##### Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 10-Q   (Mark One) ☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR  ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from
 to Commission file number 814-00861   Fidus Investment Corporation (Exact Name of Registrant as Specified in its Charter)    Maryland

27-5017321(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)1603 Orrington Avenue, Suite 1005
Evanston, Illinois

60201(Address of Principal Executive Offices)

(Zip Code) (847) 859-3940 (Registrants telephone number, including area code)   n/a (Former name, former
address and former fiscal year, if changed since last report)   Securities
registered pursuant to Section 12(b) of the Act:  Title of each class

Trading
Symbol

Name of each exchange
on which registeredCommon Stock, par value $0.001 per share

FDUS

The NASDAQ Global Select Market5.875% Notes due 2023

FDUSL

The NASDAQ Global Select Market6.000% Notes due 2024

FDUSZ

The NASDAQ Global Select Market5.375% Notes due 2024

FDUSG

The NASDAQ Global Select Market Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  ☒    No  ☐ Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting
company and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):  Large accelerated filer

☐

Accelerated filer

☒Non-accelerated filer

☐

Smaller reporting company

☐Emerging growth company

☐ If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒ As of October 29, 2019, the Registrant had outstanding 24,463,119 shares of common stock, $0.001 par value.




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##### Table of Contents

FIDUS INVESTMENT CORPORATION TABLE OF CONTENTS QUARTERLY REPORT ON FORM 10-Q  PART I  FINANCIAL INFORMATIONItem 1.

Financial Statements


3Consolidated Statements of Assets and Liabilities  September 
30, 2019 (unaudited) and December 31, 2018


3Consolidated Statements of Operations  Three and Nine Months Ended September 30, 2019 (unaudited) and 2018 (unaudited)


4Consolidated Statements of Changes in Net Assets  Three and Nine Months Ended September 30, 2019 (unaudited) and 2018 (unaudited)


5Consolidated Statements of Cash Flows  Nine Months Ended September 30,
 2019 (unaudited) and 2018 (unaudited)


6Consolidated Schedules of Investments  September 
30, 2019 (unaudited) and December 31, 2018


7Notes to Consolidated Financial Statements (unaudited)


18Item 2.

Managements Discussion and Analysis of Financial Condition and Results
 of Operations


38Item 3.

Quantitative and Qualitative Disclosures About Market Risk


55Item 4.

Controls and Procedures


56PART II  OTHER INFORMATIONItem 1.

Legal Proceedings


57Item 1A.

Risk Factors


57Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds



58Item 3.

Defaults Upon Senior Securities


59Item 4.

Mine Safety Disclosures


59Item 5.

Other Information


59Item 6.

Exhibits


60Signatures


61Exhibit Index  2




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##### Table of Contents

PART I  FINANCIAL INFORMATION  Item 1.
Financial Statements. FIDUS INVESTMENT CORPORATION Consolidated Statements of Assets and Liabilities (in thousands, except shares and per share data)  September 30, 2019(unaudited)


December 31,2018ASSETSInvestments, at fair value:Control investments (cost: $27,279 and $22,697, respectively)

$
15,132


$
18,820Affiliate investments (cost: $56,160 and $70,924, respectively)


111,872



123,051Non-control/non-affiliate 
investments (cost: $608,077 and $505,129, respectively)


602,438



501,111Total investments, at fair value (cost: $691,516 and $598,750, respectively)


729,442



642,982Cash and cash equivalents


17,526



42,015Interest receivable


6,483



7,528Prepaid expenses and other assets


1,289



1,351Total assets

$
754,740


$
693,876LIABILITIESSBA debentures, net of deferred financing costs (Note 6)

$
153,662


$
186,734Public Notes, net of deferred financing costs (Note 6)


115,535



48,411Borrowings under Credit Facility, net of deferred financing costs (Note 6)


65,316



36,358Accrued interest and fees payable


1,644



2,812Base management fee payable  due to affiliate


3,179



2,927Income incentive fee payable  due to affiliate


2,163



2,785Capital gains incentive fee payable  due to affiliate


9,788



9,415Administration fee payable and other  due to affiliate


199



474Taxes payable


1



803Accounts payable and other liabilities


421



172Total liabilities


351,908



290,891Commitments and contingencies (Note 7)NET ASSETSCommon stock, $0.001 par value (100,000,000 shares authorized, 24,463,119 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively)


24



24Additional paid-in capital


366,278



366,278Total distributable earnings


36,530



36,683Total net assets


402,832



402,985Total liabilities and net assets

$
754,740


$
693,876Net asset value per common share

$
16.47


$
16.47 See Notes to Consolidated Financial Statements (unaudited).  3




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Statements of Operations (unaudited) (in thousands, except shares and per share data)  Three Months EndedSeptember 30,


Nine Months EndedSeptember 30,2019


2018


2019


2018Investment Income:Interest incomeControl investments

$
70


$
63


$
420


$
181Affiliate investments


1,192



1,730



4,126



5,268Non-control/non-affiliate 
investments


14,871



13,621



40,686



40,385Total interest income


16,133



15,414



45,232



45,834Payment-in-kind interest
incomeControl investments


191



171



1,611



486Affiliate investments


86



106



254



613Non-control/non-affiliate 
investments


1,976



1,238



5,973



3,425Total payment-in-kind 
interest income


2,253



1,515



7,838



4,524Dividend incomeControl investments














Affiliate investments


1



312



942



953Non-control/non-affiliate 
investments


(39
)


45



(54
)


37Total dividend income


(38
)


357



888



990Fee incomeControl investments










349



Affiliate investments


4







26



23Non-control/non-affiliate 
investments


821



556



3,150



2,745Total fee income


825



556



3,525



2,768Interest on idle funds and other income


28



30



116



101Total investment income


19,201



17,872



57,599



54,217Expenses:Interest and financing expenses


4,421



3,106



12,197



9,084Base management fee


3,179



2,932



9,066



8,438Incentive fee - income


2,163



2,234



5,947



6,628Incentive fee - capital gains


1,307



1,464



373



2,731Administrative service expenses


422



366



1,199



1,112Professional fees


217



233



1,213



1,018Other general and administrative expenses


210



226



1,025



1,212Total expenses


11,919



10,561



31,020



30,223Net investment income before income taxes


7,282



7,311



26,579



23,994Income tax provision (benefit)


(80
)


(170
)


(25
)


28Net investment income


7,362



7,481



26,604



23,966Net realized and unrealized gains (losses) on investments:Net realized gains (losses):Control investments










(1,268
)


Affiliate investments


26



109



(73
)


842Non-control/non-affiliate 
investments


10,507



(7,345
)


10,172



(15,996
)Total net realized gain (loss) on investments


10,533



(7,236
)


8,831



(15,154
)Income tax (provision) benefit from realized gains on investments


32



340



(261
)


(1,408
)Net change in unrealized appreciation (depreciation):Control investments


(9,843
)


105



(8,270
)


(94
)Affiliate investments


(1,701
)


12,208



3,585



27,946Non-control/non-affiliate 
investments


7,722



1,903



(1,621
)


2,364Total net change in unrealized appreciation (depreciation) on investments


(3,822
)


14,216



(6,306
)


30,216Net gain (loss) on investments


6,743



7,320



2,264



13,654Realized losses on extinguishment of debt


(210
)






(399
)


(150
)Net increase in net assets resulting from operations

$
13,895


$
14,801


$
28,469


$
37,470Per common share data:Net investment income per share-basic and diluted

$
0.30


$
0.31


$
1.09


$
0.98Net increase in net assets resulting from operations per share  basic and diluted

$
0.57


$
0.61


$
1.16


$
1.53Dividends declared per share

$
0.39


$
0.39


$
1.17


$
1.17Weighted average number of shares outstanding  basic and diluted


24,463,119



24,463,119



24,463,119



24,474,632 See Notes to Consolidated Financial Statements (unaudited).  4




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Statements of Changes in Net Assets (unaudited) (in thousands, except shares)  Common Stock


Additional


TotalNumber of


Par


paid-in


distributable


Total netshares


value


capital


earnings


assetsBalances at December 31, 2017


24,507,940


$
24


$
370,796


$
22,453


$
393,273Repurchases of common stock under Stock Repurchase Program (Note 8)


(44,821
)






(582
)






(582
)Net investment income














7,527



7,527Net realized gain (loss) on investments, net of taxes














5,531



5,531Net unrealized appreciation (depreciation) on investments














2,117



2,117Realized losses on extinguishment of debt














(150
)


(150
)Dividends declared














(9,558
)


(9,558
)Balances at March 31, 2018


24,463,119


$
24


$
370,214


$
27,920


$
398,158Net investment income














8,958



8,958Net realized gain (loss) on investments, net of taxes














(15,197
)


(15,197
)Net unrealized appreciation (depreciation) on investments














13,883



13,883Realized losses on extinguishment of debt


















Dividends declared














(9,541
)


(9,541
)Balances at June 30, 2018


24,463,119


$
24


$
370,214


$
26,023


$
396,261Net investment income














7,481



7,481Net realized gain (loss) on investments, net of taxes














(6,896
)


(6,896
)Net unrealized appreciation (depreciation) on investments














14,216



14,216Realized losses on extinguishment of debt


















Dividends declared














(9,540
)


(9,540
)Balances at September 30, 2018


24,463,119


$
24


$
370,214


$
31,284


$
401,522Balances at December 31, 2018


24,463,119


$
24


$
366,278


$
36,683


$
402,985Net investment income














9,599



9,599Net realized gain (loss) on investments, net of taxes














(1,583
)


(1,583
)Net unrealized appreciation (depreciation) on investments














3,545



3,545Realized losses on extinguishment of debt














(189
)


(189
)Dividends declared














(9,541
)


(9,541
)Balances at March 31, 2019


24,463,119


$
24


$
366,278


$
38,514


$
404,816Net investment income














9,643



9,643Net realized gain (loss) on investments, net of taxes














(412
)


(412
)Net unrealized appreciation (depreciation) on investments














(6,029
)


(6,029
)Realized losses on extinguishment of debt


















Dividends declared














(9,540
)


(9,540
)Balances at June 30, 2019


24,463,119


$
24


$
366,278


$
32,176


$
398,478Net investment income














7,362



7,362Net realized gain (loss) on investments, net of taxes














10,565



10,565Net unrealized appreciation (depreciation) on investments














(3,822
)


(3,822
)Realized losses on extinguishment of debt














(210
)


(210
)Dividends declared














(9,541
)


(9,541
)Balances at September 30, 2019


24,463,119


$
24


$
366,278


$
36,530


$
402,832 See Notes to Consolidated Financial Statements (unaudited).  5




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Statements of Cash Flows (unaudited) (in thousands)  Nine Months Ended September 30,2019


2018Cash Flows from Operating Activities:Net increase in net assets resulting from operations

$
28,469


$
37,470Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for)
operating activities:Net change in unrealized (appreciation) depreciation on investments


6,306



(30,216
)Net realized (gain) loss on investments


(8,831
)


15,154Interest and dividend
income paid-in-kind


(7,838
)


(4,610
)Accretion of original issue discount


(51
)


(208
)Accretion of loan origination fees


(796
)


(624
)Purchase of investments


(175,535
)


(144,614
)Proceeds from sales and repayments of investments


98,805



92,052Proceeds from loan origination fees


1,480



871Realized losses on extinguishment of debt


399



150Amortization of deferred financing costs


1,315



1,014Changes in operating assets and liabilities:Interest receivable


1,045



1,387Prepaid expenses and other assets


44



40Accrued interest and fees payable


(1,169
)


(1,432
)Base management fee payable  due to affiliate


252



346Income incentive fee payable  due to affiliate


(622
)


80Capital gains incentive fee payable  due to affiliate


373



2,731Administration fee payable and other  due to affiliate


(275
)


(137
)Taxes payable


(802
)


30Accounts payable and other liabilities


250



187Net cash provided by (used for) operating activities


(57,181
)


(30,329
)Cash Flows from Financing Activities:Proceeds received from SBA debentures


7,500



27,000Repayments of SBA debentures


(41,000
)


(43,800
)Proceeds received from issuance of Public Notes


69,000



50,000Proceeds received from (repayments of) borrowings under Credit Facility, net


30,000



25,500Payment of deferred financing costs


(4,186
)


(2,650
)Dividends paid to stockholders, including expenses


(28,622
)


(28,639
)Repurchases of common stock under Stock Repurchase Program






(582
)Net cash provided by (used for) financing activities


32,692



26,829Net increase (decrease) in cash and cash equivalents


(24,489
)


(3,500
)Cash and cash equivalents:Beginning of period


42,015



41,572End of period

$
17,526


$
38,072Supplemental disclosure of cash flow information:Cash payments for interest

$
12,050


$
9,502Cash payments for taxes, net of tax refunds received

$
1,038


$
1,406 See Notes to Consolidated Financial Statements (unaudited).  6




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments (unaudited) September 30, 2019 (in thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type
(c)

Industry


Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsControl Investments (t)FDS Avionics Corp. (dba Flight Display Systems)


Aerospace & Defense ManufacturingSecond Lien Debt







4.00%/11.00%

11/5/2014

7/1/2020

$
6,735


$
6,732


$
5,802Revolving Loan ($30 commitment)







4.00%/11.00%

4/12/2018

7/1/2020


254



254



254Common Equity (7,478 shares) (j)









11/10/2017








748



7,734



6,056



2
%US GreenFiber, LLC


Building Products ManufacturingSecond Lien Debt (k)(p)







7.00%/6.00%

7/3/2014

8/30/2024


14,363



14,359



4,476Second Lien Debt (k)(p)







7.50%/7.50%

11/9/2018

8/30/2024


4,600



4,600



4,600Common Equity (2,522 units) (h)(j)









7/3/2014








585



Common Equity (425,508 units) (j)









8/30/2019








1



19,545



9,076



2
%Total Control Investments

















$
27,279


$
15,132



4
%Affiliate Investments (l)FAR Research Inc. (n)


Specialty ChemicalsCommon Equity (1,396 units)









3/31/2014







$



$
49



0
%Fiber Materials, Inc.


Aerospace & Defense ManufacturingCommon Equity (10 units)









11/30/2016








645



3,916



1
%Medsurant Holdings, LLC


Healthcare ServicesSecond Lien Debt







13.00%/0.00%

12/18/2015

6/30/2020


8,823



8,809



8,823Preferred Equity (126,662 units) (h)









4/12/2011








1,346



2,074Warrant (505,176 units) (h)(m)









4/12/2011








4,516



7,47214,671



18,369



5
%Microbiology Research Associates, Inc.


Healthcare ServicesSubordinated Debt







11.00%/1.50%

5/13/2015

3/13/2022


8,897



8,886



8,897Common Equity (1,625,731 units) (j)









5/13/2015








1,940



2,43910,826



11,336



3
%Mirage Trailers LLC


Utility Equipment ManufacturingSecond Lien Debt (k)





(L + 11.50%) / (1.00%)

13.59%/1.50%

11/25/2015

11/25/2020


6,178



6,158



6,178Common Equity (2,500,000 shares) (o)









11/25/2015








2,182



1,0398,340



7,217



2
%Pfanstiehl, Inc.


Healthcare ProductsSubordinated Debt







10.50%/0.00%

3/29/2013

9/29/2022


6,208



6,200



6,208Common Equity (8,500 units) (j)









3/29/2013








850



18,9467,050



25,154



6
%Pinnergy, Ltd.


Oil & Gas ServicesCommon Equity - Class A-2 (42,500 units) (k)









10/13/2016








3,000



33,771Common Equity - Class B (1,000 units) (k)









10/13/2016








3,000



3,0006,000



36,771



9
%Steward Holding LLC (dba Steward Advanced Materials)


Aerospace & Defense ManufacturingSecond Lien Debt







12.00%/1.50%

11/12/2015

5/12/2021


7,638



7,628



7,638Common Equity (1,000,000 units)









11/12/2015








1,000



1,4228,628



9,060



2
%Total Affiliate Investments

















$
56,160


$
111,872



28
%  7




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments (unaudited) September 30, 2019 (in
thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type
(c)

Industry


Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsNon-control/Non-affiliate
InvestmentsAccent Food Services, LLC


Vending Equipment ManufacturingSecond Lien Debt (k)(x)







0.00%/15.00%

11/30/2016

5/30/2022

$
33,842


$
33,759


$
33,104Subordinated Debt (j)







0.00%/17.00%

6/28/2019

5/30/2022


1,567



1,567



1,503Common Equity (7,885 units) (h)(j)









11/30/2016








800



42536,126



35,032



9
%Allied 100 Group, Inc.


Healthcare ProductsSubordinated Debt (k)







11.25%/0.00%

7/31/2019

5/26/2023


21,500



21,397



21,397Common Equity (1,250,000 units) (j)









11/26/2014








1,250



1,44922,647



22,846



6
%Alzheimers Research and Treatment Center, LLC


Healthcare ServicesFirst Lien Debt (j)(w)





(L + 5.75%) / (2.00%)

8.07%/0.00%

10/23/2018

10/23/2023


6,500



6,459



6,500Common Equity (1,000 units) (h)(j)









10/23/2018








1,000



1,2797,459



7,779



2
%American AllWaste LLC (dba WasteWater Transport Services)


Environmental IndustriesSecond Lien Debt (j)





(L + 11.00%) / (2.00%)

13.10%/0.00%

5/31/2018

11/30/2023


17,503



17,405



17,503Preferred Equity (500 units) (h)(j)









5/31/2018








500



535Preferred Equity (207 units) (h)(j)









8/6/2019








250



25018,155



18,288



5
%Argo Turboserve Corporation


Business ServicesSecond Lien Debt (j)





(L + 9.75%) / (2.00%)

12.08%/0.00%

12/26/2018

6/28/2023


14,438



14,375



14,438



4
%AVC Investors, LLC (dba Auveco)


Specialty DistributionSecond Lien Debt (k)







11.50%/0.00%

1/3/2018

7/3/2023


22,500



22,422



22,500Common Equity (5,000 units) (j)









1/3/2018








490



74522,912



23,245



6
%B&B Roadway and Security Solutions, LLC


Component ManufacturingSecond Lien Debt







10.50%/3.50%

2/27/2018

8/27/2023


10,400



10,360



9,553Common Equity (50,000 units) (h)(j)









2/27/2018








500



18210,860



9,735



2
%Bandon Fitness (Texas), Inc.


RetailFirst Lien Debt (j)(z)





(L + 6.00%) / (2.25%)

8.25%/0.00%

8/9/2019

8/9/2024


10,000



9,594



9,594Common Equity (439,531 units) (j)









8/9/2019








750



75010,344



10,344



3
%BCC Group Holdings, Inc.


Information Technology ServicesSubordinated Debt







11.00%/1.00%

1/28/2019

4/11/2023


18,122



17,971



18,122Common Equity (451 shares)









1/28/2019








1



169Preferred Equity (14 shares)









1/28/2019








374



14318,346



18,434



5
%BCM One Group Holdings, Inc.


Information Technology ServicesSubordinated Debt (k)







11.00%/0.00%

1/3/2019

7/3/2024


27,000



26,882



27,000Common Equity (2,286 shares)









1/3/2019








2



163Preferred Equity (133 shares)









1/3/2019








1,330



1,33028,214



28,493



7
%Bedford Precision Parts LLC


Specialty DistributionFirst Lien Debt (j)(s)





(L + 6.25%) / (2.00%)

8.38%/0.00%

3/12/2019

3/12/2024


5,000



4,967



5,000Common Equity (500,000 units) (h)(j)









3/12/2019








500



5255,467



5,525



1
%Cardboard Box LLC (dba Anthonys Coal Fired Pizza)


RestaurantsCommon Equity (521,021 units) (j)









12/15/2015








520



180



0
%ControlScan, Inc.


Information Technology ServicesSubordinated Debt (j)







11.00%/0.00%

7/28/2017

1/28/2023


6,750



6,730



6,750Common Equity (3,704 shares) (j)









7/28/2017








4



582Preferred Equity (100 shares) (j)









7/28/2017








996



9967,730



8,328



2
%CRS Solutions Holdings, LLC (dba CRS Texas)


Business ServicesSecond Lien Debt







10.50%/1.00%

3/14/2018

9/14/2023


9,142



9,110



9,142Common Equity (750,000 units) (h)(j)









3/14/2018








750



8089,860



9,950



2
%Diversified Search LLC


Business ServicesFirst Lien Debt (k)(r)





(L + 5.75%) / (1.75%)

8.05%/0.00%

2/7/2019

2/7/2024


15,155



14,926



15,155Common Equity (573 units) (h)(j)









2/7/2019








592



65415,518



15,809



4
%EBL, LLC (EbLens)


RetailSecond Lien Debt (j)







12.00%/1.00%

7/13/2017

1/13/2023


9,460



9,405



9,460Common Equity (75,000 units) (j)









7/13/2017








750



66010,155



10,120



2
%  8




---

##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments (unaudited) September 30, 2019 (in
thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type
(c)

Industry


Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsFrench Transit, LLC


Consumer ProductsFirst Lien Debt (j)





(L + 9.00%) / (2.25%)

11.32%/0.00%

6/21/2019

6/21/2024

$
8,000


$
7,962


$
7,962Revolving Loan ($1,000 commitment) (j)(u)





(L + 9.00%) / (2.25%)

11.32%/0.00%

6/21/2019

6/21/2024






(5
)


7,957



7,962



2
%Global Plasma Solutions, Inc.


Component ManufacturingFirst Lien Debt (j)(v)





(L + 5.00%) / (2.00%)

7.33%/0.00%

9/21/2018

9/21/2023


7,071



7,009



7,071Preferred Equity (947 shares) (j)









9/21/2018








360



391Common Equity (947 shares) (j)









9/21/2018








15



1667,384



7,628



2
%Gurobi Optimization, LLC


Information Technology ServicesCommon Equity (5 shares)









12/19/2017








1,500



3,289



1
%Hilco Plastics Holdings, LLC (dba Hilco Technologies)


Component ManufacturingSecond Lien Debt







11.50%/1.50%

9/23/2016

12/31/2019


10,071



10,066



9,897Preferred Equity (1,000,000 units) (h)(j)









4/18/2018








1,000



931Common Equity (72,507 units) (h)(j)









9/23/2016








473



11,539



10,828



3
%Hoonuit, LLC


Information Technology ServicesFirst Lien Debt





(L + 9.25%) / (2.25%)

11.57%/0.00%

6/7/2019

6/7/2024


7,165



7,120



7,120Preferred Equity (610 units) (h)(j)









6/20/2019

1/1/2022






250



2507,370



7,370



2
%Hub Acquisition Sub, LLC (dba Hub Pen)


Promotional productsSecond Lien Debt (k)







12.25%/0.00%

3/23/2016

9/23/2021


25,000



24,940



25,000Common Equity (7,500 units)









3/23/2016








263



1,42425,203



26,424



7
%Hunter Defense Technologies, Inc.


Aerospace & Defense ManufacturingFirst Lien Debt (j)





(L + 7.00%) / (1.00%)

9.10%/0.00%

9/27/2018

3/29/2023


9,494



9,416



9,494



2
%IBH Holdings, LLC (fka Inflexxion, Inc.)


Business ServicesCommon Equity (150,000 units)









6/20/2018
















0
%K2 Merger Agreement Agent, LLC (fka K2 Industrial Services,
Inc.) (n)


Industrial Cleaning & CoatingsSecond Lien Debt







0.00%/10.00%

1/28/2019

1/28/2021


2,632



2,632



2,632



1
%The Kyjen Company, LLC (dba Outward Hound)


Consumer ProductsSecond Lien Debt (k)







12.00%/0.00%

12/8/2017

6/8/2024


15,000



14,946



14,435Common Equity (765 shares) (j)









12/8/2017








765



74315,711



15,178



4
%LNG Indy, LLC (dba Kinetrex Energy)


Oil & Gas DistributionSecond Lien Debt (k)







11.50%/0.00%

12/28/2016

11/12/2021


5,000



4,989



5,000Common Equity (1,000 units)









12/28/2016








1,000



1,1665,989



6,166



2
%Marco Group International OpCo, LLC


Industrial Cleaning & CoatingsSecond Lien Debt







10.50%/0.75%

7/21/2017

1/21/2023


12,202



12,166



12,202Common Equity (960,482 units) (h)(j)









7/21/2017








960



93013,126



13,132



3
%Mesa Line Services, LLC


Utilities: ServicesSecond Lien Debt (j)







10.50%/1.50%

11/30/2017

8/1/2024


17,148



17,055



17,148Delayed Draw Commitment ($2,160 commitment) (i)(j)




10.50%/1.00%

11/30/2017

12/31/2019






(3
)


Common Equity (833 shares) (j)









11/30/2017








1,000



1,30518,052



18,453



5
%Midwest Transit Equipment, Inc.


