Amedeo Afp Regulatory News (AA4)

20 July 2018

AMEDEO AIR FOUR PLUS LIMITED (the "Company")

Consolidated Annual Financial Report

The Board of the Company is pleased to announce its results for the year ended 31 March 2018.

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

http://www.rns-pdf.londonstockexchange.com/rns/3532V_1-2018-7-20.pdf

In addition, to comply with DTR 4.1 please find below the full text of the Consolidated Annual Financial Report. The report will also shortly be available on the Company's website, http://www.aa4plus.com/category/news/.

For further information, please contact:

Administrative Enquiries:

JTC Fund Solutions (Guernsey) Limited

Tel: +44 (0) 1481 702400

Amedeo Air Four Plus Limited

Consolidated

Annual Financial

Report (audited)

For the year ended 31 March 2018

COMPANY OVERVIEW

Amedeo Air Four Plus Limited ("AA4" or the "Company") is a Guernsey company incorporated on 16 January 2015. The Company operates under The Companies (Guernsey) Law, 2008, as amended (the "Law") and the Disclosure Guidance and Transparency Rules (the "DGTRs") of the UK's Financial Conduct Authority (the "FCA").

The Company's shares were first admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange's Main Market on 13 May 2015 upon the admission of 202,000,000 redeemable ordinary shares ("Shares") at an issue price of 100 pence per Share. Subsequently, the Company has conducted six additional placings, resulting in the issue and admission to trading on the SFS of an additional 440,250,000 Shares at issue prices in the range of 100 pence to 104 pence. The latter two placings were undertaken in the year under review.

On 5 June 2017 shareholder approval was obtained for the acquisition of four Airbus A350-900 aircraft leased to Thai Airways. On 13 June 2017 the Company published its latest prospectus to launch a further one year placing programme intended to raise additional equity for investment by the issue of up to a maximum of 500,000,000 Shares. The initial placing under this latest programme closed on 20 June 2017 with the issue and admission to trading on the SFS of an additional 134,650,000 Shares at an issue price of 104 pence to fund the purchase of three A350-900 aircraft leased to Thai Airways. On 1 November 2017 the Company announced the launch of the Second Placing to acquire a fourth Airbus A350-900 leased to Thai Airways. The Second Placing closed on 27 November 2017 with the issue and admission to trading on the SFS of an additional 40,350,000 Shares at an issue price of 104 pence.

As at 16 July 2018, the last practicable date prior to the publication of this report, the Company's total issued share capital was 642,250,000 Shares trading at 107 pence per Share.

Investment Objectives and Policy

The Company's investment objective is to obtain income returns and a capital return for its shareholders by acquiring, leasing and then selling aircraft (each an "Asset" and together "Assets").

To pursue its investment objective, the Company seeks to use the net proceeds of placings and/or other equity capital raisings, together with debt facilities (or instruments), to acquire aircraft which will be leased to one or more major airlines.

The Company's Articles of Incorporation (the "Articles") provide that the Company may only acquire further aircraft with the approval of the Company's shareholders by ordinary resolution in relation to each proposed acquisition. Where such approval for a new acquisition is obtained, it is the current intention of the Board of directors of the Company (the "Board") to offer shareholders the opportunity to participate in any equity financing of such further acquisitions on a broadly pre-emptive basis, although other approaches to the equity financing may also be considered and pursued if the Board consider it appropriate to do so in order to diversify the funding sources of the Company.

In accordance with the investment policy, it is the Board's intention that, subject to finding suitable deals and obtaining subsequent shareholder approval, the Company be grown into a larger vehicle owning a range of aircraft leased to more airlines. The aim of such a strategy is to diversify the risk profile of the Company's portfolio of Assets and lease credits whilst maintaining its target investor returns of a quarterly dividend of 2.0625 pence per share and a double digit total return.

The Board, in discussions with its advisors, Amedeo Limited ("Amedeo" or the "Asset Manager") and Nimrod Capital LLP ("Nimrod"), is considering further acquisitions to be completed over the next 12 months.

Investment Portfolio

As at the financial reporting date the Company had sixteen wholly-owned subsidiaries, see Note 1 for further details. Together the Company and its subsidiaries are known as the "Group". 

The table below details the Assets held by the Group at the reporting date:

* "Emirates" means Emirates Airline;

"Etihad" means Etihad Airways PJSC;

"Thai" means Thai Airways International Public Company Limited.

Distribution Policy

The Company aims to provide shareholders with an attractive total return comprising income from distributions through the period of the Company's ownership of the Assets and a capital gain upon the sale, or other disposition of the Assets.

The Company receives income in the form of lease payments. Income distributions are made to shareholders quarterly, subject to compliance with applicable laws and regulations. The Company currently targets and has achieved to date a distribution to shareholders of 2.0625 pence per Share per quarter.

There can be no guarantee that dividends will be paid to shareholders and, if dividends are paid, as to the timing and amount of any such dividend. There can also be no guarantee that the Company will, at all times, satisfy the statutory solvency test (the "Solvency Test") required to be satisfied pursuant to section 304 of the Law prior to any declaration of a dividend by the Board. 

In the event that the Company is wound-up pursuant to a shareholders' resolution, shareholders may also receive a capital return from the net proceeds of a sale of the Assets.

Performance Overview

All payments by the Lessees have to date been made in accordance with the terms of the respective leases.

In accordance with the Distribution Policy, the Company declared four dividends of 2.0625 pence per Share during the year under review and one dividend of 2.0625 pence per Share was declared after the end of the reporting period. Further details of dividends declared and paid can be found on page 21. 

Return of Capital

Following the sale of an Asset the Board may, as it deems appropriate at its absolute discretion, either return to shareholders all or part of the net capital proceeds of such sale (subject to satisfaction of the Solvency Test), or re-invest the proceeds in accordance with the Company's investment policy. 

The Asset Manager regularly monitors the market valuations of the Assets and, subject to any lease obligations, will consider the most appropriate time for the sale of any one or more of the Assets. The Board will consider any recommendation from the Asset Manager as to the sale of any Asset and proceed as the Board considers appropriate.

Liquidation Resolution

Although the Company does not have a fixed life, the Articles require that the Board convenes a Liquidation Proposal Meeting in 2029 or such other date as shareholders may approve by ordinary resolution.

CHAIRMAN'S STATEMENT

I am pleased to present shareholders with the Group's full year financial report covering the period from 1 April 2017 to 31 March 2018.

It has again been a very busy period for your Company with further activity raising new monies, acquiring more aircraft and diversifying the portfolio. On 20 June 2017 we announced the completion of the initial placing under the new placing programme, which was significantly oversubscribed, issuing 134,650,000 shares at 104 pence to acquire the first three of four Airbus A350-900 aircraft leased to Thai Airways International Public Company Limited ("Thai"), each for a period of twelve years from delivery. Deliveries of the three A350-900 aircraft occurred on 13 July, 31 August and 22 September 2017, fully deploying the initial placing proceeds ahead of target. A second placing of 40,350,000 shares at 104 pence occurred on 27 November 2017 to fund the delivery of the fourth A350-900 leased to Thai also for a lease term of twelve years and the aircraft was delivered on 26 January 2018.

The Company has now acquired eight Airbus A380 aircraft, six on lease to Emirates Airline ("Emirates") and two to Etihad Airways PJSC ("Etihad"), two Boeing 777-300ER aircraft leased to Emirates and four Airbus A350-900 aircraft leased to Thai. At the time of writing the Company has a market capitalisation in excess of £687 million based on 642,250,000 shares in issue. The increase in the overall market capitalisation of the Company following the acquisition of the latest aircraft has increased the attractiveness of the Company's shares to a wider investor base.

The Company's Asset Manager, Amedeo, continues to monitor the leases and reports regularly to the Board. Nimrod, the Company's Corporate and Shareholder Adviser, continues to liaise between the Board and shareholders. 

During the year the Company has continued to declare quarterly dividends of 2.0625 pence per share, representing a yearly distribution of 8.25 pence per share and your Board are hopeful of continuing to pay such dividends for the foreseeable future. 

Since its inception, in accordance with its investment policy, it has been the intention that the Company should be grown into a larger vehicle, owning a range of wide-body and other aircraft which are leased to a number of different airline counterparties. The aim of this strategy is to diversify the risk profile of the Company's portfolio of assets as well as to potentially increase its target annualised total return. Since its launch some three years ago we believe the Company has and continues to achieve its objectives in this regard and the Board are pleased to have reached these milestones.

The Board will also consider further acquisitions of aircraft for leasing to a variety of major airlines over the next 12 months and beyond. If, in the view of the Board, it is in the interests of the Company to acquire such further aircraft (taking into account the maintenance of the Company's target income distributions, opportunities for capital growth, and the diversification of the Company's portfolio), the Board will continue to seek shareholders' approval of those proposed acquisitions. Over the course of the year lease rate factors have fallen as capital continued to flow into the asset class, and the Board actively considers such movement in the context of assessing new investments.

IATA forecast 2018 to be another year of strong passenger growth with passenger volumes currently moving upwards at rates between 5.0% and 5.6% per annum. Despite the slower start to the year in January, February's figures show a rebound to the start of the year's performance. Strong economic drivers, favourable business confidence indictors and continued capacity expansion are likely to encourage passenger growth over the course of the next year. Notwithstanding oil prices up 16% year‐on‐year in February 2018, airlines are indicating strong earnings with EBITDA profit margin results at 8.6% of revenues for the third quarter of 2017, with particularly strong results from Asia Pacific and Latin American carriers. 

News flow relating to the Airbus A380, which forms a large part of your Company's portfolio, has been widespread over the period and the Board keeps a close eye on such developments, receiving regular market updates from the Company's Asset Manager. The confirmation of a new order from Emirates in January 2018 was accompanied by a public commitment by Airbus to produce the A380 at least for another ten years. This order underlines the importance of the A380 to Emirates business model. With 102 A380s now flying as part of the Emirates fleet, it is a key aircraft and likely is to be so for many years to come. Airbus have also stated that they are confident of further orders for the A380 now that production certainty has been achieved. More recently, news that two A380's owned by German funds managed by Dr Peters Group are to be sold for parts is disappointing. Whilst providing a positive result for investors, according to Dr Peters, it is noted that this outcome is the product of unique circumstances which are unlikely to be repeated. More positively, Hi Fly, is planning to start operating at least one second hand A380, which represents an important milestone in the model's lifecycle. The Company's existing long lease periods offer some stability and a suitable time horizon in which to assess such market developments.

Emirates, Etihad and Thai continue to perform well and are fully servicing their obligations. Further details on each operator can be found in the Company's quarterly report for Q1 2018 as well as their respective websites: www.emirates.com, www.etihad.com and www.thaiairways.com.

Regulatory change has continued apace during the period and the Board continues to monitor and respond to these changes. In particular, the turn of the year saw the introduction of MiFID II and PRIIPS. This EU regulation requires the Company to prepare a Key Information Document ('KID') which is available on our website. Investors should note that the procedures for calculating the costs, risks and potential returns are prescribed by this regulation, and the figures in the KID may not reflect the results investors will experience in the future. As a result, it is recommended that the KID is not considered in isolation but is read in conjunction with the Company's financial statements and quarterly reports. 

