10-Q

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

10-Q 1 d752627d10q.htm 10-Q 10-Q

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 June 30, 2019

☐	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)

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):

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 ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	FDUS	The NASDAQ Global Select Market
5.875% Notes due 2023	FDUSL	The NASDAQ Global Select Market
6.000% Notes due 2024	FDUSZ	The NASDAQ Global Select Market

As of July 30, 2019, the Registrant had outstanding 24,463,119 shares of common stock, $0.001 par value.

FIDUS INVESTMENT CORPORATION

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q


PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Statements of Assets and Liabilities — June 30, 2019 (unaudited) and December 31, 2018	3
	Consolidated Statements of Operations — Three and Six Months Ended June 30, 2019 (unaudited) and 2018 (unaudited)	4
	Consolidated Statements of Changes in Net Assets — Three and Six Months Ended June 30, 2019 (unaudited) and 2018 (unaudited)	5
	Consolidated Statements of Cash Flows — Six Months Ended June 30, 2019 (unaudited) and 2018 (unaudited)	6
	Consolidated Schedules of Investments — June 30, 2019 (unaudited) and December 31, 2018	7
	Notes to Consolidated Financial Statements (unaudited)	20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	57
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
Signatures		62

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)


	June 30, 2019		December 31,
	(unaudited)		2018
ASSETS
Investments, at fair value
Control investments (cost: $7,522 and $22,697, respectively)	$	5,218	$	18,820
Affiliate investments (cost: $60,057 and $70,924, respectively)		117,470		123,051
Non-control/non-affiliate investments (cost: $587,945 and $505,129, respectively)		574,584		501,111

Total investments, at fair value (cost: $655,524 and $598,750, respectively)		697,272		642,982
Cash and cash equivalents		21,885		42,015
Interest receivable		5,898		7,528
Prepaid expenses and other assets		816		1,351

Total assets	$	725,871	$	693,876

LIABILITIES
SBA debentures, net of deferred financing costs (Note 6)	$	167,232	$	186,734
Public Notes, net of deferred financing costs (Note 6)		115,314		48,411
Borrowings under Credit Facility, net of deferred financing costs (Note 6)		28,232		36,358
Accrued interest and fees payable		3,151		2,812
Base management fee payable – due to affiliate		3,016		2,927
Income incentive fee payable – due to affiliate		1,299		2,785
Capital gains incentive fee payable – due to affiliate		8,481		9,415
Administration fee payable and other – due to affiliate		300		474
Taxes payable		—		803
Accounts payable and other liabilities		368		172

Total liabilities		327,393		290,891

Commitments and contingencies (Note 7)
NET ASSETS
Common stock, $0.001 par value (100,000,000 shares authorized, 24,463,119 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively)		24		24
Additional paid-in capital		366,278		366,278
Total distributable earnings		32,176		36,683

Total net assets		398,478		402,985

Total liabilities and net assets	$	725,871	$	693,876

Net asset value per common share	$	16.29	$	16.47

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Operations (unaudited)

(in thousands, except shares and per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Investment Income:
Interest income
Control investments	$	68		$	61		$	350		$	118
Affiliate investments		1,414			1,883			2,934			3,538
Non-control/non-affiliate investments		12,365			13,741			25,815			26,764

Total interest income		13,847			15,685			29,099			30,420
Payment-in-kind interest income
Control investments		183			162			1,420			315
Affiliate investments		85			107			168			507
Non-control/non-affiliate investments		2,687			1,061			3,997			2,187

Total payment-in-kind interest income		2,955			1,330			5,585			3,009
Dividend income
Control investments		—			—			—			—
Affiliate investments		573			197			941			641
Non-control/non-affiliate investments		58			98			(15	)		(8	)

Total dividend income		631			295			926			633
Fee income
Control investments		—			—			349			—
Affiliate investments		—			27			22			23
Non-control/non-affiliate investments		601			748			2,329			2,189

Total fee income		601			775			2,700			2,212
Interest on idle funds and other income		34			27			88			71

Total investment income		18,068			18,112			38,398			36,345

Expenses:
Interest and financing expenses		4,052			3,046			7,776			5,978
Base management fee		3,016			2,821			5,887			5,506
Incentive fee - income		1,299			2,170			3,784			4,394
Incentive fee - capital gains		(1,289	)		(263	)		(934	)		1,267
Administrative service expenses		378			347			777			746
Professional fees		406			275			996			785
Other general and administrative expenses		510			691			815			986

Total expenses		8,372			9,087			19,101			19,662

Net investment income before income taxes		9,696			9,025			19,297			16,683
Income tax provision (benefit)		53			67			55			198

Net investment income		9,643			8,958			19,242			16,485

Net realized and unrealized gains (losses) on investments:
Net realized gains (losses):
Control investments		—			—			(1,268	)		—
Affiliate investments		(134	)		(6,240	)		(99	)		733
Non-control/non-affiliate investments		23			(8,956	)		(335	)		(8,651	)

Total net realized gain (loss) on investments		(111	)		(15,196	)		(1,702	)		(7,918	)

Income tax (provision) benefit from realized gains on investments		(301	)		(1	)		(293	)		(1,748	)
Net change in unrealized appreciation (depreciation):
Control investments		(64	)		(272	)		1,573			(199	)
Affiliate investments		2,527			9,353			5,286			15,738
Non-control/non-affiliate investments		(8,492	)		4,802			(9,343	)		461

Total net change in unrealized appreciation (depreciation) on investments		(6,029	)		13,883			(2,484	)		16,000

Net gain (loss) on investments		(6,441	)		(1,314	)		(4,479	)		6,334
Realized losses on extinguishment of debt		—			—			(189	)		(150	)

Net increase in net assets resulting from operations	$	3,202		$	7,644		$	14,574		$	22,669

Per common share data:
Net investment income per share-basic and diluted	$	0.39		$	0.37		$	0.79		$	0.67

Net increase in net assets resulting from operations per share — basic and diluted	$	0.13		$	0.31		$	0.60		$	0.93

Dividends declared per share	$	0.39		$	0.39		$	0.78		$	0.78

Weighted average number of shares outstanding — basic and diluted		24,463,119			24,463,119			24,463,119			24,480,484

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Changes in Net Assets (unaudited)

(in thousands, except shares)


