What changed in this filing

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Item 1. Business

2021-02-25 compared with 2020-02-27 · 146 added, 146 removed, 1029 unchanged (22% of the section changed)

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Select Market under the symbol FDUS.

FIC may make investments directly or through its three wholly-owned investment company

subsidiaries, Fidus Mezzanine Capital, L.P.

(Fund I), Fidus Mezzanine Capital II, L.P.

FIC may make investments directly or through its two wholly-owned investment company

subsidiaries, Fidus Mezzanine Capital II, L.P.

(Fund II) and Fidus Mezzanine Capital III, L.P.

(Fund III)(collectively Fund I, Fund II and Fund III are referred to as the

Fidus Investment GP, LLC, the general partner of the Funds, is also a wholly owned subsidiary of FIC.

(Fund III) (collectively Fund II and Fund III are referred to as the Funds).

Fidus Investment GP, LLC, the general

partner of the Funds, is also a wholly owned subsidiary of FIC.

The Funds are licensed by the U.S.

Small Business Administration (the SBA) as small business investment companies

The Funds utilize the proceeds of the issuance of SBA-guaranteed debentures to enhance returns to our stockholders.

As of September 9, 2019, Fund I completed a wind-down plan,

relinquished its SBIC license, and can no longer issue additional SBA debentures.

Small Business Administration (the SBA) as small business investment companies (SBICs).

The Funds utilize the proceeds of the

issuance of SBA-guaranteed debentures to enhance returns to our stockholders.

As of September 9, 2019, Fidus Mezzanine Capital, L.P.

(Fund I) completed a wind-down plan, relinquished its SBIC

license, and can no longer issue additional SBA debentures.

We believe that utilizing both FIC and the Funds as investment vehicles provides us with access to a broader array of investment opportunities.

Given our access to

lower cost capital through the SBAs SBIC debenture program, we expect that we will continue to make investments through the Funds until the Funds reach their borrowing limit under the program.

For three or more SBICs under common control, the

maximum amount of outstanding SBA debentures cannot exceed $350.0 million.

Given our access to lower cost capital

through the SBAs SBIC debenture program, we expect that we will continue to make investments through the Funds until the Funds reach their borrowing limit under the program.

For two or more SBICs under common control, the maximum amount of

outstanding SBA debentures cannot exceed $350.0 million.

Overview of our Business

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For the year ended December 31, 2020, our total return based on net asset value (NAV) per share was 7.6% and our total return based on market value was 1.0%.

year ended December 31, 2018, our total return based on NAV was 12.6% and our total return based on market value was (15.8)%.

ended December 31, 2019, our total return based on NAV was 12.0% and our total return based on market value was 37.6%.

Total return based on net asset value per share equals the change in net asset value per share during the period, plus

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These professionals also have expertise in structuring securities at all levels of the capital structure, which we believe positions us well to meet the unique financing needs of our portfolio companies.

We invest primarily in second lien and

subordinated debt securities, typically coupled with an equity interest;

however, on a selective basis we may invest in first lien senior secured or unitranche loans.

Further, as a publicly-traded BDC, we have a longer investment horizon without the

capital return requirements of traditional private investment vehicles.

We believe this flexibility enables us to generate attractive risk-adjusted returns on invested capital and enables us to be a better long-term partner for our portfolio

We believe that by leveraging the industry and structuring expertise of our investment advisor coupled with our long-term investment horizon, we are well positioned to be a value-added partner for our portfolio companies.

We invest primarily in first lien senior

secured or unitranche loans, second lien and subordinated debt securities, typically coupled with an equity interest.

Further, as a publicly-traded BDC, we have a longer investment horizon without the capital return requirements of traditional

private investment vehicles.

We believe this flexibility enables us to generate attractive risk-adjusted returns on invested capital and enables us to be a better long-term partner for our portfolio companies.

We believe that by leveraging the

industry and structuring expertise of our investment advisor coupled with our long-term investment horizon, we are well positioned to be a value-added partner for our portfolio companies.

Employing Rigorous Due Diligence and Underwriting Processes Focused on Capital Preservation .