Transportation servicesWarrant (14,384 shares) (j)(m)









6/23/2017








361



1,015Warrant (9.59% of Junior Subordinated Notes) (j)(q)






6/23/2017








381



459742



1,474



0
%NGT Acquisition Holdings, LLC (dba Techniks Industries)


Component ManufacturingCommon Equity (378 units) (j)









5/24/2017








500



115



0
%Oaktree Medical Centre, P.C. (dba Pain Management
Associates)


Healthcare ServicesFirst Lien Debt (j)(p)







11.50%/3.00%

5/6/2014

5/31/2019


548



625



First Lien Debt (j)(p)







7.00%/15.00%

5/6/2014

5/31/2019


7,558



8,146



Subordinated Debt (j)(p)







7.00%/0.00%

3/15/2019

1/1/2020


38



38



Revolving Loan (j)(p)







11.50%/3.00%

5/6/2014

5/31/2019


2,398



2,597



Revolving Loan (j)(p)







11.50%/3.00%

12/31/2018

5/31/2019


194



194



Revolving Loan (j)(p)







11.50%/3.00%

3/11/2019

5/31/2019


1,742



1,742



Revolving Loan (j)(p)







11.50%/3.00%

8/6/2019

8/6/2019


500



500



13,842







0
%OMC Investors, LLC (dba Ohio Medical Corporation)


Healthcare ProductsSecond Lien Debt







12.00%/0.00%

1/15/2016

7/15/2021


10,000



9,967



10,000Common Equity (5,000 units)









1/15/2016








500



46410,467



10,464



2
%  9




---

##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments (unaudited) September 30, 2019 (in
thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type
(c)

Industry


Spread /Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsPalisade Company, LLC


Information Technology ServicesSubordinated Debt (j)







11.75%/0.00%

11/15/2018

5/15/2024

$
6,500


$
6,473


$
6,500Common Equity (100 shares) (j)









11/15/2018








1,000



9127,473



7,412



2
%Palmetto Moon, LLC


RetailFirst Lien Debt







11.50%/2.50%

11/3/2016

10/31/2021


5,089



5,073



5,089Common Equity (499 units) (j)









11/3/2016








493



355,566



5,124



1
%Power Grid Components, Inc.


Specialty DistributionSecond Lien Debt (k)







11.00%/1.00%

4/12/2018

5/20/2023


11,368



11,328



11,368Preferred Equity (392 shares) (j)









4/12/2018








392



456Common Equity (9,695 shares) (j)









4/12/2018








358



41512,078



12,239



3
%Pugh Lubricants, LLC


Specialty DistributionSecond Lien Debt (k)







12.25%/0.00%

11/10/2016

5/10/2022


23,581



23,516



23,581Common Equity (6,125 units) (h)(j)









11/10/2016








580



1,15224,096



24,733



6
%Revenue Management Solutions, LLC


Information Technology ServicesCommon Equity (2,250,000 shares)









1/4/2017








2,250



4,737



1
%Rhino Assembly Company, LLC


Specialty DistributionSecond Lien Debt (k)







12.00%/1.00%

8/11/2017

2/11/2023


11,410



11,370



10,495Delayed Draw Commitment ($875 commitment) (i)(j)




12.00%/1.00%

8/11/2017

5/17/2022










Preferred Equity (8,864 units) (h)(j)









8/11/2017








944



96612,314



11,461



3
%Road Safety Services, Inc.


Business ServicesSecond Lien Debt







11.25%/1.50%

9/18/2018

3/18/2024


10,183



10,143



9,696Common Equity (655 units)









9/18/2018








621



63310,764



10,329



2
%Rohrer Corporation


PackagingSubordinated Debt (j)







10.50%/1.00%

10/1/2018

4/1/2024


13,839



13,783



13,839Common Equity (400 shares)









7/18/2016








780



80914,563



14,648



3
%SES Investors, LLC (dba SES Foam)


Building Products ManufacturingSecond Lien Debt







13.00%/0.00%

9/8/2016

12/29/2020


3,095



3,079



3,095Common Equity (6,000 units) (h)(j)









9/8/2016








600



8253,679



3,920



1
%Simplex Manufacturing Co.


Aerospace & Defense ManufacturingSubordinated Debt







14.00%/0.00%

10/31/2007

2/15/2020


4,050



4,050



4,050Warrant (29 shares) (m)









10/31/2007








1,155



3,8575,205



7,907



2
%Software Technology, LLC


Information Technology ServicesSubordinated Debt (k)







11.00%/0.00%

12/23/2016

6/23/2023


10,000



9,970



10,000Common Equity (12 shares)









12/23/2016








1,291



1,51811,261



11,518



3
%Specialized Elevator Services Holdings, LLC


Business ServicesFirst Lien Debt (j)(y)





(L + 5.25%) / (2.00%)

7.58%/0.00%

5/7/2019

5/3/2024


7,080



6,980



6,980Common Equity (500 units) (j)









5/8/2019








500



5007,480



7,480



2
%SpendMend LLC


Business ServicesSecond Lien Debt (k)







11.00%/0.75%

1/8/2018

7/8/2023


10,469



10,431



10,469Common Equity (1,000,000 units)









1/8/2018








1,000



1,21011,431



11,679



3
%  10




---

##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments (unaudited) September 30, 2019 (in
thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type
(c)

Industry


Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsThermoforming Technology Group LLC (dba Brown Machine
Group) (n)


Capital Equipment ManufacturingCommon Equity (3,760 units) (h)(j)









3/14/2016







$



$
10



0
%TransGo, LLC


Component ManufacturingCommon Equity (1,000 units)









2/28/2017








998



1,004



0
%The Tranzonic Companies


Specialty DistributionSubordinated Debt (j)







10.00%/1.50%

3/27/2018

3/27/2025

$
6,896



6,841



6,896Preferred Equity (5,653 units) (j)









3/27/2018








565



643Common Equity (1 units) (j)









3/27/2018












7,406



7,539



2
%UBEO, LLC


Business ServicesSubordinated Debt (j)







11.00%/0.00%

4/3/2018

10/3/2024


13,893



13,788



13,637Common Equity (705,000 units) (h)(j)









4/3/2018








705



77914,493



14,416



3
%United Biologics, LLC


Healthcare ServicesPreferred Equity (98,377 units) (h)(j)









4/1/2012








1,008



33Warrant (57,469 units) (m)









3/5/2012








566



281,574



61



0
%US Pack Logistics LLC


Transportation servicesSecond Lien Debt (k)







12.00%/3.75%

3/27/2015

3/28/2023


7,587



7,578



7,587Preferred Equity (9,458 units) (h)(j)









9/28/2017








900



944Common Equity (5,833 units) (h)(j)









3/27/2015








527



9,005



8,531



2
%Vanguard Dealer Services, L.L.C. (n)


Business ServicesCommon Equity (6,000 units)









7/30/2015












22Common Equity (2,380 units) (j)









2/2/2018












9



31



0
%Virginia Tile Company, LLC


Specialty DistributionSecond Lien Debt (k)







12.25%/0.00%

12/19/2014

4/7/2022


12,000



11,987



12,000Common Equity (17 units)









12/19/2014








342



96212,329



12,962



3
%Wheel Pros, Inc.


Specialty DistributionSecond Lien Debt (j)





(L + 8.50%) / (0.00%)

10.54%/0.00%

5/17/2019

4/4/2026


20,000



19,811



19,811Preferred Equity (694,444 units) (j)









5/15/2019








1,500



1,50021,311



21,311



5
%Worldwide Express Operations, LLC


Transportation servicesSecond Lien Debt (j)





(L + 8.00%) / (1.00%)

10.17%/0.00%

2/27/2017

2/3/2025


20,000



19,727



20,000Common Equity (4,000 units) (h)(j)









2/27/2017








2,956



4,23122,683



24,231



6
%Total
Non-control/Non-affiliate Investments

















$
608,077


$
602,438



149
%Total Investments

















$
691,516


$
729,442



181
%  (a)
See Note 3 to the consolidated financial statements for portfolio composition by geographic location. (b)
Equity ownership may be held in shares or units of companies related to the portfolio companies. (c)
All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted. (d)
Variable rate investments bear interest at a rate indexed to LIBOR (L), which is reset monthly, bimonthly,
quarterly, or semi-annually. Certain variable rate investments also include a LIBOR interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of September 30, 2019. (e)
Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of September 30, 2019. Generally, payment-in-kind interest can be paid-in-kind or all in cash. (f)
Investment date represents the date of the initial investment in the security. (g)
The Companys investment portfolio is comprised entirely of debt and equity securities of privately held
companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the board of
directors, using significant unobservable Level 3 inputs.  11




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments (unaudited) September 30, 2019 (in
thousands, except shares)  (h)
Investment is held by a Taxable Subsidiary of the Company. (i)
The disclosed commitment represents the unfunded amount as of September 30, 2019. The Company is earning
0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded. (j)
Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the
creditors of the Company to satisfy any obligations of the Company other than the Companys obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (k)
The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a
result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Companys obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (l)
As defined in the 1940 Act, the Company is deemed to be an Affiliated Person of this portfolio
company because it owns 5% or more of the portfolio companys outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated
Person are detailed in Note 3 to the consolidated financial statements. (m)
Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any. (n)
Investment in portfolio company that has sold its operations and is in the process of winding down. (o)
Income producing. Maturity date, if any, represents mandatory redemption date. (p)
Investment was on non-accrual status as of September 30, 2019,
meaning the Company has ceased recognizing interest income on the investment. (q)
Warrant entitles the Company to purchase 9.59% of the outstanding principal of Junior Subordinated Notes prior
to exercise, and is non-income producing. (r)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 4.82% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. (s)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 4.01% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. (t)
As defined in the 1940 Act, the Company is deemed to be both an Affiliated Person of and
Control this portfolio company because it owns 25% or more of the portfolio companys outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in
which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control are detailed in Note 3 to the consolidated financial statements. (u)
The disclosed commitment represents the unfunded amount as of September 30, 2019. The Company is earning
0.75% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate earned on the outstanding, funded balance of the commitment. (v)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 3.38% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. (w)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 4.06% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. (x)
For the nine months ended September 30, 2019, all interest was treated as PIK interest and capitalized to
the principal balance of the investment. (y)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 3.75% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. (z)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 4.38% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. See Notes to Consolidated Financial Statements (unaudited).  12




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2018 (in thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type (c)

Industry


Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsControl Investments (s)FDS Avionics Corp. (dba Flight Display Systems)


Aerospace & Defense ManufacturingSecond Lien Debt







4.00%/11.00%

11/5/2014

4/1/2020

$
6,203


$
6,196


$
5,397Revolving Loan ($50 commitment)







4.00%/11.00%

4/12/2018

4/1/2020


215



215



215Common Equity (7,478 shares) (j)









11/10/2017








748



7,159



5,612



2
%K2 Industrial Services, Inc.


Industrial Cleaning & CoatingsSecond Lien Debt (p)







0.00%/15.00%

10/25/2016

6/25/2020


10,453



10,423



10,453Second Lien Debt (p)







0.00%/12.00%

10/25/2016

6/25/2020


2,261



2,255



1,155Second Lien Debt (p)







0.00%/19.00%

10/17/2018

6/25/2020


1,600



1,592



1,600Common Equity (1,673 shares)









9/30/2016








1,268



15,538



13,208



3
%Total Control Investments

















$
22,697


$
18,820



5
%Affiliate Investments (l)FAR Research Inc. (n)


Specialty ChemicalsCommon Equity (1,396 units)









3/31/2014







$



$
116



0
%Fiber Materials, Inc.


Aerospace & Defense ManufacturingSecond Lien Debt







12.00%/0.00%

11/30/2016

5/30/2022

$
4,044



4,032



4,044Common Equity (10 units)









11/30/2016








1,000



2,1045,032



6,148



2
%Medsurant Holdings, LLC


Healthcare ServicesSecond Lien Debt







13.00%/0.00%

12/18/2015

6/30/2020


8,823



8,795



8,823Preferred Equity (126,662 units) (h)









4/12/2011








1,346



2,703Warrant (505,176 units) (h)(m)









4/12/2011








4,516



9,82014,657



21,346



5
%Microbiology Research Associates, Inc.


Healthcare ServicesSubordinated Debt







11.00%/1.50%

5/13/2015

3/13/2022


8,798



8,783



8,122Common Equity (1,625,731 units) (j)









5/13/2015








1,938



1,92410,721



10,046



3
%Mirage Trailers LLC


Utility Equipment ManufacturingSecond Lien Debt (k)





(L + 11.50%) / (1.00%)

13.85%/1.50%

11/25/2015

11/25/2020


6,109



6,075



6,109Common Equity (2,500,000 shares) (o)









11/25/2015








2,179



3,1748,254



9,283



2
%Pfanstiehl, Inc.


Healthcare ProductsSubordinated Debt







10.50%/0.00%

3/29/2013

9/29/2022


6,208



6,197



6,208Common Equity (8,500 units) (j)









3/29/2013








850



13,8157,047



20,023



5
%Pinnergy, Ltd.


Oil & Gas ServicesSecond Lien Debt (k)







12.00%/0.00%

10/13/2016

1/24/2020


4,000



3,993



4,000Common Equity - Class A-2 (42,500 units) (k)









10/13/2016








3,000



33,878Common Equity - Class B (1,000 units) (k)









10/13/2016








3,000



3,0009,993



40,878



10
%Steward Holding LLC (dba Steward Advanced
Materials)


Aerospace & Defense ManufacturingSecond Lien Debt







12.00%/1.50%

11/12/2015

5/12/2021


7,553



7,538



7,553Common Equity (1,000,000 units)









11/12/2015








1,000



1,3578,538



8,910



2
%Trantech Radiator Products, Inc.


Utility Equipment ManufacturingSecond Lien Debt (j)







13.75%/0.00%

11/4/2011

12/31/2019


5,994



5,994



5,994Common Equity (6,875 shares) (j)









11/4/2011








688



3076,682



6,301



2
%Total Affiliate Investments

















$
70,924


$
123,051



31
%  13




---

##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2018 (in
thousands, except shares)  Portfolio Company (a)(b)




Variable Index


Rate (e)


Investment





Principal





Fair


Percent ofInvestment Type (c)

Industry


Spread / Floor (d)


Cash/PIK


Date (f)


Maturity


Amount


Cost


Value (g)


Net AssetsNon-control/Non-affiliate
InvestmentsAccent Food Services, LLC


Vending Equipment ManufacturingSecond Lien Debt (k)










10.00%/5.00%



11/30/2016



5/30/2022


$
30,312


$
30,205


$
28,879Common Equity (7,885 units) (h)(j)














11/30/2016











800



46231,005



29,341



7
%Allied 100 Group, Inc.


Healthcare ProductsCommon Equity (1,250,000 units) (j)














11/26/2014











1,250



1,744



0
%Alzheimers Research and Treatment Center


Healthcare ServicesFirst Lien Debt (j)(v)






(L + 5.75%) / (2.00%)



8.23%/0.00%



10/23/2018



10/23/2023



6,500



6,451



6,451Common Equity (1,000 units) (h)(j)














10/23/2018











1,000



1,0007,451



7,451



2
%American AllWaste LLC (dba WasteWater
Transport Services)


Environmental IndustriesSecond Lien Debt (j)










11.00%/1.50%



5/31/2018



11/30/2023



11,826



11,765



11,826Delayed Draw Commitment ($2,276 commitment) (i)(j)







11.00%/1.50%



5/31/2018



11/30/2019







(7
)


Preferred Equity (500 units) (j)














5/31/2018











500



61512,258



12,441



3
%Argo Turboserve Corporation


Business ServicesSecond Lien Debt (j)()






(L + 9.75%) / (2.00%)



12.56%/0.00%



12/26/2018



6/28/2023



15,000



14,925



14,925



4
%AVC Investors, LLC (dba Auveco)


Specialty DistributionSecond Lien Debt (k)










11.50%/0.00%



1/3/2018



7/3/2023



22,500



22,406



22,500Common Equity (5,000 units) (j)














1/3/2018











500



68222,906



23,182



6
%B&B Roadway and Security Solutions, LLC


Component ManufacturingSecond Lien Debt










10.50%/1.50%



2/27/2018



8/27/2023



10,129



10,080



9,524Common Equity (50,000 units) ($133 commitment) (h)(j)











2/27/2018











500



30410,580



9,828



2
%Cardboard Box LLC (dba Anthonys Coal Fired Pizza)


RestaurantsCommon Equity (521,021 units) (j)














12/15/2015











521



108



0
%Consolidated Infrastructure Group Holdings, LP


Business ServicesCommon Equity (298 units)














11/30/2017











378



49



0
%ControlScan, Inc.


Information Technology ServicesSubordinated Debt (j)










11.00%/0.00%



7/28/2017



1/28/2023



6,750



6,725



6,750Common Equity (3,704 shares) (j)














7/28/2017











4



620Preferred Equity (100 shares) (j)














7/28/2017











996



9967,725



8,366



2
%CRS Solutions Holdings, LLC (dba CRS Texas) Second
Lien Debt


Business Services







10.50%/1.00%



3/14/2018



9/14/2023



9,073



9,035



9,073Common Equity (750,000 units) (j)














3/14/2018











750



7579,785



9,830



2
%EBL, LLC (EbLens)


RetailSecond Lien Debt (j)










12.00%/1.00%



7/13/2017



1/13/2023



9,389



9,321



9,389Common Equity (75,000 units) (j)














7/13/2017











750



74210,071



10,131



3
%Global Plasma Solutions, Inc.


Component ManufacturingFirst Lien Debt (j)(u)






(L + 5.00%) / (2.00%)



7.40%/0.00%



9/21/2018



9/21/2023



8,703



8,629



8,629Preferred Equity (947 shares) (j)














9/21/2018











360



360Common Equity (947 shares) (j)














9/21/2018











15



159,004



9,004



2
%Gurobi Optimization, LLC


Information Technology ServicesSubordinated Debt (k)










11.00%/0.00%



12/19/2017



6/19/2023



20,000



19,920



20,400Common Equity (5 shares)














12/19/2017











1,500



2,32321,420



22,723



6
%Hilco Plastics Holdings, LLC (dba Hilco Technologies)


Component ManufacturingSecond Lien Debt










11.50%/1.50%



9/23/2016



12/31/2019



9,940



9,922



9,439Preferred Equity (1,000,000 units) (h)(j)














4/18/2018











1,000



1,112Common Equity (72,507 units) (h)(j)














9/23/2016











473



22711,395



10,778



3
%  14




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2018 (in
thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type (c)

Industry


Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsHub Acquisition Sub, LLC (dba Hub Pen)


Promotional productsSecond Lien Debt (k)







12.25%/0.00%

3/23/2016

9/23/2021

$
25,000


$
24,918


$
25,000Common Equity (7,500 units)









3/23/2016








249



1,41725,167



26,417



7
%Hunter Defense Technologies, Inc.


Aerospace & Defense ManufacturingFirst Lien Debt (j)





(L + 7.00%) / (1.00%)

9.80%/0.00%

9/27/2018

3/29/2023


9,747



9,653



9,653



2
%IBH Holdings, LLC (fka Inflexxion, Inc.)


Business ServicesCommon Equity (150,000 units)









6/20/2018
















0
%inthinc Technology Solutions, Inc. (n)


Information Technology ServicesRoyalty Rights









10/15/2015

4/24/2020






185







0
%The Kyjen Company, LLC (dba Outward Hound)


Consumer ProductsSecond Lien Debt (k)







12.00%/0.00%

12/8/2017

6/8/2024


15,000



14,937



13,950Common Equity (765 shares) (j)









12/8/2017








765



75415,702



14,704



4
%LNG Indy, LLC (dba Kinetrex Energy)


Oil & Gas DistributionSecond Lien Debt (k)







11.50%/0.00%

12/28/2016

9/28/2021


5,000



4,985



5,000Common Equity (1,000 units)









12/28/2016








1,000



1,5615,985



6,561



2
%Marco Group International OpCo, LLC


Industrial Cleaning & CoatingsSecond Lien Debt







10.50%/0.75%

7/21/2017

1/21/2023


12,133



12,089



12,133Common Equity (750,000 units) (h)(j)









7/21/2017








750



80012,839



12,933



3
%Mesa Line Services, LLC


Utilities: ServicesSecond Lien Debt (j)







10.50%/0.50%

11/30/2017

5/31/2023


10,014



9,963



10,014Delayed Draw Commitment ($3,160 commitment) (i)(j)







10.50%/0.50%

11/30/2017

5/31/2019






(4
)


Common Equity (500 shares) (j)









11/30/2017








500



67610,459



10,690



3
%Midwest Transit Equipment, Inc.


Transportation servicesWarrant (14,384 shares) (j)(m)









6/23/2017








361



436Warrant (9.59% of Junior Subordinated Notes) (j)(q)









6/23/2017








381



398742



834



0
%New Era Technology, Inc.


Information Technology ServicesCommon Equity (197,369 shares) (j)









3/3/2017








750



990



0
%NGT Acquisition Holdings, LLC (dba Techniks Industries)


Component ManufacturingSubordinated Debt







12.50%/2.00%

5/24/2017

3/21/2022


11,579



11,542



10,460Common Equity (378 units) (j)









5/24/2017








500



7212,042



10,532



3
%Oaktree Medical Centre, P.C. (dba Pain Management Associates)


Healthcare ServicesFirst Lien Debt (j)(t)







14.50%/0.00%

5/6/2014

1/1/2018


571



649



566First Lien Debt (j)(t)







10.00%/12.00%

5/6/2014

1/1/2018


7,751



8,338



8,133Revolving Loan (j)(t)







14.50%/0.00%

5/6/2014

1/1/2018


2,500



2,699



2,490Revolving Loan (j)(t)







14.50%/0.00%

12/31/2018

1/31/2019


200



200



20011,886



11,389



3
%OMC Investors, LLC (dba Ohio Medical Corporation)


Healthcare ProductsSecond Lien Debt







12.00%/0.00%

1/15/2016

7/15/2021


10,000



9,954



8,748Common Equity (5,000 units)









1/15/2016








500



13910,454



8,887



2
%Palisade Company, LLC


Information Technology ServicesSubordinated Debt (j)







11.75%/0.00%

11/15/2018

5/15/2024


6,500



6,468



6,468Common Equity (100 shares) (j)









11/15/2018








1,000



1,0007,468



7,468



2
%Palmetto Moon, LLC


RetailFirst Lien Debt







11.50%/2.50%

11/3/2016

10/31/2021


5,512



5,490



5,512Common Equity (499 units) (j)









11/3/2016








494



1085,984



5,620



1
%  15




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2018 (in
thousands, except shares)  Portfolio Company (a)(b)




Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type (c)

Industry


Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsPower Grid Components, Inc.


Specialty DistributionSecond Lien Debt (k)







11.00%/1.00%

4/12/2018

5/20/2023

$
11,282


$
11,234


$
11,282Preferred Equity (392 shares) (j)









4/12/2018








392



422Common Equity (9,695 shares) (j)









4/12/2018








358



26011,984



11,964



3
%Pugh Lubricants, LLC


Specialty DistributionSecond Lien Debt (k)







12.25%/0.00%

11/10/2016

5/10/2022


18,581



18,523



18,581Common Equity (6,125 units) (h)(j)









11/10/2016








612



1,00019,135



19,581



5
%Revenue Management Solutions, LLC


Information Technology ServicesCommon Equity (2,250,000 shares)









1/4/2017








2,250



3,888



1
%Rhino Assembly Company, LLC


Specialty DistributionSecond Lien Debt (k)







12.00%/1.00%

8/11/2017

2/11/2023


11,324



11,275



11,324Delayed Draw Commitment ($875 commitment) (i)(j)




12.00%/1.00%

8/11/2017

5/17/2022










Preferred Equity (8,864 units) (j)(r)









8/11/2017








945



1,27212,220



12,596



3
%Road Safety Services, Inc.


Business ServicesSecond Lien Debt







11.25%/1.50%

9/18/2018

3/18/2024


10,068



10,022



10,022Common Equity (655 units)









9/18/2018








621



62110,643



10,643



2
%Rohrer Corporation


PackagingSubordinated Debt (j)







10.50%/1.00%

10/1/2018

4/1/2024


13,735



13,670



13,670Common Equity (400 shares)









7/18/2016








780



72414,450



14,394



4
%SES Investors, LLC (dba SES Foam)


Building Products ManufacturingSecond Lien Debt







15.00%/0.00%

9/8/2016

12/29/2020


3,095



3,069



2,703Common Equity (6,000 units) (h)(j)









9/8/2016








600



1673,669



2,870



1
%Simplex Manufacturing Co.