	Common Stock					Additional			Total
	Number of			Par		paid-in			distributable			Total net
	shares			value		capital			earnings			assets
Balances at December 31, 2017		24,507,940		$	24	$	370,796		$	22,453		$	393,273
Repurchases of common stock under Stock Repurchase Program (Note 8)		(44,821	)		—		(582	)		—			(582	)
Net investment income		—			—		—			7,527			7,527
Net realized gain (loss) on investments, net of taxes		—			—		—			5,531			5,531
Net unrealized appreciation (depreciation) on investments		—			—		—			2,117			2,117
Realized 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		$	398,158

Net investment income		—			—		—			8,958			8,958
Net realized gain (loss) on investments, net of taxes		—			—		—			(15,197	)		(15,197	)
Net unrealized appreciation (depreciation) on investments		—			—		—			13,883			13,883
Realized losses on extinguishment of debt		—			—		—			—			—
Dividends declared		—			—		—			(9,541	)		(9,541	)

Balances at June 30, 2018		24,463,119		$	24	$	370,214		$	26,023		$	396,261

Balances at December 31, 2018		24,463,119		$	24	$	366,278		$	36,683		$	402,985
Net investment income		—			—		—			9,599			9,599
Net realized gain (loss) on investments, net of taxes		—			—		—			(1,583	)		(1,583	)
Net unrealized appreciation (depreciation) on investments		—			—		—			3,545			3,545
Realized 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		$	404,816

Net investment income		—			—		—			9,643			9,643
Net 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		$	398,478

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	Six Months Ended June 30,
	2019			2018
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations	$	14,574		$	22,669
Adjustments 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		2,484			(16,000	)
Net realized (gain) loss on investments		1,702			7,918
Interest and dividend income paid-in-kind		(5,585	)		(3,098	)
Accretion of original issue discount		(30	)		(105	)
Accretion of loan origination fees		(567	)		(434	)
Purchase of investments		(128,460	)		(103,989	)
Proceeds from sales and repayments of investments		75,320			65,270
Proceeds from loan origination fees		846			564
Realized losses on extinguishment of debt		189			150
Amortization of deferred financing costs		858			661
Changes in operating assets and liabilities:
Interest receivable		1,630			969
Prepaid expenses and other assets		517			(164	)
Accrued interest and fees payable		339			228
Base management fee payable – due to affiliate		89			235
Income incentive fee payable – due to affiliate		(1,486	)		16
Capital gains incentive fee payable – due to affiliate		(934	)		1,267
Administration fee payable and other – due to affiliate		(174	)		(222	)
Taxes payable		(803	)		19
Accounts payable and other liabilities		196			104

Net cash provided by (used for) operating activities		(39,295	)		(23,942	)

Cash Flows from Financing Activities:
Proceeds received from SBA debentures		—			27,000
Repayments of SBA debentures		(19,750	)		(43,800	)
Proceeds received from issuance of Public Notes		69,000			50,000
Proceeds received from (repayments of) borrowings under Credit Facility, net		(7,000	)		(4,500	)
Payment of deferred financing costs		(4,004	)		(2,650	)
Dividends paid to stockholders, including expenses		(19,081	)		(19,099	)
Repurchases of common stock under Stock Repurchase Program		—			(582	)

Net cash provided by (used for) financing activities		19,165			6,369

Net increase (decrease) in cash and cash equivalents		(20,130	)		(17,573	)
Cash and cash equivalents:
Beginning of period		42,015			41,572

End of period	$	21,885		$	23,999

Supplemental disclosure of cash flow information:
Cash payments for interest	$	6,579		$	5,089
Cash payments for taxes, net of tax refunds received	$	1,151		$	1,927

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2019

(in thousands, except shares)


Portfolio Company (a)(b)		Rate (d)					Principal				Fair		Percent of
Investment Type (c)	Industry	Cash/PIK			Maturity		Amount		Cost		Value (e)		Net Assets
Control Investments (t)
FDS Avionics Corp. (dba Flight Display Systems)	Aerospace & Defense Manufacturing
Second Lien Debt			4.00%/11.00	%		4/1/2020	$	6,550	$	6,547	$	4,991
Revolving Loan ($50 commitment)			4.00%/11.00	%		4/1/2020		227		227		227
Common Equity (7,478 shares) (j)										748		—

										7,522		5,218		1	%

Total Control Investments									$	7,522	$	5,218		1	%

Affiliate Investments (l)
FAR Research Inc. (n)	Specialty Chemicals
Common Equity (1,396 units)									$	—	$	49		0	%

Fiber Materials, Inc.	Aerospace & Defense Manufacturing
Common Equity (10 units)										645		3,116		1	%

Medsurant Holdings, LLC	Healthcare Services
Second Lien Debt			13.00%/0.00	%		6/30/2020		8,823		8,804		8,823
Preferred Equity (126,662 units) (h)										1,346		1,944
Warrant (505,176 units) (h)(m)										4,517		6,992

										14,667		17,759		4	%
Microbiology Research Associates, Inc.	Healthcare Services
Subordinated Debt			11.00%/1.50	%		3/13/2022		8,863		8,852		8,683
Common Equity (1,625,731 units) (j)										1,939		2,305

										10,791		10,988		3	%
Mirage Trailers LLC	Utility Equipment Manufacturing
Second Lien Debt (f)(k)			13.93%/1.50	%		11/25/2020		6,155		6,129		6,155
Common Equity (2,500,000 shares) (g)										2,181		3,297

										8,310		9,452		2	%
Pfanstiehl, Inc.	Healthcare Products
Subordinated Debt			10.50%/0.00	%		9/29/2022		6,208		6,199		6,208
Common Equity (8,500 units) (j)										850		17,377

										7,049		23,585		6	%
Pinnergy, Ltd.	Oil & Gas Services
Second Lien Debt (k)			12.00%/0.00	%		1/24/2020		4,000		3,997		4,000
Common Equity - Class A-2 (42,500 units) (k)										3,000		36,392
Common Equity - Class B (1,000 units) (k)										3,000		3,000

										9,997		43,392		11	%
Steward Holding LLC (dba Steward Advanced Materials)	Aerospace & Defense Manufacturing
Second Lien Debt			12.00%/1.50	%		5/12/2021		7,610		7,598		7,610
Common Equity (1,000,000 units)										1,000		1,519

										8,598		9,129		2	%

Total Affiliate Investments									$	60,057	$	117,470		29	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2019

