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Forecast report

Global economy grows at a smooth pace

According to the estimates of the International Monetary Fund (IMF), the global meconomy will this year (2006) once again grow by 4.3% and thus will not develop any additional momentum. The researchers expect a slowing down of the tempo, especially with the driving forces such as China (IMF estimate: + 8.2%) and the USA (IMF estimate: + 3.3%).

It is generally expected that the policy of small interest rate steps implemented by the US Federal Reserve Bank will initially be discontinued with the change in leadership at the bank. For the European Central bank, market observers see a limited potential for streamlining of the main refinancing rate.

Speeding up of economic recovery in Germany

The experts at the Hamburg WeltWirtschaftsInstitut (HWWI) expect there will be a further recovery of the economy in Germany in 2006. According to estimates from the institute, the growth of the real gross domestic product will be 1.4% (German Institute for Economic Research DIW: 1.7%). The researchers estimate the advance effects resulting from the VAT increase announced for 2007 to be a quarter of a percentage point (DIW: 0.3%). These effects will ensure that domestic demand will be livelier and so will overcompensate for the export economy which is not expanding at the same pace.

For 2007, the experts at the HWWI expect that the economy will again lose considerable momentum. The restrictive financial policy and the counter-reaction of the advance effects are likely to be reflected in a gross domestic product increasing by only 0.75% (DIW: 1.2%). A slowing down of the expansion of the global economy, which cannot be ruled out, is likely to be a further burden for this forecast.

The market for closed-end funds

For 2006, experts are expecting a fall in the market volume of the closed-end investment model to EUR 10.8 billion. The demand for high-yield investments remains high from the point of view of both sales and investors. On the one hand, the changes in the legal framework conditions ensured clarity in design in the past year, but on the other hand mean the end of the tax-driven investment model with a corresponding effect on the total market volume.

Development of new growth opportunities

In the current 2006 financial year, MPC Capital expects to place equity to the value of between EUR 950 million and EUR 1 billion. The forecast net income for the year is between EUR 36 million and EUR 39 million and represents earnings per share of between EUR 3.40 and EUR 3.68. The Management Board intends to keep to its shareholderfriendly distribution policy in the current financial year.

The diversification of the product portfolio over the last few years shows, on the one hand, a high degree of readiness and ability of MPC Capital to innovate and on the other hand, leads to the company being less dependent on developments in individual business divisions. This diversification strategy is accompanied by two fundamental product concepts. The first is asset-oriented investments such as traditional real estate funds, ship investments and life insurance funds, a vital factor in whose potential is the ability of MPC Capital to identify and secure attractive projects. The other is the development of investments whose product availability can be continually developed based on, for example, fund of fund structures. The private equity funds and structured products and the umbrella funds and real estate opportunity funds are products of this sort. MPC Capital will, in the current financial year, create the organisational and marketing prerequisites needed to give the different products a clearer external profile and especially to increase the market penetration for continuously available products.

The start-up costs associated with the investment in the further development of the company influence the expected net income for the current year. Nevertheless, MPC Capital is convinced that the development will open up attractive potential for the future, which amongst other things will lead to a considerable increase in the share of returning sales.

The organic development of the MPC Capital Group will be rigorously continued. This will include examining further possibilities of strategic partnerships with product providers in the future, too.

Examination of the business divisions

Real estate funds

The development of the international real estate markets and strict adherence to high quality criteria is currently making it more difficult to initiate high-yield investments in the area of traditional foreign real estate funds. MPC Capital is planning to continue the product lines in Holland, Canada and England real estate funds and is selecting the possibilities of further real estate markets. The contribution of this area to the placement volume in 2006 depends on the opportunities offered in the course of the year. MPC Capital is currently assuming there will be a decrease in placed equity.

In contrast, the area of Real Estate Opportunity Funds is expected to grow. The beginning of 2006 will see the placing of the first product to include a volume option. The successor to this product, which has already been designed, will be distributed in the course of the second quarter.

