Annual Report & Accounts | 2017 smbc A350 XWB to Airbus of an Delivery Korea South for a first Airlines, Asiana aviation Capital. Aviation SMBC for and capital • Annual Report & Accounts | 2017 2 3 smbc aviation capital • Annual Report & Accounts | 2017 smbc aviation capital • Annual Report & Accounts | 2017 4 Contents

report accounts 2017 Highlights 5 Directors and Other Information 34 Chairman’s Statement 6 Directors’ Report 35 Chief Executive’s Statement 8 Statement of Directors’ Responsibilities 38 Financial Review 12 Independent Auditors’ Report 39 Our Executive Team 14 Consolidated Statement of Comprehensive Income 41 Doing Deals Across the Globe Consolidated Statement of Financial Position 42 Delivering a Boeing B787-8 to Avianca 16 Company Statement of Financial Position 43 Our People & Our Teams Consolidated Statement of Changes in Equity 44 Yan-Ping Cheng, Shanghai 18 Company Statement of Changes in Equity 45 Doing Deals Across the Globe A five aircraft deal with SAS 20 Consolidated Statement of Cash Flows 46 Our People & Our Teams Company Statement of Cash Flows 47 Rodolphe Demarcq, Toulouse 22 Notes to the Financial Statements 48 Doing Deals Across the Globe Acronyms and Abbreviations 85 Our first A350 XWB 24 Our People & Our Teams Chris O'Scannlain, New York 26 Metamorphosis 28 2017 Highlights with ourpeers. the industrywhencompared one oftheyoungestfleetsin fleet management,wemaintain investors. Throughactive our airlinecustomersand that aremostsoughtafterby advanced aircraftintheworld most modern,technologically Our strategyistoinvestinthe our customers countries worldwide. customers inover 50 airline and investor owned/managed/ 150+ our fleet 670 committed.

A the highest rated lessors in Fitch &S&Pratings, oneof growth and profitability. year track record of our history - our ratinG /BBB+ the industry. 16

professionals working weighted average and shareholders. deliver consistent returns toour business has served usvery well, allowingus to Our consistent disciplined strategy broadest product offerings inthisindustry. giving usthescaletoprovide oneof the Sumitomo Corporation setsusapart by Sumitomo MitsuiFinancial Group and The support ofour Japanese shareholders, airlines and theirmarkets. to risk management, understanding our We have adopted arelentless approach our 160+ our fleet age offleet. worldwide. 4.5 people

party investorsparty and airlines our seniormanagement aircraft sold to85+third our experience combined experience. team have 150+years our tradinG 335+ since inception. 150+

5 smbc aviation capital • Annual Report & Accounts | 2017 smbc aviation capital • Annual Report & Accounts | 2017 6

Chairman's

Shinichi Hayashida Statement chairman I am delighted to report that once again, we enjoyed a positive year in all aspects of our business. Our Annual Report & Accounts | 2017 & Accounts Report • Annual continued focus on maintaining our discipline has enabled us to deliver continued profi tability while growing our leasing business, with new aircraft being

delivered to both existing and new airline customers. capital smbc aviation

In this, the fi ft h year since we were Refl ecting our proven track record of acquired by our shareholders Sumitomo profi tability and our signifi cance to Mitsui Financial Group and Sumitomo our majority shareholder, Sumitomo Corporation, we have mutually benefi ted Mitsui Financial Group, Fitch Ratings from our partnership. SMBC Aviation has upgraded SMBC Aviation Capital's 7 Capital plays a critical role in SMFG’s credit rating from BBB+ to A- in and Sumitomo Corporation’s strategy May 2017. This affi rms our position and our integration has yielded many as one of the highest rated lessors advantages including the platform to in the industry and strengthens off er innovative fi nancing solutions. the base for further development and expansion of our business. During the year, we continued to transition our portfolio to the most We are confi dent that by adopting technologically advanced aircraft . While a rigorous approach to governance, our focus remains on the narrowbody compliance and, most of all, through market, there has also been an increase carefully measured assessments of risk in demand for the newest widebody factors at both the macro and micro aircraft , with our fi rst delivery of the A350 levels, we can continue to perform well. XWB since year-end to leading Asian airline, Asiana Airlines of South Korea. On a personal note, I am pleased to welcome two new non-executive directors Aircraft have become an investment of to our Board, Masaki Tachibana and choice for many investors who are seeking Yasuyuki Kawasaki. I would like to stable and consistent returns compared thank those now departing, Makoto with many alternative investments. Two Takashima and Manabu Hosokawa, investor seminars, held in Tokyo and for the insights and integrity they Osaka, demonstrated this ongoing appetite have brought to our business. and enabled us to further enhance our customer base in Japan. Allied to the The growth of SMBC Aviation Capital wider global demand, we continued to is testimony to the strength of the actively trade our aircraft , which helped team and I wish to pay tribute to our us to maintain one of the youngest fl eets employees for another outstanding year in the industry, by weighted average age. of growth. Together, we have further strengthened one of the most robust From a balance sheet perspective, SMBC leasing platforms in the industry which Aviation Capital also demonstrated positions us well for further expansion. considerable strength and enhanced credibility in the marketplace with the launch of our corporate bond programme, which has been highly successful. smbc aviation capital

• Annual Report & Accounts | 2017 chief executive's statement

our ambition

Our ambition is to be the leading aircraft 8 leasing company in the world. At 31 March 2017, we owned a fleet of 261 aircraft valued at approximately $10 billion and managed a further 194 aircraft with a value of over $6 billion.

We also have commitments for a further five years since our acquisition 215 aircraft, including 200 from our direct It is five years since we were acquired order book with Boeing and Airbus, by our shareholders, Sumitomo which are among the most modern, Mitsui Financial Group and Sumitomo efficient and in demand aircraft. Corporation. It is a successful partnership which gives us a distinct competitive We work hard to provide our 100 advantage by enabling us to provide a airline and 85 investor customers in broader product offering to our customers. 50 countries around the world with a superior service to enable them to In addition to providing operating leases, grow and develop their businesses. we can harness our shareholders’ debt financing and tax equity arrangement Our activity during the year has capabilities. Working together with demonstrated an ongoing commitment our shareholders, we arranged more to delivering on our strategy, which was than $2.2 billion of transactions executed by an outstanding team of 162 with airlines on their behalf. professionals based in 10 global locations. Maintaining our discipline and focus has We are in a strong financial position, yielded yet another strong performance, through the ongoing support from resulting in a total revenue of $1.1 billion our shareholders and following the and profit before taxation of $312.5 establishment of our bond programme in million, with our total assets reaching July 2016, which raised $500 million. Since $10.6 billion. This was driven by solid the end of the financial year we have closed growth on the leasing side of our business a second bond issue, bringing our funding combined with one of our most successful under this programme to $1 billion. years in aircraft trading in our history. Annual Report & Accounts | 2017 & Accounts Report • Annual smbc aviation capital smbc aviation

9

Chief Executive's

Peter Barrett Statement chief executive officer smbc aviation capital

• Annual Report & Accounts | 2017 chief executive's statement (continued)

↗ Katie Dillon, VP Commercial Negotiation. 10

operating review Boeing and Airbus have enabled us to risk management react quickly to customer needs. Our business is driven by demand for We believe that we have the strongest air travel, which has doubled every 15 focus on risk management in the aircraft Some of the other highlights during years, a trend we expect to continue. leasing industry which has been a key the year included the delivery of seven Increasing passenger numbers, factor in our strong performance. Being Boeing B787-8 aircraft which were especially in the emerging markets part of a fi nancial institution ensures placed on lease to Air Europa in Spain of Asia and South America, have that we adopt a discipline and rigour in and South American airline, Avianca. resulted in strong underlying demand all of our transactions. Risk management We delivered our fi rst A320neo on sale for new aircraft from our order book starts with the selection of our portfolio, and leaseback to GoAir in India and also which is placed with new and existing however, our sophisticated credit reached agreement for the placement customers into 2019 and beyond. risk and technical teams also spend of fi ve A320neo aircraft on sale and signifi cant time on the ground developing leaseback with Scandinavian airline, SAS. We achieved a solid operating intimate knowledge of our markets and performance, with 106 individual the related operating environment. aircraft trading transactions in our owned fl eet in the year. We took delivery of 26 aircraft which Trading aircraft allows us to manage the allowed us to grow our business, renew quality of our portfolio. We benefi tted our fl eet and service our customers. from the current strong appetite from We also had a very active year in investors to sell 35 aircraft from our terms of our existing aircraft portfolio, owned portfolio, with an average age enhancing customer relationships of 9.8 years, and six from our managed by successfully completing 45 lease portfolio, making this one of the extensions and transitions of aircraft strongest trading years in our history. from one operator to another. We worked with 21 diff erent investors, We have been the lessor of choice in a 18 of which are new customers, number of sale and leaseback transactions including a variety of pension funds, and have built new customer relationships lessors and other fi nancial investors. with airlines such as SAS, West Air and This active management enabled since year-end, with Philippine Airlines. us to lower the weighted average In addition, our strong relationships of our fl eet to just 4.5 years. with the aircraft manufacturers Annual Report & Accounts | 2017 & Accounts Report • Annual smbc aviation capital smbc aviation

↑ Nicolas Clouet, SVP & Regional Manager, Airline Marketing. ← Yu Morikuni from our Transaction Management Team who worked with our team of volunteers to construct a nursery school in Malawi. 11

our people and our processes corporate social responsibility the future Our people are critical to our success. We are committed to playing a role in We expect continued positive momentum We take pride in recruiting some of the addressing some of the key social issues in the aviation industry in 2017 and into best industry talent and this year we facing our communities today. Our CSR 2018 as leasing companies continue to play have added 17 new members to our team, Committee has funded a number of worthy a critical role in funding new deliveries. taking our workforce up to 162 people. causes both locally and internationally during the year. We focus on the needs of We are pleased with our expanding Our team has access to the latest in children and the less fortunate in society global footprint and believe we can innovative programmes and processes who require our support both fi nancially continue to deliver growth, especially to enable them to continually deliver and where our teams can actively volunteer in key markets like Asia and South on all of our objectives. To that end, with the charities which we support. America. Our strategy, when combined we have invested signifi cantly in our with our leading market position and technology platforms, resulting in faster This has included a trip by ten company supportive shareholders, ensures that and better decision making across our volunteers to construct a nursery school in we are well placed for the future. business and boosting productivity. Malawi, in addition to supporting a number of Irish charities including the Peter I would like to thank our customers, We recognise the importance of McVerry Trust for homeless families and our shareholders and our people cultivating the next generation of LauraLynn, Ireland's Children's Hospice. for their continuing support which talent and our Graduate Recruitment enables us to realise our ambition Programme has attracted hundreds which is to be the leading aircraft of applicants from across the globe. leasing company in the world. Meanwhile, we continue to support education through our sponsorship of Europe’s fi rst MSc in Aviation Finance at University College Dublin. smbc aviation capital • Annual Report & Accounts | 2017 12

Financial Review

Barry Flannery SMBC Aviation Capital has continued its track chief financial officer record of consistent profitability, which is a result of our strategy to maintain a young, modern fleet that generates stable and attractive long-term contracted cash flows. The year ended 31 March 2017 was a year on year. There was a signifi cant hiGhliGhts landmark year that saw average aircraft reduction in impairments year on year operating lease assets increase by 9% driven primarily by the non-recurrence

to $9.6 billion, total income increase to of exceptional credit events in the prior | 2017 & Accounts Report • Annual $1.1 billion, profi t before tax increase to year and no further reduction in liquidity $312 million, and core operating margins of certain asset types. Depreciation was revenues increase to 37.2%. higher due to a combination of the higher average aircraft asset base and our policy $1.1bn operating performance of depreciating to the physical condition of the aircraft aft er lease end, which During the current year, we closed 106 off sets the higher lease end compensation capital smbc aviation transactions. We took delivery of 26 aircraft , received. Finance costs increased by 11.6% including $1 billion in new Airbus A320neo to $301 million due to a combination of and Boeing B787 technology, bringing increased aircraft assets and increased the percentage of the newest technology break costs on sales incurred in line with aircraft in our portfolio at 31 March 2017 profit before taxation our policy of broadly matching our asset to 11% by net book value. We also sold 35 and liability base. aircraft with an average age of 9.8 years, generating profi ts on sale of $60 million. $312m funding and liquidity This activity has enabled the reduction in the weighted average age of our owned During the year we successfully reduced fl eet at 31 March 2017 to 4.5 years and our debt to equity ratio despite the increase

increase our weighted average lease term in our asset base through the retention 13 remaining to 6.4 years1. Our fl eet utilisation of all earnings in the business. We aim to stood at 99.96% for the period, refl ecting manage our third party debt to equity to be 3rd party debt²/eQuity close to or below our peers, and it measures the attractiveness of our aircraft to our up well at 1.8x at 31 March 2017. 1.8X customer base. The year was also marked by our inaugural overview of financial performance $500m unsecured corporate bond issuance. Lease revenues increased by $103 This issuance, marks the start of a program million (11.5%) to $1,002 million due to which we intend to be the cornerstone a combination of increased fl eet size, of our third party funding strategy going increased redelivery compensation on lease forward. Our low level of encumbrances operatinG marGin³ expiry and improvements in lease rate (secured debt comprising 2.5% of assets), factor. Other operating income increased strong liquidity position and ongoing by $13 million (21.9%) to $70 million, as a shareholder support continue to position us 37.2% result of higher profi t on disposal of assets as one of the highest rated aircraft lessors (up $9 million to $60 million) and increased in the industry, which will further enhance management fee income (up $4 million to our third party fundraising capability. $10 million). Our continued consistent, stable fi nancial Driving effi ciencies from our operating performance and robust capital structure platform resulted in a reduction in provides us with a strong platform from operating expenses of $9 million (7.6%) which to build our business for the future.

movement in profit before taxation The growth in profi t before taxation was achieved through improvements across all the key areas in the business:

FOOTNOTES 41 27 31 ¹ Weighted by net book value 13 9 at 31 March 2017.

² Defi ned as total external fi nancial obligations being 103 the sum of obligations under fi nance leases, the JBIC Facility,

the Ex-IM and European ECA $ MILLIONS 312 guaranteed loans, other term 204 loans from third parties and the outstanding 2.65% notes due 2021.

³ Defi ned as (Lease Revenue 31 March 16 Lease Other Operating Reduced Depreciation Finance 31 March 17 less Depreciation less Finance Profi t before Revenues Operating Expenses / Impairments Costs Profi t before Expense (excluding Break Taxation Income Other Taxation Costs)) / Lease Revenue.

↑ Barry Flannery

Peter Barrett ↑ Peter

Biographies senior management team Our experienced together for 16 years and have have worked developed a disciplined business strategy tability which enables steady and stable profi through the cycle. Shinichi Hayashida ↑ Shinichi

smbc aviation capital • Annual Report & Accounts | 2017 14 B.Eng from University College Cork. Peat Aviation (“GPA”). Peter holds a with RBSand initially withGuinness fi nance for over 25 years, previously has beenactive inaircraft leasing and including itsacquisition in2012. Peter growth and expansion ofthecompany time, hehasoverseen thecontinued Executive Offi cerin2004.Duringthis Peter Barrett was appointed Chief chief executiveofficer Peter Barrett Laws from theUniversity ofPennsylvania. from Tokyo University and aMasters of role. MrHayashida holds aBachelor ofLaw moving toDublin toassumehiscurrent assumed therole ofadvisor toSMFL before the Sumitomo Bank Limited.In2012, he began hiscareer in1979 when hejoined our Dublin headquarters. MrHayashida SMBC Aviation Capital and isbasedin Shinichi Hayashida isChairman of chairman Shinichi Hayashida ↑ Brian Harvey ↑ David Swan Fairfi eld University inConnecticut. region. He holds aBSinAccounting from of Airline Marketing for theAmericas within thecompany including Head He hasheld anumber ofimportant roles the positionofBoard Director in2011. He joinedthecompany in2002,assuming Brian Harvey isChief Marketing Offi cer. chief marketingofficer Brian Harvey Accountantsof Chartered inIreland. Dublin and is afellow oftheInstitute and Economicsfrom Trinity College holds an honours degree inPsychology the Board ofDirectors in2007. Barry company in1997 and was appointed to information technology. He joinedthe corporate accounting, taxation and with responsibility for fi nance, treasury, FlanneryBarry isChief Financial Offi cer chief financialofficer Flannery Barry Law from University College Dublin. Law Degree and aDiploma inEuropean in 2007. Catharine holds aBachelor ofCivil assuming therole ofCompany Secretary joining theBoard ofDirectors in2004and Chief Legal Offi cerin2002,subsequently Catharine Ennisjoinedthecompany as chief legalofficer Catharine Ennis from Trinity College Dublin. International Business and Economics He holds an honours degree in asset management across thebusiness. operating platform alongwithrisk and is responsible for leading thecompany’s years' experience intheindustry, David Board ofDirectors in2007. With over 25 Operating Offi cerin2004,joiningthe David Swan was appointed Chief chief operating officer David Swan ↑ Catharine Ennis

15 smbc aviation capital • Annual Report & Accounts | 2017 smbc aviation capital

• Annual Report & Accounts | 2017 avianca

In September 2016 at the Boeing facility in Charleston, USA, we delivered a Dreamliner B787-8 to leading South American airline, Avianca. 16

This was one of the quickest turnaround times for a deal that we have ever achieved. From agreement to delivery, it was completed in just 16 days, demonstrating our ability to meet the needs of our airline customers in an extremely short timeframe.

At the delivery ceremony, Hernán Rincón, President and CEO of Avianca spoke of the long lasting relationship that Avianca has had with SMBC Aviation Capital for over ten years and that he looks forward to working with us in the future as the airline continues to execute its fl eet program.

In total, we have ten aircraft on lease to Avianca including three Boeing B787-8s. Annual Report & Accounts | 2017 & Accounts Report • Annual smbc aviation capital smbc aviation 17

↑ The delivery of a B787-8 to Avianca at the Boeing facility in Seattle.

