Institutional Deposit Token Holders

Version 2.0 - Released and Dated 5th Jan 2024

Institutional Deposit Token Holders - Terms and Conditions

The Frictionless Institutional Deposit Token Terms and Conditions in this document constitute an addendum to the PPM (Private Placement Memorandum) and Final Terms for the use and guidance of Investors executing the subscription agreement to enable them to participate in the issuance of financial instruments by FRICTIONLESS MARKETS SECURITIES (the Fund) duly incorporated in Luxembourg under fund registration number O46, managed by FRICTIONLESS MARKETS S.À.R.L., a société à responsabilité limitée incorporated and existing under the laws of the Grand Duchy of Luxembourg, having its registered office located at 2C, Parc d’activités, L-8308 Capellen, Grand Duchy of Luxembourg and registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés, Luxembourg) under number R.C.S. Luxembourg B272278 (the Fund Manager).

The Terms and Conditions described shall apply to any Frictionless Institutional Deposit Token issued by the Fund and to all Investors equally unless expressly stipulated otherwise or varied in the Fund or Fund Manager contractual documentation submitted, or unless provided for in the Final Terms document.

1. General Provisions

1.1 Overview of Frictionless Institutional Deposit Tokens

1.1.1 The Frictionless Institutional Deposit Token (Deposit Token(s)) issued by the Fund represents a unit share of the securitized currency undertaking represented by a passive zero-interest FIAT note with an aggregate reserved amount, that is open-ended. Each unit share represents a 1:1 share of a specific currency held within the Fund.

The risk stabilisation of this securitized currency undertaking is based on the management regulations of the Fund Manager, which includes bankruptcy remote and orphan entity protection and excludes non-professional clients as per MiFID II.

The smart contracts and technology enabling Deposit Tokens prevent the transfer to non-permissioned market participants. An investor or market participant may only acquire Deposit Tokens by signing the subscription agreement to the securitization transaction and by acknowledging the PPM and final terms documents as being binding and applicable in all circumstances.

The token is classified as a financial instrument and may only be used within the platform by permissioned market participants in securitisation transactions such as;

1. Investment in securitized risk in Funds, AMC's (Actively Managed Certificates), Notes or Tracker Certificates which are undertakings of the Fund and Fund manager and tokenized into Digital/Tokenized Securities.

2. Settlement of the securitization undertaking.

3. Transfer of risk from one Investor or market participant to another in the securitization undertaking.

The Fund Manager accepts all charges and interest on issuances and maintains a net asset value of 1:1 matching the underlying currency denomination. An independent auditors (“Reviseurs d’entreprises agrees”) appointed by Frictionless Markets S.à r.l. Severe as the permissioned Fund Accountant issuing a daily attestation proving the balances and NAV for each denomination of Deposit Token and associated compartments.

The finality and settlement of all Deposit Tokens are subject to settlement times, processes and management regulations of the Fund and/or the Fund Manager and not the blockchain record.

1.2 Definitions

1.2.1 "Investor Token Holder" means any Investor as defined in the general terms and conditions that does, or intends to purchase, sell, convert, redeem, hold or transfer Deposit Tokens on the Frictionless Markets platform. 1.2.2 "SV" means a securitisation vehicle within the meaning of the Luxembourg securitization law which entered into law on the 22nd March 2022.

1.2.3 "Platform" means the online software platform operated by the Fund Manager for the issuance and redemption of Deposit Tokens.

1.2.4 "Account" means an Investor account with the Fund.

1.2.5 "Currency" means one of the designated FIAT currencies on the platform.

1.2.6 "Compartment" means the creation of pools of assets or sub-funds to be managed separately so that the result of each pool is not influenced by the risks and liabilities of other compartments. The management regulations of the Fund Manager and the securitization funds articles of incorporation authorise the creation of such compartments according to the Securitisation Laws of Luxembourg and in particular, Article 5 of the Law of the 22nd March 2004 as recently amended. Each such compartment represents a distinct set of assets and liabilities.

1.2.7 "Securitisation" means the transaction by which a securitization undertaking (SV) acquires or assumes, directly or through another undertaking, risks relation to claims, other assets, or obligations assumed by third parties are inherent to all or part of the activities of third parties and issues financial instruments or contracts for all our part of it, any type of loan, whose value or yield depends on such risks (Article 1 of the Luxembourg Securitisation Law)

1.2.8 "Financial Instruments" has the broadest possible meaning, including:

(a) all securities and other instruments including, but not limited to shares in companies and other securities equivalent to shares in companies participation in companies and units in collective investment undertaking, bonds and other forms of debt instruments, certificates of deposit, loan notes and payment instruments

(b) securities which give the right to acquire shares, bonds or other securities by subscription, purchase or exchange,

(c) financial instruments and instruments giving rise to a cash settlement (excluding Instruments of payment) including money market instruments

(d) all other instruments evidencing ownership rights, claim rights or securities,

(e) all other instruments related to financial underlyings, indices, commodities, precious metals produce metals or merchandise other goods are risks

(f) claims relation to the items described in third paragraphs a to e above or rights in or respect of these items,

whether these financial instruments are in physical form, dematerialized, transferable by book entry including the securities accounts maintained within or through secured electronic registration mechanisms, including distributed ledgers or electronic databases, or delivery bearer or registered endorsable or not and regardless of their governing law.( Art 1 (8) Luxembourg Law of the 5th August 2005).

