GRAYSCALE FUNDS TRUST APPROVAL OF ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT (Continued)
other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, (vi) acquired fund fees and expenses, (vii) accrued deferred tax liability, (viii) litigation and litigation-related indemnification expenses, (ix) distribution fees and expenses paid by the Fund under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act, (x) compensation payable to a party not affiliated with the Adviser in connection with the recovery of tax reclaims, and (xi) other extraordinary or non-routine expenses. The Board received and reviewed information showing the fee rates and expense ratios of funds in each Fund’s Expense Group (“Peer Funds”). The Board considered how the Expense Group was assembled by the Adviser and, taking this information into account, reviewed how each Fund compared to, and differed from, the Peer Funds. The Board noted that the unitary fee rate proposed for each Fund approximated the median net expense ratio of its Expense Group. Based on its review of the information provided, including regarding the expense ratios of the Peer Funds, the Board determined that the proposed unitary advisory fee for each Fund was fair and reasonable. The Board considered the estimated profitability of the Fund to the Adviser and Sub-Adviser at various asset levels. With respect to the Sub-Adviser, the Board considered that the Sub-Adviser would be paid by the Adviser from the Fund’s unitary fee and that the sub-advisory fee rate was the product of an arm’s length negotiation. The Board also considered whether economies of scale may be realized by the Fund as it grows larger. Noting that the Fund had not yet commenced operations and did not yet have any assets, the Board concluded that profitability and economies of scale were not material factors for the Board to consider in approving the Agreements. Other Benefits The Board considered other potential benefits described by each of the Adviser and Sub-Adviser that may be realized from its relationship with the Fund. Among others, the Board noted that the Adviser and Sub-Adviser may each potentially increase its market visibility because of its relationship with the Fund. Based on these and other considerations, including that the Fund had not yet commenced operations and did not yet have any assets, the Board determined that such benefits were not currently material and would not be unreasonable during the term of the Agreements. Conclusion The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. Based on its review, including consideration of each of the factors referenced above and of memoranda from counsel regarding the legal standard applicable to the Board’s consideration of the Agreements, the Board, including the Independent Trustees, determined in the exercise of its reasonable business judgment, that the advisory arrangements, as set forth in the Advisory Agreement and Sub-Advisory Agreement, were fair and reasonable in light of the services to be performed, expenses to be incurred and such other matters as the Board considered relevant.
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