Doing Deals Across the Globe smbc aviation capital • Annual Report & Accounts | 2017 18

↑ Yan-Ping Cheng, photographed in Shanghai.

Our People & Teams yan-ping cheng Senior Vice President, Airline Marketing. Annual Report & Accounts | 2017 & Accounts Report • Annual Based in Shanghai. smbc aviation capital smbc aviation I'm part of the recently expanded team of 16 people, with extensive experience in Airline Marketing. In many respects, we are a bridge between the customer and the rest of the company and for that there is simply no substitute for being on the ground with in-depth local knowledge and relationships. 19

Our experience is also invaluable in ensuring a really strong customer focus. An important part of our job is to help our colleagues understand why a particular deal needs to happen and to understand the customer’s perspective.

Above all, the Airline Marketing team is concerned with relationships, identifying potential new ones and maintaining existing ones.

I cover mainland China, Hong Kong, Taiwan and Macau, dealing with numerous customers and potential customers with whom I need to keep in close contact. Our team also maintains good relationships with the aircraft manufacturers, Boeing and Airbus, so that when we are placing aircraft from our own order book we can provide customers with the support they need.

Our big advantage in China is that we have been in this marketplace since 2001. We have a good reputation for the support we provide — that is why we have so many long-lasting relationships. smbc aviation capital

• Annual Report & Accounts | 2017 sas

In December 2016, we completed a sale and leaseback transaction with Scandinavian Airline, SAS, for fi ve Airbus A320neo aircraft. This is our most signifi cant deal with SAS and saw the placement of our fi rst Airbus A320neo in Europe. 20

This deal of scale was also a new partnership with the airline with the fi rst delivery completed in December 2016 and the second in March 2017. Niklas Hårdänge, Vice President Fleet Management in SAS recognised how pleased the airline was to add these new technologically enhanced aircraft from SMBC Aviation Capital to its fl eet in line with its growth objectives.

As of 31 March 2017, SMBC Aviation Capital leased four Airbus A320neo aircraft to its airline customers. Annual Report & Accounts | 2017 & Accounts Report • Annual smbc aviation capital smbc aviation 21

↑ A fi rst A320neo for SAS at the Airbus facility in Hamburg.

Doing Deals Across the Globe smbc aviation capital • Annual Report & Accounts | 2017 22

↑ Rodolphe Demarcq on the aircraft manufacturing line at the Airbus facility in Toulouse.

Our People & Teams rodolphe demarcq Senior Vice President, Technical Asset Annual Report & Accounts | 2017 & Accounts Report • Annual Management. Based in Toulouse. smbc aviation capital smbc aviation My job is to project manage the delivery of new Airbus aircraft in Toulouse and Hamburg on behalf of our airline customers. Every airline has its own specifi cation, its own culture and way of working and we are here to help ensure their deliveries are on time and to the highest standard. 23

Building an aircraft is a living process. Every aircraft is unique and there can always be unexpected manufacturing or supplier issues; you could say that this is an intrinsic part of the process. I have worked in Toulouse and Hamburg since 1994, including 12 years spent with Airbus, so I have an intimate knowledge of the Airbus company and the entire procurement and manufacturing process and bring this depth of experience to every scenario.

Last year, we delivered 21 new Airbus aircraft to customers as far apart as Northern Europe, China, Japan, India and South America. Each customer has a diff erent way of working and requires a diff erent level of engagement. We are happy to provide the level of support they fi nd most helpful. It is important that I am always here to help at any stage and will always seek to anticipate a customer’s needs. smbc aviation capital

• Annual Report & Accounts | 2017 asiana airlines

In April 2017, one of South Korea’s and Asia’s leading airlines, Asiana Airlines added its fi rst Airbus A350 XWB to its fl eet. Executed by SMBC Aviation Capital, this was the fi rst delivery of a six-aircraft A350 sale and leaseback deal which also includes the fi nancing of pre-delivery payments due to the aircraft manufacturer. 24

The aircraft is the fi rst of its type to be operated by a South Korean airline. Together with Airbus and Asiana, we celebrated the delivery at the Airbus facility in Toulouse.

Mr Soo-Cheon Kim, President and CEO of Asiana Airlines was proud that the delivery began a new chapter in the history of the airline, providing Asiana with operational advantages across its long-haul network. Fabrice Brégier, CEO of Airbus added that Airbus was delighted to deliver the fi rst A350 XWB to Asiana to provide an unrivalled fl ying experience across Asiana’s extensive long haul network.

As a company, we are committed to developing our long standing relationship with Asiana, while also expanding our footprint in the Asia Pacifi c region which is one of our largest markets. Annual Report & Accounts | 2017 & Accounts Report • Annual smbc aviation capital smbc aviation 25

↖ (l–r): Didier Evrard, Executive Vice President, Head of Programmes, Airbus, Soo Cheon Kim, President and CEO Asiana Airlines, Peter Barrett, CEO of SMBC Aviation Capital, Ewen McDonald, SVP Asia Pacifi c, Rolls Royce. Doing Deals Across the Globe smbc aviation capital • Annual Report & Accounts | 2017 26

↑ Chris O'Scannlain, photographed in New York.

Our People & Teams chris o'scannlain Senior Vice President, Credit Risk. Annual Report & Accounts | 2017 & Accounts Report • Annual Based in New York. smbc aviation capital smbc aviation In many businesses Credit Risk is a desktop task. But not for us. We have to be close to our markets and to our customers. Our team comprises twelve analysts based in four offi ces worldwide. We provide our colleagues with in-

depth analyses of airlines and their markets so 27 that they can make well informed decisions.

Living and working in the same time zones gives us better access to our customers and to the many macro and sectoral analysts with whom we are in regular contact. We have close relationships within the fi nance / leasing / aviation ecosystems and we keep our fi ngers on the pulse by having a presence where the action is.

In the risk function, developing an accurate picture of risks, especially in developing markets, means we can manage them. Our ultimate aim is to ensure we have the right information we need so that we can establish relationships and help airlines, including start-ups, get the aircraft they need. smbc aviation capital

• Annual Report & Accounts | 2017 Metamorphosis

SMBC Aviation Capital commissioned a young local photographer, Matthew Thompson to work on an original piece. Matthew explored some of the many unseen people and processes involved in the transitioning of an aircraft from one lessee to another, a feature of much of the MRO (Maintenance, Repair

28 and Overhaul) work undertaken in Dublin airport. Within the maintenance and paint facilities, Matthew was drawn to one of our Boeing 737-800 aircraft which had been stripped of its paintwork in advance of being painted with new livery. Matthew took close up photographs which focus on the human interaction with the aircraft . A feature of these photographs are the detail of the swirl of the sander on aluminium skin or a smudge of sealant from one of the many hands that contribute to putting an aircraft into service. The resulting triptych, entitled “Metamorphosis”, beautifully captures one of the unseen steps in a complex process involving the team at SMBC Aviation Capital and the many others we work with to deliver a newly transitioned aircraft to our customers.

↓ Matthew Thompson Metamorphosis I (2016) Matthew Thompson Metamorphosis II (2016) Matthew Thompson Metamorphosis III (2016) Matthew Thompson ↑ The “Metamorphosis” triptych in SMBC Aviation Capital's Dublin headquarters. 31 March 2017

Directors’ Report and | 2017 & Accounts Report • Annual Consolidated Financial

Statements 2017 capital smbc aviation 33 INDEPENDENT AUDITOR KPMG Chartered Accountants Place 1 Harbourmaster IFSC 1 Dublin Ireland SOLICITORS London Chance, Clifford Street Bank 10 Upper London E14 5JJ Kingdom United Fitzgerald McCann One Riverside Quay Rogerson's Sir John 2 Dublin Ireland BANKS Limited Europe Corporation Mitsui Banking Sumitomo Street Victoria Queen 99 4EH London EC4V Kingdom United Corporation Mitsui Banking Sumitomo Branch York New Avenue 277 Park NY10172 York, New USA DIRECTORS (Irish) P Barrett C A Ennis (Irish) (Irish) B Flannery (Irish) D Swan (American) B Harvey (Japanese) S Hayashida (Japanese) Kawamura Y (Japanese) M Hosokawa (Japanese) Murata T 2016) 6 April appointed I Sakata (Japanese; 2017) 28 April appointed (Japanese; Kawasaki Y 2017) 28 April resigned (Japanese; Takashima M 2016) 6 April resigned (Japanese; Tanaka T SECRETARY C A Ennis OFFICE REGISTERED IFSC House IFSC 1 Dublin Ireland directors and directors information other

smbc aviation capital • Annual Report & Accounts | 2017 34 (31 March 2016: $nil). The Directors donot recommend thepayment ofadividend assets held for saleattheendofyear (2016: $nil). There was noproperty, plant and equipment classified as $10,142 millionattheyear-end (31March 2016: $9,551 million). The netbook value ofproperty, plant and equipment was total assetsof$10,637 million(31 March 2016: $9,922 million). At theendoffinancial year, thefinancial position showed 4.5 years asat31March 2017 (31March 2016: 4.7). maintained ayoung fleetwith an average weighted age of the profile ofitsaircraft portfolio and,asa result, have The Group and Company continues toactively manage and investor customers tomeettheirspecific requirements. closely and building strong relationships withitsairline most modern,efficient anddesirable aircraft while working The Group and Company's strategy istoownand lease the PERFORMANCE ANDSTRATEGY english/investor/financial/latest_statement.html. Sumitomo MitsuiFinancial Group -http://www.smfg.co.jp/ english/ir/report/annual_report.html Sumitomo Corporation -http://www.sumitomocorp.co.jp/ The annual reports oftheseentities can beobtained at: and Sumitomo Corporation (the ("SC") “Consortium”). ofSumitomo MitsuiFinancialconsortium Group ("SMFG") The Group and Company isamemberoftheJapanese in US Dollars. consolidated financial statements are therefore presented US Dollars and thisisthefunctional currency. The aircraft industry are undertaken predominantly in The Group and Company's activities and thoseofthe in connectionwithfinancing and refinancing. brokerage totheairline services and airline related industry Group and Company also provides financial solutions and modes oftransport and theircomponents parts. The plant, equipment, machinery, engines, vehicles orother management orinany other way dealing withaircraft, finance, and thesaleor purchase, ownership, leasing or lease rental, credit saleorother appropriate methodsof components and parts, by way ofloan, hire purchase, engines, vehicles orother modesoftransport and their the financing ofaircraft, plant, equipment, machinery, include actinginthecapacity ofprincipal, agent orbroker, The principal business activities oftheGroup and Company PRINCIPAL ACTIVITIES adopted by theEuropean Union. International Financial Reporting Standards ("IFRSs"), as statements have beenprepared inaccordance with Group") for theyear ended31March 2017. The financial Limited ("theCompany") and itssubsidiaries (together "the consolidated financial statements of SMBC Aviation Capital The Directors present theirreport and theaudited directors’ report third party Japanesethird party investors. acquire and/or sell aircraft valued atover $2.2 billion for JOLCO business, collaborating withitsshareholders to Group also haditsmostactive year todate for itsJOL and and intheprocess adding19 new investor partners. The one ofthemostsuccessful years for aircraft saleson record, Group’s ownedportfolio asnoted above, makingthis year strong level ofaircraft saleswith35aircraft sold from the The year underreview was also significant becauseofthe A320neo onoperating lease toGoAir. delivery offour Airbus A320neo aircraft including itsfirst in theKorean market. Inaddition,theGroup alsotook also for theairline and thefirst ofitstypetobe placed ANA, and delivered itsfirst A350toAsiana Airlines, afirst Boeing B737-800 aircraft, of whichtwo will go onlease to The Group alsorecently tothree committed additional which were placed onlease withAirEuropa and Avianca. The Group took delivery ofseven BoeingB787-8 aircraft transition tothemosttechnologically advanced aircraft. achievements which are evidence further oftheGroup’s Furthermore, there were anumber ofnotable extensions and 35aircraft sales. placement of5aircraft from itsdirect order book, 25lease placements of21new aircraft viasale and leaseback, lease which involved significant modificationofaircraft, lease total. This included roll-off placement of24usedaircraft During theyear, theGroup completed 110 transactions in aircraft.committed The Group's fleetconsistsof 670 owned,managed and The Group has96airline customers in41countries. OPERATIONAL five major banks. $600 millionrevolving of credit facilitywithaconsortium Capital Finance DAC, on19 July 2016 and hasaccesstoa 2021 through itswholly-owned subsidiary, SMBC Aviation sale of$500millionits2.65% seniorunsecured notes due financial institutions, theGroup successfully closed the from parent group and Japanese third party undertakings In additiontotheGroup and Company’s existingfunding industry. as oneofthehighest rated aircraft leasing companies inthe from BBB+. This affirmsthe Group andCompany's position the Group and Company credit rating on11 May 2017 toA- (31 March 2016: BBB+ from both). Fitch Ratingsupgraded of A- from Fitch Ratingsand BBB+ from Standard &Poor’s offering, reflected inthe Group andCompany’s credit rating financial strength and scaletotheGroup and Company's world’s largest trading companies. This bringssubstantial of theworld’s largest financial institutionswithoneofthe ownership structure noted above, which combinesone The Group and Company continues tobenefit from its FINANCING

35 smbc aviation capital • Annual Report & Accounts | 2017 Appointed 2016 6 April Appointed 2017 28 April Appointed Resigned 2016 6 April Resigned 2017 28 April Resigned a compliance policy statement setting out the setting statement out policy a compliance with to complying with regard policies Company's has been under the 2014 Act obligations the relevant prepared; in place been put have structures and arrangements material to secure consider sufficient that they obligations; relevant with the Company's compliance and has been structures and the arrangements of a review this which to year the financial during conducted relates. report Directors' Risks are managed in line with guidance given by the by given in line with guidance managed are Risks rate interest to both Exposure companies. parent Group's the use of derivatives by is minimised risk currency and risk economic conditions The current rate loans. fixed and uncertainties and the airline associated with risks create long-term has considerable the Group However, industry. Past experience of customers. with a number contracts and carefully be managed can risk indicates that airline successfully. enquiries as they such made having The Directors, the financial prepared have appropriate, considered concern basis. on a going statements COMPLIANCE STATEMENT DIRECTORS’ are that they acknowledge of the Company The Directors with its compliance the Company's securing for responsible Act 2014 in the Companies (as defined obligations relevant section 225 of the 2014 by as required and, Act")) "2014 (the confirm that: the Directors Act, i. ii. iii. AND SECRETARY DIRECTORS 34. listed on page are Secretary and Directors The present the year: during place took changes The following Directors I Sakata Kawasaki Y Directors Tanaka T Takashima M capital in the share interest an held of the Directors None or or in the shares Company, of the capital or the loan subsidiary of the undertakings of the of any capital loan Company. or 1%, than of more interest an held of the Directors None in the 1%, than of more interest an to acquire had options undertakings of the Company. of the parent shares fuel prices fuel costs maintenance of a new the introduction and innovation technological types of aircraft generation regulations environmental and government passenger air travel and air cargo demand air cargo and air travel passenger For further detail on the principal financial risks and the risks financial further detail on the principal For minimising these financial for policy Company's and Group 23. to note refer risks, GOING CONCERN together activities, business Company's and The Group development, future its to affect likely with the factors along with above, set out are position and performance In and Company. position of the Group the financial 23 to the financial note above, addition, also as noted processes and policies the objectives, includes: statements management risk the financial capital; managing for and hedging instruments details of financial objectives; liquidity risk, and risk to credit the exposures and activities; and 2017 at 31 March in place that these were to the extent year. the preceding • • • • Despite a more competitive environment in the Sale and in the Sale and environment competitive a more Despite its growth about is optimistic Group the market, Leaseback on young to its focus term, due the longer over prospects and aircraft narrow-body advanced technologically and with its type of aircraft these for demand the continuing customers. environment the trading about positive remains The Group placed well is shareholders with its and together aircraft for and market in the Japanese to maximise opportunities beyond. PEOPLE its additions to of key has made a number The Group of number average in an resulting the year, over team (2016: of 162 the year during in the organisation people and employees direct consisting of both of 150), average of staff in commitment quality and The representatives. - has been a key of the organisation - at all levels the Group success. and growth its ongoing factor behind driving UNCERTAINTIES RISKS AND PRINCIPAL The competitive. highly and is cyclical industry The airline leases operating under are aircraft Company's and Group over recovered is substantially the cost of the aircraft where type of of a specific The oversupply the term of the leases. and rates lease aircraft depress could in the market aircraft and The supply rates. re-lease affect would which values, factors cyclical various by is affected of aircraft demand including: • directors’ report directors’ (continued)

smbc aviation capital • Annual Report & Accounts | 2017 36 Statements. adjustment toordisclosure intheConsolidated Financial Company have occurred since31March 2017, which require No other significant events affecting the Group and notes rating to'A-' from 'BBB+'. and SMBC Aviation Capital Finance DAC's seniorunsecured Long-Term Issuer Default Ratings("IDRs") to'A-' from 'BBB+' Capital Limited's and SMBC Aviation Capital Finance DAC's On 11 May 2017, Fitch Ratingsupgraded SMBC Aviation the same day, Mr. Y. Kawasaki was appointed asDirector. On 28April 2017, Mr. M. Takashima resigned asDirector. On POST BALANCESHEETEVENTS Company’s auditor isaware ofthatinformation. any relevant audit information and toestablish thatthe taken asaDirector inorder tomake themselves aware of and they have taken allthesteps thatthey ought tohave audit information ofwhich theGroup’s auditor isunaware; confirmed thatasfar asthey are aware, there isno relevant The Directors inofficeatthe dateofthis report have each RELEVANT AUDIT INFORMATION 383 oftheCompanies Act 2014. willingness tocontinue inofficeaccordance withSection KPMG, Accountants, Chartered have indicated their INDEPENDENT AUDITOR requirements ofSection167 oftheCompanies Act 2014. The Company iscurrently consideringtheadditional hasnotcommittee beenestablished yet. by Section167 oftheCompanies Act 2014asan audit The Board ofDirectors performs theduties asrequired AUDIT COMMITTEE year ended31March 2017 (2016: $nil). The Company didnot make any political donationsinthe POLITICAL DONATIONS Ireland. House, International Financial Centre, Services Dublin 1, are maintained attheCompany's registered officesatIFSC finance function. Theaccounting records oftheCompany expertise and by providing adequateresources tothe employing accounting personnel withtheappropriate with regard tokeeping adequateaccounting records by requirements ofSection281 oftheCompanies Act, 2014 The Directors believe thatthey have complied withthe ACCOUNTING RECORDS Company Registration No: 270775 Date: 26May 2017 Director Director P Barrett the Board by: Approved by theBoard ofDirectors and signedonbehalf of Date: 26May 2017 B Flannery