2. Investor Token Holder Terms

2.1 Application

2.1.1 This section applies to Investor Token Holders and constitutes an addendum to the general terms and conditions, PPM and Final Terms and the subscription agreement. To the extent that there is a conflict between the PPM, the Final Terms and the Subscription Agreement and Conditions and Terms herein with respect to Deposit Tokens, the Terms and Conditions of this agreement shall govern the relationship between the parties and prevail in all circumstances. If you do not agree to accept all of the Terms and Conditions of this within agreement, please immediately discontinue access to, and any use of all services and products on the platform.

2.1.2 By agreeing to the terms and conditions of this agreement herein, the Investor Token Holder agrees to be bound by the general terms and conditions and all contractual documentation including the PP, Final Terms and the Subscription Agreement. The rights of the Investors in the Fund, whether such Investor Token Holders act as joint owners or as settlors (fiduciants) are represented by the financial instruments issued in accordance with the management regulations.

2.1.3 If you are under the age of 18 years or under the legal age for entering legally binding contracts under applicable Luxembourg law, you are not permitted to use any of the Frictionless Market services and products. By continuing to access the platform, you indicate that you are over the age of 18 years or older and you have the legal capacity to enter legally binding contracts under the applicable Luxembourg laws. In the event of a misrepresentation of your age to gain access to any of the Frictionless Market services and products on the platform this representation will be deemed to be a material breach of the agreement herein and shall be terminated by the Fund Manager at its sole option and without notice to the person or person seeking admission to the platform.

2.2 The Platform

2.2.1 The Platform is an online software platform that allows investment token holders, who will be professionally accredited under the terms MiFID II to invest in and acquire Deposit Tokens in exchange for a fiat contribution in whatever currency denomination that may be available on the platform at the time of the subscription agreement is entered into and subject to the approval of the Fund Manager.

2.2.2 The Fund and platform will only deal with accredited, professional clients, or institutional investors in accordance with the provisions of the Luxembourg Securitisation Laws and in particular Article 19 as recently amended of the Law of the 22nd March 2004 on Securitisation. The platform through its application of ERC-3643 and OnChainId technology excludes the admission of permissionless or retail investors.

2.2.3 The Fund Manager may and without limitation, where it is believed that the issuance or redemption of the FIAT currency would be contrary to applicable law or would otherwise expose the Fund Manager or the Fund to legal liability in either the jurisdiction of Luxembourg or any other international jurisdiction refuses to issue or redeem Deposit Tokens. In the absence of a reasonable justification not to redeem the FIAT currency, and provided that the Investor is a fully verified investor on the platform, the FIAT tokens will be freely redeemable, subject to the redemption minimums described herein.

2.3 Withdrawals, Redemption from Deposit Token to FIAT

2.3.1 Investor Token Holders may withdraw some or all of their Deposit Tokens from their accounts at any time, upon request to the Fund Manager, via the platform or in writing to the registered office of the Fund Manager. The Investor Token Holder for the withdrawal will be transferred from the designated Fund account to the bank account designated by the Investor Token Holder.

2.3.2 The Fund Manager may impose withdrawal limits on the Fund as per the management regulations.

2.3.3 The withdrawal of any currency amount may be delayed as necessary to comply with applicable Luxembourg laws especially as it relates to KYC /AML requirements to verify the correct wallet address in which to effect the deposit of the redeemed tokens. Withdrawal time frames are dependent on third-party banking providers and may take up to two days to complete, provided that larger withdrawals may take substantially longer to complete.

2.3.4 ALL REDEMPTIONS WILL BE ON A ONE-FOR-ONE BASIS, NOTWITHSTANDING ANY CHANGE IN THE NET ASSET VALUE OF THE FIAT NOTE ISSUED.

2.3.5 All Deposit Tokens are issued using six decimal precision and are rounded to the nearest base unit of the referenced FIAT currency at redemption.

2.3.6 The Fund Manager and Fund may require a minimum amount for redemption, which may be updated from time to time, equal to the minimum aggregate fees of the Fund and/or third-party banking provider for the transaction.

2.4 Subscribing to a Fund

2.4.1 By subscribing to the Fund, the Investor is bound to the PPM, Final Terms and Subscription Agreement and these Terms and Conditions.

