Doric Nimrod 3 Regulatory News (DNA3)

HALF YEARLY FINANCIAL REPORT

The Board of the Company is pleased to announce its results for the period from 1 April 2017 to 30 September 2017.

To view the Company's half yearly financial report please visit the Company's website, http://www.dnairthree.com.

In addition, to comply with DTR 6.3.5(1) please find below the full text of the half yearly financial report.

Enquiries:

For further information, please contact:

For administrative and company information:

JTC Fund Solutions (Guernsey) Limited

+44 (0) 1481 702400

For shareholder information:

Nimrod Capital LLP

Richard Bolchover

Marc Gordon

+44 (0) 20 7382 4565

E&OE - in transmission  

SUMMARY INFORMATION

COMPANY OVERVIEW

Doric Nimrod Air Three Limited

Doric Nimrod Air Three Limited (LSE Ticker: DNA3) ("DNA3" or the "Company") is a Guernsey company incorporated on 29 March 2012. Its Ordinary Shares were admitted to trading on the Specialist Fund Segment ("SFS") of the London Stock Exchange ("LSE") on 2 July 2013.

The Company's total issued share capital consists of 220,000,000 Ordinary Shares (the "Shares"). As at 11 December 2017, the latest practicable date prior to publication of this report, the Shares were trading at 95.75 pence per Share.

Investment Objectives and Policy

The Company's investment objective is to obtain income returns and a capital return for its shareholders (the "Shareholders") by acquiring, leasing and then selling aircraft (each an "Asset" or "Assets" and together the "Assets or "Aircraft"). To pursue its investment objective, the Company has used the net proceeds of placings and other equity capital raisings, together with debt facilities (or instruments), to initially acquire four Airbus A380 Aircraft which are leased to Emirates Airline ("Emirates"), the national carrier owned by The Investment Corporation of Dubai based in Dubai, United Arab Emirates.

DNA Alpha

The Company has one wholly-owned subsidiary, DNA Alpha Limited ("DNA Alpha") which holds the Assets for the Company. Together the Company and DNA Alpha are known as the ("Group").

The first Asset was acquired by DNA Alpha on 29 August 2013 for a purchase price of USD 245 million. Upon delivery, DNA Alpha entered into an operating lease with Emirates, pursuant to which the first Asset has been leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration.

The second Asset was acquired by DNA Alpha on 29 October 2013 for a purchase price of USD 245 million. Upon delivery, DNA Alpha entered into an operating lease with Emirates, pursuant to which the second Asset has been leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration.

The third Asset was acquired by DNA Alpha on 14 November 2013 for a purchase price of USD 245 million. Upon delivery, DNA Alpha entered into an operating lease with Emirates, pursuant to which the third Asset has been leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration.

The fourth Asset was acquired by DNA Alpha on 27 November 2013 for a purchase price of USD 245 million. Upon delivery, DNA Alpha entered into an operating lease with Emirates, pursuant to which the fourth Asset has been leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration.

DNA Alpha acquired the Assets using a combination of a portion of the proceeds of the issue of the Shares by the Company together with the proceeds of the sale of Equipment Notes issued by DNA Alpha (the "Equipment Notes") and the initial rent payment pursuant to the relevant operating leases. The Equipment Notes were acquired by two separate pass through trusts using the proceeds of their issue of enhanced equipment trust certificates (the "Certificates") as detailed within the Offering Circular issued by DNA Alpha dated 10 July 2013. The Certificates, with an aggregate face amount of approximately USD 630 million, were admitted to the official list of the Irish Stock Exchange and to trading on the Main Securities market thereof on 12 July 2013 and will mature on 30 May 2025.

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 Assets and capital upon the sale of the Assets.

The Group receives income from the lease rentals paid by Emirates pursuant to the leases. Income distributions are made quarterly, subject to compliance with applicable laws and regulations. The Company currently targets a distribution of 2.0625 pence per Share per quarter. Emirates bears all costs (including maintenance, repair and insurance) relating to the aircraft during the lifetime of the leases.

There is no guarantee that dividends will be paid to Shareholders, nor is there a guarantee of the timing or amount of any such dividend. There is also no guarantee that the Company will, at all times, satisfy the solvency test required by section 304 of the Law enabling the Directors to effect the payment of dividends.

Performance Overview

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

During the year under review (the "Period") and in accordance with the Distribution Policy the Company declared two interim dividends of 2.0625 pence per Share. One interim dividend of 2.0625 pence per Share was declared after the reporting period. Further details of dividend payments can be found on page 27.

Return of Capital

If and when the Group 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 Assets subject to compliance with the Company's Articles of Incorporation (the "Articles") and the applicable laws (including any applicable requirements of the solvency test contained therein).

