Item 5: Fees and Compensation
SG3 does not charge the Fund or its investors an advisory fee based on assets under
management. SG3 only charges an incentive allocation (i.e., a performance fee) based on a
percent of the profits generated by the activity of the Fund.
SG3 Capital
Pursuant to SG3 Capital’s Operating Agreement, SG3 receives a profit-sharing incentive
allocation from SG3 Capital. The incentive allocation is 42% for Class B Members and 50% for
Class C Members.
If any Profits are allocated in any Accounting Period, then 42% (for Class B Members) and 50%
(for Class C Members) of such Profits (the “Incentive Allocation”) is allocated to a Suspense
Account. At the end of each Fiscal Year, the Incentive Allocation is distributed from the
Suspense Account to (i) the Fund investors in an amount necessary to eliminate such investors’
Loss Carry Forward Amount; and (ii) any remaining Incentive Allocation will be allocated by
SG3 in accordance to the provisions of the Operating Agreement. This distribution is made by
SG3 to the appropriate Class A Members who receive the Incentive Allocation, and the client
does not have the ability to take any affirmative action in payment of fees. In addition, SG3’s
clients should be aware that SG3’s fees might be materially higher than those of other
investment advisers who provide similar services. Investors in any Fund managed by SG3
should carefully review the Fund’s governing documents and consult with their own legal,
financial or tax advisors to discuss any legal, financial or tax implications that the investor may
face by making an investment in a Fund.
Expenses
Investors in SG3 Capital will bear not only SG3’s performance fees, but also other fees and
expenses of the Fund. Such expenses include, but are not limited to (i) brokerage commissions,
and charges (for additional information, see discussion at Item 12-Brokerage), (ii) fees and
charges of custodians and clearing agencies, (iii) interest and commitment fees on loans and
debit balances, if any, (iv) income taxes, withholding taxes, transfer taxes and other
governmental charges and duties, (v) fees of legal advisers (including any legal fees in
connection with any litigation and regulatory matters), administrators, net asset value
calculation agents, accountants and independent auditors, (vi) Directors’ fees and expenses, if
any, (vii) the costs of maintaining the Fund’s registered office or other offices of the Fund, (viii)
the costs of printing and distributing any private placement memorandums and subscription
materials and any reports and notices to investors or prospective investors, (ix) research,
database and due diligence costs and expenses, technology and other software costs and
expenses, (x) blue sky and other regulatory filing fees, (xi) insurance costs, (xii) employee
salaries and benefits, and (xiii) consulting fees and expenses and fees of other service providers.
The Fund will also bear its organizational fees and expenses. In addition, the Fund will
reimburse SG3 for any costs that SG3 incurs in relation to managing the Fund. The Fund’s
Operating Agreement details all fees, compensation, and expenses that the Fund might incur in
relation to its operations.
Additional Compensation
SG3 (inclusive of its related or supervised persons) does not receive any additional
compensation for advisory services in connection with the sale of securities or investment
products, including asset-based sales charges, service fees, or commissions from the sale of
mutual funds.
All fees, compensation, and expenses are contractually agreed to in the Fund’s Operating
Agreement and Members of the Fund can refer to the Operating Agreement (which is provided
to Members of the Fund) for further details if needed.
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