Item 5 Fees and Compensation
The annual fee for the firm's core investment services is 15 basis points of the market value of each
client's account. Core investment services include the following:
Investment advice. MCM provides investment advice reflecting the asset and liability needs of
each client, including investments approved by the client, the target investment allocation and
approved tolerance, the relative value of available securities and the expected contribution of
selected securities to the client's portfolio performance.
Summary balance sheet modeling. MCM models the client's asset and liabilities as reflected by
regulatory call reports and projects risk and return, including net interest income, net interest
margin, return on assets, return on equity, the economic value of equity, and the duration of the
economic value of equity, among other measures.
Estimates of impact from prospective new assets and liabilities. MCM projects the impact of new
assets, new liabilities or both on balance sheet risk and return as estimated from regulatory call
report data.
Investment execution. MCM sources assets from primary and non-primary dealers as designated
by the Federal Reserve Bank of New York based on the availability of suitable securities in
sufficient volume and at fair market value.
Reporting. MCM provides clients with a website where the client can monitor advised assets at
any time and see securities held, their estimated fair market value, cash paid or received, asset
allocations and other security and portfolio attributes.
Research. MCM provides periodic reports on developments in economics, rates and funding
markets, securitized products and corporate and municipal debt markets.
Fees are charged quarterly in advance or in arrears based upon the asset values on the last day of the
previous calendar quarter. The first advisory fee will be assessed on a pro-rata basis taking into
account the time for which the account was not managed by the firm. If a client's investment
management agreement is terminated or a withdrawal is made from a client account during a quarter,
the fee payable to the Firm will be calculated based on the value of the assets on the termination date
or withdrawal date and prorated for the number of days during the quarter in which the investment
management arrangement was in effect.
Fees to the firm are generally not negotiable. The firm, however, has the right to reduce or waive the
management fee charged to any client account.
Fees are either automatically deducted from the account, as authorized in writing by the client, or billed
at each quarter end. For accounts from which fees are automatically deducted, the quarterly statement
provided to the client by the qualified custodian shows fees for services provided.
For certain premium services, client may contract with MCM at an hourly rate which will be agreed
upon with the client to in advance. Premium services include the following:
Proprietary balance sheet modeling. MCM models the client's assets and liabilities based on the
client's proprietary data on loans, securities and other assets and on deposits and other funding.
Proprietary balance sheet on demand. MCM allows clients to use a model of their proprietary
assets and liabilities and estimate the impact of new loans, new securities or new liabilities under
various scenarios.
Financial, accounting and regulatory data feeds. MCM can arrange for secure electronic transfer
of investment portfolio data into clients' financial, accounting or regulatory reporting systems.
Investment education. MCM can do research on existing or prospective investments, market
conditions, the investment implications of accounting or regulatory changes or on other special
topics and prepare and deliver reports to the client.
Advisory Services Offered to Private Funds (Hedge Funds)
Specific information regarding our advisory fees as it relates to private funds can be found in the
applicable Private Offering Memorandum or offering documents. All fees and expenses assessed to
the private funds are fully disclosed to investors in the respective hedge fund's Private Placement
Memorandum or offering documents and in Investor Subscription documents.
In addition to advisory fees, the Firm may also receive a performance-based allocation based on a
share of capital gains on or capital appreciation of the Hedge Fund's assets.
The Hedge Fund's minimum subscription amount is $500,000 for institutions (these minimums are
negotiable and can be waived at the investment manager's discretion).
Investment advice we provide to private funds is under a separate agreement. We may recommend
investments in the hedge funds we manage for our client accounts. Therefore, as a client of our firm,
you are advised that we will receive compensation from private funds where we act as the adviser and
that a conflict of interest exists when investing your assets in the hedge funds we advise. We will only
make such investments where we believe it is consistent with our fiduciary duty and your investment
objectives. We will earn fees from the private funds for investments made in the private funds we
advise and may earn separate fees from you for asset allocation, monitoring and other services. The
fees that you pay to our firm for investment advisory services are separate and distinct from the fees
and expenses charged by private funds. For tax-qualified accounts with assets invested in the hedge
fund, the advisory fee on such assets will be offset by the amount of the management fee paid to us by
the hedge fund.