Liquidation Resolution

Although the Group does not have a fixed life, the Articles require that the Directors convene a General Meeting of the Company in 2026 where an ordinary resolution will be proposed that the Company proceed to an orderly wind-up at the end of the last lease and the directors will consider (and if necessary, propose to Shareholders) alternatives for the future of the Company, including re-leasing the Assets, or selling the Assets and reinvesting the capital received from the sale of the Assets in other aircraft.

CHAIRMAN'S STATEMENT

I am very pleased to present Shareholders with the Company's half-yearly consolidated financial report covering the period 1 April 2017 until 30 September 2017 (the "Period").

I am glad to report that during the Period the Company has performed as anticipated and has declared and paid quarterly dividends of 2.0625 pence per share as expected, representing 8.25 pence share per year.

The Company owns four Airbus A380s all leased to the Emirates. The lease payments received by the Company from Emirates cover repayment of the debt as well as income to pay operating expenses and dividends to Shareholders. Emirates bears all costs (including maintenance, repair and insurance) relating to the aircraft during the lifetime of the leases.

The Company's Asset Manager, Amedeo Management Limited, continues to monitor the Leases and reports regularly to the Board. Nimrod Capital LLP, the Company's Corporate and Shareholder Advisor, continues to liaise between the Board and Shareholders, and to distribute quarterly fact sheets.

According to the International Air Transport Association ("IATA"), 2017 is on course to be another year of strong traffic growth with data for the month of August (measured in total revenue passenger kilometers or RPKs) showing demand climbed 7.9% during the year to date while the load factor climbed 0.7 percentage points to 84.5%. During the first half of 2017, premium passenger demand growth was stronger than economy seat demand in a number of markets, particularly across the Pacific and within Asia. This is consistent with the recent pick-up in global trade conditions, which tends to correlate well with premium travel demand. By contrast, premium demand lagged behind its economy counterpart in a number of cases, notably between Europe and the Middle East.

Over the past year Middle Eastern carriers have faced a multitude of challenges, including geo-political turbulence in various parts of the world, heightened concern about immigration on an international scale and enhanced security procedures impacting operations to the US. Fortunately, in the latter case, some of these headwinds are starting to ease during the period with the US laptop ban being lifted fully during July.

In July, Emirates announced that it is entering a broad partnership with low-cost operator Flydubai, which will include a codeshare and optimisation of the airlines' networks. Both carriers are government-owned, and the move aims to reduce unnecessary competition, enabling Emirates to benefit from Flydubai's single-aisle operations. Between them, the airlines operate routes to 216 cities with networks that overlap to an extent. However, they expect to be serving 240 destinations as a combined operation by 2022, with a total fleet of 380 aircraft.

The Board took note of a number of A380-related information and events, which became available or took place after September 30, 2017. This includes the return of the first A380, previously operated by Singapore Airlines, to its lessor. The aircraft is temporarily stored in Southern France, with the four engines leased to manufacturer Rolls-Royce. Furthermore, it was noted that Emirates did not commit to purchase additional A380 aircraft so far. It was widely expected that Emirates would sign a corresponding agreement at the Dubai Air Show in November this year. The Board and its Asset Manager continue to monitor these developments carefully.

In economic reality, the Company has performed as expected. Two interim dividends were declared in the half-year and future dividends are targeted to be declared and paid on a quarterly basis. However, as required by International Financial Reporting Standards ("IFRS"), the financial statements do not, in the Board's view, properly convey this economic reality due to the accounting treatment for foreign exchange, rental income and finance costs.

IFRS 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. When the lease matures and the debt is repaid these foreign exchange differences will disappear.

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 debt repayments due which are likewise denominated in US Dollars. US Dollar lease rentals and debt 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 Consolidated 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 debt repayments which is treated as interest and is debited to the Consolidated Statement of Comprehensive Income, varies over the term of the debt 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 Consolidated 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 debt repayment instalment and allow for payments of operating costs and dividends.

The Company produces a fact sheet on a quarterly basis which is available on its website and which I encourage all shareholders to view. 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.

Charles Wilkinson

Chairman

ASSET MANAGER'S REPORT

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

1. The Assets

The Company acquired four Airbus A380 aircraft by the end of November 2013. Since delivery, each of the four aircraft has been leased to Emirates Airline ("Emirates") - the national carrier owned by the Investment Corporation of Dubai, based in Dubai, United Arab Emirates - for an initial term of 12 years with fixed lease rentals for the duration. In order to complete the purchase of the aircraft, DNA Alpha Ltd ("DNA Alpha"), a wholly owned subsidiary of the Company, issued two tranches of enhanced equipment trust certificates ("the Certificates" or "EETC") - a form of debt security - in July 2013 in the aggregate face amount of USD 630 million. DNA Alpha used the proceeds from both the Equity and the Certificates to finance the acquisition of the four new Airbus A380 aircraft.