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These SBA debentures carry long-term fixed rates that are generally lower than rates on comparable bank and public debt.

Because lower-cost SBA leverage is, and will continue to be,

a significant part of our funding strategy, our relative cost of debt capital should be lower than many of our competitors.

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

$350.0 million.

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

Our investments

typically range between $5.0 million to $30.0 million per portfolio company, although this investment size may vary proportionately with the size of our capital base.

Our investment objective is to provide attractive risk-adjusted returns

by generating both current income from our debt investments and capital appreciation from our equity related investments.

We may invest in the equity securities of our portfolio companies, such as preferred stock, common stock, warrants and other

equity interests, either directly or in conjunction with our debt investments.

Because lower-cost SBA leverage is a significant part of our

funding strategy, our relative cost of debt capital should be lower than many of our competitors.

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

create a diversified investment portfolio that primarily includes loans and, to a lesser extent, equity securities.

Our investments typically range between $5.0 million to $35.0 million per portfolio company, although this investment size

may vary proportionately with the size of our capital base.

Our investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related

We may invest in the equity securities of our portfolio companies, such as preferred stock, common stock, warrants and other equity interests, either directly or in conjunction with our debt investments.

Second Lien Debt.

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Specialty Distribution

Business Services

Information Technology Services

Business Services

Healthcare Products

Healthcare Services

Component Manufacturing

Healthcare Services

Aerospace & Defense Manufacturing

Oil & Gas Services

Vending Equipment Manufacturing

Promotional Products

Transportation Services

Consumer Products

Promotional Products

Building Products Manufacturing

Transportation Services

Oil & Gas Services

Environmental Industries

Oil & Gas Distribution

Industrial Cleaning & Coatings

Utility Equipment Manufacturing

Oil & Gas Distribution

Vending Equipment Manufacturing

Specialty Chemicals

Capital Equipment Manufacturing

Percentage is less than 0.1% of respective total.

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We expect some loss of principal.

The following table shows the distribution

of our investments on the 1 to 5 investment rating scale at fair value and cost as of December 31, 2019 and 2018 (dollars in millions).

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

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

Investment Rating

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MANAGEMENT AND OTHER AGREEMENTS

investment advisor is located at 1603 Orrington Avenue, Suite 1005, Evanston, Illinois 60201.

Our investment advisor also maintains additional office space at 227 West Trade Street Suite 1910, Charlotte, North Carolina 28202, and 1140 Avenue of the

Americas, Suite 1500, New York, New York 10036.

Our investment advisor is registered as an investment adviser under the Advisers Act.

Subject to the overall supervision of our board of directors and in accordance with the 1940 Act, our investment

advisor manages our day-to-day operations and provides investment advisory services to us.

Our investment advisor is located at 1603 Orrington Avenue, Suite 1005, Evanston, Illinois 60201.

Our investment advisor also maintains

additional office space at 227 West Trade Street Suite 1910, Charlotte, North Carolina 28202, and 1140 Avenue of the Americas, 21 st Floor, New York, New York 10036.

Our investment advisor is

registered as an investment adviser under the Advisers Act.

Subject to the overall supervision of our board of directors and in accordance with the 1940 Act, our investment advisor manages our day-to-day operations and provides investment advisory services to us.

Under the terms of the Investment Advisory Agreement, our investment advisor:

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any, that exceeds 2.5% in any calendar quarter.

These calculations are appropriately prorated for any period of less

than three months and adjusted for any share issuances or repurchases during the current quarter.

The following is a graphical representation of the calculation of the quarterly income-related portion of

the incentive fee:

Quarterly Incentive Fee Based on Pre-Incentive Fee Net Investment Income

These calculations are appropriately prorated for any period of less than three months and

adjusted for any share issuances or repurchases during the current quarter.

The following is a graphical representation of the calculation of the

quarterly income-related portion of the incentive fee:

Quarterly Incentive Fee Based on

Pre-Incentive Fee Net Investment Income

Pre-incentive fee net investment income

(expressed as a percentage of the value of net assets)

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(2.2625% 2.0%)

Pre-incentive fee net investment income exceeds the

hurdle rate, but does not fully satisfy the catch-up provision, therefore the income related portion of the incentive fee is 0.2625%.

