Item 5. Fees and Compensation
Investors in the Funds will be subject to management fees (“Management Fees”), payable to
Frontlight, asset-based distribution (“Asset-Based Strategic Distributions”) made to the Strategic
Investor (as defined in Item 10 below), and performance based allocations (“Performance
Allocations”) made to Frontlight Group LLC, a Delaware limited liability company that acts as
general partner to the U.S. Fund and the Master Fund (the “General Partner”), and the Strategic
Investor. The Feeder Funds will invest all or substantially all of their assets in the Master Fund.
Accordingly, the Management Fees, Asset-Based Strategic Distributions and Performance
Allocations will be paid or allocated at the level of the Master Fund. Investors in the Feeder Funds
will not be subject to additional Management Fees, Asset-Based Strategic Distributions or
Performance Allocations at the applicable Feeder Fund level.
Management Fees and Asset-Based Strategic Distributions. The Master Fund will pay Frontlight
a quarterly Management Fee. The Feeder Funds, as limited partners of the Master Fund, will be
charged their pro rata share of such Management Fee, and each investor in the Feeder Funds will
be charged its pro rata share thereof. The Management Fee will be payable quarterly in advance
and calculated based on the net asset value of each investor’s interest in the Master Fund (or
indirectly through the Feeder Fund). In addition, the Master Fund has issued certain limited
partnership interests to the Strategic Investor that entitles it to receive Asset-Based Strategic
Distributions from the Master Fund, which will be calculated in a manner similar to the
DB3/ 201050317.2 4
FRONTLIGHT CAPITAL LP PART 2A OF FORM ADV AS OF MARCH 29, 2018
Management Fee and the Management Fee will be reduced by the amount of such Asset-Based
Strategic Distributions. The aggregate amount of the Management Fees and the Asset-Based
Strategic Distributions that will be borne by each investor (directly, or indirectly through the
Feeder Funds) will be an amount equal to (A) 0.4375% (1.75% annualized) of the net asset value
of each investor’s investment in “class A” interests (and any related “class DI” interests), and (B)
0.375% (1.50% annualized) of the net asset value of each investor’s investment in “class F”
interests, “class SI-A” interests and “class SI-B” interests (and any related “class DI” interests), in
each case, at the beginning of each calendar quarter (computed prior to the accrual of any
Performance Allocation applicable to such investor during a calendar year). A pro rata
Management Fee and Asset-Based Strategic Distribution also will be assessed on any subscription
(including any additional subscription from an existing investor) that is accepted as of any date
other than the first day of a calendar quarter. No portion of the Management Fee or Asset-Based
Strategic Distribution will be refunded if an investor is permitted to withdraw or redeem from a
Fund on a date other than the end of a calendar quarter.
Performance Allocation. Performance Allocations will be made by the Master Fund, pursuant to
the partnership agreement governing the Master Fund (and the General Partner of the Master Fund
and the Strategic Investor are parties to such partnership agreement). At the end of each fiscal
year of the Master Fund, the General Partner and the Strategic Investor will have reallocated to
their capital accounts in the Master Fund in the aggregate the Applicable Percentage (as defined
below) of the excess, if any, of the (i) Net Increase (as defined below) preliminarily allocated to
each of the capital accounts maintained for each investor in the Master Fund (in respect of each of
the sub-accounts for each investor in the Feeder Funds) for the fiscal year over (ii) the Hurdle
Amount (as defined below) for the fiscal year (the “Performance Allocation”), subject to the “high
watermark” provision described below. The “Applicable Percentage” means (1) twenty percent
(20%) for each “class A” interest and (2) fifteen percent (15%) for each “class F” interest, “class
SI-A” interest and “class SI-B” interest. “Net Increase” means the (i) excess realized and
unrealized net profits for a fiscal year (prior to giving effect to any Performance Allocation for
such fiscal year, but after reduction for the Management Fee and Asset-Based Strategic
Distribution and other expenses and fees incurred by the Master Fund for such fiscal year
(including expenses incurred at the Feeder Funds level), over (ii) realized and unrealized net losses
for such fiscal year, that are allocated to each capital account (and sub-account for each investor
in eacht Feeder Fund) (after adjustments to reflect redemptions during such period). The “Hurdle
Amount” shall equal a return that would have accrued had the sum equal to the beginning balance
of each such capital account (and sub- account) been invested in 3 month U.S. Treasury Bills as
measured by the calculated monthly average 3 month Treasury Bill rate published by the Federal
Reserve (http://www.federalrserve.gov/releases/h15/data.htm) or Bloomberg TBSM3M Index
during the fiscal year (the “Hurdle Amount”). The Hurdle Amount shall be adjusted to reflect
withdrawals/redemptions during a fiscal year, and to account for additional subscriptions as of any
date later than the first Business Day of a fiscal year or to account for the establishment of any
capital account (or sub-account) as of any date later than the first Business Day of a fiscal year.
For purposes of clarity, the applicable Hurdle Amount for any fiscal year shall not be carried
forward into future fiscal years.
In the event of a withdrawal or redemption other than at the end of a fiscal year, the Performance
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