ALAFCO Aviation Lease and Finance K S C P : Q2 Financial Results 2023-24

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF ALAFCO AVIATION LEASE AND FINANCE COMPANY K.S.C.P.

Introduction

We have reviewed the accompanying interim condensed consolidated statement of financial

position of ALAFCO Aviation Lease and Finance Company K.S.C.P. Parent CompanyGroup as at 31 March 2024, and the related interim condensed consolidated statements of income and comprehensive income for the three months

and six months periods then ended, and the related interim condensed consolidated statements of changes in equity and cash flows for the six months period then ended. The management of the Parent Company is responsible for the preparation and presentation of this interim condensed consolidated financial information in accordance with International Accounting Standard 34:

interim condensed consolidated financial information based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements

. A review of interim condensed consolidated financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34.

Material Uncertainty Related to Going Concern

We draw attention to Note 2, Note 7, and Note 17 to the interim condensed consolidated financial information, which states that the Extraordinary General Meeting of Shareholders of the Parent Company convened on 27 December 2022 and on 19 February 2024 have approved the -end, the Parent Company also obtained the approvals from the Kuwait Competition Protection Agency (Kuwait CPA) and the Federal Economic Competition Commission of Mexico (COFECE) relating to sale of the remaining fleet approved by the Extraordinary General Meeting of Shareholders convened on 19 February 2024. Furthermore, the Parent Company will formulate a strategy relating to the future prospects after execution of the sale. These conditions, along with other matters stated in Note 2, indicate the existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern. Our conclusion is not modified in respect of this matter.

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF ALAFCO AVIATION LEASE AND FINANCE COMPANY K.S.C.P. (continued)

Report on Other Legal and Regulatory Requirements

Furthermore, based on our review, the interim condensed consolidated financial information is in agreement with the books of account of the Parent Company. We further report that, to the best of our knowledge and belief, we have not become aware of any violations of the Companies Law No. 1 of 2016, as amended, and its Executive Regulations, as amended, or of the Parent

C Memorandum of Incorporation and Articles of Association during the six months period ended 31 March 2024 that might have had a material effect on the business of the Parent Company or on its financial position.

We further report that, during the course of our review, we have not become aware of any violations of the provisions of Law No. 7 of 2010 concerning establishment of Capital Markets , during the six months period ended 31 March 2024 that might have had a material effect on the business of the Parent Company or on its financial position.

ABDULKARIM ALSAMDAN

LICENCE NO. 208-A

EY

AL AIBAN, AL OSAIMI & PARTNERS

6 May 2024

Kuwait

2

ALAFCO Aviation Lease and Finance Company K.S.C.P. and Subsidiaries

INTERIM CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

For the period ended 31 March 2024

			Three months ended			Six months ended
			31 March			31 March
		2024		2023			2024		2023
	Notes		KD		KD			KD		KD
Operating lease income	9	9,719,038	8,765,146		19,425,637		16,974,322
Murabaha income		271,087		48,921		560,172		48,921
(Loss) gain on disposal of aircraft, engines		(8,277,678)				(15,346,433)
and equipment	5 & 7	710,812			1,437,768
Other income	10	9,197,629		7,011,026		13,554,720		15,788,225
Staff costs		(552,893)	(866,587)		(1,144,916)		(1,523,006)
Depreciation	5	(4,003,215)	(3,898,305)		(8,059,449)		(7,840,099)
Other operating expenses		(1,069,104)	(1,069,916)		(1,777,225)		(2,061,649)
(Allowance for) reversal of credit loss on		(2,105)				1,619,293
receivables		616,360		616,360
Finance costs		(6,091,966)	(12,165,230)		(13,576,282)		(23,632,472)
LOSS FOR THE PERIOD
BEFORE CONTRIBUTION TO
KUWAIT FOUNDATION FOR THE
ADVANCEMENT OF		(809,207)	(847,773)		(4,744,483)		(191,630)
SCIENCES (KFAS)
Contribution to KFAS		-		5,905		-		-
LOSS FOR THE PERIOD		(809,207)	(841,868)		(4,744,483)		(191,630)
Basic and diluted losses per share	4		(0.85) fils		(0.88) fils			(4.98) fils		(0.20) fils

The attached notes 1 to 17 form part of this interim condensed consolidated financial information.

4

ALAFCO Aviation Lease and Finance Company K.S.C.P. and Subsidiaries

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

For the period ended 31 March 2024

		Three months ended			Six months ended
		31 March			31 March
	2024		2023			2024			2023
		KD	KD			KD			KD
Loss for the period	(809,207)	(841,868)	(4,744,483)	(191,630)
Other comprehensive income (loss):
Items that are not reclassified subsequently to
interim condensed consolidated statement of
income:	588,857				(424,613)
Foreign currency translation adjustment		184,463		(3,062,549)
Other comprehensive income (loss) for
the period	588,857		184,463		(424,613)	(3,062,549)
Total comprehensive loss for the period	(220,350)	(657,405)	(5,169,096)	(3,254,179)

The attached notes 1 to 17 form part of this interim condensed consolidated financial information.

