DNA.L Regulatory News (DNA)

DORIC NIMROD AIR ONE LIMITED (THE "COMPANY")

CORRECTION TO ANNUAL FINANCIAL REPORT ANNOUNCEMENT

The following amendments have been made to the "Annual Financial Report" announcement released on 30 July 2014 at 16:30 under RNS Number 7798N16.

Four paragraphs with regard to the Notes to the Financial Statements were omitted due to a formatting error.

Note 2(k) - Property, plant and equipment - Aircraft now includes the below wording:

"Depreciation is recognised so as to write off the cost of the Asset less the estimated residual value of £69.2 million over the estimated useful life of the Asset of 12 years, using the straight line method. The depreciation method reflects the pattern of benefit consumption. The residual value is reviewed annually and is the amount the entity would receive currently if the asset were already of the age and condition expected at the end of its useful life. Useful life is also reviewed annually and for the purposes of the financial statements represents the likely period of the Company's ownership of these Assets. Depreciation starts when the asset is available for use."

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

Note 2(l) Financial liabilities now includes the below wording:

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

Note 3 Critical Accounting Judgement, Operating lease commitments - Company as lessor now includes the below wording:

"The Company has determined that the operating lease on the Asset is 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 their lease at the end of the initial term of 10 years, a penalty equal to the present value of the remaining 2 years lease rentals would be due."

All other details remain unchanged. The full corrected Annual Financial Report can be found below.  

For further information about this announcement contact:

Doric Nimrod Air One Limited

Annual Financial Report

From 1 April 2013 to

31 March 2014

Company Facts

Doric Nimrod Air One Limited (LSE:DNA) ("DNA" or the "Company") is a Guernsey company incorporated on 8 October 2010, and admitted to the Official List and to trading on the Channel Islands Stock Exchange ("CISX") and the Specialist Fund Market of the London Stock Exchange ("SFM") on 13 December 2010. On 20 December 2013 the Royal Court of Guernsey approved the scheme of arrangement ("the scheme") between CISX and The Channel Islands Securities Exchange ("CISE"). In accordance with the scheme, the business of CISX has been acquired by CISE. All securities that were listed on the Official List of CISX have been transferred and are now listed on the Official List of CISE. 

The Company's total issued share capital currently consists of 42,450,000 Ordinary Preference Shares ("Shares") which were admitted to trading at an issue price of 100 pence per Share. As at 25 July 2014, the latest practicable date prior to publication of this report, the Shares are trading at 114.125 pence.

Investment Objectives and Policy

The Company's investment objective is to deliver an income return and a capital return for its shareholders (the "Shareholders") by acquiring leasing and then remarketing a single aircraft. The Company purchased one Airbus A380-861 Aircraft, manufacturers' serial number 016 (the "Asset") in December 2010, which it leased (the "Lease") to Emirates Airlines ("Emirates"), the national carrier owned by The Investment Corporation of Dubai based in Dubai, United Arab Emirates.

Distribution Policy

The Company aims to provide its Shareholders with an attractive total return, comprising income from distributions through the period of the Company's ownership of the Asset and capital upon the sale of the Asset.

The Company receives income from the lease rentals paid by Emirates pursuant to the Lease. The Lease payments received by the Company from Emirates cover repayment of the debt and all interest, as well as income to pay dividends to shareholders. Emirates bears all costs (including maintenance, repair and insurance) relating to the aircraft, during the lifetime of the lease.

Future dividend payments are anticipated to continue to be declared and paid on a quarterly cycle and as per the Prospectus are targeted at 2.25 pence per Ordinary Preference Share per quarter subject to compliance with applicable laws and regulations.

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

Performance Overview

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

In accordance with the Distribution Policy the Company declared four dividends of 2.25 pence per Ordinary Preference Share during the financial year to 31 March 2014 and two dividends of 2.25 pence per Ordinary Preference Share after the reporting period.

Return of Capital

If and when the Company is wound up (pursuant to a shareholder resolution, including the liquidation resolution) the Company intends to return to Shareholders the net capital proceeds upon the eventual sale of the Asset subject to compliance with the relevant laws (including any applicable requirements of the solvency test contained therein).

Liquidation Resolution

Although the Company does not have a fixed life, the articles of incorporation (the "Articles") require that the directors convene a general meeting of the Company six months before the end of the term of the Lease where an ordinary resolution will be proposed that the Company proceed to an orderly wind-up at the end of the term of the Lease and the directors will consider (and if necessary, propose to Shareholders) alternatives for the future of the Company, including re-leasing the Asset, or selling the Asset and reinvesting the capital received from the sale of the Asset in another aircraft.

I am very pleased to present shareholders with the Company's third annual financial report, covering the period from 1 April 2013 until 31 March 2014 ("the Period") .

I am glad to report that during the Period the Company has continued to perform well and declared quarterly dividends as expected.

The Company's investment objective is to obtain income returns and a capital return for its shareholders by acquiring, leasing and then selling a single aircraft. The Company purchased one Airbus A380-861, aircraft manufacturer's serial number 016 (the "Asset"), which it leased to Emirates Airlines, the national carrier owned by the Investment Corporation of Dubai, based in Dubai, United Arab Emirates. A senior secured finance facility provided by Westpac, in the amount of $122m provided the monies along with the placing proceeds for the acquisition of the aircraft. On the purchase of the plane, the Company entered into a lease with Emirates for an initial term of 12 years, with fixed lease rentals for the duration. The debt portion of the funding will be fully amortised over the 12-year term of the lease, with the aim of leaving the aircraft unencumbered on the conclusion of the lease.