Pre-incentive fee net investment income exceeds the hurdle rate, but

does not fully satisfy the catch-up provision, therefore the income related portion of the incentive fee is 0.2625%.

Alternative 3

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= 0.5% + 0.0725%

Pre-incentive fee net investment income exceeds the hurdle rate

and fully satisfies the catch-up provision, therefore the income related portion of the incentive fee is 0.5725%.

Pre-incentive fee net investment income exceeds the hurdle rate and

fully satisfies the catch-up provision, therefore the income related portion of the incentive fee is 0.5725%.

Represents 8.0% annualized hurdle rate.

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Duration and Termination

At an in-person meeting of our board of directors on June 6, 2019, our board of directors,

including a majority of the Independent Directors, unanimously voted to approve the continuation of the Investment Advisory Agreement to June 20, 2020.

Unless terminated earlier, the Investment Advisory Agreement will automatically renew for

successive annual periods if approved annually by our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities (as that term is defined in the 1940 Act), including, in either case, approval by a

majority of the Independent Directors.

In reaching a decision to approve the current Investment Advisory Agreement, our board of

directors reviewed information comparing our investment performance to other externally managed BDCs with similar investment objectives and to appropriate market indices.

At a meeting of our board of directors on June 4, 2020, our board of directors, including a majority of the Independent Directors,

unanimously voted to approve the continuation of the Investment Advisory Agreement to June 20, 2021.

Unless terminated earlier, the Investment Advisory Agreement will automatically renew for successive annual periods if approved annually by our

board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities (as that term is defined in the 1940 Act), including, in either case, approval by a majority of the Independent Directors.

In reaching a decision to approve the current Investment Advisory Agreement, our board of directors reviewed information comparing our

investment performance to other externally managed BDCs with similar investment objectives and to appropriate market indices.

The board also reviewed other information and considered, among other things:

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To the extent that our investment advisor outsources any of its functions, we will pay the fees associated with such functions on a direct basis without profit to our investment

At an in-person meeting of our board of directors on June 6, 2019, our board of

directors, including a majority of the Independent Directors, unanimously voted to approve the continuation of the Administration Agreement to June 20, 2020.

Unless terminated earlier, the Administration Agreement will automatically renew for

majority of our Independent Directors.

In making the decision to approve the continuation of the Administration Agreement, our board of directors took into account, to the extent relevant, certain information set forth above under Investment

Advisory Agreement Duration and Termination with respect to its consideration of the Investment Advisory Agreement.

At a meeting of our board of directors on June 4, 2020, our board of directors, including a majority of the Independent

Directors, unanimously voted to approve the continuation of the Administration Agreement to June 20, 2021.

Unless terminated earlier, the Administration Agreement will automatically renew for successive annual periods if approved annually by

our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities (as that term is defined in the 1940 Act), including, in either case, approval by a majority of our Independent Directors.

the decision to approve the continuation of the Administration Agreement, our board of directors took into account, to the extent relevant, certain information set forth above under Investment Advisory Agreement Duration and

Termination with respect to its consideration of the Investment Advisory Agreement.

The Administration Agreement may be terminated by either party without penalty upon 60

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We are permitted,

under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200.0% (or 150.0% on and after April 29, 2020)

immediately after each such issuance (exclusive of the SBA debentures pursuant to our SEC exemptive relief).

In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the

repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase.

We may also borrow amounts up to 5.0% of the value of our total assets for temporary or emergency purposes

without regard to asset coverage.

For a discussion of the risks associated with leverage, see Risk Factors Risks Relating to Our Business and Structure Regulations governing our operation as a BDC affect our ability to raise, and

the way in which we raise, additional capital which may have a negative effect on our growth.

the SBA debentures pursuant to our SEC exemptive relief).

In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we

meet the applicable asset coverage ratios at the time of the distribution or repurchase.

We may also borrow amounts up to 5.0% of the value of our total assets for temporary or emergency purposes without regard to asset coverage.

