Terms

This offering supplement has to be read as forming part of and in conjunction with the offering memorandum currently in issue by the company in respect of the offer of participating shares in any and all segregated portfolios established from time to time by the company and containing general information in respect of the company and all such segregated portfolios.

The investments described in this confidential offering supplement have not been approved for offer or sale in the public under the securities laws of any country or jurisdiction.

This offering supplement is dated Dec 2024 and replaces all previous offering supplements issued in respect of the fund.

The participating shares involve significant risk and are suitable only for investors of substantial means who have no need for liquidity in their investments. See "Risk factors".

In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved.

The offering memorandum and this offering supplement are directed only to countries other than the united states. The investments described in this offering supplement are not being offered or sold in the united states or to us persons.

In the event of any conflict between this offering supplement and the offering memorandum, the terms of this offering supplement shall prevail.

NOTICE TO INVESTORS

If you are in any doubt about the contents of this document you should consult your accountant, lawyer, solicitor, or other independent professional adviser.

This offering supplement is not a prospectus or an advertisement, and the offering of the participating shares is not being made to the public.

This Offering Supplement has been prepared in connection with the offering and sale by SPC (the "Company") of redeemable non-voting participating shares in the Web3 Fund No. 1 (the "Fund"), a segregated portfolio of the Company. The Company is a segregated portfolio company incorporated with limited liability under the laws of the Cayman Islands. The Company has established the Fund as a separate segregated portfolio of the Company and may from time to time establish other segregated portfolios which may have different investment objectives and strategies to those of the Fund.

The Directors of the Company collectively and individually accept full responsibility for the accuracy of the information contained in this Offering Supplement and confirm, having made reasonable enquiry that, to the best of their knowledge and belief, there are no facts, the omission of which,would make any statement contained in this Offering Supplement misleading.

Only Eligible Investors (as defined herein) may apply for the Participating Shares that are the subject of this offering.

Certain information contained in this Offering Supplement may constitute "forward-looking statements", which can be identified by the use of forward-looking terminology such as "may","will", "should", "expect", "anticipate", "estimate", "intend", or "believe" or the negatives thereof or other variations thereon or comparable terminology. Such statements may be dependent on factors not within the control of the Company or the Directors and accordingly, the Company and/or the Directors do not warrant the accuracy of such. Nor should you consider the information all-inclusive. By their nature, certain forward-looking statements are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains and losses could materially differ from those that have been estimated.

No action has been taken to permit the distribution of this Offering Supplement or the offering of Participating Shares in any jurisdiction where action would be required for such purpose. The distribution of this Offering Supplement and the offering of Participating Shares may be wholly or partly restricted in certain jurisdictions. This Offering Supplement does not constitute an offer to sell or a solicitation of any offer to buy, nor shall there be any sale of Participating Shares in any jurisdiction where solicitation or sale would be prohibited by law prior to registration, qualification or exemption under the securities laws of such jurisdiction. It is the responsibility of any persons in possession of this Offering Supplement and any persons wishing to make application for Participating Shares on the basis of or pursuant to this Offering Supplement to inform themselves of and to observe fully the applicable laws and regulations of any relevant jurisdiction.

Reliance on the Offering Supplement

The Participating Shares are offered solely on the basis of the information and representations contained in the Offering Memorandum and this Offering Supplement and any further information given, or representations made by any person, whether orally or in writing, may not be relied upon as having been authorised by the Company or the Directors. Neither the delivery of this Offering Supplement nor the issue of Participating Shares implies that there has been no change to the facts and representations contained in it since the date hereof.

This confidential Offering Supplement has to be read as forming part of and one and the same document with and must be read only and in conjunction with the Offering Memorandum currently in issue by the Company, before investing in the Fund, and the offering of Participating Shares in the Fund is strictly based on both such documents together and qualified by the information, terms and conditions made in each of them.

This Offering Supplement is based on the law and practice in force in the Cayman Islands at the date hereof.

