WHITE PAPER

Version 2.1
December 5th, 2017
Table of Contents

1. Introduction .......................................................................................................................................................4

2. Investors ................................................................................................................................................................5

3. Tokenized Fund ................................................................................................................................................5

4. Leadership Team .............................................................................................................................................7

5. Investment Strategy .....................................................................................................................................9

6. Tokens ....................................................................................................................................................................11

7. Economic Model ............................................................................................................................................ 12

8. Technical Solutions ...................................................................................................................................... 14

8.1. Components....................................................................................................................................... 14

8.2. Asset Management and the Website ...............................................................................14

8.3. Backend Service............................................................................................................................... 15

8.4. Smart Contracts on Ethereum Blockchain .................................................................. 15

8.5. Investment Flow ............................................................................................................................. 15

8.6. The Code .............................................................................................................................................. 15

9. Risks ........................................................................................................................................................................16

10. Liquidation .........................................................................................................................................................16

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Abstract

With the development of blockchain technology and the rapid growth of the crypto-currency
market, new opportunities appear consistently in the field of Investment. The traditional
economy changes its form, new values arise in the digital "world" and a significant role in
these processes is played by decentralised technologies, in which cryptocurrencies and digital
tokens play a critical role.

Most of private investors and even many professional participants do not have enough
knowledge about the crypto currency markets or find it difficult to make a choice from a
variety of objects for investment. For them, it is important not to miss the opportunities to get
additional income, using safe and handy tool. Professionals of the crypto market (portfolio
managers and traders) are also often not sufficiently open to potential investors. That's why
The Token Fund was launched.

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1. Introduction

The past and current trend of initial coin offerings (ICO) has led to more than 1000 new
cryptocurrencies being created which are traded daily. Some have proven to have gained trust
and support among people in the community, whereas some have ended up in “pump and
dump“ territory. During 2017, the volume of trade at the crypto exchanges increased tens of
times, in November, going over the threshold of 25 billion USD per day. At the same time, the
total market capitalization of all crypto-assets increased from 18 to 300 + billion USD, which is
more than 1600%. For comparison, the S&P 500 index for the same period added only 16%. The
market price of the «main cryptocurrency» Bitcoin has grown more than 10 times in the last
year.

However, returns can be misleading and expertise in the investment field as well as an
understanding of crypto coin content is needed to gain optimal exposure into the crypto
investment universe.

Cryptocurrencies are an evolving investment asset which shouldn’t be overlooked by an

investor willing to diversify its portfolio. As correlation between assets in the real economy is
moving towards 1 (particularly at a time of distress on markets), cryptocurrencies have a much
smaller correlation between themselves, in some cases close to zero. Therefore, assets from
the new economy are serving as a natural hedge as they are disconnected from the
traditional market and represent an alternative. Cryptocurrencies can be split into at least two
types of assets:

- One group consists of pioneer currencies based on blockchain technology such as

Bitcoin. This type of digital asset serves as an alternative for the transfer of wealth across
the globe, being fully transparent, secure and effective. Its intrinsic value lies in its use as
a medium of exchange and as a store of value. The number of transactions, demand and
grade of trust drive the value of currencies such as these;

- The second group consists of “app tokens” that are more reminiscent of traditional
company bonds, shares, where the company acts as a decentralised autonomous
organization. Such projects have been growing exponentially in the last year as the
community is perceiving the new economy as similar to the sharing economy.
Importantly, such organizations can deliver value added services, which are comparable
to the traditional economy but far more efficient and cheaper for the consumer.

We believe that the second group of cryptocurrencies, or better “app tokens” will, with the
help of smart contracts, replace the traditional type of services. Growing interest in such assets
may be promising something big, perhaps a revolution similar to the one the Internet
provided in the early 90s. At that point, there wasn’t an option to invest in a service such as the
Internet. Now we believe there is and the best way to achieve it is to diversify assets via an
investment vehicle such as a fund.

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2. Investors

The target group of investors consists of individuals and institutional investors who either have
some understanding about the cryptocurrency world or those who mainly want to diversify a
small part of their classical financial assets into the new economy. It is expected that the large
majority of people outside the community are still sceptical about cryptocurrencies and that it
will take time to gain support among them.

Nevertheless, inflated equity valuations, negative yields and a lack of alternative opportunities
to invest in the current investment environment will force investors to take part in
cryptocurrencies and businesses created upon blockchain technology. The exponential rise of
blockchain technology used in real businesses is already delivering visible value added effects
to the economy. Undoubtedly such a revolution, although gradual, will not be overlooked by
the retail investors.

