Risk warning

The non-binding translation below is for your convenience only. The original legal version (in German) can be found here: http://www.kensington-crowd.com/fuer-anleger/risikohinweise.
1. General notes
The following general risk notes describe in general terms the risks that may arise from investing in subordinated loans brokered through the kensington-crowd.com platform. These general risk phrases are supplemented by project-specific risk phrases in the individual financing projects. These project-specific risk phrases may differ from the explanations below and take precedence over them. The project-specific risk information is made available to investors as part of the respective investment. 
 
2. General risks and risks arising from the structure of subordinated loans  
  1. Maximum risk - total loss risk
There is a risk of a total loss of invested capital and interest. Individually, the investor may suffer additional asset disadvantages, e.g. due to costs for back tax payments. Therefore, the investment is only suitable as an addition to an investment portfolio. Loans are only suitable for investors who could accept a loss up to the total loss of their capital investment. Subordinated loans are not suitable for retirement provision. However, there is no risk of an obligation to make additional contributions or of any other liability exceeding the amount of the loan capital employed.
 
  1. Subordinated risk and entrepreneurial nature of the investment 
The brokered loan agreements are loans with a so-called qualified subordination. All claims of the lender under the loan agreement - in particular the claims to repayment of the loan amount and payment of interest - (“subordinated claims”) cannot be asserted against the borrower if this would lead to insolvency for the borrower. This means that the payment of interest and repayment of the loan may not cause the borrower to become insolvent. Then neither interest nor principal payments should be made to the lenders. In addition, in the event of liquidation proceedings and in the event of the borrower’s insolvency, the lender’s subordinated claims will be subordinated to all present and future claims of all non-subordinated creditors of the borrower, i.e. the lender’s claims will only be taken into ac- count after all other creditors of the borrower (with the exception of other subordinated creditors) have been fully and definitively satisfied.
  The lender therefore bears a (co-)entrepreneurial risk that is higher than the risk of a regular lender. The lender does not himself become a shareholder of the borrower and does not acquire any share- holder rights. It is not a so-called gilt-edged participation, but an entrepreneurial participation with a liability function similar to equity capital.

The qualified subordination could have the following effects: The borrower would have to suspend the payment of interest and repayment of principal for as long as he is obliged to do so in the event of insolvency. The lender would not be allowed to claim his claims when they mature. The lender would have to repay an interest payment to the borrower on demand, which he had unduly received despite subordination. It is also possible that the lender may not receive the interest payments or the principal payments as a result of subordination. In addition, the lender may have to pay tax on interest already paid, even though he is obliged to repay the amounts received.
  1. Lack of collateralisation of loans
Since the loans are unsecured, in the event of the borrower’s insolvency, the lender would not be able to satisfy his claim to repayment of the capital employed or his interest payment claims from col- lateral. In the event of insolvency, this could mean that the claims of the individual lenders cannot be enforced or can only be enforced to a lesser extent. This could result in interest or redemption payments not being made or not being made on time or in partial or complete loss of the invested capital.
 
  1. Final maturity of redemption
Depending on the financing project, it can be agreed that the borrower does not have to repay the total loan capital until the end of the term (bullet repayment). In this case, there is a risk that the borrower will not be able to generate the capital required for repayment from its business activities and/or will not receive any follow-up financing required at that time and will therefore not be able to make the final repayment or not at the planned time.
 
  1. Sellability (fungibility), availability of invested capital, long-term commitment
The loan agreements have a fixed term. There is no provision for premature ordinary termination by the lender. Subordinated loans are not securities and are not comparable with these. There is currently no liquid secondary market for the loan agreements concluded. A sale of the loan by the investor is in principle legally possible. However, the possibility of selling the loan is not assured due to the small market size and trading volumes. It is also possible that an assignment cannot be made at the nominal value of the receivable. It could there- fore be the case that no buyer can be found in the event of a sale request or that the sale can only take place at a lower price than desired. The invested capital can therefore be tied up until the end of the contract period.
 
  1. Possible extension of capital commitment
As these are subordinated loans, they may only be repaid if this would not lead to insolvency and/or over-indebtedness of the borrower. If this were the case, the term of the loan would automatically be extended until this situation no longer existed. The investment is therefore not recommended for lenders who are dependent on receiving their money back exactly at the planned end of the term. 
 
3. risks at borrower level
  1. Business risk of the borrower
The lender bears the risk of an adverse business development of the respective borrower. There is a risk that the borrower will not have the necessary funds available in the future to meet the interest claims and repay the loan proceeds. Neither the economic success of the borrower‘s future business activities nor the success of the entrepreneurial strategy pursued by the borrower can be predicted with certainty. The borrower can neither guarantee nor guarantee the amount and timing of inflows. The loan agreement grants a fixed interest rate for each financing project in accordance with the details of the respective loan agreement and the General Loan Terms and Conditions. In addition, a variable interest component can also be granted (e.g. current performance-related interest, one-time performance-related bonus interest at the end of the term or pro rata temporis at the time of an ordinary termination by the borrower). Whether and to what extent such a variable interest component is paid depends in each individual case on the economic success of a financed project and/or on the future economic development of the borrower‘s company.
 