This Offering Supplement is not intended to provide any advice relating to legal, taxation or investment matters and prospective investors should not construe it as containing any such advice. Each investor should consult its own counsel and accountant as to tax, legal and other matters concerning this investment.

Restrictions on Distribution

The distribution of this Offering Supplement and the offering of Participating Shares in certain jurisdictions may be restricted and, accordingly, persons into whose possession this Offering Supplement may come must inform themselves about and observe any such restrictions. A prospective investor, by accepting delivery of this Offering Supplement, agrees to return it and all other documents delivered in connection with this offering to the Administrator if the prospective investor does not undertake to purchase any of the Participating Shares offered hereby. Any reproduction or distribution of this Offering Supplement, in whole or in part, or the divulgence of any of its contents, except to the prospective investor’s representative or advisers, without the prior written consent of the Company, is prohibited. This Offering Supplement does not constitute, and may not be used for the purposes of, an offer or solicitation by any person in any jurisdiction:

(a) in which such offer or solicitation is not authorised; or

(b) in which the person making such offer or solicitation is not qualified to do so; or

(c) to any person to whom it is unlawful to make such offer or solicitation.

Applicants for Participating Shares are required to declare that they are Eligible Investors (as defined herein) and the Directors may, in their discretion, reject any application. Holders of Participating Shares who cease to be Eligible Investors will be required to dispose of such shares either through redemption or, with the consent of the Directors, by transfer to an Eligible Investor.

TABLE OF CONTENTS

1. Fund Overview

2. Fund Management Structure

Investment Manager

Legal Advisor

Auditor

Fund Administrator

Fund Operations Support

Custodian Bank

Fund Registration Location

3. Investment Objectives and Strategy

Investment Objectives

Investment Strategy

4. Fund Operations and Fees

Target Scale

Planned Term

Management Fee Rate

Performance Fee Rate

Subscription and Redemption

5. Risk Management and Compliance

Risk Management

Legal Compliance

6. Investor Information

Target Investors

Investor Protection

7. Risk Factors

Web3 Crypto Fund No. 1

DEFINITIONS

Unless otherwise indicated, terms used and not defined herein shall have the meaning given to such terms in the Offering Memorandum. For the purposes of this Offering Supplement, the following expressions have the following meanings:

IMPORTANT INFORMATION ON THIS OFFERING SUPPLEMENT

This Offering Supplement relates to shares in the Fund, which is an independent investment portfolio of the Company.

Eligible Investors

Participating Shares may be purchased and held only by investors (i) who are aware of the risks associated with the trading activities to be undertaken by the Fund; (ii) who do not require immediate liquidity from their investments; (iii) who are aware that there can be no assurance that the Fund or the Participating Shares will be profitable or that the Fund will be able to meet its investment objective; (iv) who are not holding Participating Shares in breach of the law or requirements of any country or governmental authority; and (v) who are not holding Participating Shares in circumstances (whether directly or indirectly affecting such person and whether taken alone or in conjunction with any other person, connected or not, or any other circumstances) which, in the opinion of the Directors, might result in the Fund or the Investment Manager incurring any liability to taxation or suffering any other pecuniary, legal or administrative disadvantage which the Fund or the Investment Manager might not otherwise have incurred or suffered.

Unless otherwise agreed by the Directors, each prospective investor will be required to certify that the Participating Shares of the Fund are not being acquired by such investor directly or indirectly for the account or benefit of a "U.S. Person".

For the purposes of this Offering Memorandum, a "U.S. Person" is:

(a) a natural person who is a citizen of or resident in the U.S.

