New Incredi-pass holder, need clarification please

So, we just upgraded tickets to annual pass, and I have a question (or, I have an understanding that I want to make sure I'm not wrong on).

Is it correct that annual pass holders can make a reservation for every day they are staying at a Disney property, plus still hold the 5 reservations you get as a pass holder. So long as we are staying on property, park reservations during that time do not count to the 5 reservations you can hold?

Or did I completely misunderstand.

Thanks all