Performance Report 2007
| Letter to investors and partners | Evaluation Principles |
Balance Sheet as per 31 December 2007
Assetsin EUR
Shareholders’ Equity and Liabilitiesin EUR
Income StatementIncome Statement for Fiscal Years 2007 and 2006in EUR
Notes for Fiscal Year 2007 (Excerpt)Application of the German Accounting Directives Act (Bilanzrichtliniengesetz)The annual accounts of König & Cie. GmbH & Co. KG as per 31/12/2007 have been prepared in accordance with the German Accounting Directives Act of 19/12/1985, which entered into force on 01 January 1986We decided to use the cost categories oriented format for the income statement presentation. 1. Explanatory Notes on the Balance Sheet1.1. Fixed AssetsIntangible and tangible assets were measured at acquisition or manufacturing costs. Scheduled depreciation was based on the presumed useful life of the assets and, in accordance with tax laws, taken according to the straight-line method for intangible assets and according to the straight-line and declining balance methods for the tangible fixed assets. The change from the declining balance method to the straightline method is made at the point when the latter results in higher write-offs for the year. Depreciation on tangible and intangible assets during the fiscal year amount to €275,789.00; write-offs on financial assets come to €57,171.73. The useful life is 8 to 10 years for land, similar rights and buildings, including buildings on third-party land; 5 to 12 years for technical equipment and machinery, 3 to 10 years for other equipment, factory and office equipment. The financial assets include shares in group undertakings, undertakings in which the company has a participating interest and securities. The disclosure is shown at acquisition costs, including incidental acquisition costs. If value has been permanently reduced, a write-off is taken to the lower attributable value. All companies in which the Company holds more than 50% of the shares with voting rights are deemed group undertakings. The development of fixed assets is shown in the exhibit on page 244. 1.3. Receivables and other assets Trade receivables and other assets are measured at nominal value less any valuation allowances required for discernible risks in individual cases. All of the receivables and other assets are due within one year. Receivables and liabilities in foreign currency are measured at the exchange rate on the day of the business transaction. Losses from changes in exchange rates have been taken into account. 1.4. Equity Net income of €23,521,632.74 was realised during the current fiscal year 2007. The limited liability capital was increased during the fiscal year from €2,000,000.00 to €4,000,000.00. 1.5. Provisions The other provisions were created for all contingent liabi lities. All discernible risks were taken into account in their creation. 1.6. Liabilities Liabilities are measured at the repayment amount. The loans from the Bankhaus Wölbern are secured by the pledging of ship investments totalling €11,170k. The credit balance at the BREMER LANDESBANK of €1,000k serves as security for all claims for the financing of the MS »KING ANTON« Schiffahrts GmbH & Co. KG and the MS »KING ATTILA« Schiffahrts GmbH & Co. KG. 1.7. Other Financial Obligations and Contingent Liabilities The Company has long-term obligations from leases and leasing agreements which are due as shown below: 
As per the balance sheet closing date, the Company has liabilities from warranty agreements in the amount of €622,088k, thereof €23,776k with respect to group undertakings, and liabilities from guarantees in the amount of €93,935k, thereof €0k with respect to group undertakings. 3. Directors and Officers3.1. Management/RepresentationDuring the fiscal year, the Company was managed by the general partner Verwaltung König & Cie. GmbH, represented by Mssrs Tobias König (ship broker), Klaus Fickert (retail merchant), Dr Andreas Opatz (master’s degree in commerce) (until 30/09/2007), Jörn Meyer (master’s degree in business administration) and Johannes Bitter-Suermann (lawyer) (from 23/01/2007). Gesamtprokura (joint general commercial power of representation) was held by Mssrs Martin Borkmann, Dominicus von Nerée (until 02/08/2007), Khaled Bouamoud, Michael Klarhöfer, Andreas Kemptner, Joachim van Grieken, Adriaan Jeroen Rüppel (from 25/04/2007), Dr Moritz Dimde (from 01/11/2007) and Ms Heike Niemeyer (from 09/03/2007). The Prokuristen (holders of commercial power of representation) are entitled to represent the Company acting jointly with a managing director or with a second Prokurist. Analysis of Fixed Assets Movement
3.2. Personally Liable Partner Personally liable partner (general partner) is Verwaltung König & Cie. GmbH, Hamburg, with subscribed capital of €30,000. The company is entered in the Commercial Register No. HRB 65448 of the Hamburg Local Court. In accordance with the Partners’ Agreement, the general partner receives compensation in the amount of 10% of its paid-in share capital as shown at the end of the fiscal year. 3.3. Managers' Compensation Total compensation paid to the management in 2007 amounted to €1,950k. 4. Size of Staff (Annual Average)König & Cie. GmbH & Co. KG employed an average staff of 51 (previous year: 44) during the fiscal year.Hamburg, 30 April 2008 