For a discussion of

the risks associated with leverage, see Risk Factors Risks Relating to Our Business and Structure Regulations governing our operation as a BDC affect our ability to raise, and the way in which we raise, additional capital which

may have a negative effect on our growth.

The SEC has proposed a new rule under the 1940 Act that would govern financial commitment

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Proxy Voting Records

You may obtain information about how our investment advisor voted proxies for us by making a written request for proxy voting

information to:

You may obtain information about how our investment advisor voted proxies for us by making a written request for proxy voting information to:

Fidus Investment Corporation, 1603 Orrington Avenue, Suite 1005, Evanston, Illinois 60201, Attention:

Investor Relations, or by calling Fidus Investment Corporation collect at (847) 859-3940.

(847) 859-3940.

Compliance Policies and Procedures

We, Fund I and our investment advisor have each adopted and implemented written policies and procedures reasonably designed to prevent

violation of federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation.

Our chief compliance officer is responsible for administering these

policies and procedures.

Fund I and our investment advisor have each adopted and implemented written policies and procedures reasonably designed to prevent violation of federal securities laws and are required to review these compliance policies and procedures annually for

their adequacy and the effectiveness of their implementation.

Our chief compliance officer is responsible for administering these policies and procedures.

Privacy Principles

We are committed to maintaining the privacy of our stockholders and to safeguarding their nonpublic personal information.

The following

information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.

From time to time, we may receive nonpublic personal information relating to our stockholders.

We do not disclose nonpublic personal

information about our stockholders or former stockholders to anyone, except as required by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third-party administrator).

We restrict access to nonpublic personal information about our stockholders to employees of our investment advisor, its affiliates or

authorized service providers that have a legitimate business need for the information.

We maintain physical, electronic and procedural safeguards designed to protect the nonpublic personal information of our stockholders.

Under the 1940 Act, we are

required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or

our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such persons office.

We are committed to

maintaining the privacy of our stockholders and to safeguarding their nonpublic personal information.

The following information is provided to help you understand what personal information we collect, how we protect that information and why, in

certain cases, we may share information with select other parties.

From time to time, we may receive nonpublic personal information

relating to our stockholders.

We do not disclose nonpublic personal information about our stockholders or former stockholders to anyone, except as required by law or as is necessary in order to service stockholder accounts (for example, to a

transfer agent or third-party administrator).

We restrict access to nonpublic personal information about our stockholders to employees of

our investment advisor, its affiliates or authorized service providers that have a legitimate business need for the information.

We maintain physical, electronic and procedural safeguards designed to protect the nonpublic personal information of our

stockholders.

Under the 1940

Act, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

Furthermore, as a BDC, we are prohibited from protecting any director or officer against any

liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such persons office.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior

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exemptive relief was amended to include Fund II and any future direct or indirect wholly owned subsidiary.

Therefore, any SBA debentures issued by Fund II are not subject to the 200.0% (or 150.0%, provided that certain requirements are met) asset

coverage requirement.

Therefore, any SBA debentures issued by Fund II and Fund III are not subject to the 150.0% asset coverage requirement.

Small Business Administration Regulations

The Funds are licensed by the SBA to operate as SBICs under Section 301(c) of the Small Business Investment Act of 1958.

Fund I, Fund II

and Fund III received their SBIC licenses on October 22, 2007, May 28, 2013, and March 21, 2019, respectively.

Fund II and Fund

III received their SBIC licenses on May 28, 2013, and March 21, 2019, respectively.

We may issue SBA debentures to fund additional investments through the Funds.

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However, once an SBIC has invested in a portfolio company, it may continue to make follow-on investments in the portfolio company, regardless of the size of the portfolio company at the time of the follow-on investment, up to the time of the portfolio companys initial public offering.

prohibits an SBIC from providing funds to small businesses for certain purposes, such as relending and investment outside the U.S., to businesses engaged in a few prohibited industries, and to certain passive (non-operating) companies.

In addition, under SBA regulations, without prior SBA approval, an SBIC may not invest more than 30.0% of its regulatory capital in any one portfolio company (assuming the SBIC intends to

draw leverage equal to twice its regulatory capital).

The SBA places certain limitations on the financing terms of investments by SBICs in

portfolio companies (such as limiting the permissible interest rate on debt securities held by an SBIC in a portfolio company).

