Transactions with Related Parties

6 Months Ended

Jun. 30, 2012

Transactions with Related Parties

10. Transactions with Related Parties

Management Fees

The Company is externally managed by ACA pursuant to a management agreement (the “Management Agreement”). All of the Company’s executive officers are also employees of ACA. ACA manages the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors which includes four independent directors. The Management Agreement expires on February 23, 2015 and is thereafter automatically renewed for an additional one-year term unless terminated under certain circumstances. ACA must be provided 180 days prior notice of any such termination and will be paid a termination fee equal to four times the average annual management fee earned by ACA during the two year period immediately preceding termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination.

Under the terms of the Management Agreement, the Company is reimbursed for certain operating expenses of the Company that are borne by ACA. ACA is entitled to receive a management fee payable monthly in arrears in an amount equal to 1/12th of an amount determined as follows:

• for the Company’s equity up to $250 million, 1.50% (per annum) of equity; plus

• for the Company’s equity in excess of $250 million and up to $500 million, 1.10% (per annum) of equity; plus

• for the Company’s equity in excess of $500 million and up to $750 million, 0.80% (per annum) of equity; plus

• for the Company’s equity in excess of $750 million, 0.50% (per annum) of equity.

For purposes of calculating the management fee, equity is defined as the value, computed in accordance with GAAP, of shareholders’ equity, adjusted to exclude the effects of unrealized gains or losses. For the three months ended June 30, 2012 and 2011, the Company incurred $4,312 and $3,531 in management fees, respectively. For the six months ended June 30, 2012 and 2011, the Company incurred $8,154 and $6,623 in management fees, respectively. For the three and six months ended June 30, 2012, the Company reimbursed ACA $354 and $626, respectively, for expenses ACA incurred on behalf of the Company. There were no reimbursable expenses incurred under the management agreement in 2011. None of the reimbursement payments were specifically attributable to the compensation of the Company’s executive officers. At June 30, 2012 and December 31, 2011, the Company owed ACA $1,591 and $1,171, respectively, for the management fee and reimbursable expenses, which is included in accounts payable and other liabilities.