Tobias König Managing Director of the General Partner Management Report 2007Business ActivitiesKönig & Cie. GmbH & Co. KG develops and realises closed-end funds in the sectors shipping, private equity, real estate, secondary market German and British life insurance policies and renewable energy sources. Since the establishment of the Company in 1999, it has initiated 69 funds and projects with a total investment volume of more than €3.3 billion.The added value chain ranges from the purchase and conception of new investment properties to the preparation of the prospectuses and marketing of the products to the investor care and content support of the funds throughout their entire life cycle. Investor care is provided by König & Cie. Treuhand GmbH. Course of Business1. Development of the Placement VolumeAn increase of more than 54% in comparison with the previous year meant that far and away the highest placement volume in the Company's history was achieved in 2007, especially in the division "Ships".
The major performance indicators of profitability for fiscal year 2007 in comparison with fiscal year 2006 are shown below.
The financial and group results are comprised mainly of earnings from investments of €16,141k (thereof from distributions €8,045k, earnings from profit sharing €5,956k and dividends €2,133k), interest income of €394k, interest expenses of €2,049k and €57k in write-offs on financial assets. 3. Assets and Liabilities We have eliminated the following special effect in the assets and liabilities and financial position in comparison with the balance sheet as per 31 December 2006 and in the financial position as per 31 December 2007 in order to give a more meaningful view of the assets and liabilities and financial position, in particular in the comparison with the previous year. As of the end of fiscal year 2006, the Company increased its limited partner’s contributions to three one-ship subsidiaries by €4,870k each, i.e., by €14,610k in total. Each of the limited partner’s contributions was due for payment in January 2007. These circumstances are shown in the balance sheet as per 31 December 2006 as an addition to financial assets on the one hand and as an increase in amounts owed to undertakings in which the Company has a participating interest on the other. These three subsidiaries sold the seagoing vessels which they owned at a profit in December 2006, the sale effective in February 2007. The three subsidiaries have thus ceased operations and are being liquidated. The increased limited partner’s contributions were not called up; the cash from the payment of the purchase prices for the seagoing vessels which have been sold went to König & Cie in 2007, provided that it was not required for the repayment of loan obligations, thus reducing the participation interests in the subsidiaries.
Short-term loans to group undertakings and to undertakings in which the Company has a participating interest totalling €2,845k are included in other receivables and assets. Shareholders' equity increased by €16,413k in comparison with the previous year, mainly as a result of the good net results for 2007. Long-term liabilities include participation rights capital of €9,000k for strengthening the liquidity of the current projects. Short-term liabilities have declined in comparison with the previous year by €11,805k. Essentially, they break down into short-term liabilities due to banks of €2,809k, trade liabilities (in particular sales commissions) of €2,151k and liabilities due to group undertakings and to undertakings in which the company has a participating interest of €5,182k. 4. Financial Position
Cash flow from investment activities shows a reduction in the inflow of funds of €37,842k, reflecting largely the investments in the financial assets. Cash flow from financing activities shows an inflow of funds of €13,301k. This results in particular from the taking out of long-term and middle-term loans. Cash on the closing date was €2,031k lower in comparison with fiscal year 2006. 5. Business Development of the Segments5.1 ShippingKönig & Cie. continues to focus its activities on the shipping sector. The Company has been highly successful in expanding further the container and tanker shipping segments. 8 container ships and 8 tankers were taken over in 2007. During the reporting period, König & Cie. GmbH & Co. KG further diversified in the shipping sector by ordering and purchasing ships for dry bulk goods (bulkers) in various ship sizes; they will become part of the fleet at various times during the period from 2008 to 2011. In addition, we again intensified our work with the tried and proven twin fund concept during the reporting period. A mixture of fixed charters and spot market employment provides a high degree of security to investors in combination with the opportunity to profit from the opportunities on the shipping markets. A total of 10 ships were sold during the reporting period with highly satisfactory results for the investors through subsidiary partnerships.. A total of 52 ship funds have been created since the Company was founded, eight of them in the reporting period alone.
