Risk warning

RISK WARNING

Risk factors

Prospective Members must understand the risks associated with unregulated investment, including making a capital contribution into partnerships, and that economic factors can affect (positively and negatively) market values of the same. As such, any person reading this Memorandum and considering the potential participation and investment opportunity should carry out their own due diligence in respect of such opportunity and make their own commercial assessment of an investment opportunity after seeking the advice of an appropriately authorised or regulated financial advisor. Prospective Members are also encouraged and recommended to take their own independent legal and taxation advice together with any other advice that they may consider necessary to consider the benefit and risk attached to this investment opportunity.

Understanding the risks

It is vitally important that you read and fully understand the following risks of investing. A Membership and Capital Contribution (investment) into the Nemo’s Business involve a high degree of risk. Accordingly, the prospective Members should consider carefully all of the information set out in this document and the risks attaching to participation and investment in the Partnership, including, in particular, the risks described below, prior to making any investment decision. The information below does not purport to be an exhaustive list or summary of the risks which the Partnership may encounter and is not set out in any particular order of priority. Prior to making an investment decision, the prospective Member should consider whether an investment in the Business through making a capital contribution to the Partnership constitutes a suitable investment for them in light of their circumstances, tax position and the financial resources available to them. The Partnership’s Business, financial condition or operations could be materially and adversely affected by the occurrence of any of the risks described below. In such case, the value of the Capital Contribution could decline due to any of these risks, and the Members could lose all or part of their investment. Additional risks to the listed below not presently known to the Chairman, or that the Chairman currently deems immaterial may also have an adverse effect on the Partnership.

No guarantee

There can be no guarantee that the Partnership will achieve its stated Business Objective. The value of the Partnership’s assets may go down as well as up. Members may, therefore, release less than their original Capital Contribution (Investment). The Partnership is a newly incorporated entity established for the purpose of achieving its stated Business Objective and to bring a substantial financial return to its Members. However, this does mean that the Partnership does not have a trading history on which Investors can evaluate its potential future profitability from past performance. The Partnership does not have any assets currently and therefore Investors have no existing security.

Operational risk

The Partnership is exposed to operational risk. Operational risk is the risk of losses that may arise as a result of system inefficiencies, breakdowns in internal processes, human error or the effect of any external negative factor. There can be no assurance that the Company will be able to prevent operational risks materialising, or mitigate the damage caused should such operational risks materialise.

Financing risk

The Partnership’s core business and activities is, but is not limited to being a budget hotel owner and operator. There can be no absolute assurance that upon a default, the Partnership can recover the amount of the financing in default.

Liquidity risk

Typically, investments into private equity, bonds, loan notes, debentures, and unlisted entities (including making capital contributions into partnerships) are subject to limits in the levels of liquidity which may impact the ability of the entity to exit their investments within the desired time frames. The Chairman and advisors do all they can to identify and plan for liquidity. However, there can be no assurance that the Partnership will be able to plan for and mitigate the damage caused should it find itself in circumstances of liquidity stress or shortfalls.

Execution and costs risks

Whilst the Partnership has already agreed on refurbishing costs for the proposed property; the Partnership may find that the costs or other risks associated with leasing the property are in excess of the sums set aside for doing so or are more than the amounts required to provide the returns identified in this document as being achievable.

Construction and refurbishing risks

Construction and refurbishing of property carry execution risks. Unanticipated situations may arise on-site or may affect builders or contractors (which may include unforeseen circumstances such as the presence of protected wildlife, inclement weather, insolvency affecting contractors, unforeseen ground conditions etc.) each of which may cause increased cost or delay or cause the project to fail (in extreme circumstances).

Hidden defects

Whilst the Chairman will take steps to survey the property, there may be hidden defects which were not apparent or identified and which may later affect the property’s operating income and the Business profitability.

Dependence on key executives and personnel

The Partnership ’s future success is substantially dependents on the continued services and performance of its founders. The Partnership cannot give assurances that the founders will continue to remain with the Partnership. The loss of the services of the Chairman could damage the Partnership’s Business. Further details on the Chairman may be found on the Nemo Hotel website. The Partnership will mitigate this risk by providing appropriate incentives for senior staff to have an interest in the long term success of the Business.

The need to raise additional capital in the future

It is no easy for the Chairman to predict the timing and amount of future costs accurately and therefore of any future need to raise further capital. If the assumptions set out in the Partnership’s working plan change or prove to be inaccurate, the Partnership may require further financing. If the Partnership is unable to obtain additional funding as needed, it may be required to reduce the scope of its operations, and such a reduction may not bring the indicative returns.

Government and legislative change and threat of litigation

Changes in Government policy (and in particular changes in taxation) could affect the return on any investment in the Partnership ’s business. Inflation figures used internally by the Chairman in projecting financial returns may be higher or lower than originally forecast. The core financial forecast has been prepared based on income and expenditure in real terms. It has been assumed that fees charged will be adequate of offset inflation in operating costs.

Liquidity of investments

A Capital Contribution into the Partnership is not a liquid security, and cannot be transferred to any third party and is not listed on any stock exchange. The return on investments in the Partnership’s business is not guaranteed and prospective investors should be aware they may therefore not recover either their original Capital Contribution (investment) in the business or to get the levels of returns initially projected. All investments carry an element of risk. However, investments in private limited companies or capital contributions in partnerships can carry a significantly greater risk than, for example, investments in shares issued by FTSE 100 companies.