The Company's Asset Manager, Doric GmbH, continues to monitor the lease and to report regularly to the Board. Nimrod Capital LLP, the Company's Placing Agent as well as its Corporate and Shareholder Advisory Agent, continues to liaise between the Board and Shareholders, and to distribute quarterly fact sheets and interim management statements.

During the calendar year 2013 overall global air traffic passenger demand, measured in revenue passenger kilometres (RPKs), expanded by 5.2% compared to the year before. This number represents exactly the average historical growth rate over the last 30 years, and was mainly driven by solid economic growth in the emerging regions. Less mature air travel markets continued to expand significantly faster than the more mature ones. In general, increasing air travel was consistent with the pick-up in economic growth around the globe. 

Emirates has also continued to perform well flying more passengers than ever before carrying 44.5 million people to 142 destinations in 80 countries on six continents during the last financial year 2013/14. Passenger load factors remain high and the airline has ordered more wide bodied planes (including a further 50 A380's) to cope with its forecast increasing demand. 

At the end of April 2014 the A380 had 10 operators with 128 planes in service. There were undelivered orders of some 195 A380s at that point in time.

According to Airbus, until March 2014 the worldwide A380 fleet had accumulated 1.3 million flight hours in close to 155,000 commercial flights. The number of passengers who flew aboard an Airbus A380 was 55 million. Currently the A380 operates between 35 airports and every five minutes an A380 takes off or lands at these destinations. 

The Board recognise Emirates are the sole lessee of the Asset, and in the event that Emirates default on the rental payments 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. We do not believe this is a likelihood at this moment in time given the current and historical performance of Emirates and its current financial position.

In economic reality, the Company has also performed well. Four interim dividends were declared in the year and future dividends are targeted to be declared and paid on a quarterly basis. However, the financial statements do not, in the Board's view, properly convey this economic reality due to the accounting treatments for foreign exchange, rental income and finance costs.

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 result is that the figures sometimes show very large mismatches which are reported as unrealised foreign exchange differences.

On an on-going 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 Company's life and are very similar in amount and timing.

In addition to this, rental income receivable is credited evenly to the Statement of Comprehensive Income over the planned life of the Company. Conversely, the methodology for accounting for interest cost means that the proportion of the loan repayments which is treated as interest, and is debited to the Statement of Comprehensive Income, varies over the course of the loan with a higher proportion of interest expense recognised in earlier periods - so that the differential between rental income and interest cost (as reported in the Statement of Comprehensive Income) reduces over the course of 12 years. In reality however the amount of rental income is fixed so as to closely match the interest and principal components of each loan repayment instalment and allow for payments of operating costs and dividends.

An annual review is required of the residual value of the Asset as per IAS 16 Property, Plant and Equipment which defines residual value as "the 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 age and in the condition expected at the end of its useful life." The Company's estimation technique is to make reference to the current forecast market value, not the amount that would currently be achieved, and so this value is not a direct application of the IAS 16 definition of residual value. The Company has engaged three internationally recognised expert appraisers to provide the Company with third party consultancy valuation services. The Company has also received reports from Doric, who have confirmed it has no reason to question the methodology used within the appraisal reports to determine the residual value and that they do not believe the appraisals show a fundamental movement in the anticipated residual value of the plane since it was acquired. Thus Doric has advised they do not believe the estimate of residual value need be changed for the Period. Upon review of the professional advice they have received, the Board is of the opinion that, the current estimate of the residual value of the Asset is a reasonable approximation of the residual value within the IAS 16 definition of residual value given a comparable asset is not available.

On behalf of the Board, I would like to thank our service providers for all their help and assistance and all shareholders for their continued support of the Company.

Charles Wilkinson

Chairman

On the invitation of the directors of the Company, the following commentary has been provided by Doric GmbH as Asset Manager of the Company and is provided without any warranty as to its accuracy and without any liability incurred on the part of the Company, its directors and officers and service providers. The commentary is not intended to constitute, and should not be construed as, investment advice. Potential investors in the Company should seek their own independent financial advice and may not rely on this communication in evaluating the merits of an investment in the Company. The commentary is provided as a source of information for shareholders of the Company but is not attributable to the Company.

The Airbus A380 with the manufacturer's serial number (MSN) 016 is registered in the United Arab Emirates under the registration mark A6-EDC. For the period from original delivery of the aircraft to Emirates in November 2008 until the end of March 2014, a total of 2,819 flight cycles were registered. Total flight hours were 23,573. This equates to an average flight duration of approximately eight hours and 20 minutes.

In September 2013 the Australian Transport Safety Bureau (ATSB) released an investigation report, involving an engine formerly owned by Doric Nimrod Air One Limited ("the Company"). The engine (serial number P550121) experienced an uncommanded in-flight shutdown during climb out of Sydney on 11 November 2012 while it was installed on another A380 of the Emirates fleet. A break-up and dislodgement of some high pressure turbine (HPT) nozzles were identified as the root cause. At that point in time, manufacturer Engine Alliance (EA) was already aware of the issue in general and an exchange programme with redesigned nozzles was underway. Nozzle exchange was planned for the next workshop visit of the Company's former engine. After the incident, EA has intensified its efforts to prevent future failures with several measures, including enhanced real time trend monitoring during flight and mandatory inspection intervals for HPT nozzles. According to the ATSB, "the associated risks to the safety of continued flight were relatively low". In May 2013 the Company took ownership of a new engine (P550349) that EA agreed to replace in exchange for the damaged one.