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity		Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Non-control/Non-affiliate Investments
Accent Food Services, LLC	Vending Equipment Manufacturing
Second Lien Debt (k)(z)			10.00%/5.00	%		5/30/2022	$	32,609	$	32,518		$	30,823
Subordinated Debt (j)			0.00%/17.00	%		5/30/2022		1,502		1,502			1,502
Common Equity (7,885 units) (h)(j)										800			393

										34,820			32,718		8	%
Allied 100 Group, Inc.	Healthcare Products
Common Equity (1,250,000 units) (j)										1,250			1,484		0	%

Alzheimer’s Research and Treatment Center, LLC	Healthcare Services
First Lien Debt (j)(x)			8.34%/0.00	%		10/23/2023		6,500		6,456			6,500
Common Equity (1,000 units) (h)(j)										1,000			1,267

										7,456			7,767		2	%
American AllWaste LLC (dba WasteWater Transport Services)	Environmental Industries
Second Lien Debt (j)			11.00%/1.50	%		11/30/2023		12,458		12,400			12,458
Delayed Draw Commitment ($1,736 commitment) (i)(j)			11.00%/1.50	%		11/30/2019		—		(3	)		—
Preferred Equity (500 units) (j)										500			530

										12,897			12,988		3	%
Argo Turboserve Corporation	Business Services
Second Lien Debt (j)(y)			12.35%/0.00	%		6/28/2023		14,719		14,652			14,719		4	%

AVC Investors, LLC (dba Auveco)	Specialty Distribution
Second Lien Debt (k)			11.50%/0.00	%		7/3/2023		22,500		22,417			22,500
Common Equity (5,000 units) (j)										500			732

										22,917			23,232		6	%
B&B Roadway and Security Solutions, LLC	Component Manufacturing
Second Lien Debt			10.50%/3.50	%		8/27/2023		10,308		10,265			9,074
Common Equity (50,000 units) (h)(j)										500			135

										10,765			9,209		2	%
BCC Group Holdings, Inc.	Information Technology Services
Subordinated Debt			11.00%/1.00	%		4/11/2023		18,077		17,915			17,915
Common Equity (451 shares)										1			1
Preferred Equity (37 shares)										374			374

										18,290			18,290		5	%
BCM One Group Holdings, Inc.	Information Technology Services
Subordinated Debt (k)			11.00%/0.00	%		7/3/2024		27,000		26,876			26,876
Common Equity (2,286 shares)										2			2
Preferred Equity (133 shares)										1,330			1,330

										28,208			28,208		7	%
Bedford Precision Parts LLC	Specialty Distribution
First Lien Debt (j)(s)			8.69%/0.00	%		3/12/2024		5,000		4,965			4,965
Common Equity (500,000 units) (h)(j)										500			500

										5,465			5,465		1	%
Cardboard Box LLC (dba Anthony’s Coal Fired Pizza)	Restaurants
Common Equity (521,021 units) (j)										520			180		0	%

ControlScan, Inc.	Information Technology Services
Subordinated Debt (j)			11.00%/0.00	%		1/28/2023		6,750		6,728			6,750
Common Equity (3,704 shares) (j)										4			595
Preferred Equity (100 shares) (j)										996			996

										7,728			8,341		2	%
CRS Solutions Holdings, LLC (dba CRS Texas)	Business Services
Second Lien Debt			10.50%/1.00	%		9/14/2023		9,119		9,085			9,119
Common Equity (750,000 units) (j)										750			890

										9,835			10,009		3	%
Diversified Search LLC	Business Services
First Lien Debt (k)(r)			8.32%/0.00	%		2/7/2024		11,800		11,591			11,591
Common Equity (573 units) (h)(j)										593			593

										12,184			12,184		3	%
EBL, LLC (EbLens)	Retail
Second Lien Debt (j)			12.00%/1.00	%		1/13/2023		9,436		9,377			9,436
Common Equity (75,000 units) (j)										750			650

										10,127			10,086		3	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2019

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity		Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
French Transit, LLC	Consumer Products
First Lien Debt (j)(aa)			11.39%/0.00	%		6/21/2024	$	8,000	$	7,960		$	7,960
Revolving Loan ($500 commitment) (j)(u)(aa)			11.39%/0.00	%		6/21/2024		500		495			495

										8,455			8,455		2	%
Global Plasma Solutions, Inc.	Component Manufacturing
First Lien Debt (j)(v)			7.60%/0.00	%		9/21/2023		7,518		7,452			7,518
Preferred Equity (947 shares) (j)										360			383
Common Equity (947 shares) (j)										15			179

										7,827			8,080		2	%
Gurobi Optimization, LLC	Information Technology Services
Common Equity (5 shares)										1,500			2,675		1	%

Hilco Plastics Holdings, LLC (dba Hilco Technologies)	Component Manufacturing
Second Lien Debt			11.50%/1.50	%		12/31/2019		10,027		10,017			9,702
Preferred Equity (1,000,000 units) (h)(j)										1,000			1,201
Common Equity (72,507 units) (h)(j)										473			210

										11,490			11,113		3	%
Hoonuit, LLC	Information Technology Services
First Lien Debt (ab)			11.72%/0.00	%		6/7/2024		7,165		7,130			7,130
Preferred Equity (610 units) (h)(j)						1/1/2022				250			250

										7,380			7,380		2	%
Hub Acquisition Sub, LLC (dba Hub Pen)	Promotional products
Second Lien Debt (k)			12.25%/0.00	%		9/23/2021		25,000		24,932			25,000
Common Equity (7,500 units)										249			1,440

										25,181			26,440		7	%
Hunter Defense Technologies, Inc.	Aerospace & Defense Manufacturing
First Lien Debt (j)(w)			9.33%/0.00	%		3/29/2023		9,620		9,537			9,620		2	%

IBH Holdings, LLC (fka Inflexxion, Inc.)	Business Services
Common Equity (150,000 units)										—			—		0	%

inthinc Technology Solutions, Inc. (n)	Information Technology Services
Royalty Rights						4/24/2020				185			—		0	%

K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.) (n)	Industrial Cleaning & Coatings
Second Lien Debt			0.00%/10.00	%		1/28/2021		2,566		2,566			2,566		1	%