The four Airbus A380 aircraft bear manufacturer's serial numbers (MSN) 132, 133, 134 and 136.

The A380s owned by the Company recently visited Auckland, Bangkok, Brisbane, Casablanca, Jeddah, Los Angeles, Melbourne, Milan, Munich, New York JFK, Perth, Rome, San Francisco, Sao Paulo, Singapore, Sydney, and Tokyo. Aircraft utilisation for the period from delivery of each Airbus A380 until the end of September 2017 was as follows:

Maintenance Status

Emirates maintains its A380 aircraft fleet based on a maintenance programme according to which minor maintenance checks are performed every 1,500 flight hours, and more significant maintenance checks (C checks) at 24 month or 12,000 flight hour intervals, whichever occurs first. Emirates bears all costs relating to the aircraft during the lifetime of the leases (including for maintenance, repairs and insurance).

Inspections

Amedeo Management Limited, the asset manager, performed an inspection of MSN 132 in March 2017. The physical condition of the aircraft was in compliance with the provisions of the lease agreement.

The asset manager performed inspections of MSNs 133 and 136 in August 2017. The physical condition of the aircraft were in compliance with the provisions of the respective lease agreement. MSN 134 was inspected in September 2017 and its condition was also in compliance with the provisions of the lease agreement.

2. Market Overview

In the first seven months of 2017, global revenue passenger kilometres (RPKs) grew by 7.7% compared to the same period in the previous year. The robust end to 2016 provided for a favourable start for RPK growth rates in 2017. However, IATA notes that the upward trend in seasonally-adjusted (SA) passenger traffic has slowed since the end of 2016. While industry-wide RPKs were growing at an annualized rate of more than 12% coming into 2017, that growth has begun to slow to around 6% over the past three months. This annualized growth rate is between its five-year and ten-year averages (6.4% and 5.5%, respectively).

During the first seven months of this year, industry-wide available seat kilometres (ASKs) increased by 6.1%. As ASKs and RPKs have trended upward at similar rates, the global passenger load factor (PLF) rose by 1.2 percentage points in the first seven months of 2017, resulting in a PLF of 81.3%. All regions, except for the Middle East, recorded increases in PLF in the first seven months of 2017 compared to the same period in 2016. PLF in the Middle East decreased by 0.2 percentage points to 74.7% during this period.

International RPKs flown by Middle Eastern airlines have grown by 7.0% in the first seven months of 2017, compared with the five-year average of 11.2%. Adjusting for the later timing of Eid this year, a Muslim holiday at the end of Ramadan, SA traffic volumes are still level with where they started this year. In particular, the Middle East to North America market continues to feel the effects of a combination of factors, including the (recently-lifted) ban on personal electronic devices (PED) as well as the proposed travel bans to the US. Traffic growth on the segment was already slowing in early-2017, in line with the slowing growth rate of non-stop services flown by the largest Middle Eastern airlines. However, in June, RPKs on these routes between the Middle East and North America fell for the fourth consecutive month in year-on-year terms (-6.8%).

With an RPK growth of 10.2% until July 2017 Asia/Pacific-based operators outperformed the overall market demand this year. Europe ranked second with 8.6% and Africa third with 7.7%, ahead of Latin America (6.8%). With a combined domestic and international RPK growth of 6.7% the Middle East reached the second-last place, with North America achieving 3.9%.

For 2017, IATA forecasts that the airlines fuel bill will rise to USD 129 billion and represent 18.8% of average operating costs. As jet fuel prices have begun to rise with oil prices, IATA expects an average price of USD 64 per barrel of jet fuel during 2017.

© International Air Transport Association, 2017. Air Passenger Market Analysis July 2017, Air Passenger Market Analysis June 2017, Economic Performance of the Airline Industry, 2017 Mid-Year Report. All Rights Reserved. Available on the IATA Economics page.

3. Lessee - Emirates Key Financials

In the 2016/17 financial year ending 31 March 2017, Emirates recorded the 29th consecutive year of profit with a net result of USD 340 million (AED 1,250 million), down 82% compared to the previous financial year. The net profit margin was 1.5%, down by 7 percentage points. Revenue for the period remained unchanged at USD 23.2 billion (AED 85.1 billion). However, lower results were to be expected as Emirates' president Tim Clark hinted earlier in March 2017 that the increased volatility in the market had affected Emirates' performance. His Highness Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates, listed a number of destabilizing events, which impacted travel demand during the year: the Brexit vote, Europe's immigration challenges and terror attacks, new policies impacting air travel into the US, and currency devaluation. He deemed the past fiscal year as "one of our most challenging years to date".