I encourage shareholders to view the Company's quarterly reports which now provide a breakdown of the implied future total return of the Company through both dividends and a potential return of capital based on the latest appraised portfolio residual value. I hope these regular reports, in addition to the communication you receive from the Company's Corporate and Shareholder Adviser, are useful and informative and I welcome shareholders feedback. 

Our underlying leases with respect to Emirates and Etihad include monthly lease rentals paid in US Dollars (matched in currency and amount to interest and regular principal loan repayments) and Sterling (to cover operating costs and dividend payments). In the case of Thai, the entire monthly lease rental is denominated in US Dollars.

The financial statements do not in the Board's view properly convey the economic reality due to the accounting treatment for foreign exchange, rental income, finance costs and residual debt. International Financial Reporting Standards require that transactions denominated in US Dollars (including, most importantly, the cost of the aircraft) are translated into Sterling at the exchange rate ruling at the date of the transaction whilst monetary items (principally the outstanding borrowings) are translated at the rate prevailing on the reporting date. The resultant variations may sometimes produce very large mismatches and these are reported in the Consolidated Statement of Comprehensive Income as foreign exchange gains of £184,771,192 (2017: losses of £118,664,321). When viewed on a per Share basis this equates to a 28.8 pence gain (2017: 25.4 pence loss) resulting in a reported NAV per Share of 109.58 pence per Share (2017:73.48 pence per Share). 

On an on-going basis and assuming the lease and loan payments are made as anticipated, such exchange differences will not reflect the commercial substance of the situation in the sense that the key transactions denominated in US Dollars are in fact fairly matched. Rental income received in US Dollars is used to pay loan interest and regular capital repayments of debt (but excluding any bullet or balloon repayment of principal), which are likewise denominated in US Dollars. US Dollar lease rentals and loan repayments, with the exception of the four Thai aircraft which incorporate floating rate lease rentals - matched to floating rate loan repayments, are furthermore fixed at the outset of the each lease's life and are very similar in amount and timing save for the repayment of bullet repayments of principal due on the final maturity of a loan.

In addition to this, rental income receivable is credited evenly to the Consolidated Statement of Comprehensive Income over the planned life of each lease. Conversely, the methodology for accounting for interest costs means that the proportion of the loan repayments which is treated as interest and is debited to the Consolidated Statement of Comprehensive Income varies over the course of the loan - so that the differential between rental income and interest cost (as reported in the Consolidated Statement of Comprehensive Income) reduces over the course of each twelve year lease. In reality however, the amount of rental income is fixed, except from the four Thai aircraft where floating lease rental payments are matched to floating rate loan repayments, so as to closely match the loan interest and capital repayments, save for the repayment of any bullet payment of principal due on the final maturity of a loan.

Furthermore, we have for this reporting period and the future altered our approach to calculating the book value/carry cost of each asset so as to more accurately reflect IAS 16 and as a consequence of doing so will now only disclose the net aggregated figures for all assets rather than, as previous, disclose these figures on an aircraft by aircraft basis. Such detailed disclosure is not required by the relevant Accounting Standard and your Board consider it not commercially prudent to be so transparent when there is no need to be so. Further, your Asset Manager has asked that we keep such knowledge confidential so as not to impair their ability to successfully negotiate the disposal of any aircraft when the time is deemed right so to do.

Finally, the Board is always keen to meet shareholders, as was the case last year, and we welcome the opportunity to meet more shareholders in this coming year as your Board very much welcomes an open dialogue. Please do not hesitate to contact the Board or Nimrod to request a meeting.

On behalf of the Board, I would like to thank our service providers for all their help and all shareholders for their continuing support of the Company and I look forward to keeping all shareholders up to date with further progress.

Robin Hallam

Chairman

Date: 20 July 2018

Asset Manager's Report

THE ASSETS

As of 31st March 2018

During the lifetime of each lease, the respective airline bears all costs of the aircraft including maintenance, repair and insurance.

During Q1 2018, Amedeo performed a records and physical survey inspection as per the underlying lease agreements on three of the aircraft in the portfolio. The aircraft were made available for physical inspection during a day stop while access to records was provided in electronic format. The aircraft were found in good physical condition and maintained to a very high commercial standard.

IATA ECONOMIC ANALYSIS

Ø The strong growth in global passenger traffic for 2017 continues into 2018 as RPK's (revenue passenger kilometres) grew by 7.6% year-on-year in February. Up from a growth rate of 4.6% for January, the difference in passenger volumes for the first two months of 2018 occurred due to the late timing of the Lunar New Year resulting in the surge in passenger demand to fall in February.

Ø Industry wide passenger capacity increased by 6.3% year-on-year in February 2018. Whilst capacity outpaced passenger demand for January, figures for February show passenger load factors to have increased to 80.4%.

Ø Most notably from February's performance, South American carriers posted the highest rate of international RPK traffic growth for the month at 9.8%. At the same time, India's year-on-year passenger demand growth (RPKs) was 22.9% for February making this the 42nd month in a row of double digit growth for the country.

Ø 2018 is forecast to be a year of strong growth with passenger volumes currently moving upwards at rates between 5.0% and 5.6% per annum. Despite the slower start to the year, February's figures show a rebound to the initial year's performance. Strong economic drivers, favourable business confidence indicators and continued capacity expansion are likely to encourage passenger growth over the course of 2018.

Ø Despite oil prices up 16% year-on-year for February 2018, airlines are indicating strong earnings with EBIT profit margin results at 8.6% of revenues for the third quarter of 2017, with particularly strong results from Asia Pacific and Latin American carriers.

Source: IATA (International Air Transport Association).