The A380 (MSN 016) owned by the Company visited Auckland, London Heathrow, Hong Kong, Manchester, Moscow, Toronto and Sydney during the financial year ended on 31 March 2014.

1. 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) every 24 months or 12,000 flight hours, whichever comes first. The second C check of the aircraft took place in the Emirates engineering facility at Dubai International Airport in November 2012. The next heavy maintenance check will be the 6-year check (which will include the third C check) scheduled for November 2014.

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

Hairline Cracks

In late 2011, hairline cracks were detected in a small number of L-shaped metal brackets (known as wing rib feet) within the wing structure of some A380s. The aircraft remain fully airworthy and the hairline cracks pose no risk to flight safety as affirmed by the European Aviation Safety Agency (EASA) and Airbus.

EASA released its latest Airworthiness Directive in May 2013, outlining which modification need to be made and the respective compliance terms. The wing rib feet modifications programme for Emirates' aircraft is essentially managed by Airbus. All modification activities will be covered by the applicable manufacturer's warranties. Emirates decided to embody all modifications in one step. The downtime required to incorporate the permanent fix has in some cases been reduced from originally planned eight weeks down to 51 days. The Company has been notified by Emirates that the implementation of the final fix for MSN 016 started on 4 February 2014 and was completed on 28 March 2014. The modification works were being conducted by Sabena Technics (in Bordeaux, France).

2. Market Overview

During 2013 passenger demand, measured in revenue passenger kilometres (RPKs), expanded by 5.2% compared to the year before. This number represents exactly the average historical growth rate over the last 30 years. Market development during 2013 was mainly driven by solid economic growth in the emerging regions. Less mature air travel markets continued to expand significantly faster than the more mature ones. The industry also experienced a firm start into the year 2014. RPKs in the first quarter of the current calendar year increased by 5.6% above the same period the year before, but stagnated in March compared to February. In general, accelerating air travel markets during the last months are consistent with a pick-up in economic growth across the globe.

A regional breakdown reveals that the Middle East airlines were once more the best-performing in terms of RPK growth with a plus of 11.4% during 2013. The Asia/Pacific region grew by 7.1%. The most modest growth was again observed in North America with 2.3%. This growth pattern is continuing in the current year. During the first quarter of 2014 traffic in the Middle East increased by 13.3% compared to the same period the year before. At the lower end North America has been replaced by Africa where RPKs contracted by 0.5%.

Between January and December 2013 airlines increased their capacities, measured in available seat kilometres (ASKs), by 4.8%. With some exceptions, the operators remained careful in their capacity planning. Overall the growth rate of RPKs exceeded the ASK increase. The average passenger load factor during the year 2013 was 79.5%. This is an increase of 0.4%-points compared to the year before. From a historic perspective passenger load factors remain stable on a high level. In 2014 worldwide passenger load factors could exceed 81% for the first time in the industry's history. According to the latest traffic forecast released by IATA in March 2014, RPKs are expected to grow by 5.8% in 2014 and 6.7% in 2015. Outlook for 2015 was slightly downgraded by 0.2%-points since the previous publication from December 2013.

IATA released its latest industry outlook in March 2014 according to which global industry profits are expected to reach USD 18.7 billion in 2014. This is slightly lower than IATA's December 2013 estimate of USD 19.7 billion. The main driver of this downward revision is an adjusted projection for oil price development, which has been increased by USD 3.50 per barrel for geo-political reasons such as the latest developments in the Ukraine. But according to IATA's General Director and CEO, Tony Tyler, the general outlook to the industry is positive. Expected GDP growth, which is closely linked to airlines profitability, is largely driven by developed economies after some key emerging economies like India and Brazil face economic challenges.

During 2013 Airbus delivered more aircraft to its customers than ever before. At the same time the European aircraft manufacturer received new orders for 1,503 aircraft. At year-end order backlog increased to 5,559 aircraft with a cumulative list price of more than USD 800 billion. This is a new record to the aviation industry.

Source: Airbus, IATA

3. Lessee - Emirates Key Financials

Emirates announced its 26th consecutive year of profit and company-wide growth for the financial year ended on 31 March 2014, despite competitive pressure and a global economic environment that is only slowly recovering.

Revenue reached a record high of USD 22.5 billion, up by 13% compared to the previous financial year, and continues to be well balanced with no region contributing more than 30%. East Asia and Australasia remained the highest revenue contributing regions with USD 6.5 billion, up 14.1% from 2012/2013. Gulf and Middle East (up 16.6% to USD 2.3 billion), Europe (up 16.3% to USD 6.4 billion) and Africa (up 15.1% to USD 2.1 billion) saw the most significant growth rates, reflecting new destinations as well as increased frequency and capacity to these regions.

The airline posted a net profit of USD 887 million, representing an increase of 43% over last year's results. With a share of nearly 40% fuel remains the largest operating cost category. Compared to last financial year, the average price of jet fuel was slightly lower relieving the carrier's bottom line. Due to the growing fleet Emirates' fuel bill increased by 10% to reach USD 8.4 billion. Total operating costs showed a smaller increase (+11.5%) than the revenues (+13%) in the financial year 2013/2014 resulting in a profit margin of 3.9%.