(b) a partnership, corporation or other entity (whether or not taxable or tax-exempt) either organized or incorporated under the laws of the U.S. or any political subdivision thereof or having its principal place of business in the U.S.;

(c) an estate or trust the income of which is included in gross income for U.S. federal income tax purposes regardless of its source;

(d) a trust if a court within the U.S. is able to exercise primary supervision over the administration of   the trust and one or more U.S. persons has the authority to control all substantial decisions of the trust;

(e) an agency or branch of a foreign entity located in the U.S.;

(f) a non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person;

(g) a discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the U.S.;

(h) a partnership or corporation or any corporate entity if (A) organized or incorporated under the laws of any foreign jurisdiction and (B) formed by one or more of the persons or entities described in (i) through (vii) above principally for the purpose of investing in securities not registered under the Securities Act;

(i) a pension plan for the employees, officers or principals of (A) any state in or the federal government of the U.S., or any political subdivision of or within, agency of, or any entity chartered pursuant to any of the foregoing, or (B) an entity organized or having its principal place of business in the U.S.; or

(j) an entity organized principally for passive investment if (A) at least 10% of such entity’s units are owned by persons or entities described in (a), (b), (c) or (i) above or (B) such entity was formed principally for the purpose of facilitating investment by persons or entities described in (a), (b), (c) or (i) above.

The Fund’s suitability standards represent minimum suitability requirements for prospective investors, and the satisfaction of such standards does not necessarily mean that the Participating Shares are a suitable investment for a prospective investor.

Any prospective investor acting in any fiduciary capacity is required to certify the number of beneficial owners for whom Participating Shares are being purchased.

It is the responsibility of each investor to verify that such investor’s purchase and payment for the Participating Shares is in compliance with all relevant laws of the investor’s jurisdiction of residence.

1. Fund Overview

WEB3 Crypto Fund 1 is a private equity investment fund that primarily invests in Web3 crypto assets to achieve medium - and long-term capital appreciation investment goals.  

2. Fund Management Structure

·Investment Manager

Hong Kong Web3 Crypto Fund Investment Management Co., Ltd. is responsible for the investment management of the Fund. With extensive investment management experience and a professional management team, the company is dedicated to maximizing investor benefits through scientific investment strategies and rigorous risk  control. Grayscale Investment（Hong Kong）Limited enjoys a high reputation in the private equity fund sector due to its exceptional management capabilities and extensive industry resources.

·Legal Advisor

Donald Wilson provides legal consultancy and compliance support to ensure the Fund’s operations and management adhere to relevant laws and regulations. As an internationally renowned legal advisory firm, Wilton Donald brings a wealth of legal experience and a professional team of lawyers to offer robust compliance and legal risk management for the Fund.

·Auditor

Moore Stephens Cayman is responsible for the financial audit of the Fund, ensuring the accuracy and transparency of financial reports. As a leading global auditing and consulting firm, Moore Stephens Cayman’s professional audit services help the Fund maintain high standards of financial transparency and compliance.

·Fund Administrator

Grayscale Investment（Hong Kong）Limited. is also in charge of the Fund’s administrative management, including daily operations and administrative tasks. Leveraging its rich administrative management experience and efficient operational team, the company ensures the smooth handling of all Fund-related matters.

·Fund Operational Support

Grayscale Investment（Hong Kong）Limited. provides comprehensive fund operational support to ensure the efficient operation and management of the Fund. With a professional operational team and a well-established operational mechanism, Hong Kong Ant Private Equity Fund Investment Management Co., Ltd. offers full-spectrum support services for the Fund.

·Custodian Bank

DBS Bank (Hong Kong) Limited provides custodial services for the Fund, ensuring the security and independence  of the Fund’s assets. As a leading bank in Asia, DBS Bank offers exceptional financial services and high security standards, providing solid assurance for the custody of the Fund’s assets.

·Fund Domicile

The Fund is registered in the Cayman Islands, enjoying the legal and tax advantages of this jurisdiction. As a globally renowned offshore financial center, the Cayman Islands offers a well-developed legal system and favorable tax policies, providing an ideal environment for the Fund’s establishment and operation.

3. Investment Objectives and Strategies  

·Investment Objectives

WEB3 cryptocurrencies

·Investment Strategies

On the basis of the original Web3 investment strategy of the Gray, we devoted to make Web3 investment in line with the laws and regulations of Hong Kong, and make a series of strategy supplements on the basis of the original strategy.