3. Tokenized Fund

There are various types of funds that already invest in crypto assets (Hedge Funds, Classic
ETFs, Closed-End Funds, Venture Capital Funds). Independent and still a small segment of the
market are tokenized funds. The key phenomena here is that investors acquire a share
calculated by reference to the assets in the fund, implemented through tokenized smart
contracts.

What are the advantages of tokenized funds? Consider the answer to this question, listing the
main potential features of tokenized funds:

Characteristics Description

Class of assets that the Any tokenized assets

fund can invest in

Period of operation of Stipulated by terms of the fund, can be evergreen or with

funds a limited investment period and term

Types of funds Any category of investor, regardless of the amount of

(investor category) investment (the restriction to the capacity of the crypto-
active market itself)

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 The certification of the In the form of fund tokens. The value of 1 token is equal to
rights to shares of the total value of assets in the fund's portfolio divided by
investors in the fund the total number of tokens. The security of storing the
fund's tokens and the authenticity of the transaction
history for investors is ensured by the technology of
blockchain

Automation of the Receipt of investors' funds, issue of tokens (shares) and

process for mutual reverse process of payment of funds are fully automated:
settlements payment processing is connected with the fund's smart
contract. The fund commission is also automated with the
help of a smart contract.

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4. Leadership Team

VIKTOR SHPAKOVSKY VLADIMIR SMERKIS

MANAGING PARTNER, FUND MANAGER MANAGING PARTNER, FUND MANAGER

Co-founder at the Digital360 web Managing Partner at Brandship.me. Ex-

development agency. deputy vice-president for international
development at Mail.ru Group.

IGOR DOGANOV VADIM KOLEOSHKIN

FUND MANAGER PARTNER, PRODUCT MANAGER

Began his career at the investment Hi-tech entrepreneur and software

company Finam, becoming the head of the engineer. Co-founder of Jufy Projects (more
regional training centre. Certified appraiser, than 100 successful corporate projects). Co-
worked in the mortgage division of Bank founder of a fintech company Zerion
Otkritie. (powering ICOs around the globe).

ALEXEY BASHLYKOV EVGENY YURTAEV

PARTNER, ETHEREUM DEVELOPER PARTNER, ARCHITECT

Chief Technology Officer (CTO) at Zerion. CEO at Zerion. Founder and developer at
CryptoTrader.

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 EUGENE YURYEV DMITRY SHMAKOV
HEAD OF PRODUCT DESIGN CHIEF MARKETING DIRECTOR

Co-founder at Bikelane Studio, Miami, one Has great experience in marketing and
of the leading firms in creating visual related industries. ChronoPay — VP
identities and app UI's for the largest sports Marketing and Business development,
companies and rapidly growing financial Rambler Internet holdings —
start-ups. Communications Director, International
Media Group — CEO, Goodwin Augmented
Reality — CEO.

SERGEY RASTORGUEV ALEKSANDR VOLKOV

FRONT-END ENGINEER LEAD BACKEND DEVELOPER

Experienced front-end engineer focused on Full-stack developer and software engineer

single-page applications powered by React. with more than 10 years of experience,
Solves uncommon problems and simplifies including project developments for the
complex things with the help of new energy sector. Certified PHP and
methods. Has an experience of cooperation cryptography engineer.
with leading companies, such as Art.
Lebedev Studio.

OUR FUND MANAGERS ARE RESPONSIBLE FOR:

RATIONAL EFFICIENT, SECURITY AND DEVELOPMENT OF

INVESTMENT TRANSPARENT AND CONTINGENCY THE FUND IN
DECISIONS PROVABLE MEASURES TERMS OF
OPERATIONS MARKETING AND
CUSTOMER SERVICE

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5. Investment Strategy

The investment strategy of the fund is focused on maximizing profitability with a controlled
level of risk.

The Token Fund token (hereinafter referred to as TKN) weighted by its market cap targets
conservative investors. Note, however, that cryptocurrencies have extremely high volatility in
practice, compared to traditional financial instruments and are without a doubt risky
investments. Daily volatility (standard deviation) in many cases exceeds 10%. On the other
hand, cryptocurrencies have very low correlation (in many cases close to 0) when compared
with one another. This is a very positive sign for fund efficiency at delivering risk diversification.

All cryptocurrencies and tokens have a monetary (fiat) value. Even the price of
cryptocurrencies and tokens traded only in a pair to BTC is ultimately expressed in USD,
because Bitcoin has this rating. Thus, the key indicator for the fund profitability - dynamics of
the TKN price in USD (US dollars). At the same time, the additional goal is to maximize
profitability in comparison with the cryptocurrencies accepted as settlement in fund: BTC and
ETH.