As of 31 March 2014 the balance sheet total amounted to USD 27.7 billion, an increase of 7.2% from the previous year. Total equity increased by 10.6% to USD 6.9 billion with an equity ratio of 25.1%. The equity ratio is defined as total equity/balance sheet total. The current ratio was 0.84; therefore the airline would be able to meet most of its current liabilities by liquidating all of its current assets. Significant items on the liabilities side of the balance sheet included finance leases in the amount of USD 8.6 billion and revenues received in advance from passenger and freight sales (USD 3.1 billion). As of 31 March 2014 the carrier's cash balance reached USD 4.5 billion.

Emirates continued with its growth plan and saw the largest increase in Available Tonne Kilometres (ATKs) in the airline's history during the financial year 2013/2014.

Between April 2013 and March 2014, as compared to the prior financial year, the airline's ASKs increased by 14.6%. Measured in RPKs passenger traffic grew by 14.2%, resulting in an average passenger load factor of 79.4%. This is slightly below the 79.7% reached in the period before. A record 44.5 million passengers flew with Emirates between April 2013 and March 2014 - an increase of 13.1% compared to the previous period.

The airline received 24 widebody aircraft, including 16 Airbus A380s, 6 Boeing 777-300ER and 2 Boeing 777F freighters during the financial year ended on 31 March 2014. At the Dubai Air Show in November 2013 Emirates signed contracts with Airbus and Boeing for a combined value of USD 99 billion (list prices) consisting of 150 Boeing 777X and another 50 Airbus A380. According to the operator, the first 25 of the additional A380 will come into service before the first quarter of 2018. Deliveries for 777Xs are scheduled to start in 2020. By that year Emirates expects to have more than 250 widebody aircraft in the air serving some 70 million passengers a year.

The airline is not only heavily investing in new aircraft, but it is also running the world's largest paint hangar owned by an airline. Twice the size of a football field, the facility operates 24 hours a day, seven days a week. Between January and December 2013 Emirates completed 21 "make-overs" comprising paint stripping and repaint of complete aircraft. According to the airline, the first A380 which entered into service in August 2008 will be due for a repaint in 2015.

As of 30 April 2014 Emirates has 213 widebody aircraft in operation, with firm orders for another 224 aircraft, including 93 A380s, 58 Boeing 777-300ER and 120 Airbus A350. The airline operates the world's largest fleets of Airbus A380s and Boeing 777-300ER. During the financial year 2013/2014 Emirates raised USD 3.3 billion in new funding mainly to secure its on-going fleet expansion. The carrier benefited from a variety of financing structures to meet its refinancing needs, including a second Enhanced Equipment Trust Certificate (EETC) issue by a lessor (Doric Nimrod Air Three Ltd.).

With its increased fleet and resources, Emirates launched nine new destinations during the last financial year. In May 2014 Emirates operated flights to 141 destinations in 80 countries on six continents. During the calendar year 2013 the airline's fleet travelled more than 751 million kilometres, circling the globe over 18,000 times and carrying over 43 million passengers. As of May 2014 the airline operates nearly 3,200 flights per week.

In the current financial year the airline envisage adding at least another five passenger routes including Abuja (Nigeria), Brussels, Chicago, Kano (Nigeria) and Oslo.

Source: Ascend, Emirates

4. Aircraft - A380

At the end of April 2014 Emirates had a fleet of 47 A380s which serve 26 destinations worldwide: Amsterdam, Auckland, Bangkok, Barcelona, Beijing, Brisbane, Hong Kong, Jeddah, Kuala Lumpur, London Gatwick, London Heathrow, Los Angeles, Manchester, Mauritius, Melbourne, Moscow, Munich, New York JFK, Paris, Rome, Seoul, Shanghai, Singapore, Sydney, Toronto, and Zurich. London Gatwick became an A380 destination only recently, even though it was Emirates' first destination when the airline commenced flights to the UK back in 1987. Furthermore Emirates announced an upgrade of service from Dubai to Kuwait with the introduction of the A380 starting in July 2014. Dallas is scheduled to complement the list of A380 destinations in October 2014. The carrier remains by far the largest A380 operator in terms of aircraft number. Emirates has an additional 93 aircraft of this type on firm order.

At the end of April 2014, the global A380 fleet consisted of 128 planes that were in service with ten operators: Emirates (47 A380 aircraft), Singapore Airlines (19), Qantas (12), Deutsche Lufthansa (11), Air France (9), Korean Airways (8), China Southern Airlines (5), Malaysia Airlines (6), Thai Airways (6) and British Airways (5). There are 195 outstanding orders for Airbus A380s at the end of April 2014 as yet undelivered. Qantas, Air France and Virgin Atlantic have announced various postponements from the original delivery dates of their part of these unfilled orders, which concerns 16 of these aircraft . Deutsche Lufthansa has cancelled options to buy three aircraft following a fleet planning revision in 2013.

According to the manufacturer, a number of new operators will receive their aircraft in the current calendar year. Qatar Airways will join the club of A380 operators first, followed by South-Korean based Asiana Airlines and Skymark Airlines of Japan. United Arab Emirates' flag carrier Etihad Airways is expected to receive the first A380 by the close of this year.

In January 2014 the Indian Ministry of Civil Aviation lifted the ban for A380 operations at Indian airports. Four major international airports including New Delhi and Mumbai have already been equipped to handle the superjumbo. It is expected that major A380 operators like Emirates, Deutsche Lufthansa and Singapore Airlines will use their aircraft for flights to India in the future. Services will be subject to traffic entitlements within bilateral agreements.

In February 2014 Doric Lease Corp Management Limited, which had been formed in 2013, changed its name to Amedeo Management Limited. Amedeo aims to be a dedicated and actively managed widebody aircraft acquisition and leasing business , with a specialised focus on the A380. It confirmed an order for twenty A380s at the Singapore Air Show in February 2014 with the aim of leasing these planes on to commercial airlines.

