Item 5. Fees and Compensation
The Adviser charges the Clients a fixed asset-based investment management fee (the “Management Fee”).
The Adviser, or Ayrton Capital GP LLC, (the “General Partner”), 1 the affiliate of the Adviser that serves
as the general partner of the U.S. Fund and the management company of the Offshore Fund, are also eligible
to receive from the Clients an incentive allocation (the “Incentive Allocation”), which is compensation
based on a share of realized and unrealized appreciation of the Clients’ net assets. Fund investors are
subject to the Management Fee and Incentive Allocation indirectly through their investment in the Funds.
The Management Fee is payable quarterly in advance and at an annual rate of 2.35%. The Management
Fee will be prorated for any period that is less than a full fiscal quarter, and will be adjusted for subscriptions
and withdrawals. Depending on the Client, the Adviser instructs the Client’s custodian to deduct the
Management Fee from the Client’s account.
1 The General Partner also acts as the management company of the Offshore Fund and the Master Fund.
The Incentive Allocation charged to certain Clients is 20% of the Clients’ net profits (including any realized
and unrealized gains and losses) and is subject to a loss carry-forward provision. The Incentive Allocation,
if any, will be reallocated to the Adviser or its affiliate at the end of each fiscal year, or at the time of full
or partial withdrawal from a Client, if other than year end.
In addition to paying the Management Fee and allocating the Incentive Allocation, the Funds will bear their
own expenses and their pro rata share of the Master Fund’s expenses related to the U.S. Fund’s, the Offshore
Fund’s and the Master Fund’s operations, respectively, including, without limitation, the following:
investment-related expenses (such as brokerage commissions) (see Item 12 for more information on
brokerage activity), research expenses (such as Bloomberg, Kynex and other research portals),
expenses related to expert networks, travel expenses (including, without limitation, those related to
attending research/idea sourcing conferences or meetings with management teams), due diligence or
investment research-related endeavors that may have a direct or indirect connection with the investments
in or of the Master Fund, costs and expenses associated with monitoring and administration of the Funds’
investments, expenses incurred in connection with transactions not consummated, interest on margin
accounts and other indebtedness, borrowing charges on securities sold short, fees in connection with the
administration of the Funds (including fees to the Administrator), custodial fees, bank service fees,
withholding and transfer fees, taxes, clearing and settlement charges, professional fees relating to
investments (including, without limitation, expenses of consultants and experts, legal, accounting, asset
valuation, audit and tax advisors), expenses related to the purchase, sale or transmittal of the Master Funds’
investments, costs of providing news, data and quotation services, costs of computer equipment, data feeds,
databases and software (including, without limitation, portfolio and risk management systems, accounting
systems, profit and loss calculation systems, costs of reporting positions to risk measurement and
aggregation reporting services—in each case, except to the extent provided through soft dollars generated
by a Master Fund Portfolio), accounting, audit and tax expenses, expenses for tax services, licensing
fees, advisory fees and compensation paid to sub-advisors (if any), fees and expenses of the Offshore
Fund’s and the Master Fund’s AML Officers (as defined herein) and other anti-money
laundering compliance expenses, registered office expenses, fees payable to the Offshore Fund and Master
Fund Directors, the Management Fee, organizational expenses and offering and governing document
update expenses (to the extent applicable and which may be amortized), legal expenses and costs of
legal services (including, without limitation, the costs of legal and regulatory advice by outside counsel
and costs related to in-house legal counsel as such internal counsel performs services that would be paid
by the Funds if outside counsel provided the same or similar legal or regulatory service), compensation for
investment professionals of the Adviser or its affiliates (including salaries and bonuses), costs and
expenses of compensatory arrangements for any outside consultants/advisors (i.e., legal or financial)
and/or idea-sourcing and transaction sourcing professionals, expenses of preferred service providers
specifically requested by investors of a particular Portfolio, compliance consulting expenses
(including, without limitation, mock audit expenses and any third-party expenses related to an evaluation
or exam), expenses in connection with regulatory and middle office providers (if any), regulatory
compliance fees and filing fees and expenses directly attributable to the Funds (as well as fees and
expenses associated with the completion of regulatory filings that are attributable to the Funds (including,
without limitation, Form PF filings and Form ADV filings)), expenses related to blue sky filings,
technology-related costs and expenses (including, but not limited to, software licenses, data feeds and
colocation expenses, as well as cybersecurity expenses, cybersecurity consulting and cybersecurity
insurance premiums), director and officer liability insurance or other insurance premiums for any principal
or employee of the Funds, the Adviser or any affiliate thereof (including, without limitation, errors and
omissions insurance, fiduciary liability insurance and ransomware insurance), expenses relating to the
offering and sale of interests in the Funds, marketing fees, expenses of communications to the Funds’
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