In the face of these challenges, Emirates increased its passenger numbers, RPKs and cargo carried during the 2016/17 financial year. Emirates carried a record 56.1 million passengers (8.1% more than in the previous fiscal year), increased capacity for passengers (measured in ASK) by 10.3% and increased RPKs by 8.4%. As a result, the passenger seat factor dropped by 1.4 percentage points to 75.1%. In the 2016/17 annual report it was noted that seat factor on the Emirates' A380 fleet was high - and a testament of the customer preference for this aircraft. The share of passengers carried by Emirates' A380 aircraft increased by 5 percentage points to 37%.

The costs resulting from the ongoing efforts to expand capacity contributed to a 7.7% increase in operating costs. While fuel prices fell by 2%, an 8% uplift in line with the capacity increase led the airline's fuel bill to increase 6%. Fuel costs as a percentage of operating costs only slightly decreased from 25.7% to 25.4% during the reporting period, remaining the biggest cost component for the airline, followed by personnel costs. The overall increase in operating costs is marginally higher than the capacity growth of 7.2%.

As of 31 March 2017, the balance sheet totalled USD 33.1 billion (AED 121.6 billion), an increase of 2% compared to the previous financial year. Total equity increased by 8.3% to USD 9.6 billion (AED 35.1 billion) with an equity ratio of nearly 29%. The carrier had a cash balance of USD 4.3 billion (AED 15.7 billion) at the end of the period, down by USD 1.2 billion (AED 4.3 billion) compared to the previous financial year. This included the repayment the amount of USD 1.1 billion. The current ratio stood at 0.73, meaning the airline would be able to meet nearly three-quarters of its current liabilities by liquidating all its current assets. Significant items on the liabilities' side of the balance sheet included current and non-current borrowings and lease liabilities in the amount of USD 13.9 billion - an increase of 1.8% against the previous financial year.

In line with its strategy to increase capacity through a young and efficient fleet, Emirates received a record number of 35 wide-body aircraft, consisting of 19 Airbus A380 and 16 Boeing 777-300ER, during the 2016/2017 financial year. At the same time, the airline also retired 27 older aircraft, bringing the average fleet age of six years two months down to five years three months, which is well below the industry average of nearly 12 years.

In the 2016/17 financial year, Emirates launched services to six new passenger points (Yinchuan and Zhengzhou in China, Yangon in Myanmar, Hanoi in Vietnam, Fort Lauderdale and Newark in the US). These new destinations add to Emirates' well-balanced regional distribution, whereby no region represents more than 30 percent of overall revenues. In line with increased demand, the operator added frequencies and increased capacity to several existing destinations of its global route network, which spanned 156 destinations in 83 countries by fiscal year end.

In June, the airline won the World's Best Inflight Entertainment award for a record 13th year at this year's Skytrax World Airline Awards, which are considered a global benchmark of airline excellence. Nearly 20 million passengers reviewed over 320 airlines.

In July, Emirates announced that it is entering a broad partnership with low-cost operator Flydubai, which will include a codeshare and optimization of the airlines' networks. Both carriers are government-owned, and the move aims to reduce unnecessary competition, enabling Emirates to benefit from Flydubai's single-aisle operations. Between them, the airlines operate routes to 216 cities with networks that overlap to an extent. However, they expect to be serving 240 destinations as a combined operation by 2022, with a total fleet of 380 aircraft.

In August 2017 Moody's Investors Service (Moody's) downgraded its Class A rating assigned to the Certificates issued by DNA Alpha, a subsidiary of the Company, to Baa1 from A3. The Class B rating remains unchanged and the rating outlook is stable. According to Moody's, the downgrade reflects that the market for the A380 has weakened since the transaction was first rated in 2013, which increases market risk and potentially, the sufficiency of collateral coverage under a certificate default scenario. It was further confirmed, that Moody's long-term view on the credit quality of the airline remains unchanged from the time the EETC rating was assigned. Moody's also used delivery date values that were approximately 20% (USD 45 million per aircraft) below the lower of mean or median values of the transaction appraisers when rating these transactions. Moody's expects improvements in the equity cushions with upcoming amortization payments and the rating agency expects that the A380 will remain integral part to the carrier's network strategy.

Market data from Reuters indicate that the downgrade by one notch did not result in an increased risk perception of potential investors in the EETC issuance of the Company. The spread in the market over the interbank swap rate for the corresponding weighted average life has actually narrowed for both the Class A and Class B Certificates post the rating downgrade.