Aerospace & Defense ManufacturingSubordinated Debt







14.00%/0.00%

10/31/2007

7/31/2019


4,050



4,050



4,050Warrant (29 shares) (m)









10/31/2007








1,155



3,0365,205



7,086



2
%Software Technology, LLC


Information Technology ServicesSubordinated Debt (k)







11.00%/0.00%

12/23/2016

6/23/2023


10,000



9,964



10,000Common Equity (12 shares)









12/23/2016








1,291



1,36411,255



11,364



3
%SpendMend LLC


Business ServicesSecond Lien Debt (k)







11.00%/1.00%

1/8/2018

7/8/2023


10,401



10,355



10,401Common Equity (1,000,000 units)









1/8/2018








1,000



1,17911,355



11,580



3
%The Wolf Organization, LLC


Building Products ManufacturingCommon Equity (175 shares)









5/29/2015








753



3,711



1
%Thermoforming Technology Group LLC (dbaBrown Machine Group) (n)


Capital Equipment ManufacturingCommon Equity (3,760 units) (h)(j)









3/14/2016












10



0
%Tile Redi, LLC


Building Products ManufacturingFirst Lien Debt (j)





(L + 10.00%) / (1.00%)

12.80%/0.00%

7/18/2017

6/16/2022


10,194



10,122



10,156



2
%TransGo, LLC


Component ManufacturingSecond Lien Debt







13.25%/0.00%

2/28/2017

8/28/2022


9,500



9,468



9,500Common Equity (1,000 units)









2/28/2017








998



90510,466



10,405



3
%The Tranzonic Companies


Specialty DistributionSubordinated Debt (j)







10.00%/1.50%

3/27/2018

3/27/2025


5,664



5,614



4,997Preferred Equity (5,000 units) (j)









3/27/2018








500



391Common Equity (1 units) (j)









3/27/2018












6,114



5,388



1
%UBEO, LLC


Business ServicesSubordinated Debt (j)







11.00%/0.00%

4/3/2018

10/3/2024


13,100



12,979



13,100Delayed Draw Commitment ($1,500 commitment) (j)(i)(w)




11.00%/0.00%

11/7/2018

8/7/2019






(12
)


Common Equity (705,000 units) (j)









4/3/2018








705



1,02713,672



14,127



3
%  16




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2018 (in
thousands, except shares)  Portfolio Company (a)(b)



Variable Index

Rate (e)

Investment



Principal





Fair


Percent ofInvestment Type (c)

Industry

Spread / Floor (d)

Cash/PIK

Date (f)

Maturity

Amount


Cost


Value (g)


Net AssetsUnited Biologics, LLC

Healthcare ServicesPreferred Equity (98,377 units) (h)(j)







4/1/2012







$
1,008


$
64Warrant (57,469 units) (m)







3/5/2012








566



531,574



117



0
%US GreenFiber, LLC

Building Products ManufacturingSecond Lien Debt (k)(p)





12.00%/2.00%

7/3/2014

5/31/2019

$
14,363



14,359



6,549Second Lien Debt (p)





0.00%/16.00%

11/9/2018

5/31/2019


1,000



1,000



1,000Common Equity (2,522 units) (h)(j)







7/3/2014








586



15,945



7,549



2
%US Pack Logistics LLC

Transportation servicesSecond Lien Debt (k)





12.00%/1.75%

3/27/2015

3/28/2023


7,412



7,396



7,412Common Equity (5,833 units) (h)(j)







3/27/2015








555



178Preferred Equity (9,458 units) (h)(j)







9/28/2017








927



1,0468,878



8,636



2
%Vanguard Dealer Services, L.L.C.

Business ServicesCommon Equity (6,000 units)







7/30/2015








154



851Common Equity (2,380 units) (j)







2/2/2018








327



338481



1,189



0
%Virginia Tile Company, LLC

Specialty DistributionSecond Lien Debt (k)





12.25%/0.00%

12/19/2014

4/7/2022


12,000



11,980



12,000Common Equity (17 units)







12/19/2014








342



1,45512,322



13,455



3
%Worldwide Express Operations, LLC

Transportation servicesSecond Lien Debt (j)



(L + 8.00%) /(1.00%)

10.86%/0.00%

2/27/2017

2/3/2025


20,000



19,690



20,000Common Equity (4,000 units) (h)(j)







2/27/2017








2,956



3,82322,646



23,823



6
%Total
Non-control/Non-affiliate Investments















$
505,129


$
501,111



124
%Total Investments















$
598,750


$
642,982



160
%  (a)
See Note 3 to the consolidated financial statements for portfolio composition by geographic location. (b)
Equity ownership may be held in shares or units of companies related to the portfolio companies. (c)
All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted. (d)
Variable rate investments bear interest at a rate indexed to LIBOR (L), which is reset monthly, bimonthly,
quarterly, or semi-annually. Certain variable rate investments also include a LIBOR interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of December 31, 2018. (e)
Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of December 31, 2018. Generally, payment-in-kind interest can be paid-in-kind or all in cash. (f)
Investment date represents the date of the initial investment in the security. (g)
The Companys investment portfolio is comprised entirely of debt and equity securities of privately held
companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the board of
directors, using significant unobservable Level 3 inputs. (h)
Investment is held by a Taxable Subsidiary of the Company. (i)
The disclosed commitment represents the unfunded amount as of December 31, 2018. The Company is earning
0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded. (j)
Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the
creditors of the Company to satisfy any obligations of the Company other than the Companys obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (k)
The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a
result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Companys obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (l)
As defined in the 1940 Act, the Company is deemed to be an Affiliated Person of this portfolio
company because it owns 5% or more of the portfolio companys outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated
Person are detailed in Note 3 to the consolidated financial statements. (m)
Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any. (n)
Investment in portfolio company that has sold its operations and is in the process of winding down. (o)
Income producing. Maturity date, if any, represents mandatory redemption date. (p)
Investment was on non-accrual status as of December 31, 2018,
meaning the Company has ceased recognizing interest income on the investment. (q)
Warrant entitles the Company to purchase 9.59% of the outstanding principal of Junior Subordinated Notes prior
to exercise, and is non-income producing. (r)
A portion of the investment is held by a wholly-owned subsidiary of the Company, other than the Funds. (s)
As defined in the 1940 Act, the Company is deemed to be both an Affiliated Person of and
Control this portfolio company because it owns 25% or more of the portfolio companys outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in
which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control are detailed in Note 3 to the consolidated financial statements. (t)
The debt investment continues to pay interest, including the default rate, while the portfolio company pursues
refinancing options. (u)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 3.54% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. (v)
In addition to the interest earned based on the stated interest rate of this security, the Company is entitled
to receive an additional interest amount of 4.15% on its last out tranche of the portfolio companys senior term debt, which was previously syndicated into first out and last out tranches, whereby the
first out tranche will have priority as to the last out tranche with respect to payments of principal, interest and any other amounts due thereunder. (w)
The maturity date presented represents the final termination date of the commitment. $707 of the commitment
expires on May 7, 2019. See Notes to Consolidated Financial Statements.  17




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data) Note 1. Organization and Nature of Business Fidus Investment Corporation (FIC, and together with its subsidiaries, the Company), a Maryland corporation, operates
as an externally managed, closed-end, non-diversified business development company (BDC) under the Investment Company Act of 1940, as amended (1940
Act). FIC completed its initial public offering, or IPO, in June 2011. In addition, for federal income tax purposes, the Company elected to be treated as a regulated investment company (RIC) under Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). The Company provides customized debt and equity financing solutions to lower
middle-market companies, and may make investments directly or through its three wholly-owned investment company subsidiaries, Fidus Mezzanine Capital, L.P. (Fund I), Fidus Mezzanine Capital II, L.P. (Fund II) and Fidus
Mezzanine Capital III, L.P. (Fund III) (collectively Fund I, Fund II and Fund III are referred to as the Funds). The Funds are licensed by the U.S. Small Business Administration (the SBA) as small business
investment companies (SBIC). The SBIC licenses allow the Funds to obtain leverage by issuing SBA-guaranteed debentures (SBA debentures), subject to the issuance of leverage commitments
by the SBA and other customary procedures. As SBICs, the Funds are subject to a variety of regulations and oversight by the SBA under the Small Business Investment Act of 1958, as amended (the SBIC Act), concerning, among other things,
the size and nature of the companies in which they may invest and the structure of those investments. As of September 9, 2019, Fund I has completed a wind-down plan and has relinquished its SBIC license and can no longer issue additional SBA
debentures. We believe that utilizing both FIC and the Funds as investment vehicles provides us with access to a broader array of
investment opportunities. Given our access to lower cost capital through the SBAs SBIC debenture program, we expect that we will continue to make investments through the Funds until the Funds reach their borrowing limit under the program. For
three or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350,000. Fund I has also
elected to be regulated as a BDC under the 1940 Act. Fund II and Fund III are not registered under the 1940 Act and rely on the exclusion from the definition of investment company contained in Section 3(c)(7) of the 1940 Act. The Company pays a quarterly base management fee and an incentive fee to Fidus Investment Advisors, LLC (the Investment Advisor)
under an investment advisory agreement (the Investment Advisory Agreement). Note 2. Significant Accounting Policies Basis of presentation: The accompanying consolidated financial statements of the Company have been prepared in accordance with generally
accepted accounting principles in the United States of America (GAAP) pursuant to the requirements for reporting on Form 10-Q, Accounting Standards Codification (ASC) 946, Financial
Services  Investment Companies(ASC 946), and Articles 6 or 10 of Regulation S-X. In the opinion of management, the consolidated financial statements reflect all adjustments and
reclassifications that are necessary for the fair presentation of financial results as of and for the periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. The current periods
results of operation are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 2018. Use of estimates: The preparation of the consolidated financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Consolidation: Pursuant to Article 6 of Regulation S-X and ASC 946, the Company will generally
not consolidate its investments in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. As a result, the consolidated financial statements of the
Company include only the accounts of the Company and its wholly-owned subsidiaries, including the Funds. All significant intercompany balances and transactions have been eliminated. Investment risks: The Companys investments are subject to a variety of risks. These risks may include, but are not limited to the
following:  

Market risk - In contrast to investment-grade bonds (the market prices of which change primarily as a
reaction to changes in interest rates), the market prices of high-yield bonds (which are also affected by changes in interest rates) are influenced much more by credit factors and financial results of the issuer as well as general economic factors
that influence the financial markets as a whole. The portfolio companies in which the Company invests may be unseasoned, unprofitable and/or have little established operating history or earnings. These companies may also lack technical, marketing,
financial, and other resources or may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team, as compared to larger, more established  18




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FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  entities. The failure of a single product, service or distribution channel, or the loss or the ineffectiveness of a key executive or executives within the management team may have a materially
adverse impact on such companies. Furthermore, these companies may be more vulnerable to competition and to overall economic conditions than larger, more established entities.  

Credit risk - Credit risk represents the risk that the Company would incur if the counterparties failed to
perform pursuant to the terms of their agreements with the Company. Issues of high-yield debt securities in which the Company invests are more likely to default on interest or principal than are issues of investment-grade securities.  

Liquidity risk - Liquidity risk represents the possibility that the Company may not be able to sell its
investments quickly or at a reasonable price (given the lack of an established market).  

Interest rate risk - Interest rate risk represents the likelihood that a change in interest rates could
have an adverse impact on the fair value of an interest-bearing financial instrument.  

Prepayment risk - Certain of the Companys debt investments allow for prepayment of principal without
penalty. Downward changes in market interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the debt investments and making the instrument less likely to be an income producing
instrument through the stated maturity date.  

Off-Balance sheet risk - Some of the Companys financial
instruments contain off-balance sheet risk. Generally, these financial instruments represent future commitments to purchase other financial instruments at defined terms at defined future dates. See Note 7 for
further details. Fair value of financial instruments: The Company measures and discloses fair value with respect
to substantially all of its financial instruments in accordance with ASC Topic 820  Fair Value Measurements and Disclosures (ASC Topic 820). ASC Topic 820 defines fair value, establishes a framework used to measure fair
value, and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. See Note 4 to the consolidated financial statements for
further discussion regarding the fair value measurements and hierarchy. Investment classification: The Company classifies its
investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, Control Investments are defined as investments in those companies where the Company owns more than 25% of the voting securities of such company or has
rights to maintain greater than 50% of the board representation. Under the 1940 Act, Affiliate Investments are defined as investments in those companies where the Company owns between 5% and 25% of the voting securities of such company. Non-Control/Non-Affiliate Investments are those that neither qualify as Control Investments nor Affiliate Investments. Segments: In accordance with ASC Topic 280  Segment Reporting, the Company has determined that it has a single reporting
segment and operating unit structure. Cash and cash equivalents: Cash and cash equivalents are highly liquid investments with an
original maturity of three months or less at the date of acquisition. The Company places its cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits. The Company does
not believe its cash balances are exposed to any significant credit risk. Deferred financing costs: Deferred financing costs
consist of fees and expenses paid in connection with the Credit Facility (as defined in Note 6) and SBA debentures. Deferred financing costs are capitalized and amortized to interest and financing expenses over the term of the debt agreement using
the effective interest method. Unamortized deferred financing costs are presented as an offset to the corresponding debt liabilities on the consolidated statements of assets and liabilities. Realized losses on extinguishment of debt: Upon the repayment of debt obligations which are deemed to be extinguishments, the
difference between the principal amount due at maturity adjusted for any unamortized deferred financing costs is recognized as a loss (i.e., the unamortized deferred financing costs are recognized as a loss upon extinguishment of the underlying debt
obligation). In 2019, the Company elected to change the manner in which it presents the derecognition of unamortized deferred financing costs upon extinguishment of the related debt obligation. Previously, the Company classified the extinguishment
as a component of interest and financing expenses on the consolidated statements of operations. Comparative prior periods presented have been reclassified retrospectively to conform to the revised presentation. There is no change in historical net
increase in net assets resulting from operations due to this change in presentation. Deferred offering costs: Deferred offering
costs include registration expenses related to shelf filings. These expenses primarily consist of U.S. Securities and Exchange Commission (SEC) registration fees, legal fees and accounting fees incurred. These expenses are included in
prepaid expenses and other assets on the Consolidated Statements of Assets and Liabilities. Upon the completion of an equity offering or a debt offering, the deferred expenses are charged to additional paid-in
capital or deferred financing costs, respectively. If no offering is completed prior to the expiration of the registration statement, the deferred costs are charged to expense.  19




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FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Realized gains or losses and unrealized appreciation or depreciation on investments:Realized gains or losses on investments are recorded upon the sale or disposition of a portfolio investment and are calculated as the difference between the net proceeds from the sale or disposition and the cost basis of the investment, without
regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation on the consolidated statements of operations includes changes in the fair value of investments from the prior period, as
determined in good faith by the Companys board of directors (the Board) through the application of the Companys valuation policy, as well as reclassifications of any prior period unrealized appreciation or depreciation on
exited investments to realized gains or losses on investments. Interest and dividend income: Interest and dividend income is
recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt. Dividend income is recorded as dividends are
declared or at the point an obligation exists for the portfolio company to make a distribution, and is generally recognized when received. Distributions from portfolio companies are evaluated to determine if the distribution is a distribution of
earnings or a return of capital. Distributions of earnings are included in dividend income while a return of capital is recorded as a reduction in the cost basis of the investment. Estimates are adjusted as necessary after the relevant tax forms are
received from the portfolio company. PIK income:Certain of the Companys investments contain a payment-in-kind (PIK) income provision. The PIK income, computed at the contractual rate specified in the applicable investment agreement, is added to the
principal balance of the investment, rather than being paid in cash, and recorded as interest or dividend income, as applicable, on the consolidated statements of operations. Generally, PIK can be paid-in-kind or all in cash. The Company stops accruing PIK income when there is reasonable doubt that PIK income will be collected. PIK income that has been contractually capitalized to the principal balance
of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the investment (with corresponding adjustments
to unrealized depreciation, as applicable). PIK income is included in the Companys taxable income and, therefore, affects the amount the Company is required to pay to shareholders in the form of dividends in order to maintain the
Companys tax treatment as a RIC and to avoid corporate federal income tax, even though the Company has not yet collected the cash. Non-accrual:Debt investments or preferred equity investments (for which the Company is
accruing PIK dividends) are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or
dividends will be collected. Interest and dividend payments received on non-accrual investments may be recognized as interest or dividend income or may be applied to the investment principal balance based on
managements judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in managements judgment, payments are likely to remain
current. Origination and closing fees:The Company also typically receives debt investment origination or closing fees in
connection with such investments. Such debt investment origination and closing fees are capitalized as unearned income and offset against investment cost basis on the consolidated statements of assets and liabilities and accreted into interest
income over the life of the investment. Upon the prepayment of a debt investment, any unaccreted debt investment origination and closing fees are accelerated into interest income. Warrants: In connection with the Companys debt investments, the Company will sometimes receive warrants or other equity-related
securities from the borrower (Warrants). The Company determines the cost basis of Warrants based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and Warrants received. Any
resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the Warrants is treated as original issue discount (OID), and accreted into interest income using the
effective interest method over the term of the debt investment. Upon the prepayment of a debt investment, any unaccreted OID is accelerated into interest income. Fee income: Transaction fees earned in connection with the Companys investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including structuring and advisory services, provided to portfolio companies. The Company recognizes income from fees for providing such structuring and
advisory services when the services are rendered or the transactions are completed. Upon the prepayment of a debt investment, any prepayment penalties are recorded as fee income when earned. Partial loan sales:The Company follows the guidance in ASC 860, Transfers and Servicing,when accountingfor loan (debt
investment) participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be
allowed. Participations or other partial loan sales which do not meet the definition of a participating interest should remain on the Companys consolidated statement of assets and liabilities and the proceeds recorded as a secured borrowing
until the definition is met. Management has determined that all participations and other partial loan sale transactions entered into by the Company have met the definition of a participating interest. Accordingly, the Company uses sale treatment in
accounting for such transactions.  20




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Income taxes: The Company has elected to be treated as a RIC under Subchapter M of the
Code, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to stockholders. To maintain the tax treatment of a RIC, the Company is required to timely distribute to its stockholders at least
90.0% of investment company taxable income, as defined by Subchapter M of the Code, each year. Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current
year distributions into the next tax year; however, the Company will pay a 4.0% excise tax if it does not distribute at least 98.0% of the current years ordinary taxable income. Any such carryover taxable income must be distributed through a
dividend declared prior to the later of the date on which the final tax return related to the year in which the Company generated such taxable income is filed or the 15th day of the 10th month following the close of such taxable year. In addition, the Company will be subject to federal excise tax if it does not distribute at least 98.2% of its net capital gains realized, computed
for any one year period ending October 31. In the future, the Funds may be limited by provisions of the SBIC Act and SBA regulations
governing SBICs from making certain distributions to FIC that may be necessary to enable FIC to make the minimum distributions required to maintain the tax treatment of a RIC. The Company has certain wholly-owned taxable subsidiaries (the Taxable Subsidiaries), each of which generally holds one or more of
the Companys portfolio investments listed on the consolidated schedules of investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Companys consolidated financial statements reflect the
Companys investment in the portfolio company investments owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies that are taxed as partnerships for
U.S. federal income tax purposes (such as entities organized as limited liability companies (LLCs) or other forms of pass through entities) while complying with the
source-of-income requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate
income tax purposes, and each Taxable Subsidiary will be subject to U.S. federal corporate income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations. U.S. federal income tax regulations differ from GAAP, and as a result, distributions in accordance with tax regulations may differ from net
investment income and realized gains recognized under GAAP. Differences may be permanent or temporary. Permanent differences may arise as a result of, among other items, a difference in the book and tax basis of certain assets and nondeductible
federal income taxes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. ASC Topic 740  Accounting for Uncertainty in Income Taxes (ASC Topic 740) provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Companys tax returns to determine whether
the tax positions are more-likely-than-not to be respected by the applicable tax authorities. Tax benefits of positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Companys policy to recognize accrued interest and penalties related to uncertain tax benefits included in
the income tax provision, if any. There were no material uncertain income tax positions at September 30, 2019 and December 31, 2018. The Companys tax returns are generally subject to examination by U.S. federal and most state tax
authorities for a period of three years from the date the respective returns are filed, and, accordingly, the Companys 2016 through 2018 tax years remain subject to examination. Dividends to stockholders: Dividends to stockholders are recorded on the record date with respect to such distributions. The amount, if
any, to be distributed to stockholders, is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, may be distributed at least annually, although the Company may
decide to retain such capital gains for investment. The determination of the tax attributes for the Companys distributions is made
annually, and is based upon the Companys taxable income and distributions paid to its stockholders for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income
from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax characterization of
the Companys distributions generally includes both ordinary income and capital gains but may also include qualified dividends or return of capital. The Company has adopted a dividend reinvestment plan (DRIP) that provides for the reinvestment of dividends on behalf of its
stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the Companys stockholders who have not opted out of the DRIP at least two days prior to the dividend
payment date will have their cash dividend automatically reinvested into additional shares of the Companys common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance of new shares of common
stock or through open market purchases  21




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the Companys common stock on a date determined by the Board. Shares
purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased by the DRIP plan administrator before any associated brokerage or other costs. See Note 9 to the
consolidated financial statements regarding dividend declarations and distributions. Earnings and net asset value per share: The
earnings per share calculations for the three and nine months ended September 30, 2019 and 2018, are computed utilizing the weighted average shares outstanding for the period. Net asset value per share is calculated using the number of shares
outstanding as of the end of the period. Stock Repurchase Program: The Company has an open market stock repurchase program (the
Stock Repurchase Program) under which the Company may acquire up to $5,000 of its outstanding common stock. Under the Stock Repurchase Program, the Company may, but is not obligated to, repurchase outstanding common stock in the open
market from time to time provided that the Company complies with the prohibitions under its insider trading policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended,
including certain price, market value and timing constraints. The timing, manner, price and amount of any share repurchases will be determined by the Companys management, in its discretion, based upon the evaluation of economic and market
conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate considerations. On October 29, 2019, the Board extended the Stock Repurchase Program through December 31, 2020, or until the
approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not require the Company to repurchase any specific number of shares and the Company cannot assure that any shares will be repurchased under the Stock
Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time. The Company did not make any repurchases of common stock during the three and nine months ended September 30, 2019. During the
three and nine months ended September 30, 2018, the Company repurchased zero and 44,821 shares, respectively, of common stock on the open market for zero and $582, respectively. Refer to Note 8 for additional information concerning stock
repurchases. Recent accounting pronouncements: In August 2018, the FASB issued ASU 2018-13,Fair Value Measurement (Topic 820) 
Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019.
The Company is currently evaluating the impact this ASU will have on the Companys consolidated financial position or disclosures. Note 3.
Portfolio Company Investments The Companys portfolio investments principally consist of secured and unsecured debt, equity
warrants and direct equity investments in privately held companies. The debt investments may or may not be secured by either a first or second lien on the assets of the portfolio company. The debt investments generally bear interest at fixed rates,
and generally mature between five and seven years from the original investment. In connection with a debt investment, the Company also may receive nominally priced equity warrants and/or make a direct equity investment in the portfolio company. The
Companys warrants or equity investments may be investments in a holding company related to the portfolio company. In addition, the Company periodically makes equity investments in its portfolio companies through Taxable Subsidiaries. In both
situations, the investment is generally reported under the name of the operating company on the consolidated schedules of investments. As
of September 30, 2019, the Company had active investments in 62 portfolio companies and residual investments in four portfolio companies that have sold its underlying operations. The aggregate fair value of the total portfolio was $729,442 and
the weighted average effective yield on the Companys debt investments was 12.3% as of such date. As of September 30, 2019, the Company held equity investments in 92.4% of its portfolio companies and the weighted average fully diluted
equity ownership in those portfolio companies was 5.9%. The weighted average fully diluted equity ownership was computed using the fully diluted equity ownership for equity investments (including warrants) at cost as of September 30, 2019. As of December 31, 2018, the Company had active investments in 60 portfolio companies and residual investments in three portfolio
companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $642,982 and the weighted average effective yield on the Companys debt investments was 12.6% as of such date. As of December 31,
2018, the Company held equity investments in 93.7% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 6.6%. The weighted average fully diluted equity ownership was computed using the
fully diluted equity ownership for equity investments (including warrants) at cost as of December 31, 2018. The weighted average
yield of the Companys debt investments is not the same as a return on investment for its stockholders but, rather, relates to a portion of the Companys investment portfolio and is calculated before the payment of all of the
Companys and its subsidiaries fees and expenses.The weighted average yields were computed using the effective interest rates for debt investments at cost as of September 30, 2019 and December 31, 2018, including
accretion of OID and debt investment origination fees, but excluding investments on non-accrual status, if any.  22




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Purchases of debt and equity investments for the nine months ended September 30, 2019
and 2018 totaled $175,535 and $144,614, respectively. Proceeds from sales and repayments, including principal, return of capital distributions and realized gains, of portfolio investments for the nine months ended September 30, 2019 and 2018
totaled $98,805 and $92,052, respectively. Investments by type with corresponding percentage of total portfolio investments consisted of
the following:  Fair Value


CostSeptember 30,


December 31,


September 30,


December 31,2019


2018


2019


2018Second Lien Debt

$
377,887



51.7
%

$
366,517



57.0
%

$
391,104



56.6
%

$
379,973



63.5
%Subordinated Debt


144,799



19.9



104,225



16.2



144,576



20.9



105,900



17.7First Lien Debt


79,965



11.0



51,790



8.1



93,305



13.5



52,231



8.7Equity


113,960



15.6



106,707



16.6



55,552



8.0



53,482



8.9Warrants


12,831



1.8



13,743



2.1



6,979



1.0



6,979



1.2Royalty Rights


























185



Total

$
729,442



100.0
%

$
642,982



100.0
%

$
691,516



100.0
%

$
598,750



100.0
% All investments made by the Company as of September 30, 2019 and December 31, 2018 were made in
portfolio companies headquartered in the U.S. The following table shows portfolio composition by geographic region at fair value and cost and as a percentage of total investments. The geographic composition is determined by the location of the
corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio companys business.  Fair Value


CostSeptember 30,


December 31,


September 30,


December 31,2019


2018


2019


2018Midwest

$
177,467



24.4
%

$
161,067



25.1
%

$
158,184



22.9
%

$
152,607



25.5
%Southeast


149,490



20.5



176,819



27.5



143,730



20.8



155,271



25.9Northeast


150,469



20.6



89,661



13.9



145,227



21.0



84,246



14.1West


86,428



11.8



62,824



9.8



81,673



11.8



54,469



9.1Southwest


165,588



22.7



152,611



23.7



162,702



23.5



152,157



25.4Total

$
729,442



100.0
%

$
642,982



100.0
%

$
691,516



100.0
%

$
598,750



100.0
% The following table shows portfolio composition by type and by geographic region at fair value as a percentage
of net assets.  By Type


By Geographic RegionSeptember 30,


December 31,




September 30,


December 31,2019


2018




2019


2018Second Lien Debt


93.8
%


90.9
%

Midwest


44.0
%


40.0
%Subordinated Debt


35.9



25.9


Southeast


37.1



43.9First Lien Debt


19.9



12.9


Northeast


37.4



22.2Equity


28.3



26.5


West


21.5



15.6Warrants


3.2



3.4


Southwest


41.1



37.9Royalty Rights






Total


181.1
%


159.6
%

Total


181.1
%


159.6
% As of September 30, 2019 and December 31, 2018, the Company had no portfolio company investments
that represented more than 10% of the total investment portfolio on a fair value or cost basis.  23




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  As of September 30, 2019 and December 31, 2018, the Company had debt investments in
two portfolio companies on non-accrual status, respectively:  September 30, 2019


December 31, 2018Fair





FairPortfolio Company

Value


Cost


Value


CostK2 Industrial Services, Inc.