5

ALAFCO Aviation Lease and Finance Company K.S.C.P. and Subsidiaries

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

For the period ended 31 March 2024

							Foreign
							currency
	Share		Share		Statutory		translation		Retained
	capital		premium		reserve		reserve		earnings		Total
	KD		KD		KD		KD		KD		KD
Balance as at 1 October 2023	95,209,348	17,829,167	29,571,005	17,807,900	60,433,519	220,850,939
Loss for the period	-	-	-	-	(4,744,483)	(4,744,483)
Other comprehensive loss for the period	-	-	-	(424,613)	-	(424,613)
Total comprehensive loss for the period	-	-	-	(424,613)	(4,744,483)	(5,169,096)
Balance as at 31 March 2024	95,209,348	17,829,167	29,571,005	17,383,287	55,689,036	215,681,843
Balance as at 1 October 2022	95,209,348	17,829,167	29,571,005	19,829,279	61,583,713	224,022,512
Profit for the period	-	-	-	-	(191,630)	(191,630)
Other comprehensive loss for the period	-	-	-	(3,062,549)	-	(3,062,549)
Total comprehensive loss for the period	-	-	-	(3,062,549)	(191,630)	(3,254,179)
Balance as at 31 March 2023	95,209,348	17,829,167	29,571,005	16,766,730	61,392,083	220,768,333

The attached notes 1 to 17 form part of this interim condensed consolidated financial information.

6

ALAFCO Aviation Lease and Finance Company K.S.C.P. and Subsidiaries

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

For the period ended 31 March 2024

			Six months ended
			31 March
		2024	2023
OPERATING ACTIVITIES	Notes		KD		KD
	(4,744,483)
Loss for the period		(191,630)
Adjustments for:		8,059,449
Depreciation	5	7,840,099
Murabaha income		(560,172)	(48,921)
Finance costs		13,576,282	23,632,472
Reversal of credit loss on receivables		(1,619,293)	(616,360)
Loss (gain) on disposal of aircraft, engines and equipment	5 & 7	15,346,433	(1,437,768)
Changes in operating assets and liabilities:		30,058,216	29,177,892
	5,457,520
Receivables and other assets		(11,983,238)
Other liabilities		5,974,594	27,617,388
Maintenance reserve and provisions		6,058,108	2,145,302
Cash from operations		47,548,438	46,957,344
Finance cost paid		(13,290,110)	(22,839,205)
Net cash flows from operating activities		34,258,328	24,118,139
INVESTING ACTIVITIES
Purchase of aircraft, engines and equipment		-	(1,024,541)
Proceeds from disposal of aircraft, engines and equipment		89,731,168	29,351,988
Capital advances for purchase of aircraft, engines and equipment		-	(107,467)
Capital advances refunded by the manufacturer		34,928,152	-
Murabaha income received		540,773	14,276
Net cash flows from investing activities		125,200,093	28,234,256
FINANCING ACTIVITIES
Financing facilities received		-	24,528,000
Financing facilities repaid		(139,605,006)	(49,804,544)
Net cash flows used in financing activities		(139,605,006)	(25,276,544)
NET INCREASE IN CASH AND CASH EQUIVALENTS		19,853,415	27,075,851
Foreign currency translation adjustment		6,767	(394,906)
Cash and cash equivalents at 1 October		13,105,157	25,113,155
CASH AND CASH EQUIVALENTS AT 31 MARCH		32,965,339	51,794,100

The attached notes 1 to 17 form part of this interim condensed consolidated financial information.

7

ALAFCO Aviation Lease and Finance Company K.S.C.P. and Subsidiaries

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

As at and for the period ended 31 March 2024

1 INCORPORATION AND PRINCIPAL ACTIVITIES

ALAFCO Aviation Lease and Finance Company K.S.C.P. (ALAFCO) (the "Parent Company") is a Kuwaiti shareholding company registered and incorporated in Kuwait on 21 March 2000. The Parent Company is engaged in providing service to buy aircraft and other related assets on behalf of the aviation companies, coordinating with factories, providing asset management services to different aviation companies, providing operating lease or financing lease services commensurate with the needs and desires of aviation company customers, providing project financing to buy aircraft wholly or partly in light of the evaluation studies and the renewal of risk factors associated with such projects, marketing of aircraft to meet the needs of medium-andlong-term for aviation companies wishing with such services, assisting aviation companies in the marketing of their aircraft through selling and leasing, participation in providing services associated with financing and providing technical support to aviation companies, assistance in the joint investment operations and specialized in aviation industry, Wholly or partly investment in providing aircraft, engines and spare parts as appropriate to needs of aviation companies and factories customers, Management and investment of revenues generated and collected from the above mentioned operations. The Parent Company may have an interest or to participate in any aspect in other entities conducting similar activities or which may assist in achieving its objectives in Kuwait or abroad and it may establish, participate or buy these bodies or in their equity.