Source: ch-aviation, CNN, Emirates, FlightGlobal, Moody's Investors Service, Reuters

4. Aircraft - A380

By mid-September 2017, Emirates operated a fleet of 97 A380s, which currently serve 47 destinations within its global network via its hub in Dubai. A380 destinations include: Amsterdam, Auckland, Bangkok, Barcelona, Beijing, Birmingham, Brisbane, Casablanca, Christchurch, Copenhagen, Doha, Dusseldorf, Frankfurt, Guangzhou, Hong Kong, Johannesburg, Kuala Lumpur, Kuwait, London Gatwick, London Heathrow, Los Angeles, Madrid, Manchester, Mauritius, Melbourne, Milan, Moscow, Mumbai, Munich, New York JFK, Nice, Paris, Perth, Prague, Rome, San Francisco, Sao Paulo, Seoul, Shanghai, Singapore, Sydney, Taipei, Tokyo, Toronto, Vienna, Washington, and Zurich.

As of mid-September 2017, the global A380 fleet consisted of 215 commercially operated planes in service. The 13 operators are Emirates (97), Singapore Airlines (19), Deutsche Lufthansa (14), Qantas (12), British Airways (12), Air France (ten), Korean Air Lines (ten), Etihad Airways (ten) Malaysia Airlines (six), Qatar Airways (eight), Thai Airways (six), China Southern Airlines (five), and Asiana Airlines (six). The number of undelivered A380 orders stood at 102.

Singapore Airlines will receive three new A380s by March 2018 and two more to be delivered during the remainder of 2018. However, Singapore Airlines confirmed that it will phase out four of its oldest A380 superjumbo jets by the end of March 2018. These aircraft, which were leased for a period of ten years, will be one of the first to test the second hand market for these type. Qantas is planning on moving two A380s onto Asian routes in the next year, once its Boeing 787-9s take over the services between Melbourne and London in March 2018. The chief executive officer of Qantas International, Gareth Evans, stated that the carrier plans on using the additional capacity from the A380s during periods of higher demand on its Asian network. The nominated destinations, with high peak periods, include Singapore and Hong Kong.

At the sidelines of the Paris Air Show, Malaysia Airlines (MAS) provided an update regarding the charter business with religious pilgrimage flights which MAS intends to run in a subsidiary with a separate Malaysian air operator certificate: "We've already signed contracts in the last couple of weeks with operators to do a significant amount of work", said Peter Bellew, the then CEO of MAS. Furthermore, he was very positive about the future of the A380 in general. "The airframes were spotless. I think these A380s are going to be flying still in 40 years' time, a bit like the 707s that are still flying in America, nearly 55-60 years later. I think the A380 will end up being like that." An aircraft like the A380 makes "incredible financial sense" from his point of view, "because the fuel is not going to be the blocker in the utilization of these aircraft".

Emirates expects the delivery of its 100th A380 later this year. The increasing number of superjumbos allows the airline to increase the number of A380 destinations as well as frequency on existing routes: From March 2018, the carrier will add a fourth daily A380 service from Dubai to Sydney, which will increase the capacity for Emirates' Australian services by more than 7%. Also from March 2018, the carrier will upgrade its third daily flight between Dubai and Melbourne from a Boeing 777-300ER to an A380. From October this year, Emirates will make its second daily flight to Moscow an A380 service. On 29 October 2017, Emirates launched a second daily A380 service between Dubai and Birmingham. The decision was based on the high demand from passengers wanting to travel with the iconic aircraft. A total of 300,000 passengers have already flown on the aircraft between the two cities since 27 March 2016.

Additionally, due to the high customer demand, Emirates replaced the current Boeing 777-300ER operations with two more superjumbos to Beijing and Shanghai on 1 July 2017. This move increased the capacity and opportunity for passengers heading to either destination. In August 2017, Emirates commenced Hajj services. The airline operated 45 additional flights to Jeddah and 12 additional flights to Medina between 17 August 2017 and 11 September 2017, in addition to its regular three time daily Jeddah and twice daily Medina frequencies. The A380 was used to support the increased demand to Medina during this time. Emirates anticipated a total of 2 million pilgrims traveling to Mecca, 20,000 of which would fly with Emirates from destinations such as Yangon, Manchester, Mauritius, Jakarta, Karachi, Lagos and Nairobi.

Speaking during the Aviation Festival event in London on 7 September, Emirates president Tim Clark stated that the airline will capitalize on its flexibility in order to compete with long-haul, low-cost operators. Clark noted that Emirates' fleet of 97 A380s would enable the airline to "compartmentalise" by offering "three or four economy classes" on the main deck alone. This would allow Emirates to match long-haul, low-cost operators in their base price while still being to offer additional enhancements.

