held) will not take a contrary position. In addition, changes in law or changes to the Trust’s Staking Arrangements could cause all or a portion of the Trust’s staking rewards to be treated as U.S.-source FDAP income in the future. As a result, Non-U.S. Holders (as defined under “Material U.S. Federal Income Tax Consequences—Tax Consequences to Non-U.S. Holders”) should be aware that, in the absence of guidance, a withholding agent (including a broker through which a Non-U.S. Holder holds Shares) may withhold 30% of any such income recognized by a non-U.S. Holder in respect of its Shares, including by deducting such withheld amounts from proceeds that such non-U.S. Holder would otherwise be entitled to receive in connection with a distribution of Incidental Rights, IR Virtual Currency or Staking Consideration received as staking rewards. See “Material U.S. Federal Income Tax Consequences.” In addition, the Trust may enter into Staking Arrangements with Staking Providers organized in, or that have operations in, a non- U.S. jurisdiction. Non-U.S. jurisdictions may seek to impose withholding tax on Staking Consideration received by the Trust as staking rewards, which may negatively affect a shareholder’s investment in the Trust. Risk Factors Related to Staking Although the Trust is permitted to engage in Staking, the Trust will not be permitted to engage in any different form of Staking unless (and, then, only to the extent that) the Staking Condition is satisfied in addition to the Trust satisfying any additional requirements that may arise in connection with the satisfaction of the Staking Condition, which could negatively affect the value of the Shares. Although the Trust is permitted to engage in Staking, the Trust is only permitted to engage in Staking to the extent that the Staking Condition is satisfied with respect thereto. There can be no assurance that the Trust will be permitted to engage in any different form of Staking in the future. The Trust Agreement provides that the Trust may engage in Staking, but only if (and, then, only to the extent that) the Staking Condition has been satisfied. Subject to the Staking Condition being satisfied and subject to compliance with certain related requirements, in the future the Sponsor may, from time to time, seek to modify the form of Staking in which the Trust engages, but only if (and, then, only to the extent that) the Staking Condition has been satisfied with respect to any such modified form of Staking, and subject to compliance with any additional requirements that may arise in connection with satisfaction of the Staking Condition with respect thereto. However, as long as the Staking Condition and any related requirements have not been satisfied with respect to any modified form of Staking, the Trust will not be permitted to engage in such modified form of Staking, which could place the Shares at a comparative disadvantage relative to an investment in SUI directly or through a vehicle that is not subject to such a prohibition, which could negatively affect the value of the Shares. Staking introduces a risk of loss of SUI, which could adversely affect the value of the Shares. Staking introduces a risk of loss of SUI. None of the Trust’s assets, including potentially staked assets, are subject to the protections enjoyed by depositors or customers of institutions with FDIC or Securities Investor Protection Corporation membership. The Sui Network may impose penalties (i.e., “slashing”) if a validator commits malicious acts related to the validation of blocks with invalid transactions. Although the Sui Network does not implement slashing of staked principal, the protocol may impose penalties—such as loss of rewards or removal from the validator set—if a validator commits malicious acts or fails to perform required validation activities. There can be no guarantee that slashing penalties and resulting losses will not occur as a result of the activities of a Staking Provider. Furthermore, a Staking Provider’s liability to the Trust is expected to be limited, and a Staking Provider may lack the assets or insurance in order to support the recovery of any losses incurred. While the Staking Arrangements may provide for indemnification up to a specified cap, slashing insurance or other reimbursement programs, there can be no guarantee that the Trust would recover any of its staked assets, or the value thereof, if it is subject to penalties imposed by the Sui Network. Staked SUI tokens will be inaccessible for a variable period of time, determined by a range of factors, which could result in certain liquidity risk to the Trust. Under current Sui Network protocols, staked SUI tokens are permitted to be un-staked by the holder of the private keys for the withdrawal address of such SUI tokens. However, as part of the “activating” and “exiting” processes of staking, staked SUI tokens will be inaccessible for a variable period of time determined by a range of factors, including network congestion, resulting in certain liquidity risks that the Sponsor plans to manage. “Activation” is the funding of a validator to be included in the active set, thereby allowing the validator to participate in the Sui Network’s proof-of-stake consensus protocol. “Exit” is the request to exit from the active set and no longer participate in the Sui Network’s proof-of-stake consensus protocol. As part of these “activating” and “exiting” processes of staking on the Sui Network, any staked SUI will be inaccessible for a period of time. The duration of activating and exiting periods are dependent on a range of factors, including network conditions. However, depending on demand, un-staking can
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