$

(1)

$

(1)

$
13,208


$
14,270Oaktree Medical Centre, P.C. (dba Pain Management Associates)






13,842




(2)



(2)US GreenFiber, LLC


9,076



18,959



7,549



15,359Total

$
9,076


$
32,801


$
20,757


$
29,629  (1)
Portfolio company was no longer held at period end. Interest earned while on non-accrual was paid in full at
exit. (2)
Portfolio company debt investments were not on non-accrual status at period end. Consolidated Schedule of Investments In and Advances To Affiliates The table below represents the fair value of control and affiliate investments as of December 31, 2018 and any additions and reductions
made to such investments during the nine months ended September 30, 2019, the ending fair value as of September 30, 2019, and the total investment income earned on such investments during the period.  Nine Months Ended September 30, 2019September 30,2019

















Net Change inPrincipal


December 31,








September 30,


Net Realized


Unrealized





Payment-in-Amount - Debt


2018


Gross


Gross


2019


Gains


Appreciation


Interest


kind Interest


Dividend


FeePortfolio Company (1)

Investments


Fair Value


Additions (2)


Reductions (3)


Fair Value


(Losses) (4)


(Depreciation)


Income


Income


Income


IncomeControl InvestmentsFDS Avionics Corp. (dba Flight Display Systems)

$
6,989


$
5,612


$
575


$
(131
)

$
6,056


$



$
(131
)

$
203


$
551


$



$
K2 Industrial Services, Inc.






13,208



3,435



(16,643
)






(1,268
)


2,330



217



1,060







349US GreenFiber, LLC (5)


18,963







19,549



(10,473
)


9,076







(10,469
)














Total Control Investments

$
25,952


$
18,820


$
23,559


$
(27,247
)

$
15,132


$
(1,268
)

$
(8,270
)

$
420


$
1,611


$



$
349Affiliate InvestmentsFAR Research Inc.

$



$
116


$



$
(67
)

$
49


$



$
(68
)

$



$



$



$
Fiber Materials, Inc.






6,148



2,167



(4,399
)


3,916







2,154



56











Medsurant Holdings, LLC


8,823



21,346



13



(2,990
)


18,369







(2,990
)


884











4Microbiology Research Associates, Inc.


8,897



10,046



1,290







11,336







1,188



730



99







22Mirage Trailers LLC


6,178



9,283



86



(2,152
)


7,217







(2,152
)


661



70



76



Pfanstiehl, Inc.


6,208



20,023



5,131







25,154







5,127



490







366



Pinnergy, Ltd.






40,878



8



(4,115
)


36,771







(115
)


274







500



Steward Holding LLC (dba Steward Advanced Materials)


7,638



8,910



150







9,060







60



685



85







Trantech Radiator Products, Inc.






6,301



380



(6,681
)






(257
)


381



346











Total Affiliate Investments

$
37,744


$
123,051


$
9,225


$
(20,404
)

$
111,872


$
(257
)

$
3,585


$
4,126


$
254


$
942


$
26  (1)
The investment type, industry, ownership detail for equity investments, and if the investment is income
producing is disclosed in the consolidated schedule of investments. (2)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest and PIK dividend income, accretion of OID and origination fees, and net unrealized appreciation recognized during the period. Gross additions also include transfers of
portfolio companies into the control or affiliate classification during the period, as applicable. (3)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or
sales and net unrealized (depreciation) recognized during the period. Gross reductions also include include transfers of portfolio companies out of the control or affiliate classification during the period, as applicable. (4)
The schedule does not reflect realized gains or losses on escrow receivables for investments which were
previously exited and were not held during the period presented. Gains and losses on escrow receivables are classified in the consolidated statements of operations according to the control classification at the time the investment was exited. Escrow
receivables are presented in prepaid expenses and other assets on the consolidated statements of assets and liabilities. (5)
Portfolio company was transferred to Control investments from Non-control/Non-affiliate investments during the nine months ended September 30, 2019. Note 4. Fair Value Measurements Investments The Board has established and documented processes and methodologies for determining the fair values of portfolio company investments on a
recurring basis in accordance with ASC Topic 820 and consistent with the requirements of the 1940 Act. Fair value is the price, determined at the measurement date, that would be received in the sale of an asset or paid to transfer a liability in an
orderly transaction between market participants. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available or reliable, valuation
techniques described below are applied. Under ASC Topic 820, portfolio investments recorded at fair value in the consolidated financial statements are classified within the fair value hierarchy based upon the level of judgment associated with the
inputs used to measure their value, as defined below: Level1  Inputs are unadjusted, quoted prices in
active markets for identical assets as of the measurement date. Level2  Inputs include quoted prices for
similar assets in active markets, or that are quoted prices for identical or similar assets in markets that are not active and inputs that are observable, either directly or indirectly, for substantially the full term, if applicable, of the
investment. Level3  Inputs include those that are both unobservable and significant to the overall fair
value measurement. An investments categorization within the valuation hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. The Companys investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2
inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the Board, using Level 3 inputs. The  24




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  degree of judgment exercised by the Board in determining fair value is greatest for investments classified as Level 3 inputs. Due to the inherent uncertainty of determining the fair values
of investments that do not have readily available market values, the Boards estimate of fair values may differ significantly from the values that would have been used had a ready market for the securities existed, and those differences may be
material. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the amounts ultimately realized on these investments to be materially different than
the valuations currently assigned. With respect to investments for which market quotations are not readily available, the Board
undertakes a multi-step valuation process each quarter, as described below:  

the quarterly valuation process begins with each portfolio company or investment being initially evaluated and
rated by the investment professionals of the Investment Advisor responsible for the portfolio investment;  

preliminary valuation conclusions are then documented and discussed with the investment committee of the
Investment Advisor;  

the Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of
our portfolio investments for which market quotations are not readily available. Each portfolio company investment is generally appraised by the valuation firm(s) at least once every calendar year and each new portfolio company investment is
appraised at least once in the twelve-month period following the initial investment. In certain instances, the Company may determine that it is not cost-effective, and as a result it is not in the Companys stockholders best interest, to
request the independent appraisal of certain portfolio company investments. Such instances include, but are not limited to, situations where the Company determines that the fair value of the portfolio company investment is relatively insignificant
to the fair value of the total portfolio. The Board consulted with the independent valuation firm(s) in arriving at the Companys determination of fair value for 13 and 16 of its portfolio company investments representing 26.8% and 36.0% of the
total portfolio investments at fair value (exclusive of new portfolio company investments made during the three months ended September 30, 2019 and December 31, 2018, respectively) as of September 30, 2019 and December 31, 2018,
respectively.  

the audit committee of the Board reviews the preliminary valuations of the Investment Advisor and of the
independent valuation firm(s) and responds and supplements the valuation recommendations to reflect any comments; and  

the Board discusses these valuations and determines the fair value of each investment in our portfolio in good
faith, based on the input of the Investment Advisor, the independent valuation firm(s) and the audit committee. In
making the good faith determination of the value of portfolio investments, the Board starts with the cost basis of the security. The transaction price is typically the best estimate of fair value at inception. When evidence supports a subsequent
change to the carrying value from the original transaction price, adjustments are made to reflect the expected exit values. Consistent
with the policies and methodologies adopted by the Board, the Company performs detailed valuations of its debt and equity investments, including an analysis on the Companys unfunded debt investment commitments, using both the market and income
approaches as appropriate. Under the market approach, the Company typically uses the enterprise value methodology to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one
portfolio company, enterprise value is generally best expressed as a range of values, from which the Company derives a single estimate of enterprise value. Under the income approach, the Company typically prepares and analyzes discounted cash flow
models to estimate the present value of future cash flows of either an individual debt investment or of the underlying portfolio company itself. The Company evaluates investments in portfolio companies using the most recent portfolio company financial statements and forecasts. The
Company also consults with the portfolio companys senior management to obtain further updates on the portfolio companys performance, including information such as industry trends, new product development and other operational issues. For the Companys debt investments the primary valuation technique used to estimate the fair value is the discounted cash flow
method. However, if there is deterioration in credit quality or a debt investment is in workout status, the Company may consider other methods in determining the fair value, including the value attributable to the debt investment from the enterprise
value of the portfolio company or the proceeds that would be received in a liquidation analysis. The Companys discounted cash flow models estimate a range of fair values by applying an appropriate discount rate to the future cash flow streams
of its debt investments, based on future interest and principal payments as set forth in the associated debt investment agreements. The Company prepares a weighted average cost of capital for use in the discounted cash flow model for each
investment, based on factors including, but not limited to: current pricing and credit metrics for similar proposed or executed investment transactions of private companies; the portfolio companys historical financial results and outlook; and
the portfolio companys current leverage and credit quality as compared to leverage and credit quality as of the date the investment was made. The Company may also consider the following factors when determining the fair value of debt
investments: the portfolio companys ability to make future scheduled payments; prepayment  25




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  penalties and other fees; estimated remaining life; the nature and realizable value of any collateral securing such debt investment; and changes in the interest rate environment and the credit
markets that generally may affect the price at which similar investments may be made. The Company estimates the remaining life of its debt investments to generally be the legal maturity date of the instrument, as the Company generally intends to
hold its debt investments to maturity. However, if the Company has information available to it that the debt investment is expected to be repaid in the near term, it would use an estimated remaining life based on the expected repayment date. For the Companys equity investments, including equity and warrants, the Company generally uses a market approach, including valuation
methodologies consistent with industry practice, to estimate the enterprise value of portfolio companies. Typically, the enterprise value of a private company is based on multiples of EBITDA, net income, revenues, or in limited cases, book value. In
estimating the enterprise value of a portfolio company, the Company analyzes various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio companys historical and projected
financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of
financial ratios of peer companies that are public. Where applicable, the Company considers the Companys ability to influence the capital structure of the portfolio company, as well as the timing of a potential exit. The Company may also utilize an income approach when estimating the fair value of its equity securities, either as a primary methodology if
consistent with industry practice or if the market approach is otherwise not applicable, or as a supporting methodology to corroborate the fair value ranges determined by the market approach. The Company typically prepares and analyzes discounted
cash flow models based on projections of the future free cash flows (or earnings) of the portfolio company. The Company considers various factors, including, but not limited to, the portfolio companys projected financial results, applicable
market trading and transaction comparables, applicable market yields and leverage levels, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. The fair value of the Companys royalty rights are calculated based on projected future cash flows and the specific provisions contained
in the pertinent agreements. The determination of the fair value of such royalty rights is not a significant component of the Companys valuation process. The Company reviews the fair value hierarchy classifications on a quarterly basis. Reclassifications impacting Level 3 of the fair value
hierarchy are reported as transfers in or out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur. There were no transfers among Levels 1, 2, and 3 during the nine months ended September 30,
2019 and 2018. The following tables present a reconciliation of the beginning and ending balances for fair valued investments measured
using significant unobservable inputs (Level 3) for the nine months ended September 30, 2019 and 2018:  Second Lien


Subordinated


First Lien








RoyaltyDebt


Debt


Debt


Equity


Warrants


Rights


TotalBalance, December 31, 2017

$
341,279


$
126,481


$
28,911


$
84,585


$
15,052


$



$
596,308Net realized gains (losses) on investments


(16,252
)






(4,293
)


5,362



29







(15,154
)Net change in unrealized appreciation (depreciation) on investments


(2,568
)


(1,494
)


3,727



29,329



1,222







30,216Purchase of investments


104,005



13,950



18,700



7,959











144,614Proceeds from sales and repayments of investments


(49,868
)


(30,102
)


(1,256
)


(10,514
)


(312
)






(92,052
)Interest and dividend income paid-in-kind


2,983



738



803



86











4,610Proceeds from loan origination fees


(524
)


(133
)


(214
)














(871
)Accretion of loan origination fees


427



167



25



5











624Accretion of original issue discount


96



109







3











208Transfers between classifications


6,823



(6,823
)


















Balance, September 30, 2018

$
386,401


$
102,893


$
46,403


$
116,815


$
15,991


$



$
668,503Balance, December 31, 2018

$
366,517


$
104,225


$
51,790


$
106,707


$
13,743


$



$
642,982Net realized gains (losses) on investments














9,016







(185
)


8,831Net change in unrealized appreciation (depreciation) on investments


239



1,898



(12,899
)


5,183



(912
)


185



(6,306
)Purchase of investments


43,445



70,036



55,150



6,904











175,535Proceeds from sales and repayments of investments


(39,475
)


(32,045
)


(13,433
)


(13,852
)










(98,805
)Interest and dividend income paid-in-kind


6,854



885



99















7,838Proceeds from loan origination fees


(135
)


(435
)


(909
)


(1
)










(1,480
)Accretion of loan origination fees


408



235



150



3











796Accretion of original issue discount


34







17















51Balance, September 30, 2019

$
377,887


$
144,799


$
79,965


$
113,960


$
12,831


$



$
729,442 Net change in unrealized (depreciation) of $(10,334) and $(14,655) for the three and nine months ended
September 30, 2019, respectively, was attributable to Level 3 investments held at September 30, 2019. Net change in unrealized appreciation of $9,125 and $23,971 for the three and nine months ended September 30, 2018,
respectively, was attributable to Level 3 investments held at September 30, 2018.  26




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  The following tables summarize the significant unobservable inputs by valuation technique
used to determine the fair value of the Companys Level 3 debt and equity investments as of September 30, 2019 and December 31, 2018. The tables are not intended to be all-inclusive, but
instead capture the significant unobservable inputs relevant to the Companys determination of fair values.  Fair Value at


Valuation

Unobservable

RangeSeptember 30, 2019


Techniques

Inputs

(weighted average)Debt investments:Second Lien Debt

$
366,179


Discounted cash flow

Weighted average cost of capital

10.5% - 24.0% (13.3%)9,076


Enterprise value

Revenue multiples

0.2x - 0.2x (0.2x)2,632


Enterprise value

Asset Coverage

1.1x - 1.1x (1.1x)Subordinated Debt


144,799


Discounted cash flow

Weighted average cost of capital

10.9% - 18.1% (12.0%)


Enterprise value

Asset Coverage

50.0% - 50.0% (n/a)First Lien Debt


72,846


Discounted cash flow

Weighted average cost of capital

9.4% - 14.8% (12.3%)7,119


Enterprise value

Revenue multiples

4.4x - 4.4x (4.4x)


Enterprise value

Asset Coverage

50.0% - 50.0% (n/a)Equity investments:Equity


113,710


Enterprise value

EBITDA multiples

3.4x - 16.8x (7.3x)250


Enterprise value

Revenue multiples

1.2x - 4.4x (4.4x)Warrants


12,831


Enterprise value

EBITDA multiples

4.0x - 7.0x (6.8x)Fair Value at


Valuation

Unobservable

RangeDecember 31, 2018


Techniques

Inputs

(weighted average)Debt investments:Second Lien Debt

$
357,813


Discounted cash flow

Weighted average cost of capital

11.2% - 30.0% (13.5%)8,704


Enterprise value

EBITDA multiples

5.0x - 5.9x (5.1x)Subordinated Debt


104,225


Discounted cash flow

Weighted average cost of capital

10.9% - 16.5% (12.5%)First Lien Debt


51,790


Discounted cash flow

Weighted average cost of capital

10.2% - 20.7% (12.3%)Equity investments:Equity


106,707


Enterprise value

EBITDA multiples

3.5x - 17.3x (7.0x)Warrants


13,743


Enterprise value

EBITDA multiples

4.0x - 8.0x (7.2x)Royalty Rights





Discounted cash flow

Weighted average cost of capital

N/A The significant unobservable input used in determining the fair value under the discounted cash flow technique
is the weighted average cost of capital of each security. Significant increases (or decreases) in this input would likely result in significantly lower (or higher) fair value estimates. The significant unobservable inputs used in determining fair value under the enterprise value technique are revenue and EBITDA multiples, as
well as asset coverage. Significant increases (or decreases) in these inputs could result in significantly higher (or lower) fair value estimates. Other Financial Assets and Liabilities ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company
believes that the carrying amounts of its other financial instruments such as cash and cash equivalents, interest receivable and accounts payable and other liabilities approximate the fair value of such items due to the short maturity of such
instruments. The Companys borrowings under the Credit Facility (as defined in Note 6), SBA debentures, and Public Notes (as defined in Note 6) are recorded at their respective carrying values.  27




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  The following tables summarize the carrying value and fair value of the Companys debt
obligations as of September 30, 2019 and December 31, 2018.  September 30, 2019


December 31, 2018Carrying Value (1)


Fair Value


Carrying Value (1)


Fair ValueSBA debentures (2)

$
157,500


$
157,500


$
191,000


$
191,000Credit Facility borrowings (3)


66,500



66,500



36,500



36,5002023 Notes (4)


50,000



52,120



50,000



51,492February 2024 Notes (4)


69,000



73,388







Total

$
343,000


$
349,508


$
277,500


$
278,992  (1)
Carrying value represents the outstanding principal balance of the debt obligation. (2)
The fair value of SBA debentures is estimated by discounting the remaining payments using current market rates
for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the debentures, which are Level 3 inputs under ASC Topic 820. (3)
The fair value of borrowings under the Credit Facility, if valued under ASC Topic 820, are based on a market
yield approach and current interest rates, which are Level 3 inputs to the market yield model. (4)
The Public Notes, if valued under ASC Topic 820, are valued using available market quotes, which is a
Level 1 input. The following table summarizes the inputs used to value the Companys debt obligations if
measured at fair value as of September 30, 2019 and December 31, 2018.  Fair ValueValuation Inputs

September 30,2019


December 31,2018Level 1

$
125,508


$
51,492Level 2






Level 3


224,000



227,500Total

$
349,508


$
278,992 Note 5. Related Party Transactions Investment Advisory Agreement: The Company has entered into an Investment Advisory Agreement with the Investment Advisor. On
June 6, 2019, the Board approved the renewal of the Investment Advisory Agreement through June 20, 2020. Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board, the Investment Advisor provides
investment advisory services to the Company. For providing these services, the Investment Advisor receives a fee, consisting of two components  a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% based on the average value of total assets (other than cash or cash
equivalents but including assets purchased with borrowed amounts) at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears. The base management fee under the Investment Advisory
Agreement was $3,179 and $9,066, for the three and nine months ended September 30, 2019, respectively, and $2,932 and $8,438 for the three and nine months ended September 30, 2018, respectively. As of September 30,
2019 and December 31, 2018, the base management fee payable was $3,179 and $2,927, respectively. The incentive fee consists of two
parts. The first part is calculated and payable quarterly in arrears based on the Companys pre-incentive fee net investment income for the quarter. Pre-incentive
fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio
companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement (defined
below) and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee and excise taxes on realized gains). Pre-incentive fee net investment income includes, in
the case of investments with a deferred interest feature (such as market discount, debt instruments with PIK income, preferred stock with PIK dividends and zero-coupon securities), accrued income the Company
has not yet received in cash. The Investment Advisor is not under any obligation to reimburse the Company for any part of the incentive fee it receives that was based on accrued interest that the Company never collects.  28




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Pre-incentive fee net investment income does not
include any realized capital gains, taxes associated with such realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay
an incentive fee in a quarter where the Company incurs a loss. For example, if the Company generates pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, the
Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to a net loss on investments. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Companys net assets (defined as total assets less indebtedness and before taking into account any incentive fees
payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed hurdle rate of 2.0% per quarter. If market interest rates rise, the Company may be able to invest funds in debt instruments
that provide for a higher return, which would increase the Companys pre-incentive fee net investment income and make it easier for the Investment Advisor to surpass the fixed hurdle rate and receive an
incentive fee based on such net investment income. The Company pays the Investment Advisor an incentive fee with respect to pre-incentive fee net investment income in each calendar quarter as follows:  

no incentive fee in any calendar quarter in which the pre-incentive fee
net investment income does not exceed the hurdle rate of 2.0%;  

100.0% of the Companys pre-incentive fee net investment income with
respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5% in any calendar quarter. This portion of the
pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.5%) is referred to as the catch-up provision. The catch-up is meant to provide the Investment Advisor with 20.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income
exceeds 2.5% in any calendar quarter; and  