According to Airbus, the worldwide A380 fleet has accumulated around 1.3 million flight hours in close to 155,000 commercial flights until March 2014. The number of passengers flying aboard an Airbus A380 to date is approximately 55 million.

Source: Airbus, Ascend, Bloomberg, Emirates

Charles Edmund Wilkinson - Chairman (Age 71)

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 currently Chairman of Doric Nimrod Air Three Limited and Chairman of the Audit Committee of Doric Nimrod Air Two Limited, and a Director of Premier Energy and Water Trust PLC (a listed investment trust), and of Landore Resources Ltd, a Guernsey based mining exploration company. He is resident in Guernsey.

Norbert Bannon (Age 65)

Norbert Bannon is chairman of a large UK DB pension fund, a major Irish DC pension scheme and is a Director of and advisor to a number of other financial companies . He is on the board of the UK subsidiary of a major Canadian bank and is Chairman of Doric Nimrod Air Two Limited and Chairman of the audit committee of Doric Nimrod Air Three Limited.

He has extensive experience in international finance having been CEO of banks in Singapore and New York. He was CEO of Ireland's largest venture capital company and was Finance Director and Head of Risk at AIB Capital Markets, which he left in 2002. He has worked as a consultant on risk issues internationally.

He earned a degree in Economics from Queens University Belfast, studied at Stanford Graduate School of Business and is a Chartered Accountant.

Geoffrey Alan Hall (Age 65)

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 currently a Director of Doric Nimrod Air Two Limited and Doric Nimrod Air Three Limited.

Geoffrey earned his masters degree in Geography at University of London. He is an associate of the UK Society of Investment Professionals (CFA Institute of the UK).

John Le Prevost (Age 62)

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 30 years working in offshore trusts and investment business during which time he was Managing Director of County NatWest Investment Management (Channel Islands) Limited, Royal Bank of Canada's mutual fund company in Guernsey and Republic National Bank of New York's international trust company. John is a Director of BlueCrest AllBlue Fund Limited, a FTSE 250 listed fund of hedge funds and of Guaranteed Investment Products I PCC Limited, Guernsey's largest protected cell company. 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 also currently a Director of Doric Nimrod Air Two Limited and Doric Nimrod Air Three Limited. He is resident in Guernsey.

Management and the Delegation of Functions

The directors, whose details are set out in pages 15 to 16 are responsible for reviewing the business affairs of the Company in accordance with the Articles and the Prospectus and have overall responsibility for the Company's activities including all business decisions, review of performance and authorisation of distributions. All of the directors are independent and non-executive. The Company has delegated management of the Asset to Doric GmbH ("Doric" or the "Asset Manager"), which is a Company incorporated in Germany and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht, as outlined in more detail below under the heading Asset Manager. The directors delegate secretarial and administrative functions to JTC Fund Managers (Guernsey) Limited ("JTC" or the "Secretary & Administrator") which is a company incorporated in Guernsey and licensed by the Guernsey Financial Services Commission for the provision of administration services.

Asset Manager

Doric has been appointed by the Company to provide asset management services to the Company. Pursuant to the Asset Management Agreement, Doric will: (i) monitor Emirates' and any subsequent lessees' performance of its obligations under the Leases and any subsequent leases respectively (which shall include the obligations relating to the maintenance of insurance cover); (ii) provide the Company 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 Company 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 loan, as required.

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

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

services by Doric to the Company under the Asset Management Agreement; and (ii) facilitate communication between the Company and Doric.

Doric is the holding company of the Doric Group of companies and provides for the fund administration and asset management services of the Doric Group.

The Doric Group is a leading provider of products and services for investors in the fields of aviation, shipping, renewable energy and real estate. The Doric Group has an international presence, with offices in Germany, the United States and the United Kingdom, and a multinational team which offers access to extensive relationship networks and expert asset knowledge. One of the firm's core competencies is its asset management expertise, which is an integrated part of all Doric transactions and a cornerstone of the business.

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

The aircraft portfolio currently managed by the Doric Group is valued at US$7 billion and consists of 36 aircraft under management. These aircraft include commercial jet airliners ranging from the Airbus A320 family, through the Boeing 777 and Airbus A330/A340 family, up to the Airbus A380.

The Doric Group has 22 Airbus A380 aircraft currently under management and is therefore considered well positioned to perform the technical asset management of this aircraft type.

Liaison Agent

Amedeo Services (UK) Limited has been appointed by the Company, pursuant to the Liaison Services Agreement, to, where requested by the Board, participate in Board meetings, assist in the review of all asset management matters and provide advice in all asset management related matters. Amedeo Services (UK) Limited is part of the Amedeo group of companies.

The Amedeo group is primarily involved in the operating lease and management of widebody aircraft. In February 2014 at the Singapore Air Show, Amedeo confirmed an order for twenty A380 aircraft. Amedeo is a member of ISTAT, the International Society of Transport Aircraft Trading.

Corporate and Shareholder Adviser

Nimrod Capital LLP (which is authorised by the Financial Conduct Authority) has been appointed as the Corporate and Shareholder adviser by the Company.

Nimrod Capital LLP 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. It has launched eight listed investment companies since its formation and it also provides investment, marketing, distribution and advisory services to investment companies and their Board and managers.

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

Secretary & Administrator

Formed in 1987, JTC Group is a multi-jurisdictional, independent provider of corporate, fund and private client services, with significant global experience and £23.8 billion (US$39.7bn) assets under administration.

