HirviForest

Although the project owner’s operations are not particularly complex, operational risk is moderate. The business relies on the project company's own machinery fleet, so equipment breakdowns or unexpected repair needs can affect deliveries and costs.

Management risk is moderate, as the project owner is managed solely by CEO Jaakko Hirvi and the forest manager. However, the business model itself is relatively simple, which to some extent limits the complexity required of management, although key person dependency on Jaakko Hirvi remains a risk from a management perspective.

The project owner follows payment terms in accordance with Finnish legislation and established practices, which supports receivables management. The project owner’s customer base is well diversified, which limits risk related to any individual customer and reduces the impact of a potential default by a single customer on the project company's finances. Accordingly, receivables risk is moderate.

In accordance with Article 2(1)(a) of Regulation (EC) No 1893/2006 of the European Parliament and of the Council (the "Regulation"), the project owner’s business activity falls under Section A (see Annex I of the Regulation).

The project owner’s revenue has grown steadily in an industry where innovation is limited and success is based primarily on personal relationships and industry knowledge. The forecasts assume only minor or negligible growth, with the underlying premise being the stable continuation of the business at its current level rather than actual growth. It is typical of the project owner’s industry that numerous smaller companies operate across the country and that customer relationships are often formed through personal contacts and referrals. Accordingly, sector risk is moderate.

By making this investment, investors are exposed to the insolvency risk of the project owner. The holders of the bonds bear the full risk of the project owner’s inability to pay, i.e. the risk that the project owner may be temporarily or permanently unable to meet its payment obligations towards the bondholders and/or third parties when due. In particular, in the event of insolvency proceedings, bondholders may suffer a total loss of their investment. The following specific circumstances may lead to such a situation:

• (serious) change in macroeconomic situation,
• mismanagement,
• lack of experience,
• fraud,
• financing that is not in line with the business purpose,
• unsuccessful introduction of the project owner’s products or services,
• insufficient cash flow.

a) Insolvency risk relating to collateral and collateral providers:

Investors bear the risk regarding the enforceability and realisation of the collateral provided. In the event of insolvency of the collateral providers, this may lead to delayed payments, loss of interest payments or the loss of the invested capital. Further details on the agreed collateral and the collateral providers are set out in Part D, letter (f) of this document.

There is a risk that the return may be lower than expected, delayed or may not materialise at all. Interest payments and capital repayments depend on eco-nomic developments and the the project owner’s solvency and payment default may occur in whole or in part. Investors may therefore lose part or all of their invested capital. In addition, inflation, exchange rate fluctuations, costs and individual tax circumstances may further reduce the return.

There is a risk that the crowdfunding platform may be temporarily or permanently unavailable or may cease its business operations. In such a case, delays in communication as well as in interest and repayment payments may occur. The contractual claims of investors against the project owner remain unaffected; however, the enforcement of such claims may become more difficult. As the crowdfunding service provider does not at any time obtain possession or owner-ship of the investors’ funds and payment processing is carried out through a payment service provider, a loss of the invested capital based solely on a plat-form failure is unlikely.

The bonds have a fixed maturity and are not subject to ordinary termination by the investors during their term. A transfer is only possible to a limited extent, as the transfer is technically restricted to registered digital safe deposit boxes. The entity maintaining the e-securities register is Smart Registry GmbH, regis-tered in the commercial register of the Local Court (Amtsgericht) Charlottenburg (Berlin) under registration number HRB 234468 B. The digital safe deposit box is an IT application that enables the custody and transfer of e-securities. Currently, there is neither stock exchange trading nor a liquid secondary market for the bonds. Even if the bonds were to be admitted to trading at a later stage, it is uncertain whether a functioning market would develop. Investors may there-fore be required to hold the bonds until maturity and bear the risk of not finding a buyer or being able to sell the investment only at a financial loss. The bonds may prove to be completely illiquid.

In addition, the following securities-related risks apply:

• No influence or participation rights: The bonds give rise exclusively to contractual claims against the project owner and do not grant any participa-tion, involvement or voting rights in the shareholders’ meeting of the project owner. Shareholder resolutions may be adopted at the shareholders’ meeting of the project owner which may have an adverse effect on individual bondholders. Bondholders have no possibility to influence the busi-ness activities of the project owner. This also applies to the utilisation of the capital raised through the issuance of the bonds. In particular, bond-holders have no possibility to terminate loss-making business activities of the project owner before the contributed capital has been utilised. This may result in a total loss of the invested capital for the bondholders.
• Deterioration of terms by majority resolution: According to the terms and conditions of the bonds, these may also be amended during the term of the bonds if the approvals required under the terms and conditions of the bonds are obtained by corresponding majority resolutions of the bond-holders. Each individual bondholder therefore bears the risk that amendments to the terms and conditions of the bonds may be adopted against their will by majority resolution of the bondholders, which may adversely affect them (e.g. lower interest, extended maturity or waivers).
• Technology and database risks: The technology and all related technological components and regulated services (e.g. digital custody, mainte-nance of the e-securities register) are still at an early stage of technical development. Bondholders face the risk that this technology may be sub-ject to technical difficulties or that its functionality may be impaired by external influences. A partial or complete failure of the electronic decentral-ised database relevant for the e-securities (hereinafter the “E-database”) may temporarily or permanently prevent the bondholder from accessing their e-securities.
  There is a risk of attacks on the network or on the E-database used. Various types of attacks are conceivable. Such attacks could render the net-work or the E-database unusable, so that bondholders would no longer be able to transfer the e-securities. If the network or the E-database be-comes completely unusable, there is a risk that bondholders may no longer have access to their digital safe deposit boxes. In the worst case, this could lead to the irretrievable loss of the e-securities. The project owner provides bondholders, via an authorised custodian of e-securities, with a technical solution enabling the holding, storage and disposal of e-securities. There is a risk that this solution may be flawed and/or particularly vulnerable to potential hacker attacks. As a result, bondholders may temporarily or permanently lose access to their e-securities, which in the worst case may lead to the irretrievable loss of the e-securities. The ongoing administration, in the sense of exercising the rights and obligations arising from the e-securities, is performed neither by the custodian of e-securities nor by the project owner.

The risks listed above are not the only risk factors that may affect the business activities of the project owner. Other risks and uncertainties that the project owner currently does not consider relevant or is not currently aware of may also have a material impact on the business operations, business results and financial standing of the project owner.