37 smbc aviation capital • Annual Report & Accounts | 2017 B Flannery 2017 Date: 26 May The Directors are responsible for the maintenance and and the maintenance for responsible are The Directors information financial and the corporate of integrity in the Legislation website. on the Company's included and the preparation governing Ireland of Republic from differ may statements dissemination of financial jurisdictions. in other legislation of signed on behalf and of Directors the Board by Approved by: the Board P Barrett Director Director 2017 Date: 26 May make judgements and accounting estimates that are estimates that are accounting and judgements make prudent; and reasonable in accordance been prepared have they state whether and EU; the by as adopted with IFRS going concern on the statements the financial prepare that the Group to presume basis unless it is inappropriate in business. will continue Company and select suitable accounting policies and then apply them apply then and policies accounting suitable select consistently; The Directors are responsible for keeping adequate keeping for responsible are The Directors with reasonable disclose which records accounting position financial liabilities, time the assets, at any accuracy them enable which and or loss of the Company profit and are of the Group statements that the financial to ensure by as adopted IFRS, with applicable in accordance prepared of the Companies with the provisions comply and the EU taking such for responsibility general have They 2014. Act the to them to safeguard open reasonably as are steps and to prevent and the Company and assets of the Group also are The Directors irregularities. other and detect fraud that complies Report a Directors’ preparing for responsible 2014. Act the Companies of with the requirements • • • The Directors are responsible for preparing the Directors' the Directors' preparing for responsible are The Directors with in accordance statements the financial and Report regulations. and law applicable financial to prepare the Directors requires law Company they law Under that year. financial each for statements financial Company and the Group to prepare elected have Financial International with in accordance statements and the EU by as adopted (“IFRS”) Standards Reporting law. applicable the approve not must the Directors law company Under are unless they statements financial Company and Group of the assets, and fair view a true give that they satisfied and Company position of the Group financial liabilities and In preparing year. for that or loss profit of the Group’s and the statements, financial Company and of the Group each to: required are Directors • statement of directors’ of directors’ statement of in respect responsibilities the and report the directors’ statements financial

smbc aviation capital • Annual Report & Accounts | 2017 38 Report isconsistent with thefinancial statements. In our opinion theinformation given intheDirectors’ agreement withtheaccounting records. and properly audited and thefinancial statements are in sufficient topermitthefinancial statements tobe readily In our opinion theaccounting records oftheCompany were which we for considernecessary thepurposes ofour audit. We have obtained alltheinformation and explanations below required toreport by theCompanies Act 2014 are setout 2. Ourconclusions onother matters onwhich we are • • • • • In our opinion: 1. Ouropinion onthefinancial statements isunmodified ARISING FROMOURAUDIT OPINIONS ANDCONCLUSIONS on Auditing (“ISAs”) (UK &Ireland). was conducted inaccordance withInternational Standards with theprovisions oftheCompanies Act 2014.Ouraudit Company financial statements, as applied inaccordance as adopted by theEuropean Union, and, asregards the and International Financial Reporting Standards (“IFRS”) that hasbeenapplied intheirpreparation isIrish law and therelated notes. The financial frameworkreporting Group and Company Statements ofChanges inEquity the Group and Company Statements ofCash Flows, the Position, theGroup Statement ofComprehensive Income, comprise The Group and Company Statements ofFinancial Capital Limitedfor theyear ended31March 2017 which statements (‘‘financial statements’’) of SMBC Aviation We have audited theGroup and Company financial smbc aviation capital limited report to themembersof independent auditor’s of theCompanies Act 2014. properly prepared inaccordance withtherequirements the Group and Company financial statements have been provisions oftheCompanies Act 2014;and European Union and asapplied inaccordance withthe prepared inaccordance withIFRS asadopted by the the Company financial statements have beenproperly European Union; prepared inaccordance withIFRS asadopted by the the Group financial statements have beenproperly Company asat31March 2017; view oftheassets, liabilitiesand financial positionofthe the Company financial statements gives atrue and fair then ended; Group asat31March 2017 and ofitsprofit for the year of theassets, liabilitiesand financial positionofthe the Group financial statements give atrue and fairview

implications for our report. misstatements orinconsistencies we considerthe the audit. If we becomeaware ofany apparent material knowledge acquired by usinthecourse ofperforming incorrect basedon,ormaterially inconsistent with,the anyto identify information thatisapparently materially inconsistencies withtheaudited financial statements and information intheAnnual material Report toidentify In addition,we read allthefinancial and non-financial the overall presentation ofthefinancial statements. significant accounting estimatesmade by thedirectors; and applied and adequately disclosed; thereasonableness of Company’s circumstances and have beenconsistently the accounting policies are appropriate totheGroup and fraud orerror. This includes an assessment of:whether are free from materialmisstatement, whether causedby give reasonable assurance thatthefinancial statements and disclosures inthefinancial statements sufficient to Ireland) involves obtaining evidence about theamounts An audit undertaken inaccordance withISAs (UK & Auditors. with theFinancial Reporting Council’s EthicalStandards for (UK and Ireland). Those standards require ustocomply financial statements inaccordance withIrish law and ISAs responsibility istoaudit and express an opinion onthe and otherwise comply withtheCompanies Act 2014.Our and for beingsatisfied thatthey give atrue and fairview responsible for thepreparation ofthefinancial statements Responsibilities setout onpage 38, thedirectors are As explained more fully intheStatement ofDirectors’ AND RESTRICTIONS ONUSE BASIS OFOURREPORT, RESPONSIBILITIES 312 oftheAct are not made. remuneration and transactions required by sections305to to you if, inour opinion, thedisclosures ofdirectors’ In addition,theCompanies Act 2014requires ustoreport that isotherwise misleading. financial statements, amaterialmisstatement offact,or material inconsistencywitheitherthatknowledge orthe identified information inthe annual thatcontains a report on theknowledge we acquired during our audit, we have ISAs (UK &Ireland) require thatwe report toyou if, based we are required toreport by exception 3. We have nothing toreport inrespect ofmatters onwhich

39 smbc aviation capital • Annual Report & Accounts | 2017

) continued smbc aviation capital limited capital aviation smbc ( report to the members of of members the to report Paul Dobey of on behalf and for KPMG Firm Audit Statutory Chartered Accountants, Place 1 Harbourmaster 1 IFSC, Dublin 2017 Date: 26 May Whilst an audit conducted in accordance with ISAs (UK & (UK with ISAs in accordance conducted audit Whilst an of assurance reasonable is designed to provide Ireland) or omissions it is not identifying material misstatements the audit plans Rather the auditor to do so. guaranteed to an of testing needed to reduce to determine the extent that the aggregate the probability low level appropriately not does misstatements undetected and of uncorrected whole. as a statements the financial for materiality exceed work audit significant us to conduct This testing requires expense income and liabilities, of assets, range on a broad time of the most experienced significant as devoting as well the engagement in particular team, of the audit members of the areas to subjective the audit, for partnerresponsible reporting. and accounting as members, to the Company’s is made solely Our report of the Companies with section 391 in accordance a body, that we so has been undertaken work 2014. Our audit Act we those matters members state to the Company’s might for and report auditor’s to state to them in an required are we law, permitted extent by the fullest To purpose. no other than other to anyone or assume responsibility accept do not for as a body, members the Company’s and the Company have we the opinions or for this report, for work, audit our formed. independent auditor’s independent

smbc aviation capital • Annual Report & Accounts | 2017 40 Director P Barrett for theyearended31March2017 Effective portionofchangesinfairvaluecashflowhedges other comprehensiveincome Other operatingexpenses Impairment 10/11 Lease revenue Income continuing operations comprehensive income profit andloss andother consolidated statement of other comprehensiveincomefortheyear,netoftax Tax onothercomprehensiveincome profit beforetaxation Net tradingincome/(expense) Interestincome Finance costs statements. year areattributabletotheownersofcompany. Theaccompanyingnotesformanintegralpartofthesefinancial All incomerelatestocontinuingoperations.profitsandtotalcomprehensive incomeforcurrentandprecedingfinancial Tax expense

Total revenues Other revenue total comprehensiveincomeforthe year profit fromoperating activities Breaklosses Interestexpense profit fromcontinuingoperations

Other operatingincome net financecosts

Depreciation Operating expenses

B Flannery

Note 10 15 9 2 2 2 8 8 8 4 3 7

1,090,570 Year ended (300,897) 1,020,258 1,002,159 (109,252) (315,689) (347,736) 315,209 270,728 175,042 (20,598) (61,279) 613,382 312,485 31 March (41,757) 50,880 44,481 (6,399) 3,784 (19,185) 33,977 18,099 70,312 $'000 2017 398 (269,531) Year ended (292,050) (320,967) 203,865 974,480 (26,474) 473,396 899,024 (118,027) 148,568 (30,258) (28,823) 31 March (14,700) 916,819 57,661 37,219 17,795 $'000 2016 (811)

41 smbc aviation capital • Annual Report & Accounts | 2017 547 235 420 2016 $'000 22,017 51,524 54,723 54,723 43,799 43,799 187,513 22,449 171,244 69,695 612,745 612,745 482,818 31 March 278,945 1,112,307 485,983 286,584 259,902 259,902 204,737 1,153,998 1,153,998 1,471,064 9,921,998 9,921,998 9,921,998 9,550,921 7,296,936 7,296,936 8,450,934 8,450,934 6,223,833 9,643,053 - 6 2017 $'000 67,891 24,165 16,339 21,320 12,558 187,513 95,376 59,556 59,556 571,861 215,725 215,725 294,198 294,198 488,812 31 March 227,028 227,028 278,393 505,573 1,120,229 1,120,229 1,786,273 1,786,273 10,141,783 1,383,035 6,681,890 10,636,511 10,636,511 8,850,238 8,850,238 7,730,009 7,730,009 10,266,056

370,455 10,636,511

11 17 14 14 14 14 21 21 18 19 19 10 24 22 22 26 25 20 20 Note

B Flannery The accompanying notes form an integral part of these financial statements. total equity and liabilities total total liabilities total

Derivative financial instruments Borrowings Obligations under finance leases current liabilities other payables and Trade

Derivative financial instruments Deferred tax liabilities Borrowings Obligations under finance leases non-current liabilities and other payables Trade total equity total Profit and loss account Other components of equity equity Share capital assets total Lease incentive assets Lease Derivative financial instruments Cash and cash equivalents current assets and other receivables Trade

Derivative financial instruments Derivative financial incentive assets Lease

Goodwill and intangible assets Goodwill and intangible

P Barrett Director Director non-current assets plant and equipment Property, as at 31 March 2017 consolidated statement statement consolidated position of financial

smbc aviation capital • Annual Report & Accounts | 2017 42 Director P Barrett as at31March2017 Property, plantandequipment non-current assets of financialposition company statement

Loan receivables Goodwillandintangibleassets

Investmentinsubsidiaries Lease incentiveassets Derivativefinancialinstruments Trade andotherreceivables Loan receivables current assets Cashandcashequivalents Derivativefinancialinstruments Lease incentiveassets

total assets Sharecapital equity Othercomponentsofequity total equity Profitandlossaccount Obligationsunderfinanceleases Trade andotherpayables non-current liabilities Borrowings Derivativefinancialinstruments Deferredtaxliabilities

Obligationsunderfinanceleases Trade andotherpayables current liabilities Borrowings Derivativefinancialinstruments

total liabilities The accompanyingnotesformanintegralpartofthesefinancialstatements. total equityandliabilities B Flannery

Note 20 20 25 26 22 22 24 10 16 19 16 12 19 18 21 21 14 14 14 14 17 11

10,517,884 9,981,902 7,576,326 6,580,856 1,328,692 10,517,884 9,582,139 8,787,897 1,729,987 535,982 265,523 1,211,571 227,347 433,040 227,028 212,922 31 March 219,034 93,545 718,975 213,782 481,631 59,556 66,442 70,263 187,513 23,153 21,288 16,339 6,694 $'000 2017 6 - 8,300,549 9,445,088 6,055,360 9,734,910 1,247,633 9,065,169 1,434,361 7,052,916 9,734,910 289,822 1,077,316 286,584 169,532 223,070 115,000 444,444 212,922 31 March 721,596 470,767 151,672 66,555 90,942 43,458 187,513 54,723 20,471 9,080 2,444 $'000 2016 420 547 35

43 smbc aviation capital • Annual Report & Accounts | 2017 Total $'000 Equity 44,481 175,042 315,209 (26,474) 148,568 270,728 1,786,273 1,471,064

- - $'000 1,322,496 937,265 175,042 175,042 270,728 270,728 270,728 270,728 Profit and 1,112,307 1,112,307 1,383,035 loss account

- - $'000 Hedge 6,272 (11,735) 44,481 44,481 Reserve (26,474) (26,474) (38,209) Cash Flow ------Other $'000 Reserves Reserves 209,453 209,453 209,453 209,453 ------Share $'000 Capital 209,453 187,513 187,513 187,513 187,513 187,513

26 26 Note

31 march 2017 balance at of these financial statements. The accompanying notes form an integral part 31 march 2016 balance at Profit for the period Cash flow hedge reserve Cash flow hedge reserve Profit for the period balance at 1 april 2015 balance at as at 31 March 2017 consolidated statement consolidated of changes in equity in of changes

smbc aviation capital • Annual Report & Accounts | 2017 44 as at31March2017 The accompanyingnotesformanintegralpartofthesefinancialstatements. balance at 31march2017 Cash flowhedgereserve Profit fortheperiod balance at 31march2016 Cash flowhedgereserve Profit fortheperiod balance at 1april2015 of changesinequity company statement

Note 26 26

187,513 187,513 187,513 Capital $'000 Share ------207,486 207,486 207,486 Reserves $'000 Other ------Cash Flow (26,464) (26,464) (37,954) (11,490) 44,250 44,250 Reserve 6,296 Hedge $'000 - - lossaccount 1,328,692 1,077,316 922,250 155,066 155,066 Profit and 251,376 251,376 $'000 - - 1,729,987 1,305,759 295,626 1,434,361 (26,464) 155,066 251,376 128,602 44,250 Equity $'000 Total

45 smbc aviation capital • Annual Report & Accounts | 2017

269 2016 $'000 6,595 45,174 45,174 25,466 (3,844) 753,891 159,563 159,563 (51,500) 31 March 204,737 204,737 643,785 (24,212) (48,081) 823,488 382,246 159,563 159,563 203,865 (75,335) 256,005 (93,585) (663,617) (165,878) 234,898 1,022,144 Year ended Year (1,303,558)

2017 (49) (398) 811 (582) (5,836) $'000 5,216 (486) 23,191 119,479 (57,771) 30,804 21,982 (11,965) 79,177 (54,723) 31 March 278,740 95,639 312,485 159,563 934,961 (60,284) 883,398 368,398 434,909 402,168 (262,417) (281,789) 278,393 865,225 255,202 255,202 (888,897) Year ended Year (1,772,246)

582,854

18 18 18 18 Note

unrestricted cash and cash equivalents at beginning of the period at unrestricted cash and cash equivalents net increase / (decrease) in unrestricted cash and cash equivalents changes on unrestricted cash and cash equivalents rate effect of exchange net cash from / (used in) financing activities Proceeds from / (repayment of) indebtedness Repayment of obligations under finance leases Repayment financing activities from / (payments to) restricted cash accounts Receipts Interest paid activities net cash from operating investing activities plant and equipment Proceeds on disposal of property, plant and equipment Purchases of property, Purchases of intangible assets net cash used in investing activities: Income taxes paid Income taxes (Decrease) / increase in payables operations by cash generated (Increase) / decrease in receivables Profit on disposal of assets held under operating leases Profit on disposal of assets held under operating capital in working before movements cash flows operating Movement in fair value of derivatives not in a hedge relationship Movement in fair value of derivatives not and other fair value hedges The accompanying notes form an integral part of these financial statements. Interest expense cash as reported Restricted cash and cash equivalents Total Lease incentive asset amortisation Lease Unrestricted cash and cash equivalents as above Adjustments for: plant and equipment on property, Depreciation and impairment of intangible assets Amortisation and impairment end of the period at unrestricted cash and cash equivalents

profit before tax for the year ended 31 March 2017 for the year ended consolidated statement statement consolidated flows of cash

smbc aviation capital • Annual Report & Accounts | 2017 46 for theyearended31March2017 net cashusedinfinancingactivities: Dividendsreceived Purchasesofintangibleassets Purchasesofproperty, plantandequipment Proceedsondisposalofproperty, plantandequipment investing activities net cashfromoperating activities Interestpaid Incometaxes paid cash generated by operations (Decrease)/increaseinpayables (Increase)/decreaseinreceivables operating cashflows beforemovements inworking capital Profitondisposalofassetsheldunderoperatingleases andotherfairvaluehedges Movementinfairvalueofderivativesnotahedgerelationship Interestexpense Dividendincome Lease incentiveassetamortisation Amortisationandimpairmentofintangibleassets Depreciationandimpairmentonproperty, plantandequipment Adjustments for: profit beforetax of cashflows company statement The accompanyingnotesforman integralpartofthesefinancialstatements. Total cashandequivalents Restricted cashasreported Unrestricted cashandequivalentsasabove unrestricted cashandequivalents at endoftheperiod unrestricted cashandequivalents at beginningoftheperiod net increase/(decrease)inunrestrictedcashandequivalents effect ofexchange rate changesonunrestrictedcashandequivalents net cashfromfinancingactivities Proceedsfromindebtedness Repayment ofobligationsunderfinanceleases Receipts from/(paymentsto)restrictedcashaccounts financing activities