The ship funds shown below have been created since the Company’s foundation.
The fund »International Private Equity I« was fully placed in 2007. The successor fund »International Private Equity II« is now in the placement phase.
This sector has become established as an important corporate branch and now has six funds. A distinction is made between funds with German and British policies on the secondary market.
The funds shown below have been issued on the life insurance secondary market since the company’s establishment.
5.4 Other Investment Classes König & Cie. Real Estate GmbH introduced the fund »Mezzanine- Opportunity US I« on the market during the reporting period. This is an umbrella fund company which invests in a number of selected target funds. The target funds invest in turn in numerous commercial debt products, so-called mezzanine investments, and in project developments on the real estate market in the USA. Sales of the König & Cie. »Investment Portfolio I« were highly successful in 2007. This is an umbrella fund which invests in König & Cie. funds in accordance with the applicable investment guidelines. At the time this report was prepared, the fund had been almost completely placed, and its successor was already on the market. In the sector of renewable energy sources, König & Cie. New Energy GmbH successfully sold a wind farm in 2007. Activities continue to concentrate on the care of the wind farm fund »Herzogtum Lauenburg« and the constant review of interesting new offers.
6. Sales Organisation During the reporting period, more than 850 sales partners – significantly more than in the previous year – actively sold the König & Cie. investments either directly or indirectly. The 30 best sales organisations mediated approx. 90% of the turnover. No one sales organisation mediated more than 20% of the equity placed in 2007. The sales partners active on behalf of König & Cie. can be classified as follows: Investment consultants/Asset managers 32% Transaction platforms 32% Major sales organisations 11% Banks/Savings and loans 23% Direct sales (own participations) 2% 7. Investments Investments in the amount of €43,752k were made during the fiscal year, of which €65k was invested in intangible assets and €951k in tangible assets. The Company acquired investments amounting to €42,736k in the sector of financial investments. 8. Personnel The growth in company activities makes it necessary to build up and expand a qualified staff. As per 31/12/2007, König & Cie. and the subsidiaries employed a staff of 100; the figure was 84 one year ago. The departments Finances, Sales/Concept, Shipping/Ship Management Business and Real Estate expanded especially quickly. Managing directors at König & Cie. GmbH & Co. KG, besides Tobias König, are Klaus Fickert (Sales and Concept) and Jörn Meyer (Finances). Until 30/09/2007, Dr Andreas Opatz was the managing director responsible for the division Shipping. Johannes Bitter-Suermann has reinforced management since 23 January 2007 and is responsible for the departments Real Estate, Special Funds and New Energy. Report on Opportunities and RisksThe management of König & Cie. analyses, evaluates and regularly monitors the opportunities and risks which are of significance for the Company. All opportunities and risks are assessed with the help of a performance indicator system which is constantly being developed further. The system consists of a series of risk factors and contexts which are evaluated individually as per the reporting date and submitted as part of the reporting system to management for assessment.1. Opportunities and Risks Related to Market and Environment1.1 Dependence on the Availability of Investment ProductsSince market access and the consequent purchase price have a decisive influence on the profitability of the fund products, restrictions on the availability of investment goods represent a risk in the industry. This risk is minimised and opportunities are determined promptly and pursued by means of a structured product pipeline, intensive efforts to secure new market access, the assessment of every purchase decision by the relevant departments and the constant observation of market developments. Products which do not satisfy requirements are refused. 1.2 Dependency on the Development of the Legal Environment, in Particular of Tax Laws The extent to which changes in the legal environment, in particular the tax laws, will affect the market for closed-end funds in the future is not predictable, especially against the background of a constant discussion concerning a reform of the tax landscape in this political constellation. The Company receives information, well in advance and solution-oriented, regarding any upcoming changes by maintaining close contacts to well-known tax accountant, accounting and law firms which are active supraregionally, so it can exploit the lead time thus provided to move into an ideal position with its products. 