AIRLINE MARKET DEVELOPMENTS

Air travel has developed considerably over the past few decades. Most noticeably, air fares have become more and more affordable. Continuous technological improvements are being implemented in new aircraft and the adoption of supportive government policies has allowed air travel to become a significant economic driver in a growing number of countries. As a result, air travel has become ever more accessible to consumers in developing regions, whilst other countries have established themselves as the 'super connectors' in international travel. Overall, the landscape of commercial air travel is not the same as it was almost two decades ago when air traffic growth was once led by Europe and North America. Today, it is being driven by the rapid growth in the Asia Pacific, Middle East and South American markets that are forecast to continue to grow.

In 2017, the United States, China and Japan, retained top positions for the world's busiest airline markets in terms of seats. While the US has stayed at the top of the podium with Hartfield-Jackson Atlanta being the only airport to carry over 100 million passengers a year, China's Beijing Capital International Airport has set another record high in terms of passengers carried (95.8 million passengers in 2017). Traffic between Beijing and Shanghai is now the eighth busiest route in the world and is only superseded by other city pairs within the Asia Pacific region.

China continues to close the gap to overtake the US and with Beijing's new airport opening in 2019, the capital will gain some of the additional infrastructure needed to support the forecast rise in traffic expected in the region. Beijing's growth emulates that of the wider Chinese market for which IATA has revised its latest growth forecasts and predicts China to displace the US as the world's largest market by 2022, a full two years ahead of the original forecast.

In terms of market potential, the majority of the world's fastest growing markets in the past eight years can be located within Asia and the Middle East. Countries such as India and Indonesia are experiencing rapid levels of growth, whilst also being listed as some of the biggest markets in the world. To compare, India has overtaken the UK as the fourth busiest market in terms of seat capacity. Whilst London Heathrow's passenger numbers grew by 1.7% in 2017 (year-on-year), Delhi saw a 15.1% increase during the same period. India's lead on the UK is only set to continue as Delhi's airport is to expand existing terminals and build a new runway, whilst London Heathrow has only recently been able to secure government approval for a vital third runway.

Infrastructure constraints are a global issue. With the forecast rise in passenger traffic, the industry must plan for future capacity and whilst some areas such as China, Singapore and India are able to expand their airports and traffic capacity accordingly, other regions of the world need additional government support and investment in order to facilitate future growth. Regions such as the Americas, where facilities can be up to fifty years old, require planning that can accommodate the next 25 years of passenger travel. For the Latin American aviation industry, this is a necessity as it continues to grow with above average passenger traffic growth of 6.1% (RPK's) for January 2018. It is estimated that US$100bn of investment is required in North America alone, to modernise existing facilities. With insufficient investment to date, some markets are constrained in their own operations.

As forecast by IATA, the Asia Pacific region is expected to be the origin of more than half of the world's new passengers within the next 20 years. With the world's number of city pairs now exceeding 20,000, where nearly 45% of the increased connectivity in the past year came from new routes within Asia, it is certain that the Asia Pacific region is becoming the epicentre of air traffic demand. What's more, the rising levels of connectivity between cities makes markets more open in terms of tourism, trade and investment.

As Asia's network expands, it is expected the region will need between fourteen to sixteen thousand new aircraft in order to support regional growth through trade and tourism over the coming decades. By today's standards, where 48% of the world's aircraft in service are leased, Asia will rely on the leasing industry to fund almost half of the new aircraft to be delivered over the next 20 years.

Source: Airbus, Airports Council International, Ascend, Boeing, CAPA, Diio, IATA, Routes (UBM UK).

EMIRATES GROUP

Ø As of March 2018, the airline had 268 aircraft in its fleet with a combined average age of 5.7 years. Emirates operates two passenger aircraft types and has additional A380 and B777-300ER aircraft on order as well as an agreement to purchase forty B787-10 aircraft delivering from 2022.

Ø Emirates total passenger and cargo capacity for the year was 61.4 billion available tonne kilometres, making Emirates the world's largest international carrier. The flag carrier posted a record of 58.5 million passengers carried (up 4% year-on-year), and achieved an average passenger load factor of 77.5% (up 0.4% year-on- year). During the year, Emirates launched two new passenger destinations to Cambodia and Croatia, as well as increasing its capacity on 15 existing destinations.

Ø For 2018-19, Emirates has announced new routes to London Stansted, Santiago, Edinburgh and an additional flight between Dubai and Auckland via Bali, aside from capacity increases across existing destinations.

Ø Emirates also grew its global connectivity and customer proposition through strategic partnerships. During 2017-18, Emirates entered into significant partnerships with flydubai and Cargolux, expanding the choice of air services on offer to passenger and cargo customers respectively. Emirates also received authorisation to extend its partnership with Qantas until 2023.

Ø The airline posted revenue of AED 92.3 billion (USD 25.2 billion) for the financial year ending March 2018. Revenue generated from across Emirates' six regions continues to be well balanced, with no region contributing more than 30% of overall revenues. Europe was the highest revenue contributing region with AED 26.7 billion (USD 7.3 billion), up 12% from 2016-17.

Ø The Carrier's operating costs increased by 7% in comparison to the previous year, with the implications of rising oil prices being a significant driver of this increase. Fuel accounted for 28% of the airline's operating costs, compared with 25% in 2016-17, and remains the biggest cost component for Emirates.

Ø Despite the political challenges in the region, intense competition in the form of airfare pricing and rising fuel costs, Emirates posted a net profit of AED 2.8 billion (USD 762 million). With a net profit increase of 124% year-on-year, and with a profit margin of 3.0%, the airline has displayed the ability to successfully manage strong competitive pressures across all markets.

Source: Emirates, Ascend.

