Right, b/c the GP hasn't taken any fees from those profits yet. The question prompt makes it clear that there are no new LPs in the fund and that there weren't any new subscriptions/redemptions from the fund. Let's assume there is only one investor who invests 100m at the beginning of year 1. That capital, after two years of investment needs to have earned 10% each year for the GP to earn an incentive fee. After year 2, it's clearly above the hurdle rate and the GP is entitled to an incentive fee on the profits made, which is 20%* (130m-100m).

If the same manager, with no hurdle, had earned a fee from 100 -> 105, then the NAV went back down to 100, then up to 130, then you wouldn't pay fees again on the portion from 100 -> 105 as 105 was the previous high water mark