Note 18 18 18 18

893,064 287,508 106,498 503,959 (1,652,728) Year ended (813,435) (275,757) (180,495) 1,785 (52,822) 536,700 838,472 276,573 (29,278) 123,373 351,606 31 March 683,291 907,199 (54,723) 227,347 204,156 204,156 106,498 407,510 650,147 29,032 97,658 21,982 23,191 2,435 $'000 (398) 811 (870) - (376) 318 (49) 2017 870 (24) (183) (1,360,464) Year ended (256,869) (744,648) 102,825 619,660 253,967 376,653 (53,634) 106,498 31 March 782,041 (48,081) (63,651) (24,212) 177,683 151,672 30,532 170,149 23,762 (3,844) 45,174 2,799 $'000 2016 -

47 smbc aviation capital • Annual Report & Accounts | 2017 Basis of consolidation Basis the include Statements Financial The Consolidated and of the Company Statements Financial annual 2017. to 31 March up drawn all of its subsidiaries, in associates investments have does not The Group in IFRS. as defined ventures or joint a introduced the standard 10, IFRS In applying based all entities for model consolidation single the where consolidation requires which on control or exposure the entity, over has power Company with the entity involvement from to returns rights The returns. to affect the ability to use power and in the included are an entity of statements financial the date from Statements Financial Consolidated that this the date until commences that this control ceases. control have Statements Financial The Consolidated policies accounting using uniform been prepared in similar events other and transactions for circumstances. In particular, the judgements and assumptions assumptions and the judgements In particular, accounting Company's and in the Group involved on effect the most significant have which policies Statements in the Financial recognised the amounts as follows: are Equipment: and Plant - Property, 10 Note of property, in respect The material judgements the identification include equipment and plant such of impairment measurement subsequent and flow including estimates of cash and as triggers Estimates also rates. discounts and values residual to 5 years) used (currently the intervals include the purposes for values market determine future individual for rates of setting depreciation aircraft. Tax: 24 - Deferred Note measured are liabilities tax assets and Deferred based on the rates and using enacted tax laws those which in years in the to be in effect expected Any reverse. to expected are differences temporary in a substantial result can in the tax rates change in the consolidated on the tax charge impact tax payments. and income statement reviewed are assumptions underlying Estimates and to accounting Revisions basis. ongoing on an in the period in which recognised estimates are periods future in any and the estimate is revised based on are these estimates Although affected. of the amount, best knowledge management’s those from differ may or action, actual results event estimates. c

Estimates and judgements Estimates in Statements of Financial The preparation requires the EU by adopted as with IFRS conformity estimates use of judgements, to make management reportedamounts the that affect assumptions and date liabilities as at the reporting of assets and expenses of income and amount the reported and period. the reported during The Consolidated Financial Statements have been have Statements Financial The Consolidated as under the historical cost convention prepared of certainvaluation the fair modified to include accounting The principal instruments. financial below. set out are policies of the Statements Financial The Consolidated with in accordance been prepared have Company financial The entity the EU. by as adopted IFRSs been prepared have of the Company statements and the EU by as adopted with IFRS in accordance Act with the Companies in accordance as applied its that publishes permits a company 2014 which together statements financial Group and Company in Section 304 of the exemption advantage to take presenting 2014, from Act of the Companies (2) income statement its Company to its members part of the approved form that notes related and Statements. Financial Company is the US currency functional The Company's of the primary economic being the currency Dollar, The operates. the Company in which environment Company and the Group for currency presentation presented information All financial Dollar. is US US to the nearest has been rounded Dollar in US stated. unless otherwise Dollar in conjunction be read should which The accounts, on a going prepared are Report, with the Directors' as with IFRS in accordance concern basis and Union. the European by adopted Basis of preparation Basis b significant accounting policies significant accounting is a company "Company") (the Capital Aviation SMBC The address domiciled in Ireland. and incorporated International House, office is IFSC of its registered Ireland. 1, Dublin Services Centre, Financial prepared are Statements Financial The Consolidated Reporting Financial with International in accordance with and the EU by as adopted (“IFRS”) Standards to 2014 applicable Act those parts of the Companies under IFRS. reporting companies a

financial statements financial 1 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 48 1

Subsidiaries

significant accounting policies c d e

differences, is reflected in other reserves. based onbook values adjustedfor accounting policy and any difference between thenetassetsacquired, if necessary, toreflect Group accounting policies of thetransferor. Assetsand liabilitiesare adjusted, amounttheir carrying inthefinancial statements liabilities are recognised upon consolidation at Group obtains theownership interest. Assetsand statements prospectively from thedate the are accounted for intheconsolidated financial Business combinationsundercommoncontrol Common control transactions Financial Statements. interests topresent separately intheConsolidated Company and, assuch, there are nonon-controlling Company's subsidiaries are wholly ownedby the the Consolidated Financial Statements. Allofthe intragroup transactions are eliminated inpreparing and any unrealised gains and lossesarising from Intragroup transactions, intragroup balances consistent withthepolicies adopted by theGroup. The accounting policies ofallsubsidiaries are subsidiaries have coterminous financial year ends. that are substantive are taken into account. All entity. Inassessingcontrol, potential voting rights to affect those returns through itspower over the its involvement withtheentity and hastheability exposed, orhasrights, tovariable returns from Company. Control existswhen theCompany is isanA subsidiary entity controlled by the Basis ofconsolidation (continued) cost, lessany provision for impairment. in theCompany Statement ofFinancial Position at Investments are stated undertakings insubsidiary Investment insubsidiaries Income underfinance and operating leases lease. on astraight-line basisover thetermofrelevant Rental incomefrom operating leases isrecognised investment outstanding inrespect oftheleases. a constant periodic rate ofreturn onthe net allocated toaccounting periodssoastoreflect oftheinvestmentamortisation inthelease, is Finance lease income, which includes the leases are classified as operating leases. and rewards ofownership tothelessee. Allother terms ofthelease transfer substantially alltherisks Leases are classified asfinance leases whenever the

( continued)

f g h Taxation in trade and other payables. agreements are recorded as‘Prepaid lease rentals’ Rentals received, but unearned underlease included inoperating expenses. receivables are expensed through profit orloss and deposits. Such provisions for baddebts for lease the extent such pastdue rentals exceed security management’s assessment ofcollectability and to provision may beestablished onthebasisof For pastdue rentals onallleases, an impairment of completion provided. oftheservice Fee incomeisrecognised by reference tothestage Fee income enacted, atthereporting date. on taxrates and laws enacted,orsubstantively will berealised based ortheliabilitiessettled, expected toapply intheperiodswhen theassets recovered. Deferred taxiscalculated usingtaxrates to theextent thatitis probable thatthey willbe differences and deferred taxassets are recognised are generally recognised for alltaxable temporary amount for taxpurposes. Deferred taxliabilities liability for accounting purposes and itscarrying between amount thecarrying ofan assetor recoverable inrespect oftemporary differences Deferred taxistheexpected tobepayable or substantively enactedatthereporting date. is madefor current taxatrates enactedor year arising inincomeorequity. Provision respect ofthetaxable profit orloss for theperiod/ Current taxisincomepayable orrecoverable in equity asappropriate. or charged toother comprehensive incomeorto outside theincomestatement which iscredited statement except incometaxonitemsrecognised tax and deferred tax,isrecorded intheincome Income taxexpense orincome, comprising current the periodinwhich they are incurred. borrowing costsare recognised asan expense in capitalised oftheaircraft aspart cost.All other acquisition ofaircraft not yet delivered are Borrowing costsdirectly attributable tothe Borrowing costs

49 smbc aviation capital • Annual Report & Accounts | 2017 Goodwill and impairment of the of the fair value is the excess Goodwill the acquisition over an paid for consideration of the identifiable of the fair value share Group When the fair value liabilities acquired. assets and and liabilities acquired assets of the identifiable are the cost of a combination the values exceeds is recognised gain remaining any and reassessed is allocated Goodwill or loss. in profit immediately (“CGUs”) units of cash-generating to the groups of synergies the from to benefit expected that are at which level This is the lowest the combination. management internal for is monitored goodwill is goodwill recognition After initial purposes. impairment accumulated at cost less any measured losses. testing on an is subject to impairment Goodwill and, year time each at a consistent basis, annual indicator is considered impairment time an at any comparing is determined by to exist. Impairment of amount to the recoverable the carrying amount relates. the goodwill to which of CGUs the groups of fair is the greater amount The recoverable the When value-in-use. and less costs to sell, value is less of CGUs of the groups amount recoverable loss is impairment an the carrying amount, than recognised. and of CGUs part of a group forms goodwill Where within that unit is disposed part of the operation associated with the operation the goodwill of, of in the carrying amount of is included disposed or loss on determining the gain when the operation of in disposed Goodwill of the operation. disposal on the basis of the is measured this circumstance the of and disposed of the operation values relative retained. of CGUs portion of the group The carrying amounts of the Group and Company’s Company’s and the Group of The carrying amounts date to reporting each at reviewed are aircraft indication of is any there determine whether then indication exists, such any If impairment. An is estimated. amount recoverable the asset’s if the carrying is recognised loss impairment amount. its recoverable asset exceeds of an amount asset is the greater of an amount The recoverable less costs to sell. its fair value in use and of its value or in the profit recognised losses are Impairment loss. of the avail Company and the Group IAS 39, Under to certain capital in relation own-use exemption commitments. k

continued) (

to the next useful economic life (“UEL”) point, point, (“UEL”) economic life to the next useful of 5 years maximum Property, plant and equipment plant Property, stated at cost are equipment and plant Property, recognised any and depreciation less accumulated loss. impairment to the Consolidated depreciated Assets are their Income over of Comprehensive Statement as follows: economic lives, estimated useful leases operating under for hire Aircraft –  & fittings and fixtures Office equipment use into brought when date from – 3 to 10 years aircraft to hold policy Company’s and is the Group It the Because of this, period of 5 years. average an for market estimates the future Company and Group which intervals at 5 year value) (residual value points. to UEL correspond values. residual to their depreciated are Aircraft determined based on estimated are values Residual of the aircraft lives at the end of the useful values assets. based on contractual values Estimated residual reviewed are conditions of the aircraft return the expected includes This review annually. excess any of the asset and condition maintenance on to be available expected reserves maintenance estimated residual Where maturity of the lease. this significantly, changed to have found are values in estimate as a change prospectively is recorded useful remaining the over charges depreciation and of the revised account adjusted to take are life estimate. Foreign currency Foreign at recorded are currencies foreign in Transactions of the on the dates prevailing of exchange the rates liabilities assets and Non-monetary transactions. at translated are currencies denominated in foreign At of the transaction. at the date prevailing the rates liabilities monetary assets and date, reporting each are currencies denominated in foreign that are on the reporting prevailing at the rates retranslated are retranslation on losses arising Gains and date. for the period. or loss in the profit included j i significant accounting policies significant accounting ) continued

financial statements financial ( 1 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 50 1

significant accounting policies( k l m n recognition. in profit orloss and are not reversed following Impairment lossesongoodwill are recognised for impairment priortotheendofthatyear. allocation toCGUs, thegroups ofCGUs are tested occurs, and thegoodwill arising affects the goodwill In theyear inwhich abusiness combination Goodwill andimpairmentGoodwill (continued) recoverable. valuesindicate thatthecarrying may not be testing when events orchanges incircumstances reporting date and are subjecttoimpairment reviewed for indicators ofimpairment ateach from two years totenyears. values Carrying are basis over theirestimateduseful lives which vary impairment. onastraight-line Costisamortised cost lessany accumulated and amortisation Subsequently intangible assetsare carried at which istheirfairvalue atthedate ofacquisition. Intangible assetsare initially recognised atcost Intangible (other assets than goodwill) impairment ateach reporting date. losses are reviewed for possible reversal ofthe than goodwill thathave suffered impairment identifiable cash flows. Non-financial assets other the lowest levels for which there are separately assessing impairment, assetsare grouped at fair value lesscoststosell and value-in-use. When The recoverable amount isthehigher ofan asset’s amountcarrying exceeds itsrecoverable amount. recognised for theamount by which theasset’s may not berecoverable. Animpairment lossis circumstances amount indicatethatthecarrying for impairment whenever events orchanges in ordepreciationsubject toamortisation are tested Long-term tangible and intangible assetsthatare goodwill) Impairment ofnon-financial assets (other than Plant and Equipment. and financing costs are re-classified to Property, subject toPDPs are delivered, allapplicable PDPs are capitalised asincurred. Asaircraft which are with PDPs and aircraft that are yet tobedelivered are not depreciated. Borrowing costsassociated the Statement ofFinancial Position atcostand Pre-delivery payments (“PDPs”) are recorded in Pre-delivery payments continued)

o p q carrying amountcarrying and fairvalue lesscoststosell. asset held for saleismeasured atthelower ofits condition and thesalemust behighly probable. An must beavailable for immediatesaleinitspresent as held for sale. Assetsclassified asheld for sale rather than through continuing useare classified recovered primarily through asaletransaction assets and liabilities) thatare expected tobe Non-current assets(or disposals groups comprising Non-current held assets for sale IAS 39. trading’ and hedge accounting instruments under derivative financial instruments classed as‘held for liabilities atfairvalue through theprofit orloss are cancelled orexpired. Allfinancial assets and obligation specified inthecontract isdischarged, 39. Afinancial liabilityisderecognised when the qualifies for derecognition inaccordance withIAS it transfers thefinancials asset and thetransfer the cash flows from thefinancial asset expire or a financial asset when thecontractual rights to trade date accounting. The Company derecognises The purchase offinancial assetsis recognised using Position. other payables’ intheStatement ofFinancial ‘obligations underfinance leases’‘trade and and measured costincludes atamortised ‘borrowings’, value through theprofit orloss’. Financial liabilities or‘financial liabilitiesatfair cost’ at amortised categorised aseither‘financial liabilitiesmeasured The Group and Company’s financial liabilities are income. in fairvalue included withinother comprehensive into shares held atfairvalue withthemovement (equity and preference) and claims tobeconverted Available for saleassetscomprise listedshares the Consolidated Statement ofFinancial Position. other receivables’ and ‘cash and cash equivalents’ in comprise ‘finance lease receivables’,‘trade and “available for saleassets”. Loans and receivables assets atfairvalue through theprofit orloss’ are either‘loans and receivables’ or‘financial The Group and Company’s financial assetcategories Financial instruments include swaps, forwards and options. foreign exchange and interest rate risk. Derivatives financial instruments (derivatives) to manage The Group and Company hasentered into various Derivatives andhedge accounting

51 smbc aviation capital • Annual Report & Accounts | 2017 Determination of fair values of derivative financial financial of derivative of fair values Determination value liabilities in fair financial and instruments relationships hedge quoted determined from are fair values Derivative Where available. where markets prices in active fair instrument, an for market is no active there the derivative’s prices for from is derived value pricing or valuation using appropriate components pricing and Company’s and The Group models. in conjunction managed methods are valuation Corporation Mitsui Banking with Sumitomo pricing models The current Inc. Markets Capital because material subjectivity entail do not incorporate utilised do not the methodologies included and the parameters judgement significant quoted to actively be calibrated can in the models pricing from established Values prices. market liquidity and risk credit adjusted for are models risk. profit or loss, and in the same line item in the the same and in or loss, profit Income. of Comprehensive Statement Consolidated value in the fair portionchanges of ineffective Any in the immediately is recognised of the derivative or loss. profit is designated as the hedging When a derivative in fair changes hedge, in a fair value instrument of Statement in the Consolidated recorded are value changes with any together Income, Comprehensive asset or liability that are the hedged of in fair value risk. to the hedged attributable or is sold, expires derivative the hedging If no longer or the hedge terminated, or exercised, accounting, flow hedge cash meets the criteria for then hedge designation is revoked, or the hedge In prospectively. is discontinued accounting transaction of a forecast hedge a discounted in Other recognised amount the cumulative the period when Income from Comprehensive other from reclassified is effective was the hedge or loss as a income to profit comprehensive forecast when the adjustment reclassification If the or loss. profit affects and occurs transaction to occur, expected is no longer transaction forecast income comprehensive in other then the balance or loss as a to the profit immediately is reclassified for hedge criteria If the adjustment. reclassification a fair value to in relation to be met cease accounting made to the no further are adjustments hedge, to attributable changes fair value item for hedged to the adjustment The cumulative risk. the hedged item is amortised to of a hedged carrying amount the period to maturity using the or loss over profit method. interest effective