ETIHAD AIRWAYS

Ø As of March 2018, the airline had 113 aircraft in its fleet comprising a mix of narrow and wide-body aircraft with an average age of 6.9 years. The airline operates 4 passenger aircraft types and has A350, B787, B777 and A320 neo aircraft on order. During the quarter the carrier reduced its in service fleet from 122 aircraft at the start of the year due to management's decision to withdraw from its cargo operations and scale back capacity on its North America routes over the next year.

Ø The airline boasts an extensive international network of 83 destinations across 51 countries with its three largest markets currently being India, the UK, and Saudi Arabia in terms of seats.

Ø Etihad posted an annual loss of US$ 1.87bn for the financial year ending March 2017 as it dealt with the impact of terrorism in the EU and the implications of low oil prices on the region's economy. A total of US$ 808m of the annual loss was attributed to a write down in the value of its investment in Air Berlin and Alitalia. The Gulf carrier remains 100% owned by the Abu Dhabi government and therefore we anticipate no impact on the receipt of AA4's lease rental payments or compliance with the terms of the leases.

Ø Reports have been published in 2018 as to a potential US$ 1.2bn bond default linked to Etihad. Issued by EA Partners, a bankruptcy remote special purpose company created to issue the bond, in 2015, the proceeds were used to enter into debt obligations with Alitalia, Air Berlin and Etihad. Following the insolvency of Air Berlin and Alitalia, liquidity facilities have been exercised to ensure bond holders are being repaid. Whilst Etihad is yet to comment on the matter, a recent report has announced that EA Partners are to auction their claims on the two insolvent airlines. A covenant within the bond documents triggers a 'remarketing event' when the liquidity pool falls below 75% of the initial reserves whereby only claims on the insolvent airlines are to be auctioned.

Source: Etihad, Ascend, CAPA, Reuters, Financial Times, Gulf Times

THAI AIRWAYS INTERNATIONAL

Ø For 2017 Thai Airways' total revenue grew by 5.01% year-on-year to THB 190,535m (USD 5,868m) due to increased demand across the company's passenger, freight and ancillary services.

Ø The group's operating performance improved year-on-year with a 10.3% increase in the number of passengers carried to 24.56m, whilst demand (RPK's at 71,634m) increased more than Thai's capacity (ASK's at 90,498m) resulting in a load factor increase of 5.8% to 79.2% for the year.

Ø During the period, the group expanded its operations throughout Asia and Europe and launched a direct route to Vienna. In total Thai Airways currently serves 64 destinations within Asian, Europe and the Middle East.

Ø At the end of 2017 the group's in-service fleet stood at 100 aircraft and fleet replacement continued with the addition of 7 new aircraft during the year. Comprising five Airbus A350-900 XWBs and two Boeing 787-9s all under lease, these next generation technology aircraft are to be operated on the group's intercontinental and regional routes such as Bangkok - Rome, Bangkok - Brussels, Bangkok - Auckland, and Bangkok - Singapore.

Ø Operating expenses for the year increased by 5.8% to THB 193,430m. An increase in fuel expenses can be attributed to a rise in jet fuel prices during 2017, however this was marginally offset by an appreciating THB against the USD. At the same time lease rental expenses also increased year-on-year due to the airline's fleet replacement program.

Ø The group posted an operating loss of THB 2,895m (USD 89m) and net loss of THB 1,555m (USD 49m) for the year due to increased operating expenses and extraordinary losses from the impairment of older assets and the revaluation of foreign currency liabilities due to FX movements.

Source: Thai Airways International Public Company Limited, Ascend. N.B.: USD/THB = 32.58 FX rate as of 31/12/17.

A380 MARKET UPDATE

Ø Hi Fly, a charter operator, has announced plans to introduce an A380 aircraft into its fleet by mid ‐ 2018. The Portuguese company will become the first wet lease operator of the A380 and enable other airlines and governments to employ the aircraft through short term leases. Hi Fly's unprecedented move to begin wet lease operations using an A380 will enable operators whose business models may not suit longer term leases or cannot bear the cost of ownership to take advantage of the aircraft's size, technology and consumer appeal with minimal operational risk.

Ø In other news, Airbus reported that the main sections for the first A380 to be delivered to Japan's All Nippon Airways ("ANA") had arrived in the manufacturer's Toulouse facility for final assembly. Due for delivery in early 2019, ANA's first of three ordered A380s will be operated on the airline's Tokyo to Honolulu route. Once delivered, ANA will become the fifteenth operator of the A380, which includes Hi Fly.

Ø It has been reported that a German lessor, Dr Peters Group, will part out two A380s returned from Singapore Airlines. There were a number of unique circumstances that came together to force this outcome and it is not expected that this outcome will be repeated.

A350 MARKET UPDATE

Ø Airbus delivered a total of 78 A350-900 aircraft in 2017, surpassing its target of 75 deliveries.

Ø The A350-900 entered service in early 2015 and Airbus has delivered over 160 of the aircraft as of Q2 2018, including eight to Delta Airlines, making it the first North American A350 operator.

Ø A primary supporter of the new technology aircraft, Singapore Airlines will introduce a Regional variant of the A350-900 in late 2018 to complement its 787-10, but "will be configured in a manner that will allow us to stretch the distance a little longer than the 787-10", says the chief executive Goh Choon Phong.

Ø In addition, Airbus is to modify the current -900 to introduce a ULR (Ultra Long Range) version. Currently in flight-testing and delivering in late 2018 to Singapore Airlines as the launch customer for seven -900ULRs, the aircraft will enable the carrier to operate 19 hour journeys such as Singapore to New York non-stop.

B777-300ER MARKET UPDATE

Ø The B777-300ER continues to be the bestselling widebody variant to date in the Boeing 777 family with over 800 sold and 70 still on backlog as of Q2 2018.

Ø The Boeing 777-300ER is the core long-haul type worldwide and is especially popular in Asia Pacific and Middle East.

