Item 5. Fees and Compensation
Our fees and compensation are described in detail in each Fund’s respective offering documents.
PIM charges the Funds a management fee based on a percentage of the net asset value of each
Fund. The management fee for the MBS LP and the MBS LTD is equal to 0.25% (approximately
1.0% annually) of the net asset value of the Funds, charged quarterly in advance, and prorated for
an investment in the Fund at times other than the start of a quarter and generally deducted from
the Funds’ accounts. The management fee of the Insurance Fund is equal to 0.105%
(approximately 1.25% annually) of the net asset value of the Fund, charged monthly. With the
exception of the Insurance Fund, PIM, in its sole and absolute discretion, may waive or reduce
the management fee charged by the Funds. Generally, once paid, the management fee is not
refundable.
We receive annual performance-based fees or allocations from the Funds which are based on a
percentage of the capital appreciation of client assets. PIM receives from the MBS LP, MBS
LTD and Insurance Fund a performance fee or performance allocation at the close of each
calendar year equal to either 10% or 15% of the increase (depending on the investment date of the
investor), if any, in the value of the Fund’s assets (including realized and unrealized gains and net
of the management fee and adjusted for subscriptions and withdrawals) attributable to each
investor as of the close of such year (or, in the case of a withdrawing investor, the net income
attributable to such investor as of his or her withdrawal date). The performance fee/allocation
shall be subject to a “high water mark” or loss carryforward provision so that net investment
losses must be recouped prior to PIM receiving additional performance fees/allocations. PIM, in
its sole and absolute discretion, may waive all or any portion of its performance fees/allocations
from by the Funds.
As the management fees and performance-based fees and allocations are based directly on the net
asset value of the client accounts, we have a conflict of interest in valuing the assets held in the
accounts. Our fund administrator, who is responsible for striking the monthly official NAV, will
follow our documented valuation policies in order to mitigate this conflict.
Clients that are Funds generally bear (i) all expenses associated with the organization and
ongoing administration of such Funds, including legal and accounting fees, (ii) all expenses
incurred in connection with communications with investors and the ongoing offer and sale of
interests in the Funds, (iii) all third party administration, accounting, tax preparation, audit,
bookkeeping, directors fees and expenses, the costs of any regulatory filings (including any
filings required by the European Alternative Investment Fund Managers Directive and preparing
and filing Form PF), governmental fees and taxes and legal and compliance fees and expenses of,
or relating to, the Funds, (iv) all expenses incurred for the benefit of the Funds related to the
maintenance and procurement of information technology and data related services, systems and
equipment, valuation services, proxy voting services and insurance, (v) all direct and incidental
expenses relating to research and due diligence of existing and potential investments (including,
without limitation, the use of consultants and attorneys) and research materials, and (vi) all
trading and investment related costs and expenses (e.g., brokerage commissions, margin interest,
expenses related to short sales, custodial fees and clearing and settlement charges). See
“Brokerage Practices” below.