The equity currently expected to be syndicated in the area of real estate funds is between EUR 250 million and EUR 300 million, while the share syndicated to the area of Real Estate Opportunity Funds is likely to be between 45% and 50%.

Ship investments
Two attractive ship portfolios were secured with equity of around EUR 320 million at the start of the financial year. One was a fleet of 14 container ships of class 1,800 TEU (nine ships) and 2,800 TEU (five ships), which will be gradually delivered from the autumn of 2006 until April 2008. The other was the acquisition of 14 modern second-hand reefer ships. These ships will be taken over from February 2006. Both investments plan initial distributions of 8% and will probably be offered to investors from the second quarter onwards.

Together with the ships which had already been contracted in 2003 and 2004 as well as the first tanker project, MPC Capital expects the year to see substantial placements in the area of ship investments, especially as the demand for attractive high-yield ship investments remains high. MPC Capital is currently assuming a placement volume of between EUR 350 million and EUR 400 million for 2006.

For 2006, the experts from Howe Robinson expect a 16% growth in the container fleet. This compares with an expected growth in demand of between 11% and 12%. Based on these assumptions, a further fall in the charter rates as well as a decline in new construction and second-hand prices are possible. In order to use the positive long-term prospects for the customers, a security-oriented design approach is therefore essential.

Life insurance funds
In 2006, MPC Capital will continue the range of life insurance fund products based on German and British policies. The current intention is to launch a new fund in each of the two product variations.

Suitable good quality insurance policies remain the limiting factor for product availability. For the German secondary market in particular, the product partner cash.life AG expects accelerated growth which would push the launch time even closer to the placing of equity and thus create new opportunities in the long term. The positive experience with the launch process associated with the British life insurance fund will probably result in an increased equity volume in the current year. The current forecast for the equity volume for the 2006 financial year is around EUR 160 million.

Structured products
Following the product-specific and organisational construction phase for the area, MPC Capital expects for the coming year an expansion of product and sales activities. In addition to the positioning as an independent product provider for institutional sales partners, MPC Capital sees considerable sales potential for structured products, especially with asset consultants and investment managers. The first product for this area was structured with the MPC Auventas Note. This Note, which follows the Fortrust Note in terms of design, will be placed from January 16 to April 10, 2006. Further products from the Fortrust range of products are in preparation. In addition, other product concepts are constantly being developed and brought to market maturity. In the area of structured products, MPC Capital expects for 2006 a total placement volume of around EUR 100 million.

Private equity
The revised funds design of the Global Equity range of products and the continuous revival in the area of private equity should enable this more opportunistic asset class to grow in 2006. With the MPC Global Equity 7 currently being placed, a 2006 placement volume of between EUR 30 million and EUR 50 million is expected for the successor product Global Equity 8, which is following on seamlessly, and from the Step by Step savings plan.

Distribution

The intensive and service-oriented cooperation with institutional distribution partners ensures both the high quality of products and the placement success of the investments. MPC Capital is committed to a dual distribution structure with institutional and independent distribution partners. MPC Capital is, as a product partner independent of the banks and a market-leading initiator, well positioned to fulfil the demand for attractive investments from the banks and savings banks as well as from the independent distribution partners. In addition, the planned organisational and structural changes within the MPC Capital Group will further intensify both the cooperation with the partners and the distribution penetration.

Fundamentally, it should always be assumed that there will be changes in the framework of tax legislation. However, achieving tax benefits is not the main motivating factor behind MPC Capital’s return-oriented investments. Therefore, the Group currently cannot identify any potential tax changes that could have material effects on the development and sale of products.

MPC Capital is convinced of the business model's suitability for the future and its sustainability. The Management Board does not believe the above developments contain any risks requiring disclosure.


Hamburg, February 23, 2006
The Management Board

Dr. Axel Schroeder    Ulrich Oldehaver    Ulf Holländer
Chairman