The Parent Company oper The Parent Company registered head office is at Kuwait Chamber of Commerce and Industry Building Annexe, Second Floor, Abdul Aziz Hamid Al Sagar Street, Al-Mirqab, Kuwait.

The shares of the Parent Company are listed on Boursa Kuwait.

The Parent Company and Gulf Investment Corporation S.A.G. (GIC).

The interim condensed consolidated financial information includes transactions and balances of the Parent Company and wholly owned Special Purpose Companies (SPC) (its subsidiaries), together referred to as the G

The interim condensed consolidated financial information of the Group for the six months period ended 31 March 2024 was authorised for issue in accordance with a resolution of the board of directors on 6 May 2024.

2 FUNDAMENTAL ACCOUNTING CONCEPT

The management and the Board of Directors of the Parent Company have taken a number of actions to ensure best possible returns and meeting liquidity requirements as disclosed in Note 15:

As disclosed in Note 7, the Board of Directors of the Parent Company considered, and the General Meeting of Shareholders convened on 27 December 2022 have approved the sale of 53 aircrafts (72% of

the Group As of 31 March 2024, the Group has completed the sale of 30 aircrafts.

The sale of 30 aircrafts has generated net cash proceeds of USD 261.25 million (approximately, KD 80.32 million) after settling secured financing facilities, of which KD 46,207,500 relates to the Bank and KD 187,674,750 relates to other financial institutions.

The sale of the remaining 23 aircrafts is expected to generate net cash proceeds of USD 305.87 million (approximately, KD 94.04 million) after settling financing facilities, of which KD 20,673,441 relates to the Bank and KD 201,080,396 relates to other financial institutions.

The Management and the Board of Directors of the Parent Company expects the execution of the sale to be completed within 12 months of signing the Sale Agreement, but also acknowledges that there is an inherent uncertainty associated w associated with the transaction that might affect the timely execution and therefore the expected settlement of the related financing facilities.

8

ALAFCO Aviation Lease and Finance Company K.S.C.P. and Subsidiaries

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

As at and for the period ended 31 March 2024

2 FUNDAMENTAL ACCOUNTING CONCEPT (continued)

During the current period, on 11 January 2024, the Parent Company has signed an amendment agreement with the Buyer relating to sale of remaining portfolio (23 aircrafts) to the Buyer. On 19 February 2024, the Parent Company obtained the approval of the shareholders at the General Assembly Meeting. The execution of this amendment was subject to the approval of Kuwait Competition Protection Agency (Kuwait CPA) and the Federal Economic Competition Commission of Mexico (COFECE), which was obtained subsequent to the reporting period. The sale of the 23 aircrafts is expected to generate net cash proceeds of USD 391.44 million (approximately, KD 120.35 million) after settling financing facilities of KD 179,927,635 which relates to various financial institutions.

The shareholders at the General Assembly Meeting held on 19 February 2024, delegated the board of directors to analyse the future strategy of the Group and prepare a proposal on the matter after completion of the sale of all aircrafts. As of the reporting date, the board of directors have not yet completed their analysis with regards to the future strategy of the Group.

As such, the Board of Directors of the Parent Company has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The interim condensed consolidated financial information does not include any adjustment relating to the recoverability and classification of recorded assets and classification of liabilities which may be necessary if the Group is unable to continue as a going concern.

3

3.1 Basis of preparation

The interim condensed consolidated financial information of the Group is prepared in accordance with

International Accounting Standard 34, Interim Financial Reporting.

The interim condensed consolidated financial information does not contain all information and disclosures required for full consolidated financial statements prepared in accordance with the International Financial Reporting Standards. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included.

Operating results for the six months period ended 31 March 2024 are not necessarily indicative of the results that may be expected for the financial year ending 30 September 2024. For more details, please refer to the consolidated financial statements and its related disclosures for the year ended 30 September 2023.

The functional currency of the Parent Company is US dollars. The interim condensed consolidated financial information is presented in Kuwaiti Dinars.

3.2 New standards, interpretations, and amendments adopted by the Group

The accounting policies adopted in the preparation of the interim condensed consolidated financial information are consistent with those followed in the preparation of the Group the year ended 30 September 2023, except for the adoption of new standards effective as of 1 October 2023.

The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Several amendments and interpretations apply for the first time from 1 October 2023, but do not have an impact on the interim condensed consolidated financial information of the Group.

9