Fees and Compensation
The Firm is compensated for its management through fees on the net asset value of the various funds and
a percentage of the net profits (Managers Allocation). The details of the compensation for management
of each 303 Fund are explained below.
303 Equity
Management Fee
Three Zero Three receives 70% of the annual management fee (“Management Fee”) of 2% of the net
asset value of 303 Equity, payable in quarterly installments of 1/4th of 2.0% in arrears as of the last
business day of each month. A pro rata Management Fee is charged on any amount invested or
withdrawn during any calendar quarter. Three Zero Three may waive or reduce the Management Fee as
to a particular investor in certain circumstances.
Manager’s Allocation
Three Zero Three also receives 30% of the Manager’s Allocation equal to 20% of 303 Equity’s net new
profits, paid quarterly (“Manager’s Allocation”). The Manager’s Allocation is calculated separately in
respect of each investor’s capital account. The Manager’s Allocation is calculated on a “high water
mark” basis, i.e., only to the extent that the increase in net asset value recognized by an investor’s capital
account (net of additions and withdrawals) exceeds the highest cumulative level of such increase in net
asset value as of the most recent calendar month-end for which an allocation was made with respect to
such capital account (or, if no increase in net asset value has been recognized, only to the extent that such
increase causes an investor’s capital account to exceed the investor’s net capital contributions). Three
Zero Three may waive or reduce the Manager’s Allocation as to a particular investor in certain
circumstances.
The Manager’s Allocation is a performance based fee arrangement which complies with Rule 205-3 of
the Investment Adviser’s Act of 1940. The Manager’s Allocation may create an incentive to Three Zero
Three to make investments that are riskier or more speculative than would be the case in the absence of
the allocation to Three Zero Three.
303 Equity investors may generally withdraw all or any part of their investment at the end of each
calendar quarter on forty-five days prior written notice.
National
Management Fee
Three Zero Three receives a quarterly “Management Fee” in an amount not to exceed 0.50% of the
Fund’s Net Asset Value, determined as of the end of each quarter (Net Asset Value for such purposes to
be calculated on a prorated basis for any mid-quarter subscriptions and redemptions, and without
reduction for accrued Management Fees or accrued Managing Member Allocations as of such date).
Three Zero Three may, in its sole discretion, charge an investor a reduced Management Fee.
Endurance
Management Fee
Three Zero Three receives 20% of the quarterly “Management Fee” equal to .5% of the Fund’s Net Asset
Value, determined as of the end of each quarter (Net Asset Value for such purposes to be calculated on a
prorated basis for any mid-quarter subscriptions and redemptions, and without reduction for accrued
Management Fees or accrued Managing Member Allocations as of such date). The Managing Member
may, in its sole discretion, charge an investor a reduced Management Fee.
Manager’s Allocation
Three Zero Three receives 20% of the “Managing Member Allocation” which equals 20% of the New Net
Profits. The Manager’s Allocation is distributed on a quarterly basis. Three Zero Three may, in its sole
discretion, charge an investor a reduced Manager Allocation.
Performance-Based Fees and Side-By-Side Management
Three Zero Three receives a Manager’s Allocation which is also referred to as an “Incentive Fee”. This
fee is specifically addressed for each of the Funds in the “Fees and Compensations” section.
Type of Clients
Three Zero Three provides discretionary investment advice and management services, in its capacity as
manager to privately held pooled investment vehicles (“Funds”) exempt from registration as investment
companies under the Investment Company Act of 1940. Three Zero Three is the managing member of
each Fund and the Funds are its Clients.
Methods of Analysis, Investment Strategies and Risk of Loss
Three Zero Three provides the management services to various privately held pooled investment vehicles
Funds, and the various Funds are its Clients. Additional details of the investments for each Fund are
provided below.
303 Equity
The Fund seeks to generate gains and income principally by allocating its capital to KCM Management,
LLC (“KCM”), which deploys a model-based trading strategies which actively trade equities and equity
derivative products. The strategies are based upon KCM’s developed multiple integrated models which
trade an equity volatility relative value approach. The models capture mispricings across listed equity and
ETF options which are delta hedged using underlying shares. The various models are differentiated based
upon volatility forecasting, hedging mechanisms, underlying product (stocks, ETFs), and
option/underlying liquidity.
The Fund’s business objective is to seek significant capital appreciation and income regardless of the
phase of economic or investment market cycles. The Fund will seek to achieve this objective by
allocating capital to KCM which may actively buy and sell (and sometimes hold for longer periods of
time) a broad range of equity options and equity securities, including but not limited to, exchange traded
U.S. equities, equity and index options, foreign equities and equity and index options, U.S. and foreign
equity index futures and futures options, U.S. and foreign single stock futures, U.S. and foreign exchange-
traded-funds (“ETFs”), U.S. and foreign over-the-counter traded equities and equity derivatives, U.S. and
foreign debt securities, U.S. and foreign debt derivative instruments and restricted and other illiquid
securities, over time frames ranging from intra-day to several or more months.
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