The Kyjen Company, LLC (dba Outward Hound)	Consumer Products
Second Lien Debt (k)			12.00%/0.00	%		6/8/2024		15,000		14,942			14,309
Common Equity (765 shares) (j)										765			743

										15,707			15,052		4	%
LNG Indy, LLC (dba Kinetrex Energy)	Oil & Gas Distribution
Second Lien Debt (k)			11.50%/0.00	%		11/12/2021		5,000		4,988			5,000
Common Equity (1,000 units)										1,000			1,556

										5,988			6,556		2	%
Marco Group International OpCo, LLC	Industrial Cleaning & Coatings
Second Lien Debt			10.50%/0.75	%		1/21/2023		12,179		12,140			12,179
Common Equity (960,482 units) (h)(j)										960			966

										13,100			13,145		3	%
Mesa Line Services, LLC	Utilities: Services
Second Lien Debt (j)			10.50%/1.00	%		8/1/2024		17,089		16,992			17,089
Delayed Draw Commitment ($2,160 commitment) (i)(j)			10.50%/1.00	%		12/31/2019		—		(7	)		—
Common Equity (833 shares) (j)										1,000			1,345

										17,985			18,434		5	%
Midwest Transit Equipment, Inc.	Transportation services
Warrant (14,384 shares) (j)(m)										361			418
Warrant (9.59% of Junior Subordinated Notes) (j)(q)										380			450

										741			868		0	%
New Era Technology, Inc.	Information Technology Services
Common Equity (197,369 shares) (j)										750			1,384
Preferred Equity (632 shares) (j)										77			155

										827			1,539		0	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2019

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity	Principal Amount		Cost		Fair Value (e)		Percent of Net Assets
NGT Acquisition Holdings, LLC (dba Techniks Industries)	Component Manufacturing
Subordinated Debt			12.50%/2.00	%	3/21/2022	$	5,331	$	5,300	$	5,331
Common Equity (378 units) (j)									500		112

									5,800		5,443		1	%
Oaktree Medical Centre, P.C. (dba Pain Management Associates)	Healthcare Services
First Lien Debt (j)(p)			11.50%/3.00	%	5/31/2019		548		625		—
First Lien Debt (j)(p)			7.00%/15.00	%	5/31/2019		7,558		8,147		—
Subordinated Debt (j)(p)			7.00%/0.00	%	1/1/2020		63		63		—
Revolving Loan (j)(p)			11.50%/3.00	%	5/31/2019		2,398		2,597		—
Revolving Loan (j)(p)			11.50%/3.00	%	5/31/2019		194		194		—
Revolving Loan (j)(p)			11.50%/3.00	%	5/31/2019		1,742		1,742		—

									13,368		—		0	%
OMC Investors, LLC (dba Ohio Medical Corporation)	Healthcare Products
Second Lien Debt			12.00%/0.00	%	7/15/2021		10,000		9,963		10,000
Common Equity (5,000 units)									500		404

									10,463		10,404		3	%
Palisade Company, LLC	Information Technology Services
Subordinated Debt (j)			11.75%/0.00	%	5/15/2024		6,500		6,471		6,500
Common Equity (100 shares) (j)									1,000		936

									7,471		7,436		2	%
Palmetto Moon, LLC	Retail
First Lien Debt			11.50%/2.50	%	10/31/2021		5,058		5,039		5,058
Common Equity (499 units) (j)									494		17

									5,533		5,075		1	%
Power Grid Components, Inc.	Specialty Distribution
Second Lien Debt (k)			11.00%/1.00	%	5/20/2023		11,339		11,297		11,339
Preferred Equity (392 shares) (j)									392		439
Common Equity (9,695 shares) (j)									358		209

									12,047		11,987		3	%
Pugh Lubricants, LLC	Specialty Distribution
Second Lien Debt (k)			12.25%/0.00	%	5/10/2022		23,581		23,509		23,581
Common Equity (6,125 units) (h)(j)									612		1,217

									24,121		24,798		6	%
Revenue Management Solutions, LLC	Information Technology Services
Common Equity (2,250,000 shares)									2,250		4,626		1	%

Rhino Assembly Company, LLC	Specialty Distribution
Second Lien Debt (k)			12.00%/1.00	%	2/11/2023		11,380		11,338		11,178
Delayed Draw Commitment ($875 commitment) (i)(j)			12.00%/1.00	%	5/17/2022		—		—		—
Preferred Equity (8,864 units) (h)(j)									945		1,074

									12,283		12,252		3	%
Road Safety Services, Inc.	Business Services
Second Lien Debt			11.25%/1.50	%	3/18/2024		10,144		10,103		9,398
Common Equity (655 units)									621		531

									10,724		9,929		2	%
Rohrer Corporation	Packaging
Subordinated Debt (j)			10.50%/1.00	%	4/1/2024		13,804		13,745		13,572
Common Equity (400 shares)									780		686

									14,525		14,258		4	%
SES Investors, LLC (dba SES Foam)	Building Products Manufacturing
Second Lien Debt			15.00%/0.00	%	12/29/2020		3,095		3,075		2,786
Common Equity (6,000 units) (h)(j)									600		447

									3,675		3,233		1	%
Simplex Manufacturing Co.	Aerospace & Defense Manufacturing
Subordinated Debt			14.00%/0.00	%	7/31/2019		4,050		4,050		4,050
Warrant (29 shares) (m)									1,155		3,762

									5,205		7,812		2	%
Software Technology, LLC	Information Technology Services
Subordinated Debt (k)			11.00%/0.00	%	6/23/2023		10,000		9,968		10,000
Common Equity (12 shares)									1,290		1,496

									11,258		11,496		3	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2019

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity	Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Specialized Elevator Services Holdings, LLC	Business Services
First Lien Debt (j)(ac)			7.58%/0.00	%	5/3/2024	$	5,000	$	4,912		$	4,912
Common Equity (500 units) (j)									500			500

									5,412			5,412		1	%
SpendMend LLC	Business Services
Second Lien Debt (k)			11.00%/0.75	%	7/8/2023		10,449		10,409			10,449
Common Equity (1,000,000 units)									1,000			1,381

									11,409			11,830		3	%
Thermoforming Technology Group LLC (dba Brown Machine Group) (n)	Capital Equipment Manufacturing
Common Equity (3,760 units) (h)(j)									—			10		0	%

TransGo, LLC	Component Manufacturing
Common Equity (1,000 units)									998			897		0	%