Ø In addition to its passenger operations, airlines see the cargo benefit of the 777-300ERs belly-hold capacity. By operating passenger and cargo operations across services, many carriers have pivoted focus from dedicated cargo operations to belly capacity on passenger routes to streamline costs and enhance efficiency.

Source: Airbus, Ascend, AirFinance Journal, CAPA (Centre for Aviation), Hi Fly, Independent Digital News & Media

Disclaimer

The Asset Manager has not made and does not make any express or implied representation or warranty as to the accuracy or completeness of the information provided by it and, to the extent permitted by law neither the Company nor the Asset Manager nor their Directors or officers shall be liable for any loss or damage that anyone may suffer in reliance on such information.

DIRECTORS

Robin Hallam (age 64) (Chairman) (independent non-executive)

Until 31 December 2015, Robin Hallam was a partner and co-head of Asset Finance at international law firm Hogan Lovells LLP, where he was a partner since 1995 specialising in aircraft finance, particularly leasing, export credit and structured financing. Between January and December 2016, Robin was a consultant at Hogan Lovells LLP. He is currently a consultant at Bird & Bird LLP in their aviation finance team. He has represented financial institutions, operating lessors, investors, airlines and export credit agencies. Robin holds a degree in law from Trinity College, Cambridge, is a member of International Society of Transport Aircraft Trading ("ISTAT") and is currently ranked Band 1 for Asset Finance in Chambers UK 2015.

David Gelber (age 70) (independent non-executive)

David Gelber began his career with Citibank in London in 1974. Over the course of the next twenty years he held a variety of trading roles in foreign exchange, fixed income and derivatives at Citibank, Chemical Bank and HSBC where he was Chief Operating Officer of HSBC Global Markets. In 1994 he joined ICAP, an inter-dealer broker, as COO and oversaw two mergers and a number of acquisitions. He is currently the non-executive Chairman of Walker Crips PLC, a stock broker and wealth manager; and a non-executive director of IPGL, a holding company with investments in a number of companies. In addition he is a non-executive director of DDCAP Ltd, a leading arranger of Islamic compliant financial transactions, Exotix LLP, an investment banking boutique specialising in frontier markets and SAXO Bank Capital Markets, a provider of a multi-asset trading platform. David holds a BSc in Statistics and Law from the University of Jerusalem and an MSc in Computer Science from the University of London.

John Le Prevost (age 66) (independent non-executive)

John Le Prevost is the Chief Executive Officer of Anson Group Limited and Chairman of Anson Registrars Limited (the Company's Registrar). He has spent over forty years working in offshore fund, trust and investment businesses during which time he has been a managing director of subsidiaries in Guernsey for County NatWest Investment Management, The Royal Bank of Canada and for Republic National Bank of New York. He is a Full Member of the Society of Trust and Estate Practitioners. He is a director of a number of other companies associated with Anson Group's business as well as being a trustee of the Guernsey Sailing Trust. John is currently also a non-executive director of Doric Nimrod Air One Limited, Doric Nimrod Air Two Limited and Doric Nimrod Air Three Limited (each of which is an aircraft leasing investment vehicle). He is resident in Guernsey.

Laurence Barron (age 66) (independent non-executive)

Having begun his career as a commercial lawyer in Paris and then in Tokyo, where he first became involved in aircraft financing transactions, Laurence joined Airbus in 1982 as an in-house lawyer specialising in aircraft finance. He subsequently moved to the business side when, in 1984, he was appointed Sales Finance Director North America, becoming Head of Sales Finance in 1985, and then, in 1987, Vice President of Customer Finance. In 1994, he was asked to set up the Asset Management Organisation within Airbus and that year became Vice President and Head of Asset Management. Airbus Asset Management has full responsibility for all used aircraft transactions at Airbus and acts as an in-house leasing company for the used Airbus aircraft owned or controlled by the Airbus group of companies. In 2001 he was promoted to Senior Vice President of Airbus before assuming the role of President of Airbus China in 2004, with responsibility for Airbus' overall activities in the People's Republic of China. In January, 2013, Laurence was appointed Chairman of EADS China, now rebranded Airbus China. Laurence retired from salaried Airbus employment at the end of April 2016 and was non-executive Chairman of Airbus China until the end of 2017. He holds an LLB from Bristol University Law Faculty.

MANAGEMENT AND THE DELEGATION OF FUNCTIONS

The Directors, whose details are set out on page 17, are responsible for managing the business affairs of the Group in accordance with the Articles and have overall responsibility for the Group's activities, including investment activity and performance. Each of the Directors is a non-executive director and is independent. The Group has delegated management of the Assets to Amedeo, which is a company incorporated in Ireland. The Directors delegate secretarial and administrative functions to JTC Fund Solutions (Guernsey) Limited ("JTCFSL" or the "Secretary" or the "Administrator") which is a company incorporated in Guernsey and licensed by the Guernsey Financial Services Commission for the provision of administration services. The Company has appointed Nimrod as the Company's Corporate and Shareholder adviser and Anson Registrars Limited ("Anson") as the Company's Registrar, Transfer Agent and Payment Agent.

Asset Manager, Agency Services and Liaison Agent

Amedeo has been appointed by the Company to provide asset management services to the Group. Pursuant to the Asset Management Agreement dated 30 April 2015, Amedeo will: (i) monitor and, to the extent required pursuant to the terms and conditions set out in each lease, administer each relevant lessee's performance of its obligations under the relevant lease (including such lessee's obligations relating to the insurance of the Assets); (ii) as the Group's exclusive remarketing agent in respect of the Assets, use all reasonable endeavours to solicit offers to lease or sell each of the Assets on the best terms reasonably obtainable having due regard to the then current market conditions (including current industry and market practice); (iii) carry out mid-lease inspections of the Assets; (iv) provide the Group with information and analysis with respect to each Asset, including a quarterly asset monitoring report which will include recent developments and a forward looking statement including inspection results, events, any material information, significant changes, decisions which have been or need to be made, events affecting distributions, and other major or pending events, issues or outcomes as far as known to Amedeo; and (v) if requested by the Group, acting reasonably, provide a financial model that would allow the Board to prepare or re-assess target distributions based on the Asset Manager's view of projected cash flows and liabilities.

