Crescent provides the Advisor with experienced investment professionals (including the members of the Advisor’s investment committee) and access to the resources of Crescent so as to enable the Advisor to fulfill its obligations under the Corporation’s Investment Advisory Agreement with the Advisor (the “Investment Advisory Agreement”). Through the Resource Sharing Agreement, the Advisor capitalizes on the deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Crescent’s investment professionals.
Investment Advisory Agreement
On January 29, 2020, in connection with the Alcentra Acquisition, the Corporation's stockholders approved an Amended and Restated Investment Advisory Agreement, which had been approved by the Board of Directors, including the Independent Directors, on October 2, 2019 (the “Prior Advisory Agreement”). At a special meeting of stockholders of the Corporation held on December 17, 2020, the Corporation's stockholders approved a new investment advisory agreement between the Corporation and the Advisor upon the closing of acquisition of a majority indirect ownership interest in the Advisor by Sun Life Financial Inc., which occurred on January 5, 2021 (the “New“Investment Advisory Agreement”). The terms of the Prior Advisory Agreement and the New Advisory Agreement generally are the same except for the dates and initial terms thereof. As such, references to the “Advisory Agreement” below reflect the terms of the Prior Advisory Agreement and New Advisory Agreement, as applicable.
Under the terms of the Investment Advisory Agreement, the AdvisorAdviser provides investment advisory services to the Corporation and its portfolio investments. The Advisor’sAdviser’s services under the Investment Advisory Agreement are not exclusive, and the AdvisorAdviser is free to furnish similar or other services to others so long as its services to the Corporation are not impaired. Under the terms of the Investment Advisory Agreement, the AdvisorAdviser is entitled to receive the Base Management Feea base management fee and may also receive certain Incentive Fees,incentive fees, as discussed below.]
Base Management Fee
UnderPursuant to the Investment Advisory Agreement, the Base Management Feebase management fee is calculated and payable quarterly in arrears at an annual rate of 1.25% of the Corporation’s gross assets, including assets acquired through the incurrence of debt but excluding any cash, and cash equivalents (i.e., U.S. government securities and commercial paper maturing within one year of purchase).restricted cash. The Base Management Feebase management fee is calculated based on the average value of gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. In addition,For purposes of the Advisor contractually hasInvestment Advisory Agreement, cash equivalents means U.S. government securities and commercial paper maturing within one year of purchase.
Under the terms of the Investment Advisory Agreement, the Adviser agreed to waive a portion of the Base Management Feemanagement fee from February 1, 2020 through July 31, 2021, so that only 0.75% shall bewas charged for such time period. The Adviser has also 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.
For the year ended December 31, 2021, the Corporation incurred management fees of $14,117,560, of which $3,301,660 was waived. As of December 31, 2021, management fees of $3,830,493 were unpaid.
Incentive Fees
Under the Investment Advisory Agreement, the incentive fee consists of two parts:
The first part, the income incentive fee, is calculated and payable quarterly in arrears and (a) equals 100% of the excess of the pre-incentive fee net investment income for the immediately preceding calendar quarter, over a preferred return of 1.75% per quarter (7.0% annualized) (the “Hurdle”), and a catch-up feature until the Adviser has received 17.5%, of the pre-incentive fee net investment income for the current quarter up to 2.1212% (the “Catch-up”), and (b) 17.5% of all remaining pre-incentive fee net investment income above the “Catch-up.”
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.
Under the terms of the Investment Advisory Agreement, the Adviser agreed to waive the income based portion of the incentive fee from February 1, 2020 through July 31, 2021
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