With a highly qualified and multilingual workforce of nearly 300 employees, JTC Group operates from 18 jurisdictions around the world with offices in Argentina, Brazil, BVI, Guernsey, Jersey, Luxembourg, New Zealand, Switzerland, UK and USA (a representative office), as well as alliance offices in the Cayman Islands, Cyprus, Hong Kong, Indonesia, Labuan, Malaysia, Netherlands and Singapore.

JTC Fund Managers (Guernsey) Limited ("JTC") is a Guernsey incorporated company and provides administration and secretarial services to the Company pursuant to an Administration and Secretarial Agreement. In such capacity, JTC is responsible for the general secretarial functions required by the law and ensures that the Company complies with its continuing obligations as well as advising on the corporate governance requirements and recommendations as applicable to a company listed on the CISE and admitted to trading on the SFM. JTC was formerly known as Anson Fund Managers Limited which was acquired by JTC Group in December 2013.

The Administrator is also responsible for the Company's general administrative functions such as the calculation of the net asset value of Shares, the maintenance of accounting and statutory records and any reporting required under the Foreign Account Tax Compliance Act of the United States of America.

Review

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

A description of important events which have occurred during the Period, their impact on the performance of the Company as shown in the financial statements and a description of the principal risks and uncertainties facing the Company are given in the Chairman's Statement, Asset Managers Report and the notes to the financial statements contained on pages 47 to70 and are incorporated here by reference.

Going Concern

The Company's principal activities are set out within the Company Overview on page 2. The financial position of the Company is set out on pages 43 to 46. In addition, Note 17 to the financial statements includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives and its exposures to credit risk and liquidity risk. The Loan interest rate has been fixed and the fixed rental income under the Lease means that the rent should be sufficient to repay the Loan and provide surplus income to pay for the Company's expenses and permit payment of dividends.

After making reasonable enquiries, and as described above the directors have a reasonable expectation that the Company has adequate resources to continue in its operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing these annual financial statements.

Responsibility Statement

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

(a) The financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, give a fair, balanced and understandable view of the assets, liabilities, financial position and profits of the Company and performance of the Company; and

(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 Company, 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 Company's performance, business model and strategy; and

(d) The Annual Report includes information required by the CISE and for ensuring the Company complies with the relevant provisions of the Disclosure and Transparency Rules of the UK Listing Authority.

Charles Wilkinson Norbert Bannon

Chairman Chairman of the Audit Committee

The directors present their report and financial statements of the Company for the period from 1 April 2013 to 31 March 2014 (the "Period").

Principal Activities

The principal activity of the Company is to acquire, lease and then sell a single aircraft. The directors do not envisage any change in these activities for the foreseeable future. A description of the activities of the Company in the period under review is given in the Asset Manager's Report on pages 8 to 14.

Status

The Company is a Guernsey domiciled company the Ordinary Preference Shares of which are admitted to the Official List of the CISE and to trading on SFM. Its registered number is 52484. The Company operates in accordance with the Companies (Guernsey) Law, 2008, as amended (the "Law").

Results and Dividends

The results of the Company for the Period are set out on pages 43 to 46.

The Company declared the following dividends during the period from 1 April 2013 to date as follows:

The Company aims to continue to pay quarterly dividends of 2.25 pence per Ordinary Preference 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 pages 15 to 16, and all directors remain in office as at the date of signature of these financial statements. Mr John Le Prevost was appointed as non-executive Director of the company effective 13 January 2014. Further details of the Director's responsibilities are given on pages 26 to 32.

Anson Registrars Limited 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 Registrars Limited.

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

The following interests in shares of the Company are held by directors and their connected persons:

Other than the above share holdings and Mr Le Prevost's interest in Anson Registrars Limited, 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 period and none of the Directors has or has had any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Company, and which was effected by the Company during the reporting period.

At the date of this report, there are no outstanding loans or guarantees between the Company and any Director.

There were no material related party transactions which took place in the financial period, other than those disclosed in the Directors' Report and at Note 20 to the financial statements.

Substantial Shareholdings

The Company has been notified of the following substantial interests in accordance with Chapter 5 of the Disclosure and Transparency Rules, in the Company's share capital.

There have been no material changes in the below list of substantial holdings since 24 July 2014, being the latest practicable date prior to publication of this report.

Corporate Governance

Statement of Compliance with the UK Corporate Governance Code

As a Guernsey company with shares admitted to the SFM, the Company is not obliged to adopt the UK Corporate Governance Code. The Company has, however, voluntarily committed to comply with the UK Corporate Governance Code. A copy of the UK Corporate Governance Code is available for download from the Financial Reporting Council's web-site (www.frc.org.uk). Companies which report against the UK Corporate Governance Code are also deemed to meet the requirements of the GFSC Code.

Save for departing from the requirements to: (i) have a chief executive (since the Company does not have any executive directors); (ii) have a senior independent Director (since the Company considers that each Director who is not Chairman can effectively fulfil this function); (iii) have a remuneration committee (given the small size of the exclusively non-executive and independent Board); (iv) have a nomination committee (given the small size of the exclusively non-executive and independent Board); (v) appoint the directors for a term of six years (given the term of the Leases is twelve years) and (vi) have an internal audit function (as the Company has no executives or employees of its own), the Company is not presently aware of any departures from the UK Corporate Governance Code.