The Tranzonic Companies	Specialty Distribution
Subordinated Debt (j)			10.00%/1.50	%	3/27/2025		6,870		6,813			6,870
Preferred Equity (5,653 units) (j)									565			579
Common Equity (1 units) (j)									—			—

									7,378			7,449		2	%
UBEO, LLC	Business Services
Subordinated Debt (j)			11.00%/0.00	%	10/3/2024		13,100		12,989			12,982
Delayed Draw Commitment ($793 commitment) (i)(j)			11.00%/0.00	%	8/7/2019		—		(2	)		—
Common Equity (705,000 units) (j)									705			637

									13,692			13,619		4	%
United Biologics, LLC	Healthcare Services
Preferred Equity (98,377 units) (h)(j)									1,008			32
Warrant (57,469 units) (m)									566			27

									1,574			59		0	%
US GreenFiber, LLC	Building Products Manufacturing
Second Lien Debt (k)(p)			12.00%/2.00	%	10/15/2019		14,363		14,359			4,520
Second Lien Debt (k)(p)			0.00%/16.00	%	10/15/2019		1,800		1,800			1,647
Common Equity (2,522 units) (h)(j)									586			—

									16,745			6,167		2	%
US Pack Logistics LLC	Transportation services
Second Lien Debt (k)			12.00%/3.75	%	3/28/2023		7,514		7,503			7,514
Preferred Equity (9,458 units) (h)(j)									927			744
Common Equity (5,833 units) (h)(j)									555			—

									8,985			8,258		2	%
Vanguard Dealer Services, L.L.C.	Business Services
Common Equity (6,000 units)									154			2,106
Common Equity (2,380 units) (j)									327			836

									481			2,942		1	%
Virginia Tile Company, LLC	Specialty Distribution
Second Lien Debt (k)			12.25%/0.00	%	4/7/2022		12,000		11,984			12,000
Common Equity (17 units)									342			1,096

									12,326			13,096		3	%
Wheel Pros, Inc.	Specialty Distribution
Second Lien Debt (j)(ad)			10.89%/0.00	%	4/4/2026		20,000		19,804			19,804
Preferred Equity (694,444 units) (j)									1,500			1,500

									21,304			21,304		5	%
The Wolf Organization, LLC	Building Products Manufacturing
Common Equity (175 shares)									664			4,055		1	%

Worldwide Express Operations, LLC	Transportation services
Second Lien Debt (j)(o)			10.52%/0.00	%	2/3/2025		20,000		19,715			20,000
Common Equity (4,000 units) (h)(j)									2,956			3,934

									22,671			23,934		6	%

Total Non-control/Non-affiliate Investments								$	587,945		$	574,584		145	%

Total Investments								$	655,524		$	697,272		175	%

(a)	See Note 3 to the consolidated financial statements for portfolio composition by geographic location.

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2019

(in thousands, except shares)

(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)	Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of June 30, 2019. Generally, payment-in-kind interest can be paid-in-kind or all in cash.

(e)

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.

(f)

The investment bears cash interest at a variable rate that is determined by reference to one-month LIBOR, which is reset monthly. The cash interest rate is set as one-month LIBOR + 11.50% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of June 30, 2019.

(g)	Income producing. Maturity date, if any, represents mandatory redemption date.

(h)	Investment is held by a Taxable Subsidiary of the Company.

(i)	The disclosed commitment represents the unfunded amount as of June 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)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 8.00% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of June 30, 2019.

(p)	Investment was on non-accrual status as of June 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)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.75% and is subject to a 1.75% LIBOR interest rate floor. 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 5.21% 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)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 6.25% and is subject to a 2.00% LIBOR interest rate floor. 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.

(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 June 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)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.00% and is subject to a 2.00% LIBOR interest rate floor. 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 3.44% 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 investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 7.00% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of June 30, 2019.

(x)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.75% and is subject to a 2.00% LIBOR interest rate floor. 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 4.11% 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.

(y)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 9.75% and is subject to a 2.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of June 30, 2019.

(z)	For the six months ended June 30, 2019, all interest was treated as PIK interest and capitalized to the principal balance of the investment.

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2019

(in thousands, except shares)

(aa)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 9.00% and is subject to a 2.25% LIBOR interest rate floor. The Company has provided the interest rate in effect as of June 30, 2019.

(ab)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 9.25% and is subject to a 2.25% LIBOR interest rate floor. The Company has provided the interest rate in effect as of June 30, 2019.

(ac)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.25% and is subject to a 2.00% LIBOR interest rate floor. 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.

(ad)	The investment bears interest at a variable rate that is determined by reference to one-month LIBOR, which is reset monthly. The interest rate is set as one-month LIBOR + 8.50%. The Company has provided the interest rate in effect as of June 30, 2019.

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity	Principal Amount		Cost		Fair Value (e)		Percent of Net Assets
Control Investments (t)
FDS Avionics Corp. (dba Flight Display Systems)	Aerospace & Defense Manufacturing
Second Lien Debt			4.00%/11.00	%	4/1/2020	$	6,203	$	6,196	$	5,397
Revolving Loan ($50 commitment)			4.00%/11.00	%	4/1/2020		215		215		215
Common Equity (7,478 shares) (j)									748		—

									7,159		5,612		2	%
K2 Industrial Services, Inc.	Industrial Cleaning & Coatings
Second Lien Debt (p)			0.00%/15.00	%	6/25/2020		10,453		10,423		10,453
Second Lien Debt (p)			0.00%/12.00	%	6/25/2020		2,261		2,255		1,155
Second Lien Debt (p)			0.00%/19.00	%	6/25/2020		1,600		1,592		1,600
Common Equity (1,673 shares)									1,268		—

									15,538		13,208		3	%

Total Control Investments								$	22,697	$	18,820		5	%

Affiliate Investments (l)
FAR Research Inc. (n)	Specialty Chemicals
Common Equity (1,396 units)								$	—	$	116		0	%

Fiber Materials, Inc.	Aerospace & Defense Manufacturing
Second Lien Debt			12.00%/0.00	%	5/30/2022	$	4,044		4,032		4,044
Common Equity (10 units)									1,000		2,104

									5,032		6,148		2	%
Medsurant Holdings, LLC	Healthcare Services
Second Lien Debt			13.00%/0.00	%	6/30/2020		8,823		8,795		8,823
Preferred Equity (126,662 units) (h)									1,346		2,703
Warrant (505,176 units) (h)(m)									4,516		9,820