Amedeo has further undertaken that it will dedicate sufficient time and resources as they reasonably believe is sufficient from time to time to fulfil any contractual arrangements it enters into with the Group.

Amedeo has also been appointed as Agency Services provider by the Company, pursuant to the Agency Agreement dated 30 April 2015, to assist the Group, and act as the Group's agent, in relation to the arrangement, negotiation, review, and, following the approval and execution by the Group, the management of the acquisition of Assets, the borrowings of the Group relating to the acquisition of the Assets (including any Financing Documentation), each lease and ensuring that Material Agreements are consistent with market practice in the aviation industry.

Amedeo Services (UK) Limited has been appointed as Liaison and Administration Oversight Agent by the Company, pursuant to the Liaison and Administration Oversight Agreement dated 30 April 2015, to: (i) co-ordinate the provision of services by service providers to the Group under the Asset Management Agreement, the Agency Agreement and the Administration Agreement; (ii) facilitate communication between the Group and its service providers in relation to the services provided under the Administration Agreement, Asset Management Agreement and Agency Agreement; (iii) in relation to the acquisition of any Asset, monitor and review the timing or payments and any currency exchanges to be effected in order to ensure payments are made in a timely maker; (iv) monitor the on-going budget of the Group and the payment of recurring and certain non-recurring costs, fees and expenses, and (v) assist the Administrator in monitoring the balances in the bank accounts of the Group and, where appropriate, provide the Administrator with any assistance it might reasonably require with respect to making payments, transferring balances or entering into currency exchanges as appropriate. Amedeo Services (UK) Limited is authorised and regulated by the Financial Conduct Authority. 

The Amedeo group is primarily involved in the operating lease and management of wide-body aircraft. The aircraft portfolio currently managed by the Amedeo group is valued at over USD8 billion and consists of 50 aircraft under management. These aircraft include commercial airliners including A380, A350, A330, A321 and Boeing 777, 787 and 747-F. Amedeo is a member of ISTAT, the International Society of Transport Aircraft Trading, and is a Strategic Partner of the International Air Transport Association ("IATA").

Corporate and Shareholder Adviser

Nimrod, which is authorised by the Financial Conduct Authority, has been appointed as the Corporate and Shareholder adviser by the Company pursuant to the Corporate and Shareholder Advisory Agreement dated 30 April 2015. In such a capacity Nimrod maintains a regular dialogue with shareholders as and when they deem it appropriate to do so in order to ensure that any significant developments in relation to the Group are communicated appropriately to shareholders.

Nimrod was founded in 2008 as an entirely 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. Nimrod has launched nine listed investment companies since its formation and it also provides investment, marketing, distribution and advisory services to investment companies and their board of directors and managers.

Secretary and Administrator

JTCFSL is an independent provider of institutional and private client services to clients in numerous jurisdictions and is a member of the JTC Group. See the JTC Group's website at www.jtcgroup.com.

JTCFSL is a Guernsey incorporated company, which is licensed by the Guernsey Financial Services Commission. JTCFSL provides administration and secretarial services to the Group pursuant to the Administration Agreement dated 30 April 2015, as amended. In such capacity, JTCFSL 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.

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

Registrar

Anson has been appointed as registrar, transfer agent and paying agent by the Company pursuant to a Registrar's Agreement dated 30 April 2015. Anson performs all the usual duties of a registrar, transfer agent and paying agent in relation to the Shares and the maintenance of the Company's Share register.

Review

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

A full list of the Group's service providers is set out on pages 4 and 5.

MANAGEMENT REPORT

A description of important events that have occurred during the financial year, their impact on the financial statements and a description of the principal risks and uncertainties facing the Group, together with an indication of important events that have occurred since the end of the financial year and are likely to affect the Group's likely future development are included in the Company Overview, the Chairman's Statement, Asset Manager's Report, Statement of Principal Risks and Uncertainties, Audit Committee Report and the notes to the consolidated financial statements contained on pages 50 to 81 and are incorporated herein by reference.

There were no events or changes in the related parties during the financial year which had or could have had a material impact on the financial position of the Group, other than those disclosed in this consolidated annual financial report.

Responsibility Statement

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

(a) the consolidated financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and

(b) this management report (including the information incorporated by reference) includes 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 the Group faces.

John Le Prevost

Director

DIRECTORS' REPORT

The Directors present their consolidated annual financial report of the Group for the financial year ended 31 March 2018.

Principal Activities and Business Review

The principal activity of the Group is to acquire, lease and then sell aircraft. The Directors do not envisage any change in these activities for the foreseeable future. A description of the activities of the Group in the year under review is given in the Chairman's Statement on pages 9 to 11.

Status

The Company is a Guernsey domiciled company with registered number 59675, the shares of which have been admitted to trading on the Specialist Fund Segment of the London Stock Exchange's Main Market.

Results and Dividends

The financial results of the Group for the financial year are set out on pages 46 to 49.

The Company declared and paid the following dividends during the financial year:

The Company declared and paid the following dividend after the financial year end:

The Company aims to continue for the time being to pay quarterly dividends of 2.0625 pence per Share in accordance with the distribution policy subject on each occasion to the Company's satisfaction of the statutory solvency test. There is no guarantee that any future dividends will be paid.