This summer, Airbus presented a development study for an enhanced A380, called "A380plus". It includes aerodynamic improvements like large winglets. An optimised cabin layout would allow up to 80 additional seats.

As a result of weak sales, Airbus announced that it will cut A380 deliveries in 2019 to eight aircraft. The production rate for 2018 remains at 12 aircraft. Airbus is expecting only a relatively small impact from the cut in production rate, as a result of its continuing effort to bring down fixed costs associated with the programme.

Source: Ascend, Aviation Week, Bloomberg, CAPA, Emirates, FlightGlobal, iflyA380, MarketWatch, Reuters

Disclaimer:

This document is issued by Doric Nimrod Air Three Limited (the "Company") to and for the information of its existing shareholders and does not in any jurisdiction constitute investment advice or an invitation to invest in the shares of the Company. The Company has used reasonable care to ensure that the information included in this document is accurate at the date of its issue but does not undertake to update or revise the information, including any information provided by the Asset Manager, or guarantee the accuracy of such information.

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. Past performance cannot be relied on as a guide to future performance. The value of an investment may go down as well as up and some or all of the total amount invested may be lost.

DIRECTORS

Charles Edmund Wilkinson - Chairman (Age 74)

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 One Limited, Chairman of the Audit Committee of Doric Nimrod Air Two Limited, and a director of Landore Resources Ltd, a Guernsey based mining exploration company. He is resident in Guernsey.

Norbert Bannon (Age 68)

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 Chairman of Doric Nimrod Air Two Limited and Chairman of the Audit Committee of Doric Nimrod Air One 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 Chief Risk Officer at a leading investment bank in Ireland. He has worked as a consultant on risk issues internationally.

He earned a degree in economics from Queen's University, studied at Stanford Graduate School of Business and is a Chartered Accountant.

Geoffrey Alan Hall (Age 69)

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 One Limited and Doric Nimrod Air Two Limited.

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

John Le Prevost (Age 66)

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 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 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 One Limited, Doric Nimrod Air Two Limited and Amedeo Air Four Plus Limited. He is resident in Guernsey.

INTERIM MANAGEMENT REPORT

A description of important events which have occurred during the Period, their impact on the performance of the Group as shown in the financial statements and a description of the principal risks and uncertainties facing the Group is given in the Chairman's Statement, Asset Manager's Report, and the Notes to the Financial Statements contained on pages 19 to 41 and are incorporated here by reference.

There were no material related party transactions which took place in the Period, other than those disclosed at Note 21 of the Notes to the Financial Statements.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company are unchanged from those disclosed in the Company's annual financial report for the year ended 31 March 2017.

Going Concern

The Group's principal activities are set out within the Company Overview on pages 2 to 4. The financial position of the Group is set out on pages 15 to 41. In addition, Note 19 to the financial statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives and its exposures to credit risk and liquidity risk.

The Equipment Note payments have been fixed and the fixed rental income under the relevant operating lease means that the rent should be sufficient to repay the debt and provide surplus income to pay for the Group's expenses and permit payment of dividends.

After making reasonable enquiries, and as described above the Directors have a reasonable expectation that the Group 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 the annual financial statements.

Responsibility Statement

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

(a) The financial statements, prepared in accordance with IFRS give a fair, balanced and understandable view of the assets, liabilities, financial position and profits of the Company and performance of the Company;

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

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

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

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

Signed on behalf of the Board of Directors of the Company on 13 December 2017

John Le Prevost Director

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period from 01 April 2017 to 30 September 2017

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

The notes on pages 19 to 40 form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2017

The consolidated financial statements were approved by the Board of Directors and authorised for issue on 13 December 2017 and are signed on its behalf by:

John Le Prevost

Director

The notes on pages 19 to 41 form an integral part of these consolidated financial statements.

The notes on pages 19 to 41 form an integral part of these consolidated financial statements.

The notes on pages 19 to 41 form an integral part of these financial statements.

Notes to the Consolidated Financial Statements

For the period from 01 April 2017 to 30 September 2017

1 GENERAL INFORMATION

The consolidated financial statements incorporate the results of Doric Nimrod Air Three Limited (the "Company") and DNA Alpha Limited (the "Subsidiary") (together known as the "Group").

The Company was incorporated in Guernsey on 29 March 2012 with registered number 54908. Its share capital consists of one class of Ordinary Preference Shares ("Ordinary Shares") and one class of Subordinated Administrative Shares ("Admin Shares"). The Company's Ordinary Shares have been admitted to trading on the SFS of the LSE. The Company delisted from the Channel Islands Securities Exchange ("CISEA") on 5 September 2014.