									14,657		21,346		5	%
Microbiology Research Associates, Inc.	Healthcare Services
Subordinated Debt			11.00%/1.50	%	3/13/2022		8,798		8,783		8,122
Common Equity (1,625,731 units) (j)									1,938		1,924

									10,721		10,046		3	%
Mirage Trailers LLC	Utility Equipment Manufacturing
Second Lien Debt (k)(f)			13.85%/1.50	%	11/25/2020		6,109		6,075		6,109
Common Equity (2,500,000 shares) (g)									2,179		3,174

									8,254		9,283		2	%
Pfanstiehl, Inc.	Healthcare Products
Subordinated Debt			10.50%/0.00	%	9/29/2022		6,208		6,197		6,208
Common Equity (8,500 units) (j)									850		13,815

									7,047		20,023		5	%
Pinnergy, Ltd.	Oil & Gas Services
Second Lien Debt (k)			12.00%/0.00	%	1/24/2020		4,000		3,993		4,000
Common Equity - Class A-2 (42,500 units) (k)									3,000		33,878
Common Equity - Class B (1,000 units) (k)									3,000		3,000

									9,993		40,878		10	%
Steward Holding LLC (dba Steward Advanced Materials)	Aerospace & Defense Manufacturing
Second Lien Debt			12.00%/1.50	%	5/12/2021		7,553		7,538		7,553
Common Equity (1,000,000 units)									1,000		1,357

									8,538		8,910		2	%
Trantech Radiator Products, Inc.	Utility Equipment Manufacturing
Second Lien Debt (j)			13.75%/0.00	%	12/31/2019		5,994		5,994		5,994
Common Equity (6,875 shares) (j)									688		307

									6,682		6,301		2	%

Total Affiliate Investments								$	70,924	$	123,051		31	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity	Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Non-control/Non-affiliate Investments
Accent Food Services, LLC	Vending Equipment Manufacturing
Second Lien Debt (k)			10.00%/5.00	%	5/30/2022	$	30,312	$	30,205		$	28,879
Common Equity (7,885 units) (h)(j)									800			462

									31,005			29,341		7	%
Allied 100 Group, Inc.	Healthcare Products
Common Equity (1,250,000 units) (j)									1,250			1,744		0	%

Alzheimer’s Research and Treatment Center	Healthcare Services
First Lien Debt (j)(x)			8.23%/0.00	%	10/23/2023		6,500		6,451			6,451
Common Equity (1,000 units) (h)(j)									1,000			1,000

									7,451			7,451		2	%
American AllWaste LLC (dba WasteWater Transport Services)	Environmental Industries
Second Lien Debt (j)			11.00%/1.50	%	11/30/2023		11,826		11,765			11,826
Delayed Draw Commitment ($2,276 commitment) (i)(j)			11.00%/1.50	%	11/30/2019		—		(7	)		—
Preferred Equity (500 units) (j)									500			615

									12,258			12,441		3	%
Argo Turboserve Corporation	Business Services
Second Lien Debt (j)(y)			12.56%/0.00	%	6/28/2023		15,000		14,925			14,925		4	%

AVC Investors, LLC (dba Auveco)	Specialty Distribution
Second Lien Debt (k)			11.50%/0.00	%	7/3/2023		22,500		22,406			22,500
Common Equity (5,000 units) (j)									500			682

									22,906			23,182		6	%
B&B Roadway and Security Solutions, LLC	Component Manufacturing
Second Lien Debt			10.50%/1.50	%	8/27/2023		10,129		10,080			9,524
Common Equity (50,000 units) ($133 commitment) (h)(j)									500			304

									10,580			9,828		2	%
Cardboard Box LLC (dba Anthony’s Coal Fired Pizza)	Restaurants
Common Equity (521,021 units) (j)									521			108		0	%

Consolidated Infrastructure Group Holdings, LP	Business Services
Common Equity (298 units)									378			49		0	%

ControlScan, Inc.	Information Technology Services
Subordinated Debt (j)			11.00%/0.00	%	1/28/2023		6,750		6,725			6,750
Common Equity (3,704 shares) (j)									4			620
Preferred Equity (100 shares) (j)									996			996

									7,725			8,366		2	%
CRS Solutions Holdings, LLC (dba CRS Texas)	Business Services
Second Lien Debt			10.50%/1.00	%	9/14/2023		9,073		9,035			9,073
Common Equity (750,000 units) (j)									750			757

									9,785			9,830		2	%
EBL, LLC (EbLens)	Retail
Second Lien Debt (j)			12.00%/1.00	%	1/13/2023		9,389		9,321			9,389
Common Equity (75,000 units) (j)									750			742

									10,071			10,131		3	%
Global Plasma Solutions, Inc.	Component Manufacturing
First Lien Debt (j)(v)			7.40%/0.00	%	9/21/2023		8,703		8,629			8,629
Preferred Equity (947 shares) (j)									360			360
Common Equity (947 shares) (j)									15			15

									9,004			9,004		2	%
Gurobi Optimization, LLC	Information Technology Services
Subordinated Debt (k)			11.00%/0.00	%	6/19/2023		20,000		19,920			20,400
Common Equity (5 shares)									1,500			2,323

									21,420			22,723		6	%
Hilco Plastics Holdings, LLC (dba Hilco Technologies)	Component Manufacturing
Second Lien Debt			11.50%/1.50	%	12/31/2019		9,940		9,922			9,439
Preferred Equity (1,000,000 units) (h)(j)									1,000			1,112
Common Equity (72,507 units) (h)(j)									473			227

									11,395			10,778		3	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity	Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Hub Acquisition Sub, LLC (dba Hub Pen)	Promotional products
Second Lien Debt (k)			12.25%/0.00	%	9/23/2021	$	25,000	$	24,918		$	25,000
Common Equity (7,500 units)									249			1,417

									25,167			26,417		7	%
Hunter Defense Technologies, Inc.	Aerospace & Defense Manufacturing
First Lien Debt (j)(w)			9.80%/0.00	%	3/29/2023		9,747		9,653			9,653		2	%

IBH Holdings, LLC (fka Inflexxion, Inc.)	Business Services
Common Equity (150,000 units)									—			—		0	%

inthinc Technology Solutions, Inc. (n)	Information Technology Services
Royalty Rights					4/24/2020				185			—		0	%