20.0% of the amount of the Companys pre-incentive fee net
investment income, if any, that exceeds 2.5% in any calendar quarter. The sum of the calculations above equals the
income incentive fee. The income incentive fee is appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the calendar quarter. The income incentive fee
was $2,163 and $5,947, for the three and nine months ended September 30, 2019 , respectively, and $2,234 and $6,628 for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019 and
December 31, 2018, the income incentive fee payable was $2,163 and $2,785, respectively. The second part of the incentive fee is a
capital gains incentive fee that is determined and paid in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.0% of the net capital gains as of the end of
the fiscal year. In determining the capital gains incentive fee to be paid in cash to the Investment Advisor, the Company calculates the cumulative aggregate realized capital gains and losses since the Formation Transactions (realized capital gains
and losses include realized gains and losses on investments, net of income tax provision from realized gains on investments, and realized losses on extinguishment of debt), and the aggregate unrealized capital depreciation on investments as of the
date of the calculation. At the end of the applicable year, the amount of capital gains that serves as the basis for the calculation of the capital gains incentive fee to be paid equals the cumulative aggregate realized capital gains on investments,
less cumulative aggregate realized capital losses on investments, less aggregate unrealized capital depreciation on investments, and less cumulative aggregate realized losses on extinguishment of debt. If this number is positive at the end of such
year, then the capital gains incentive fee to be paid in cash for such year equals 20.0% of such amount, less the aggregate amount of any capital gains incentive fees paid in all prior years. As of September 30, 2019 and December 31, 2018,
the capital gains incentive fee payable in cash was $0 (as cumulative aggregate realized capital gains and losses on investments plus aggregate unrealized capital depreciation on investments plus realized losses on extinguishment of debt was
negative as of each period). The aggregate amount of capital gains incentive fees paid from the IPO through September 30, 2019 was $348. In addition, the Company accrues, but does not pay in cash, a capital gains incentive fee in connection with any unrealized capital
appreciation on investments, as applicable. If, on a cumulative basis, the sum of (i) net realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments plus (iii) realized losses on
extinguishment of debt decreases during a period, the Company will reverse any excess capital gains incentive fee previously accrued such that the amount of capital gains incentive fee accrued is no more than 20.0% of the sum of (i) net
realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments plus (iii) realized losses on extinguishment of debt. The capital gains incentive fee accrued (reversed) during the three and nine
months ended September 30, 2019 was $1,307 and $373, respectively, and $1,464 and $2,731 for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019 and December 31, 2018, the accrued capital
gains incentive fee payable was $9,788 and $9,415, respectively. Unless terminated earlier as described below, the Investment Advisory
Agreement will continue in effect from year to year if approved annually by the Board or by the affirmative vote of the holders of a majority of the Companys outstanding voting securities, and, in either case, if also approved by a majority of
the Independent Directors. The Investment Advisory Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, by the Investment Advisor and may be terminated by either party without penalty upon not less than 60
days written notice to the other. The holders of a majority of the Companys outstanding voting securities may also terminate the Investment Advisory Agreement without penalty.  29




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Administration Agreement:The Company also entered into an administration agreement
(the Administration Agreement) with the Investment Advisor. On June 6, 2019, the Board approved the renewal of the Administration Agreement through June 20, 2020. Under the Administration Agreement, the Investment Advisor
furnishes the Company with office facilities and equipment, provides clerical, bookkeeping, and record keeping services at such facilities and provides the Company with other administrative services necessary to conduct its day-to-day operations. The Company reimburses the Investment Advisor for the allocable portion of overhead expenses incurred in performing its obligations under the
Administration Agreement, including rent and the Companys allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs. Under the Administration Agreement, the Investment Advisor also
provides managerial assistance to those portfolio companies to which the Company is required to provide such assistance and the Company reimburses the Investment Advisor for fees and expenses incurred with providing such services. In addition, the
Company reimburses the Investment Advisor for fees and expenses incurred while performing due diligence on the Companys prospective portfolio companies, including dead deal expenses. Under the Administration Agreement,
administrative service expenses for the three and nine months ended September 30, 2019 were $422 and $1,199, respectively, and $366 and $1,112 for the three and nine months ended September 30, 2018. As of September 30, 2019 and
December 31, 2018, the accrued administrative service expense was $199 and $474, respectively. Note 6. Debt Revolving Credit Facility: On June 16, 2014, FIC entered into a senior secured revolving credit agreement (the Credit
Facility) with ING Capital LLC (ING), as the administrative agent, collateral agent, and lender. The Credit Facility is secured by certain portfolio investments held by the Company, but portfolio investments held by the Funds are
not collateral for the Credit Facility. On April 24, 2019, the Company entered into an Amended & Restated Senior Secured Revolving Credit Agreement (the Amended Credit Agreement) among the Company, as borrower, the lenders
party thereto, and ING Capital LLC, as administrative agent. The Amended Credit Agreement amends, restates, and replaces the Credit Facility. Under the Amended Credit Agreement, (i) revolving commitments by lenders were increased from $90,000 to $100,000, with an accordion
feature that allows for an increase in total commitments up to $250,000, subject to satisfaction of certain conditions at the time of any such future increase, (ii) the maturity date of the Credit Facility was extended from June 16, 2019
to April 24, 2023, and (iii) borrowings under the credit facility bear interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if (x) no equity interests are
included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the contribution to the borrowing base of
eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00%
(or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero. The Company pays a commitment fee that varies depending
on the size of the unused portion of the Credit Facility: 3.00% per annum on the unused portion of the credit facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the Credit Facility between the total
commitments and the 35% minimum utilization. The Amended Credit Agreement also modifies certain covenants in the credit facility, including to provide for a minimum asset coverage ratio of 2.00 to 1. The Credit Facility is secured by a first
priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries. Amounts available to borrow under the
Credit Facility are subject to a minimum borrowing/collateral base that applies an advance rate to certain investments held by the Company, excluding investments held by the Funds. The Company is subject to limitations with respect to the
investments securing the Credit Facility, including, but not limited to, restrictions on sector concentrations, loan size, payment frequency and status and collateral interests, as well as restrictions on portfolio company leverage, which may also
affect the borrowing base and therefore amounts available to borrow. The Company has made customary representations and warranties and is
required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. These covenants are subject to important limitations and exceptions that are described in the documents governing the
Credit Facility. As of September 30, 2019 and December 31, 2018, the Company was in compliance in all material respect with the terms of the Credit Facility. SBA debentures: The Company uses debenture leverage provided through the SBA to fund a portion of its investment purchases. Under the SBA debenture program, the SBA commits to purchase debentures issued by SBICs; such debentures have
10-year terms with the entire principal balance due at maturity and are guaranteed by the SBA. Interest on SBA debentures is payable semi-annually on March 1 and September 1. As of September 30,
2019 and December 31, 2018, approved and unused SBA debenture commitments were $17,500 and zero, respectively. The SBA may limit the amount that may be drawn each year under these commitments, and each issuance of leverage is conditioned on the
Companys full compliance, as determined by the SBA, with the terms and conditions set forth in the SBIC Act.  30




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  As of September 30, 2019 and December 31, 2018, the Companys issued and
outstanding SBA debentures mature as follows:  PoolingDate (1)

MaturityDate


FixedInterest Rate


September 30,2019


December 31,20189/21/2011


9/1/2021



3.594
%

$



$
2,0003/21/2012


3/1/2022



3.051







8,0009/19/2012


9/1/2022



2.530







11,0009/19/2012


9/1/2022



3.049







11,5003/27/2013


3/1/2023



3.155







3,0009/24/2014


9/1/2024



3.775



1,000



1,0003/25/2015


3/1/2025



3.321







5,5003/25/2015


3/1/2025



3.277



22,500



22,5009/23/2015


9/1/2025



3.571



16,700



16,7003/23/2016


3/1/2026



3.267



1,500



1,5003/23/2016


3/1/2026



3.249



21,800



21,8009/21/2016


9/1/2026



2.793



500



5003/29/2017


3/1/2027



3.587



10,000



10,0009/20/2017


9/1/2027



3.260



1,000



1,0009/20/2017


9/1/2027



3.190



33,000



33,0003/21/2018


3/1/2028



3.859



16,000



16,0003/21/2018


3/1/2028



3.534



15,500



15,5009/19/2018


9/1/2028



3.895



9,500



9,5009/19/2018


9/1/2028



4.220



1,000



1,0009/25/2019


9/1/2029



2.377



7,500



Total outstanding SBA debentures






$
157,500


$
191,000  (1)
The SBA has two scheduled pooling dates for debentures (in March and in September). Certain debentures funded
during the reporting periods may not be pooled until the subsequent pooling date. Public Notes:On
February 2, 2018, the Company closed the public offering of approximately $43,478 in aggregate principal amount of its 5.875% notes due 2023, or the 2023 Notes. On February 22, 2018, the underwriters exercised their option to
purchase an additional $6,522 in aggregate principal of the 2023 Notes. The total net proceeds to the Company from the 2023 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of approximately $1,500 and
offering expenses of $438, were approximately $48,062. The 2023 Notes mature on February 1, 2023 and bear interest at a rate of
5.875%. The 2023 Notes may be redeemed in whole or in part at any time or from time to time at the Companys option on or after February 1, 2020. Interest on the 2023 Notes is payable quarterly on February 1, May 1, August 1
and November 1 of each year. The 2023 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSL. On February 8, 2019, the Company closed the public offering of approximately $60,000 in aggregate principal amount of its 6.000% notes
due 2024, or the February 2024 Notes (and collectively with the 2023 Notes, the Public Notes). On February 19, 2019, the underwriters exercised their option to purchase an additional $9,000 in aggregate principal of the
February 2024 Notes. The total net proceeds to the Company from the February 2024 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of approximately $2,070 and estimated offering expenses of $409,
were approximately $66,521. The February 2024 Notes mature on February 15, 2024 and bear interest at a rate of 6.000%. The February
2024 Notes may be redeemed in whole or in part at any time or from time to time at the Companys option on or after February 15, 2021. Interest on the February 2024 Notes is payable quarterly on February 15, May 15,
August 15 and November 15 of each year, beginning May 15, 2019. The February 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSZ.  31




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  The Public Notes are unsecured obligations of the Company and rank pari passu with the
Companys future unsecured indebtedness; effectively subordinated to all of the Companys existing and future secured indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of its
subsidiaries, financing vehicles, or similar facilities the Company may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities. Interest and Financing Expenses Interest
and fees related to the Companys debt for the three and nine months ended September 30, 2019 and 2018 which are included in interest and financing expenses on the consolidated statements of operations, were as follows:  Three Months Ended September 30, 2019


Three Months Ended September 30, 2018SBAdebentures


CreditFacility


PublicNotes


Total


SBAdebentures


CreditFacility


PublicNotes


TotalStated interest expense

$
1,439


$
756


$
1,769


$
3,964


$
1,796


$
223


$
734


$
2,753Amortization of deferred financing costs


152



84



221



457



180



76



97



353Total interest and financing expenses

$
1,591


$
840


$
1,990


$
4,421


$
1,976


$
299


$
831


$
3,106  Nine Months Ended September 30, 2019


Nine Months Ended September 30, 2018SBAdebentures


CreditFacility


PublicNotes


Total


SBAdebentures


CreditFacility


PublicNotes


TotalStated interest expense

$
4,399


$
1,631


$
4,852


$
10,882


$
5,515


$
605


$
1,950


$
8,070Amortization of deferred financing costs


461



251



603



1,315



553



209



252



1,014Total interest and financing expenses

$
4,860


$
1,882


$
5,455


$
12,197


$
6,068


$
814


$
2,202


$
9,084Weighted average stated interest rate, period end


3.392
%


5.063
%


5.947
%


4.602
%


3.355
%


5.749
%


5.875
%


4.067
%Unused commitment fee rate, period end


N/A



0.500
%


N/A



0.500
%


N/A



0.500
%


N/A



0.500
% Realized Losses on Extinguishment of Debt During the nine months ended September 30, 2019 and 2018, the Company prepaid $41,000 and $43,800 of SBA debentures, respectively, which
were scheduled to mature on dates ranging from 2021 to 2025 and 2019 to 2022, respectively. As a result of the prepayments, the Company recognized realized losses on extinguishment of debt of $399 and $150, respectively, equal to the write-off of the related unamortized deferred financing costs, during the nine months ended September 30, 2019 and 2018. Deferred Financing Costs Deferred
financing costs are amortized into interest and financing expenses on the consolidated statements of operations, using the effective interest method, over the term of the respective financing instrument. Deferred financing costs related to the
Credit Facility, SBA debentures, and Public Notes as of September 30, 2019 and December 31, 2018 were as follows:  September 30, 2019


December 31, 2018SBAdebentures


CreditFacility


PublicNotes


Total


SBAdebentures


CreditFacility


PublicNotes


TotalSBA debenture commitment fees

$
1,750


$



$



$
1,750


$
3,000


$



$



$
3,000SBA debenture leverage fees


3,820











3,820



7,276











7,276Credit Facility upfront fees






2,894







2,894







1,601







1,601Public Notes underwriting discounts










3,570



3,570











1,500



1,500Public Notes debt issue costs










847



847











438



438Total deferred financing costs


5,570



2,894



4,417



12,881



10,276



1,601



1,938



13,815Less: accumulated amortization


(1,732
)


(1,710
)


(952
)


(4,394
)


(6,010
)


(1,459
)


(349
)


(7,818
)Unamortized deferred financing costs

$
3,838


$
1,184


$
3,465


$
8,487


$
4,266


$
142


$
1,589


$
5,997 Unamortized deferred financing costs are presented as a direct offset to the SBA debentures, Credit Facility
and Public Notes liabilities on the consolidated statements of assets and liabilities. The following table summarizes the outstanding debt net of unamortized deferred financing costs as of September 30, 2019 and December 31, 2018:  September 30, 2019


December 31, 2018SBAdebentures


CreditFacility


PublicNotes


Total


SBAdebentures


CreditFacility


PublicNotes


TotalOutstanding debt

$
157,500


$
66,500


$
119,000


$
343,000


$
191,000


$
36,500


$
50,000


$
277,500Less: unamortized deferred financing costs


(3,838
)


(1,184
)


(3,465
)


(8,487
)


(4,266
)


(142
)


(1,589
)


(5,997
)Debt, net of deferred financing costs

$
153,662


$
65,316


$
115,535


$
334,513


$
186,734


$
36,358


$
48,411


$
271,503  32




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  As of September 30, 2019, the Companys debt liabilities are scheduled to mature as
follows (1):  SBA


Credit


PublicYear

debentures


Facility


Notes


Total2019

$



$



$



$
2020














2021














2022














2023






66,500



50,000



116,500Thereafter


157,500







69,000



226,500Total

$
157,500


$
66,500


$
119,000


$
343,000  (1)
The table above presents scheduled maturities of the Companys outstanding debt liabilities as of a point
in time pursuant to the terms of those instruments. The timing of actual repayments of outstanding debt liabilities may not ultimately correspond with the scheduled maturity dates depending on the terms of the underlying instruments and the
potential for earlier prepayments. Note 7. Commitments and Contingencies Commitments: The Company had outstanding commitments to portfolio companies to fund various undrawn revolving loans, other debt
investments and capital commitments totaling $6,917 and $10,846 as of September 30, 2019 and December 31, 2018, respectively. Such outstanding commitments are summarized in the following table:  September 30, 2019


December 31, 2018Total


Unfunded


Total


UnfundedPortfolio Company - Investment

Commitment


Commitment


Commitment


CommitmentAmerican AllWaste LLC (dba WasteWater Transport Services) - Delayed Draw Commitment - Term Loan-B

$



$



$
3,000


$
2,276B&B Roadway and Security Solutions, LLC - Common Equity (Units)










133



133FDS Avionics Corp. (dba Flight Display Systems) - Revolving Loan


250



30



250



50French Transit, LLC - Revolving Loan


1,000



1,000







Mesa Line Services, LLC - Delayed Draw Term Loan Commitment


3,000



2,160



4,000



3,160Rhino Assembly Company, LLC - Delayed Draw Commitment


875



875



875



875Safety Products Group, LLC - Common Equity (Units)


2,852
(1)


2,852
(1)


2,852
(1)


2,852
(1)UBEO, LLC - Delayed Draw Term Loan Commitment










1,500



1,500Total

$
7,977


$
6,917


$
12,610


$
10,846  (1)
Portfolio company was no longer held at period end. The commitment represents the Companys maximum
potential liability related to certain guaranteed obligations stemming from the prior sale of the portfolio companys underlying operations. Additional detail for each of the commitments above is provided in the Companys consolidated schedules of investments. The commitments are generally subject to the borrowers meeting certain criteria such as compliance with financial and nonfinancial covenants.
Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of
representations and warranties that provide indemnifications under certain circumstances. In addition, in connection with the disposition of an investment in a portfolio company, the Company may be required to make representations about the business
and financial affairs of such portfolio company typical of those made in connection with the sale of a business. The Company may also be required to indemnify the purchasers of such investment to the extent that any such representations are
inaccurate. The Companys maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company expects the risk of future obligation under these
indemnifications to be remote. Legal proceedings: In the normal course of business, the Company may be subject to legal and
regulatory proceedings that are generally incidental to its ongoing operations. While the outcome of any such legal proceedings cannot be predicted with certainty, the Company does not believe any such legal proceedings will have a material adverse
effect on the Companys consolidated financial statements.  33




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Note 8. Common Stock Public Offerings of Common Stock The
following table summarizes the cumulative total shares issued, net proceeds received, and weighted average offering price in public offerings of the Companys common stock since the IPO.  Period

CumulativeNumber of Shares


Cumulative GrossProceeds


CumulativeUnderwritingFees andCommissions andOffering Costs (1)


Weighted AverageOffering PriceCumulative since IPO


14,388,414


$
236,597


$
8,989


$
16.44  (1)
Fidus Investment Advisors, LLC agreed to bear a cumulative of $1,925 of underwriting fees and commissions and
offering costs associated with these offerings (such amounts are not included in the number reported above). All such payments made by Fidus Investment Advisors, LLC are not subject to reimbursement by the Company. The following table summarizes the cumulative total shares issued, net proceeds received, and weighted average offering price in public
offerings of the Companys common stock during the last two fiscal years and for the nine months ended September 30, 2019.  Period

Total Numberof Shares


Total GrossProceeds


TotalUnderwritingFees andCommissions andOffering Costs


Weighted AverageOffering PriceFiscal year ended December 31, 2017


2,012,500


$
33,810


$
1,508


$
16.80Fiscal year ended December 31, 2018





$



$



$
Nine months ended September 30, 2019





$



$



$
 Common Stock ATM Program On August 21, 2014, the Company entered into an equity distribution agreement with Raymond James & Associates, Inc. and Robert W.
Baird & Co. Incorporated through which the Company could sell, by means of at-the-market offerings from time to time, shares of the Companys common stock
having an aggregate offering price of up to $50,000 (the ATM Program). There were no issuances of common stock under the ATM program during the last two fiscal years and for the nine months ended September 30, 2019. Stock Repurchase Program As described in
Note 2, the Company has a Stock Repurchase Program under which the Company may acquire up to $5,000 of its outstanding common stock. The Company did not make any repurchases of common stock during the three and nine months ended September 30,
2019. During the three and nine months ended September 30, 2018, the Company repurchased zero and 44,821 shares of common stock, respectively, on the open market for zero and $582, respectively. The Companys NAV per share increased by
approximately zero and $0.01 for the three and nine months ended September 30, 2018, respectively, as a result of the share repurchases. The following table summarizes the Companys share repurchases under the Stock Repurchase Program for
the three and nine months ended September 30, 2019 and 2018:  Three Months Ended September 30,


Nine Months Ended September 30,Repurchases of Common Stock

2019


2018


2019


2018Number of shares repurchased














44,821Cost of shares repurchased, including commissions

$



$



$



$
582Weighted average price per share

$



$



$



$
12.94Weighted average discount to net asset value at quarter end prior to repurchases


N/A



N/A



N/A



19.4
% Refer to Note 9 for additional information regarding the issuance of shares under the DRIP. The Company had 24,463,119 shares of common stock outstanding as of September 30, 2019 and December 31, 2018.  34




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Note 9. Dividends and Distributions The Companys dividends and distributions are recorded on the record date. The following table summarizes the dividends paid during the
last two fiscal years and for the nine months ended September 30, 2019.  DRIP





DRIPDate

Record


Payment


Amount


Total


Cash


Shares


DRIP


ShareDeclared

Date


Date


Per Share


Distribution


Distribution


Value


Shares


Issue PriceFiscal Year Ended December 31, 2017:2/14/2017


3/10/2017



3/24/2017


$
0.39


$
8,754


$
8,556


$
198



11,500


$
17.175/1/2017


6/9/2017



6/23/2017



0.39



8,758



8,582



176



10,548



16.747/31/2017


9/8/2017



9/22/2017



0.39



9,548



9,353



195



12,256



15.9010/30/2017


12/20/2017



12/27/2017



0.39



9,552



9,343



209



13,659



15.3010/30/2017(1)


12/20/2017



12/27/2017



0.04



980



959



21



1,401



15.30$
1.60


$
37,592


$
36,793


$
799



49,364Fiscal Year Ended December 31, 2018:2/13/2018


3/9/2018



3/23/2018


$
0.39


$
9,558


$
9,558


$

(2)



(2)


4/30/2018


6/8/2018



6/22/2018



0.39



9,541



9,541




(2)



(2)


7/30/2018


9/7/2018



9/21/2018



0.39



9,540



9,540




(2)



(2)


10/30/2018


12/7/2018



12/21/2018



0.39



9,541



9,541




(2)



(2)


10/30/2018 (1)


12/7/2018



12/21/2018



0.04



978



978




(2)



(2)


$
1.60


$
39,158


$
39,158


$




Nine Months Ended September 30, 2019:1/31/2019


3/8/2019



3/22/2019


$
0.39


$
9,541


$
9,541


$

(2)



(2)


4/29/2019


6/7/2019



6/21/2019



0.39



9,540



9,540




(2)



(2)


7/29/2019


9/6/2019



9/20/2019



0.39



9,541



9,541




(2)



(2)


$
1.17


$
28,622


$
28,622


$




  (1)
Special dividend. (2)
During the nine months ended September 30, 2019 and the year ended December 31, 2018, the Company
directed the DRIP program plan administrator to repurchase shares on the open market in order to satisfy the DRIP obligation to deliver shares of common stock in lieu of issuing new shares. Accordingly, the Company purchased and reissued shares to
satisfy the DRIP obligation as follows:  Fiscal Year Ended December 31, 2018:

Number ofSharesPurchasedand Reissued


AveragePrice PaidPer Share


TotalAmount PaidJanuary 1, 2018 through March 31, 2018


16,503


$
12.97


$
214April 1, 2018 through June 30, 2018


16,216



14.48



235July 1, 2018 through September 30, 2018


16,207



14.83



240October 1, 2018 through December 31, 2018


29,152



11.85



346Total


78,078


$
13.25


$
1,035Nine Months Ended September 30, 2019:

Number ofSharesPurchasedand Reissued


AveragePrice PaidPer Share


TotalAmount PaidJanuary 1, 2019 through March 31, 2019


21,855


$
15.25


$
333April 1, 2019 through June 30, 2019


14,067



16.23



228July 1, 2019 through September 30, 2019


15,289



15.35



235Total


51,211


$
15.55


$
796  35




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Note 10. Financial Highlights The following is a schedule of financial highlights for the nine months ended September 30, 2019 and 2018:  Nine Months Ended September 30,2019


2018Per share data:Net asset value at beginning of period

$
16.47


$
16.05Net investment income(1)


1.09



0.98Net realized gain (loss) on investments, net of tax (provision)(1)


0.35



(0.67
)Net unrealized appreciation (depreciation) on investments(1)


(0.26
)


1.23Realized losses on extinguishment of debt
(1)


(0.02
)


(0.01
)Total increase from investment
operations(1)


1.16



1.53Accretive (dilutive) effect of share issuances and repurchases






0.01Dividends to stockholders


(1.17
)


(1.17
)Other(2)


0.01



(0.01
)Net asset value at end of period

$
16.47


$
16.41Market value at end of period

$
14.83


$
14.62Shares outstanding at end of period


24,463,119



24,463,119Weighted average shares outstanding during the period


24,463,119



24,474,632Net assets at end of period

$
402,832


$
401,522Average net assets(7)

$
402,278


$
397,304Ratios to average net assets:Total expenses(3)(5)(10)


10.3
%


10.1
%Net investment income(3)(6)


8.8
%


8.0
%Total return based on market
value(4)


34.0
%


1.9
%Total return based on net asset value
(9)


7.0
%


9.5
%Portfolio turnover ratio (3)


19.2
%


19.3
%Supplemental Data:Average debt outstanding (8)

$
307,625


$
270,075Average debt per share(1)

$
12.58


$
11.03  (1)
Weighted average per share data. (2)
Represents the impact of different share amounts used in calculating per share data as a result of calculating
certain per share data based on weighted average shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date, or other rounding. (3)
Annualized. (4)
Total return based on market value equals the change in the market value of the Companys common stock per
share during the period divided by the market value per share at the beginning of the period, and assumes reinvestment of dividends at prices obtained by our dividend reinvestment plan during the period. The return does not reflect any sales load
that may be paid by an investor. (5)
The total expenses to average net assets ratio is calculated using the total expenses caption as presented on
the consolidated statements of operations, which includes incentive fee and excludes the income tax provision. (6)
The net investment income to average net assets ratio is calculated using the net investment income caption as
presented on the consolidated statements of operations, which includes incentive fee. (7)
Average net assets is calculated as the average of the net asset balances as of each quarter end during the
fiscal year and the prior year end. (8)
Average debt outstanding is calculated as the average of the outstanding debt balances as of each quarter end
during the fiscal year and the prior year end. (9)
Total return based on net asset value per share equals the change in net asset value per share during the
period, plus dividends paid per share during the period, less other non-operating changes during the period, and divided by beginning net asset value per share for the period.
Non-operating changes include any items that affect net asset value per share other than increase from investment operations, such as the effects of share issuances and repurchases and other miscellaneous
items. (10)
The following is a schedule of supplemental expense ratios to average net assets:  36




