The
second part, the capital gains incentive fee, is determined and payable in arrears as of the end of each fiscal year at a rate of 17.5%
of the Corporation’s realized capital gains, if any, on a cumulative basis from the Corporation’s inception through the end
of the fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate
amount of any previously paid capital gain incentive fees. In the event that the Investment Advisory Agreement shall terminate as of a
date that is not a fiscal year end, the termination date shall be treated as though it were a fiscal year end for purposes of calculating
and paying a capital gains incentive fee.
The
Adviser has voluntarily waived its right to receive management fees that would result from the Corporation’s investments in GACP
II LP and WhiteHawk III Onshore Fund LP.
Additionally,
on February 22, 2021, the Adviser notified the Board of its intent to voluntarily waive income incentive fees to the extent net investment
income falls short of the regular declared dividend on a full dollar basis. The waiver initially became effective on July 31, 2021
and, pursuant to the most recent extension of the waiver announced on October 4, 2022, will continue through December 31, 2023.
For
the year ended December 31, 2022, the Corporation incurred income incentive fees of $11,214,048 of which $537,545 were waived by
the Advisor. As of December 31, 2022, income incentive fees of $3,111,758 were unpaid.
GAAP
Incentive Fee on Cumulative Unrealized Capital Appreciation
The
Corporation accrues, but does not pay, a portion of the incentive fee based on capital gains with respect to net unrealized appreciation.
Under GAAP, the Corporation is required to accrue an incentive fee based on capital gains that includes net realized capital gains and
losses and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the accrual
for the incentive fee based on capital gains, the Corporation considers the cumulative aggregate unrealized capital appreciation in the
calculation, since an incentive fee based on capital gains would be payable if such unrealized capital appreciation were realized, even
though such unrealized capital appreciation is not permitted to be considered in calculating the fee payable under the Investment Advisory
Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized
capital appreciation or depreciation. If such amount is positive at the end of a period, then the Corporation records a capital gains
incentive fee equal to 17.5% of such amount, minus the aggregate amount of actual incentive fees based on capital gains paid in all prior
periods. If such amount is negative, then there is no accrual for such period. There can be no assurance that such unrealized capital
appreciation will be realized in the future.
For
the year ended December 31, 2022, the Corporation reversed capital gains incentive fees on unrealized capital appreciation of $6,324,241,
of which $0 was accrued and unpaid at December 31, 2022.
Indemnification
Under
the Investment Advisory Agreement, the Advisor has not assumed any responsibility to the Corporation other than to render the services
called for under that agreement. It will not be responsible for any action of the Board in following or declining to follow the Advisor’s
advice or recommendations. Under the Investment Advisory Agreement, the Advisor, its officers, managers, partners, agents, employees,
controlling persons, members and any other person or entity affiliated with the Advisor, including, without limitation, its general partner
and the Administrator, and any person controlling or controlled by the Advisor will not be liable to the Corporation, any subsidiary of
the Corporation, the Directors, stockholders or any subsidiary’s stockholders or partners for acts or omissions performed in accordance
with and pursuant to the Investment Advisory Agreement, except those resulting from acts constituting gross negligence, willful misfeasance,
bad faith or reckless disregard of the duties that the Advisor owes to the Corporation under the Investment Advisory Agreement. In addition,
as part of the Investment Advisory Agreement, the Corporation has agreed to indemnify the Advisor and each of its officers, managers,
partners, agents, employees, controlling persons, members and any other person or entity affiliated with the Advisor, including, without
limitation, its general partner and the Administrator, from and against any claims or liabilities, including reasonable legal fees and
other expenses reasonably incurred, arising out of or in connection with the Corporation’s business and operations or any action
taken or omitted on the Corporation’s behalf pursuant to authority granted by the Investment Advisory Agreement, except where attributable
to gross negligence, willful misfeasance, bad faith or reckless disregard of such person’s duties under the Investment Advisory
Agreement. These protections may lead the Advisor to act in a riskier manner when acting on the Corporation’s behalf than it would
when acting for its own account.