2.4.2 The Investor is permitted to subscribe to any Fund issuing a Deposit Token.

2.4.3 The Fund Manager may require a minimum amount for the subscription as set out in the management regulations and the terms of conditions herein and this amount may be updated from time to time. Full details of the changes proposed by the Fund Manager will be available in advance to the Investor.

2.4.4 Prior to the subscription on the platform, the Investor will be required to review the following information: the amount of the subscription, the commission (if any) to be charged by the platform and/or the Fund Manager, the wallet address to which the Deposit Tokens will be sent.

2.4.5 Once the Subscription Agreement has been executed by the Investor and the KYC/AML compliance checks processed satisfactorily on the platform and by the Fund Manager the order will be processed according to the terms and conditions set out herein.

2.5 Purchasing Deposit Tokens

2.5.1 Subject to subscribing to a Fund, Deposit Tokens may be received under a capital call for the subscribed amount. Once the Fund has received the funds and has validated that they are from a bank account owned by the Investor, the Fund Manager will mint the matching amount of Deposit Tokens and transfer it to the Investor Token Holder wallet.

2.5.2 If the FIAT contribution to be transferred does not originate from a bank account owned by the Investor, the FIAT contribution will be rejected by the platform and the Fund Manager and will be returned to its source. Transfers of funds from jurisdictions outside of the European Union may be subject to different time processes, bank holidays, jurisdictional delays and the internal process of the delivering bank of the Investor. This matter is outside the control of the Fund Manager and of the platform.

2.5.3 Once an issuance of the Deposit Tokens has been executed and the appropriate FIAT contribution received by the Fund Manager and the platform the transaction may not be reversible.

2.6 Cancelled Subscriptions and Purchases

2.6.1. The Fund Manager reserves the right to cancel, nullify and cease subscriptions and purhases on the platform if the order contains a bug, virus or anomaly or where the Fund Manager is aware of an actual or suspected breach of this agreement.

2.7 Fees and Charges

2.7.1 A detailed description of the fees and charges on issuance and redemption is set out at: https://docs.frictionless.markets/legal/fees/deposit-tokens and may be amended from time to time.

2.7.2 The Fund Manager and Fund reserves the right at all times to offer incentives to investors or reduced fees or charges at its sole discretion.

2.7.3 The Fund Manager and Fund reserve the right at any time to change or modify the fee and charging structure as it sees fit and in its absolute discretion. Any such changes, modifications or increases will be effective from the date and time of posting on the official fee card on the Fund Manager's website and will be subject to the requirements of applicable Luxembourg laws and regulations. The first use of your account or interaction with a Deposit Token following the posting on the site of any such changes to the fees or charging structure will constitute acceptance of such changes. If you do not agree with the changes as posted on the website you are at liberty to close your account as provided in this agreement.

3. Any Token Holder or Transferee Terms

This section applies to all transferees, purchasers and assignees of Deposit Tokens and is deemed to include any current holders of the Deposit Tokens. If you as an Investor, Manager or prospective participant and intend to hold Deposit Tokens or currently hold Deposit Tokens do not agree to accept all of the terms of this section please immediately discontinue access to and use of all services, products and the platform.

3.1.1 Deposit Tokens do not constitute legal tender, money or a monetary instrument. Once you hold Deposit Tokens, they can be transferred, traded, kept or redeemed from the platform and the Fund Manager and Fund subject to the limitations described in this Agreement and the conditions as set out in the management regulations of the Fund.

3.1.2 The Deposit Token is a tokenized representation of the FIAT note issued by the Fund and is fully based on cash custodied at G-SIB banking providers in the Grand Duchy of Luxembourg or the E.U. The Fund and the Fund Manager do not invest in any cash equivalents such as treasuries, repos, or government debt.

3.1.3. The attestation of balances held in the various compartments of the Fund is dependent on the fidelity of the data provided by the cash custodians, banking and service providers and the appointed fund accountants of the Fund Manager and the Fund.

3.1.4 The Fund Manager and the Fund may instruct the appointed fund accountants to aggregate attestations of multiple accounts to provide the total supply of a Deposit Token denominated in a given currency. The attestations are publicly available via the attestation contracts as defined at:

https://docs.frictionless.markets/developer/smart-contracts/deployments

3.1.5. Neither the Fund Manager nor its parent company nor any of its subsidiaries actively manage the currency contributions paid in by the Investors or any other permissioned participants on the platform. All of the investment decisions and choices as to a particular investment on the platform are made exclusively by the Investors, the investing institution, or their appointed advisers or agents. The accredited investor is therefore deemed to be a professional investor on the platform and to have knowledge of the investment risks that necessarily attend such investment decisions.