The Company's investment objective is to obtain income returns and a capital return for its Shareholders by acquiring, leasing and then selling aircraft.

2 ACCOUNTING POLICIES

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

(a) Basis of Preparation

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

This report is to be read in conjunction with the annual report for the year ended 31 March 2017 which is prepared in accordance with the International Financial Reporting Standards adopted by the European Union and any public announcements made by the Company during the interim reporting period.

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

Changes in accounting policies and disclosure

The following Standards or Interpretations have been adopted in the current period. Their adoption has not had any impact on the amounts reported in these consolidated financial statements and is not expected to have any impact on future financial periods:

IAS 7 Statement of Cash Flows - amendments resulting from the disclosure initiative effective for annual periods beginning on or after 1 January 2017 (and was endorsement by the EU in November 2017). The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. The Group is not required to provide additional disclosures in its consolidated half yearly financial statements, but will disclose additional information in its annual consolidated financial statements for the year ended 31 March 2018.

The following Standards or Interpretations that are expected to affect the Group have been issued but not yet adopted by the Group as shown below. Other Standards or Interpretations issued by the International Accounting Standards Board ("IASB") and International Financial Reporting Standards Interpretations Committee ("IFRIC") are not expected to affect the Group.

IFRS 9 Financial Instruments - finalised version, incorporating requirements for classification and measurement, impairment, general hedge accounting and derecognition. There is no mandatory effective date, however the IASB has tentatively proposed that this will be effective for accounting periods commencing on or after 1 January 2018 and is endorsed in the EU.

IFRS 15 Revenue from contracts with customers - deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts', related interpretations and is endorsed by the EU. The standard is effective for a period beginning on or after 1 January 2018.

IFRS 16 Leases - specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17 (EU endorsement is outstanding) and is effective for annual periods beginning on or after 1 January 2019.

IFRIC 22 'Foreign currency transactions and advance consideration' - this IFRIC addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidance aims to reduce diversity in practice and is effective for annual periods beginning on or after 1 January 2018 (EU endorsement is outstanding).

The Directors have considered the above and are of the opinion that the above Standards and Interpretations are not expected to have an impact on the Group's financial statements except for the presentation of additional disclosures and changes to the presentation of components of the financial statements. These items will be applied in the first financial period for which they are required.

(b) Basis of Consolidation

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

(c) Taxation

The Company and its Subsidiary have been assessed for tax at the Guernsey standard rate of 0%.

(d) Share Capital

Ordinary Preference Shares (the "Shares") are classified as equity. Incremental costs directly attributable to the issue of Shares are recognised as a deduction from equity.

(e) Expenses

All expenses are accounted for on an accruals basis.

(f) Interest Income

Interest income is accounted for on an accruals basis.

(g) Foreign Currency Translation

The currency of the primary economic environment in which the Group operates (the functional currency) is Great British Pounds ("GBP" or "£") which is also the presentation currency.

Transactions denominated in foreign currencies are translated into GBP at the rate of exchange ruling at the date of the transaction.

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

(h) Cash and Cash Equivalents

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

(i) Segmental Reporting

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

(j) Going Concern

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors believe the Group is well placed to manage its business risks successfully despite the current economic climate as the loans and Equipment Notes interest has been fixed and the fixed rental income under the operating leases means that the rents should be sufficient to repay the debt and provide surplus income to pay for the Group's expenses and permit payment of dividends. Accordingly, the Directors have adopted the going concern basis in preparing the consolidated financial statements. Management is not aware of any material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern.

(k) Leasing and Rental Income

The leases relating to the Assets have been classified as operating leases as the terms of the leases do not transfer substantially all the risks and rewards of ownership to the lessee. The Assets are shown as non-current assets in the Statement of Financial Position. Further details of the leases are given in Note 11.

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

(l) Property, Plant and Equipment - Aircraft

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

Depreciation is recognised so as to write off the cost of each Asset less the estimated residual value over the estimated useful life of the Asset of 12 years, using the straight line method. The estimated residual value of the four planes ranges from £97.2 to £98.1 million. Residual values have been arrived at by taking into account disposition fees. The depreciation method reflects the pattern of benefit consumption. The residual value is reviewed annually and is an estimate of the fair amount the entity would receive 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 Group's ownership of these Assets. Depreciation starts when the Assets are available for use.

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

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

If the recoverable amount of an Asset is estimated to be less than its carrying amount, the carrying amount of the Asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

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

(m) Financial Liabilities

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

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

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

3 SIGNIFICANT JUDGEMENTS AND ESTIMATES

In the application of the Group's accounting policies, which are described in Note 2, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and estimates that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.

