capital appreciation that such company has with respect to its investments, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, despite the
fact that such unrealized capital appreciation is not used by the Corporation in determining the amount of Capital Gains Fee actually payable under the terms of the RCM Investment Management Agreement. A capital gains incentive fee accrual under
GAAP is calculated using the cumulative aggregate realized capital gains and losses and the aggregate net change in unrealized capital appreciation/depreciation at the close of the period. If the calculated amount is positive, GAAP requires the
Corporation to record a capital gains incentive fee accrual equal to 20% of this cumulative amount, less the aggregate amount of actual capital gains incentive fees paid, or capital gains incentive fees accrued under GAAP, for all prior periods.
There can be no guarantee that the Corporation will realize the unrealized capital appreciation, upon which this accrual has been calculated, in the future.
As of September 30, 2022, there was no Capital Gains Fee currently payable under the terms of the Investment Management Agreement, and
the final calculations are determined annually, and subject to change based on subsequent realized gains, losses or unrealized losses during the remainder of 2022. At December 31, 2021, there was $652,240 of Capital Gains Fee payable. The
Capital Gains Fee earned of $652,240 was included in the Due to investment adviser line on the Consolidated Statements of Financial Position and the $3,547,760 cumulative accrued capital gains incentive fee was recorded in the line item
Capital gains incentive fees on the Consolidated Statements of Financial Position at December 31, 2021.
In accordance
with GAAP, the Corporation is required to accrue a capital gains incentive fee on all realized and unrealized gains and losses, resulting in an accrual of $2,667,000 at September 30, 2022, which represents the fee that would be due based on net
portfolio appreciation. The $2,667,000 accrued capital gains incentive fee is recorded in the line item Capital gains incentive fees on the Consolidated Statements of Financial Position at September 30, 2022. At December 31,
2021, there was an accrual of $4,200,000 for the capital gains incentive fee, which represented both the capital gains fee payable to RCM of $652,240 and $3,547,760 that would be due based on net portfolio appreciation at December 31, 2021. The
$652,240 capital gains fee payable was paid to RCM during the nine months ended September 30, 2022.
Administration Agreement
Under the terms of the Administration Agreement, RCM agreed to perform (or oversee, or arrange for, the performance of) the administrative
services necessary for the Corporations operations, including, but not limited to, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and such other
services as RCM, subject to review by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. RCM shall also arrange for the services of, and oversee, custodians,
depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed
to be necessary or desirable.
RCM is responsible for the Corporations financial and other records that are required to be
maintained and prepares all reports and other materials required to be filed with the SEC or any other regulatory authority, including reports to shareholders. In addition, RCM assists the Corporation in determining and publishing the
Corporations net asset value (NAV), overseeing the preparation and filing of the tax returns, and the printing and dissemination of reports to shareholders, and generally overseeing the payment of expenses and the performance of administrative
and professional services rendered by others. RCM provides, on the Corporations behalf, managerial assistance to those portfolio companies that have accepted its offer to provide such assistance.
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