Investing in Engines. Euromoney Round Table London, 7 April Alternative Engine Financing Lothar Ratei, Managing Director and Partner GSI Group

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1 Investing in Engines Euromoney Round Table London, 7 April 2009 Alternative Engine Financing Lothar Ratei, Managing Director and Partner GSI Group

2 GSI Fonds GmbH & Co. KG GSI, a German fund company well known for new products with innovative structures in the German closed end retail fund market. 50% owned by the management 50% owned by the German M.M.Warburg Bank Main product lines: - assets of aviation sector - assets of regenerative energy plants - assets of other transport sectors

3 General Situation in the German Investment Market 2008 estimated

4 Equity and Loan in German Fund Business Investments in Total Market in Mill. EUR Source: VGF Market Data 2008; Scope Annual Study

5 Trends 2009 according to Fund Issuing Houses Source: Scope Annual Study 2008/2009; 50 Initiators

6 Different Sorts of Funds 1 Asset Funds Portfolio Funds Direct investments (fund entity purchases the assets directly) More influence on the assets Favourable fee structure More flexibility (decisions, remarketing) Higher administrative expenditures but also Higher possible upsides Indirect investments (fund entity invests in another fund (participation) Less influence Additional fees Less flexibility Less administrative expenditures but also Limited upside potential Fund structures

7 GSI Fonds main aviation investment transactions after GSI started to reopen the German equity market in 2006 (after 9/11) Acquisition of almost 50 aero spare engines with a volume of about $ 300 Mio. Common engine types with leases attached (medium and long term), e.g. CFM56-3, -5, -7, CF6-80 s, IAE V s, RR AE 3007 s, Trent 700, PW 4000 s Investment in a few regional aircraft as private placement

8 GSI-Engine Fund Structure (Aero Spare Engine Portfolio) GSI Triebwerke GmbH (General Partner) Management Agreement Investors (Limited Partners) Equitiy of about 35 % of total asset costs GSI Fonds GmbH & Co. KG (Initiator) Germany Different Management Tasks Equity Provider Financing Agent Consulting Agreement GSI Triebwerke. GmbH & Co. KG (Limited Partner) 100% Bank(s) GSI Engines Ltd. (General Partner) UK Loan Agreement of about 65 % of total asset costs and Equity Bridge Loan Management Agreement GSI Engines. Limited Partnership (LP) Engine Leases Engine Purchase Agreements Seller Asset Manager International Airline 1 Airline 2 Airline 3 Airline N

9 Engine Leasing Investors Advantages Attractive equity distributions Comparatively "safe" lease returns Cost-intensive maintenance is with the lessee Shop visit Return conditions approx. 60 % spare parts approx. 20 % cost of repair / maintenance approx. 20 % direct labour cost Engines as assets with long lasting in value Engine means the sum of its parts Further high level of employment is estimated on the long run Possible value enhancement due to inflation and employment situation

10 Market Shares Engine Leasing The engine leasing market for spare engines actually leases engines amounting to more than 8 bn US $. Up to now the market is dominated by 6 great leasing companies with portfolios of more than 100 spare engines. Willis Lease Finance 10% Pratt & Whitney 8% Others 16% Shannon Engine Support 11% ~1,600 leased engines GE Engine Leasing 27% Engine Lease Finance 11% Rolls-Royce Partners Finance 17%

11 Leasing Companies Requirements Sales in order to finance growth Lessors speculatively buy spare engines Leasing companies solve logistic and capital problems for the airlines Pooling of engines Pooling of smaller airlines Need always to keep in mind future developments of aircraft fleets

12 Other Environmental Challenges Fuel consumption Open rotor concept Variable turbofan gearbox New upgrade kits Use of fuel alternatives Emissions Reduction of green house gas CO2 Reduction of nitrogen oxides Reduction of noise Use of biofuels

13 Conclusion: Aviation assets remain interesting for the future German Fund Business. Thank you very much for your attention! Contact: Lothar Ratei GSI Fonds GmbH & Co. KG Alt-Heerdt Düsseldorf Germany Phone: info@gsi-fonds.de