The fund focuses on secondary investment, with cooperation with market makers of high-quality projects as an auxiliary, which has a quantitative stable strategy under the continuous domestication of independent AI system from the top trading team, to continuously create returns for investors.

In the secondary investment of Web3, the fund focuses on the conditions of many years of research and investment experience, through the analysis of the global macro economy, supplemented by the understanding of the monetary policies of various central banks, and on the premise of immersive investment in Web3 for more than 10 years, to customize specific annual, quarterly and monthly strategies.

In addition, specific strategies will be carried out in CEX operations according to detailed indicators such as market capitalization, track, sector rotation, technical route, development route, and chain tracking, and some DEX operations will be carried out to obtain high returns.

·Risk Control Strategy

While pursuing returns, the fund will control risk through a multi-strategy model, and the maximum drawdown will be controlled within 30% in the long run.

4. Fund Operation and Fees  

·Expected Scale Target

The expected scale target for the Fund is HKD 200 million. By scaling up investments, the Fund will effectively diversify risks, enhance investment efficiency, and gain stronger market competitiveness.

·Planned Term

The planned term of the Fund is 1 year, meaning the initial term of the Fund is 1 year, which can be extended to the second and third years based on market conditions and investor demand. At the end of each term, the Fund Manager will evaluate the market environment and the Fund’s performance to decide whether to extend the term.

·Management Fee

The Fund’s management fee is 2% per annum, covering the Fund Manager’s management costs. The management fee will cover the Fund’s daily operations, investment management, and administrative expenses, ensuring the Fund’s normal operation.

·Performance Fee

The performance rate will be equal to 50% of the net asset value appreciation. The setting of performance rate aims to motivate fund management teams to pursue higher investment returns while ensuring the maximization of investors' interests.

·Subscription and Redemption

Participating shares will be issued at an initial subscription price of HKD 800,000 per participating share on the initial subscription date. To process applications for participating shares on the initial subscription date, the Manager must receive the subscription agreement by 5:00 pm (Hong Kong time) on the business day immediately preceding the initial subscription date. Cash subscription payments must be sent by wire transfer, net of bank fees, to be received in cleared funds in the Fund’s bank account no later than 5:00 pm (Hong Kong time) on the business day before the initial subscription date for the relevant segregated portfolio. Late applications or funds not cleared in time will be held without interest and invested on the next subscription date. Investors can make subsequent subscriptions after the initial subscription, with a minimum amount of HKD 100,000 for each subsequent subscription. All subscriptions must be paid in full.

Subscription Fee: The maximum subscription fee is 1%, charged once upon subscription, mainly covering the Fund’s issuance and sales costs.

Redemption Frequency: Redemption frequency is set to once a year, designed to maintain the Fund’s stability, avoid disruptions from frequent redemptions, and ensure investors have opportunities to retrieve their investment funds within the specified period.

Redemption: During the lock-up period, investors cannot redeem within the first year. After the first year, investors can choose to redeem or renew, with a maximum redemption fee of 2%. This policy provides  some flexibility for investors while protecting the Fund’s long-term investment strategy from short-term market fluctuations.

Dividend Policy: Cash dividends will be distributed. The dividend policy aims to provide investors with a stable cash flow while ensuring the Fund’s long-term growth.

Principal Distribution: The principal distribution will be made in the month following the expiration of the product. After the Fund matures, the Manager will conduct asset liquidation and profit distribution to ensure investors receive their principal and returns timely. The liquidation and distribution process will follow strict financial management and audit procedures to ensure transparency and fairness, providing assurance to investors.

5. Risk Management and Compliance

·Risk Management

The Fund adopts strict risk management measures to ensure the safety of investors' funds through diversified investments, insurance mechanisms, and emergency plans. The risk management strategy includes.