3.1.6 The Fund Manager and Fund passively manage a series of open-ended fund structures which are designed to securitise the currency contributions, and thereafter the Deposit Tokens can be used in the investment and settlement in tokenized securities from funds listed on the platform.

3.1.7. It is a matter for each token holder to make appropriate enquiries and checks as to the validity of the smart contracts used to issue the Deposit Token. Any other address purporting to offer access to the Frictionless protocol or services on the platform is invalid.

3.2 Upgrades and Freezes

3.2.1 As part of the ERC-3643 smart contract and as part of the Services, the Fund Manager has the ability and the right to freeze and upgrade all Deposit Tokens (on an aggregate basis), regardless of where the Deposit Tokens are being held. The Fund Manager will make commercially reasonable efforts to provide prior notice of any material freeze or upgrade and inform holders of Deposit Tokens of the reasons and consequences of such freeze and/or upgrade. The Fund Manager will make commercially reasonable efforts to use the freeze and/or upgrade feature only under limited circumstances.

3.2.2 The Fund Manager must comply with any legal and/or regulatory directive to freeze, temporarily or permanently, user access to the Deposit Tokens or the FIAT backing your Deposit Tokens with or without advance notice. The Fund Manager will only freeze such assets (1) if required to do so by law, specifically when the Fund Manager receives a formal legal directive from a regulator, judicial body, law enforcement agency, or other legal entity having jurisdiction over the Fund Manager, (2) pursuant to a formal notification by a the Fund Manager partner according to previously agreed contractual terms, or (3) as deemed necessary by the Fund Manager in its sole discretion. Legal directive formats include court-ordered subpoenas, national security letters, and formal written directives from a regulator with oversight over the Fund Manager.

3.2.3 Your Deposit Tokens and the FIAT backing your Deposit Tokens may be subject to seizure or forfeiture by a formal written legal directive from a regulator, judicial body, law enforcement agency, or other legal entity having jurisdiction over the Fund Manager, and we will comply with the legal process in respect thereof. Seizure may not occur under any circumstances absent such a binding legal directive. If tokens are seized, the Fund Manager transaction generation will ensure that the seized funds are sent to a segregated wallet address held by the Fund Manager for the purposes of seizure/forfeiture, until such time as they may be disposed of or otherwise handled as required by law.

3.2.4 If the Fund Manager determines after investigation that any of your Deposit Tokens have been used, or are being used, for illegal (or sanctioned) activity, we may not permit you to redeem your Deposit Tokens for FIAT from the Fund Manager, and, if presented for redemption, such Deposit Tokens and the FIAT backing such Deposit Tokens may be forfeited.

3.2.5 Any Deposit Tokens or FIAT currency underlying the Deposit Tokens that are subject to freeze, seizure, forfeiture or similar limitation on their use imposed by law may become wholly and permanently unrecoverable and unusable, and in appropriate circumstances, may be destroyed. If tokens are seized, the Fund Manager transaction generation will ensure that the seized funds are sent to a segregated wallet address held by the Fund Manager for the purposes of seizure/forfeiture, until such time as they may be disposed of or otherwise handled as required by law.

3.2.6 This Section 3.2 applies to all holders of Deposit Tokens

3.2.7 By using, or holding Deposit Tokens, you agree that we may take the actions set forth above and that we will not be liable to you therefore.

3.2.8 If any party is aware of improper conduct involving Deposit Tokens, the party should immediately contact the Fund Manager at [e-mail], as well as law enforcement to work towards filing a law enforcement report. The Fund Manager will make a reasonable effort to cooperate with law enforcement inquiries and assist with investigations pertaining to Deposit Tokens.

3.2.9 Regulators and law enforcement may submit information requests to [e-mail].

3.4 Illegal Use of Deposit Tokens

3.4.1 The Fund Manager may freeze, temporarily or permanently, your use of, and access to, Deposit Tokens or the FIAT backing your Deposit Tokens, with or without advance notice.

3.4.2 Your Deposit Tokens and the FIAT backing your Deposit Tokens may be subject to seizure or forfeiture by law enforcement, and we will comply with the legal process in respect thereof.

3.4.3 If the Fund Manager determines after an investigation that any of your Deposit Tokens have been used, or are being used, for illegal (or sanctioned) activity, we may not permit you to redeem your Deposit Tokens for FIAT from the Fund Manager, and, if presented for redemption, such Deposit Tokens and the FIAT backing such Deposit Tokens may be forfeited.

3.4.4 Any Deposit Tokens or FIAT currency underlying Deposit Tokens that are subject to freeze, seizure, forfeiture or similar limitation on their use imposed by law may become wholly and permanently unrecoverable and unusable, and in appropriate circumstances, may be destroyed.

3.4.5 This section applies to all holders of Deposit Tokens.

3.4.6 By using or holding Deposit Tokens, you, agree that the Fund Manager may take the actions set forth above and that will not be liable to you therefore.