  1. Default risk of the borrower (issuer risk)
The borrower may become insolvent or overindebted. This may in particular be the case if the borrower has lower income and/or higher expenses than expected or if he cannot obtain any necessary follow-up financing. The borrower‘s insolvency may result in the loss of the investor‘s investment and interest, as the borrower does not belong to any deposit guarantee scheme.
 
  1. Project company
The borrower may be a project company which, apart from carrying out the planned project (e.g. in the fields of renewable energy or real estate), does not engage in any other business from which any losses can be covered and payment difficulties over- come. Whether and when the interest owed under the loan agreement and the repayment can be made depends in these cases largely on the course and economic success of the respective project.
 
  1. Early business phase
The borrower may also be a company in an early stage of development that does not initially generate a positive operating cash flow (i.e. the outflow of cash and cash equivalents from operating activities initially exceeds the inflow of cash and cash equivalents). The financing of such young companies is associated with specific risks. If a business idea is not successful in the market or if the planned business development cannot be implemented as hoped, investors are exposed to a total loss risk. The success of a company depends on various factors such as the team, certain key personnel, specialists and consultants, the market environment, supplier relationships, technological developments, intellectual property rights, legal framework conditions, competitors and other factors. Investors who invest in an early-stage company are much more likely to lose their invested capital than to earn a return on their invested capital.
 
  1. Risks arising from business activities
Various risk factors may affect the borrower‘s ability to meet its obligations under the loan agreement. These may be specific risks arising from the implementation of the borrower‘s business strategy or the financed project. Implementation may be more complex than expected. Unexpected and/or higher implementation risks may occur and/or business processes may involve more effort and costs than expected. Planning errors may become apparent or the borrower‘s contractual partners may perform poorly. Necessary approvals could not be granted. There could be delays in the planned process and/or problems in generating revenues or savings in the planned amount or at the planned time. Legal requirements may change and may require changes or additional measures in connection with the implementation of the business strategy or project, which may result in additional costs and/or delays.

On the other hand, the general business activities of the respective borrower may also be associated with risks, such as market-related risks (e.g. decline in demand and sales; payment difficulties or insolvencies of customers; cost increases and capacity bottlenecks on the procurement side; political changes; interest rate and inflation developments; country and exchange rate risks; changes in the legal and tax framework of the borrower‘s activities) and company related risks (e.g. risks from the financial and economic crisis, B. quality risks; product defects; financing and interest rate risks; risks arising from trademarks and industrial property rights; dependence on partner companies, key persons and qualified personnel; risks arising from legal disputes, inadequate insurance cover, from the shareholder and/or group structure, from the internal organization, from asset valuations and additional tax claims).   
These and/or other risks could have a negative im- pact on the borrower‘s net assets, financial position and results of operations. As a result, the borrower may not have the necessary funds available in the future to meet the interest claims and repay the loan capital employed.
 
  1. Capital structure risk
The respective borrower may make use of further debt financing and therefore enter into obligations which (irrespective of its income situation) are to be serviced with priority over the claims of the subordinated lenders.
 
  1. Forecast risk
The forecasts made by the borrower regarding the costs of implementing the corporate strategy or the planned project, the achievable revenues and other aspects may prove to be incorrect.
Past market or business developments are no basis or indicator for future developments. 
 
4. Risks at investor level
  1. Borrowing risk
Depending on the individual circumstances, the lender may suffer further financial disadvantages in individual cases, e.g. due to back tax payments. If the lender finances the loan amount by borrowing a private loan from a bank, for example, the loss of the invested capital may be accompanied by a threat to the lender‘s other assets. The maximum risk of the lender in this case is an over-indebted- ness, which in the worst case can lead to the private insolvency of the lender. This can be the case if the lender is financially unable to service the interest and repayment burden from his external financing in the event of small or no returns from the asset investment. It is therefore not advisable to borrow the loan amount.
 
  1. Note on risk diversification and avoidance of risk concentration 
Due to the risk structure, the investment in the sub- ordinated loan agreement should only be regarded as a component of a diversified (risk-mixed) investment portfolio. In principle, the higher the return or return, the greater the risk of loss. By distributing the invested capital across several asset classes and projects, a better risk diversification can be achieved and „cluster risks“ can be avoided.  
 
5. Instructions of the platform operator
  1. Scope of the project appraisal by the platform operator
The platform operator only carries out an examination according to formal criteria prior to the placement of a project on the platform. The placement on the platform does not constitute an investment recommendation. The platform operator does not assess the creditworthiness of the borrower and does not check the information provided by the borrower for its truthfulness, completeness or topicality.
 
  1. Activity profile of the platform operator
The platform operator does not perform any consulting activity and does not provide any consulting services. In particular, no financing and/or investment advice and no tax and/or legal advice are provided. The platform operator does not make any personal recommendations to investors regarding the purchase of financial instruments based on an examination of the personal circumstances of the respective investor. The personal circumstances will only be requested to the extent required by law as part of the investment brokerage process and only with the aim of providing the legally required information, but not with the aim of making a personal recommendation to the investor to purchase a particular financial instrument.
 
  1. Information content of the project description
The project profile and project description for a financing project on the platform do not claim to contain all the information necessary for the assess- ment of the plant offered. Investors should take the opportunity to ask the borrower questions about the Platform, obtain information from independent sources and seek expert advice if they are unsure whether to enter into the loan agreement. As each lender can pursue personal objectives in its lending, the borrower‘s information and assumptions should be carefully considered in the light of the individual situation.
 

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