBP
Balance as at 1 April 2021 208,953,833 (133,639,697 ) 75,314,136
Total Comprehensive Profit for the year ā 2,651,156 2,651,156
Dividends paid 8 ā (18,150,000 ) (18,150,000 )
Balance as at 31 March 2022 208,953,833 (149,138,541 ) 59,815,292
The notes on pages 55 to 76 form an integral part of these Consolidated Financial Statements.
55
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
56
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
57
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
58
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
59
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
60
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
61
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
62
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
63
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
64
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
65
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
6 DIRECTORSā REMUNERATION
Under their terms of appointment, each director was paid a fee of Ā£23,000 per annum by the Group, except for the Chair, who
received Ā£29,000 per annum and the Chair of Audit committee, who received Ā£27,000 per annum. The rate of remuneration per
director has remained unchanged from that which applied in the year ended 31 March 2022.
Following a review of Directorās Remuneration undertaken by the Nomination Committee where Directorās fees were benchmarked
against available market data, the Nomination Committee proposed an increase in directorsā remuneration to align with market
standards. The Board subsequently approved the proposed remuneration uplift on 17 April 2023 that each director will receive
Ā£30,000, the Chair of the Board will receive Ā£37,000 per annum, and the Chair of the Audit committee will receive Ā£34,500 per
annum, effective from 1 July 2023.
7 NET FOREIGN EXCHANGE (LOSSES) / GAINS
Year ended
31 Mar 2023
GBP
Year ended
31 Mar 2022
GBP
Cash at bank 59,488 51,123
Borrowings (4,673,615) (3,073,014)
Rebates (25,380) (26,079)
(4,639,507) (3,047,970)
The foreign exchange loss in the year reflects the 6.49 percent movement in the Sterling/US dollar exchange rate from 1.3138
as at 31 March 2022 to 1.2337 as at 31 March 2023.
66
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
67
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
68
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
69
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
70
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
71
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
72
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
73
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
74
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
75
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
76
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the year ended 31 March 2023
77
Doric Nimrod Air Three Limited (the āCompanyā) Consolidated Annual Financial Report
KEY ADVISERS AND CONTACT INFORMATION
KEY INFORMATION
Exchange:
Ticker:
Listing Date:
Financial Year End:
Base Currency:
ISIN:
SEDOL:
LEI:
Country of Incorporation:
Registration number:
Specialist Fund Segment of the London Stock Exchangeās Main Market
DNA3
2 July 2013
31 March
Pound Sterling
GG00B92LHN58
B92LHN5
213800BMYMCBKT5W8M49
Guernsey
54908
MANAGEMENT AND ADMINISTRATION
Registered Office
Doric Nimrod Air Three Limited
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey, GY1 2HT
Secretary and Administrator
JTC Fund Solutions (Guernsey) Limited
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey, GY1 2HT
Asset Manager
Amedeo Management Limited
Pembroke House
28-32 Pembroke Street Upper
Dublin 2, Ireland
D02 EK84
Liaison Agent
Amedeo Services (UK) Limited
35 New Broad Street
New Broad Street House
London
EC2M 1NH
Corporate and Shareholder Advisor
Nimrod Capital LLP
New Derwent House
69-73 Theobalds Road
London
WCIX 8TA
Registrar
JTC Registrars Limited
Ground Floor, Dorey Court
Admiral Park
St Peter Port
Guernsey, GY1 2HT
Lease and Debt Arranger
Amedeo Management Limited
Pembroke House
28-32 Pembroke Street Upper
Dublin 2, Ireland
D02 EK84
Advocates to the Company (as to Guernsey Law)
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey, GY1 4BZ
Auditor
Grant Thornton Limited
St James Place
St James Street
St Peter Port
Guernsey
GY1 2NZ
Solicitors to the Company (as to English Law)
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
England, EC2A 2HS
The paper used in this publication is 100%
post consumer reclaimed material, certified in
accordance with the FSCĀ® (Forest Stewardship
Council), reducing the impact of landfill and
energy consumption.