The primary investment focus of the fund’s portfolio is on solutions that enable the essential
autonomous infrastructure for supranational economy: decentralised computation, data
storage and communications, decentralised exchanges, investment solutions, prediction
markets, pegged assets protocols, cross chain gross settlement systems, identity protocols,
DAO and smart contract frameworks, reputation systems and social networks.

The Token Fund managers hold the view that diversification is necessary not only in terms of
including a large number of assets in the portfolio. It is also important to leave the possibility
of extracting income from various market conditions and new investment opportunities
(Initial Coin Offering). That is why a combined investment strategy will be applied. Investment
and trading decisions will be made in the following types of strategies:

PORTFOLIO INVESTMENT WITH A MEDIUM AND LONG-TERM HORIZON PLANNING

(AT LEAST 60% OF THE FUND'S ASSETS)

Evidence from the practice of investing in stocks suggests that passive portfolios can
outperform the actively managed accounts in the long term, especially if the investor tends to
low volatility and stable income from assets. Passive accounts track indices and have low
transaction costs because of lower mandatory turnover. Currently, there is no generally
accepted index for crypto assets, however passive funds can determine their own investment
policy with the help of index characteristics.

In practice, creating an index which will be implied in The Token Fund portfolio structure is
usually done by setting a structure according to market capitalisation of known currencies.
Being the most dominant currency by market cap, Bitcoin may easily takes more than 50% of
all portfolio. That is why certain limits have to be imposed on the structure. Market cap
shouldn’t be the only factor affecting the index structure. Traded volume should play an
important role, as well as the “free float” of the currencies. Seeking the optimal structure of

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The Token Fund portfolio is more art than science. As mentioned, currencies should be added
to the portfolio based mostly on their market cap by applying some limitations:

- Only eligible currencies can enter the selection process (currencies based on blockchain
technology);

- The portfolio should be limited to those currencies which are easily tradable on the
exchange on a daily basis. Average daily turnover in last 6 months should therefore not
be below 100,000 USD. Exceptions can be done only for cryptocurrencies and tokens
acquired during the initial placement (ICO, ITO, TGE of the projects), while the share of
assets sent to a separate project can not exceed 5% of the fund's assets at the time of
investment.

- Once a selection is made, the structure of the portfolio is based on pre-defined rules. A
rational investor does not want to be too exposed to individual currencies, therefore
maximum weight should be applied (25%).

- Because of the high risk of the cryptocurrency market volatility, especially the alt coin
market, maximum weight of Bitcoin and Ethereum may be applied more than 25%.

PORTFOLIO INVESTMENT AND TRADING WITH A SHORT-TERM HORIZON

PLANNING (NOT MORE THAN 40% OF THE FUND'S ASSETS)

This strategy is implemented by managers and the analytical team of the Fund to decrease
the volatility of the TKN price on the falling market and to use the market move during “flat”
periods. These positions can be accounted for in large part within the general balances of
USD, BTC, ETH.

Once the portfolio structure rules are set, rebalancing rules should be defined. Namely, The
Token Fund structure becomes very dynamic with the daily movement of prices. Therefore,
weekly or monthly rebalancing is proposed, whereby the fund managers makes the required
transactions to reset investment fund structure in accordance with predefined rules. The fund
managers reserves their right to rebalance the portfolio to its target structure within 1 day of
the rebalancing date. Similarly, the weights of the fund’s investments will be set according to
the rules, where deviation of +/- 5 percentage points is allowed during the rebalancing period.

The fund managers reserve the right not to participate in the separation (splits) of existing
blockchain systems (hardfork), if these decisions are dictated by the investment strategy of the
fund, as well as for security reasons.

Predefined rules will be followed by the fund managers regularly unless specific market
events occur (low liquidity of certain currencies, investments are too risky despite their
growing market cap, systemic risk spreading, etc.). As mentioned, the fund managers will act
in the interest of the fund’s investors and their investments, therefore it reserves its right to
overrule fund policy rules when an experienced team of currency analysts assesses that too
risky investment decisions could be undertaken.

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6. Tokens

Supply of TKN depends on incomes and outcomes of fund’s capital. Every time a purchaser
sends BTC or ETH to The Token Fund BTC or ETH address The Token Fund issues TKN based
on a price which is calculated at 12:00 and 00:00 UTC each day.

TOKEN PRICE = ⦗ Value of Assets ⨸ Supply ⦘

PURCHASER’S TOKENS = ⦗ Investments ⨸ Token Price ⦘ ⊝ Entrance Fee

Every time a TKN holder sends TKN to The Token Fund account tokens are destroyed. Payout
is calculated based on a price which is calculated at 12:00 and 00:00 UTC each day.