continued) (

Derivatives and hedge accounting (continued) accounting and hedge Derivatives of on the Statement recognised are All derivatives value). (market at their fair value Position Financial be received is the price that would value Market in an a liability asset or paid to transfer an to sell at participants market between transaction orderly date. the measurement gain the resulting The method of recognising the on whether depends or loss on derivatives instrument. hedging is designated as a derivative at fair classified are derivatives Non-hedging and losses Gains or loss. the profit through value of a non-hedging in fair value changes from arising in the arise as they recognised are derivative Income of Comprehensive Statement Consolidated income/expense. under trading designates certain Company and The Group as well management risk for held derivatives instruments financial as certain non-derivative in qualifying instruments hedging as hedging On initial designation of the hedge, relationships. the documents formally Company and the Group instruments hedging the between relationship management the risk including items, hedged and in undertaking strategy and the hedge, objective that will be used to assess with the method together The relationships. of the hedging the effectiveness both assessment an makes Company and Group as well relationship of the hedge at the inception the hedging as to whether basis, ongoing as on an in effective highly to be expected are instruments value or fair flows in cash changes offsetting the the period items during hedged of the respective whether is designated, and the hedge which for within a are hedge of each the actual results Company and The Group percent. of 80-125 range of a flow hedge a cash for assessment an makes the forecast as to whether transaction, forecast presents to occur and probable is highly transaction that could flows in cash to variations exposure an or loss. profit affect ultimately is designated as the hedging When a derivative in cash of the variability in a hedge instrument associated risk to a particular attributable flows asset or liability or a highly with a recognised affect that could transaction forecast probable in the portion changes of effective the or loss, profit in other is recognised of the derivative fair value reserve. income in the hedging comprehensive comprehensive in other recognised The amount or loss in the profit to the income is reclassified the affect flows cash period as the hedged same q significant accounting policies significant accounting ) continued

financial statements financial ( 1 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 52 1

significant accounting policies( s r Provisions t u the discount isrecognised asfinance cost. the risks specific totheliability. Theunwinding of the timevalue ofmoney and, where appropriate, tax rate thatreflects current market assessments of discounting theexpected future cash flows atapre- reliably estimated.Provisions are determinedby theobligationto settle and theamount can be outflow ofeconomicbenefits willbe required estimated reliably and itisprobable thatan legal orconstructive obligation thatcan be event, theGroup and Company hasapresent A provision isrecognised if, asaresult ofapast charged onsuch payments. at costtogether withtheamount ofany interest commencement lease oftheprimary are included Progress payments madepriortothe unearned finance income. the present value ofthereceivable isrecognised as The difference between thegross receivable and at theamount ofthenetinvestment intheleases. under finance leases are recorded as receivables obligations expire. Amounts due from lessees derecognised when allcontractual rights and contractual right totheasset’s cash flows and A finance lease is recognised when there isa Amounts receivable underfinance leases recognition. at theeffective interest rate computed atinitial value ofestimatedfuture cash flows discounted the asset’s amount carrying and thepresent recognised ismeasured asthedifference between evidence thattheassetisimpaired. The allowance in theprofit orloss when there is objective estimated irrecoverable amounts are recognised interest rate method.Appropriate allowances for measured costusingtheeffective atamortised recognition atfairvalue, and subsequently Loan receivables are measured oninitial Loans receivable insignificant risk of changes in value. to aknownamount ofcash and are subjecttoan liquid investments thatare readily convertible hand, demand deposits and other highly short-term Cash and cash equivalents comprise ofcash on Cash andcash equivalents continued)

v w x y z Pensions access. the Group and Company doesnot have unfettered for specific financing arrangements andto which Company which isring-fenced orusedassecurity Restricted cash includes cash held by theGroup and Restricted cash during thelease. major maintenance events, expected tooccur to contribute tothelessee’s costofthenextplanned obligations oftheGroup onthepart and Company Lessor contributions represent contractual maintenance income. the life oftheassociatedlease asacharge against recognised for thisamount, over and itisamortised contribution. Inaddition,alease incentive assetis the bestestimateofcontractually obligated the commencement ofthelease representing A lessorcontribution liabilityisestablished at Lease incentive accounting of theliability. constant rate ofinterest ontheremaining balance reduction ofthelease obligation soastoachieve a are apportioned between finance charges and finance lease payable obligation. Lease payments in theStatement ofFinancial Position asa corresponding liabilitytothelessorisincluded accounting policy applicable tothatasset. The the assetisaccounted for inaccordance withthe of thelease. Subsequent toinitialrecognition, lease payments, each determinedattheinception or, iflower, atthepresent value oftheminimum assets oftheGroup and Company attheirfairvalue Assets held underfinance leases are recognised as Obligations underfinance leases received from theemployee. expense intheprofit orlossasthe related is service contribution pensionplans are recognised asan Obligations for contributions todefined Contingent Liabilitiesand Contingent Assets. obligation inaccordance withIAS37, Provisions, when theGroup and Company thefull settles only recognised asrevenue intheincome statement supplemental incomefrom maintenance reserve is the lease any excess istaken torevenue. Excess Statement ofFinancial Position. At theendof lease agreements are recognised ontheConsolidated All cash maintenance reserves collected underthe Maintenance reserves

53 smbc aviation capital • Annual Report & Accounts | 2017 The extent of the impact for future accounting accounting future for of the impact The extent and the Group by periods is still under review to amendments standards, the new and Company in will be applied interpretations and standards the EU from Statements Financial the Consolidated are standards These new date. effective endorsed on the impact a significant to have expected not and Company. of the Group statements financial with Customers Contracts from 15 Revenue IFRS will revenue when and how 15 specifies IFRS to entities as requiring as well be recognised with more statements of financial users provide The standard disclosures. relevant informative, model based five-step principles a single, provides The with customers. to all contracts to be applied on periods beginning annual date will be effective 2018. January or after 1 Leases 16 IFRS of a the definition addresses ‘Leases’ 16, IFRS of leases measurement and recognition lease, useful reporting for principles establishes and about statements of financial to users information lessors. lessees and of both activities the leasing is that most 16 IFRS from arising change A key on-balance for will be accounted leases operating will lessors for The accounting lessees. for sheet IAS replaces The standard change. materially not The effective interpretations. related and ‘Leases’ 17 on or after 1 periods beginning will be annual date 2019. January    continued)

IFRS 5, ‘Non –current assets held for sale and sale and for assets held –current 5, ‘Non IFRS methods of regarding operations’ discontinued disposal; (with Disclosures’, instruments: ‘Financial 7, IFRS 1) regarding to IFRS amendments consequential servicing contracts; discount regarding benefits’ ‘Employee IAS 19, rates; reporting’regarding financial IAS 34, ‘Interim of information. disclosure Instruments 9 Financial IFRS in IAS 39 the guidance will replace This standard and on the classification requirements includes and The and liabilities. assets of financial measurement periods beginning on annual date will be effective 2018. January or after 1 The following new standards approved by the by approved standards new The following Company, and Group to the will be relevant IASB and have 2017, March at 31 effective not were but these financial in preparing been applied not statements: The following standards / amendments to standards to standards / amendments standards The following Company and the Group by been adopted have 2017. 31 March ended the year during - 2014 2012 improvements Annual –  –  –  –  New standards adoption and amendments to IFRS and amendments to adoption standards New Ordinary shares are classified as equity. as equity. classified are shares Ordinary to the issue attributable costs directly Incremental as a deduction recognised are shares of ordinary tax effects. net of any equity, from Share capital Share Operating profit is stated before charging or charging is stated before profit Operating costs. finance income and investment crediting Profit from operating activities operating from Profit Short-term employee benefit obligations are are obligations benefit Short-term employee are basis and undiscounted on an measured service is provided. as the related expensed Short term employee benefits employee Short term   dd  cc  bb  aa significant accounting policies ( significant accounting ) continued 

standards: four impacts This set of amendments

financial statements financial ( 1 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 54

4 3 2

revenue Portfolio managementproject costs Amortisation ofintangibleassets Administration expenses other operating expenses Other operatingincome Profit ondisposalofproperty, plantandequipment other operating income MiddleEast&Africa Asia NorthAmerica EmergingEurope SouthAmerica EmergingAsia DevelopedEurope Total revenuedistributionbygeographicalregion: favour ofthelesseeorGroupdependingoncontractandprevailingmarket rates. The contingentelementrelatestoleaserentalsthatarevariablebasedonmarket interestrates.Theratescanbeinthe Contingent rentals Included inoperatingleaserevenueabovearethefollowingamounts: 2016: $nil). Rentals receivablesfortheyeararereportednetofaprovisiondeferredrentals$3,038,000(yearended31March Other revenue Otherfeeincome Aircraftmanagementfees Fee income Lease revenue Maintenanceincome Lease incentiveamortisation(note19) Rentals receivable Operating leaserevenue

1,020,258 Year ended Year ended Year ended 1,002,159 (103,972) (109,252) (118,027) (30,804) 954,631 31 March 31 March 31 March (5,280) 78,332 18,099 60,284 70,312 17,926 10,028 100.0 2,704 $'000 $'000 $'000 20.5 12.3 22.3 2017 2017 2017 27.1 173 5.2 4.8 7.8 % -

Year ended Year ended Year ended 866,250 (105,132) (25,466) 899,024 31 March 31 March 31 March (6,300) (6,595) (11,287) 916,819 51,500 58,240 57,661 17,795 17,561 100.0 $'000 $'000 $'000 6,161 12.4 234 2016 2016 2016 16.6 21.8 27.7 6.2 9.9 5.4 %

55 smbc aviation capital • Annual Report & Accounts | 2017

- - - - 1 421 801 (811) (811) (121) 296 2016 2016 2016 1,414 1,518 1,518 $'000 $'000 $'000 2,827 4,953 2,083 26,411 74,176 74,176 74,176 74,176 61,279 40,249 40,249 66,396 31 March 31 March 31 March 320,967 320,967 Year ended Year Year ended Year Year ended Year

- 14 64 119 373 746 334 (26) 424 398 826 2017 2017 2017 826 1,227 2,102 $'000 $'000 $'000 3,085 5,229 18,667 23,214 64,738 73,052 33,258 20,598 (18,243) - 73,052 347,736 31 March 31 March 31 March Year ended Year Year ended Year Year ended Year

Operating profit has been arrived at after charging/(crediting): Operating profit has been profit from operating activities profit from operating Depreciation Impairment of assets realised Negative goodwill Bad debt charge remuneration Auditor's on property Rent Fees and commissions Group service fee costs (note 6) Staff Other operating expenses loss/(gain) Foreign exchange remuneration: Auditor's of the Group accounts Audit advisory services Tax Other assurance services Of which related to the Company costs staff Fair value movement on interest rate swaps in qualifying hedging relationships Social security costs Other pension costs number of people in the No staff costs were capitalised during the year (year ended 31 March 2016: $nil). The average and representatives, of organisation during the financial year was 162 (2016: 150), consisting of both direct employees to operational (2016: 59) and the which 37 staff members were dedicated to commercial & strategy functions (2016: 31), 66 compliance and other support functions. remainder to finance, net trading income / (expense) rate borrowings issued in qualifying hedging relationships Fair value movement on fixed ineffective portion of the fair The portion of the net income from financial instruments carried at fair value relating to the value hedges at 31 March 2017 is a charge of $424,000 (year ended 31 March 2016: $nil). Staff costs Staff Net income / expense from financial instruments at fair value (note 22) Net income / expense Other net trading expense Net trading income / (expense) ) continued

financial statements financial ( 5 notes to the to notes

6

7

smbc aviation capital • Annual Report & Accounts | 2017 56

b a 9 taxation 8

Tax charge Permanent difference-disallowed expenses Permanent difference-non-taxableincome Other differences Tax onprofitattherate of25%(2016:25%) Tax onprofitattherate of33.33%(2016:33.33%) Tax onprofitattherate of12.5%(2016:12.5%) Profit beforetaxsubjecttoat25% Profit beforetaxsubjecttoat33.33% Profit beforetaxsubjecttoat12.5% FACTORS AFFECTINGTHETAX CHARGEFORTHEYEAR Tax charge -Currentyear Deferred tax-originationandreversaloftemporarydifferences: -Currentyear Current taxcharge: ANALYSIS OFTAX CHARGEFORTHEYEAR Break costsrelatedtoderivativesandliabilitymanagement Net interestpayable Total interestpayableandrelatedcharges Bankcharges,guarantee&otherfeesonborrowings Interestpayableonsecuritydeposits Interestpayableonborrowings Interestpayableonswaps Finance costs: Total interestincome Interestincomeondeposits Interestincomeonloanstorelatedcompanies Interestincomeonswaps Finance income: finance costs

Year ended Year ended (254,789) (315,689) (281,712) (42,404) 290,659 312,485 (18,442) 31 March 31 March 36,332 (19,185) 33,796 33,977 41,757 27,897 13,860 5,445 41,757 21,781 $'000 $'000 (150) 2017 2017 (54) 45 110 181 15 5 - Year ended Year ended (292,050) (229,644) (254,831) 203,865 (42,894) 31 March 31 March 179,680 (19,440) (14,700) 22,460 23,862 28,823 28,823 26,675 35,752 37,219 5,966 $'000 $'000 1,370 2,148 2016 2016 108 406 323 (117) (72) 97 -

57 smbc aviation capital • Annual Report & Accounts | 2017

Total Total $'000 Group 61,279 20,662 20,662 347,736 347,736 320,967 320,967 (501,914) (101,898) 1,559,143 1,559,143 1,856,109 1,856,109 11,110,064 11,110,064 (873,870) 1,278,795 1,278,795 10,141,783 10,511,631 10,511,631 1,472,303 1,425,627 11,567,410 11,567,410 9,550,921 9,550,921 ) (1,398,763 - - 80 (93) (88) (173) 1,165 (216) 2,714 1,722 8,186 6,169 2,102 $'000 Office 4,723 4,908 6,208 10,892 10,900 & fittings equipment and fixtures

------Pre- $'000 75,320 ) (511,191 Delivery 155,026 744,225 308,354 308,354 463,380 463,380 Payments

$'000 Group Group Group leases 61,279 Aircraft 20,662 319,245 345,634 ) - (101,725 operating (501,821) - 1,701,003 1,277,630 1,390,775 (362,463) 9,234,381 1,420,904 11,093,138 1,556,429 9,762,498 9,672,234 10,790,810 (1,398,675) - for hire under

Impairment charge for the year Disposals 31 March 2017 At AMOUNT CARRYING 2017 at 31 March Net Book Value 2016 at 31 March Net Book Value ended 31 March 2016: $785,074,000) and (year assets in the Group with a carrying value of $478,947,000 During the year, years) were subject to impairment partly due to a deterioration average age of 11.2 years (year ended 31 March 2016: 7.5 to them, when assessed at in the inherent value of these aircraft and an assessment of the value of the leases attached the nature of the cash flows discount rates ranging between 5%-6% (year ended 31 March 2016: 5%-6%) depending on assessed, as well as anticipated losses on disposal of specific aircraft at year-end. (year ended 31 March 2016: $846,353,000) of aircraft was The carrying amount before impairment of $499,609,000 (year ended 31 March 2016: $785,074,000) and an determined to be higher than the value in use of $478,947,000 was recognised during the year. (year ended 31 March 2016: $61,279,000) impairment loss of $20,662,000 participant in use includes cash flow projections of contracted and estimated lease rentals in line with market Value of the aircraft return conditions view of expected values are projected based on management’s Residual expectations. lease redelivery conditions. which is based on current or expected is net of an adjustment (year ended 31 March 2016: $61,279,000) The total impairment charge for the year of $20,598,000 to goodwill and other intangible assets of $64,000 (year ended 31 March 2016: $nil). Charge for the year 31 March 2016 At Charge for the year Impairment charge for the year Disposals Disposals 31 March 2016 At AND IMPAIRMENT DEPRECIATION ACCUMULATED 1 April 2015 At COST 1 April 2015 At property, plant and equipment property, Additions Additions Disposals 31 March 2017 At ) continued

financial statements financial ( 10 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 58

10

$712,628,000 (31March2016:$750,519,000; note21). The carryingamountofassetsincludedinGroupandCompanyabovesubjecttoobligationsunderfinanceleasesis NetBookValue at31March2016 NetBookValue at31March2017 CARRYING AMOUNT At 31March2017 Disposals Impairmentchargefortheyear Chargefortheyear At 31March2016 Disposals Impairmentchargefortheyear Chargefortheyear At 1April2015 ACCUMULATED DEPRECIATION ANDIMPAIRMENT At 31March2017 Disposals Additions At 31March2016 Disposals Additions At 1April2015 COST property, plantandequipment (continued)

for hireunder (1,232,352) 10,798,429 10,394,917 9,306,368 9,334,394 8,818,866 1,356,986 1,635,864 (296,463) (433,536) 1,297,007 1,492,061 1,576,051 operating Company (95,928) 313,693 331,831 Aircraft 61,279 leases 17,715 $'000

Payments 620,202 269,609 269,609 (387,168) 238,123 238,123 Delivery 31,486 5,089 $'000 Pre------

and fixtures equipment & fittings 10,608 10,562 2,060 2,428 1,680 6,208 4,400 4,400 Office $'000 8,180 6,162 (88) (88) 748 42 - - - -

10,643,648 (1,232,440) 11,078,600 9,958,996 1,578,479 1,667,392 1,297,755 9,065,169 1,368,283 (683,631) 9,582,139 (433,624) 1,496,461 (95,928) Company 333,891 315,373 61,279 17,715 $'000 Total

59 smbc aviation capital • Annual Report & Accounts | 2017

- - - 49 1,516 assets 4,315 $'000 9,551 9,551 2,799 2,799 6,750 3,844 2,435 6,694 9,080 9,080 13,444 13,395 Company Intangible

49 298 Total Total $'000 ) (7,041 3,844 35,181 35,181 6,595 5,280 10,413 10,413 17,008 17,008 28,103 28,103 ) (10,971 22,017 15,545 12,558 39,025 39,025

- 49 assets $'000 6,595 10,413 10,413 3,844 5,280 19,941 19,941 ) (7,041 17,008 17,008 10,780 33,105 33,105 15,247 ) (10,971 36,949 26,027 Intangible

------298 298 1,778 1,778 Group Group Group $'000 2,076 2,076 2,076 2,076 Goodwill

At 31 March 2016 At of comprehensive income. in the statement in Operating expenses Amortisation of intangible assets is included upon disposal of the aircraft to which the lease intangible relates. This Amortisation of intangible assets is accelerated operating income (note 3). accelerated amortisation is recognised as part of the profit or loss on disposal as part of