The Kyjen Company, LLC (dba Outward Hound)	Consumer Products
Second Lien Debt (k)			12.00%/0.00	%	6/8/2024		15,000		14,937			13,950
Common Equity (765 shares) (j)									765			754

									15,702			14,704		4	%
LNG Indy, LLC (dba Kinetrex Energy)	Oil & Gas Distribution
Second Lien Debt (k)			11.50%/0.00	%	9/28/2021		5,000		4,985			5,000
Common Equity (1,000 units)									1,000			1,561

									5,985			6,561		2	%
Marco Group International OpCo, LLC	Industrial Cleaning & Coatings
Second Lien Debt			10.50%/0.75	%	1/21/2023		12,133		12,089			12,133
Common Equity (750,000 units) (h)(j)									750			800

									12,839			12,933		3	%
Mesa Line Services, LLC	Utilities: Services
Second Lien Debt (j)			10.50%/0.50	%	5/31/2023		10,014		9,963			10,014
Delayed Draw Commitment ($3,160 commitment) (i)(j)			10.50%/0.50	%	5/31/2019		—		(4	)		—
Common Equity (500 shares) (j)									500			676

									10,459			10,690		3	%
Midwest Transit Equipment, Inc.	Transportation services
Warrant (14,384 shares) (j)(m)									361			436
Warrant (9.59% of Junior Subordinated Notes) (j)(q)									381			398

									742			834		0	%
New Era Technology, Inc.	Information Technology Services
Common Equity (197,369 shares) (j)									750			990		0	%

NGT Acquisition Holdings, LLC (dba Techniks
Industries)	Component Manufacturing
Subordinated Debt			12.50%/2.00	%	3/21/2022		11,579		11,542			10,460
Common Equity (378 units) (j)									500			72

									12,042			10,532		3	%
Oaktree Medical Centre, P.C. (dba Pain Management Associates)	Healthcare Services
First Lien Debt (j)(u)			14.50%/0.00	%	1/1/2018		571		649			566
First Lien Debt (j)(u)			10.00%/12.00	%	1/1/2018		7,751		8,338			8,133
Revolving Loan (j)(u)			14.50%/0.00	%	1/1/2018		2,500		2,699			2,490
Revolving Loan (j)(u)			14.50%/0.00	%	1/31/2019		200		200			200

									11,886			11,389		3	%
OMC Investors, LLC (dba Ohio Medical Corporation)	Healthcare Products
Second Lien Debt			12.00%/0.00	%	7/15/2021		10,000		9,954			8,748
Common Equity (5,000 units)									500			139

									10,454			8,887		2	%
Palisade Company, LLC	Information Technology Services
Subordinated Debt (j)			11.75%/0.00	%	5/15/2024		6,500		6,468			6,468
Common Equity (100 shares) (j)									1,000			1,000

									7,468			7,468		2	%
Palmetto Moon, LLC	Retail
First Lien Debt			11.50%/2.50	%	10/31/2021		5,512		5,490			5,512
Common Equity (499 units) (j)									494			108

									5,984			5,620		1	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity		Principal Amount		Cost			Fair Value (e)		Percent of Net Assets
Power Grid Components, Inc.	Specialty Distribution
Second Lien Debt (k)			11.00%/1.00	%		5/20/2023	$	11,282	$	11,234		$	11,282
Preferred Equity (392 shares) (j)										392			422
Common Equity (9,695 shares) (j)										358			260

										11,984			11,964		3	%
Pugh Lubricants, LLC	Specialty Distribution
Second Lien Debt (k)			12.25%/0.00	%		5/10/2022		18,581		18,523			18,581
Common Equity (6,125 units) (h)(j)										612			1,000

										19,135			19,581		5	%
Revenue Management Solutions, LLC	Information Technology Services
Common Equity (2,250,000 shares)										2,250			3,888		1	%

Rhino Assembly Company, LLC	Specialty Distribution
Second Lien Debt (k)			12.00%/1.00	%		2/11/2023		11,324		11,275			11,324
Delayed Draw Commitment ($875 commitment) (i)(j)			12.00%/1.00	%		5/17/2022		—		—			—
Preferred Equity (8,864 units) (j)(s)										945			1,272

										12,220			12,596		3	%
Road Safety Services, Inc.	Business Services
Second Lien Debt			11.25%/1.50	%		3/18/2024		10,068		10,022			10,022
Common Equity (655 units)										621			621

										10,643			10,643		2	%
Rohrer Corporation	Packaging
Subordinated Debt (j)			10.50%/1.00	%		4/1/2024		13,735		13,670			13,670
Common Equity (400 shares)										780			724

										14,450			14,394		4	%
SES Investors, LLC (dba SES Foam)	Building Products Manufacturing
Second Lien Debt			15.00%/0.00	%		12/29/2020		3,095		3,069			2,703
Common Equity (6,000 units) (h)(j)										600			167

										3,669			2,870		1	%
Simplex Manufacturing Co.	Aerospace & Defense Manufacturing
Subordinated Debt			14.00%/0.00	%		7/31/2019		4,050		4,050			4,050
Warrant (29 shares) (m)										1,155			3,036

										5,205			7,086		2	%
Software Technology, LLC	Information Technology Services
Subordinated Debt (k)			11.00%/0.00	%		6/23/2023		10,000		9,964			10,000
Common Equity (12 shares)										1,291			1,364

										11,255			11,364		3	%
SpendMend LLC	Business Services
Second Lien Debt (k)			11.00%/1.00	%		7/8/2023		10,401		10,355			10,401
Common Equity (1,000,000 units)										1,000			1,179

										11,355			11,580		3	%
The Wolf Organization, LLC	Building Products Manufacturing
Common Equity (175 shares)										753			3,711		1	%

Thermoforming Technology Group LLC (dba Brown Machine Group) (n)	Capital Equipment Manufacturing
Common Equity (3,760 units) (h)(j)										—			10		0	%

Tile Redi, LLC	Building Products Manufacturing
First Lien Debt (j)(r)			12.80%/0.00	%		6/16/2022		10,194		10,122			10,156		2	%

TransGo, LLC	Component Manufacturing
Second Lien Debt			13.25%/0.00	%		8/28/2022		9,500		9,468			9,500
Common Equity (1,000 units)										998			905

