Internal Fund Management Policy

Source: Notion | Last edited: 2024-12-02 | ID: 1492d2dc-3ef...

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I. Purpose and Background

1.1 Policy Objectives

• Establish clear guidelines for internal fund operations and investment mechanisms.
• Align company product and service regulations with organizational goals and employee benefits.
• Encourage participation in the company’s internal fund for mutual growth of employees and the company.
• Create a fair, transparent, and incentive-driven structure for internal investments.

1.2 Current Situation Analysis

The company currently faces the following circumstances:

• Single revenue structure, primarily consisting of Capital Gains
• Business Costs cannot effectively offset capital gains tax
• Significant growth in personal investment accounts while company AUM shows limited growth Based on these circumstances, we have decided to adjust the existing investment structure.

II. New Policy Details

2.1 Fund Structure

• All members’ investment capital will be consolidated into Axon Capital’s internal fund.
• Each member becomes a fund unit holder based on their investment proportion.
• Fund returns will be denominated in USD.
• Fund profits and risks are shared among all unit holders.

2.2 Fee Structure

• External Fund Current Rates (For Reference Only):
  • Axon Capital: 2% Management Fee + 20% Performance Fee
  • MSA: 0% Management Fee + 30% Performance Fee
• Internal Employee Fund Rates:
  • Management Fee: 0%
  • Performance Fee: 15% (subject to 2.2.1 High Water Mark conditions)
• Internal fund fees will be recorded as revenue for Eon Labs Ltd.
• These rates apply to all internal members of Eon Labs Ltd.

#### **2.2.1 High Water Mark Implementation**

- Performance fee calculation incorporates a High Water Mark (HWM) mechanism
- Performance fee applies only when the fund's total NAV exceeds its previous HWM
- Total NAV includes both trading performance and crypto asset value changes
- No performance fee charged if total NAV is below HWM, regardless of source of losses
- This structure incentivizes capital preservation during bear markets

#### **2.2.2 Performance Fee Calculation Example**

Scenario Analysis:
- Initial Investment: $1,000,000
- High Water Mark: $1,000,000

Case 1: Bull Market Scenario
- Trading Gains: +$100,000
- Crypto Holdings Value Change: +$50,000
- Total NAV: $1,150,000
- Amount Above HWM: $150,000
- Performance Fee: $22,500 (15% of $150,000)
- New HWM: $1,150,000

Case 2: Bear Market Scenario
- Trading Gains: +$50,000
- Crypto Holdings Value Change: -$100,000
- Total NAV: $950,000
- Performance Fee: $0 (below HWM)
- HWM Remains: $1,000,00

III. Performance Deductible Credit (PDC) System

3.1 System Description

Starting from 2025, the company will issue PDCs to members who make significant contributions. PDCs function as consumable credits in the following way:

• Each PDC represents a one-time deductible amount. When applied to offset performance fee calculations, PDCs are consumed and cannot be reused
• Unused PDCs expire after 5 years from their issuance date
• PDCs are non-transferable and can only be used by the recipient

3.2 Example

Assume a member has the following situation:

• Investment Amount: $500,000
• Annual Profit: $200,000 (40% return)
• PDC Received: $50,000 Fee Calculation:

1. Adjusted Profit Base: 200,000 - 50,000(PDC) = $150,000.
2. Performance Fee: $150,000 × 15$22,500
3. Final Result:

• Actual Internal Fund Fee: $22,500
• Fee Savings: $7,500 (50,000 PDC × 15%)
• Final PDC Balance: 0

IV. Additional Notes

• This policy applies only to internal members’ personal investments.
• External investors remain subject to standard rates.
• Detailed implementation rules will be announced separately.

V. Implementation Date

This policy will take effect from December 1, 2024.