Residual Value and Useful Life of Aircraft

As described in Note 2 (l), the Group depreciates the Assets on a straight line basis over the estimated useful life of the Assets after taking into consideration the estimated residual value. IAS 16 Property, Plant and Equipment requires residual value to be determined as an estimate of the amount that the Group would currently obtain from the disposal of the Asset, after deducting the estimated costs of disposal, if the Asset were of the age and condition expected at the end of its useful life. However, there are currently no aircraft of a similar type of sufficient age for the Directors to make a direct market comparison in making this estimation. After consulting with the Asset Manager, the Directors have concluded that a forecast market value for the aircraft at the end of its useful life (including inflationary effects) best approximates residual value. In estimating residual value, the directors have made reference to forecast market values for the aircraft obtained from 3 independent expert aircraft valuers and determined that the residual value of the assets was USD 506.6. million at the 2017 year end (2016: USD 556 million as determined per the initial appraisals at inception).

The estimation of residual value remains subject to inherent uncertainty. If the estimate of residual value had decreased by 20% with effect from the beginning of this year, the net profit for the year and closing shareholders' equity would have decreased by approximately £4.1 million. An increase in residual value by 20% would have had an equal but opposite effect. This reflects the range of estimates of residual value that the Directors believe would be reasonable at this time. The useful life of each Asset, for the purpose of depreciation of the asset under IAS 16, is estimated based on the expected period for which the Group will own and lease the Aircraft. The Board of directors expects that the Aircraft will have a working life far in excess of this period.

Operating Lease Commitments - Group as Lessor

The Group has entered into operating leases on four (30 Sep 2016: four) Assets. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these Assets and accounts for the contracts as operating leases.

The Group has determined that the operating leases on the Assets are for 12 years based on an initial term of 10 years followed by an extension term of 2 years. Should the lessee choose to exit a lease at the end of the initial term of 10 years a penalty equal to the present value of the remaining 2 years would be due.

Impairment

As described in Note 2 (l), an impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The Directors review the carrying amounts of its Assets at each audited Consolidated Statement of Financial Position date and monitor the Assets for any indications of impairment as required by IAS 16 Property, Plant and Equipment and IAS 36 Impairment of Assets..

At the 31 March 2017 year end the Directors have reviewed the carrying values of the Assets and concluded that there was no indication of any impairments.

4RENTAL INCOME

Rental income is derived from the leasing of the Assets. Rent is split into A rent, which is received in US Dollars ("USD" or "$") and B rent, which is received in GBP. Rental income received in USD is translated into the functional currency (GBP) at the date of the transaction.

A and B rental income receivable will decrease / increase respectively, 10 years from the start of each lease. An adjustment has been made to spread the actual total income receivable over the term of the lease on an annual basis. In addition, advance rentals received have also been spread over the full term of the leases.

6  DIRECTORS' REMUNERATION

Under their terms of appointment, each Director is paid a fee of £23,000 per annum by the Group, except for the Chairman, who receives £29,000 per annum. The Chairman of the audit committee also receives an extra £4,000 per annum.

7  DIVIDENDS IN RESPECT OF EQUITY SHARES

8 EARNINGS / (LOSS) / PER SHARE

Earnings / (Loss) per Share (''EPS' / ''LPS'') is based on the net profit for the period of £43,707,623 (30 September 2016: loss for the period of £26,084,488) and 220,000,000 (30 September 2016: 220,000,000) Ordinary Shares being the weighted average number of Shares in issue during the period.

There are no dilutive instruments and therefore basic and diluted earnings per Share are identical.

The cost in USD and the exchange rates at acquisition for the aircraft was as follows:

Following review of the aircrafts' projected residual value, as is required by IFRS on an annual basis, using the valuers and methodology set out in Note 3, whilst the underlying USD residual values of the A380 aircraft has stayed at similar levels, the GBP values converted at the 2017 year end GBP exchange rates were increased significantly by £53,850,352. The directors already adjusted the residual values for this movement at the 2017 year end. The adjusted residual value has resulted in a decrease of £2,818,354 in the depreciation charge at 30 September 2017 from the comparative period as shown in the Consolidated Statement of Comprehensive Income.

The Group can sell the Assets during the term of the leases (with the lease attached and in accordance with the terms of the transfer provisions contained therein).

Under IAS 17 the direct costs attributed in negotiating and arranging the operating leases have been added to the carrying amount of the leased asset and recognised as an expense over the lease term. The costs have been allocated to each aircraft based on the proportional cost of the aircraft / assets.

10 FINANCE COSTS

11 OPERATING LEASES

The amounts of minimum future lease receipts at the reporting date under non cancellable operating leases are detailed below: