Item 5. Fees and Compensation
Fees and Allocations. Park Presidio’s Clients are qualified purchasers. Therefore, its fee schedule
is not included below. Park Presidio’s compensation is negotiable and varies, but is set forth
generally in each Client’s Governing Documents.
Park Presidio typically deducts management fees and performance allocations directly from the
Park Presidio Funds. U.S. Feeder and Offshore Feeder investors pay fees and allocations
indirectly, through their investments in the Master Fund. The Sub-Advised Funds and the
Managed Account are subject to management fees and performance fees, which are billed by Park
Presidio rather than directly deducted by Park Presidio from the Sub-Advised Funds or the
Managed Account. For the Funds, management fees are paid quarterly in advance and
performance allocations/fees are allocated/paid at the end of each fiscal year or at the time of a
withdrawal or redemption. For the Managed Account, management fees are paid quarterly in
arrears and only for the first three calendar quarters of each fiscal year, and performance fees are
paid at the end of each fiscal year or at the time of a withdrawal. Expenses, management fees and
performance allocations/fees are borne through the date of withdrawal/redemption or termination
of the relevant Client account, except that for withdrawals/redemptions or terminations on a date
other than the last day of a measurement period, there typically is no refund of any management
fee previously paid for that period.
Park Presidio provides certain Clients and investors special fee and allocation arrangements that it
does not provide to other Clients and investors. Park Presidio may waive all or any portion of the
management fees or performance allocations/fees with respect to any Client or investor and has
done so for employees and former employees.
Performance allocations/fees may create an incentive for Park Presidio to make more risky and
speculative investments than it would otherwise make. Performance-based compensation
arrangements also create an incentive for Park Presidio to favor Clients with higher compensation
rates over other Clients when allocating investments. In light of the foregoing, Park Presidio
allocates investment opportunities in accordance with documented procedures which are designed
to prevent such conflict from influencing the allocation of investment opportunities among Clients.
Under such procedures, Park Presidio will seek to allocate investment opportunities and trades
consistent with the Clients’ applicable Governing Documents and on a fair and equitable basis
under the circumstances, based upon a number of factors, such as: (i) each Client’s investment
strategy or other guidelines, (ii) legal, regulatory and tax considerations, (iii) relative amounts of
capital available for new investments, (iv) minimum participation thresholds Park Presidio deems
appropriate, (v) the overall portfolio composition of each Client account, (vi) eligibility to
participate in profits and losses attributable to “new issues,” (vii) liquidity, and (viii) the desire to
avoid de minimis allocations and odd lots. The Short-Only Clients’ investment opportunities are
drawn predominantly from the Long-Short Clients’ portfolios and it is expected that there will be
substantial overlap in the short positions of the Long-Short Clients and the Short-Only Clients.
Park Presidio generally expects that: (i) short positions will be allocated among all of the Client
accounts on a pro rata basis when they are initiated, subject to any adjustments that are deemed
necessary to stay within a Client’s investment guidelines, and existing short positions may be
adjusted for the Short-Only Clients over time to satisfy exposure targets and guidelines and (ii) all
other positions will be allocated among only the Long-Short Clients on a pro rata basis.
Park Presidio believes that its fees are competitive with fees charged by other investment advisers
for comparable services. Comparable services may be available, however, from other sources for
lower fees.
Withdrawal/Redemption Rights. The Flagship Funds offer “Tranche I” and “Tranche S”
interests/shares. The terms of the Sub-Advised Fund that pursues the long-short strategy generally
mirror those of Tranche S. The Sub-Advised Funds that pursue the short-only strategy are
permitted monthly withdrawals, subject to certain volume limitations. The Managed Account is
permitted withdrawals at any time, and is not subject to any volume limitations.
Before the third anniversary described below, Tranche I investors in the Feeder Funds generally
may, on at least 60 days’ advance notice to Park Presidio and subject to certain other restrictions,
withdraw/redeem up to 1/3 of their related Master Fund capital account balances as of December
31 of each calendar year, except that if a Tranche I investor makes withdrawals/redemptions in
consecutive years:
a) The 1/3 limit will apply on the first withdrawal/redemption as of December 31;
b) If the maximum 1/3 is withdrawn/redeemed as of December 31 in the first calendar year,
then the investor may withdraw/redeem up to 1/2 of its Tranche I-related Master Fund
capital account balance on the following December 31; and
c) If the maximum 1/2 is withdrawn/redeemed on the second consecutive December 31, then
the investor may withdraw/redeem up to the remaining balance of its Tranche I-related
Master Fund capital account as of the third December 31.
Thus, if a Tranche I investor desires to withdraw/redeem all of its Tranche I-related Master Fund
capital account balance, it will take at least 3 consecutive years to do so. In each case, the investor
must provide the minimum 60 days’ prior notice and, if the investor does not withdraw/redeem the
maximum permissible amount on any December 31, then the 1/3 withdrawal/redemption
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