TOKEN PRICE = ⦗ Value of Assets ⨸ Supply ⦘

INVESTMENTS = ⦗ Investments ⨸ Token Price ⦘ ⊝ Entrance Fee

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7. Economic Model

Entry fee. Any time a purchaser wants to enter The Token Fund 5% of issued tokens is being
deducted to reward fund managers and tech support. The allocation of rewards is the
following:

- Fund managers: 4% of tokens

- Tech support: 1% of tokens.

Exit fee. Any time a purchaser wants to exit The Token Fund 5% of bitcoins or ether of payout is
being deducted to reward fund managers and tech support. The allocation of rewards is the
following:

- Fund managers: 4% of bitcoins or ether;

- Tech support: 1% of bitcoins or ether.

Figure 2 shows rewards allocation for entering and exiting the fund.

Entry fee — 5%

Deposit 2

Deposit money
2

1 95%
4% 1%

Withdrawal
request
Fund Tech
Investor 3
Managers Support

4
Investment 4% 1%
value
95%

5 Withdrawal 5

Exit fee — 5%

FIGURE 2. DEPOSIT/WITHDRAWAL MONEY ALLOCATION.

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Tokens are produced on the Ethereum platform, operating standard ERC-20.

Ethereum based tokens rely on a well-established Ethereum infrastructure, benefiting from

several advantages:

- Security and solidity;

- Use of robust and well-supported clients (Ethereum-based tokens can be managed with
official Ethereum clients);

- Ethereum smart contracts enable a very transparent and secure way of reward -sharing
among the token holders.

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8. Technical Solutions

8.1. COMPONENTS

The technical solution for The Token Fund consists of three main elements: User-facing
website, backend server for asset management and smart contracts on Ethereum blockchain.
Figure 1 contains basic technical solution overview.

THE TOKEN FUND THE TOKEN FUND BACKEND 3

WEBSITE
– Website content
– Portfolio statistics
– Investor dashboard
Upd
ate
por
tfol Asset
io
Parser
Landing
Backend
page Bitcoin
Server & Ethereum
Payment
t
men Processor
vest
ct in
Colle

THE TOKEN FUND BACKEND 4

Request new
token issuance
The Issue Tokens ERC-20
Dashboard Transfer
Token Fund TKN
Smart Smart Tokens
Write latest token
Contract Contract
price on the
blockchain

FIGURE 1.
THE TOKEN FUND TECHNICAL SOLUTION OVERVIEW.

8.2. ASSET MANAGEMENT AND THE WEBSITE

All the fund's assets are located at publicly accessible Google Sheet. Every 12 hours asset
parser component calculates current portfolio value and fund performance using API of
popular blockchain explorers in order to receive balances of fund wallets and information from
the token smart-contract. Fund performance and portfolio composition from the table are
graphically displayed on the front page of The Token Fund.

The client who wants to make investments and purchase TKN must undergo the KYC
procedure ("know your customer"), for which identification documents are needed. The KYC
procedure is carried out through the website interface.

In the dashboard an investor is able to create a wallet and back up the keys for it. An address
provided by an investor or newly generated one is used by the service to issue new tokens.

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8.3. BACKEND SERVICE

Backend service is responsible for storing wallet addresses for investors and for interacting
with Ethereum Smart Contract. It takes current token supply from TKN contract and
calculates last token price based on the fund portfolio asset value. After that, it acts as an
oracle by publishing the latest price of the token on The Token Fund contract. The backend is
also responsible for initialising new token issuance once it gets investment in Bitcoin or
Ethereum through the dashboard.

8.4. SMART CONTRACTS ON ETHEREUM BLOCKCHAIN

The business logic of The Token Fund is controlled by two smart contracts on the Ethereum
blockchain: one is a token that stores the balances of investors in the fund (TKN contract), and
another is responsible for issuing new tokens in exchange for invested money (The Token
Fund contract). TKN contract is based on the ERC-20 standard token contract with an extra
function that allows new token emission. This function is only accessible by The Token Fund
contract.

8.5. INVESTMENT FLOW

A regular way of investing requires sending bitcoin or ether to the personal investment
address available in the dashboard. After receiving an investment, the backend triggers the
function on The Token Fund contract that calculates the number of tokens the investor should
be distributed based on the current price of the token. After that, the backend service
executes issuance function on The Token Fund contract to mint new tokens for a new investor.