Directors

The Directors in office are shown on page 17 and all Directors remain in office as at the date of approval of this consolidated annual financial report. Further details of the Directors' responsibilities are given on pages 23 to 24.

At each annual general meeting of the Company, all the directors who held office at the two preceding annual general meetings and did not retire shall be eligible for re-election at the same meeting.

Anson is the Company's Registrar, Transfer Agent and Paying Agent. John Le Prevost is a director and controlling shareholder of Anson Group Limited, the holding company of Anson.

Other than the above, no Director has a contract of service with the Group, nor are any such contracts proposed.

The interests in Shares of the Company held by persons discharging managerial responsibility and their persons closely associated are shown below:

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

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

There were no material related party transactions which took place in the year, other than those disclosed in this Directors' Report and in Note 24 to this consolidated annual financial report.

As Amedeo was operating as principal in the Thai transaction as well as advisor to the Company, Amedeo notified the Board of the potential conflict of interest. The Board carefully considered the acquisitions with this issue in mind. The Board took into account independent appraisals from BK Associates, IBA and MBA as to the current value of the aircraft and the future value of the aircraft, after expiry of the leases. It also engaged a firm of accountants and MBA separately to provide analytical assistance and, with the assistance of Nimrod, conducted its own analysis of the cash flows relating to the new assets. The Board believes that the acquisitions will be accretive to the Company's earnings. Accordingly, the Board considers the acquisitions and the estimated purchase price, of the new assets to be fair and reasonable so far as the Shareholders of the Company are concerned.

Substantial Shareholdings

As of the date of this report, the following shareholders had notified the Company that they held or controlled 5% or more of the total voting rights of the Company in issue:

Corporate Governance

Statement of Compliance with The UK Corporate Governance Code April 2016, as published in June 2016 (the "Code")

The Company is committed to complying with the corporate governance obligations which apply to Guernsey registered companies. As a Guernsey incorporated company and under the DGTRs, the Company was not, for the year under review, required to comply with the Code. However, the Directors place a high degree of importance on ensuring that high standards of corporate governance are maintained and have therefore chosen voluntarily to comply with the provisions of the Code to the extent that they are considered relevant to the Group.

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:

· There is no chief executive position within the Company, which is not in accordance with provision A.1.2 of the Code. The Company has no requirement for a chief executive as all directors are non-executive and each share responsibilities in running the business of the Group.

· There is no senior independent director, which "position" is recommended in provision A.4.1 of the Code. Taking into account the nature of the Company and the fact that all directors are non-executive and independent this position is not seen as necessary.

· There is no remuneration committee, which is not in accordance with provision D.2.1 of the Code. The Company has no requirement for a remuneration committee given the small size of the exclusively non-executive and independent Board, and instead, the full Board performs this function.

· There is no nomination committee, which is not in accordance with provision B.2.1 of the Code. The Company has no requirement for a nomination committee given the small size of the exclusively non-executive and independent Board, and instead, the full Board performs this function.

· There is no internal audit function within the Group. Under provision C.3.6 of the Code the Audit Committee considers that, as all of the Group's administrative functions have been delegated to independent third parties, there is no need for the Group to have an internal audit facility.

Subject to the areas of non-compliance explained above, the Company complied with the other recommendations of the Code during the year. The Code is available on the UK Financial Reporting Council's website: www.frc.org.uk

Board Evaluation

The Board has conducted a performance evaluation of itself, its committees and each of the Directors, as required by Provision B.6.1 of the Code. The process was led by the Board and consisted of each Director completing questionnaires regarding the performance of the Board as a whole, the Chairman and the committees. Each Director also completed a self assessment questionnaire.

The completed questionnaires were sent to, reviewed and discussed by the entire Board, which agreed that the Board was effectively constituted and that each committee and individual Director was contributing effectively to the Group's ongoing operations and governance, such that no changes to the Board's composition or that of any of its committees was considered necessary or desirable at this juncture.

Board Responsibilities

The Board comprises four Directors and their biographies appear on page 17 demonstrating the wide range of skills and experience they each bring to the Board. All the Directors are non-executive and independent, with Robin Hallam acting as Chairman. To date no director of the Company has resigned. 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.

All Directors receive an annual fee, payable quarterly in arrears, and there are no share options or other performance related benefits available to them. During the financial year the Board performed a review of their remuneration and it was concluded that the remuneration of the Chairman and the Chairman of the Audit Committee should be revised with effect from 1 January 2018. 

Until 31 December 2017, the Chairman was paid £65,000 per annum, the Chairman of the Audit Committee was paid £64,000 per annum and each of the other two Directors was paid a fee of £60,000 per annum. With effect from 1 January 2018, the Chairman's fee was increased to £75,000 per annum and the Chairman of the Audit Committee's fee was increased to £67,500 per annum and each of the three Directors was paid a fee of £60,000 per annum.

The Board meets at least four times per year to consider the business and affairs of the Group for the previous quarter and the outlook for the coming quarter and beyond, at which meetings the Directors review the Company's Assets and all other important issues to ensure control is maintained. At two of these meetings the Board considers and, if deemed appropriate, approves the Group's financial statements.

In the past financial year the Directors held 13 board meetings and 2 Audit Committee meetings in order to carry out their duties. As the Company's portfolio increases in size and diversity, it is likely that the Directors will need to devote more time to the Company's affairs.

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 hold strategy meetings with relevant advisors as appropriate.

The Directors are kept fully informed by the Asset Manager of all matters concerning the Assets and their financial arrangements and by the Secretary of all matters that are relevant to the business of the Group and which should be brought to the attention of the Directors and/or 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 Board and its Asset Manager.

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