Item 5 – Fees and Compensation
Fees and expenses paid by private funds are described to investors, in detail, in each Fund’s
confidential private offering memorandum. The annualized fee structure for each of the Funds
follows:
Fund Management Fee Incentive Fee
Afton LP 1% 20%
Afton II LP 2% 20%
Fees are be comprised of (1) a management fee calculated and payable quarterly in advance; and
(2) a performance-based incentive fee payable following the end of each calendar year based on
the net profits attributable to each investor’s capital account. The incentive fee is only payable to
the extent that such profits exceed any losses carried forward from prior years, based on a “high
water mark” formula.
Investors in the Funds may be subject to different fee schedules. Fees attributable to any particular
investor are based on the current fee schedule at the time they first invested in the Fund.
To the extent that Afton utilizes margin to leverage the investments in the Funds, margin strategies
entail additional fees and expenses, as the Funds must pay interest on any amounts borrowed
against the account. When using margin, investment advisory fees are calculated on the net
account balance (rather than the total market exposure) in order to avoid any incentive for Afton to
use margin to potentially increase the fee paid by the client.
Investors may withdraw all or a portion of their capital account on the first day of each calendar
quarter by providing written notice to Afton at least 30 calendar days in advance, or otherwise at
the general partner’s discretion. Specific procedures and restrictions apply to withdrawals and
terminations, including early termination fees, as described in each Fund’s confidential private
offering memorandum. The general partner, in its sole discretion, may impose minimum
redemption amounts and require the maintenance of a minimum capital account size in the event
of a partial withdrawal. The general partner may also, in its sole discretion, require an investor to
redeem all or part of its interest in any particular Fund.
All fees paid to Afton for investment advisory services are separate and distinct from the fees and
expenses charged by mutual funds or in conjunction with internal expenses associated with
exchange-traded funds. The client will be solely responsible, directly or indirectly, for these
additional expenses. Afton does not receive any portion of these additional fees. Refer to Item 12
for a detailed discussion of brokerage practices.
The investment advisory fee covers only the portfolio management and advisory services provided
by Afton and does not include brokerage commissions, redemption fees, mark-ups and mark-
downs, exchange fees, dealer spreads or other costs associated with the purchase and sale of
securities, custodian fees, transfer fees, wire fees, interest, taxes, or other account expenses. Other
fees paid by the Funds are attorney’s fees, audit and accounting fees, administrator fees and any
other fees or expenses deemed to be an obligation of the Funds. Refer to each respective Fund’s
private placement memorandum for a more detailed discussion of the fees and expenses
associated with an investment in the Funds.