Board Responsibilities

The Board comprises four directors, who meet quarterly to consider the affairs of the Company in a prescribed and structured manner. Biographies of the directors appear on pages 15 to 16 demonstrating the wide range of skills and experience they bring to the Board. All the Directors are non-executive and independent. The Board regularly reviews the balance, knowledge and effectiveness of the Board, to identify if any additional experience or skills are needed and to ensure that the current directors have sufficient available time to undertake the tasks required and remain independent. When considering the composition of the Board the directors will be mindful of diversity and meritocracy.

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 and there are no share options or other performance related benefits available to them. All directors are paid a fee of £15,000 per annum and the Chairman is paid an additional fee of £5,000 per annum. The Chairman of the Audit Committee is paid an additional £3,000 per annum.

Board meetings are held at least four times per year to consider the business and affairs of the Company for the previous quarter, at which meetings the directors also consider and if thought suitable, approve the payment of a dividend in accordance with the Company's Distribution Policy. A further two regular meetings are held each year to consider and approve the Company's financial statements as well as to consider the business and affairs of the Company during the preceding financial period and going forward thereafter.

Between these 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 in attendance 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 Company and should be brought to the attention of the directors and/or Shareholders. All directors have direct access to the Secretary and the Secretary is responsible for ensuring that Board procedures are followed and that there are good information flows both within the Board and between Committees and the Board. The directors also have access to the advice and services of the Asset Manager and Corporate and Shareholder Advisory Agent and may also, in the furtherance of their duties, take independent professional advice at the Company's expense.

During the Period the Board met six times per the regular schedule of meetings outlined above. The director's attendance is summarised below:-

Audit Committee

The directors are all members of the Audit Committee, with Norbert Bannon acting as Chairman. The Audit Committee has regard to the Guidance on Audit Committees published by the Financial Reporting Council in September 2012. The Audit Committee examines the effectiveness of the Company's and service provider internal control systems as appropriate, the annual and half-yearly reports and financial statements, the auditor's remuneration and engagement, as well as the auditor's independence and any non-audit services provided by them.

The Audit Committee considers the nature, scope and results of the auditor's 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 Audit Committee has regard to a variety of criteria including industry experience, independence, reasonableness of audit plan, ability to deliver constructive criticism, effectiveness of communication with Board and the Company's service providers, quality control procedures, management of audit process and added value beyond assurance in audit opinion.

Auditor independence is maintained through limiting non-audit services to specific audit-related work that falls within defined categories. For example certain agreed upon procedures in respect of the company's calculations should it undertake a C share conversion, the provision of advice on the application of IFRSor formal reports for any Stock Exchange purposes. All engagements with the auditor are subject to pre-approval from the Audit Committee and fully disclosed within the Annual Financial Report for the relevant period. A new lead audit partner is appointed every five years and the Audit Committee ensures the auditor has appropriate internal mechanisms in place to ensure its independence. The Audit Committee has recommended to the Board that the re-appointment of Deloitte LLP as the Company's external auditor be proposed to Shareholders at the 2014 Annual General Meeting. The Audit Committee will consider arranging for the external audit contract to be tendered in 2022 (being 10 years from the initial appointment) with the aim of ensuring a high quality and effective audit.

The Audit Committee meets at least twice annually, shortly before the Board meets to consider the Company's half-yearly and annual financial reports, and reports to the Board with its deliberations and recommendations and also has an annual planning meeting with the Auditor. The Audit Committee operates within clearly defined terms of reference based on the Institute of Chartered Secretaries and Administration recommended terms and provides a forum through which the Company's external auditor reports to the Board. The Audit Committee can request information from the Company's service providers with the majority of information being directly sourced from the Asset Manager, Secretary & Administrator and the external auditor. The terms of reference of the Audit Committee are available upon request.

Each year the Board examines the Audit Committee's performance and effectiveness, and ensures that its tasks and processes remain appropriate. Key areas covered included the clarity of the committee's role and responsibilities, the balance of skills among its members and the effectiveness of reporting its work to the Board. The Board is satisfied that all members of the Committee have relevant financial experience and knowledge and ensure that such knowledge remains up to date.

Overall the Board considered the Audit Committee had the right composition in terms of expertise and has effectively undertaken its activities and reported them to the Board during the year.

Internal Control and Financial Reporting

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

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

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

Asset Management services are provided by Doric GmbH. Administration and Secretarial duties for the Company are performed by JTC.

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

Bribery

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

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

· The Company will implement and enforce effective procedures to counter bribery.

· The Company requires all its service providers and advisors to adopt equivalent or similar principles.

Dialogue with Shareholders

All holders of Ordinary Preference 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 Company.

The primary responsibility for Shareholder relations lies with the Company's Corporate and Shareholder Advisory Agent. In addition, the directors are always available to enter into dialogue with Shareholders and the Chairman is always willing to meet major shareholders as the Company believes such communication to be important. The Company's directors can be contacted at the Company's registered office or via the Secretary.

Statement of Directors' Responsibilities

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

The Law requires the directors to prepare financial statements for each financial year. Under the Law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU and applicable law.

The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss of the Company for that period.

In preparing these financial statements, the directors are required to:

· Ensure the Annual report taken as a whole is fair, transparent and understandable and provides information necessary for shareholders to assess the Company's performance;

· properly select and apply accounting policies;

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

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

· make an assessment of the Company's ability to continue as a going concern.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Law. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

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

Disclosure of information to the auditor

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

Auditor

Deloitte LLP have expressed their willingness to continue in office as Auditor and the Audit Committee has recommended their reappointment. A resolution proposing their reappointment will therefore be submitted at the Company's forthcoming general meeting.