At 1 April 2015 At Amortisation for the year 31 March 2016 At Amortisation for the year Adjustment to goodwill during the year Disposals 31 March 2017 At 31 March 2017 At At 31 March 2017 At ADJUSTMENTS AND OTHER IMPAIRMENT AMORTISATION, ASSETS INTANGIBLE AND GOODWILL TOTAL Additions 31 March 2016 At Additions Disposals 1 April 2015 At COST goodwill and intangible assets and intangible goodwill ) continued

financial statements financial ( 11 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 60 1) IFSCHouse, IFSC,Dublin1,Ireland 12

At 31March2017 Subsidiaries dissolvedduringtheyear Addition duringtheyear At 31March2016 Subsidiaries dissolvedduringtheyear Addition duringtheyear At 1April2015 Movements duringtheyear: 5) 190ElginAvenue, GeorgeTown, GrandCayman,KY1-9005, CaymanIslands 4) Canon's Court,22VictoriaSt, HamiltonHM12,Bermuda 3) 29ruedebassano, 75008Paris, France 2) Strawinskylaan 907, 1077XX Amsterdam,TheNetherlands Registered addressesofentitiesabove, denotedbyreferenceattachedtoeachentityname: Soller Aviation Limited(5) Mallorca Aviation Limited(5) Interest instructuredentities: SMBC Aviation CapitalFinanceDesignatedActivityCompany(1) SMBC Aviation CapitalGAL HoldingsLimited(4) SMBC Aviation CapitalParis Leasing 1SARL (3) SMBC Aviation CapitalNetherlandsB.V. (2) SMBC Aviation CapitalAircraftHoldingsB.V. (2) SMBC Aviation CapitalIrelandLeasing 4Limited(1) SMBC Aviation CapitalIrelandLeasing 3Limited(1) Owned bytheCompany: capital iswhollyowned. The principaltradingsubsidiaryundertakings,thecapitalofwhichconsistsordinaryshares,areshownbelow. Allshare At cost investment insubsidiaries—company

PDP financingcompany PDP financingcompany Debt issuance Intermediate leasingcompany Ireland Leasing Ireland Leasing Leasing Leasing Leasing business: Nature of Netherlands

212,922 31March $'000 Netherlands 2017 Cayman Islands Cayman Islands Ireland Bermuda France incorporation: Country of

31March 212,922 212,922 212,922 212,922 $'000 2016 - - - -

61 smbc aviation capital • Annual Report & Accounts | 2017

655 $'000 $'000 16,345 21,288 915,211 311,537 611,729 611,729 110,367 110,367 44,005 914,671 151,672 115,000 477,644 477,644 219,034 219,034 227,347 377,694 377,694 149,003 149,003 Fair Value Fair Value 385,385 7,791,372 7,791,372 9,135,973 9,135,973 7,318,239 9,043,379

655 $'000 $'000 16,345 914,671 21,288 915,211 93,386 44,005 151,672 360,713 360,713 115,000 341,307 136,705 136,705 599,431 599,431 477,644 477,644 219,034 219,034 227,347 227,347 Company Company Company Company 286,584 6,822,187 6,822,187 8,077,479 8,077,479 6,776,956 6,776,956 8,522,374 Carrying Value Carrying Value

- - 655 Group Group $'000 $'000 67,891 67,891 16,345 51,524 21,320 44,346 311,537 477,644 477,644 994,385 204,737 204,737 256,916 968,801 278,393 Fair Value Fair Value 385,385 362,629 9,261,777 9,261,777 7,456,891 7,456,891 7,754,997 7,754,997 9,153,529 9,153,529

- - 655 Group Group $'000 $'000 67,891 67,891 16,345 51,524 21,320 44,346 341,307 477,644 477,644 204,737 204,737 256,916 968,801 278,393 994,385 286,584 362,629 8,191,032 8,191,032 6,776,107 6,776,107 6,836,578 8,556,040 Carrying Value Carrying Value

Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the Quoted prices (unadjusted) in active markets measurement date. directly either or liability, 1 that are observable for the asset Inputs other than quoted prices included within Level or indirectly Unobservable inputs for the asset or liability Trade and other payables and Trade Borrowings Financial assets measured at amortised cost receivable Loans Financial liabilities at fair value through profit and loss Derivative financial instruments Financial liabilities measured at amortised cost: Obligations under finance leases Financial liabilities IAS as per defined criteria under Where financial assets and liabilities are designated at fair value through profit and loss IFRS 13 defines each level of hierarchy IFRS require these financial assets to be classified by three levels of hierarchy. 39, by the lowest level of input into the valuations as shown below. 1 Level 2 Level 3 Level 31 March 2016 loss Financial assets at fair value through profit and Derivative financial instruments Trade and other receivables and Trade Cash and cash equivalents Financial assets 31 March 2017 value through profit and loss Financial assets at fair instruments Derivative financial financial instruments are summarised assets and liabilities by class and category financial fair value of the Group's The carrying value and below: Financial assets measured at amortised cost receivable Loans and other receivables Trade Derivative financial instruments Borrowings (held for qualifying hedging relationships) Financial liabilities measured at amortised cost: Obligations under finance leases and other payables Trade Borrowings Cash and cash equivalents Financial assets and loss Financial liabilities at fair value through profit Financial liabilities ) continued

financial statements financial ( 13 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 62 13 on thebasisthatcarryingvaluehasbeendeterminedtobeagoodapproximation offairvalue. The remainingfinancialassetsandliabilitiesmeasuredatamortisedcostallfallwithin Level 2.Fairvaluesareestimated flow analysisusingobservablemarket inputs. Obligations underfinanceleasesandBorrowingsfallwithin Level 2.Fairvaluesareestimatedbasedonadiscountedcash for identicalassets. Available forsaleassetsfallwithinLevel 1asfairvaluesarebasedonpubliclyavailablequotedpricesinanactivemarket flow analysisusingobservablemarket inputs. Loan receivablesmeasuredatamortisedcostallfallwithinLevel 2.Fairvaluesareestimatedbasedonadiscountedcash carrying amountasthecomponentsarehighlyliquid. Cash andcashequivalents-Thefairvalueofisconsideredtobeapproximately equaltotheir Level 2.Fairvaluesareestimatedbasedonadiscountedcashflowanalysisusingobservablemarket inputs. The financialinstrumentsatfairvaluethroughprofitandloss,beingtheassetsliabilitiesshownasabove, allfallwithin classified as Level 2areasfollows: The valuationtechniquesandsignificantinputsusedindeterminingthefairvaluesforfinancialassetsliabilities financial instruments (continued)

63 smbc aviation capital • Annual Report & Accounts | 2017 - - - - - 235 420 2016 (547) (159) $'000 $'000 (3,045) (21,288) (21,288) 31 March (43,458) (43,350) (18,243) (44,005) (44,005) Company (43,846) Liabilities - - - - 6 26 26 629 655 629 2017 $'000 $'000 Assets 16,345 16,339 16,345 (4,943) 16,345 (21,288) 31 March Company Company Fair values - - 235 420 2016 (547) - $'000 $'000 33,873 65,510 33,873 Notional Contract (43,691) (43,799) 31 March Company 500,000 1,481,149 1,481,149 1,163,839 1,163,839 1,663,839 1,663,839 1,580,532 1,580,532 1,546,659 - - - - - 6 2017 (159) . The value of derivatives (2016: $43,691,000). The value of derivatives $'000 $'000 16,339 (4,975) (3,077) (18,243) (21,320) (21,320) (21,320) (44,187) 31 March (44,346) (44,346) Liabilities in respect of certain ineffective (2016: $811,000 loss) in respect of certain ineffective

- - - - 26 26 629 629 655 $'000 Assets Group Fair values 16,345 16,345 16,345

Group Group

------Group $'000 33,873 65,510 33,873 Notional Contract 500,000 500,000 1,184,465 1,184,465 1,504,155 1,504,155 1,684,465 1,684,465 1,603,538 1,569,665 1,569,665

Total Total Cross currency swaps Assets due within one year Assets due after one year Liabilities due within one year Liabilities due after one year Derivatives designated as hedging instruments in cash flow hedges Interest rate swaps Total As at 31 March 2016 Derivatives — Non Hedge Accounting Interest rate swaps Derivatives — Non Hedge Accounting Interest rate swaps derivatives at fair value fair at derivatives Inc., and are Banking Corporation Capital Markets reporting date are with Sumitomo Mitsui All derivatives held at the Those and are carried at fair value. entered into are for hedging purposes All derivatives Euro. in both US Dollars and The value of criteria are held for economic hedging purposes. hedge accounting meet IAS39 derivatives that do not as a cash flow hedge relationships is $13,268,000 derivatives designated Derivatives designated as hedging instruments in fair value hedges Interest rate swaps . The total amount of the change in fair value ). The total amount of the hedge relationships is $18,243,000 (2016: $nil designated as a fair value or loss during the period was a $26,000 loss estimated in the profit in respect of certain ineffective fair values hedges. a $424,000 gain (2016: $Nil) in respect of certain ineffective cashflow hedges and Derivatives designated as hedging instruments in cash flow hedges Interest rate swaps Cross currency swaps Total

As at 31 March 2017 ) continued

Summary

financial statements financial ( 14 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 64

15

As at31March2017 As at31March2017

Company hedge ineffectivenessinthe Statement ofOtherComprehensiveIncome(2016:$nil). Other ComprehensiveIncomerelatingtotheeffectiveportionofcashflowhedge. Therewasnoamountrecognisedas During thefinancialyearended31March2017, $50,880,000 (2016:$30,258,000) wasrecognisedinthe Statement of Cash outflows Cash inflows 31 March2017 comprehensive incomeareasfollows: The timeperiodsinwhichthehedgecashflowsare expected tooccurandaffectthefinancialstatementof Cross currencyswaps Interest rateswaps Derivatives designatedashedginginstrumentsincashflowhedges As at31March2016 Cross currencyswaps Interest rateswaps Derivatives designatedashedginginstrumentsincashflowhedges Cross currencyswaps Interest rateswaps Derivatives designatedashedginginstrumentsincashflowhedges Group The fairvaluesofderivativesdesignatedascashflowhedgesarefollows: risks arisingfromreceiptofvariableinterestandforeigncurrencyreceivablesonleases. The GroupandCompanyusesinterestratecross-currencyswapstohedgetheforeigncurrency hedge accounting

Less than1 (51,945) 34,317 $'000 year

In the2nd 1,569,665 1,504,155 1,184,465 1,163,839 1,184,465 1,163,839 Contract Contract Notional Notional 65,510 (41,281) (97,906) Amount Amount $'000 $'000 38,121 year - -

16,345 96,915 16,345 16,345 16,345 Assets Assets $'000 $'000 3 to5 years 629 629 Fair values Fair values - - -

Liabilities Liabilities (44,346) (44,187) (42,182) (3,045) (3,077) (3,045) 57,508 Over 5 (3,077) $'000 $'000 $'000 years (159) - -

65 smbc aviation capital • Annual Report & Accounts | 2017

years 2016 2016 (301) (159) $'000 3,781 $'000 $'000 $'000 Over 5 2,444 57,508 57,508 (6,774) (42,182) 93,386 93,386 90,942 (23,169) (44,005) 31 March 31 March (30,244) (43,846) (26,463) Liabilities Company Company Year ended Year

- Fair values 629 629 2017 2017 years 3 to 5 $'000 $'000 $'000 Assets 96,915 24,477 (6,321) 50,571 50,571 (3,858) 70,263 70,263 66,442 44,250 29,952 29,952 136,705 136,705 136,705 136,705 31 March 31 March Company Company Year ended Year

- - - - 2016 2016 (301) $'000 $'000 $'000 3,784 3,784 Group Group 37,474 37,474 Amount (6,788) 65,510 Notional Contract (97,906) (40,762) (23,169) 31 March 31 March (26,474) (30,258) 1,481,149 1,481,149 In the 2nd 1,546,659 Year ended Year

- - - - 2017 2017 Group Group $'000 $'000 33,710 33,710 (51,177) 44,481 24,786 24,786 (3,858) (6,399) 29,952 29,952 50,880 50,880 31 March 31 March Less than 1 Less Year ended Year

$'000 $'000 $'000

year year

(continued)

as hedging instruments in cash flow hedges Derivatives designated hedge accounting Interest rate swaps Cross currency swaps The time periods in which the hedge cash flows are expected to occur and affect the financial statement of are The time periods in which the hedge cash flows comprehensive income are as follows: During the financial year ended 31 March 2017, $50,571,000 (2016: $30,244,000) was recognised in the Statement of was recognised in the (2016: $30,244,000) $50,571,000 During the financial year ended 31 March 2017, was no amount recognised as There effective portion of cash flow hedge. Other Comprehensive Income relating to the Statement of Comprehensive Income (2016: $nil). hedge ineffectiveness in the value of cash flow hedges Analysis of effective portion of changes in fair Current asset Non-current asset Cash outflows Effective portion of changes in fair value of cash flow hedges effect Tax receivables loan Amounts due from affiliated undertakings Derivatives in place for the full year Derivatives matured during the year Derivatives entered into during the year Cash inflows

As at 31 March 2016 ) continued

financial statements financial ( 15 notes to the to notes

16

smbc aviation capital • Annual Report & Accounts | 2017 66 19 18 17

(note 2). The leaseincentiveassetsareamortised overtherespectiveleasetermsandrecordedasareduction ofleaseincome Non-current leaseincentiveassets(amortisingafter12months) Current leaseincentiveassets(amortisingwithin12months) Release ofleaseincentiveassetsondisposalaircraft Additions ofleaseincentiveassets Amortised duringtheyear Lease incentiveassets lease incentiveassets for derivatives. Included inthetableaboveisrestrictedcashrelatingtocustomersecuritydepositsandacollateralcallaccount Cash andcashequivalentsnetofrestricted Restricted cash Short-term depositswithparentgroupundertakings Bank accountwithparentgroupundertakings Bank account cash andequivalents which havebeenutilisedasPDPfinancevehicles(note12). Amounts duefromgroupcompaniesinrespectoftheCompanyincludebalancesreceivablestructuredentities Other debtors Prepayments Amounts duefromgroupundertakings Trade debtors-net trade andother receivables

255,202 278,393 (30,804) 31March 31March 31March (12,820) 251,991 23,929 95,376 (23,191) 119,541 119,541 18,678 24,165 18,702 92,144 67,891 16,614 71,021 8,670 7,700 $'000 $'000 $'000 Group Group Group 2017 2017 2017 (25,466) 204,737 31March 31March 31March 159,563 (45,174) 69,695 22,449 76,396 139,764 47,057 18,652 51,524 14,456 10,643 92,144 92,144 41,214 17,916 Group Group Group $'000 $'000 $'000 7,773 2016 2016 2016 - Company Company Company (29,032) 201,242 31March 31March 31March 227,347 219,034 204,156 (12,070) 116,698 116,698 175,410 93,545 (23,191) 87,026 18,405 23,851 70,774 23,153 8,662 7,700 $'000 $'000 $'000 11,111 2017 2017 2017 Company Company Company 106,498 (23,763) 31March 31March 31March 115,000 (45,174) 151,672 66,555 72,049 87,026 87,026 37,200 38,740 97,458 15,902 20,471 78,241 14,337 6,520 17,014 $'000 $'000 $'000 2016 2016 2016 -

67 smbc aviation capital • Annual Report & Accounts | 2017

Total Total 2016 2016 9,309 9,309 $'000 $'000 $'000 $'000 20,101 20,101 83,011 40,170 40,170 9,309 9,309 13,682 47,635 47,635 37,850 37,850 61,782 61,782 44,198 44,198 95,667 64,948 88,033 99,895 99,895 81,222 114,362 144,916 97,302 97,302 118,519 915,211 915,211 36,693 129,255 129,255 968,801 466,186 466,186 504,363 470,767 470,767 994,385 469,989 469,989 31 March 31 March 444,444 Company

------2017 2017 8,422 $'000 $'000 $'000 $'000 11,845 81,394 17,267 17,267 89,617 79,992 79,992 38,312 13,222 96,362 85,410 114,946 101,314 Due > 12 Due > 12 914,671 914,671 481,631 482,818 297,388 297,388 136,897 505,573 31 March 31 March 298,042 432,632 433,040 Company

2016 2016 9,309 9,309 $'000 $'000 $'000 $'000 6,639 20,101 20,101 83,011 Group 31,748 31,748 9,309 9,309 13,682 19,903 19,903 83,011 37,850 37,850 40,170 40,170 35,790 35,790 29,970 29,970 32,893 95,667 64,948 99,895 99,895 114,362 172,601 37,850 37,850 Due < 12 Due < 12 64,948 488,812 206,321 485,983 482,818 31 March 31 March 129,255 129,255 968,801 968,801 485,983 504,363

2017 2017 Group $'000 $'000 20,101 20,101 13,682 47,635 47,635 95,667 88,033 114,362 144,916 488,812 31 March 31 March 505,573 994,385 994,385 469,989 469,989

months months

months months

as: creditors Trade Accrued interest - third party undertakings Amounts due to parent group undertakings Other creditors Amounts due to parent group undertakings Other creditors Trade creditors Trade Accrued interest - third party undertakings Amounts due to parent group undertakings Other creditors Maintenance reserve contributions Lessor Prepaid lease rentals and fee income received Maintenance reserve Prepaid lease rentals and fee income received creditors Trade Accrued interest - third party undertakings while maintenance reserves, lessor contributions and Security deposits fall due at the end of each respective lease, the remaining term of each amounts due to parent group undertakings which relate to operating leases fall due during maintenance events. respective lease based on the timing of expected As at 31 March 2016 Security deposits As at 31 March 2017 Security deposits Maintenance reserve contributions Lessor fee income received Prepaid lease rentals and Analysed after 12 months) Non-current trade and other payables (payable contributions Lessor Security deposits trade and other payables trade and other Current trade and other payables (payable within 12 months) Current trade and other payables (payable within Analysis of Group trade and other payables: ) continued

financial statements financial ( 20 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 68