1.3 Dependency on Market Developments The market is subject to substantially greater fluctuations with respect to the structure of the products and the concepts on which it is based than in the past. König & Cie. is stepping up to meet these greater requirements at all times by expanding the conception capacities. 1.4 Competition in the Sector of Sellers of Closed-end Funds By establishing the brand "König & Cie." and its competitive strategy based on stabilisation and increasing independence from the shipping business through diversification, the Company has positioned itself well in the competitive environment. König & Cie. is among the first twenty in the ranking of all of the initiators of closed-end funds; in the sector of shipping, which is still the segment with the greatest turnover, König & Cie. is in fifth place (source: Market Analysis of the Participation Models 2007 by Stefan Loipfinger). The five closed-end funds designed for Marenave Schiffahrts AG (cf. Section 5.1) are not included in this ranking. 2. Opportunities and Risks Related to the Company2.1 Responsibility as Fund Initiator, Liability Risks The agency contracts for the conception of the particular funds, the preparation of the prospectuses and the sales of the shares entail duties of due diligence, and the breach of these duties can possibly lead to liability risks. We counter these risks by carefully selecting and training the personnel entrusted with the particular partial tasks, who also have many years of experience in these sectors. Moreover, we employ the services of external professional consultants and maintain several levels of checks. 2.2 Opportunities and Risks from Contractual Integration in Fund Structures, Pre-financing and Placement Guarantees As a consequence of the build-up of an extensive product pipeline in all divisions, König & Cie. provides securities so that it can finance the underlying investment products at each stage of their development. These securities are provided by suretyships and guarantees. The provision of placement guarantees has been a common form of security for many years. The resultant risks are covered by product diversification, even within the individual segments, temporal distribution and coordination of the sales activities and close content integration of the financing banks with whom alternative strategies are developed. The compensation paid for the assumed risk in favour of the fund companies represents a source of income for König & Cie. which helps to stabilise our revenues over the term of the funds. König & Cie. regularly assumes guarantees or provides suretyships with respect to the contracts for new ship constructions which are open on the balance sheet day. The inherent possible risks are limited by the excellent relationships, developed over the course of many years, to ship financers and other partners. This is also demonstrated by the development of financing commitments in 2007. Opportunities result in particular from the fact that the ship fund market expects a continuous supply of newly built ships, and König & Cie. can secure this supply on the basis of existing contracts with various shipyards. 2.3 Trust among Investors, Sales Partners and Analysts The trust of all involved partners is a basic requirement for the successful issue of closed-end funds. The greatest possible precision in the presentations of the prospectuses, transparency, suitable measures for the prevention of losses, detailed reporting, intensive support and care of investors, sales partners and analysts as well as regular dialogue with these partners at all of the fund phases are measures which we as fund initiators employ to maintain and intensify the trust which is placed in us. 2.4 Dependency on Employees with Special Knowledge of the Industry The knowledge and market access of employees in key positions are assets which must be maintained and promoted. Various processes have been implemented and programmes to secure staff loyalty and develop employee skills have been established to secure the commitment of staff members to the Company and to make their knowledge accessible to others. All of these measures promote a positive company atmosphere. 2.5 Dependency on Sales Partners A large number of active sales partners and the constant acquisition of new sales partners prevents the development of any dependency on individuals and specific companies. Exclusive or long-term projects are realised with individual sales partners on the basis of the years of excellent cooperation and trust. 2.6 IT Risks Various security systems have been implemented to minimise the risk of system failures. They include access control systems, backup systems, emergency plans and data mirroring. Firewall systems, virus scanners and other methods are utilised and developed further to prevent unauthorised access to IT systems. 2.7 Risks of Price Changes, Failures and Liquidity as Well as Risks from Fluctuations in Payment Flows The risks of price changes can be regarded as relatively slight in all business segments because such risks are assessed within the scope of the purchase decisions of our fund projects and appropriate longer-term contracts which are permanently monitored exist. Despite sales efforts, the margin development remains permanently at the focal point of all members of management. The risk of address loss can be regarded as relatively slight – our most important business relationships are primarily the funds we have initiated. Liquidity risks and payment flow fluctuations are discovered in good time within the framework of a monthly forecast. The active management of payment flows has prevented fluctuations in liquidity of any kind in the past. König & Cie. regularly maintains positive liquidity and can, if necessary, utilise further lines of credit from the house banks, whereby the performance indicators and other information expected by the banks are regularly provided by König & Cie. 3. Overall AssessmentThe assessment of the opportunities and risks in the past and current fiscal year did not reveal any noteworthy risks which might jeopardise the existence or continued operation of the Company or have a significant influence on the assets, liabilities, financial position or profits. The opportunities and risks are monitored constantly by management, and all of the people responsible for their divisions have been adequately sensitised.Prediction Report1. Business Development and StrategyThe broadening of the product line with saleable and innovative models from various sectors for longer time periods is an important strategic goal, and all divisions make a contribution to its achievement.International developments in the shipping sector are closely watched to open up specific partial segments for us, provided that the available products are a good match for the existing portfolio and represent strategic further developments for the pertinent partial product range. In addition, common ship types are sold further or ordered whenever the negotiable prices are in line with calculable revenues and financing models. The strengthening of real estate activities and the penetration of new investment opportunities and countries into this segment represent an important area in the expansion of the product range and are being pushed forward accordingly. Just as the sector of the secondary market life insurance funds in the past, the establishment of the private equity segment as a strategic goal continues to be at the focal point of our efforts. Product models oriented even more specifically to the goals of the varying investor needs will continue to be developed in all segments. 2. Business Development in 2008The current course of placements indicates that fiscal year 2008 will achieve, perhaps even exceed the positive results of the previous year.While the results of the first quarter were approximately the same as last year, the excellent product availability in April led to substantially greater success than in the same month last year. We therefore expect the semi-annual results to be substantially higher than at this point last year. The success of the year as a whole will remain dependent on the availability of products in the shipping sector and the continuous development of the other segments. We currently have products from all sectors with an investment volume amounting to €364 million, all of which are in high demand. A comparison with previous years in particular shows that the business of König & Cie. GmbH & Co. KG is continuing to develop into a year-round business. Nevertheless, it is to be assumed that the apparent placement success of the first half of the year can be exceeded in the second half, provided that products are available. The outlook is consequently highly optimistic; no events of particular significance have occurred. 3. Subprime CrisisAlthough neither the business of König & Cie. GmbH & Co. KG nor the business of the initiated funds and managed companies of König & Cie. GmbH & Co. KG have anything in common with the business transactions which are the underlying cause of the crisis, König & Cie. GmbH & Co. KG is nonetheless affected by the changes in the financial sector even beyond the changes in general commercial conditions related to the financial crisis.This is especially true with respect to limitations in financing opportunities because the market for loan syndications collapsed during the second half of 2007 and has not yet recovered completely. But thanks to the overall excellence of its contacts to banks and the loan agreements which had previously been concluded, König & Cie. GmbH & Co. KG remains in an excellent position and has been able to realise all of its planned projects as expected. We therefore see no reason why König & Cie. GmbH & Co. KG should not be in a position to realise the relevant financing volumes for future projects as well. Hamburg, 30 April 2008
Tobias König König & Cie. GmbH & Co. KG, represented by the management of Verwaltung König & Cie. GmbH 
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