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##### Table of Contents

FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (unaudited) (in thousands, except shares and per share data)  Nine Months Ended September 30,Ratio to average net assets:

2019


2018Expenses other than incentive fee
(3)


8.2
%


7.0
%Incentive fee (3)


2.1
%


3.1
%Total expenses (3)(5)


10.3
%


10.1
% Note 11. Subsequent Events On October 1, 2019, the Company exited its debt and equity investments in Simplex Manufacturing Co. The Company received payment in full
of $4,050 on its subordinated debt investment. The Company sold its warrant investment for a realized gain of approximately $2,933. On
October 11, 2019, the Company invested $6,000 in first lien debt and common equity of Haematologic Technologies, Inc., a leading provider of biologic products and GMP compliant assay development and testing services to the biopharmaceutical
industry. On October 16, 2019, the Company closed the public offering of approximately $55,000 in aggregate principal amount of its
5.375% notes due 2024, or the November 2024 Notes. On October 23, 2019, the underwriters exercised their option to purchase an additional $8,250 in aggregate principal of the November 2024 Notes. The total net proceeds to the
Company from the November 2024 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of approximately $1,898 and estimated offering expenses of $400, were approximately $60,953. The November 2024 Notes will mature on November 1, 2024 and bear interest at a rate of 5.375%. The November 2024 Notes are unsecured
obligations and rank pari passu with the Companys future unsecured indebtedness, including the Companys Public Notes; effectively subordinated to all of the Companys existing and future secured indebtedness; and structurally
subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, financing vehicles, or similar facilities the Company may form in the future, with respect to claims on the assets of any such subsidiaries,
financing vehicles, or similar facilities. The November 2024 Notes may be redeemed in whole or in part at any time or from time to time at the Companys option on or after November 1, 2021. Interest on the November 2024 Notes is payable
quarterly on February 1, May 1, August 1 and November 1 of each year, beginning February 1, 2020. The November 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSG. The Company
may from time to time repurchase November 2024 Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of October 29, 2019, the outstanding principal balance of the November 2024 Notes was approximately $63,250. The indenture governing the November 2024 Notes, or the Indenture, contains certain covenants, including certain covenants
requiring the Company (i) to comply with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by such provisions of Section 61(a) of the 1940 Act, as may be applicable to the Company from time to time or any
successor provisions, whether or not the Company continues to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to the Company by the SEC; (ii) to comply, under certain
circumstances, with a modified version of the requirements set forth in Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940 Act as may be applicable to the Company from time to time or any successor provisions,
whether or not the Company continues to be subject to such provisions of the 1940 Act, prohibiting the declaration of any cash dividend or distribution upon any class of our capital stock (except to the extent necessary for the Company to maintain
its treatment as a regulated investment company under Subchapter M of the Internal Revenue Code), or purchasing any such capital stock, if the Company asset coverage, as defined in the 1940 Act, were below 200% (or 150% on and
after April 29, 2020) at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution, or purchase; (iii) to provide financial information to the holders of the
November 2024 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended; and (iv) to use its reasonable best efforts to effect, within 30 days of issuance and
delivery of the November 2024 Notes, the listing of the November 2024 Notes on the Nasdaq Stock Market LLC and to maintain the listing of the November 2024 Notes on the Nasdaq Stock Market LLC or another national securities exchange. These covenants
are subject to important limitations and exceptions that are described in the Indenture. On October 29, 2019, the Board declared a
regular quarterly dividend of $0.39 per share payable on December 20, 2019 to stockholders of record as of December 6, 2019. In addition, the Board declared a special dividend of $0.04 per share payable on December 20, 2019 to
stockholders of record as of December 6, 2019.  37




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##### Table of Contents

Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with Fidus Investment Corporations consolidated financial statements and related notes appearing in our annual report on Form 10-K for the year ended December 31, 2018, filed with the
U.S. Securities and Exchange Commission (SEC) on February 28, 2019. The information contained in this section should also be read in conjunction with our unaudited consolidated financial statements and related notes thereto
appearing elsewhere in this quarterly report on Form 10-Q. Except as otherwise specified,
references to we, us, our, Fidus and FIC refer to Fidus Investment Corporation and its consolidated subsidiaries. Forward Looking Statements This
Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current
expectations, estimates and projections about Fidus Investment Corporation, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as anticipates, expects,
intends, plans, will, may, continue, believes, seeks, estimates, would, could, should, targets,
projects and variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q
involve risks and uncertainties, including statements as to:  

our future operating results;  

our business prospects and the prospects of our portfolio companies;  

the impact of investments that we expect to make;  

our contractual arrangements and relationships with third parties;  

the dependence of our future success on the general economy and its impact on the industries in which we invest;  

the ability of our portfolio companies to achieve their objectives;  

our expected financing and investments;  

the adequacy of our cash resources and working capital; and  

the timing of cash flows, if any, from the operations of our portfolio companies. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond
our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:  

an economic downturn could impair our portfolio companies ability to continue to operate, which could lead
to the loss of some or all of our investments in such portfolio companies;  

a contraction of available credit and/or an inability to access the equity markets could impair our lending and
investment activities;  

interest rate volatility could adversely affect our results, particularly because we use leverage as part of our
investment strategy;  

currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to
the extent that we receive payments denominated in foreign currency rather than the U.S. dollars; and,  

the risks, uncertainties and other factors we identify in Item 1A.  Risk Factors contained in our
Annual Report on Form 10-K for the year ended December 31, 2018, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of
those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new debt investments, certain margins and
levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q
should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in Item 1.A  Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this
Quarterly Report on Form 10-Q.  38




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##### Table of Contents

Overview General and Corporate Structure We provide customized debt and equity financing solutions to lower middle-market companies, which we define as U.S. based companies having
revenues between $10.0 million and $150.0 million. Our investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related
investments. Our investment strategy includes partnering with business owners, management teams and financial sponsors by providing customized financing for ownership transactions, recapitalizations, strategic acquisitions, business expansion and
other growth initiatives. We seek to maintain a diversified portfolio of investments in order to help mitigate the potential effects of adverse economic events related to particular companies, regions or industries. FIC was formed as a Maryland corporation on February 14, 2011. We completed our initial public offering, or IPO, in June 2011. On June 20, 2011, FIC acquired all of the limited partnership interests of Fund I and membership interests of Fidus Mezzanine Capital GP,
LLC, its general partner, resulting in Fund I becoming our wholly-owned SBIC subsidiary. Immediately following the acquisition, we and Fund I elected to be treated as business development companies, or BDCs, under the 1940 Act and our investment
activities have been managed by Fidus Investment Advisors, LLC, our investment advisor, and supervised by our board of directors, a majority of whom are independent of us. On March 29, 2013, we commenced operations of a second wholly-owned
subsidiary, Fund II. On April 18, 2018, we commenced operations of a third wholly-owned subsidiary, Fund III. Fund I, Fund II and Fund III are collectively referred to as the Funds. Fund I, Fund II and Fund III received their SBIC licenses on October 22, 2007, May 28, 2013, and March 21, 2019, respectively.
We plan to continue to operate the Funds as SBICs, subject to SBA approval, and to utilize the proceeds of the sale of SBA-guaranteed debentures to enhance returns to our stockholders. As of September 9,
2019, Fund I has completed a wind-down plan and has relinquished its SBIC license and can no longer issue additional SBA debentures. We have also made, and continue to make, investments directly through FIC. We believe that utilizing FIC and the
Funds as investment vehicles provides us with access to a broader array of investment opportunities. We have certain wholly-owned taxable
subsidiaries (the Taxable Subsidiaries), each of which generally holds one or more of our portfolio investments listed on the consolidated schedules of investments. The Taxable Subsidiaries are consolidated for financial reporting
purposes, such that the our consolidated financial statements reflect our investment in the portfolio company investments owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit us to hold equity investments in
portfolio companies that are taxed as partnerships for U.S. federal income tax purposes (such as entities organized as limited liability companies (LLCs) or other forms of pass through entities) while complying with the source-of-income requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with us for U.S. federal corporate income tax
purposes, and each Taxable Subsidiary will be subject to U.S. federal corporate income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations. Investments We seek to
create a diversified investment portfolio that primarily includes debt investments and, to a lesser extent, equity securities. Our investments typically range between $5.0 million to $30.0 million per portfolio company, although this
investment size may vary proportionately with the size of our capital base. Our investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity
related investments. We may invest in the equity securities of our portfolio companies, such as preferred stock, common stock, warrants and other equity interests, either directly or in conjunction with our debt investments. Second Lien Debt. The majority of our debt investments take the form of second lien debt, which includes senior subordinated notes.
Second lien debt investments obtain security interests in the assets of the portfolio company as collateral in support of the repayment of such loans. Second lien debt typically is senior on a lien basis to other liabilities in the issuers
capital structure and has the benefit of a security interest over assets of the issuer, though ranking junior to first lien debt secured by those assets. First lien lenders and second lien lenders typically have separate liens on the collateral, and
an intercreditor agreement provides the first lien lenders with priority over the second lien lenders liens on the collateral. These loans typically provide for no contractual loan amortization, with all amortization deferred until loan
maturity, and may include payment-in-kind (PIK) interest, which increases the principal balance over the term and, coupled with the deferred principal
payment provision, increases credit risk exposure over the life of the loan. Subordinated Debt. These investments are typically
structured as unsecured, subordinated notes. Structurally, subordinated debt usually ranks subordinate in priority of payment to first lien and second lien debt and may not have the benefit of financial covenants common in first lien and second lien
debt. Subordinated debt may rank junior as it relates to proceeds in certain liquidations where it does not have the benefit of a lien in specific collateral held by creditors (typically first lien and/or second  39




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##### Table of Contents

lien) who have a perfected security interest in such collateral. However, subordinated debt ranks senior to common and preferred equity in an issuers capital structure. These loans
typically have relatively higher fixed interest rates (often representing a combination of cash pay and PIK interest) and amortization of principal deferred to maturity. The PIK feature (meaning a feature allowing for the payment of interest in the
form of additional principal amount of the loan instead of in cash), which effectively operates as negative amortization of loan principal, coupled with the deferred principal payment provision, increases credit risk exposure over the life of the
loan. First Lien Debt. To a lesser extent, we also structure some of our debt investments as senior secured or first lien debt
investments. First lien debt investments are secured by a first priority lien on existing and future assets of the borrower and may take the form of term loans or revolving lines of credit. First lien debt is typically senior on a lien basis to
other liabilities in the issuers capital structure and has the benefit of a first-priority security interest in assets of the issuer. The security interest ranks above the security interest of any second lien lenders in those assets. Our first
lien debt may include stand-alone first lien loans, last out first lien loans, or unitranche loans. Stand-alone first lien loans are traditional first lien loans. All lenders in the facility have equal rights to the
collateral that is subject to the first-priority security interest. Last out first lien loans have a secondary priority behind super-senior first out first lien loans in the collateral securing the loans in certain
circumstances. The arrangements for a last out first lien loan are set forth in an agreement among lenders, which provides lenders with first out and last out payment streams based on a single lien on
the collateral. Since the first out lenders generally have priority over the last out lenders for receiving payment under certain specified events of default, or upon the occurrence of other triggering events under
intercreditor agreements or agreements among lenders, the last out lenders bear a greater risk and, in exchange, receive a higher effective interest rate, through arrangements among the lenders, than the first out lenders or
lenders in stand-alone first lien loans. Agreements among lenders also typically provide greater voting rights to the last out lenders than the intercreditor agreements to which second lien lenders often are subject. Many of our debt investments also include excess cash flow sweep features, whereby principal repayment may be required before maturity if the
portfolio company achieves certain defined operating targets. Additionally, our debt investments typically have principal prepayment penalties in the early years of the debt investment. The majority of our debt investments provide for a fixed
interest rate. Equity Securities. Our equity securities typically consist of either a direct minority equity investment in common
or preferred stock or membership/partnership interests of a portfolio company, or we may receive warrants to buy a minority equity interest in a portfolio company in connection with a debt investment. Warrants we receive with our debt investments
typically require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. Our equity investments are typically not control-oriented investments,
and in many cases, we acquire equity securities as part of a group of private equity investors in which we are not the lead investor. We may structure such equity investments to include provisions protecting our rights as a minority-interest holder,
as well as a put, or right to sell such securities back to the issuer, upon the occurrence of specified events. In many cases, we may also seek to obtain registration rights in connection with these equity interests, which may include
demand and piggyback registration rights. Our equity investments typically are made in connection with debt investments to the same portfolio companies. Revenues: We generate revenue in the form of interest and fee income on debt investments and dividends, if any, on equity investments.
Our debt investments, whether in the form of second lien, subordinated or first lien loans, typically have terms of five to seven years and most bear interest at a fixed rate, but some bear interest at a floating rate. In some instances, we receive
payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we may receive repayments of some of our debt investments prior to their scheduled maturity dates, which may include prepayment penalties. The
frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity may reflect the proceeds of sales of securities. In some cases, our investments provide for deferred interest payments or PIK interest.
The principal amount of debt investments and any accrued but unpaid interest generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, amendment, or structuring fees and fees for
providing managerial assistance. Debt investment origination fees, OID and market discount or premium, if any, are capitalized, and we accrete or amortize such amounts into interest income. We record prepayment penalties on debt investments as fee
income when earned. Interest and dividend income is recorded on the accrual basis to the extent that we expect to collect such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt
investment. Dividend income is recorded as dividends are declared or at the point an obligation exists for the portfolio company to make a distribution, and is generally recognized when received. Distributions of earnings from portfolio companies
are evaluated to determine if the distribution is a distribution of earnings or a return of capital. Distributions of earnings are included in dividend income while a return of capital is recorded as a reduction in the cost basis of the investment.
Estimates are adjusted as necessary after the relevant tax forms are received from the portfolio company. Debt investments or preferred equity investments (for which we are accruing PIK dividends) are placed
on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Interest and
dividend payments received on non-accrual investments may be recognized as interest or dividend income or may be applied to the investment principal balance based on managements judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in managements judgment, payments are likely to remain current. See Critical Accounting
Policies and Use of Estimates  Revenue Recognition.  40




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##### Table of Contents

We recognize realized gains or losses on investments based on the difference between the net
proceeds from the disposition and the cost basis of the investment, without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments that are measured at fair value as a component of
the net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations. Expenses:
All investment professionals of our investment advisor and/or its affiliates, when and to the extent engaged in providing investment advisory and management services to us, and the compensation and routine overhead expenses allocable to personnel
who provide these services to us, are provided and paid for by our investment advisor and not by us. We bear all other out-of-pocket costs and expenses of our operations
and transactions, including, without limitation, those relating to:  

organization;  

calculating our net asset value (including the cost and expenses of any independent valuation firm);  

fees and expenses incurred by our investment advisor under the Investment Advisory Agreement or payable to third
parties, including agents, consultants or other advisors, in monitoring financial and legal affairs for us and in monitoring our investments and performing due diligence on our prospective portfolio companies or otherwise relating to, or associated
with, evaluating and making investments, including dead deal costs;  

interest payable on debt, if any, incurred to finance our investments;  

offerings of our common stock and other securities;  

investment advisory fees and management fees;  

administration fees and expenses, if any, payable under the Administration Agreement (including payments under
the Administration Agreement between us and our investment advisor based upon our allocable portion of our investment advisors overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion
of the cost of our officers, including our chief compliance officer, our chief financial officer, and their respective staffs);  

transfer agent, dividend agent and custodial fees and expenses;  

federal and state registration fees;  

all costs of registration and listing our shares on any securities exchange;  

U.S. federal, state and local taxes;  

Independent Directors fees and expenses;  

costs of preparing and filing reports or other documents required by the SEC or other regulators including
printing costs;  

costs of any reports, proxy statements or other notices to stockholders, including printing and mailing costs;  

our allocable portion of any fidelity bond, directors and officers/errors and omissions liability insurance, and
any other insurance premiums;  

direct costs and expenses of administration, including printing, mailing, long distance telephone, copying,
secretarial and other staff, independent auditors and outside legal costs;  

proxy voting expenses; and  

all other expenses reasonably incurred by us or our investment advisor in connection with administering our
business. Portfolio Composition, Investment Activity and Yield During the nine months ended September 30, 2019 and 2018, we invested $175.5 million and $144.6 million, respectively, in debt
and equity investments including 10 and 12 new portfolio companies, respectively. During the nine months ended September 30, 2019 and 2018, we received proceeds from sales or repayments, including principal, return of capital dividends and net
realized gains (losses), of $98.8 million and $92.1 million, respectively, including exits of seven and nine portfolio companies, respectively. The following table summarizes investment purchases and sales and repayments of investments by
type for the nine months ended September 30, 2019 and 2018 (dollars in millions).  Purchases of Investments


Sales and Repayments of Investments2019


2018


2019


2018Second Lien Debt

$
43.4



24.8
%

$
104.0



71.9
%

$
39.5



39.9
%

$
49.9



54.2
%Subordinated Debt


70.0



39.9



13.9



9.7



32.0



32.4



30.1



32.7First Lien Debt


55.2



31.4



18.7



12.9



13.4



13.6



1.3



1.4Equity


6.9



3.9



8.0



5.5



13.9



14.1



10.5



11.4Warrants


























0.3



0.3Royalty Rights






























Total

$
175.5



100.0
%

$
144.6



100.0
%

$
98.8



100.0
%

$
92.1



100.0
%  41




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##### Table of Contents

As of September 30, 2019, the fair value of our investment portfolio totaled
$729.4 million and consisted of 62 active portfolio companies and four portfolio companies that have sold their underlying operations. As of September 30, 2019, 14 portfolio companies debt investments bore interest at a variable
rate, which represented $152.8 million, or 25.4%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments. Overall, the portfolio had net unrealized
appreciation of $37.9 million as of September 30, 2019. As of September 30, 2019, our average active portfolio company investment at amortized cost was $11.1 million, which excludes investments in the four portfolio companies
that have sold their underlying operations. As of December 31, 2018, the fair value of our investment portfolio totaled
$643.0 million and consisted of 60 active portfolio companies and three portfolio companies that have sold their underlying operations. As of December 31, 2018, seven portfolio companies debt investments bore interest at a variable
rate, which represented $75.9 million, or 14.5%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments. Overall, the portfolio had net unrealized
appreciation of $44.2 million as of December 31, 2018. As of December 31, 2018, our average active portfolio company investment at amortized cost was $10.0 million, which excludes investments in the three portfolio companies that
have sold their underlying operations. The weighted average yield on debt investments as of September 30, 2019 and December 31,
2018 was 12.3% and 12.6%, respectively. The weighted average yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the
payment of all of our and our subsidiaries fees and expenses. The weighted average yields were computed using the effective interest rates for debt investments at cost as of September 30, 2019 and December 31, 2018, respectively,
including the accretion of OID and debt investment origination fees, but excluding investments on non-accrual status, if any. The following table shows the portfolio composition by investment type at fair value and cost and as a percentage of total investments
(dollars in millions):  Fair Value


CostSeptember 30,


December 31,


September 30,


December 31,2019


2018


2019


2018Second Lien Debt

$
377.9



51.7
%

$
366.5



57.0
%

$
391.1



56.6
%

$
380.0



63.5
%Subordinated Debt


144.7



19.9



104.3



16.2



144.6



20.9



105.9



17.7First Lien Debt


80.0



11.0



51.8



8.1



93.3



13.5



52.2



8.7Equity


114.0



15.6



106.7



16.6



55.5



8.0



53.5



8.9Warrants


12.8



1.8



13.7



2.1



7.0



1.0



7.0



1.2Royalty Rights


























0.2



Total

$
729.4



100.0
%

$
643.0



100.0
%

$
691.5



100.0
%

$
598.8



100.0
% All investments made by us as of September 30, 2019 and December 31, 2018 were made in portfolio
companies headquartered in the U.S. The following table shows portfolio composition by geographic region at fair value and cost and as a percentage of total investments (dollars in millions). The geographic composition is determined by the location
of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio companys business.  Fair Value


CostSeptember 30,


December 31,


September 30,


December 31,2019


2018


2019


2018Midwest

$
177.4



24.4
%

$
161.1



25.1
%

$
158.2



22.9
%

$
152.6



25.5
%Southeast


149.5



20.5



176.8



27.5



143.7



20.8



155.3



25.9Northeast


150.5



20.6



89.7



13.9



145.2



21.0



84.2



14.1West


86.4



11.8



62.8



9.8



81.7



11.8



54.5



9.1Southwest


165.6



22.7



152.6



23.7



162.7



23.5



152.2



25.4Total

$
729.4



100.0
%

$
643.0



100.0
%

$
691.5



100.0
%

$
598.8



100.0
%  42




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##### Table of Contents

The following table shows the detailed industry composition of our portfolio at fair value
and cost as a percentage of total investments:  Fair Value


CostSeptember 30,


December 31,


September 30,


December 31,2019


2018


2019


2018Specialty Distribution


16.3
%


13.4
%


17.1
%


14.1
%Information Technology Services


12.3



8.5



12.2



8.5Business Services


11.5



9.7



12.1



10.3Healthcare Products


8.1



4.8



5.8



3.2Aerospace & Defense Manufacturing


5.1



5.8



4.5



6.0Healthcare Services


5.1



7.8



7.0



7.7Oil & Gas Services


5.0



6.4



0.9



1.7Vending Equipment Manufacturing


4.8



4.6



5.2



5.2Transportation Services


4.7



5.2



4.7



5.4Component Manufacturing


4.0



7.9



4.5



8.9Promotional Products


3.6



4.1



3.6



4.2Retail


3.5



2.4



3.8



2.7Consumer Products


3.2



2.3



3.4



2.6Environmental Industries


2.5



1.9



2.6



2.0Utilities: Services


2.5



1.7



2.6



1.7Industrial Cleaning & Coatings


2.2



4.1



2.3



4.7Packaging


2.0



2.2



2.1



2.4Building Products Manufacturing


1.8



3.8



3.4



5.1Utility Equipment Manufacturing


1.0



2.4



1.2



2.5Oil & Gas Distribution


0.8



1.0



0.9



1.0Capital Equipment Manufacturing


0.0
(1)


0.0
(1)


0.0
(1)


0.0
(1)Restaurants


0.0
(1)


0.0
(1)


0.1



0.1Specialty Chemicals


0.0
(1)


0.0
(1)


0.0
(1)


0.0
(1)Total


100.0
%


100.0
%


100.0
%


100.0
%  (1)
Percentage is less than 0.1% of respective total. Portfolio Asset Quality In addition to
various risk management and monitoring tools, our investment advisor uses an internally developed investment rating system to characterize and monitor the credit profile and our expected level of returns on each investment in our portfolio. We use a
five-level numeric rating scale. The following is a description of the conditions associated with each investment rating:  

Investment Rating 1 is used for investments that involve the least amount of risk in our portfolio. The portfolio
company is performing above expectations, the debt investment is expected to be paid in the near term and the trends and risk factors are favorable, and may include an expected capital gain on the equity investment.  

Investment Rating 2 is used for investments that involve a level of risk similar to the risk at the time of
origination. The portfolio company is performing substantially within our expectations and the risk factors are neutral or favorable. Each new portfolio investment enters our portfolio with Investment Rating 2.  

Investment Rating 3 is used for investments performing below expectations and indicates the investments
risk has increased somewhat since origination. The portfolio company requires closer monitoring, but we expect a full return of principal and collection of all interest and/or dividends.  

Investment Rating 4 is used for investments performing materially below expectations and the risk has increased
materially since origination. The investment has the potential for some loss of investment return, but we expect no loss of principal.  