8.6. THE CODE

You can find the code of all our contracts at these links:

GitHub TKN contract The Token Fund Asset parser

repository contract

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9. Risks

The purchase of TKN carries with it significant risks. Purchasers and fund managers are
exposed to the following risks: inherent market risk, liquidity risk, technological risk, loss risk,
theft risk, regulatory risk, miscomprehension risk. By sending bitcoins or ether to address the
purchaser agrees that he or she understands and accepts these risks and potential losses of all
funds without a possibility to restore. Fund managers do not hold any risks except for risk of
losing personal investments.

For security reasons, fund managers reserve the right not to disclose information o about the
way of storing crypto-assets, or to change the content of information published in the public
domain.

10. Liquidation

The following events could trigger the liquidation procedure:

DECISION IMPOSSIBILITY OF THE FUND

OF TWO FUND MANAGERS ADMINISTRATION BY BOTH
MANAGERS

The following procedures will be executed in case of liquidation:

1 2 3
All available holdings All ETH are split across All ETH are sent
are exchanged into ETH TKN holders to the registered
proportionally to their
in 2 weeks period addresses of TKN holders
share of The Token Fund
(excluding fees)

If there is an illiquid asset under possession, it is held by fund managers or a trusted person
until it could be exchanged into ETH.

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Limitation of Liability

THE INFORMATION PROVIDED IN THIS DOCUMENT IS NOT INTENDED FOR DISTRIBUTION

TO, OR USE BY, ANY PERSON OR ENTITY IN THE UNITED STATES OR THE REPUBLIC OF
SINGAPORE, OR IN ANY JURISDICTION OR COUNTRY WHERE SUCH DISTRIBUTION OR USE
WOULD BE CONTRARY TO ANY LAW OR REGULATION, OR WHICH WOULD SUBJECT THE
TOKEN FUND AND/OR ENTITY CREATING THE TKN TOKENS (INCLUDING THEIR AFFILIATES)
OR ANY OF THEIR PRODUCTS OR SERVICES TO ANY REGISTRATION, LICENSING OR OTHER
AUTHORISATION REQUIREMENT WITHIN SUCH JURISDICTION OR COUNTRY.

YOU ARE ONLY ALLOWED TO PURCHASE TKN TOKENS IF AND BY BUYING TKN TOKENS YOU
COVENANT, REPRESENT, AND WARRANT THAT YOU ARE NEITHER A U. S. CITIZEN OR
PERMANENT RESIDENT OF THE UNITED STATES, NOR DO YOU HAVE A PRIMARY
RESIDENCE OR DOMICILE IN THE UNITED STATES, INCLUDING PUERTO RICO, THE U. S.
VIRGIN ISLANDS, AND ANY OTHER POSSESSIONS OF THE UNITED STATES. IN ORDER TO
BUY TKN TOKENS AND BY BUYING TKN TOKENS YOU COVENANT, REPRESENT, AND
WARRANT THAT NONE OF THE OWNERS OF THE COMPANY, OF WHICH YOU ARE AN
AUTHORISED OFFICER, ARE U. S. CITIZEN OR PERMANENT RESIDENT OF THE UNITED
STATES, NOR DO YOU HAVE A PRIMARY RESIDENCE OR DOMICILE IN THE UNITED STATES,
INCLUDING PUERTO RICO, THE U. S. VIRGIN ISLANDS, AND ANY OTHER POSSESSIONS OF
THE UNITED STATES. SHOULD THIS CHANGE AT ANY TIME, YOU SHALL IMMEDIATELY NOTIFY
THE CREATOR OF TKN TOKENS.

CREATOR OF TKN TOKENS SHALL RESERVE THE RIGHT TO REFUSE SELLING TKN TOKENS
TO ANYONE WHO DOES NOT MEET CRITERIA NECESSARY FOR THEIR BUYING, AS SET OUT
HEREUNDER AND BY THE APPLICABLE LAW. IN PARTICULAR, THE CREATOR OF TKN
TOKENS MAY REFUSE SELLING TKN TOKENS TO U. S. CITIZENS, PERMANENT RESIDENTS OF
THE UNITED STATES AND THOSE USERS WHO DO NOT MEET ELIGIBILITY CRITERIA
ESTABLISHED BY THE CREATOR OF TKN TOKENS FROM TO TIME IN ITS SOLE DISCRETION.

The data content of this document is intended for general information purposes only and
does not constitute solicitation of or an offer to purchase any securities. This document should
be used for general research purposes only. It does not, nor does it purport to, constitute any
form of professional investment advice, recommendation or independent analysis.
Consequently, the information contained on this document has not been prepared in
accordance with the relevant rules and regulations governing such publications in various
jurisdictions.

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THETOKEN.IO