AB 2020 Form 10-K

PIFNII, expressed as a rate of return on the average value of the Fund’s net assets (defined as total assets, less indebtedness and before taking into account any incentive fees payable during the period) as of the first day of each month during the course of the immediately preceding calendar quarter, will be compared to various “hurdle rates,” with the income-based incentive fee rate of return increasing at each hurdle rate. Description of Quarterly Incentive Fee Calculations The Fund pays the Adviser an income-based incentive fee with respect to PIFNII in each calendar quarter as follows: • No income-based incentive fee in any calendar quarter in which the PIFNII does not exceed 1.5% per quarter (6% per annum), the “6% Hurdle Rate”; and • 100% of PIFNII with respect to that portion of such PIFNII, if any, that exceeds the 6% Hurdle Rate but is less than 1.67% in any calendar quarter (the “6% Catch-up Cap”), approximately 6.67% per annum. This portion of PIFNII (which exceeds the 6% Hurdle Rate but is less than the 6% Catch-up Cap) is referred to as the “6% Catch-up.” The 6% Catch-up is meant to provide the Adviser with 10.0% of the PIFNII as if a hurdle rate did not apply if this net investment income exceeded 1.67% but was less than 1.94% in any calendar quarter; and • 10.0% of the amount of PIFNII, if any, that exceeds the 6% Catch-up Cap, but is less than 1.94% (the “7% Hurdle Rate”), approximately 7.78% per annum. The 7% Hurdle Rate is meant to limit the Adviser to 10% of the PIFNII until the amount of PIFNII exceeds 1.94%, approximately 7.78% per annum; and • 100% of PIFNII with respect to that portion of such PIFNII, if any, that exceeds the 7% Hurdle Rate but is less than 2.06% in any calendar quarter (the “7% Catch-up Cap”), approximately 8.24% per annum. This portion of PIFNII (which exceeds the 7% Hurdle Rate but is less than the 7% Catch-up Cap) is referred to as the “7% Catch-up.” The 7% Catch-up is meant to provide the Adviser with 15.0% of the PIFNII as if a hurdle rate did not apply if this net investment income exceeded 2.06% but was less than 2.35% in any calendar quarter; and • 15.0% of the amount of PIFNII, if any, that exceeds the 7% Catch-up Cap, but is less than 2.35% (the “8% Hurdle Rate”), approximately 9.41% per annum. The 8% Hurdle Rate is meant to limit the Adviser to 15% of the PIFNII until the amount of PIFNII exceeds 2.35%, approximately 9.41% per annum; and • 100% of PIFNII with respect to that portion of such PIFNII, if any, that exceeds the 8% Hurdle Rate but is less than 2.50% in any calendar quarter (the “8% Catch-up Cap”), approximately 10% per annum. This portion of PIFNII (which exceeds the 8% Hurdle Rate but is less than the 8% Catch-up Cap) is referred to as the “8% Catch-up”. The 8% Catch-up is meant to provide the Adviser with 20.0% of the PIFNII as if a hurdle rate did not apply if this net investment income exceeded 2.50% in any calendar quarter; and • 20.0% of the amount of PIFNII, if any, that exceeds 2.50% in any calendar quarter. Capital Gains Incentive Fee : The capital gains incentive fee is determined and payable at the end of each fiscal year as 20% of the Fund’s aggregate cumulative realized capital gains from the date of the Fund’s election to be regulated as a BDC through the end of that year, computed net of all aggregate cumulative realized capital losses and aggregate cumulative unrealized depreciation through the end of such year, less the aggregate amount of any previously paid capital gain incentive fees. For the foregoing purpose, the Fund’s “aggregate cumulative realized capital gains” will not include any unrealized appreciation. For accounting purposes only, the Fund is required under GAAP to accrue a hypothetical capital gains incentive fee based upon net realized gains and unrealized depreciation for that calendar year (in accordance with the terms of the Advisory Agreement), plus unrealized appreciation on investments held at the end of the period. The accrual of this hypothetical capital gains incentive fee assumes all unrealized capital gain and loss is realized in order to reflect a hypothetical capital gains incentive fee that would be payable to the Adviser at each measurement date. The capital gains incentive fee is not subject to any minimum return to stockholders. If such amount is negative, then no capital gains incentive fee will be payable for such year. Additionally, if the Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date will be treated as though it were a calendar year end for purposes of calculating and paying the capital gains incentive fee. 6 0 (no incentive fee paid) 100% (100% of pre-incentive fee net investment income between 6% hurdle rate and 6% catch-up cap paid) 10% (10% of pre-incentive fee net investment income between 6% catch-up cap and 7% hurdle rate paid) 100% (100% of pre-incentive fee net investment income between 7% hurdle rate and 7% catch-up cap paid) 15% (15% of pre-incentive fee net investment income between 6% catch-up cap and 7% hurdle rate paid) 100% (100% of pre-incentive fee net investment income between 8% hurdle rate and 8% catch-up cap paid) 20% (20% of pre-incentive fee net investment income above 8% catch-up cap paid) 0 0 0 1.50% 6.00% 6.00% (6% hurdle rate) 1.67% 6.67% 6.00% (6% catch-up cap) 1.94% 7.78% 7.00% (7% hurdle rate) 2.06% 8.24% 7.00% (7% catch-up cap) 2.35% 9.41% 8.00% (8% hurdle rate) 2.50% 10.00% 8.00% (8% catch-up cap) Quarterly Pre-Incentive Fee Net Investment Income: Annualized Pre-Incentive Fee Net Investment Income: Investor Net Return: