What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-29 compared with 2020-08-06 · 735 added, 639 removed, 2395 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except shares and per share data)

June 30, 2020

September 30,

Investments, at fair value:

16 unchanged sentences

Base management fee payable due to affiliate

Income incentive fee payable, net of incentive fee waiver due to affiliate

Income incentive fee payable due to affiliate

Capital gains incentive fee payable due to affiliate

5 unchanged sentences

Common stock, $0.001 par value (100,000,000 shares authorized, 24,437,400 and 24,463,119 shares

outstanding at June 30, 2020 and December 31, 2019, respectively)

outstanding at September 30, 2020 and December 31, 2019, respectively)

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Investment Income:

48 unchanged sentences

Realized losses on extinguishment of debt

Net increase (decrease) in net assets resulting from operations

Net increase in net assets resulting from operations

Per common share data:

Net investment income per share-basic and diluted

Net increase (decrease) in net assets resulting from operations per share basic and

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

Dividends declared per share

18 unchanged sentences

Balances at June 30, 2019

Net investment income

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

Net unrealized appreciation (depreciation) on investments

Realized losses on extinguishment of debt

Dividends declared

Balances at September 30, 2019

Balances at December 31, 2019

12 unchanged sentences

Balances at June 30, 2020

Net investment income

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

Net unrealized appreciation (depreciation) on investments

Realized losses on extinguishment of debt

Dividends declared

Balances at September 30, 2020

* amount is greater than zero but less than one

3 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities:

Net increase (decrease) in net assets resulting from operations

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net

cash provided by (used for) operating activities:

Net increase in net assets resulting from operations

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

14 unchanged sentences

Base management fee payable due to affiliate

Income incentive fee payable, net of incentive fee waiver due to affiliate

Income incentive fee payable due to affiliate

Capital gains incentive fee payable due to affiliate

22 unchanged sentences

Consolidated Schedule of Investments (unaudited)

June 30, 2020

thousands, except shares)

September 30, 2020

(in thousands, except shares)

Portfolio Company (a)(b)

Variable Index

Investment Type (c)

Investment Type

Spread / Floor (d)

11 unchanged sentences

Second Lien Debt (j)

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

Common Equity (425,508 units) (j)

Common Equity (1,022,813 units) (h)

Total Control Investments

13 unchanged sentences

Utility Equipment Manufacturing

Second Lien Debt (k)(ad)

Second Lien Debt (k)

(L + 10.00%) / (1.00%)

15 unchanged sentences

Consolidated Schedule of Investments (unaudited)

June 30, 2020

thousands, except shares)

September 30, 2020

(in thousands, except shares)

Portfolio Company (a)(b)

Variable Index

Investment Type (c)

Investment Type

Spread / Floor (d)

8 unchanged sentences

Common Equity (625,000 units) (j)

Allredi, LLC (fka Marco Group International OpCo, LLC)

Industrial Cleaning & Coatings

Second Lien Debt

Common Equity (570,636 units) (h)(j)

Alzheimers Research and Treatment Center, LLC

74 unchanged sentences

(L + 10.00%) / (2.25%)

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

(L + 9.00%) / (2.25%)

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

September 30, 2020

(in thousands, except shares)

Portfolio Company (a)(b)

Variable Index

Investment Type

Spread / Floor (d)

Global Plasma Solutions, Inc.

4 unchanged sentences

Common Equity (947 shares) (j)

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2020

thousands, except shares)

Portfolio Company (a)(b)

Variable Index

Investment Type (c)

Spread / Floor (d)

Gurobi Optimization, LLC

16 unchanged sentences

Information Technology Services

First Lien Debt

(L + 9.25%) / (2.25%)

Preferred Equity (610 units) (h)(j)

8 unchanged sentences

Information Technology Services

First Lien Debt (j)(ae)

First Lien Debt (j)(u)

(L + 8.50%) / (2.00%)

10 unchanged sentences

Common Equity (500 units)

Marco Group International OpCo, LLC

Industrial Cleaning & Coatings

Second Lien Debt

Common Equity (570,636 units) (h)(j)

Mesa Line Services, LLC

1 unchanged sentence

Common Equity (981 shares) (j)

Microbiology Research Associates, Inc.

Healthcare Services

Subordinated Debt (j)

Common Equity (812,866 units) (j)

Midwest Transit Equipment, Inc.

22 unchanged sentences

Common Equity (10,622 shares) (j)

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2020

thousands, except shares)

Portfolio Company (a)(b)

Variable Index

Investment Type (c)

Spread / Floor (d)

Prime AE Group, Inc.

3 unchanged sentences

Preferred Equity (500,000 shares) (j)

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

September 30, 2020

(in thousands, except shares)

Portfolio Company (a)(b)

Variable Index

Investment Type

Spread / Floor (d)

Pugh Lubricants, LLC

36 unchanged sentences

Business Services

Second Lien Debt (k)

Common Equity (1,000,000 units)

33 unchanged sentences

Total Investments

See Note 3 to the consolidated financial statements for portfolio composition by geographic

Equity ownership may be held in shares or units of companies related to the portfolio

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

Equity ownership may be held in shares or units of companies related to the portfolio companies.

All debt investments are income producing, unless otherwise indicated.

3 unchanged sentences

Certain variable rate investments also include a LIBOR interest rate floor.

For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of June 30, 2020.

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2020

thousands, except shares)

Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of June 30, 2020.

For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of September 30, 2020.

Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of September 30, 2020.

Generally, payment-in-kind interest can be paid-in-kind or all in cash.

5 unchanged sentences

Investment is held by a Taxable Subsidiary of the Company.

The disclosed commitment represents the unfunded amount as of June 30, 2020.

The disclosed commitment represents the unfunded amount as of September 30, 2020.

The Company is earning

1 unchanged sentence

The interest rate disclosed represents the rate which will be earned if the commitment is funded.

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

September 30, 2020

(in thousands, except shares)

Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the

8 unchanged sentences

The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

Investment in portfolio company that has sold its operations and is in the process of winding

Investment in portfolio company that has sold its operations and is in the process of winding down.

Income producing.

Maturity date, if any, represents mandatory redemption date.

Investment was on non-accrual status as of June 30, 2020, meaning

the Company has ceased recognizing interest income on the investment.

Investment was on non-accrual status as of September 30, 2020,

meaning the Company has ceased recognizing interest income on the investment.

Warrant entitles the Company to purchase 9.59% of the outstanding principal of Junior Subordinated Notes prior

10 unchanged sentences

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.

The disclosed commitment represents the unfunded amount as of June 30, 2020.

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.

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled

19 unchanged sentences

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.

The disclosed commitment represents the unfunded amount as of June 30, 2020.

The Company is earning 1.00%

interest on the unfunded balance of the commitment.

The interest rate disclosed represents the rate earned on the outstanding, funded balance of the commitment.

Investment was on PIK-only

non-accrual status as of June 30, 2020, meaning the Company has ceased recognizing PIK interest income on the investment.

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled

1 unchanged sentence

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.

The disclosed commitment represents the unfunded amount as of September 30, 2020.

The Company is earning

1.00% interest on the unfunded balance of the commitment.

The interest rate disclosed represents the rate earned on the outstanding, funded balance of the commitment.

See Notes to Consolidated Financial Statements (unaudited).

134 unchanged sentences

Common Equity (573 units) (h)(j)

EBL, LLC (Eb Lens)

EBL, LLC (EbLens)

Second Lien Debt (j)

490 unchanged sentences

the income tax provision, if any.

There were no material uncertain income tax positions at June 30, 2020 and December 31, 2019.

There were no material uncertain income tax positions at September 30, 2020 and December 31, 2019.

The Companys tax returns are generally subject to examination by U.S.

29 unchanged sentences

The earnings per share calculations for the

three and six months ended June 30, 2020 and 2019, are computed utilizing the weighted average shares outstanding for the period.

three and nine months ended September 30, 2020 and 2019, 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.

3 unchanged sentences

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.

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 (the Exchange Act), including certain price, market value and timing

The timing, manner, price and amount of any share repurchases will be determined by the Companys management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability,

5 unchanged sentences

Program may be suspended, extended, modified or discontinued at any time.

During the three and six months ended June 30, 2020, the Company repurchased zero and 25,719 shares of common stock on the open market for zero and $268, respectively.

The Company did not make any repurchases of common stock during the three and six months ended June 30, 2019, respectively.

During the three and nine months ended September 30, 2020, the Company repurchased zero and 25,719 shares of common stock on the open market for zero and $268,

respectively.

The Company did not make any repurchases of common stock during the three and nine months ended September 30, 2019, respectively.

Refer to Note 8 for additional information concerning stock repurchases.

16 unchanged sentences

The Company is evaluating the potential impact that the adoption of ASU 2020-04 will have on the Companys consolidated financial statements.

SEC Rule 12b-2 Update:

In March 2020, the SEC adopted a final rule under SEC Release No.

34-88365 (the Final

Rule), amending the accelerated filer and large accelerated filer definitions in Exchange Act Rule 12b-2.

The amendments include a provision under which a BDC will be excluded from the accelerated filer and large accelerated

filer definitions if the BDC has (1) a public float of $75,000 or more, but less than $700,000, and (2) has annual investment income of less than $100,000.

In addition, BDCs are subject to the same transition provisions for

accelerated filer and large accelerated filer status as other issuers, but instead substituting investment income for revenue.

The amendments will reduce the number of issuers required to comply with the auditor attestation on the internal control

over financial reporting requirement provided under Section 404(b) of the Sarbanes-Oxley Act of 2002.

The Final Rule applies to annual report filings due on or after April 27, 2020.

The Company is currently assessing this Final Rule,

but believes it will no longer be an accelerated filer.

Portfolio Company Investments

10 unchanged sentences

generally reported under the name of the operating company on the consolidated schedules of investments.

As of June 30, 2020, the

Company had active investments in 64 portfolio companies and residual investments in three portfolio companies that have sold their underlying operations.

The aggregate fair value of the total portfolio was $732,620 and the weighted average

effective yield on the Companys debt investments was 12.0% as of such date.

As of June 30, 2020, the Company held equity investments in 89.6% of its portfolio companies and the weighted average fully diluted equity ownership in those

portfolio companies was 4.7%.

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, 2020.

FIDUS INVESTMENT CORPORATION

1 unchanged sentence

(in thousands, except shares and per share data)

As of December 31, 2019, the Company had active investments in 61 portfolio companies

As of September 30, 2020, the Company had active investments in 63 portfolio companies

and residual investments in three portfolio companies that have sold their underlying operations.

1 unchanged sentence

as of such date.

As of December 31, 2019, 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 5.3%.

As of September 30, 2020, the Company held equity investments in 89.4% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 6.0%.

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, 2019.

The weighted average yield of the Companys debt investments is not the same as a return on investment for its stockholders but, rather,

relates to a portion of the Companys investment portfolio and is calculated before the payment of all of the Companys 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, 2020 and December 31, 2019, 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, 2020 and 2019 totaled $85,097 and

equity ownership was computed using the fully diluted equity ownership for equity investments (including warrants) at cost as of September 30, 2020.

As of December 31, 2019, the Company had active investments in 61 portfolio companies and residual investments in three portfolio

companies that have sold their underlying operations.

The aggregate fair value of the total portfolio was $766,919 and the weighted average effective yield on the Companys debt investments was 12.0% as of such date.

As of December 31,

2019, 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 5.3%.

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, 2019.

The weighted average

yield of the Companys debt investments is not the same as a return on investment for its stockholders but, rather, relates to a portion of the Companys investment portfolio and is calculated before the payment of all of the

Companys and its subsidiaries fees and expenses.

The weighted average yields were computed using the effective interest rates for debt investments at cost as of September 30, 2020 and December 31, 2019, 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 nine months ended September 30, 2020 and 2019 totaled $86,121 and $175,535,

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, 2020 and 2019 totaled $76,315 and $75,320,

Proceeds from sales and repayments, including principal, return of capital distributions and realized gains, of portfolio investments for the nine months ended September 30, 2020 and 2019 totaled $110,149 and $98,805,

respectively.

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

September 30,

Second Lien Debt

2 unchanged sentences

Royalty Rights

All investments made by the Company as of June 30, 2020 and December 31, 2019 were made in portfolio

companies headquartered in the U.S.

All investments made by the Company as of September 30, 2020 and December 31, 2019 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 companys business.

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 companys business.

September 30,

FIDUS INVESTMENT CORPORATION

4 unchanged sentences

By Geographic Region

September 30,

Second Lien Debt

2 unchanged sentences

Royalty Rights

As of June 30, 2020 and December 31, 2019, the Company had no portfolio company investments that

represented more than 10% of the total investment portfolio on a fair value or cost basis.

As of June 30, 2020 and December 31,

2019, the Company had debt investments in two and one portfolio companies on non-accrual status, respectively:

June 30, 2020

As of September 30, 2020 and December 31, 2019, the Company had no portfolio company investments

that represented more than 10% of the total investment portfolio on a fair value or cost basis.

As of September 30, 2020 and

December 31, 2019, the Company had debt investments in one portfolio company on non-accrual status:

September 30, 2020

December 31, 2019

1 unchanged sentence

Accent Food Services, LLC

Mirage Trailers LLC

Portfolio company was on PIK-only on

non-accrual status at period end, meaning the Company has ceased recognizing PIK interest income on the investment.

Portfolio company debt investments were not on non-accrual status at

Consolidated Schedule of Investments In and Advances To Affiliates

The table below represents the fair value of control and affiliate investments as of December 31, 2019 and any additions and reductions

made to such investments during the six months ended June 30, 2020, the ending fair value as of June 30, 2020, and the total investment income earned on such investments during the period.

Six Months Ended June 30, 2020

made to such investments during the nine months ended September 30, 2020, the ending fair value as of September 30, 2020, and the total investment income earned on such investments during the period.

Nine Months Ended September 30, 2020

Portfolio Company (1)

June 30, 2020

September 30,

2020 Principal

Amount - Debt

Additions (2)

September 30,

Net Change in

17 unchanged sentences

producing is disclosed in the consolidated schedule of investments.

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest and PIK dividend income, accretion of OID and origination fees, and net unrealized appreciation recognized during the period.

Gross additions also include transfers of

portfolio companies into the control or affiliate classification during the period, as applicable.

Gross additions include increases in the cost basis of investments resulting from new portfolio investments,

follow-on investments, accrued PIK interest and PIK dividend income, accretion of OID and origination fees, and net unrealized appreciation recognized during the period.

Gross additions also include transfers of portfolio companies into the control

or affiliate classification during the period, as applicable.

Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales

5 unchanged sentences

receivables are presented in prepaid expenses and other assets on the consolidated statements of assets and liabilities.

Portfolio company was transferred to

Non-control/Non-affiliate investments from Affiliate investments during the six months ended June 30, 2020.

Portfolio company was transferred to Non-control/Non-affiliate investments from Affiliate investments during the

nine months ended September 30, 2020.

FIDUS INVESTMENT CORPORATION

1 unchanged sentence

(in thousands, except shares and per share data)

Unconsolidated Significant Subsidiaries

In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, the Company must determine which of its unconsolidated controlled portfolio companies, if any, are considered significant subsidiaries. In evaluating these unconsolidated controlled

portfolio companies, there are three tests utilized to determine if any of the Companys Control Investments (as defined in Note 2) are considered significant subsidiaries:

the investment test, the asset test and the income test.

income test is measured by dividing the absolute value of the combined total of investment income, net realized gain (loss) and net unrealized appreciation (depreciation) from each Control Investment for the period being tested by the absolute value

of the Companys pre-tax income for the same period.

Rule 3-09 of Regulation S-X, as interpreted by the SEC,

requires the Company to include separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which the Company owns greater than 50% of the voting securities) in an annual report if any of the three

tests exceeds 20% of the Companys total assets or total income, as applicable.

Rule 4-08(g) of Regulation S-X requires summarized financial information

of a Control Investment in an annual report if any of the three tests exceeds 10% of the Companys annual total amounts and Rule 10-01(b)(1) of

Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20% of the Companys

year-to-date total amounts.

As of September 30, 2020

and December 31, 2019, the Company had no single investment that represented greater than 10% of its total investment portfolio at fair value and no single investment whose total assets represented greater than 10% of its total assets.

performing the income test for the nine months ended September 30, 2020, the Company determined that its income from US GreenFiber, LLC (US GreenFiber) and FDS Avionics Corp.

(dba Flight Display Systems) (FDS) generated

more than 20% of its total income, primarily due to the net unrealized appreciation (depreciation) that was recognized by the Company for the nine months ended September 30, 2020.

As such, US GreenFiber and FDS, unconsolidated portfolio

companies that were Control Investments, were considered significant subsidiaries at the 20% level as of September 30, 2020.

on the requirements under Regulation S-X Rule 10-01(b)(1), the summarized unaudited consolidated financial information of US GreenFiber and FDS is presented below:

September 30,

Balance Sheet Data

(dollars in thousands)

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

Total liabilities

Total liabilities and equity

September 30,

Summary of Operations

(dollars in thousands)

Total revenue

Net income (loss)

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Fair Value Measurements

102 unchanged sentences

There were no transfers among Levels 1, 2, and 3 during

the six months ended June 30, 2020 and 2019.

the nine months ended September 30, 2020 and 2019.

FIDUS INVESTMENT CORPORATION

2 unchanged sentences

The following tables present a reconciliation of the beginning and ending balances for fair

valued investments measured using significant unobservable inputs (Level 3) for the six months ended June 30, 2020 and 2019:

valued investments measured using significant unobservable inputs (Level 3) for the nine months ended September 30, 2020 and 2019:

Balance, December 31, 2018

3 unchanged sentences

Proceeds from sales and repayments of investments

Interest and dividend income

Interest and dividend income paid-in-kind

Proceeds from loan origination fees

1 unchanged sentence

Accretion of original issue discount

Balance, June 30, 2019

Balance, September 30, 2019

Balance, December 31, 2019

3 unchanged sentences

Proceeds from sales and repayments of investments

Interest and dividend income

Interest and dividend income paid-in-kind

Proceeds from loan origination fees

1 unchanged sentence

Accretion of original issue discount

Balance, June 30, 2020

Net change in unrealized (depreciation) of $(1,508) and $(75,441) for the three and six months ended

June 30, 2020, respectively, was attributable to Level 3 investments held at June 30, 2020.

Net change in unrealized (depreciation) of $(6,335) and $(4,840) for the three and six months ended June 30, 2019 was attributable to

Level 3 investments held at June 30, 2019.

The following tables summarize the significant unobservable inputs by valuation

technique used to determine the fair value of the Companys Level 3 debt and equity investments as of June 30, 2020 and December 31, 2019.

The tables are not intended to be all-inclusive,

but instead capture the significant unobservable inputs relevant to the Companys determination of fair values.

Balance, September 30, 2020

Net change in unrealized appreciation and (depreciation) of $12,489 and $(62,591) for the three and nine

months ended September 30, 2020, respectively, was attributable to Level 3 investments held at September 30, 2020.

Net change in unrealized (depreciation) of $(10,334) and $(14,655) for the three and nine months ended

September 30, 2019 was attributable to Level 3 investments held at September 30, 2019.

The following tables summarize the

significant unobservable inputs by valuation technique used to determine the fair value of the Companys Level 3 debt and equity investments as of September 30, 2020 and December 31, 2019.

The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Companys determination of fair values.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Fair Value at

June 30, 2020

(weighted average) (1)

September 30,

Valuation Techniques

Unobservable Inputs

Range (weighted average) (1)

Debt investments:

7 unchanged sentences

Enterprise value

Revenue multiples

0.8x - 0.8x (0.8x)

Enterprise value

Asset Coverage

12 unchanged sentences

Enterprise value

EBITDA multiples

Asset Coverage

1.6x - 1.6x (1.6x)

10 unchanged sentences

Unobservable inputs were weighted by the relative fair value of the instruments.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Debt investments:

Fair Value at

December 31, 2019

Valuation Techniques

Unobservable Inputs

Range (weighted

Range (weighted average) (1)

Debt investments:

Second Lien Debt

29 unchanged sentences

4.0x - 7.0x (6.6x)

Unobservable inputs were weighted by the relative fair value of the

The significant unobservable input used in determining the fair value under the

discounted cash flow technique is the weighted average cost of capital of each security.

Unobservable inputs were weighted by the relative fair value of the instruments.

The significant unobservable input used in determining the fair value under the discounted cash flow technique is the

weighted average cost of capital of each security.

Significant increases (or decreases) in this input would likely result in significantly lower (or higher) fair value estimates.

6 unchanged sentences

The Companys borrowings under the Credit Facility (as defined in Note 6), SBA debentures, and Public Notes (as defined in Note 6) are recorded at their respective carrying values.

The following tables summarize the carrying value and fair value of the Companys debt obligations as of June 30, 2020 and

December 31, 2019.

June 30, 2020

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

The following tables summarize the carrying value and fair value of the Companys debt

obligations as of September 30, 2020 and December 31, 2019.

September 30, 2020

December 31, 2019

6 unchanged sentences

November 2024 Notes (4)

Carrying value represents the outstanding principal balance of the debt

Carrying value represents the outstanding principal balance of the debt obligation.

The fair value of SBA debentures is estimated by discounting the remaining payments using current market rates

4 unchanged sentences

Level 1 input.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

The following table summarizes the inputs used to value the Companys debt obligations

if measured at fair value as of June 30, 2020 and December 31, 2019.

The following table summarizes the inputs used to value the Companys debt obligations if

measured at fair value as of September 30, 2020 and December 31, 2019.

Valuation Inputs

June 30, 2020

December 31, 2019

September 30,

Related Party Transactions

9 unchanged sentences

The base management fee under the Investment Advisory

Agreement was $3,193 and $6,465 for the three and six months ended June 30, 2020, respectively and $3,016 and $5,887, for the three and six months ended June 30, 2019, respectively.

June 30, 2020 and December 31, 2019, the base management fee payable was $3,193 and $3,334, respectively.

The incentive fee

consists of two parts.

Agreement was $3,223 and $9,688 for the three and nine months ended September 30, 2020, respectively and $3,179 and $9,066, for the three and nine months ended September 30, 2019, respectively.

September 30, 2020 and December 31, 2019, the base management fee payable was $3,224 and $3,334, respectively.

The incentive

fee consists of two parts.

The first part is calculated and payable quarterly in arrears based on the Companys pre-incentive fee net investment income for the quarter.

5 unchanged sentences

based on accrued interest that the Company never collects.

Pre-incentive fee net investment

income does not include any realized capital gains, taxes associated with such realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Because of the structure of the incentive fee, it is possible that the

Company may pay an incentive fee in a quarter where the Company incurs a loss.

For example, if the Company generates pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for

a quarter, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to a net loss on investments.

Pre-incentive fee net investment income, expressed as a rate of return on the value of the

Companys net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed hurdle

rate of 2.0% per quarter.

If market interest rates rise, the Company may be able to invest funds in debt instruments that provide for a higher return, which would increase the Companys

pre-incentive fee net investment income and make it easier for the Investment Advisor to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income.

The Company pays the Investment Advisor an incentive fee with respect to pre-incentive fee net

investment income in each calendar quarter as follows:

no incentive fee in any calendar quarter in which the pre-incentive fee

net investment income does not exceed the hurdle rate of 2.0%;

FIDUS INVESTMENT CORPORATION

1 unchanged sentence

(in thousands, except shares and per share data)

Pre-incentive fee net investment income does not

include any realized capital gains, taxes associated with such realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Because of the structure of the incentive fee, it is possible that the Company may pay

an incentive fee in a quarter where the Company incurs a loss.

For example, if the Company generates pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, the

Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to a net loss on investments.

Pre-incentive fee net investment income, expressed as a rate of return on the value of the Companys net assets (defined as total assets less indebtedness and before taking into account any incentive fees

payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed hurdle rate of 2.0% per quarter.

If market interest rates rise, the Company may be able to invest funds in debt instruments

that provide for a higher return, which would increase the Companys pre-incentive fee net investment income and make it easier for the Investment Advisor to surpass the fixed hurdle rate and receive an

incentive fee based on such net investment income.

The Company pays the Investment Advisor an incentive fee with respect to pre-incentive fee net investment income in each calendar quarter as follows:

no incentive fee in any calendar quarter in which the pre-incentive fee

net investment income does not exceed the hurdle rate of 2.0%;

100.0% of the Companys pre-incentive fee net investment income with

10 unchanged sentences

The income incentive fee

was $2,113 and $3,968, for the three and six months ended June 30, 2020, respectively, and $1,299 and $3,784, for the three and six months ended June 30, 2019, respectively.

The Investment Advisor, in

consultation with the Board, agreed to voluntarily waive $423 of the income incentive fee for the three and six months ended June 30, 2020.

There was no income incentive fee waiver for the three and six months ended June 30, 2019.

June 30, 2020 and December 31, 2019, the income incentive fee payable (net of the income incentive fee waiver) was $1,690 and $1,497, respectively.

was $2,374 and $6,342, for the three and nine months ended September 30, 2020, respectively, and $2,163 and $5,947, for the three and nine months ended September 30, 2019, respectively.

The Investment

Advisor, in consultation with the Board, agreed to voluntarily waive $423 of the income incentive fee for the nine months ended September 30, 2020.

There was no income incentive fee waiver for the three months ended September 30, 2020.

There was no income incentive fee waiver for the three and nine months ended September 30, 2019.

As of September 30, 2020 and December 31, 2019, the income incentive fee payable was $2,374 and $1,497, respectively.

The second part of the incentive fee is a capital gains incentive fee that is determined and paid in arrears as of the end of each fiscal year

8 unchanged sentences

such amount, less the aggregate amount of any capital gains incentive fees paid in all prior years.

As of June 30, 2020 and December 31, 2019, the capital gains incentive fee payable in cash was $0 (as cumulative aggregate realized capital

gains and losses on investments plus aggregate unrealized capital depreciation on investments plus realized losses on extinguishment of debt was negative as of each period).

The aggregate amount of capital gains incentive fees paid from the IPO

through June 30, 2020 was $348.

In addition, the Company accrues, but does not pay in cash, a capital gains incentive fee in

connection with any unrealized capital appreciation on investments, as applicable.

As of September 30, 2020 and December 31, 2019, the capital gains incentive fee payable in cash was $0 (as cumulative aggregate realized

capital gains and losses on investments plus aggregate unrealized capital depreciation on investments plus realized losses on extinguishment of debt was negative as of each period).

The aggregate amount of capital gains incentive fees paid from the

IPO through September 30, 2020 was $348.

In addition, the Company accrues, but does not pay in cash, a capital gains incentive fee

in connection with any unrealized capital appreciation on investments, as applicable.

If, on a cumulative basis, the sum of (i) net realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments

2 unchanged sentences

The capital gains incentive fee accrued (reversed)

during the three and six months ended June 30, 2020 was $(263) and $(9,141), respectively, and $(1,289) and $(934) for the three and six months ended June 30, 2019, respectively.

As of June 30, 2020 and December 31, 2019, the

accrued capital gains incentive fee payable was $3,574 and $12,715, respectively.

Unless terminated earlier as described below, the

Investment Advisory Agreement will continue in effect from year to year if approved annually by the Board or by the affirmative vote of the holders of a majority of the Companys outstanding voting securities, and, in either case, if also

approved by a majority of the directors who are not interested persons of the Company, as such term is defined under Section 2(a)(19) of the 1940 Act (the Independent Directors).

The Investment Advisory Agreement

automatically terminates in the event of its assignment, as defined in the 1940 Act, by the Investment Advisor and may be terminated by either party without penalty upon not less than 60 days written notice to the other.

The holders of a

majority of the Companys outstanding voting securities may also terminate the Investment Advisory Agreement without penalty.

Administration Agreement:

The Company also entered into an administration agreement (the Administration Agreement) with the

Investment Advisor.

On June 4, 2020, the Board approved the renewal of the Administration Agreement through June 20, 2021.

Under the Administration Agreement, the Investment Advisor furnishes the Company with office facilities and

equipment, provides clerical, bookkeeping, and record keeping services at such facilities and provides the Company with other administrative services necessary to conduct its

day-to-day operations.

The Company reimburses the Investment Advisor for the allocable portion of overhead expenses incurred in performing its obligations under the

Administration Agreement, including rent and the Companys allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs.

Under the Administration Agreement, the Investment Advisor also

provides managerial assistance to those portfolio companies to which the Company is required to provide such assistance and the Company reimburses the Investment Advisor for fees and expenses incurred with providing such services.

In addition, the

Company reimburses the Investment Advisor for fees and expenses incurred while performing due diligence on the Companys prospective portfolio companies, including dead deal expenses .

Under the Administration Agreement,

administrative service expenses for the three and six months ended June 30, 2020 were $364 and $830, respectively, and $378 and $777 for the three and six months ended June 30, 2019.

As of June 30, 2020 and December 31, 2019, the

accrued administrative service expense was $506 and $528, respectively.

during the three and nine months ended September 30, 2020 was $2,761 and $(6,380) respectively, and $1,307 and $373 for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020 and December 31,

2019, the accrued capital gains incentive fee payable was $6,335 and $12,715, respectively.

FIDUS INVESTMENT CORPORATION

1 unchanged sentence

(in thousands, except shares and per share data)

Unless terminated earlier as described below, the Investment Advisory Agreement will continue

in effect from year to year if approved annually by the Board or by the affirmative vote of the holders of a majority of the Companys outstanding voting securities, and, in either case, if also approved by a majority of the directors who are

not interested persons of the Company, as such term is defined under Section 2(a)(19) of the 1940 Act (the Independent Directors).

The Investment Advisory Agreement automatically terminates in the event of its

assignment, as defined in the 1940 Act, by the Investment Advisor and may be terminated by either party without penalty upon not less than 60 days written notice to the other.

The holders of a majority of the Companys outstanding voting

securities may also terminate the Investment Advisory Agreement without penalty.

Administration Agreement:

The Company also

entered into an administration agreement (the Administration Agreement) with the Investment Advisor.

On June 4, 2020, the Board approved the renewal of the Administration Agreement through June 20, 2021.

Administration Agreement, the Investment Advisor furnishes the Company with office facilities and equipment, provides clerical, bookkeeping, and record keeping services at such facilities and provides the Company with other administrative services

necessary to conduct its day-to-day operations.

The Company reimburses the Investment Advisor for the allocable portion of overhead expenses incurred in performing its

obligations under the Administration Agreement, including rent and the Companys allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs.

Under the Administration Agreement, the

Investment Advisor also provides managerial assistance to those portfolio companies to which the Company is required to provide such assistance and the Company reimburses the Investment Advisor for fees and expenses incurred with providing such

In addition, the Company reimburses the Investment Advisor for fees and expenses incurred while performing due diligence on the Companys prospective portfolio companies, including dead deal expenses .

Administration Agreement, administrative service expenses for the three and nine months ended September 30, 2020 were $412 and $1,242, respectively, and $422 and $1,199 for the three and nine months ended September 30, 2019.

September 30, 2020 and December 31, 2019, the accrued administrative service expense payable was $554 and $528, respectively.

Fidus Equity Fund I, L.P.

On February 25, 2020, the Company entered into

a Limited Partnership Agreement (the Agreement) with Fidus Equity Fund I, L.P.

On February 25, 2020, the Company entered into a Limited Partnership Agreement (the

Agreement) with Fidus Equity Fund I, L.P.

Pursuant to the Agreement, the Company will serve as the General Partner of FEF I.

Owned by third-party investors, FEF I was formed

to purchase 50% of select equity investments from the Company.

On February 25, 2020, the Company sold 50% of its equity investments in 20 portfolio companies to FEF I and received net proceeds of $35,903, resulting in a realized gain, net of

estimated taxes, of $20,404.

The Company will not receive any fees from FEF I for any services provided in its capacity as the General Partner of FEF I.

Revolving Credit

On June 16, 2014, FIC entered into a senior secured revolving credit agreement (the Credit Facility) with ING Capital LLC (ING), as the administrative agent, collateral agent, and lender.

Facility is secured by certain portfolio investments held by the Company, but portfolio investments held by the Funds are not collateral for the Credit Facility.

On April 24, 2019, the Company entered into an Amended & Restated Senior

Secured Revolving Credit Agreement (the Amended Credit Agreement) among the Company, as borrower, the lenders party thereto, and ING Capital LLC, as administrative agent.

The Amended Credit Agreement amends, restates, and replaces the

Credit Facility.

On June 26, 2020, the Company amended the Amended Credit Agreement, however the material terms were unchanged.

Among other revisions, the amendment to the Amended Credit Agreement modifies certain covenants therein, including

to amend the minimum consolidated interest coverage ratio to be 2.25 to 1.00 for the four quarter period ending on June 30, 2020, 2.00 to 1.00 for the four quarter periods ending on each of September 30, 2020 and December 31, 2020,

and 1.75 to 1.00 for each four quarter period ending at the end of each quarter thereafter.

Under the Amended Credit Agreement,

(i) revolving commitments by lenders were increased from $90,000 to $100,000, with an accordion feature that allows for an increase in total commitments up to $250,000, subject to satisfaction of certain conditions at the time of any such

future increase, (ii) the maturity date of the Credit Facility was extended from June 16, 2019 to April 24, 2023, and (iii) borrowings under the credit facility bear interest, at our election, at a rate per annum equal to

(a) 3.00% (or 2.75% if certain conditions are satisfied, including if (x) no equity interests are included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first

lien bank loans is greater than or equal to 35%, and (z) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater

than or equal to 60%) plus the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%,

The Company pays a commitment fee that varies depending on the size of the unused portion of the Credit Facility:

3.00% per annum on the unused portion of the credit facility at or below 35%

of the commitments and 0.50% per annum on any remaining unused portion of the Credit Facility between the total commitments and the 35% minimum utilization.

The Amended Credit Agreement also modifies certain covenants in the credit facility,

including to provide for a minimum asset coverage ratio of 2.00 to 1 (on a regulatory basis).

The Credit Facility is secured by a first priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries.

Amounts available to borrow under the Credit Facility are subject to a minimum borrowing/collateral base that applies an advance rate to

certain investments held by the Company, excluding investments held by the Funds.

The Company is subject to limitations with respect to the investments securing the Credit Facility, including, but not limited to, restrictions on sector

concentrations, loan size, payment frequency and status and collateral interests, as well as restrictions on portfolio company leverage, which may also affect the borrowing base and therefore amounts available to borrow.

The Company has made customary representations and warranties and is required to comply with various covenants, reporting requirements and

other customary requirements for similar credit facilities.

These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility.

As of June 30, 2020 and December 31,

2019, the Company was in compliance in all material respect with the terms of the Credit Facility.

SBA debentures:

uses debenture leverage provided through the SBA to fund a portion of its investment purchases.

Under the SBA debenture program, the SBA

commits to purchase debentures issued by SBICs;

such debentures have 10-year terms with the entire principal balance due at maturity and are guaranteed by the SBA.

Interest on SBA debentures is payable

semi-annually on March 1 and September 1.

As of June 30, 2020 and December 31, 2019, approved and unused SBA debenture commitments were $11,500 and $17,500, respectively.

The SBA may limit the amount that may be drawn each year

under these commitments, and each issuance of leverage is conditioned on the Companys full compliance, as determined by the SBA, with the terms and conditions set forth in the SBIC Act.

Owned by third-party investors, FEF I was formed to purchase 50% of select equity

investments from the Company.

On February 25, 2020, the Company sold 50% of its equity investments in 20 portfolio companies to FEF I and received net proceeds of $35,903, resulting in a realized gain, net of estimated taxes, of $20,404.

Company will not receive any fees from FEF I for any services provided in its capacity as the General Partner of FEF I.

Revolving Credit Facility :

On June 16, 2014, FIC entered into a senior secured revolving credit agreement (the Credit

Facility) with ING Capital LLC (ING), as the administrative agent, collateral agent, and lender.

The Credit Facility is secured by certain portfolio investments held by the Company, but portfolio investments held by the Funds are

not collateral for the Credit Facility.

On April 24, 2019, the Company entered into an Amended & Restated Senior Secured Revolving Credit Agreement (the Amended Credit Agreement) among the Company, as borrower, the lenders

party thereto, and ING Capital LLC, as administrative agent.

The Amended Credit Agreement amends, restates, and replaces the Credit Facility.

On June 26, 2020, the Company amended the Amended Credit Agreement, however the material terms were

Among other revisions, the amendment to the Amended Credit Agreement modifies certain covenants therein, including to amend the minimum consolidated interest coverage ratio to be 2.25 to 1.00 for the four quarter period ending on

June 30, 2020, 2.00 to 1.00 for the four quarter periods ending on each of September 30, 2020 and December 31, 2020, and 1.75 to 1.00 for each four quarter period ending at the end of each quarter thereafter.

Under the Amended Credit Agreement, (i) revolving commitments by lenders were increased from $90,000 to $100,000, with an accordion

feature that allows for an increase in total commitments up to $250,000, subject to satisfaction of certain conditions at the time of any such future increase, (ii) the maturity date of the Credit Facility was extended from June 16, 2019

to April 24, 2023, and (iii) borrowings under the credit facility bear interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if (x) no equity interests are

included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the contribution to the borrowing base of

eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00%

(or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero.

The Company pays a commitment fee that varies depending

on the size of the unused portion of the Credit Facility:

3.00% per annum on the unused portion of the credit facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the Credit Facility between the total

commitments and the 35% minimum utilization.

The Amended Credit Agreement also modifies certain covenants in the credit facility, including to provide for a minimum asset coverage ratio of 2.00 to 1 (on a regulatory basis).

The Credit Facility is

secured by a first priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries.

FIDUS INVESTMENT CORPORATION

1 unchanged sentence

(in thousands, except shares and per share data)

As of June 30, 2020 and December 31, 2019, the Companys issued and

outstanding SBA debentures mature as follows:

Amounts available to borrow under the Credit Facility are subject to a minimum

borrowing/collateral base that applies an advance rate to certain investments held by the Company, excluding investments held by the Funds.

The Company is subject to limitations with respect to the investments securing the Credit Facility,

including, but not limited to, restrictions on sector concentrations, loan size, payment frequency and status and collateral interests, as well as restrictions on portfolio company leverage, which may also affect the borrowing base and therefore

amounts available to borrow.

The Company has made customary representations and warranties and is required to comply with various

covenants, reporting requirements and other customary requirements for similar credit facilities.

These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility.

September 30, 2020 and December 31, 2019, the Company was in compliance in all material respect with the terms of the Credit Facility.

SBA debentures:

The Company uses debenture leverage provided through the SBA to fund a portion of its investment purchases.

Under the SBA debenture program, the SBA commits to purchase debentures issued by SBICs;

such debentures have

10-year terms with the entire principal balance due at maturity and are guaranteed by the SBA.

Interest on SBA debentures is payable semi-annually on March 1 and September 1.

As of September 30,

2020 and December 31, 2019, approved and unused SBA debenture commitments were $11,500 and $17,500, respectively.

The SBA may limit the amount that may be drawn each year under these commitments, and each issuance of leverage is conditioned on

the Companys full compliance, as determined by the SBA, with the terms and conditions set forth in the SBIC Act.

September 30, 2020 and December 31, 2019, the Companys issued and outstanding SBA debentures mature as follows:

September 30,

Total outstanding SBA debentures

7 unchanged sentences

offering expenses of $438, were approximately $48,062.

The 2023 Notes mature on February 1, 2023 and bear interest at a rate of

The 2023 Notes may be redeemed in whole or in part at any time or from time to time at the Companys option on or after February 1, 2020.

Interest on the 2023 Notes is payable quarterly on February 1, May 1, August 1

and November 1 of each year.

The 2023 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSL.

On February 8, 2019, the Company closed the public offering of approximately $60,000 in aggregate principal amount of its 6.000% notes

due 2024, or the February 2024 Notes.

On February 19, 2019, the underwriters exercised their option to purchase an additional $9,000 in aggregate principal of the February 2024 Notes.

The total net proceeds to the Company from the

February 2024 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of approximately $2,070 and offering expenses of $409, were approximately $66,521.

The February 2024 Notes mature on February 15, 2024 and bear interest at a rate of 6.000%.

The February 2024 Notes may be redeemed in

whole or in part at any time or from time to time at the Companys option on or after February 15, 2021.

Interest on the February 2024 Notes is payable quarterly on February 15, May 15, August 15 and November 15 of each

year, beginning May 15, 2019.

The February 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSZ.

On October 16, 2019, the Company closed the public offering of approximately $55,000 in aggregate principal amount of its 5.375% notes

due 2024, or the November 2024 Notes (and collectively with the 2023 Notes and February 2024 Notes, the Public Notes).

On October 23, 2019, the underwriters exercised their option to purchase an additional $8,250 in

aggregate principal of the November 2024 Notes.

The total net proceeds to the Company from the November 2024 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of approximately $1,898 and offering

expenses of $300, were approximately $61,053.

FIDUS INVESTMENT CORPORATION

1 unchanged sentence

(in thousands, except shares and per share data)

The November 2024 Notes will mature on November 1, 2024 and bear interest at a rate of

The 2023 Notes mature on February 1, 2023 and bear interest at a rate of 5.875%.

2023 Notes may be redeemed in whole or in part at any time or from time to time at the Companys option on or after February 1, 2020.

Interest on the 2023 Notes is payable quarterly on February 1, May 1, August 1 and

November 1 of each year.

The 2023 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSL.

February 8, 2019, the Company closed the public offering of approximately $60,000 in aggregate principal amount of its 6.000% notes due 2024, or the February 2024 Notes.

On February 19, 2019, the underwriters exercised their

option to purchase an additional $9,000 in aggregate principal of the February 2024 Notes.

The total net proceeds to the Company from the February 2024 Notes, including the exercise of the underwriters option, after deducting underwriting

discounts of approximately $2,070 and offering expenses of $409, were approximately $66,521.

The February 2024 Notes mature on

February 15, 2024 and bear interest at a rate of 6.000%.

The February 2024 Notes may be redeemed in whole or in part at any time or from time to time at the Companys option on or after February 15, 2021.

Interest on the February 2024

Notes is payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning May 15, 2019.

The February 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol

On October 16, 2019, the Company closed the public offering of approximately $55,000 in aggregate principal

amount of its 5.375% notes due 2024, or the November 2024 Notes (and collectively with the 2023 Notes and February 2024 Notes, the Public Notes).

On October 23, 2019, the underwriters exercised their option to purchase

an additional $8,250 in aggregate principal of the November 2024 Notes.

The total net proceeds to the Company from the November 2024 Notes, including the exercise of the underwriters option, after deducting underwriting discounts of

approximately $1,898 and offering expenses of $300, were approximately $61,053.

The November 2024 Notes will mature on November 1,

2024 and bear interest at a rate of 5.375%.

The November 2024 Notes may be redeemed in whole or in part at any time or from time to time at the Companys option on or after November 1, 2021.

Interest on the November 2024 Notes is payable quarterly on February 1,

May 1, August 1 and November 1 of each year, beginning February 1, 2020.

Interest on the November 2024 Notes is payable

quarterly on February 1, May 1, August 1 and November 1 of each year, beginning February 1, 2020.

The November 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSG.

3 unchanged sentences

facilities the Company may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities.

As of June 30, 2020, the aggregate amount outstanding of the senior securities issued by the Company was $225,250, for which our asset

coverage was 267.0%.

As of September 30, 2020, the aggregate amount outstanding of the senior securities issued by the Company was $205,250, for which our

asset coverage was 289.8%.

The SBA-guaranteed debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective June 30,

asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities

representing indebtedness.

Interest and Financing Expenses

Interest and fees related to the Companys debt for the three and six months ended June 30, 2020 and 2019 which are

Interest and fees related to the Companys debt for the three and nine months ended September 30, 2020 and 2019 which are

included in interest and financing expenses on the consolidated statements of operations, were as follows:

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Stated interest expense

1 unchanged sentence

Total interest and financing expenses

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Stated interest expense

3 unchanged sentences

Unused commitment fee rate, period end

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Realized Losses on Extinguishment of Debt

During the six months ended June 30, 2020 and 2019, the Company prepaid $7,000 and $19,750 of SBA debentures, respectively, which were

scheduled to mature on dates ranging from 2024 to 2028 and 2021 to 2025, respectively.

As a result of the prepayments, the Company recognized realized losses on extinguishment of debt of $125 and $189, respectively, equal to the write-off of the related unamortized deferred financing costs, during the six months ended June 30, 2020 and 2019.

During the nine months ended September 30, 2020 and 2019, the Company prepaid $16,500 and $41,000 of SBA debentures, respectively, which

were scheduled to mature on dates ranging from 2024 to 2028 and 2021 to 2025, respectively.

As a result of the prepayments, the Company recognized realized losses on extinguishment of debt of $299 and $399, respectively, equal to the write-off of the related unamortized deferred financing costs, during the nine months ended September 30, 2020 and 2019.

Deferred Financing Costs

1 unchanged sentence

Deferred financing costs related to the

Credit Facility, SBA debentures, and Public Notes as of June 30, 2020 and December 31, 2019 were as follows:

June 30, 2020

Credit Facility, SBA debentures, and Public Notes as of September 30, 2020 and December 31, 2019 were as follows:

September 30, 2020

December 31, 2019

7 unchanged sentences

Unamortized deferred financing costs

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Unamortized deferred financing costs are presented as a direct offset to the SBA debentures,

Credit Facility and Public Notes liabilities on the consolidated statements of assets and liabilities.

The following table summarizes the outstanding debt net of unamortized deferred financing costs as of June 30, 2020 and December 31,

June 30, 2020

Unamortized deferred financing costs are presented as a direct offset to the SBA debentures, Credit Facility

and Public Notes liabilities on the consolidated statements of assets and liabilities.

The following table summarizes the outstanding debt net of unamortized deferred financing costs as of September 30, 2020 and December 31, 2019:

September 30, 2020

December 31, 2019

2 unchanged sentences

Debt, net of deferred financing costs

As of June 30, 2020, the Companys debt liabilities are scheduled to mature as follows (1) :

As of September 30, 2020, the Companys debt liabilities are scheduled to mature as follows (1) :

The table above presents scheduled maturities of the Companys outstanding debt liabilities as of a point

2 unchanged sentences

potential for earlier prepayments.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Commitments and Contingencies

The Company had outstanding commitments to portfolio companies to fund various undrawn revolving loans, other debt

investments and capital commitments totaling $4,857 and $4,757 as of June 30, 2020 and December 31, 2019, respectively.

investments and capital commitments totaling $3,957 and $4,757 as of September 30, 2020 and December 31, 2019, respectively.

Such outstanding commitments are summarized in the following table:

June 30, 2020

September 30, 2020

December 31, 2019

22 unchanged sentences

indemnifications to be remote.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Legal proceedings:

In the normal course of business, the Company may be subject to

legal and regulatory proceedings that are generally incidental to its ongoing operations.

While the outcome of any such legal proceedings cannot be predicted with certainty, the Company does not believe any such legal proceedings will have a

material adverse effect on the Companys consolidated financial statements.

In the normal course of business, the Company may be subject to legal and

regulatory proceedings that are generally incidental to its ongoing operations.

While the outcome of any such legal proceedings cannot be predicted with certainty, the Company does not believe any such legal proceedings will have a material adverse

effect on the Companys consolidated financial statements.

Public Offerings of Common Stock

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Incorporated through which the Company could sell, by means of at-the-market offerings from time to time, shares of the Companys common stock having an aggregate offering price of up to $50,000 (the ATM Program).

were no issuances of common stock under the ATM program during the last two fiscal years and for the six months ended June 30, 2020.

Repurchase Program

As described in Note 2, the Company has a Stock Repurchase Program under which the Company may acquire up to $5,000

of its outstanding common stock.

During the three and six months ended June 30, 2020, the Company repurchased 0 and 25,719 shares of common stock, respectively, on the open market for zero and $268, respectively.

The Company did not make any

repurchases of common stock during the three and six months ended June 30, 2019.

The Companys NAV per share increased by approximately zero and $0.01 for the three and six months ended June 30, 2020, as a result of the share

The following table summarizes the Companys share repurchases under the Stock Repurchase Program for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

were no issuances of common stock under the ATM program during the last two fiscal years and for the nine months ended September 30, 2020.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Stock Repurchase Program

As described in Note 2, the Company has a Stock Repurchase Program under which the Company may acquire up to $5,000 of its outstanding common

During the three and nine months ended September 30, 2020, the Company repurchased zero and 25,719 shares of common stock, respectively, on the open market for zero and $268, respectively.

The Company did not make any repurchases of

common stock during the three and nine months ended September 30, 2019.

The Companys NAV per share increased by approximately zero and $0.01 for the three and nine months ended September 30, 2020, as a result of the share

The following table summarizes the Companys share repurchases under the Stock Repurchase Program for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine months ended September 30,

Repurchases of Common Stock

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Refer to Note 9 for additional information regarding the issuance of shares under the DRIP.

The Company had 24,437,400 and 24,463,119 shares of common stock outstanding as of June 30, 2020 and December 31, 2019,

The Company had 24,437,400 and 24,463,119 shares of common stock outstanding as of September 30, 2020 and December 31, 2019,

respectively.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Dividends and Distributions

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The following table summarizes the dividends paid during the

last two fiscal years and for the six months ended June 30, 2020.

last two fiscal years and for the nine months ended September 30, 2020.

Fiscal Year Ended December 31, 2018:

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10/29/2019 (1)

Six Months Ended June 30, 2020:

Nine Months Ended September 30, 2020:

Special dividend.

During the six months ended June 30, 2020 and the years ended December 31, 2019 and 2018, the Company directed

the DRIP program plan administrator to repurchase shares on the open market in order to satisfy the DRIP obligation to deliver shares of common stock in lieu of issuing new shares.

Accordingly, the Company purchased and reissued shares to satisfy

the DRIP obligation as follows:

During the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, the

Company directed the DRIP program plan administrator to repurchase shares on the open market in order to satisfy the DRIP obligation to deliver shares of common stock in lieu of issuing new shares.

Accordingly, the Company purchased and reissued

shares to satisfy the DRIP obligation as follows:

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Fiscal Year Ended December 31, 2018:

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October 1, 2019 through December 31, 2019

Nine Months Ended September 30, 2020:

January 1, 2020 through March 31, 2020

April 1, 2020 through June 30, 2020

July 1, 2020 through September 30, 2020

FIDUS INVESTMENT CORPORATION

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(in thousands, except shares and per share data)

Six Months Ended June 30, 2020:

January 1, 2020 through March 31, 2020

April 1, 2020 through June 30, 2020

Financial Highlights

The following is a schedule of financial highlights for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

The following is a schedule of financial highlights for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

Per share data:

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fee waiver caption as presented on the consolidated statements of operations, which includes incentive fee and excludes the income tax provision.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

The net investment income to average net assets ratio is calculated using the net investment income caption as

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Non-operating changes include any items that affect net asset value per share other than increase from investment operations, such as the effects of share issuances and repurchases and other miscellaneous

The ratio of waived incentive fees to average net assets was (0.11%) and zero for the six months ended

June 30, 2020 and 2019, respectively.

The ratio of waived incentive fees to average net assets was (0.11%) and zero for the nine months ended

September 30, 2020 and 2019, respectively.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

The following is a schedule of supplemental expense ratios to average net assets:

Six Months Ended June 30,

Nine Months Ended September 30,

Ratio to average net assets:

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Subsequent Events

On July 2, 2020, the Company exited its debt investment in Hoonuit, LLC.

The Company received payment in full of $7,308 on its first lien

debt, which includes a prepayment penalty.

On July 24, 2020, we exited our debt and equity investments in Microbiology Research

Associates, Inc.

We received payment in full of $8,997 on our subordinated debt investment.

We sold our common equity investment for a realized gain of approximately $1,366.

On August 3, 2020, the Board declared a regular quarterly dividend of $0.30 per share payable on September 25, 2020 to stockholders

of record as of September 11, 2020.

Subsequent to June 30, 2020, the global outbreak of the coronavirus (COVID-19)

pandemic, and the related effect on the U.S.

On October 1, 2020, the Company exited its debt and equity investments in Pugh Lubricants, LLC.

The Company received payment in full of $26,630

on its subordinated debt investment, which includes a prepayment fee.

The Company received a distribution on its common equity investment for a realized gain of approximately $521.

On October 26, 2020, the Board declared a regular quarterly dividend of $0.30 per share payable on December 18, 2020 to stockholders of record

as of December 4, 2020.

In addition, the Board of Directors declared a supplemental dividend of $0.04 per share payable December 18, 2020 to stockholders of record as of December 4, 2020.

On October 28, 2020, the Company invested $6,000 in second lien debt, which was a partial funding of a $12,000 note commitment, and $1,500

common equity in a leading regional distributor of pool equipment and supplies.

Subsequent to September 30, 2020, the global outbreak of the coronavirus (COVID-19) pandemic, and the related effect on the

and global economies, has continued to have adverse consequences for the business operations of some of the Companys portfolio companies.

The ultimate economic fallout from the pandemic, and the

long-term impact on economies, markets, industries and individual issuers, remain uncertain.

The operational and financial performance of the issuers of securities in which the Company invests depends on future developments, including the duration

and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Companys investments and negatively impact the Companys performance.

The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets,

industries and individual issuers, remain uncertain.

The operational and financial performance of the issuers of securities in which the Company invests depends on future developments, including the duration and spread of the outbreak, and such

uncertainty may in turn adversely affect the value and liquidity of the Companys investments and negatively impact the Companys performance.

Managements Discussion and Analysis of Financial Condition and

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The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

our future operating results and the impact of the COVID-19 pandemic

our future operating results and the impact of the COVID-19 pandemic thereon;

our business prospects and the prospects of our portfolio companies, including our and their ability to achieve

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the adequacy of our cash resources and working capital;

the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19 pandemic thereon;

the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19

pandemic thereon;

the ability of the Investment Advisor to locate suitable investments for us and to monitor and administer our

investments and the impacts of the COVID-19 pandemic thereon.

These statements

are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted

in the forward-looking statements, including without limitation:

an economic downturn, including as a result of the current COVID-19

pandemic, could impair our portfolio companies ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

a contraction of available credit and/or an inability to access the equity markets, including as a result of the COVID-19 pandemic, could impair our lending and investment activities;

These statements are not guarantees of future performance

and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements,

including without limitation:

an economic downturn, including as a result of the current COVID-19 pandemic, could impair our portfolio

companies ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

a contraction of available credit and/or an inability to access the equity markets, including as a result of the

COVID-19 pandemic, could impair our lending and investment activities;

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

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COVID-19 Update

On March 11, 2020, the World Health Organization declared the novel coronavirus, or COVID-19, as a

pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19.

The outbreak of COVID-19 has, and continues, to severely

impact global economic activity and cause significant volatility and negative pressure in financial markets.

The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting

quarantines, mandating business and school closures and restricting travel.

Such actions are creating disruption in global supply chains and adversely impacting a number of industries.

The outbreak could have a continued adverse impact on economic

and market conditions and trigger a period of global economic slowdown.

The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19.

Nevertheless, COVID-19 presents material uncertainty and risks with respect to the underlying value of the Companys portfolio companies, the Companys business, financial condition, results of

operations and cash flows, such as the potential negative impact to financing arrangements, company decisions to delay, defer and/or modify the character of dividends in order to preserve liquidity, increased costs of operations, changes in law

and/or regulation, and uncertainty regarding government and regulatory policy.

We have evaluated subsequent events from July 1, 2020

through August 6, 2020.

On March 11, 2020, the World Health Organization declared the novel coronavirus, or COVID-19, as a pandemic, and on March 13, 2020

the United States declared a national emergency with respect to COVID-19.

The outbreak of COVID-19 has, and continues, to severely impact global economic activity and cause significant volatility and negative pressure in financial markets.

global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

Such actions are creating disruption in

global supply chains and adversely impacting a number of industries.

The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.

The rapid development and fluidity of this

situation precludes any prediction as to the ultimate adverse impact of COVID-19.

Nevertheless, COVID-19 presents material uncertainty and risks with respect to the underlying value of the Companys portfolio companies, the Companys

business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, company decisions to delay, defer and/or modify the character of dividends in order to preserve liquidity,

increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

evaluated subsequent events from October 1, 2020 through October 29, 2020.

However, as the discussion in this Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations relates to the Companys financial statements for the quarter-ended June 30,

2020, the analysis contained herein may not fully account for impacts relating to the COVID-19 pandemic.

In that regard, for example, as of June 30, 2020, the Company valued its portfolio investments in

conformity with GAAP based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time.

Due to the overall volatility that the COVID-19 pandemic has

caused, any valuations conducted now or in the future in conformity with GAAP could result in a lower fair value of our portfolio.

The potential impact to our results going forward will depend to a large extent on future developments and new

information that may emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our

Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected at this time.

Managements Discussion and Analysis of Financial Condition and Results of Operations relates to the Companys

financial statements for the quarter-ended September 30, 2020, the analysis contained herein may not fully account for impacts relating to the COVID-19 pandemic.

In that regard, for example, as of September 30, 2020, the Company valued its

portfolio investments in conformity with GAAP based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time.

Due to the overall volatility that the COVID-19 pandemic has caused, any

valuations conducted now or in the future in conformity with GAAP could result in a lower fair value of our portfolio.

The potential impact to our results going forward will depend to a large extent on future developments and new information that

may emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control.

Accordingly, the Company cannot predict the

extent to which its financial condition and results of operations will be affected at this time.

We seek to create a diversified investment portfolio that primarily includes debt investments and, to a lesser extent, equity securities.

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

fees and expenses incurred by the Investment Advisor under the Investment Advisory Agreement or payable to

third parties, including agents, consultants or other advisors, in monitoring financial and legal affairs for us and in monitoring our investments and performing due diligence on our prospective portfolio companies or otherwise relating to, or

associated with, evaluating and making investments, including dead deal costs;

fees and expenses incurred by the Investment Advisor under the Investment Advisory Agreement or payable to third

parties, including agents, consultants or other advisors, in monitoring financial and legal affairs for us and in monitoring our investments and performing due diligence on our prospective portfolio companies or otherwise relating to, or associated

with, evaluating and making investments, including dead deal costs;

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

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

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

and any other insurance premiums;

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

any other insurance premiums;

direct costs and expenses of administration, including printing, mailing, long distance telephone, copying,

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Portfolio Composition, Investment Activity and Yield

During the six months ended June 30, 2020 and 2019, we invested $85.1 million and $128.5 million, respectively, in debt and

equity investments including five and nine new portfolio companies, respectively.

During the six months ended June 30, 2020 and 2019, we received proceeds from sales or repayments, including principal, return of capital dividends and net

realized gains (losses), of $76.3 million and $75.3 million, respectively, including exits of one and four portfolio companies, respectively.

The following table summarizes investment purchases and sales and repayments of investments by

type for the six months ended June 30, 2020 and 2019 (dollars in millions).

During the nine months ended September 30, 2020 and 2019, we invested $86.1 million and $175.5 million, respectively, in debt

and equity investments including five and 10 new portfolio companies, respectively.

During the nine months ended September 30, 2020 and 2019, we received proceeds from sales or repayments, including principal, return of capital dividends and

net realized gains (losses), of $110.1 million and $98.8 million, respectively, including exits of three and seven portfolio companies, respectively.

The following table summarizes investment purchases and sales and repayments of

investments by type for the nine months ended September 30, 2020 and 2019 (dollars in millions).

Purchases of Investments

Sales and Repayments of Investments

Six Months Ended June 30,

Nine Months Ended September 30,

Second Lien Debt

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Royalty Rights

As of June 30, 2020, the fair value of our investment portfolio totaled $732.6 million and consisted

of 64 active portfolio companies and three portfolio companies that have sold their underlying operations.

As of June 30, 2020, 20 portfolio companies debt investments bore interest at a variable rate, which represented

As of September 30, 2020, the fair value of our investment portfolio totaled $715.4 million and

consisted of 63 active portfolio companies and three portfolio companies that have sold their underlying operations.

As of September 30, 2020, 19 portfolio companies debt investments bore interest at a variable rate, which represented

$203.0 million, or 32.4%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments.

Overall, the portfolio had net unrealized depreciation of $(1.0)

million as of June 30, 2020.

As of June 30, 2020, our average active portfolio company investment at amortized cost was $11.6 million, which excludes investments in the three portfolio companies that have sold their underlying

As of December 31, 2019, the fair value of our investment portfolio totaled $766.9 million and consisted of 61

active portfolio companies and three portfolio companies that have sold their underlying operations.

As of December 31, 2019, 17 portfolio companies debt investments bore interest at a variable rate, which represented $181.3 million,

or 28.7%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments.

Overall, the portfolio had net unrealized appreciation of $62.4 million as of

December 31, 2019.

As of December 31, 2019, our average active portfolio company investment at amortized cost was $11.5 million, which excludes investments in the three portfolio companies that have sold their underlying operations.

The weighted average yield on debt investments as of both June 30, 2020 and December 31, 2019 was 12.0%.

The weighted average

yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our and our subsidiaries fees and

The weighted average yields were computed using the effective interest rates for debt investments at cost as of June 30, 2020 and December 31, 2019, respectively, including the accretion of OID and debt investment origination

fees, but excluding investments on non-accrual status, if any.

million as of September 30, 2020.

As of September 30, 2020, our average active portfolio company investment at amortized cost was $11.3 million, which excludes investments in the three portfolio companies that have sold their

underlying operations.

As of December 31, 2019, the fair value of our investment portfolio totaled $766.9 million and consisted

of 61 active portfolio companies and three portfolio companies that have sold their underlying operations.

As of December 31, 2019, 17 portfolio companies debt investments bore interest at a variable rate, which represented

$181.3 million, or 28.7%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments.

Overall, the portfolio had net unrealized appreciation of

$62.4 million as of December 31, 2019.

As of December 31, 2019, our average active portfolio company investment at amortized cost was $11.5 million, which excludes investments in the three portfolio companies that have sold their

underlying operations.

The weighted average yield on debt investments as of September 30, 2020 and December 31, 2019 was 12.1%

and 12.0%, respectively.

The weighted average yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of

our and our subsidiaries fees and expenses.

The weighted average yields were computed using the effective interest rates for debt investments at cost including the accretion of OID and debt investment origination fees, but excluding

investments on non-accrual status, if any.

The following table shows the portfolio composition by investment type at fair value and

cost and as a percentage of total investments (dollars in millions):

September 30,

Second Lien Debt

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Royalty Rights

All investments made by us as of June 30, 2020 and December 31, 2019 were made in portfolio

All investments made by us as of September 30, 2020 and December 31, 2019 were made in portfolio

companies headquartered in the U.S.

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of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio companys business.

September 30,

The following table shows the detailed industry composition of our portfolio at fair value

and cost as a percentage of total investments:

September 30,

Specialty Distribution

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Component Manufacturing

Healthcare Services

Consumer Products

Aerospace & Defense Manufacturing

Healthcare Services

Promotional Products

Building Products Manufacturing

Oil & Gas Services

Transportation Services

Environmental Industries

Vending Equipment Manufacturing

Oil & Gas Services

Industrial Cleaning & Coatings

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Utility Equipment Manufacturing

Vending Equipment Manufacturing

Specialty Chemicals

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The following table shows the distribution of our investments on the 1 to 5 investment

rating scale at fair value and cost as of June 30, 2020 and December 31, 2019 (dollars in millions):

rating scale at fair value and cost as of September 30, 2020 and December 31, 2019 (dollars in millions):

Investment Rating

Based on our investment rating system, the weighted average rating of our portfolio as of June 30, 2020

and December 31, 2019 was 2.1 and 2.0, respectively, on a fair value basis and 2.3 and 2.1, respectively, on a cost basis.

As of June 30, 2020 and December 31, 2019, we had debt investments in two and

one portfolio companies on non-accrual status, respectively (dollars in millions):

September 30,

Based on our investment rating system, the weighted average rating of our portfolio as of September 30,

2020 and December 31, 2019 was 2.0 on a fair value basis and 2.3 and 2.1, respectively, on a cost basis.

As of September 30, 2020 and December 31, 2019, we had debt investments in one portfolio company on

non-accrual status, (dollars in millions):

September 30,

Portfolio Company

Accent Food Services, LLC

Mirage Trailers LLC

Portfolio company was on PIK-only on

non-accrual status at period end, meaning the Company has ceased recognizing PIK interest income on the investment.

Portfolio company debt investments were not on non-accrual status at

Discussion and Analysis of Results of Operations

Comparison of three and six months ended June 30, 2020 and 2019

Comparison of three and nine months ended September 30, 2020 and 2019

Investment Income

is a summary of the changes in total investment income for the three months ended June 30, 2020 as compared to the same period in 2019 (dollars in millions):

is a summary of the changes in total investment income for the three months ended September 30, 2020 as compared to the same period in 2019 (dollars in millions):

Three Months Ended

September 30,

% Change (1)(2)

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statements of operations.

For the three months ended June 30, 2020, total investment income was

$20.4 million, an increase of $2.3 million or 13.1%, from the $18.1 million of total investment income for the three months ended June 30, 2019.

As reflected in the table above, the decrease is primarily attributable to the

For the three months ended September 30, 2020, total investment income was

$21.1 million, an increase of $1.9 million or 9.8%, from the $19.2 million of total investment income for the three months ended September 30, 2019.

As reflected in the table above, the increase is primarily attributable to the

$1.6 million increase in total interest income (which includes a $1.1 million decrease in payment-in-kind interest income) resulting from higher average debt investment balances outstanding, during 2020 as compared to 2019.

$(0.4) million decrease in fee income resulting from a a decrease in structuring fees due to a comparative

decrease in new investments, a decrease in prepayment fee income, partially offset by an increase in amendment fee income, during 2020 as compared to 2019.

$(0.6) million decrease in dividend income, during 2020 as compared to 2019, due to decreased levels of

distributions received from equity investments.

Below is a summary of the changes in total investment income for the

six months ended June 30, 2020 as compared to the same period in 2019 (dollars in millions):

Six Months Ended

$0.5 million increase in dividend income, during 2020 as compared to 2019, due to increased levels of

distributions received from equity investments and tax true-ups related to the tax character of prior year distributions.

$(0.4) million decrease in fee income resulting from a decrease in structuring fees due to a comparative decrease

in new investments partially offset by an increase in amendment fee income and an increase in prepayment fee income, during 2020 as compared to 2019.

Below is a summary of the changes in total investment income for the nine months ended September 30, 2020 as compared to the same period

in 2019 (dollars in millions):

Nine Months Ended

September 30,

% Change (1)(2)

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statements of operations.

For the six months ended June 30, 2020, total investment income was $40.4 million,

an increase of $2.0 million or 5.3%, from the $38.4 million of total investment income for the six months ended June 30, 2019.

As reflected in the table above, the increase is primarily attributable to the following:

For the nine months ended September 30, 2020, total investment income was

$61.5 million, an increase of $3.9 million or 6.8%, from the $57.6 million of total investment income for the nine months ended September 30, 2019.

As reflected in the table above, the increase is primarily attributable to the

$5.6 million increase in total interest income (which includes a $4.3 million decrease in payment-in-kind interest income) resulting from higher average debt investment balances outstanding, during 2020 as compared to 2019.

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structuring fees due to a comparative decrease in new investments, offset by an increase in amendment fee income, during 2020 as compared to 2019.

summary of the changes in total expenses, including income tax provision, for the three months ended June 30, 2020 as compared to the same period in 2019 (dollars in millions):

summary of the changes in total expenses, including income tax provision, for the three months ended September 30, 2020 as compared to the same period in 2019 (dollars in millions):

Three Months Ended

September 30,

% Change (1)(2)

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statements of operations.

For the three months ended June 30, 2020, total expenses, including income tax

provision, were $11.1 million, an increase of $2.6 million or 32.2%, from the $8.5 million of total expenses for the three months ended June 30, 2019.

For the three months ended September 30, 2020, total expenses, including income tax

provision, were $14.2 million, an increase of $2.4 million or 19.7%, from the $11.8 million of total expenses for the three months ended September 30, 2019.

As reflected in the table above, changes across periods were primarily

attributable to the following:

$1.0 million increase in the capital gains incentive fee due to a $5.1 million decrease in net (loss)

on investments (net realized gains (losses), plus net change in unrealized appreciation (depreciation) on investments, plus realized losses on extinguishment of debt) during 2020 as compared to the same period in 2019.

$1.5 million increase in the capital gains incentive fee due to a $7.3 million increase in net gain on

investments (net realized gains (losses), plus net change in unrealized appreciation (depreciation) on investments, plus realized losses on extinguishment of debt) during 2020 as compared to the same period in 2019.

$0.5 million increase in interest and financing expenses due to an increase in average borrowings

outstanding during 2020 as compared to 2019.

$0.4 million net increase in the income incentive fee comprised of a $0.8 million increase in the

income incentive fee due to a $1.5 million increase in pre-incentive fee net investment income during 2020 offset by a one-time $0.4 income incentive fee

waiver, as compared to the same period in 2019.

$0.2 million increase in base management fee due to higher average total assets during 2020 as compared to

$0.2 million net increase in the income incentive fee due to a $1.2 million increase in pre-incentive fee net investment income during 2020 as compared to the same period in 2019.

$0.1 million increase in professional fees due to increased legal, audit and tax compliance costs during

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Below is a summary of the changes in total expenses, including income tax provision for the

six months ended June 30, 2020 as compared to the same period in 2019 (dollars in millions):

Six Months Ended

nine months ended September 30, 2020 as compared to the same period in 2019 (dollars in millions):

Nine Months Ended

September 30,

% Change (1)(2)

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statements of operations.

For the six months ended June 30, 2020, total expenses, including income tax provision,

were $13.7 million, a decrease of $(5.5) million, or (28.4)%, from the $19.2 million of total expenses, including income tax provision, for the six months ended June 30, 2019.

As reflected in the table above, the decrease is primarily

attributable to the following:

For the nine months ended September 30, 2020, total expenses, including income tax

provision, were $28.0 million, a decrease of $(3.0) million, or (10.0)%, from the $31.0 million of total expenses, including income tax provision, for the nine months ended September 30, 2019.

As reflected in the table above, the

decrease is primarily attributable to the following:

$2.5 million increase in interest and financing expenses due to an increase in average borrowings

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2020 as compared to 2019.

$(0.2) million net decrease in the income incentive fee comprised of a $0.2 increase in the income incentive fee

due to the Q2 2019 fee amount not exceeding the 2.5% hurdle rate, partially offset by a $(0.6) million decrease in pre-incentive fee net investment income and a

one-time $0.4 million incentive fee waiver during 2020 as compared to the same period in 2019.

No meaningful change in the income incentive fee as the $0.4 million net increase in the income incentive

fee due to a $0.6 million increase in pre-incentive fee net investment income during 2020 was offset by a one-time $0.4 million incentive fee waiver

during 2020 as compared to the same period in 2019.

$(6.8) million decrease in the capital gains incentive fee due to a $(33.8) million increase in net

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Net Investment Income

Net investment income decreased by $(0.3) million, or (3.7)%, to $9.3 million during the three months ended June 30, 2020 as compared

to the same period in 2019, as a result of the $2.6 million increase in total expenses, including incentive fee waiver and income tax provision, partially offset by the $2.3 increase in total investment income.

Net investment income increased by $7.5 million, or 38.8%, to $26.7 million during the six months ended June 30, 2020 as

Net investment income decreased by $(0.5) million, or (6.2)%, to $6.9 million during the three months ended September 30, 2020 as

compared to the same period in 2019, as a result of the $2.4 million increase in total expenses, including incentive fee waiver and income tax provision, partially offset by the $1.9 increase in total investment income.

Net investment income increased by $6.9 million, or 26.3%, to $33.5 million during the nine months ended September 30, 2020 as

compared to the same period in 2019, as a result of the $3.9 million increase in total investment income and a decrease in total expenses, including incentive fee waiver and income tax provision, of $(3.0) million.

Net Gain (Loss) on Investments

For the three and six months ended June 30, 2020, the total net realized gain on investments, before income tax provision on realized

gains, was $0.2 million and $31.6 million, respectively.

Income tax (provision) benefit from realized gains on investments was $(0) and $(1.1) for the three and six months ended June 30, 2020, respectively.

Significant realized gains

(losses) for the three and six months ended June 30, 2020 are summarized below (dollars in millions):

Period Ended June 30, 2020

For the three and nine months ended September 30, 2020, the total net realized gain on investments, before income tax provision on

realized gains, was $1.3 million and $32.9 million, respectively.

Income tax (provision) benefit from realized gains on investments was zero and $(1.1) for the three and nine months ended September 30, 2020, respectively.

realized gains (losses) for the three and nine months ended September 30, 2020 are summarized below (dollars in millions):

September 30, 2020

Portfolio Company

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Sale of portfolio company

Microbiology Research Associates, Inc.

Sale of portfolio company

Medsurant Holdings, LLC

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Sold 50% of equity investment

Microbiology Research Associates, Inc.

Sold 50% of equity investment

ControlScan, Inc.

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Escrow distribution

Allredi, LLC (fka Marco Group International OpCo, LLC)

Sold 50% of equity investment

Vanguard Dealer Services, L.L.C.

Escrow distribution

Palisade Company, LLC

Sale of portfolio company

Sold 50% of equity investment

Net realized gain (loss) on investments

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portfolio company investments).

For the three and six months ended June 30, 2019, the total net realized loss on

investments, before income tax provision on realized gains, was $(0.1) million and $(1.7) million, respectively.

Income tax provision from realized gains on investments was $0.3 million and $0.3 million for the three and six months ended

June 30, 2019, respectively.

Significant realized gains (losses) for the three and six months ended June 30, 2019 are summarized below (dollars in millions):

Period Ended June 30, 2019

For the three and nine months ended September 30, 2019, the total net realized gain

(loss) on investments, before income tax provision on realized gains, was $10.5 million and $8.8 million, respectively.

Income tax provision from realized gains on investments was $0.1 million and $(0.2) million for the three and nine

months ended September 30, 2019, respectively.

Significant realized gains (losses) for the three and nine months ended September 30, 2019 are summarized below (dollars in millions):

Period Ended September 30, 2019

Portfolio Company

Realization Event

The Wolf Organization, LLC

Exit of portfolio company

Vanguard Dealer Services, L.L.C.

Sale of portfolio company

New Era Technology, Inc.

Exit of portfolio company

Malabar International

Escrow distribution

inthinc Technology Solutions, Inc.

Exit of portfolio company

Trantech Radiator Products, Inc.

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Net realized gain (loss) on investments

Income tax provision from realized gains on investments

Income tax (provision) benefit from realized gains on investments

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

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portfolio company investments).

During the three and six months ended June 30, 2020 and 2019, we recorded a net

change in unrealized appreciation (depreciation) on investments attributable to the following (dollars in millions):

During the three and nine months ended September 30, 2020 and 2019, we recorded a

net change in unrealized appreciation (depreciation) on investments attributable to the following (dollars in millions):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Unrealized Appreciation (Depreciation)

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Net Increase in Net Assets Resulting From Operations

Net increase (decrease) in net assets resulting from operations during the three months ended June 30, 2020 and 2019 was $8.0 million

and $3.2 million, respectively, as a result of the events described above.

Net increase in net assets resulting from operations

during the six months ended June 30, 2020 and 2019 was $(19.0) million and $14.6 million, respectively, as a result of the events described above.

Net increase (decrease) in net assets resulting from operations during the three months ended September 30, 2020 and 2019 was

$20.7 million and $13.9 million, respectively, as a result of the events described above.

Net increase in net assets resulting

from operations during the nine months ended September 30, 2020 and 2019 was $1.7 million and $28.5 million, respectively, as a result of the events described above.

Liquidity and Capital Resources

As of June 30, 2020, we had $19.3 million in cash and cash equivalents and our net assets totaled $376.2 million.

that our current cash and cash equivalents on hand, our Credit Facility, our continued access to SBA-guaranteed debentures, and our anticipated cash flows from investments will provide adequate capital

As of September 30, 2020, we had $24.7 million in cash and cash equivalents and our net assets totaled $389.6 million.

believe that our current cash and cash equivalents on hand, our Credit Facility, our continued access to SBA-guaranteed debentures, and our anticipated cash flows from investments will provide adequate capital

resources with which to operate and finance our investment business and make distributions to our stockholders for at least the next 12 months.

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short-term and long-term basis, our primary use of funds will be investments in portfolio companies and cash distributions to our stockholders.

During the six months ended June 30, 2020, we repaid $7.0 million of SBA debentures which would

have matured during the period September 1, 2024 through September 1, 2028.

Our remaining outstanding SBA debentures continue to mature in 2025 and subsequent years through 2030, which will require repayment on or before the respective

maturity dates.

For the six months ended June 30, 2020, we experienced a net increase in cash and cash equivalents in the amount of $4.3 million.

During the nine months ended September 30, 2020, we repaid $16.5 million of SBA debentures

which would have matured during the period September 1, 2024 through September 1, 2028.

Our remaining outstanding SBA debentures continue to mature in 2025 and subsequent years through 2030, which will require repayment on or before the

respective maturity dates.

For the nine months ended September 30, 2020, we experienced a net increase in cash and cash equivalents in the amount of

$9.7 million.

During that period, $47.1 million of cash was provided by operating activities, which included the funding of $86.1 million of investments, which were offset by proceeds received from sales and repayments of investments of

$110.1 million.

During the same period, we received net borrowings of $18.0 million under our Credit Facility, partially offset by cash dividends paid to stockholders of $16.9 million, net repayments of SBA debentures of

$1.0 million, payment of deferred financing costs related to our debt financings of $0.5 million, and repurchases of common stock under the Stock Repurchase Program of $0.3 million.

During the same period, we paid $24.2 million in cash dividends to stockholders, repaid net SBA debentures of $10.5 million, repaid net borrowings of $2.0 million under our Credit Facility, paid deferred financing

costs related to our debt financings of $0.5 million, and repurchased of common stock under the Stock Repurchase Program of $0.3 million.

Capital Resources

We anticipate that we will continue to fund our investment activities on a long-term basis through a combination of additional debt and equity

anticipate that we will continue to fund our investment activities on a long-term basis through a combination of additional debt and equity capital.

SBA debentures

The Funds are licensed SBICs, and have the ability to issue debentures guaranteed by the SBA at favorable interest rates.

Under the Small

Business Investment Act and the SBA rules applicable to SBICs, an SBIC can have outstanding at any time debentures guaranteed by the SBA in an amount up to twice its regulatory capital.

The SBA regulations currently limit the amount that is

available to be borrowed by any SBIC and guaranteed by the SBA to 300.0% of an SBICs regulatory capital or $175.0 million, whichever is less.

For three or more SBICs under common control, the maximum amount of outstanding SBA debentures

cannot exceed $350.0 million.

SBA debentures have fixed interest rates that approximate prevailing 10-year Treasury Note rates plus a spread and have a maturity of ten years with interest payable

semi-annually.

are licensed SBICs, and have the ability to issue debentures guaranteed by the SBA at favorable interest rates.

Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC can have outstanding at any time debentures

guaranteed by the SBA in an amount up to twice its regulatory capital.

The SBA regulations currently limit the amount that is available to be borrowed by any SBIC and guaranteed by the SBA to 300.0% of an SBICs regulatory capital or

$175.0 million, whichever is less.

For three or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350.0 million.

SBA debentures have fixed interest rates that approximate prevailing 10-year Treasury Note rates plus a spread and have a maturity of ten years with interest payable semi-annually.

The principal amount of the SBA debentures is not required to be paid before maturity but may be pre-paid at any time.

As of June 30, 2020, Fund II and Fund III had $143.0 million and

$13.5 million of outstanding SBA debentures, respectively.

Subject to SBA regulatory requirements and approval, Fund III may access up to $161.5 million of additional SBA debentures under the SBIC debenture program.

For more information on

the SBA debentures, please refer to Note 6 to our consolidated financial statements.

As of September 30, 2020, Fund II and Fund III had $133.5 million and $13.5 million of outstanding SBA debentures, respectively.

Subject to SBA regulatory requirements and

approval, Fund III may access up to $161.5 million of additional SBA debentures under the SBIC debenture program.

For more information on the SBA debentures, please refer to Note 6 to our consolidated financial statements.

Credit Facility

In June 2014, we entered into the Credit Facility to provide additional funding for our investment and operational activities.

April 24, 2019, we entered into the Amended Credit Agreement, which amends, restates, and replaces the Credit Facility.

On June 26, 2020, the Company amended the Amended Credit Agreement, however the material terms were unchanged.

other revisions, the amendment to the Amended Credit Agreement modifies certain covenants therein, including to amend the minimum consolidated interest coverage ratio to be 2.25 to 1.00 for the four quarter period ending on June 30, 2020, 2.00

to 1.00 for the four quarter periods ending on each of September 30, 2020 and December 31, 2020, and 1.75 to 1.00 for each four quarter period ending at the end of each quarter thereafter.

The Credit Facility is secured by substantially

all of our assets, excluding the assets of the Funds.

Under the Amended Credit Agreement, (i) revolving commitments by lenders were

increased from $90.0 million to $100.0 million, with an accordion feature that allows for an increase in total commitments up to $250.0 million, subject to satisfaction of certain conditions at the time of any such future increase,

(ii) the maturity date of the credit facility was extended from June 16, 2019 to April 24, 2023, and (iii) borrowings under the Credit Facility bear interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75%

if certain conditions are satisfied, including if (x) no equity interests are included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater

than or equal to 35%, and (z) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus

the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus

1.0%, and (D) zero.

We pay a commitment fee that varies depending on the size of the unused portion of the Credit Facility:

3.00% per annum on the unused portion of the Credit Facility at or below 35% of the commitments and 0.50% per annum on

any remaining unused portion of the Credit Facility between the total commitments and the 35% minimum utilization.

The Amended Credit Agreement also modifies certain covenants in the Credit Facility, including to provide for a minimum asset coverage

ratio of 2.00 to 1 (on a regulatory basis).

2014, we entered into the Credit Facility to provide additional funding for our investment and operational activities.

On April 24, 2019, we entered into the Amended Credit Agreement, which amends, restates, and replaces the Credit Facility.

June 26, 2020, the Company amended the Amended Credit Agreement, however the material terms were unchanged.

Among other revisions, the amendment to the Amended Credit Agreement modifies certain covenants therein, including to amend the minimum

consolidated interest coverage ratio to be 2.25 to 1.00 for the four quarter period ending on June 30, 2020, 2.00 to 1.00 for the four quarter periods ending on each of September 30, 2020 and December 31, 2020, and 1.75 to 1.00 for

each four quarter period ending at the end of each quarter thereafter.

The Credit Facility is secured by substantially all of our assets, excluding the assets of the Funds.

Under the Amended Credit Agreement, (i) revolving commitments by lenders were increased from $90.0 million to $100.0 million,

with an accordion feature that allows for an increase in total commitments up to $250.0 million, subject to satisfaction of certain conditions at the time of any such future increase, (ii) the maturity date of the credit facility was

extended from June 16, 2019 to April 24, 2023, and (iii) borrowings under the Credit Facility bear interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if

(x) no equity interests are included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the

contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR

rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero.

commitment fee that varies depending on the size of the unused portion of the Credit Facility:

3.00% per annum on the unused portion of the Credit Facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the

Credit Facility between the total commitments and the 35% minimum utilization.

The Amended Credit Agreement also modifies certain covenants in the Credit Facility, including to provide for a minimum asset coverage ratio of 2.00 to 1 (on a regulatory

The Credit Facility is secured by a first priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries.

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These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility.

As of June 30, 2020, we were in compliance with all

covenants of the Credit Facility.

As of September 30, 2020, we were in compliance with

all covenants of the Credit Facility.

On February 2, 2018, we closed the public offering of approximately $43.5 million in aggregate principal amount of our 5.875% notes

due 2023, or the 2023 Notes. On February 22, 2018, the underwriters exercised their option to purchase an additional $6.5 million in aggregate principal of the 2023 Notes.

The total net proceeds to us from the 2023 Notes, including

the exercise of the underwriters option, after deducting underwriting discounts of approximately $1.5 million and offering expenses of $0.4 million, were approximately $48.1 million.

The total net proceeds to us from the 2023 Notes,

including the exercise of the underwriters option, after deducting underwriting discounts of approximately $1.5 million and offering expenses of $0.4 million, were approximately $48.1 million.

The 2023 Notes will mature on February 1, 2023 and bear interest at a rate of 5.875%.

The 2023 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after February 1, 2020.

Interest on the 2023 Notes is payable quarterly on February 1, May 1, August 1 and November 1 of

The 2023 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSL. As of June 30, 2020, the outstanding principal balance of the 2023 Notes was $50.0 million.

The 2023 Notes may be redeemed in whole or in part

at any time or from time to time at our option on or after February 1, 2020.

Interest on the 2023 Notes is payable quarterly on February 1, May 1, August 1 and November 1 of each year.

The 2023 Notes are listed on the NASDAQ

Global Select Market under the trading symbol FDUSL. As of September 30, 2020, the outstanding principal balance of the 2023 Notes was $50.0 million.

On February 8, 2019, we closed the public offering of approximately $60.0 million in aggregate principal amount of our 6.000% notes

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Interest on the 2024 Notes is payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning May 15, 2019.

2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSZ. As of June 30, 2020, the outstanding principal balance of the 2024 Notes was $69.0 million.

2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSZ. As of September 30, 2020, the outstanding principal balance of the 2024 Notes was $69.0 million.

On October 16, 2019, we closed the public offering of approximately $55.0 million in aggregate principal amount of our 5.375% notes

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The November 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol FDUSG. As

of June 30, 2020, the outstanding principal balance of the November 2024 Notes was approximately $63.3 million.

of September 30, 2020, the outstanding principal balance of the November 2024 Notes was approximately $63.3 million.

Notes are unsecured obligations and rank pari passu with our future unsecured indebtedness;

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other obligations of any of our subsidiaries, financing vehicles, or similar facilities we may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities.

As of June 30, 2020, the weighted average stated interest rates for our SBA debentures, Public Notes, and the Credit Facility were

As of September 30, 2020, the weighted average stated interest rates for our SBA debentures, Public Notes, and the Credit Facility were

3.297%, 5.749%, and 3.188% respectively.

As of June 30, 2020, we had $57.0 million of unutilized commitment under our Credit Facility, and we were subject to a 0.500% fee on such amount.

As of June 30, 2020, the weighted average

stated interest rate on total debt outstanding was 4.484%.

As a BDC, we are generally required to meet an asset coverage ratio of at

least 200.0% (or 150.0% on and after April 29, 2020) (defined as the ratio which the value of our consolidated total assets, less all consolidated liabilities and indebtedness not represented by senior securities, bears to the aggregate amount

of senior securities representing indebtedness), which includes borrowings and any preferred stock we may issue in the future.

As of September 30, 2020, we had $77.0 million of unutilized commitment under our Credit Facility, and we were subject to a 0.890% fee on such amount.

As of September 30, 2020, the weighted

average stated interest rate on total debt outstanding was 4.558%.

As a BDC, we are generally required to meet an asset coverage ratio of

at least 200.0% (or 150.0% on and after April 29, 2020) (defined as the ratio which the value of our consolidated total assets, less all consolidated liabilities and indebtedness not represented by senior securities, bears to the aggregate

amount of senior securities representing indebtedness), which includes borrowings and any preferred stock we may issue in the future.

This requirement limits the amount that we may borrow.

We have received exemptive relief from the SEC to allow us to

exclude any indebtedness guaranteed by the SBA and issued by the Funds from the 200.0% asset coverage requirements, which, in turn, will enable us to fund more investments with debt capital.

Recent legislation, however, modifies the required minimum

asset coverage ratio from 200.0% to 150.0%, if certain requirements are met.

Under the legislation, we are allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when a quorum is present,

approve a proposal to do so.

We have received exemptive relief from the SEC to allow us

to exclude any indebtedness guaranteed by the SBA and issued by the Funds from the 200.0% asset coverage requirements, which, in turn, will enable us to fund more investments with debt capital.

Recent legislation, however, modifies the required

minimum asset coverage ratio from 200.0% to 150.0%, if certain requirements are met.

Under the legislation, we are allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when a quorum is

present, approve a proposal to do so.

If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval.

Alternatively, the legislation allows the majority of the Independent Directors to approve

an increase in our leverage capacity, and such approval would become effective after the one-year anniversary of such approval.

On April 29, 2019, the Board, including a majority of the Independent Directors, approved a minimum asset coverage ratio of 150% under

Sections 18(a)(1) and 18(a)(2) of the 1940 Act.

Alternatively, the legislation allows the majority of the Independent Directors to

approve an increase in our leverage capacity, and such approval would become effective after the one-year anniversary of such approval.

On April 29, 2019, the Board, including a majority of the Independent Directors,

approved a minimum asset coverage ratio of 150% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act.

As a result, we became subject to the 150% asset coverage ratio effective as of April 29, 2020.

At present time, we do not intend to seek stockholder approval to reduce our asset coverage

As of June 30, 2020, the aggregate amount outstanding of the senior securities issued by the Company was $225.3 million, for which our asset coverage was 267.0%.

The SBA-guaranteed

debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective March 27, 2012.

The asset coverage ratio for a class of senior securities representing indebtedness

is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.

As a BDC, we are generally not permitted to issue and sell our common stock at a price below

net asset value per share.

We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if the Board, including the Independent

Directors, determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale.

On June 4, 2020, our stockholders voted to allow us to sell or otherwise issue common stock at a price below

net asset value per share for a period of one year ending on the earlier of June 4, 2021 or the date of our 2021 Annual Meeting of Stockholders.

We expect to present to our stockholders a similar proposal at our 2021 Annual Meeting of

Stockholders.

Our stockholders specified that the cumulative number of shares sold in each offering during the one-year period ending on the earlier of June 4, 2021 or the date of our 2021 Annual Meeting

of Stockholders may not exceed 25.0% of our outstanding common stock immediately prior to each such sale.

At present time, we do not intend to seek

stockholder approval to reduce our asset coverage requirement.

As of September 30, 2020, the aggregate amount outstanding of the senior securities issued by the Company was $205.3 million, for which our asset coverage was 289.8%.

The SBA-guaranteed debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective March 27, 2012.

The asset coverage ratio for a

class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.

As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value per share.

We may, however, sell

our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if the Board, including the Independent Directors, determines that such sale is in the best

interests of us and our stockholders, and if our stockholders approve such sale.

On June 4, 2020, our stockholders voted to allow us to sell or otherwise issue common stock at a price below net asset value per share for a period of one year

ending on the earlier of June 4, 2021 or the date of our 2021 Annual Meeting of Stockholders.

We expect to present to our stockholders a similar proposal at our 2021 Annual Meeting of Stockholders.

Our stockholders specified that the cumulative

number of shares sold in each offering during the one-year period ending on the earlier of June 4, 2021 or the date of our 2021 Annual Meeting of Stockholders may not exceed 25.0% of our outstanding

common stock immediately prior to each such sale.

Stock Repurchase Program

We have an open market stock repurchase program (the Stock Repurchase Program) under which we may acquire up to

$5.0 million of our outstanding common stock.

Under the Stock Repurchase Program, we may, but are not obligated to, repurchase outstanding common stock in the open market from time to time provided that we comply with the prohibitions under our

insider trading policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market value and timing constraints.

The timing, manner, price and

amount of any share repurchases will be determined by our management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate

considerations.

On October 29, 2019, the Board extended the Stock Repurchase Program through December 31, 2020, or until the approved dollar amount has been used to repurchase shares.

The Stock Repurchase Program does not require us

to repurchase any specific number of shares and we cannot assure that any shares will be repurchased under the Stock Repurchase Program.

We have an open market stock repurchase program (the Stock Repurchase Program) under which we may acquire up to $5.0 million

of our outstanding common stock.

Under the Stock Repurchase Program, we may, but are not obligated to, repurchase outstanding common stock in the open market from time to time provided that we comply with the prohibitions under our insider trading

policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market value and timing constraints.

The timing, manner, price and amount of any share repurchases will be determined by our

management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate considerations.

On October 26, 2020, the Board

extended the Stock Repurchase Program through December 31, 2021, or until the approved dollar amount has been used to repurchase shares.

The Stock Repurchase Program does not require us to repurchase any specific number of shares and we cannot

assure that any shares will be repurchased under the Stock Repurchase Program.

The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time.

During the three

and six months ended June 30, 2020, we repurchased zero and 25,719 shares of common stock on the open market for zero and $0.3 million, respectively.

We did not make any repurchases of common stock during the three and six months ended

June 30, 2019.

Refer to Note 8 to our consolidated financial statements for additional information concerning stock repurchases.

Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make

certain estimates and assumptions affecting amounts reported in the financial statements.

During the three and nine months ended September 30, 2020, we

repurchased zero and 25,719 shares of common stock on the open market for zero and $0.3 million, respectively.

We did not make any repurchases of common stock during the three and nine months ended September 30, 2019.

Refer to Note 8 to

our consolidated financial statements for additional information concerning stock repurchases.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make certain estimates and assumptions

affecting amounts reported in the financial statements.

We have identified investment valuation and revenue recognition as our most critical accounting estimates.

We continuously evaluate our estimates, including

those related to the matters described below.

We continuously evaluate our estimates, including those related to the matters

described below.

These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results could differ

materially from those estimates under different assumptions or conditions.

Actual results could differ materially from those estimates

under different assumptions or conditions.

A discussion of our critical accounting policies follows.

Portfolio Investments

As a BDC, we report our assets and liabilities at fair value at all times consistent with GAAP and the 1940

Accordingly, we are required to periodically determine the fair value of all of our portfolio investments.

Our investments generally

consist of illiquid securities including debt and equity investments in lower middle-market companies.

Valuation of Portfolio Investments

As a BDC, we report our assets and liabilities at fair value at all times consistent with GAAP and the 1940 Act.

Accordingly, we are required

to periodically determine the fair value of all of our portfolio investments.

Our investments generally consist of illiquid securities

including debt and equity investments in lower middle-market companies.

Investments for which market quotations are readily available are valued at such market quotations.

Because we expect that there will not be a

readily available market for substantially all of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by the Board using a documented valuation policy and consistently

applied valuation process.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have

been used had a readily available market value existed for such investments, and the difference could be material.

With respect to

investments for which market quotations are not readily available, the Board undertakes a multi-step valuation process each quarter, as described below:

Because we expect that there will not be a readily available market for

substantially all of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by the Board using a documented valuation policy and consistently applied valuation process.

to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available

market value existed for such investments, and the difference could be material.

With respect to investments for which market quotations

are not readily available, the Board undertakes a multi-step valuation process each quarter, as described below:

our quarterly valuation process begins with each portfolio company or investment being initially evaluated and

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The Board consulted with the independent valuation firm(s) in arriving at our determination of fair value for 17 and 13 of our portfolio company investments representing 25.8% and 30.9% of the total portfolio investments at fair value

(exclusive of new portfolio company investments made during the three months ended June 30, 2020 and December 31, 2019, respectively) as of June 30, 2020 and December 31, 2019, respectively;

(exclusive of new portfolio company investments made during the three months ended September 30, 2020 and December 31, 2019, respectively) as of September 30, 2020 and December 31, 2019, respectively;

the audit committee of the Board reviews the preliminary valuations of the Investment Advisor and of the

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The Company is evaluating the potential impact that the adoption of ASU 2020-04 will have on the Companys consolidated financial statements.

SEC Rule 12b-2 Update

In March 2020, the

SEC adopted a final rule under SEC Release No.

34-88365 (the Final Rule), amending the accelerated filer and large accelerated filer definitions in Exchange Act Rule 12b-2.

The amendments

include a provision under which a BDC will be excluded from the accelerated filer and large accelerated filer definitions if the BDC has (1) a public float of $75 million or more, but less than $700 million,

and (2) has annual investment income of less than $100 million.

In addition, BDCs are subject to the same transition provisions for accelerated filer and large accelerated filer status as other issuers, but instead substituting investment

income for revenue.

The amendments will reduce the number of issuers required to comply with the auditor attestation on the internal control over financial reporting requirement provided under Section 404(b) of the Sarbanes-Oxley Act of

The Final Rule applies to annual report filings due on or after April 27, 2020.

The Company is currently assessing this Final Rule, but believes it will no longer be an accelerated filer.

Off-Balance Sheet Arrangements

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We had off-balance sheet arrangements consisting of outstanding commitments to fund various undrawn revolving loans, other debt investments and capital

commitments totaling $4.9 and 4.8 million as of June 30, 2020 and December 31, 2019, respectively.

commitments totaling $4.0 and 4.8 million as of September 30, 2020 and December 31, 2019, respectively.

Such outstanding commitments are summarized in the following table (dollars in millions):

June 30, 2020

September 30, 2020

December 31, 2019

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The Investment Advisor, in consultation with the Board, agreed to voluntarily waive $0.4 of the income incentive

fee for the three and six months ended June 30, 2020.

There was no income incentive fee waiver for the three and six months ended June 30, 2019.

fee for the nine months ended September 30, 2020.

There was no income incentive fee waiver for the three months ended September 30, 2020 and the three and nine months ended September 30, 2019.

In connection with the IPO and our election to be regulated as a BDC, we applied for and received exemptive relief from the SEC on

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pursuant to Rule 17j-1 under the 1940 Act that governs the conduct of our and the Investment Advisors officers, directors and employees.

Additionally, the Investment Advisor has adopted a code

of ethics pursuant to rule 204A-1 under the Investment Advisers Act of 1940, as amended, and in accordance with Rule 17j-1(c) under the 1940 Act.

have also adopted a code of business conduct that is applicable to all officers, directors and employees of Fidus and the Investment Advisor.

Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland

General Corporation Law.

Additionally, the Investment Advisor has adopted a code of ethics pursuant to

rule 204A-1 under the Investment Advisers Act of 1940, as amended, and in accordance with Rule 17j-1(c) under the 1940 Act.

We have also adopted a code of business conduct that is applicable to all officers, directors and

employees of Fidus and the Investment Advisor.

Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.

Recent Developments

On July 2, 2020, the Company exited its debt investment in Hoonuit, LLC.

The Company received payment in full of $7.3 million on its

first lien debt, which includes a prepayment penalty.

On July 24, 2020, we exited our debt and equity investments in Microbiology

Research Associates, Inc.

We received payment in full of $9.0 million on our subordinated debt investment.

We sold our common equity investment for a realized gain of approximately $1.4 million.

On August 3, 2020, the Board declared a regular quarterly dividend of $0.30 per share payable on September 25, 2020 to stockholders

of record as of September 11, 2020.

Subsequent to June 30, 2020, the global outbreak of the

COVID-19 pandemic, and the related effect on the U.S.

On October 1, 2020,

we exited our debt and equity investments in Pugh Lubricants, LLC.

We received payment in full of $26.6 million on our subordinated debt investment, which includes a prepayment fee.

We received a distribution on our common equity investment for a

realized gain of approximately $0.5 million.

On October 26, 2020, our Board declared a regular quarterly dividend of $0.30 per share

payable on December 18, 2020 to stockholders of record as of December 4, 2020.

In addition, our Board of Directors declared a supplemental dividend of $0.04 per share payable December 18, 2020 to stockholders of record as of December 4, 2020.

On October 28, 2020, we invested $6.0 million in second lien debt, which was a partial funding of a $12.0 million note commitment, and $1.5

million common equity in a leading regional distributor of pool equipment and supplies.

Subsequent to September 30, 2020, the global

outbreak of the COVID-19 pandemic, and the related effect on the U.S.

and global economies, has continued to have adverse consequences for the business operations of some of the Companys portfolio companies.

ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, remain uncertain.

The operational and financial performance of the issuers of securities in which the Company invests

depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Companys investments and negatively impact the Companys performance.

The ultimate economic fallout from

the pandemic, and the long-term impact on economies, markets, industries and individual issuers, remain uncertain.

The operational and financial performance of the issuers of securities in which the Company invests depends on future developments,

including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Companys investments and negatively impact the Companys performance.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements