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Risk Report

Risk culture

The Management Board of MPC Capital AG is committed to the principles of a management system aligned to value orientation and therefore attaches great importance to systematic risk management. In addition to exposing existing risk items, it is principally about recognising opportunities.

Within the Group, responsibility for risk management with all investments lies with management. The operating units as well as the holding itself identifies, assesses, controls and continually monitors its risk situation. As potential risks must be included in corporate trading, MPC Capital implements comprehensive risk inventory measures in all areas and has worked out an efficient reporting system.

The risk policy in place at MPC Capital AG consists of exhausting available opportunities as best as possible and only taking risks associated with business activity when there is the opportunity to create a corresponding surplus value. Risk management is therefore a vital component of the business processes and of the value-oriented management of MPC Capital AG.

Dealing with risks responsibly is a task for every single employee. It is the responsibility of the operating management to create risk awareness and to deal with early recognition, assessment, control and communication of risks.

Central risk management is under the control of the CFO, who is responsible for the further development of the risk management system as well as in particular for risk aggregation throughout the entire MPC Capital Group. On the other hand, the tasks of identifying and controlling new risks, as well as the ongoing monitoring of already identified risks, are organised decentrally. Regular reporting, which is embedded in the integrated controlling concept, communicates the status of and material changes to significant risks. The controlling and reporting systems are designed in such a way that the Management Board receives all the relevant information in order to detect early on any development which could have a detrimental effect on the financial, net worth and earnings position of the Group. The risk management system in place at MPC Capital AG was looked at as part of the annual audit of the financial statements and fulfils the legal requirements of the Control and Transparency in Enterprises Act (KonTraG).

MPC Capital AG also sees its risk management as a dynamic and constantly evolving task. The findings of the daily risk management programme serve to protect the objectives of the company and to continually increase the value of the company.

Operating risks
MPC Capital AG's business model is based on the design, initiation and distribution of principally closed-end funds. In order to guarantee a high quality range of products for investors and sales partners, this model requires, both now and in the future, the continuous acquisition of high-quality assets such as ships, real estate and life insurance policies. Market, price and competition considerations all have an influence on the availability of attractive investment objects which meet MPC Capital's stringent quality criteria.

The development of products such as the Real Estate Opportunity Fund and the expansion of the structured products business division reduces the relative importance of asset-oriented asset classes such as ships, real estate and life insurance funds and also further diversifies the range of products.

MPC Capital is in a competitive situation, both in the acquisition of attractive assets and in the initiation and distribution of investments. The strength of the MPC Capital brand, the company's reliability as a business partner, the product quality and the company's leading market position in all relevant product markets and sales areas mean that MPC Capital can react flexibly to changes in market conditions and remain on course for success.

The partnership with institutional and independent sales partners provides the basis for the distribution policy. Due to the existence of a number of different relationships, individual sales partners do not dominate.

As part of the design and initiation process, MPC Capital generally provides to the fund companies a placement guarantee for the equity portion of the fund. The Group is thus exposed to a placement risk until all the fund equity is syndicated. Since the foundation of the company, it has always been possible to place the entire designated equity portion of the funds, or the funds are currently being placed. A detailed explanation of the placement guarantees and guarantee conditions of existing contingent liabilities can be found in the notes.

Once a fund has been placed in its entirety, the existing financial risks relating to the placement guarantee are eliminated. Further guarantees such as rental guarantees for real estate funds are not secured by the MPC Capital Group for basic reasons. This means that the financial development of the fund does not directly influence the net worth, financial and earnings position of the MPC Capital Group. MPC Capital AG and its subsidiaries generally only participate as limited partners in the individual fund companies. In addition to the liability risk for statements made in the prospectus, there is also an image and reputation risk with existing or potential customers in the event of negative developments in one or several funds. MPC Capital counters this risk with active fund management and a consistent quality strategy in the selection of assets and in fund design.

Financing and currency risks
With an equity ratio of 72.8% and liquid assets of TEUR 105,714, MPC Capital's financing risk remains low and provides the medium to long-term stability and flexibility to further develop the company. In particular, the interim financing requirements for the equity of the fund company are safeguarded in this way. Such interim financing is then scaled back as quickly as possible in the process of placing the equity.

While a further rise in interest rates in the global financial markets can increase the attractiveness of investment products competing with MPC Capital products, this also means a change in the financing conditions of the fund. In the target group of wealthy private customers, alternative investments, as they see the MPC Capital products, are now a fixed component of the asset structure (asset allocation). The refinancing costs of the fund company are one of many factors in the overall design. Possible effects on profitability of an increase in interest rates have so far been compensated primarily by changes in other components.

MPC Capital's expenditure and income is mainly incurred in the reporting currency of the euro. However, the initiation of funds in foreign currencies such as US dollars, Canadian dollars and British sterling can have exchange rate effects.

Organisational risks
The dynamic development of the MPC Capital Group requires adequate provision of personnel. By using modern personnel marketing measures, MPC Capital has increased the number of employees in the reporting period from an average of 182 people to 215 people and thus was successful in attaining the necessary personnel resources.

MPC Capital counters the risk of dependency on key persons by rigorous personnel and quality development of the management level below the Management Board.

Legal risks
Legal proceedings or damages claims are - in so far as they are known - of secondary importance and are taken into consideration in the annual financial statements. Moreover, claims which have a considerable influence on the economic situation are neither pending nor threatened.

Overall risk
The evaluation of the risks in the context of central risk management of MPC Capital did not reveal any risks in the past year which had a material effect on the net worth, financial and earnings position of the Group or which jeopardise the existence or future of the company.