Investment Rating 5 is used for investments performing substantially below our expectations and the risks have
increased substantially since origination. We expect some loss of principal.  43




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##### Table of Contents

The following table shows the distribution of our investments on the 1 to 5 investment
rating scale at fair value and cost as of September 30, 2019 and December 31, 2018 (dollars in millions):  Fair Value


CostSeptember 30,


December 31,


September 30,


December 31,Investment Rating

2019


2018


2019


20181

$
112.8



15.5
%

$
123.8



19.2
%

$
46.8



6.8
%

$
63.7



10.7
%2


547.2



75.0



403.1



62.7



541.2



78.3



396.2



66.23


63.9



8.8



94.3



14.7



68.5



9.9



101.4



16.94


5.4



0.7



21.3



3.3



18.2



2.6



33.2



5.55


0.1







0.5



0.1



16.8



2.4



4.3



0.7Total

$
729.4



100.0
%

$
643.0



100.0
%

$
691.5



100.0
%

$
598.8



100.0
% Based on our investment rating system, the weighted average rating of our portfolio as of September 30,
2019 and December 31, 2018 was 1.9 and 2.0, respectively, on a fair value basis and 2.2 and 2.2, respectively, on a cost basis. Non-Accrual As of September 30, 2019 and December 31, 2018, we had debt investments in two
portfolio companies on non-accrual status, respectively (dollars in millions):  September 30, 2019


December 31, 2018Fair





FairPortfolio Company

Value


Cost


Value


CostK2 Industrial Services, Inc.

$

(1)

$

(1)

$
13.2


$
14.3Oaktree Medical Centre, P.C. (dba Pain Management Associates)






13.8




(2)



(2)US GreenFiber, LLC


9.1



19.0



7.6



15.3Total

$
9.1


$
32.8


$
20.8


$
29.6  (1)
Portfolio company was no longer held at period end. Interest earned while on
non-accrual was paid in full at exit. (2)
Portfolio company debt investments were not on non-accrual status at
period end. Discussion and Analysis of Results of Operations Comparison of three and nine months ended September 30, 2019 and 2018 Investment Income Below
is a summary of the changes in total investment income for the three months ended September 30, 2019 as compared to the same period in 2018 (dollars in millions):  Three Months EndedSeptember 30,2019


2018


$ Change


% Change (1)(2)Interest income

$
16.1


$
15.4


$
0.7



4.7
%Payment-in-kind interest
income


2.3



1.5



0.8



48.7
%Dividend income






0.4



(0.4
)


(110.6
%)Fee income


0.8



0.6



0.2



48.4
%Interest on idle funds and other income














NMTotal investment income

$
19.2


$
17.9


$
1.3



7.4
%  (1)
NM = Not meaningful (2)
Percent change calculated based on underlying dollar amounts in thousands as presented on the consolidated
statements of operations. For the three months ended September 30, 2019, total investment income was
$19.2 million, an increase of $1.3 million, or 7.4%, from the $17.9 million of total investment income for the three months ended September 30, 2018. As reflected in the table above, changes across periods are primarily
attributable to the following:  

$1.5 million increase in total interest income (including payment-in-kind interest income) resulting from higher average debt investment balances outstanding, partially offset by a small decrease in weighted average debt yield, during 2019 as compared to 2018.  

$0.2 million increase in fee income resulting from an increase in structuring fees on new investments,
during 2019 as compared to 2018.  

$(0.4) million decrease in dividend income, during 2019 as compared to 2018, due to decreased levels of
distributions received from equity investments.   44




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##### Table of Contents

Below is a summary of the changes in total investment income for the nine months ended
September 30, 2019 as compared to the same period in 2018 (dollars in millions):  Nine Months EndedSeptember 30,2019


2018


$ Change


% Change (1)(2)Interest income

$
45.2


$
45.8


$
(0.6
)


(1.3
%)Payment-in-kind interest
income


7.8



4.5



3.3



73.3
%Dividend income


0.9



1.0



(0.1
)


(10.3
%)Fee income


3.6



2.8



0.8



27.3
%Interest on idle funds and other income


0.1



0.1







NMTotal investment income

$
57.6


$
54.2


$
3.4



6.2
%  (1)
NM = Not meaningful (2)
Percent change calculated based on underlying dollar amounts in thousands as presented on the consolidated
statements of operations. For the nine months ended September 30, 2019, total investment income was
$57.6 million, an increase of $3.4 million or 6.2%, from the $54.2 million of total investment income for the nine months ended September 30, 2018. As reflected in the table above, the increase is primarily attributable to the
following:  

$2.7 million increase in total interest income (including payment-in-kind interest income) resulting from higher average debt investment balances outstanding, partially offset by a small decrease in weighted average debt yield, during 2019 as compared to 2018.  

$0.8 million increase in fee income resulting from an increase in structuring fees due to a comparative
increase in new investments and an increase in prepayment fee income, during 2019 as compared to 2018.  

$(0.1) million decrease in dividend income, during 2019 as compared to 2018, due to decreased levels of
distributions received from equity investments. Expenses Below is a summary of the changes in total expenses, including income tax provision, for the three months ended September 30, 2019 as
compared to the same period in 2018 (dollars in millions):  Three Months EndedSeptember 30,2019


2018


$ Change


% Change (1)(2)Interest and financing expenses

$
4.4


$
3.1


$
1.3



42.3
%Base management fee


3.2



2.9



0.3



8.4
%Incentive fee - income


2.2



2.2







NMIncentive fee - capital gains


1.3



1.5



(0.2
)


(10.7
%)Administrative service expenses


0.4



0.4







NMProfessional fees


0.2



0.2







NMOther general and administrative expenses


0.2



0.3



(0.1
)


(7.1
%)Total expenses, before income tax provision


11.9



10.6



1.3



12.9
%Income tax provision (benefit)


(0.1
)


(0.2
)


0.1



NMTotal expenses, including income tax provision

$
11.8


$
10.4


$
1.4



13.9
%  (1)
NM = Not meaningful (2)
Percent change calculated based on underlying dollar amounts in thousands as presented on the consolidated
statements of operations. For the three months ended September 30, 2019, total expenses, including income tax
provision, were $11.8 million, an increase of $1.4 million, or 13.9%, from the $10.4 million of total expenses, including income tax provision, for the three months ended September 30, 2018. As reflected in the table above, the
increase is primarily attributable to the following:  45




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##### Table of Contents



$1.3 million increase in interest and financing expenses due to an increase in average borrowings
outstanding and an increase in weighted average interest rate on borrowings during 2019 as compared to 2018.  

$0.3 million increase in base management fee due to higher average total assets during 2019 as compared to
2018.  

$(0.2) million decrease in the capital gains incentive fee due to a $(0.8) million change in net gain
(loss) on investments (net realized gains (losses), plus net change in unrealized appreciation (depreciation) on investments, plus realized losses on extinguishment of debt) during 2019, as compared to the same period in 2018. Below is a summary of the changes in total expenses, including income tax provision, for the nine months ended September 30, 2019 as
compared to the same period in 2018 (dollars in millions):  Nine Months EndedSeptember 30,2019


2018


$ Change


% Change (1)(2)Interest and financing expenses

$
12.2


$
9.1


$
3.1



34.3
%Base management fee


9.1



8.4



0.7



7.4
%Incentive fee - income


5.9



6.6



(0.7
)


(10.3
%)Incentive fee - capital gains


0.4



2.7



(2.3
)


(86.3
%)Administrative service expenses


1.2



1.1



0.1



7.8
%Professional fees


1.2



1.0



0.2



19.2
%Other general and administrative expenses


1.0



1.3



(0.3
)


(15.4
%)Total expenses, before income tax provision


31.0



30.2



0.8



2.6
%Income tax provision (benefit)






0.1



(0.1
)


(189.3
%)Total expenses, including income tax provision

$
31.0


$
30.3


$
0.7



2.5
%  (1)
NM = Not meaningful (2)
Percent change calculated based on underlying dollar amounts in thousands as presented on the consolidated
statements of operations. For the nine months ended September 30, 2019, total expenses, including income tax
provision, were $31.0 million, an increase of $0.7 million, or 2.5%, from the $30.3 million of total expenses, including income tax provision, for the nine months ended September 30, 2018. As reflected in the table above, the
increase is primarily attributable to the following:  

$3.1 million increase in interest and financing expenses due to an increase in average borrowings
outstanding and an increase in weighted average interest rate on borrowings during 2019 as compared to 2018.  

$0.7 million increase in base management fee due to higher average total assets during 2019 as compared to
2018.  

$0.2 million increase in professional fees due to increased legal, audit and tax compliance costs during
2019 as compared to 2018.  

$(2.3) million decrease in the capital gains incentive fee due to a $(11.6) million change in net gain
(loss) on investments (net realized gains (losses) plus net change in unrealized appreciation (depreciation) on investments) during 2019, as compared to the same period in 2018.  

$(0.7) million decrease in the income incentive fee due to a $(0.4) million decrease in pre-incentive fee net investment income, during 2019 as compared to the same period in 2018, and the Q2 2019 fee amount not exceeding the 2.5% hurdle rate.  

$(0.3) million decrease in other general and administrative expenses during 2019, as 2018 included a non-recurring write-off of deferred equity offering costs related to our previous Form N-2 registration statement. Net Investment Income Net investment income decreased by $(0.1) million, or (1.6)%, to $7.4 million during the three months ended September 30, 2019 as
compared to the same period in 2018, as a result of the $1.3 million increase in total investment income and more than offset by the increase in total expenses, including income tax provision, of $1.4 million. Net investment income increased by $2.6 million, or 11.0%, to $26.6 million during the nine months ended September 30, 2019 as
compared to the same period in 2018, as a result of the $3.4 million increase in total investment income and partially offset by the increase in total expenses, including income tax provision, of $0.7 million.  46




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##### Table of Contents

Net Gain (Loss) on Investments For the three and nine months ended September 30, 2019, the total net realized gain (loss) on investments, before income tax provision on
realized gains, was $10.5 million and $8.8 million, respectively. Income tax (provision) benefit from realized gains on investments was $0.1 and $(0.2) million for the three and nine months ended September 30, 2019, respectively.
Significant realized gains (losses) for the three and nine months ended September 30, 2019 are summarized below (dollars in millions):  Period Ended September 30, 2019Portfolio Company

Realization Event (1)

ThreeMonths


NineMonthsThe Wolf Organization, LLC

Exit of portfolio company

$
3.9


$
3.9Vanguard Dealer Services, L.L.C.

Sale of portfolio company


3.7



3.7New Era Technology, Inc.

Exit of portfolio company


3.1



3.1Other








0.2Malabar International

Escrow distribution






0.1inthinc Technology Solutions, Inc.

Exit of portfolio company


(0.2
)


(0.2
)Trantech Radiator Products, Inc.

Exit of portfolio company






(0.3
)Consolidated Infrastructure Group Holdings, LP

Exit of portfolio company






(0.4
)K2 Industrial Services, Inc.

Exit of portfolio company






(1.3
)Net realized gain (loss) on investments




10.5



8.8Income tax (provision) benefit from realized gains on investments


0.1



(0.2
)Net realized gain (loss), net of income tax provision, on investments

$
10.6


$
8.6  (1)
As it relates to realization events, we define an exit of a portfolio company as situations where
we have completely exited our position in all of the portfolio companys securities and no longer carry the portfolio company on our schedule of investments. We define a sale of a portfolio company, distinguished from an exit, as
situations where the underlying operations of a portfolio company have been sold, but where we retain a residual ownership interest in the legacy entity (we generally distinguish these residual portfolio company investments from active
portfolio company investments). For the three and nine months ended September 30, 2018, the total net realized
gain (loss) on investments, before income tax provision on realized gains, was $(7.2) million and $(15.2) million, respectively. Income tax (provision) benefit from realized gains on investments was $0.3 and $(1.4) million for the three and nine
months ended September 30, 2018, respectively. Significant realized gains (losses) for the three and nine months ended September 30, 2018 are summarized below (dollars in millions):  Period Ended September 30, 2018Portfolio Company

Realization Event
(1)

ThreeMonths


NineMonthsWorld Wide Packaging, LLC

Exit of portfolio company

$
0.2


$
7.0Malabar International

Escrow distribution






0.3Worldwide Express Operations, LLC

Distributions tax character true-up






0.2Ice House America, LLC

Exit of portfolio company


0.1



0.1Other








0.1IOS Acquisitions, Inc.

Exit of portfolio company






(0.1
)Inflexxion, Inc.

Exit of portfolio company


(0.1
)


(6.5
)Cavallo Bus Lines Holdings, LLC

Exit of portfolio company


(7.4
)


(7.4
)Six Month Smiles Holdings, Inc.

Exit of portfolio company






(8.9
)Net realized gain (loss) on investments




(7.2
)


(15.2
)Income tax (provision) benefit from realized gains on investments


0.3



(1.4
)Net realized gain (loss), net of income tax provision, on investments

$
(6.9
)

$
(16.6
)  (1)
As it relates to realization events, we define an exit of a portfolio company as situations where
we have completely exited our position in all of the portfolio companys securities and no longer carry the portfolio company on our schedule of investments. We define a sale of a portfolio company, distinguished from an exit, as
situations where the underlying operations of a portfolio company have been sold, but where we retain a residual ownership interest in the legacy entity (we generally distinguish these residual portfolio company investments from active
portfolio company investments).  47




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##### Table of Contents

During the three and nine months ended September 30, 2019 and 2018, we recorded a net
change in unrealized appreciation (depreciation) on investments attributable to the following (dollars in millions):  Three Months EndedSeptember 30,


Nine Months EndedSeptember 30,Unrealized Appreciation (Depreciation)

2019


2018


2019


2018Exit, sale or restructuring of investments

$
(6.5
)

$
5.4


$
(4.2
)

$
14.7Fair value adjustments to debt investments


2.5



(5.9
)


(11.2
)


(16.7
)Fair value adjustments to equity investments


0.2



14.7



9.1



32.2Net change in unrealized appreciation (depreciation)

$
(3.8
)

$
14.2


$
(6.3
)

$
30.2 Net Increase in Net Assets Resulting From Operations Net increase in net assets resulting from operations during the three months ended September 30, 2019 and 2018 was $13.9 million and
$14.8 million, respectively, as a result of the events described above. Net increase in net assets resulting from operations during
the nine months ended September 30, 2019 and 2018 was $28.5 million and $37.5 million, respectively, as a result of the events described above. Liquidity and Capital Resources As of September 30, 2019, we had $17.5 million in cash and cash equivalents and our net assets totaled $402.8 million. We
believe that our current cash and cash equivalents on hand, our continued access to SBA-guaranteed debentures, our Credit Facility and our anticipated cash flows from investments will provide adequate capital
resources with which to operate and finance our investment business and make distributions to our stockholders for at least the next 12 months. We intend to generate additional cash primarily from the future offerings of securities (including the at-the-market program) and future borrowings, as well as cash flows from operations, including income earned from investments in our portfolio companies. On both a
short-term and long-term basis, our primary use of funds will be investments in portfolio companies and cash distributions to our stockholders. During the nine months ended September 30, 2019, we repaid $41.0 million of SBA debentures
which would have matured during the period September 1, 2021 through March 1, 2025. Our remaining outstanding SBA debentures continue to mature in 2024 and subsequent years through 2029, which will require repayment on or before the
respective maturity dates. Cash Flows For the nine months ended September 30, 2019, we experienced a net decrease in cash and cash equivalents in the amount of
$24.5 million. During that period, we used $57.2 million of cash for operating activities, which included the funding of $175.5 million of investments, which were partially offset by proceeds received from sales and repayments of
investments of $98.8 million. During the same period, we received proceeds from the issuances of SBA debentures of $7.5 million, proceeds from the issuance of our Public Notes of $69.0 million, and proceeds from net borrowings under
our Credit Facility of $30.0 million; which were partially offset by repayments of SBA debentures of $41.0 million, cash dividends paid to stockholders of $28.6 million, and the payment of deferred financing costs related to our debt
financings of $4.2 million. Capital Resources We anticipate that we will continue to fund our investment activities on a long-term basis through a combination of additional debt and equity
capital. SBA debentures The Funds are licensed SBICs, and have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small
Business Investment Act and the SBA rules applicable to SBICs, an SBIC can have outstanding at any time debentures guaranteed by the SBA in an amount up to twice its regulatory capital. The SBA regulations currently limit the amount that is
available to be borrowed by any SBIC and guaranteed by the SBA to 300.0% of an SBICs regulatory capital or $175.0 million, whichever is less. For three or more SBICs under common control, the maximum amount of outstanding SBA debentures
cannot exceed $350.0 million. SBA debentures have fixed interest rates that approximate prevailing 10-year Treasury Note rates plus a spread and have a maturity of ten years with interest payable
semi-annually. The principal amount of the SBA debentures is not required to be paid before maturity but may be pre-paid at any time. As of September 30, 2019, Fund I, Fund II and Fund III had zero,
$150.0 million and $7.5 million of outstanding SBA debentures, respectively. As of September 9, 2019, Fund I has completed a wind-down plan, relinquished its SBIC license and can no longer issue additional SBA debentures. Subject to
SBA regulatory requirements and approval, Fund III may access up to $167.5 million of additional SBA debentures under the SBIC debenture program. For more information on the SBA debentures, please refer to Note 6 to our consolidated financial
statements.  48




---

##### Table of Contents

Credit Facility In June 2014, we entered into the Credit Facility to provide additional funding for our investment and operational activities. On
April 24, 2019, we entered into the Amended Credit Agreement, which amends, restates, and replaces the Credit Facility. The Credit Facility is secured by substantially all of our assets, excluding the assets of the Funds. Under the Amended Credit Agreement, (i) revolving commitments by lenders were increased from $90.0 million to $100.0 million,
with an accordion feature that allows for an increase in total commitments up to $250.0 million, subject to satisfaction of certain conditions at the time of any such future increase, (ii) the maturity date of the credit facility was
extended from June 16, 2019 to April 24, 2023, and (iii) borrowings under the Credit Facility bear interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if
(x) no equity interests are included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the
contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR
rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero. We pay a
commitment fee that varies depending on the size of the unused portion of the Credit Facility: 3.00% per annum on the unused portion of the Credit Facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the
Credit Facility between the total commitments and the 35% minimum utilization. The Amended Credit Agreement also modifies certain covenants in the Credit Facility, including to provide for a minimum asset coverage ratio of 2.00 to 1. The Credit
Facility is secured by a first priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries. Amounts
available to borrow under the Credit Facility are subject to a minimum borrowing/collateral base that applies an advance rate to certain investments held by us, excluding investments held by the Funds. We are subject to limitations with respect to
the investments securing the Credit Facility, including, but not limited to, restrictions on sector concentrations, loan size, payment frequency and status and collateral interests, as well as restrictions on portfolio company leverage, which may
also affect the borrowing base and therefore amounts available to borrow. We have made customary representations and warranties and we
are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. These covenants are subject to important limitations and exceptions that are described in the documents governing
the Credit Facility. As of September 30, 2019, we were in compliance with all covenants of the Credit Facility and there were $66.5 million of borrowings outstanding under the Credit Facility. Public Notes On
February 2, 2018, we closed the public offering of approximately $43.5 million in aggregate principal amount of our 5.875% notes due 2023, or the 2023 Notes. On February 22, 2018, the underwriters exercised their option to
purchase an additional $6.5 million in aggregate principal of the 2023 Notes. The total net proceeds to us from the 2023 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of approximately
$1.5 million and estimated offering expenses of $0.4 million, were approximately $48.1 million. The 2023 Notes will mature
on February 1, 2023 and bear interest at a rate of 5.875%. The 2023 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after February 1, 2020. Interest on the 2023 Notes is payable quarterly on
February 1, May 1, August 1 and November 1 of each year. The 2023 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSL. As of September 30, 2019, the outstanding principal balance of
the 2023 Notes was $50.0 million. On February 8, 2019, we closed the public offering of approximately $60.0 million in
aggregate principal amount of our 6.000% notes due 2024, or the February 2024 Notes (and collectively with the 2023 Notes, the Public Notes). On February 19, 2019, the underwriters exercised their option to purchase an
additional $9.0 million in aggregate principal of the February 2024 Notes. The total net proceeds to us from the February 2024 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of
approximately $2.1 million and estimated offering expenses of $0.4 million, were approximately $66.5 million. The February
2024 Notes will mature on February 15, 2024 and bear interest at a rate of 6.000%. The February 2024 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after February 15, 2021. Interest on the
February 2024 Notes is payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning May 15, 2019. The February 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol
FDUSZ. As of September 30, 2019, the outstanding principal balance of the February 2024 Notes was $69.0 million. The Public Notes are unsecured obligations and rank pari passu with our future unsecured indebtedness; effectively subordinated to all of our
existing and future secured indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities we may form in the future, with respect to
claims on the assets of any such subsidiaries, financing vehicles, or similar facilities.  49




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##### Table of Contents

As of September 30, 2019, the weighted average stated interest rates for our SBA
debentures, the Public Notes and the Credit Facility were 3.392%, 5.947% and 5.063%, respectively. As of September 30, 2019, we had $33.5 million of unutilized commitment under our Credit Facility, and we were subject to a 0.500% fee on
such amount. As of September 30, 2019, the weighted average stated interest rate on total debt outstanding was 4.602%. As a BDC, we
are generally required to meet an asset coverage ratio of at least 200.0% (defined as the ratio which the value of our consolidated total assets, less all consolidated liabilities and indebtedness not represented by senior securities, bears to the
aggregate amount of senior securities representing indebtedness), which includes borrowings and any preferred stock we may issue in the future. This requirement limits the amount that we may borrow. We have received exemptive relief from the U.S.
Securities and Exchange Commission (SEC) to allow us to exclude any indebtedness guaranteed by the SBA and issued by the Funds from the 200.0% asset coverage requirements, which, in turn, will enable us to fund more investments with debt
capital. Recent legislation, however, modifies the required minimum asset coverage ratio from 200.0% to 150.0%, if certain requirements are met. Under the legislation, we are allowed to increase our leverage capacity if stockholders representing at
least a majority of the votes cast, when a quorum is present, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the legislation
allows the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after the one-year anniversary of such approval. On April 29, 2019, our Board, including a majority of the non-interested directors, approved a
minimum asset coverage ratio of 150% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. As a result, we will become subject to the 150% asset coverage ratio effective as of April 29, 2020. At present time, we do not intend to seek
stockholder approval to reduce our asset coverage requirement. As a BDC, we are generally not permitted to issue and sell our common
stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our board of
directors, including Independent Directors, determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale. On June 19, 2019, our stockholders voted to allow us to sell or otherwise
issue common stock at a price below net asset value per share for a period of one year ending on the earlier of June 19, 2020 or the date of our 2020 Annual Meeting of Stockholders. We expect to present to our stockholders a similar proposal at
our 2020 Annual Meeting of Stockholders. Our stockholders specified that the cumulative number of shares sold in each offering during the one-year period ending on the earlier of June 19, 2020 or the date
of our 2020 Annual Meeting of Stockholders may not exceed 25.0% of our outstanding common stock immediately prior to each such sale. Stock Repurchase Program We have an open market stock repurchase program (the Stock Repurchase Program) under which we may acquire up to $5.0 million
of our outstanding common stock. Under the Stock Repurchase Program, we may, but are not obligated to, repurchase outstanding common stock in the open market from time to time provided that we comply with the prohibitions under our insider trading
policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market value and timing constraints. The timing, manner, price and amount of any share
repurchases will be determined by our management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate
considerations. On October 29, 2019, the Board extended the Stock Repurchase Program through December 31, 2020, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not require us
to repurchase any specific number of shares and we cannot assure that any shares will be repurchased under the Stock Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time. We did not make
any repurchases of common stock during the three and nine months ended September 30, 2019. During the three and nine months ended September 30, 2018, we repurchased zero and 44,821 shares of common stock, respectively, on the open market
for zero and $0.6 million, respectively. Refer to Note 8 to our consolidated financial statements for additional information concerning stock repurchases. Critical Accounting Policies and Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make certain estimates and assumptions affecting amounts
reported in the financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. We continuously evaluate our estimates, including those related to the matters described below. These
estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different
assumptions or conditions. A discussion of our critical accounting policies follows. Valuation of Portfolio Investments As a BDC, we report our assets and liabilities at fair value at all times consistent with GAAP and the 1940 Act. Accordingly, we are required
to periodically determine the fair value of all of our portfolio investments.  50