Charles Wilkinson Norbert Bannon

Chairman of the Board Chairman of the Audit Committee

Signed on behalf of the Board on 2014

Director

MEMBERSHIP

Norbert Bannon - Chairman of the Audit Committee

Charles Wilkinson - Chairman of the Board

Geoffrey Hall - Director

John Le Prevost - Director

KEY OBJECTIVE

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

RESPONSIBILITIES

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

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

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

• overseeing the relationship with the external auditor;

• monitoring the systems of internal controls operated by the Company and by the Company's principal service providers; and

• reviewing the effectiveness of the external audit process.

COMMITTEE MEETINGS

We meet at least twice a year. We report to the Board as part of a separate agenda item, on our activities and on matters of particular relevance to the Board in the conduct of their work. During the Period we formally reported to the Board on two occasions.

MAIN ACTIVITIES OF THE COMMITTEE DURING THE YEAR

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

FAIR, BALANCED AND UNDERSTANDABLE

Following the publication of the revised version of the UK Corporate Governance Code, which applies to Financial Years commencing
on or after 1 October 2012, the Board requested that we advise them on whether we believe the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

FINANCIAL REPORTING AND SIGNIFICANT ISSUES

Our primary role in relation to financial reporting is to review, with our service providers and the external auditor, the appropriateness of the half-year and annual financial statements, the significant financial reporting issues and accounting policies and disclosures in the financial statements. The Committee has considered the key audit risks identified as being significant to the 2014 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. To aid our review we considered reports prepared by external service providers, including Doric and Nimrod, and reports from the external auditor on the outcome of their annual audit. The significant issues considered by the Committee in relation to the 2014 accounts and how these were addressed are detailed below:

GOING CONCERN

After making enquiries, the Committee has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Committee believe the Company is well placed to manage its business risks successfully as the interest on the Company's loan has been fixed and the fixed rental income under the operating lease means that the rents should be sufficient to repay the loan and provide surplus income to pay for the Company's expenses and permit payment of dividends. Accordingly, the Committee has adopted the going concern basis in preparing the financial information.

INTERNAL CONTROL

In November 2013 the Company's appointed Administrator, Anson Fund Managers Limited, was acquired by JTC Group Limited and the Administrator changed its name to JTC Fund Managers (Guernsey) Limited. The Committee has made due enquiry of the purchaser about the implications of this acquisition on the systems and controls affecting the administration of the Company's affairs. We were informed that, for the foreseeable future, the same staff, systems and controls will be used in the continuing administration of the Company's affairs.

INTERNAL AUDIT

The Company has no employees and operates no systems of its own, relying instead on the employees and systems of its external service providers. The Board has therefore taken the decision that it would be of insufficient benefit for the Company 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. We receive from Deloitte a detailed audit plan, identifying their assessment of the key risks. For the Period the primary risks identified were in respect of valuation and ownership of the aircraft; the recording of lease rental income; and accounting for fixed rate debt using the effective interest rate method.

Using our collective skills we assess the effectiveness of the audit process in addressing the matters raised through the reporting we receive from Deloitte at the year-end. In particular we formally appraise Deloitte against the following criteria:

· Independence

· Ethics and Conflicts

· Knowledge and Experience

· Challenge

· Promptness

· Cost

· Overall quality of service

In addition we also seek feedback from the Administrator on the effectiveness of the audit process.

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

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

APPOINTMENT AND INDEPENDENCE

We consider the reappointment of the external auditor, including the rotation of the audit partner, each year and also assess their independence on an ongoing basis.

The EU and Competition Commission have issued draft proposals in respect of audit tendering and mandatory rotation of auditors that are yet to be finalised. The Committee will continue to monitor developments around these proposals and will formulate a policy in respect to audit tendering and rotation at the appropriate time.

The external auditor is required to rotate the audit partner responsible for the audit every five years. The current lead audit partner has been in place since October 2012.

Deloitte has been the Company's external auditor since October 2012. We have provided the Board with its recommendation to the shareholders on the reappointment of Deloitte as external auditor for the year ending 31 March 2015. Accordingly a resolution proposing the reappointment of Deloitte as our auditor will be put to the shareholders at the 2014 Annual General Meeting. However, we keep this matter under review.

There are no contractual obligations restricting our choice of external auditor. We continue to consider the audit tendering provisions outlined in the revised UK Corporate Governance Code, of which we are very supportive.

NON-AUDIT SERVICES

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

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

COMMITTEE EVALUATION

Our activities formed part of the review of Board effectiveness performed in 2013.

An internal evaluation of our effectiveness was carried out in November 2013.

Yours faithfully

Norbert Bannon

Chairman of Audit Committee

Opinion on financial statements of Doric Nimrod Air One Limited 

In our opinion the financial statements:

· give a true and fair view of the state of the company's affairs as at 31 March 2014 and of its profit for the year then ended;

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

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

We have reviewed the directors' statement on page 21 that the company is a going concern. We confirm that:

• we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and

• we have not identified any material uncertainties that may cast significant doubt on the company's ability to continue as a going concern.

Our assessment of risks of material misstatement 

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team:

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks described above, and we do not express an opinion on these individual matters.

Our application of materiality

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

We determined materiality for the company to be £0.9 million, which is approximately 2% of total shareholder's equity.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £18,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 

An overview of the scope of our audit

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

Matters on which we are required to report by exception

John Clacy FCA

for and on behalf of Deloitte LLP

Chartered Accountants and Recognised Auditor

St Peter Port, Guernsey