Market Risk Management: Reduce the impact of market fluctuations on the Fund's returns through diversified investments and dynamic portfolio adjustments.

Operational Risk Management: Ensure the standardization and efficiency of Fund operations through comprehensive internal control and management processes, reducing operational errors and management loopholes.

Technical Risk Management: Ensure the stability and efficiency of servers through regular maintenance and technical upgrades, reducing the risk of technical failures and performance degradation.

·Legal Compliance

The Fund will strictly comply with relevant laws and regulations of the Cayman Islands and Hong Kong during its establishment and operation, conducting regular compliance reviews and assessments to ensure the Fund's legality. Compliance measures include.

Compliance Review: Regular reviews of the Fund's operations by legal advisors to ensure adherence to relevant laws and regulations.

Compliance Training: Provide legal compliance training to the management team and employees to enhance their legal awareness and compliance capabilities.

Compliance Reporting: Regularly report the Fund's compliance status to regulatory authorities and investors, ensuring information transparency and openness.

6. Investor Information

·Target Investors

The fund is aimed at professional investors, including institutional investors and high-net-worth individuals. Professional investors have a strong risk tolerance and investment experience, enabling them to fully understand and accept the fund's investment risks and expected returns.

·Investor Protection

The fund management team will ensure the full protection of investors' rights and interests through information transparency, customer service, and investor education. Investor protection measures include.

Information Transparency: Regularly disclosing the fund's operational status and performance to investors, ensuring they are well-informed about the fund's latest developments.

Customer Service: Providing professional customer service and consultation, promptly addressing investors' questions and needs, thereby enhancing their trust and satisfaction.

Investor Education: Conducting investor education activities to increase investors' risk awareness and investment capabilities, helping them make informed investment decisions.

7. Risk Factors

Investing in this fund involves various risk factors that investors should fully understand and assess in order to make informed investment decisions. The main risks faced by this fund include.

·Market Risk

Market Volatility: The fund's returns may be affected by market volatility, which includes changes in the overall economic environment, industry-specific risks, and market sentiment fluctuations. These factors may cause significant fluctuations in the value of the fund's assets.

Economic Environment: Global or regional economic recessions, inflation, changes in interest rates, and other macroeconomic factors may affect the fund's investment returns.

·Operational Risk

Management Errors: Errors in decision-making or operations by the fund management team may result in asset losses or investment returns that are below expectations.

System Failures: The fund's operations rely on high-performance computing and data management systems. Any system failures or technical issues could affect the normal operation and returns of the fund.

·Policy Risk

Regulatory Changes: The fund's operations are subject to regulatory policies in various regions. Any changes in these policies may impact the fund's compliance and returns.

Tax Policy: Changes in tax policies may increase the fund's tax burden, thereby affecting investment returns.

·Liquidity Risk

Market Liquidity Shortage: During market downturns or unexpected events, market liquidity may be insufficient, making it difficult to liquidate fund assets and meet investors' redemption needs.

Redemption Restrictions: The fund has certain redemption restrictions and lock-up periods, which may impose liquidity constraints on investors, preventing them from quickly liquidating their investments.

·Credit Risk

Counterparty Default: Partners or suppliers related to the fund's operations may default, affecting the fund's normal operations and returns.

Asset Credit Risk: Investments in high-performance servers and data center-related assets may face credit risks, such as the poor financial condition of equipment suppliers.

·Legal and Compliance Risk

Changes in Laws and Regulations: Changes in laws and regulations may affect the fund's operations and compliance, such as data privacy laws and financial regulatory requirements.

Compliance Management: Failure to timely comply with relevant laws and regulations or penalties from regulatory agencies may negatively impact the fund's reputation and operations.

·Natural Disaster and Force Majeure Risk

Natural Disasters: Earthquakes, floods, fires, and other natural disasters may damage server equipment and data centers, affecting the normal operations and returns of the fund.

Force Majeure Events: Unforeseeable events such as wars and terrorist attacks may significantly impact the fund's assets and operations.