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Our investments generally consist of illiquid securities including debt and equity
investments in lower middle-market companies. Investments for which market quotations are readily available are valued at such market quotations. Because we expect that there will not be a readily available market for substantially all of the
investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our board of directors using a documented valuation policy and consistently applied valuation process. Due to the
inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market
value existed for such investments, and the difference could be material. With respect to investments for which market quotations are not
readily available, our board of directors undertakes a multi-step valuation process each quarter, as described below:  

our quarterly valuation process begins with each portfolio company or investment being initially evaluated and
rated by the investment professionals of our investment advisor responsible for the portfolio investment;  

preliminary valuation conclusions are then documented and discussed with the investment committee of our
investment advisor;  

our board of directors engages one or more independent valuation firm(s) to conduct independent appraisals of a
selection of our portfolio investments for which market quotations are not readily available. Each portfolio company investment is generally appraised by the valuation firm(s) at least once every calendar year and each new portfolio company
investment is appraised at least once in the twelve-month period following the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result it is not in our stockholders best interest, to request
the independent appraisal of certain portfolio company investments. Such instances include, but are not limited to, situations where we determine that the fair value of the portfolio company investment is relatively insignificant to the fair value
of the total portfolio. Our board of directors consulted with the independent valuation firm(s) in arriving at our determination of fair value for 13 and 16 of our portfolio company investments representing 26.8% and 36.0% of the total portfolio
investments at fair value (exclusive of new portfolio company investments made during the three months ended September 30, 2019 and December 31, 2018, respectively) as of September 30, 2019 and December 31, 2018, respectively;  

the audit committee of our board of directors reviews the preliminary valuations of our investment advisor and of
the independent valuation firm(s) and responds and supplements the valuation recommendations to reflect any comments; and  

our board of directors discusses the valuations and determines the fair value of each investment in our portfolio
in good faith, based on the input of our investment advisor, the independent valuation firm(s) and the audit committee. In making the good faith determination of the value of portfolio investments, we start with the cost basis of the security. The transaction
price is typically the best estimate of fair value at inception. When evidence supports a subsequent change to the carrying value from the original transaction price, adjustments are made to reflect the expected exit values. Consistent with the policies and methodologies adopted by our board of directors, we perform detailed valuations of our debt and equity
investments, including an analysis on the Companys unfunded debt investment commitments, using both the market and income approaches as appropriate. Under the market approach, we typically use the enterprise value methodology to determine the
fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which we derive a single estimate of
enterprise value. Under the income approach, we typically prepare and analyze discounted cash flow models to estimate the present value of future cash flows of either an individual debt investment or of the underlying portfolio company itself. We evaluate investments in portfolio companies using the most recent portfolio company financial statements and forecasts. We also consult
with the portfolio companys senior management to obtain further updates on the portfolio companys performance, including information such as industry trends, new product development and other operational issues. For our debt investments the primary valuation technique used to estimate the fair value is the discounted cash flow method. However, if there
is deterioration in credit quality or a debt investment is in workout status, we may consider other methods in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or
the proceeds that would be received in a liquidation analysis. Our discounted cash flow models estimate a range of fair values by applying an appropriate discount rate to the future cash flow streams of our debt investments, based on future interest
and principal payments as set forth in the associated debt investment agreements. We prepare a weighted average cost of capital for use in the discounted cash flow model for each investment, based on factors including, but not limited to: current
pricing and credit metrics for similar proposed or executed investment transactions of private companies; the portfolio companys historical financial results and outlook; and the portfolio companys current leverage and credit quality as
compared to leverage and credit quality as of the date the investment was made. We may also consider the following factors when determining the fair value of debt investments: the portfolio companys ability to make future scheduled payments;
prepayment penalties and other fees; estimated remaining life; the nature and realizable value of any collateral securing such debt investment; and changes in the interest rate environment and the credit markets that generally may affect the price
at which similar investments may be made. We estimate the remaining life of our debt investments to generally be the legal maturity date of the instrument, as we generally intend to hold debt investments to maturity. However, if we have information
available to us that the debt investment is expected to be repaid in the near term, we would use an estimated remaining life based on the expected repayment date.  51




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For our equity investments, including equity securities and warrants, we generally use a
market approach, including valuation methodologies consistent with industry practice, to estimate the enterprise value of portfolio companies. Typically, the enterprise value of a private company is based on multiples of EBITDA, net income,
revenues, or in limited cases, book value. In estimating the enterprise value of a portfolio company, we analyze various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio
companys historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio
company does business, and comparisons of financial ratios of peer companies that are public. Where applicable, we consider our ability to influence the capital structure of the portfolio company, as well as the timing of a potential exit. We may also utilize an income approach when estimating the fair value of our equity securities, either as a primary methodology if consistent
with industry practice or if the market approach is otherwise not applicable, or as a supporting methodology to corroborate the fair value ranges determined by the market approach. We typically prepare and analyze discounted cash flow models based
on projections of the future free cash flows (or earnings) of the portfolio company. We consider various factors, including but not limited to the portfolio companys projected financial results, applicable market trading and transaction
comparables, applicable market yields and leverage levels, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. The fair value of our royalty rights are calculated based on projected future cash flows and the specific provisions contained in the
pertinent royalty agreement. The determination of the fair value of such royalty rights is not a significant component of our valuation process. Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements
express the uncertainties with respect to the possible effect of such valuations, and any changes in such valuations, on the consolidated financial statements. Revenue Recognition Investments and related investment income. Realized gains or losses on investments are recorded upon the sale or disposition of a
portfolio investment and are calculated as the difference between the net proceeds from the sale or disposition and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in
unrealized appreciation or depreciation on the consolidated statements of operations includes changes in the fair value of investments from the prior period, as determined by our board of directors through the application of our valuation policy, as
well as reclassifications of any prior period unrealized appreciation or depreciation on exited investments to realized gains or losses on investments. Interest and dividend income. Interest and dividend income are recorded on the accrual basis to the extent that we expect to collect
such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt. Dividend income is recorded as dividends are declared or at the point an obligation exists for the portfolio company to make a
distribution, and is generally recognized when received. Distributions from portfolio companies are evaluated to determine if the distribution is a distribution of earnings or a return of capital. Distributions of earnings are included in dividend
income while a return of capital is recorded as a reduction in the cost basis of the investment. Estimates are adjusted as necessary after the relevant tax forms are received from the portfolio company. PIK income. Certain of our investments contain a PIK income provision. The PIK income, computed at the contractual rate specified in
the applicable investment agreement, is added to the principal balance of the investment, rather than being paid in cash, and recorded as interest or dividend income, as applicable, on the consolidated statements of operations. Generally, PIK can be
paid-in-kind or all in cash. We stop accruing PIK income when there is reasonable doubt that PIK income will be collected. PIK income that has been contractually
capitalized to the principal balance of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the
investment (with corresponding adjustments to unrealized depreciation, as applicable). PIK income is included in our taxable income and, therefore, affects the amount we are required to pay to our stockholders in the form of dividends in order to
maintain our tax treatment as a RIC and to avoid paying corporate-level U.S. federal income tax, even though we have not yet collected the cash. Non-accrual. Debt investments or preferred equity investments (for which we are accruing PIK
dividends) are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected.
Interest and dividend payments received on non-accrual investments may be recognized as interest or dividend income or applied to the investment principal balance based on managements judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in managements judgment, are likely to remain current.  52




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Warrants. In connection with our debt investments, we will sometimes receive warrants
or other equity-related securities (Warrants). We determine the cost basis of Warrants based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and Warrants received. Any resulting difference
between the face amount of the debt and its recorded fair value resulting from the assignment of value to the Warrants is treated as OID and accreted into interest income using the effective interest method over the term of the debt investment. Upon
the prepayment of a debt investment, any unaccreted OID is accelerated into interest income. Fee income. All transaction fees
earned in connection with our investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including structuring and advisory services, provided to
portfolio companies. We recognize income from fees for providing such structuring and advisory services when the services are rendered or the transactions are completed. Upon the prepayment of a debt investment, any prepayment penalties are recorded
as fee income when earned. We also typically receive debt investment origination or closing fees in connection with investments. Such
debt investment origination and closing fees are capitalized as unearned income and offset against investment cost basis on our consolidated statements of assets and liabilities and accreted into interest income over the term of the investment. Upon
the prepayment of a debt investment, any unaccreted debt investment origination and closing fees are accelerated into interest income. Recently Issued
Accounting Standards In August 2018, the FASB issued ASU 2018-13,Fair Value
Measurement (Topic 820)  Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The guidance is effective for annual and interim reporting periods beginning
after December 15, 2019. We are currently evaluating the impact this ASU will have on our consolidated financial position or disclosures. Off-Balance Sheet Arrangements We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. We had off-balance sheet arrangements consisting of outstanding
commitments to fund various undrawn revolving loans, other debt investments and capital commitments totaling $6.9 million and $10.9 million as of September 30, 2019 and December 31, 2018, respectively. Such outstanding
commitments are summarized in the following table (dollars in millions):  September 30, 2019


December 31, 2018Total


Unfunded


Total


UnfundedPortfolio Company - Investment

Commitment


Commitment


Commitment


CommitmentAmerican AllWaste LLC (dba WasteWater Transport Services) - Delayed Draw Commitment - Term Loan-B

$



$



$
3.0


$
2.3B&B Roadway and Security Solutions, LLC - Common Equity (Units)










0.1



0.1FDS Avionics Corp. (dba Flight Display Systems) - Revolving Loan


0.2







0.2



0.1French Transit, LLC - Revolving Loan


1.0



1.0







Mesa Line Services, LLC - Delayed Draw Term Loan Commitment


3.0



2.1



4.0



3.1Rhino Assembly Company, LLC - Delayed Draw Commitment


0.9



0.9



0.9



0.9Safety Products Group, LLC - Common Equity (Units)


2.9
(1)


2.9
(1)


2.9
(1)


2.9
(1)UBEO, LLC - Delayed Draw Term Loan Commitment










1.5



1.5Total

$
8.0


$
6.9


$
12.6


$
10.9  (1)
Portfolio company was no longer held at period end. The commitment represents our maximum potential liability
related to certain guaranteed obligations stemming from the prior sale of the portfolio companys underlying operations. Additional detail for each of the commitments above is provided in our consolidated schedules of investments. Related Party Transactions We have
entered into a number of business relationships with affiliated or related parties, including the following:  

We have entered into the Investment Advisory Agreement with Fidus Investment Advisors, LLC, as our investment
advisor. Pursuant to the agreement our investment advisor manages our day-to-day operating and investing activities. We pay our investment advisor a fee for its services
under the Investment Advisory Agreement consisting of two components  a base management fee and an incentive fee. See Note 5 to our consolidated financial statements.  53




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

Edward H. Ross, our Chairman and Chief Executive Officer, and Thomas C. Lauer, our President, are managers of
Fidus Investment Advisors, LLC. In May 2015, Fidus Investment Advisors, LLC entered into a combination with Fidus Partners, LLC (the Combination), by which members of Fidus Investment Advisors LLC and Fidus Partners, LLC
(Partners) contributed all of their respective membership interest in Fidus Investment Advisors LLC and Partners to a newly formed limited liability company, Fidus Group Holdings, LLC (Holdings). As a result, Fidus Investment
Advisors LLC is a wholly-owned subsidiary of Holdings, which is a limited liability company organized under the laws of Delaware.  

We entered into the Administration Agreement with Fidus Investment Advisors, LLC to provide us with the office
facilities and administrative services necessary to conduct day-to-day operations. See Note 5 to our consolidated financial statements.  

We entered into a license agreement with Fidus Partners, LLC, pursuant to which Fidus Partners, LLC has granted
us a non-exclusive, royalty-free license to use the name Fidus. In
connection with the IPO and our election to be regulated as a BDC, we applied for and received exemptive relief from the SEC on March 27, 2012 to allow us to take certain actions that would otherwise be prohibited by the 1940 Act, as applicable
to BDCs. The relief permits FIC and Fund I, each of which has elected to be treated as a BDC, to operate effectively as one company, specifically allowing them to: (1) engage in certain transactions with each other; (2) invest in
securities in which the other is or proposes to be an investor; (3) file consolidated reports with the SEC; and (4) be subject to modified consolidated asset coverage requirements for senior securities issued by a BDC and its SBIC
subsidiary. Fund II and Fund III have not elected to be treated as BDCs and are not party to this exemptive relief. The fourth exemption described above allows us to exclude any indebtedness guaranteed by the SBA and issued by Fund I from the asset
coverage requirements applicable to us. Effective June 30, 2014, pursuant to separate exemptive relief from the SEC, any SBA debentures issued by Fund II and Fund III are not considered senior securities for purposes of the asset coverage
requirements. While we may co-invest with investment entities managed by our investment advisor
or its affiliates, to the extent permitted by the 1940 Act and the rules and regulations thereunder, the 1940 Act imposes significant limits on co-investment. The SEC staff has granted us relief sought in an
exemptive application that expands our ability to co-invest in portfolio companies with other funds managed by our investment advisor or its affiliates (Affiliated Funds) in a manner consistent
with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the Order). Pursuant to the Order, we are
permitted to co-invest with our affiliates if a required majority (as defined in Section 57(o) of the 1940 Act) or our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or
our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. In addition, we, Fund I and our investment advisor have each adopted a joint code of ethics pursuant to
Rule 17j-1 under the 1940 Act that governs the conduct of our and our investment advisors officers, directors and employees. Additionally, our investment advisor has adopted a code of ethics
pursuant to rule 204A-1 under the Advisers Act and in accordance with Rule 17j-1(c) under the 1940 Act. We, and Fund I, have also adopted a code of
business conduct that is applicable to all officers, directors and employees of Fidus and our investment advisor. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law. Recent Developments On
October 1, 2019, we exited our debt and equity investments in Simplex Manufacturing Co. We received payment in full of $4.1 million on our subordinated debt investment. We sold our warrant investment for a realized gain of approximately
$2.9 million. On October 11, 2019, we invested $6.0 million in first lien debt and common equity of Haematologic
Technologies, Inc., a leading provider of biologic products and GMP compliant assay development and testing services to the biopharmaceutical industry. On October 16, 2019, we closed the public offering of approximately $55.0 million in aggregate principal amount of our 5.375% notes
due 2024, or the November 2024 Notes. On October 23, 2019, the underwriters exercised their option to purchase an additional $8.3 million in aggregate principal of the November 2024 Notes. The total net proceeds to us from the
November 2024 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of approximately $1.9 million and estimated offering expenses of $0.4 million, were approximately $61.0 million. The November 2024 Notes will mature on November 1, 2024 and bear interest at a rate of 5.375%. The November 2024 Notes are unsecured
obligations and rank pari passu with our future unsecured indebtedness, including our outstanding Public Notes; effectively subordinated to all of our existing and future secured indebtedness; and structurally subordinated to all existing and future
indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities we may form in the future, with  54




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##### Table of Contents

respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities. The November 2024 Notes may be redeemed in whole or in part at any time or from time to time
at our option on or after November 1, 2021. Interest on the November 2024 Notes is payable quarterly on February 1, May 1, August 1 and November 1 of each year, beginning February 1, 2020. The November 2024 Notes are
listed on the NASDAQ Global Select Market under the trading symbol FDUSG. We may from time to time repurchase the November 2024 Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of October 29, 2019, the
outstanding principal balance of the November 2024 Notes was approximately $63.3 million. The indenture governing the November 2024
Notes, or the Indenture, contains certain covenants, including certain covenants requiring the Company (i) to comply with the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by such provisions of
Section 61(a) of the 1940 Act, as may be applicable to the Company from time to time or any successor provisions, whether or not the Company continues to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any
exemptive relief granted to the Company by the SEC; (ii) to comply, under certain circumstances, with a modified version of the requirements set forth in Section 18(a)(1)(B) as modified by such provisions of Section 61(a) of the 1940
Act as may be applicable to the Company from time to time or any successor provisions, whether or not the Company continues to be subject to such provisions of the 1940 Act, prohibiting the declaration of any cash dividend or distribution upon any
class of our capital stock (except to the extent necessary for the Company to maintain its treatment as a regulated investment company under Subchapter M of the Internal Revenue Code), or purchasing any such capital stock, if the
Company asset coverage, as defined in the 1940 Act, were below 200% (or 150% on and after April 29, 2020) at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend,
distribution, or purchase; (iii) to provide financial information to the holders of the November 2024 Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended;
and (iv) to use its reasonable best efforts to effect, within 30 days of issuance and delivery of the November 2024 Notes, the listing of the November 2024 Notes on the Nasdaq Stock Market LLC and to maintain the listing of the November 2024
Notes on the Nasdaq Stock Market LLC or another national securities exchange. These covenants are subject to important limitations and exceptions that are described in the Indenture. On October 29, 2019, our Board declared a regular quarterly dividend of $0.39 per share payable on December 20, 2019 to stockholders
of record as of December 6, 2019. In addition, our Board declared a special dividend of $0.04 per share payable on December 20, 2019 to stockholders of record as of December 6, 2019.  Item 3.
Quantitative and Qualitative Disclosures About Market Risk. We are subject to financial market risks, including changes in interest rates. Changes in interest rates affect both our cost of funding and
the valuation of our investment portfolio. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable
administrative and information systems and other policies and programs. In the future, our investment income may also be affected by changes in various interest rates, including LIBOR and prime rates, to the extent of any debt investments that
include floating interest rates. As of September 30, 2019 and December 31, 2018, 14 and seven portfolio companys debt investments, respectively, bore interest at a variable rate, which represented $152.8 million and
$75.9 million of our portfolio on a fair value basis, respectively, and the remainder of our debt portfolio was comprised entirely of fixed rate investments. Our pooled SBA debentures and our Public Notes bear interest at fixed rates. Our
Credit Facility bears interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if (x) no equity interests are included in the borrowing base, (y) the contribution to
the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank
loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest
of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero. Because we
currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly,
there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net
investment income if there is not a corresponding increase in interest income generated by our investment portfolio.  55




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The following table shows the approximate annualized increase or decrease in the components
of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of September 30, 2019 (dollars in millions):  Basis Point Increase (Decrease)

Interest IncomeIncrease(Decrease)(1)


Interest ExpenseIncrease(Decrease)(3)


Net Increase(Decrease)


Net InvestmentIncome(2)(200)

$
(1.0
)

$
(1.3
)

$
0.3


$
0.2(150)


(0.9
)


(1.0
)


0.1



0.1(100)


(0.8
)


(0.6
)


(0.2
)


(0.2
)(50)


(0.5
)


(0.3
)


(0.2
)


(0.2
)50


0.8



0.4



0.4



0.3100


1.5



0.7



0.8



0.6150


2.3



1.0



1.3



1.0200


3.1



1.4



1.7



1.4250


3.8



1.7



2.1



1.7300


4.6



2.0



2.6



2.1  (1)
Certain of our variable rate debt investments have a LIBOR interest rate floor, which lessens the impact of
decreases in interest rates. (2)
Includes the impact of income incentive fee at 20.0% on net increase (decrease) in net interest.  Item 4.
Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we
file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and that such information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act) as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and
procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls, however well designed and operated, can provide only
reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent
limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the third quarter of 2019 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.  56




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##### Table of Contents

PART II  OTHER INFORMATION  Item 1.
Legal Proceedings. We are not, and our investment advisor is not, currently subject to any material legal proceedings.  Item 1A.
Risk Factors. In addition to other information set forth in this report, including the risk factor below, you should carefully consider the Risk
Factors discussed in our Form 10-K for the year ended December 31, 2018 and filed with the SEC on February 28, 2019, which are incorporated herein by reference. These Risk Factors could
materially affect our business, financial condition and/or operating results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or
operating results. Recent legislation may allow us to incur additional leverage. The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total
borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However, the Small Business Credit Availability Act, which was signed into law on March 23, 2018, has modified the 1940 Act by allowing a BDC
to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. Under the legislation, we are allowed to increase our leverage capacity if stockholders
representing at least a majority of the votes cast, when a quorum is present, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively,
the legislation allows the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after one year. In either case, we would be required to make certain disclosures on our
website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. As a result of this legislation, we may be able to increase our leverage up to an amount that reduces our asset coverage ratio from 200% to
150%. Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. If the
value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would
cause net asset value to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase
more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay common stock
dividends, scheduled debt payments or other payments related to our securities. Leverage is generally considered a speculative investment technique. On April 29, 2019, our Board, including a majority of the non-interested directors, approved a
minimum asset coverage ratio of 150% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. As a result, we will become subject to the 150% asset coverage ratio effective as of April 29, 2020. At present time, we do not intend to seek
stockholder approval to reduce our asset coverage requirement. Changes relating to the LIBOR calculation process may adversely
affect the value of the LIBOR-indexed, floating rate debt securities in our portfolio. On July 27, 2017, the U.K. Financial
Conduct Authority announced that it intends to stop persuading or compelling banks to submit the London Interbank Offered Rate (LIBOR) after 2021. It is unclear if at that time whether LIBOR will cease to exist or if new methods of
calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is
considering replacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities called the Secured Overnight Financing Rate (SOFR). The first publication of SOFR was released in
April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain. We typically use LIBOR as a reference rate in variable rate loans we extend to portfolio companies such that the interest due to us pursuant
to a loan extended to a portfolio company is calculated using LIBOR plus a margin rate. As of September 30, 2019, we had a total of $147.4 million principal balance, or 23.3% of the principal balance of our debt investment portfolio,
in such LIBOR-linked debt investments with maturity dates extending beyond December 31, 2021. If LIBOR ceases to exist, we may need to renegotiate these debt investments with maturity dates extending beyond 2021 to replace LIBOR with the new
standard that is established in its place or another pricing method, which could have an adverse effect on our ability to receive attractive returns. In addition, borrowings under our Credit Facility, which is currently set to mature on
April 24, 2023, bear interest at LIBOR plus a margin rate. As a result, if LIBOR ceases to exist after December 31, 2021, we may need to renegotiate the interest-rate provisions in the Credit Facility to replace LIBOR with the new standard
that is established in its place or another pricing method.  57




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##### Table of Contents

Given the current uncertainties over LIBORs discontinuation and the replacement
alternatives, it is not possible at this time to predict the effect of any such changes, any establishment of alternative reference rates, or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere, including any impact on
our LIBOR-linked debt investments that mature after December 31, 2021.  Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds. Sales of Unregistered Securities None. Issuer Purchases of
Equity Securities We have an open market stock repurchase program (the Stock Repurchase Program) under which we may
acquire up to $5.0 million of our outstanding common stock. Under the Stock Repurchase Program, we may, but are not obligated to, repurchase outstanding common stock in the open market from time to time provided that we comply with the
prohibitions under our insider trading policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market value and timing constraints. The timing,
manner, price and amount of any share repurchases will be determined by our management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements
and other corporate considerations. On October 29, 2019, the Board extended the Stock Repurchase Program through December 31, 2020, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program
does not require us to repurchase any specific number of shares and we cannot assure that any shares will be repurchased under the Stock Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any
time. During the three and nine months ended September 30, 2019, we did not make any repurchases of common stock under the Stock
Repurchase Program. The following table provides information regarding such repurchases of our common stock (dollars in millions, except per share data):  Period

TotalNumber ofSharesPurchased (1)


AveragePrice PaidPer Share


Total Numberof SharesPurchased asPart of PubliclyAnnouncedPlans orPrograms


Maximum Number(or ApproximateDollar Value)of Shares that MayYet Be PurchasedUnder the
StockRepurchase ProgramJanuary 1, 2019 through January 31, 2019





$







$
4.4February 1, 2019 through February 28, 2019














4.4March 1, 2019 through March 31, 2019














4.4April 1, 2019 through April 30, 2019














4.4May 1, 2019 through May 31, 2019














4.4June 1, 2019 through June 30, 2019














4.4July 1, 2019 through July 31, 2019














4.4August 1, 2019 through August 31, 2019














4.4September 1, 2019 through September 30, 2019














4.4Total





$




  (1)
Excludes shares purchased on the open market and reissued in order to satisfy the dividend reinvestment plan
(DRIP) obligation to deliver shares of common stock in lieu of issuing new shares. During the nine months ended September 30, 2019, we purchased and reissued shares of common stock to satisfy the DRIP obligation as follows:  Number ofShares


AveragePurchased


Price Paid


TotalPeriod

and Reissued


Per Share


Amount PaidMarch 1, 2019 through March 31, 2019


21,855


$
15.25


$
0.3June 1, 2019 through June 30, 2019


14,067



16.23



0.3September 1, 2019 through September 30, 2019


15,289



15.35



0.2Total


51,211


$
15.55


$
0.8  58




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Refer to Note 8 to our consolidated financial statements for additional information
concerning stock repurchases under our Stock Repurchase Program.  Item 3.
Defaults Upon Senior Securities. None.  Item 4.
Mine Safety Disclosures. None.  Item 5.
Other Information. None.  59




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Item 6.
Exhibits.  Number

Exhibit31.1

Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 
302 of the Sarbanes-Oxley Act of 2002.31.2

Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 
302 of the Sarbanes-Oxley Act of 2002.32.1

Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  60




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##### Table of Contents

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.  FIDUS INVESTMENT CORPORATIONDate: October 31, 2019





/s/ EDWARD H. ROSSEdward H. RossChairman and Chief Executive Officer(Principal Executive Officer)Date: October 31, 2019





/s/ SHELBY E. SHERARDShelby E. SherardChief Financial Officer (Principal Financial
and Accounting Officer)  61