										10,466			10,405		3	%
The Tranzonic Companies	Specialty Distribution
Subordinated Debt (j)			10.00%/1.50	%		3/27/2025		5,664		5,614			4,997
Preferred Equity (5,000 units) (j)										500			391
Common Equity (1 units) (j)										—			—

										6,114			5,388		1	%
UBEO, LLC	Business Services
Subordinated Debt (j)			11.00%/0.00	%		10/3/2024		13,100		12,979			13,100
Delayed Draw Commitment ($1,500 commitment) (j)(i)(z)			11.00%/0.00	%		8/7/2019		—		(12	)		—
Common Equity (705,000 units) (j)										705			1,027

										13,672			14,127		3	%

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)


Portfolio Company (a)(b) Investment Type (c)	Industry	Rate (d) Cash/PIK			Maturity		Principal Amount		Cost		Fair Value (e)		Percent of Net Assets
United Biologics, LLC	Healthcare Services
Preferred Equity (98,377 units) (h)(j)									$	1,008	$	64
Warrant (57,469 units) (m)										566		53

										1,574		117		0	%
US GreenFiber, LLC	Building Products Manufacturing
Second Lien Debt (k)(p)			12.00%/2.00	%		5/31/2019	$	14,363		14,359		6,549
Second Lien Debt (p)			0.00%/16.00	%		5/31/2019		1,000		1,000		1,000
Common Equity (2,522 units) (h)(j)										586		—

										15,945		7,549		2	%
US Pack Logistics LLC	Transportation services
Second Lien Debt (k)			12.00%/1.75	%		3/28/2023		7,412		7,396		7,412
Common Equity (5,833 units) (h)(j)										555		178
Preferred Equity (9,458 units) (h)(j)										927		1,046

										8,878		8,636		2	%
Vanguard Dealer Services, L.L.C.	Business Services
Common Equity (6,000 units)										154		851
Common Equity (2,380 units) (j)										327		338

										481		1,189		0	%
Virginia Tile Company, LLC	Specialty Distribution
Second Lien Debt (k)			12.25%/0.00	%		4/7/2022		12,000		11,980		12,000
Common Equity (17 units)										342		1,455

										12,322		13,455		3	%
Worldwide Express Operations, LLC	Transportation services
Second Lien Debt (j)(o)			10.86%/0.00	%		2/3/2025		20,000		19,690		20,000
Common Equity (4,000 units) (h)(j)										2,956		3,823

										22,646		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)	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.

(e)

(f)

(g)	Income producing. Maturity date, if any, represents mandatory redemption date.

(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)

(l)

(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)

The investment bears interest at a variable rate that is determined by reference to six-month LIBOR, which is reset quarterly. The interest rate is set as six-month LIBOR + 8.00% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of December 31, 2018.

(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)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR, which is reset quarterly. The interest rate is set as three-month LIBOR + 10.00% and is subject to a 1.00% LIBOR interest rate floor. The Company has provided the interest rate in effect as of December 31, 2018.

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2018

(in thousands, except shares)

(s)	A portion of the investment is held by a wholly-owned subsidiary of the Company, other than the Funds.

(t)

(u)	The debt investment continues to pay interest, including the default rate, while the portfolio company pursues refinancing options.

(v)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.00% and is subject to a 2.00% LIBOR interest rate floor. 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.

(w)

(x)

The investment bears interest at a variable rate that is determined by reference to three-month LIBOR. The interest rate is set as three-month LIBOR + 5.75% and is subject to a 2.00% LIBOR interest rate floor. 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.

(y)

(z)	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 (unaudited).

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.

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 the majority of our investments will continue to be made 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

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.

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 accounting for 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.

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 15^th day of the 10^th 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 June 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 2015 through 2017 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

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 six months ended June 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 30, 2018, the Board extended the Stock Repurchase Program through December 31, 2019, 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 six months ended June 30, 2019. During the three and six months ended June 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.

In March 2019, the SEC issued Final Rule Release No. 33-10618, FAST Act Modernization and Simplification of Regulation S-K, which amends certain SEC disclosure requirements. The amendments are intended to simplify certain disclosure requirements, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The amendments are effective for all filings submitted on or after May 2, 2019. The Company adopted the amendments effective May 2, 2019. The amendments do not have a material effect 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 June 30, 2019, the Company had active investments in 64 portfolio companies and residual investments in four portfolio companies that have sold its underlying operations. The aggregate fair value of the total portfolio was $697,272 and the weighted average effective yield on the Company’s debt investments was 12.4% as of such date. As of June 30, 2019, the Company held equity investments in 92.6% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 6.2%. The weighted average fully diluted equity ownership was computed using the fully diluted equity ownership for equity investments (including warrants) at cost as of June 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.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

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 June 30, 2019 and December 31, 2018, including accretion of OID and debt investment origination fees, but excluding investments on non-accrual status, if any.

Purchases of debt and equity investments for the six months ended June 30, 2019 and 2018 totaled $128,460 and $103,989, respectively. Proceeds from sales and repayments, including principal, return of capital distributions and realized gains, of portfolio investments for the six months ended June 30, 2019 and 2018 totaled $75,320 and $65,270, respectively.

Investments by type with corresponding percentage of total portfolio investments consisted of the following:


	Fair Value								Cost
	June 30,				December 31,				June 30,				December 31,
	2019				2018				2019				2018
Second Lien Debt	$	369,996	53.1	%	$	366,517	57.0	%	$	385,442	58.9	%	$	379,973	63.5	%
Subordinated Debt		127,239	18.2			104,225	16.2			127,469	19.4			105,900	17.7
First Lien Debt		65,749	9.4			51,790	8.1			78,842	12.0			52,231	8.7
Equity		122,639	17.6			106,707	16.6			56,607	8.6			53,482	8.9
Warrants		11,649	1.7			13,743	2.1			6,979	1.1			6,979	1.2
Royalty Rights		—	—			—	—			185	—			185	—

Total	$	697,272	100.0	%	$	642,982	100.0	%	$	655,524	100.0	%	$	598,750	100.0	%

All investments made by the Company as of June 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								Cost
	June 30,				December 31,				June 30,		December 31,
	2019				2018				2019		2018
Midwest	$	159,074	22.9	%	$	161,067	25.1	%	$	141,931

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company