21

Amounts payableunderfinanceleases Terms, conditionsandanalysisofGroupobligationsunderfinanceleases: Fixed rateobligations Unsecured -duetoparentgroupundertakings After fiveyears Inthesecondtofifthyearsinclusive Fixed rateobligations Unsecured -duetoparentgroupundertakings Fixed rateobligations Floatingrateobligations Secured -duetothirdpartyundertakings Fixed rateobligations Floatingrateobligations Secured -duetothirdpartyundertakings Withinoneyear Present valueofminimumleasepayments: Present valueofleaseobligations Less: futurefinancecharges After fiveyears Inthesecondtofifthyearsinclusive Withinoneyear Minimum leasepayments: obligations underfinanceleases

interest rate interest rate Average Average 6.09 6.09 0.96 4.65 4.65 % % -

286,584 286,584 320,988 224,639 245,979 (34,404) 31March 59,556 72,536 maturity months maturity months Year of Year of 2,389 2,473 2022 2022 $'000 Group 2016 2021 2021 2017 -

292,293 258,648 31March 391,444 341,307 341,307 (50,137) Due <12 Due <12 28,730 27,936 54,723 59,556 46,458 56,834 56,834 70,421 54,723 52,105 Group $'000 $'000 $'000 5,647 2,722 2,618 2016 -

286,584 286,584 320,988 Company 224,639 245,979 (34,404) 286,584 31March 269,483 269,483 227,028 212,650 212,650 59,556 Due >12 Due >12 72,536 2,389 14,378 2,473 $'000 $'000 $'000 17,101 2017 - -

292,293 258,648 Company 286,584 31March 269,484 269,484 391,444 341,307 341,307 (50,137) 321,588 341,307 28,730 27,936 54,723 315,941 70,421 $'000 $'000 $'000 19,719 5,647 17,100 2016 Total Total -

69 smbc aviation capital • Annual Report & Accounts | 2017 - - Total 2016 $'000 $'000 477,644 477,644 721,596 557,470 125,000 435,282 31 March Company 4,151,956 7,253,751 1,436,444 4,061,446 3,840,825 3,840,825 2,935,282 6,055,360 2,500,000 2,500,000 2,500,000 - 2017 $'000 $'000 Due > 12 369,145 718,975 426,149 426,149 477,644 477,644 657,644 31 March 4,142,187 (718,975) (721,596) Company 2,726,149 2,726,149 6,776,956 7,299,831 6,776,956 7,299,831 2,318,966 6,681,890 3,892,745 3,478,097 6,580,856 2,300,000 2,300,000 2,500,000 - - - 2016 9,133 9,133 $'000 $'000 Group 571,861 612,745 Due < 12 209,133 209,133 362,728 362,728 592,297 31 March (612,745) 200,000 200,000 1,555,744 4,075,792 4,336,578 6,836,578 6,836,578 6,223,833 2,500,000

- 2017 2021 Group $'000 Year of Year 571,861 maturity months months 452,761 477,644 (571,861) 31 March 7,253,751 7,253,751 4,276,107 2,336,291 6,681,890 3,892,838 2,500,000 2017-2028 2019-2028 2020-2027

% 3.78 3.78 4.68 2.36 2.65 Average Average interest rate interest

Loan amounts due to parent group undertakings amounts due to parent group Loan amounts due to subsidiaries Loan in qualifying hedging relationships Debt securities issued The borrowings are repayable as follows: On demand or within one year In the second year In the third to fifth year inclusive five years After Amounts due for settlement within 12 months Less: Amounts due for settlement after 12 months $500 million of its 2.65% senior unsecured notes due 2021 through its On 19 July 2016, the Group closed the sale of guaranteed by SMBC Aviation fully and unconditionally Capital Finance DAC, SMBC Aviation wholly-owned subsidiary, risk measured at fair value through profit and loss. The debt securities were Capital Limited, and the hedged interest rate the hedge to at inception and the Group has determined that it expects designated into a qualifying hedge relationship instrument. The debt securities are fair valued through profit and loss with be highly effective over the life of the hedging hedge ineffectiveness charge of $424,000 (note 7; year ended 31 The net fair value respect to the hedged interest rate. reflects a gain from hedging instruments related to debt securities March 2016: $Nil) recognised in the income statement partially offsetting a charge from these hedged debt securities of of $18,243,000 (year ended 31 March 2016: $Nil) (year ended 31 March 2016: $Nil). $18,667,000 respective by each facility's related interest rates determined All borrowings are unsecured, interest-bearing at market term, collateral and counterparty. Group and Company was The amount of borrowing costs that were capitalised to the cost of aircraft in the year in the (year ended 31 March 2016: $8,903,000; note 10). The rate at which borrowing costs are capitalised is $8,859,000 determined by the appropriate associated funding and is adjusted on an ongoing basis. of Group borrowings before impact of derivatives: conditions and analysis Terms, Loan amounts due to third party undertakings amounts due to third party Loan Loan amount due to parent group undertakings Loan Floating rate borrowings amounts due to third party undertakings Loan As at 31 March 2017 Debt securities issued in qualifying hedging relationships Fixed rate borrowings Fixed amount due to parent group undertakings Loan ) continued

financial statements financial ( 22 borrowings notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 70 a 23 Terms, conditionsandanalysisofGroupborrowingsbeforeimpactderivatives -continued: 22 borrowings

Information onthecurrencyderivativesisprovidedinnote14. Sterling, certainderivativesdenominatedinEuroaswellreceivablesandpayablesSterling. All financialinstrumentsareinUSdollarswiththe exception ofthefollowing:certainbankaccountsheldinEuroand swaps inplaceatyear-endastheremainingcontractsmaturedduringcurrentyear. an economichedge, donotqualifyforhedgeaccountingunderIAS 39. TheGroupandtheCompanyhavenocurrency Accounting volatilityarisesfromfairvaluethroughprofitorlossmovementswherethesederivatives,enteredintoas associated financingareinthesamecurrency, orentering intocurrencyswapsorforwardsoverthelifeoflease. in foreignexchange rates.TheGroupandtheCompanyminimisescashflowcurrency riskbyensuringitsleasesand Currency riskisthethatfairvalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecausechanges Currency Risk which areestablishedtoidentifyandanalysetherisks facedbytheGroupandCompany, whichinclude: ("ACD") onbehalfoftheConsortiumdevelopsandmonitorsGroup's andtheCompany's riskmanagementpolicies Company's riskmanagementframework. TheBoardofDirectorsinconjunctionwiththeAviation CapitalDepartment The Company's BoardofDirectors hasoverallresponsibilityfortheestablishmentandoversightofGroup's andthe Risk ManagementFramework financial riskmanagement Loan amountduetoparentgroupundertakings Fixed rateborrowings Loan amountduetoparentgroupundertakings Loan amountsduetothirdpartyundertakings Floating rateborrowings As at31March2016 (continued)

interest rate Average 3.32 4.72 1.60 %

2020-2027 2016-2028 2019-2028 maturity months Year of

200,000 404,814 Due <12 612,745 207,931 $'000 7,931

2,300,000 2,596,332 6,223,833 3,627,501 296,332 Due >12 $'000

2,500,000 2,804,263 6,836,578 4,032,315 304,263 $'000 Total

71 smbc aviation capital • Annual Report & Accounts | 2017

5 (8) (31) (16) (23) 364 202 2016 2016 $'000 $'000 14,049 45,174 45,174 93,386 360,713 360,713 222,153 222,153 31 March 31 March 959,216 959,216 Company Company 2,757,323 2,757,323 8,077,479 4,360,940 4,360,940

5 36 198 652 2017 2017 (546) (293) $'000 $'000 15,461 23,191 23,191 (14,602) (16,052) 136,705 136,705 599,431 599,431 31 March 31 March 439,535 439,535 Company Company 935,959 4,671,759 4,671,759 2,914,656 8,522,374

5 (31) 364 202 2016 2016 (293) $'000 $'000 Group Group 9,857 9,857 15,357 45,174 45,174 (12,979) 31 March 31 March 256,916 201,885 1,013,147 1,013,147 8,191,032 8,191,032 4,522,556 2,655,329

- 5 (8) (8) (8) 36 (16) (16) (16) 198 (23) (23) (23) 652 2017 2017 (546) Group Group $'000 $'000 23,191 23,191 16,339 (11,975) 31 March 31 March 339,438 339,438 362,629 1,015,902 4,604,856 2,935,282 8,556,040

follows: as (continued) was Risk liabilities assets - variable rate rate - fixed - non-interest bearing Financial Assets Total Financial - variable rate rate - fixed - non-interest bearing Financial Japanese yen liabilities dollar liabilities Australian franc liabilities Swiss Canadian dollar liabilities against the US weakened/strengthened on the balances disclosed above, if the foreign currency, 31 March 2017, At the underlying post-tax profit for the Group for the year would have dollar by 5% with all other variables held constant, as a result of foreign mainly lower/higher, and for the Company would have been $60,137 been $235,451 lower/higher, gains/losses on retranslation of EUR denominated loans. exchange Financial Liabilities Total Euro assets Interest rate risk: financial risk management (continued) financial risk management Currency and liabilities are as follows: of other currency denominated monetary assets The carrying amounts Sterling assets Sterling franc assets Swiss Euro liabilities liabilities Sterling Risk Interest Rate or future cash flows of a financial instrument will fluctuate because of Interest rate risk is the risk that the fair value cash flow interest rate risk when policy is to minimise and Company's Group's interest rates. The changes in market of appropriate matched funding, including the use of derivative financial entering into leasing transactions by the use fair value through profit or loss movements where these derivatives, entered instruments. Accounting volatility arises from 39. do not qualify for hedge accounting under IAS into as an economic hedge, interest-bearing financial and Company's interest rate profile of the Group's the end of the reporting period the At instruments

Japanese yen assets ) continued

financial statements financial ( 23 a notes to the to notes b

smbc aviation capital • Annual Report & Accounts | 2017 72

c b 23

Borrowings

31 March2017 Non-derivative Interest rateswaps Currency swaps Borrowings Obligations underfinanceleases Trade andotherpayables estimated interestpaymentsandexcluding theimpactofnettingagreements. The followingaretheremainingcontractualmaturitiesatendofreportingperiodfinancialliabilities,including basis toensurethatallcashflowobligationscanbemetastheyarise. over theirlife. Theshort-termmaturitystructure oftheGroup's andCompany's liabilitiesandassetsismanagedonadaily Company's assetsandliabilitiesismanagedtoensurethattermassetcommitmentsmaybefundedonaneconomicbasis liquidity tomeetitsliabilitieswhendue. Anymaturitymis-matchwithintheoveralllong-termstructureofGroup's and Group's andCompany's approachtomanagingliquidityisensure, asfarpossible, thatitwillalwayshavesufficient Liquidity riskisthethatGroupandCompanywillnotbeabletomeetitsfinancialobligationsastheyfalldue. The Liquidity Risk higher asaresultofdecrease/increaseinthefairvaluecashflowhedgereserve. for theyearwouldhavebeen$1,340,000 lower/higher;othercomponentsofequitywouldhavebeen$2,596,000lower/ if interestratesonfinancialassetsorliabilitieswithvariableshiftedby10bps,theunderlyingpost-taxprofit interest rateswapshavetheeconomiceffectofconvertingborrowingsfromfloatingratesto fixed rates. At31March2017, The GroupandCompanymanagesitscashflowinterestrateriskbyusingfloating-to-fixed interestrateswaps.Such Interest Rate Risk(continued) financial riskmanagement (continued) Total non-derivative financialinstrumentsoutflows Obligations underfinanceleases Trade andotherpayables

financial instruments

Group Carrying Group

value

8,556,040 (1,376,947) Less than1 7,253,751 (815,599) 286,584 994,385 (488,812) (72,536) 31 March 21,320 $'000 $'000 year 2017 - 10,469,441 8,920,755 1 to2years Contracted Carrying (685,539) (823,535) 320,988 994,385 cashflows value (65,249) 31 March 233,313 (72,747) (173,233) $'000 years $'000 2017 -

6,836,578 (3,001,014) (4,418,603) (3,413,166) (4,622,480) 8,191,032 (238,919) (201,405) 968,801 31March 341,307 44,187 $'000 $'000 years 3 to5 2016 159

8,568,673 10,051,091 Contracted cashflows 968,801 31March 391,444 122,173 (2,472) Over 5 $'000 $'000 Group Group years 2016 -

73 smbc aviation capital • Annual Report & Accounts | 2017

------2016 years years Group Group $'000 $'000 $'000 5,747 5,747 Over 5 Over 5 15,326 915,211 (28,730) 391,444 31 March Company 120,085 120,085 cashflows Contracted Contracted 9,916,990 8,490,250 8,490,250 (4,901,596) ------159 (991) - 2016 3 to 5 3 to 5 years years $'000 $'000 $'000 10,805 10,805 915,211 43,846 341,307 31 March (155,903) (179,472) (4,607,154) (3,414,157) 8,077,479 8,077,479 6,776,956 6,776,956 (4,716,963) (2,189,830) (2,578,254) (4,895,849) - - - - - 2017 years years $'000 $'000 $'000 2,440 914,671 31 March (72,536) (219,757) (147,443) cashflows value (824,513) 320,988 320,988 232,026 8,217,570 8,217,570 (826,695) Contracted Carrying 1 to 2 years 1 to 2 years (1,046,631) (1,044,492) (2,589,059) 9,685,255 9,685,255 - - - - - 2017 year year $'000 $'000 $'000 (2,062) (9,713) 13,640 21,288 (3,160) (17,628) (70,421) (13,097) (2,517) 914,671 31 March (837,367) 286,584 (485,984) Less than 1 Less Less than 1 than Less 7,299,831 7,299,831 (1,393,772) 8,522,374 (1,394,575) (1,402,942)

value

Group Group Group Company Company Company Carrying Group Group Group

(continued)

(continued) Risk Liquidity Currency swaps Interest rate swaps 31 March 2016 other payables and Trade Obligations under finance leases Borrowings Gross Settled - Outflow Swaps Interest Rate Net Settled - inflow Net Settled - outflow Outflows Total Non-derivative financial instruments and other payables Trade Derivative financial instruments (gross) Currency Swaps Gross Settled - Inflow Gross Settled - Outflow Swaps Interest Rate Net Settled - inflow Net Settled - outflow Outflows Total earlier than shown above. that the cash flows in the maturity analysis could occur significantly It is not expected Derivative financial instruments (gross) Derivative financial instruments Currency Swaps Gross Settled - Inflow financial risk management Obligations under finance leases non-derivative financial instruments outflows Total ) continued

c

financial statements financial ( 23 notes to the to notes Borrowings

smbc aviation capital • Annual Report & Accounts | 2017 74 Borrowings c 23

Borrowings

It isnotexpected thatthecashflowsinmaturityanalysis couldoccursignificantlyearlierthanshownabove. Total Outflows Net Settled-outflow Net Settled-inflow Interest Rate Swaps Gross Settled-Outflow Gross Settled-Inflow Currency Swaps Derivative FinancialInstruments(gross) Total Non-derivativeFinancialInstrumentsOutflows Obligations underfinanceleases Trade andotherpayables Non-derivative FinancialInstruments 31 March2016 Non-derivative 31 March2017 Liquidity financial riskmanagement (continued) Total Outflows Net Settled-outflow Net Settled-inflow Interest Rate Swaps Gross Settled-Outflow Gross Settled-Inflow Currency Swaps Derivative FinancialInstruments(gross) Total Non-derivativeFinancialInstrumentsOutflows Obligations underfinanceleases Trade andotherpayables Risk (continued)

Financial Instruments Company Company

(1,286,994) (1,269,527) (1,491,295) (1,482,136) Less than1 Less than1 (940,948) (433,040) (470,767) (763,951) (72,536) (13,097) (2,517) (70,421) (17,467) (3,288) 13,640 (9,702) (2,304) $'000 $'000 year year - - - -

1 to2years 1 to2years (984,888) (2,447,669) (782,840) (2,064,000) (723,432) (2,854,009) (987,269) (586,183) (2,448,926) (720,144) (2,853,018) (129,512) (163,912) (72,536) (219,757) (72,747) (173,233) (61,214) (230,859) 2,440 $'000 $'000 years years - - - - (2,437,155) (4,876,464) 10,514 $'000 $'000 years years 3 to5 3 to5 (991) ------(4,702,462) (4,595,215) (4,418,510) (4,882,211) (4,610,541) (189,559) Company Company (151,019) (28,730) 15,326 (2,472) Over 5 Over 5 5,747 $'000 $'000 years years - - - - -

75 smbc aviation capital • Annual Report & Accounts | 2017

3,211 $'000 15,491 259,691 259,691 278,393

Portfolio analysis and reporting must be used to identify and manage credit risk concentrations and credit risk quality. reporting must be used to identify and manage credit risk concentrations and credit risk analysis and Portfolio Customers with emerging credit problems must be identified early and classified accordingly. Remedial actions must be identified early and classified accordingly. Customers with emerging credit problems must loss to the Company and consideration given whether to transfer be implemented promptly to minimise the potential problem management or recovery unit. customers with credit problems to a specialised All credit exposures, once approved, must be effectively monitored and managed and reviewed periodically against once approved, must All credit exposures, being subject to a greater frequency with lower quality exposures occurs at least annually, approved guidelines. Review of analysis and assessment. Where credit authority is exercised personally, the individual must not have any responsibility or accountability for the individual must not have any responsibility or personally, Where credit authority is exercised business revenue origination. Credit risk authority must be specifically granted in writing to all individuals involved in the granting of credit Credit risk authority must be specifically granted These individuals must act a credit committee. personally or collectively as part of approval, whether this is exercised credit authority. judgement in exercising independently and with balanced commercial An appropriate credit risk assessment of the customer and related credit facilities must be undertaken prior to approval customer and related credit facilities must be undertaken An appropriate credit risk assessment of the amongst others, the purpose of the credit and sources of This must include an assessment of, of credit exposure. developments and risk-adjusted sensitivity to economic and market capacity to repay, repayment, repayment history, return. Approval of credit exposure must be granted prior to any advance or extension of credit. prior to any advance or extension must be granted Approval of credit exposure The Group's principal financial assets that give rise to credit exposure are trade and other receivables ($42 million) and exposure principal financial assets that give rise to credit The Group's million with group companies). The credit risk on liquid funds is limited bank accounts ($278 million; including $260 credit-rating agencies. with high credit-ratings assigned by international because the counterparties are banks significant cash and deposit counterparties were: the Group's 31 March 2017, At ------Wells Fargo (Credit rating AA- (S&P)) Wells (S&P)) Citibank (Credit rating A+ and their dispersal across Credit risk with respect to trade receivables is generally mitigated due to the number of lessees exposed to trade debtors of $8,670,000 the Group was At the financial year end March 2017, different geographical areas. against these for $nil (2016: $nil). A number of leases were restructured and held a bad debt provision (2016: $7,773,000) 31 March 2017 the Group which resulted in a provision for deferred rentals of $3,038,000 (2016: $nil). At during the year, (2016: $264,950,000). of Credit of $311,680,000 held Letters SMBC (credit rating A (S&P)) (continued) financial risk management Credit Risk Company will incur losses from the failure of from the possibility that the Group and Credit risk is the risk arising oversight from the Aircraft Credit Department their obligations. Credit risk is managed with counterparties to meet risk versus reward performance whilst maintaining Group and Company to achieve appropriate to enable the ("ACCD") of credit risk management principles basis. The key in line with approved risk appetite on a portfolio credit risk exposure include: set out in the Framework -

) continued

financial statements financial ( 23 d notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 76 e d 23

risk profileofitsbusiness.Itregardscapitalasthetotalequity shownonthe Statement ofFinancial Position. Group andCompanyitselfisnotregulateditaimstomaintaincapital resourcescommensuratewiththenature, scaleand The GroupandCompanyisamemberofgroupwithregulatorydisciplines overtheuseofitscapital.Although Capital Management Balance at31March2017 Provision forbaddebts Balance at31March2016 Provision forbaddebts Balance at1April2015 The movementintheprovisionforbaddebtsrespectofleasereceivablesisasfollows: Lease receivables Amounts pastduebutnotimpaired 31 March2017 individually determinedtobeimpairedasattheendofreportingperiod. assets thatarepastdueattheendofreportingperiodbutnotimpairedandananalysisfinancial evidence ofareductionintherecoverabilitycashflows.Thetablebelowprovidesananalysisagefinancial An allowanceforimpairmentismadewherethereanidentifiedlosseventwhich,basedonprevious experience, is collateral held. The amountspresentedintheStatement ofFinancialPosition arenetofallowancesfordoubtfulreceivablesandgross Credit Risk(continued) financial riskmanagement (continued) Impairment Based oncounterpartypaymenthistorytheCompanyconsidersallabovefinancialassetstobeofgoodcreditquality. Lease receivables Amounts deemedtobeImpaired Lease receivables Amounts pastduebutnotimpaired 31 March2016 Lease receivables Amounts deemedtobeImpaired Losses

one month Less than 6,598 $'000 Group 7,612 - -

Onetotwo months Group $'000 680 467 - -

two months Morethan $'000 Group Company 495 591 - -

one month Less than $'000 5,871 7,604 - -

One totwo months $'000 $'000 Group 154 467 ------

two months More than Company Company $'000 $'000 495 591 ------

77 smbc aviation capital • Annual Report & Accounts | 2017 - $ 2016 2016 6,321 $'000 $'000 36,132 (3,780) 22,616 204,234 223,070 223,070 223,070 31 March 31 March 265,523 Company Company 187,512,770 187,512,770 245,000,000 245,000,000 245,000,000

14 2017 Group $'000 $'000 6,399 (3,784) 27,897 26,675 294,198 236,997 31 March 265,523 265,523 259,902 259,902 Company

$ 2017 2016 Group $'000 Number of shares 31 March 31 March 259,902 259,902 187,512,770 187,512,770 187,512,770 187,512,770 245,000,000 245,000,000

2017 Group $'000 294,198 294,198 31 March

Issued, called up and fully paid: Authorised: Charge to income from continuing operations Charge to income from income Charge to other comprehensive Issued, called up and fully paid: income. The Company has one class of ordinary voting shares which carry no right to fixed Ordinary shares of $1 Authorised: Reclassification to current tax Reclassification amount of deferred taxation shown below: Full provision has been made for the potential Accelerated capital allowances on assets financed, less carried forward tax losses Movements during the year: Movements during the 1 April 2015 At deferred tax At 31 March 2016 At Charge to income from continuing operations Charge to other comprehensive income 31 March 2017 At share capital

) continued

financial statements financial ( 24 notes to the to notes 25

smbc aviation capital • Annual Report & Accounts | 2017 78 27 26

After fiveyears In thesecondtofifthyearsinclusive Within oneyear The futureminimumleasepaymentsreceivableundernon-cancellableoperatingleasesareasfollows: operating leasearrangements transaction withshareholder, wasreflectedintheother reserve. 2013, witharelatedincreaseindeferredtaxliabilitiesof$0.658m. Thedifference, anetamountof$1.967mbeing was thatthemaintenancereservesofSMBCAviation CapitalAircraftHoldingsB.V. werereducedby$2.633mat31March Aircraft HoldingsB.V.) aspartofacommoncontroltransaction.TheimpactharmonisingtheGroup's accountingpolicies reflect theGroup's accountingpolicies. At 31 March 2013,theGroupacquiredanewsubsidiary(SMBC Aviation Capital As describedinnote1c,fornewlyacquiredsubsidiaries,thegroupadjustscarryingvalueofassetsandliabilitiesto RBS retainednorights,titlesorinterestwhatsoeverinthecontributionotherthanrightsitheldasshareholder. waived andforgavedebtof$207,486,000 intheformofacapitalcontribution.Thecontributionwasmadeabsolutelyand In May2012,theCompany's thenimmediateparentcompany, InternationalAviation Management(CI)Limited,irrevocably Total otherreserves Cash flowhedgereserve Other reserve Capital contribution other componentsofequity

2,944,727 3,691,647 7,631,818 995,444 207,486 31March 31March 215,725 6,272 $'000 $'000 1,967 Group Group 2017 2017 3,422,063 7,470,238 3,109,208 938,967 207,486 31March 31March (38,209) 171,244 $'000 $'000 1,967 Group Group 2016 2016 2,944,727 7,567,806 3,661,287 Company Company 207,486 31March 31March 961,792 213,782 6,296 $'000 $'000 2017 2017 - 3,336,247 7,336,474 3,105,067 Company Company 207,486 31March 31March 895,160 169,532 (37,954) $'000 $'000 2016 2016 -

79 smbc aviation capital • Annual Report & Accounts | 2017

------45 109 494 870 250 1,211 2016 1,370 2,601 4,740 4,740 5,494 $'000 2,669 31 March Company

------5 484 239 2017 1,789 1,789 (822) 1,520 3,775 3,775 3,409 3,226 $'000 5,465 2,000 31 March Company

- - 45 109 273 675 494 2016 1,541 1,370 1,520 2,601 4,740 4,740 Group 5,494 5,684 $'000 2,669 106,857 31 March

- - - - 5 484 569 2017 5,147 5,147 1,789 1,789 (822) 2,120 2,120 Group 4,394 3,409 3,226 $'000 5,465 78,169 78,169 31 March

Fee income Ltd Co., Sumitomo Mitsui Finance and Leasing during the period: Transactions Fee income Interest expense Operating expenses Balances at period end: with associate companies: Transactions Ltd. Management Co., Aviation during the period: Transactions Fee income Balances at period end: JRI America, Inc. during the period: Transactions Operating expenses Balances at period end: Other creditors Capital (UK) Limited SMBC Aviation during the period: Transactions rental income Lease Interest Income Balances at period end: related parties related and its subsidiaries as of the Company Statements include the Financial Statements The Consolidated Financial to subsidiaries is included in note 12. Transactions policy note 1c. A listing of the Company's documented in the accounting from, subsidiaries are eliminated in the preparation outstanding payables and receivables to and and from, together with Statements. Consolidated and Separate Financial 27, information in accordance with IAS of the consolidated financial Group (66%) and Sumitomo parent companies are Sumitomo Mitsui Financial ultimate The Group and Company's entered balances at year end and any transactions table below provides a list of any outstanding Corporation (34%). The companies and its subsidiaries. All transactions with related parties were into during the financial year with the parent length transactions. in arm's made on terms equivalent to those that prevail Borrowings Sundry debtors Other creditors Sundry debtors Amounts due to / (from) group undertakings Leasing Capital Australia SMBC Aviation during the period: Transactions Fee income Balances at period end: Amounts due from group undertakings Transactions with parent companies: Transactions ) continued

financial statements financial ( 28 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 80 28

Transactions SMBC CapitalMarkets Inc. related parties Non-currentliabilities ObligationsunderFinanceLeases Balances atperiodend: Interestexpense Transactions duringtheperiod: SMBC (Paris) Amountsduetogroupundertakings Cash Borrowings Balances atperiodend: Interestexpense Transactions duringtheperiod: SMBC (NewYork) Amountsduetogroupundertakings Balances atperiodend: Operatingexpenses Transactions duringtheperiod: SMBC (Japan) SundryCreditors Cash Balances Operating(income)/expenses Interestincome Feeincome Transactions duringtheperiod: SMBC EuropeLimited Amountsduetogroupundertakings Borrowings Balances Interestexpense Transactions duringtheperiod: SMBC Trust Bank DerivativeFinancialInstruments Amountsduetogroupundertakings Cash Balances Interestexpense Gain/(loss)onderivativefairvalue Feeexpense at at at period period period during (continued) end: end: end: the period:

3,717,353 31March 202,331 414,656 179,922 72,069 18,269 21,894 14,491 6,646 5,496 9,625 2,396 $'000 9,578 2,722 Group 7,623 1,660 7,700 2017 (106) 1,159 20 43 9 - 4,147,632 31March 108,544 201,739 37,200 12,560 48,914 24,186 41,077 10,618 $'000 9,697 17,231 Group 2,618 1,320 1,581 2016 980 815 231 110 811 37 - - - Company 3,717,353 202,088 31March 414,656 167,428 18,269 21,894 33,813 14,491 6,646 5,496 9,625 2,396 $'000 9,442 2,722 1,660 7,700 7,621 2017 1,159 (107) 815 20 43 6 - 4,134,678 Company 31March 201,400 48,907 37,200 57,696 39,762 12,268 24,186 10,618 $'000 17,231 9,677 2,618 1,320 2016 1,581 982 223 107 811 14 - - -

81 smbc aviation capital • Annual Report & Accounts | 2017 34 42 617 149 158 883 859 205 2016 2016 1,384 9,619 9,619 2,815 2,591 $'000 $'000 71,577 (1,559) 19,566 31 March 31 March Company Company - 36 60 144 (36) (36) 333 287 730 249 699 2017 2017 1,775 1,775 1,034 7,362 7,362 $'000 $'000 3,596 73,555 65,049 31 March 31 March Company Company

149 158 (36) 883 859 205 2016 1,384 9,619 9,619 2,591 Group $'000 (1,559) 31 March

- 36 144 (36) 730 287 249 2017 1,775 1,775 1,034 7,362 7,362 Group $'000 31 March

(continued) Balances at period end: Amounts due from group undertakings 4 Limited Capital Ireland Leasing SMBC Aviation during the period: Transactions Fee income Interest income Balances at period end: Amounts due from group undertakings Interest income SMBC Aviation Capital Ireland Leasing 3 Limited Capital Ireland Leasing SMBC Aviation during the period: Transactions Fee income Balances at period end: Other Creditors Limited. SMFL (Hong Kong) during the period: Transactions Operating expenses Balances at period end: Other Creditors Ltd. SMFL (China) Co., during the period: Transactions Operating expenses parties related SMFL (Singapore) Pte. Ltd. SMFL (Singapore) Pte. during the period: Transactions Operating expenses Balances at period end: Other Creditors Ltd. Capital Japan Co., SMBC Aviation during the period: Transactions Fee income Balances at period end: Amounts due (from) / to group undertakings 1 Limited Leasing Capital Labuan SMBC Aviation during the period: Transactions rental income Lease Balances at period end: Amounts due (from) / to group undertakings Transactions with subsidiaries Transactions ) continued

financial statements financial ( 28 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 82 28

No provisionshavebeenmadefor doubtfuldebtsinrespectoftheamountsowedbyrelatedparties. The amountsoutstandingareunsecured andwillbesettledincash.Nootherguaranteeshavebeen givenorreceived. Capital Limited.Theimpactonborrowings issetoutinnote22. wholly-owned subsidiary, SMBCAviation CapitalFinanceDAC, fullyandunconditionallyguaranteedbySMBCAviation On 19July2016,theGroupclosedsaleof$500millionits2.65% seniorunsecurednotesdue2021throughits Amountsduetogroupundertakings Balances atperiodend: Interestexpense Feeexpense Transactions duringtheperiod: SMBC Aviation CapitalFinanceDesignatedActivity Company Amountsduefromgroupundertakings Balances atperiodend: Interestincome Transactions duringtheperiod: Soller Aviation Limited Amountsduefromgroupundertakings Balances atperiodend: Interestincome Transactions duringtheperiod: Mallorca Aviation Limited Amountsdueto/(from)groupundertakings Balances atperiodend: Feeincome Interestexpense Transactions duringtheperiod: SMBC Aviation CapitalAircraftHoldingsB.V. Amountsduefromgroupundertakings Balances atperiodend: Lease rentalincome Feeexpense Transactions duringtheperiod: SMBC Aviation CapitalParis Leasing 1SARL Amountsdueto/(from)groupundertakings Balances atperiodend: Interestexpense Feeexpense Feeincome Transactions duringtheperiod: SMBC Aviation CapitalNetherlandsB.V. related parties (continued)

Company 31March 160,366 150,303 499,145 33,405 31,241 2,308 $'000 3,094 3,289 9,963 1,480 2017 1,176 464 8 - - 3 - Company 31March 127,729 20,438 67,286 2,995 $'000 2,831 1,578 1,887 2016 1,778 908 333 ------

83 smbc aviation capital • Annual Report & Accounts | 2017 377 2016 9,583 9,583 $'000 18,915 28,875 31 March

380 2017 $'000 10,047 10,047 20,931 20,931 10,504 10,504 31 March

(continued) benefits Total commitments capital A320neo aircraft and with Airbus and Boeing. The Airbus order consists of 110 During 2015, the Group placed firm orders The Group also has other capital aircraft, while the Boeing order consists of 90 Boeing 737 MAX 8 aircraft. 5 A321ceo billion (31 March 2016: $1.4 billion). commitments totalling $1.7 billion and delivery dates are currently scheduled for orders total $24.7 The combined remaining purchase commitment price agreements with the manufacturers, an element are based upon fixed between 2017 and 2022. These commitments price escalation formulas, but are also subject to agreed price concessions of which are adjusted for inflation and include of each aircraft will be lower than the combined purchase As a result, the effective purchase price where applicable. commitment disclosed above. of office premises of $12.3 million to March 2024. The Group also has a commitment to future rentals contingent liabilities liability at 31 March 2017 (31 March 2016: $nil). The Group and Company had no contingent subsequent events was appointed as Director. Kawasaki Y. Mr. On the same day, resigned as Director. M. Takashima Mr. On 28 April 2017, Long- Capital Finance DAC's and SMBC Aviation Capital Limited's upgraded SMBC Aviation Fitch Ratings On 11 May 2017, notes senior unsecured Capital Finance DAC's 'BBB+' and SMBC Aviation from to 'A-' ("IDRs") Issuer Default Ratings Term from 'BBB+'. rating to 'A-' which require 2017, No other significant events affecting the Group and Company have occurred since 31 March adjustment to or disclosure in the Consolidated Financial Statements. of financial statements approval on 26 May 2017. The Directors approved these Financial Statements Other long-term benefits Post-employment Post-employment Salaries and other short-term employee benefits Salaries and other short-term parties related Key management personnel include directors (executive and non-executive), members of the Executive Committee and members of the Executive and non-executive), personnel include directors (executive management Key is shown below: management paid or payable to key The compensation the Company Secretary. ) continued

29 30 31 32

financial statements financial ( 28 notes to the to notes

smbc aviation capital • Annual Report & Accounts | 2017 84 acronyms andabbreviations UEL Structured entity SMFG SMBC SC S&P PDP OEM neo MSN Managed entities JOLCO IT ISA IFSC IFRS IASB IAS Group Financial Statements EU CSR Consortium Company Companies Act/TheAct CGU ceo ACD ACCD Useful economiclife PDP financingcompany Sumitomo MitsuiFinancialGroup Sumitomo MitsuiBankingCorporation Sumitomo Corporation Standard &Poor’s Pre-delivery payment Original equipmentmanufacturer New engineoption Manufacturers SerialNumber SMBC Aviation CapitalAustralia Leasing PTYLimited SMBC Aviation Capital(UK)Limited&subsidiaryand Japanese operatingleasewithcalloption Information technology International Standard onAuditing International FinancialServicesCentre International FinancialReporting Standards International AccountingStandards Board International AccountingStandards SMBC Aviation CapitalLimitedanditssubsidiaries The GroupandCompanyfinancialstatements European Union Corporate SocialResponsibility SMFG andSC SMBC Aviation CapitalLimited Companies Act2014 Cash generatingunit Current engineoption Aviation CapitalDepartment Aircraft CreditDepartment

85 smbc aviation capital • Annual Report & Accounts | 2017 notes

smbc aviation capital • Annual Report & Accounts | 2017 86 87 smbc aviation capital • Annual Report & Accounts | 2017 SMBC Aviation Capital IFSC House IFSC, Dublin 1 Ireland smbc.aero