SBA regulations allow an SBIC to exercise control over a small business for a period of seven years from the date on

which the SBIC initially acquires its control position.

The SBA prohibits an SBIC from providing funds to small businesses for certain purposes,

such as relending and investment outside the U.S., to businesses engaged in a few prohibited industries, and to certain passive (non-operating) companies.

In addition, under SBA regulations,

without prior SBA approval, an SBIC may not invest more than 30.0% of its regulatory capital in any one portfolio company (assuming the SBIC intends to draw leverage equal to twice its regulatory capital).

The SBA places certain limitations on the financing terms of investments by SBICs in portfolio companies (such as limiting the permissible

interest rate on debt securities held by an SBIC in a portfolio company).

SBA regulations allow an SBIC to exercise control over a small business for a period of seven years from the date on which the SBIC initially acquires its control position.

This control period may be extended for an additional period of time with the SBAs prior written approval.

The SBA restricts the ability of an SBIC to lend money to any of its officers, directors and employees or to invest in affiliates thereof.

SBA also prohibits, without prior SBA approval, a change of control of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10.0% or more of a class of capital stock of a licensed SBIC.

change of control is any event that would result in the transfer of the power, direct or indirect, to direct the management and policies of an SBIC, whether through ownership, contractual arrangements or otherwise.

An SBIC (or group of SBICs under common control) may generally have outstanding debentures guaranteed by the SBA in amounts up to two times

the amount of the regulatory capital of the SBIC(s).

Debentures guaranteed by the SBA have a maturity of ten years, require semi-annual payments of interest, and do not require any principal payments prior to maturity.

The amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding is limited to $350.0 million, subject to SBA approval.

SBICs must invest idle funds that are not being used to make loans in investments permitted under SBA regulations in the following limited

types of securities:

The SBA restricts the

ability of an SBIC to lend money to any of its officers, directors and employees or to invest in affiliates thereof.

The SBA also prohibits, without prior SBA approval, a change of control of an SBIC or transfers that would result in any

person (or a group of persons acting in concert) owning 10.0% or more of a class of capital stock of a licensed SBIC.

A change of control is any event that would result in the transfer of the power, direct or indirect, to direct the

management and policies of an SBIC, whether through ownership, contractual arrangements or otherwise.

An SBIC (or group of SBICs under

common control) may generally have outstanding debentures guaranteed by the SBA in amounts up to two times the amount of the regulatory capital of the SBIC(s).

Debentures guaranteed by the SBA have a maturity of ten years, require semi-annual

payments of interest, and do not require any principal payments prior to maturity.

The amount of SBA-guaranteed debentures that affiliated SBIC funds can have outstanding is limited to $350.0 million,

subject to SBA approval.

SBICs must invest idle funds that are not being used to make loans in investments permitted under SBA

regulations in the following limited types of securities:

(i) direct obligations of, or obligations guaranteed as to principal and interest by, the U.S.

government, which mature within 15 months from the date of the investment;

(ii) repurchase agreements with federally

insured institutions with a maturity of seven days or less (and the securities underlying the repurchase obligations must be direct obligations of or guaranteed by the federal government);

(iii) certificates of deposit with a maturity of one

year or less, issued by a federally insured institution;

(ii) repurchase agreements with federally insured institutions with a maturity of seven days or less (and the securities underlying the repurchase obligations must be direct obligations of or guaranteed by the federal government);

(iii) certificates of deposit with a maturity of one year or less, issued by a federally insured institution;

(iv) a deposit account in a federally insured institution that is subject to a withdrawal restriction of one year or less;

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or (vi) a reasonable petty cash fund.

SBICs are periodically examined and audited by the SBAs staff to determine their

compliance with SBA regulations and are periodically required to file certain forms with the SBA.

SBICs are periodically

examined and audited by the SBAs staff to determine their compliance with SBA regulations and are periodically required to file certain forms with the SBA.

Neither the SBA nor the U.S.

or any of its agencies or officers has approved any ownership interest to be issued by us or any obligation that we or any of our subsidiaries may incur.

government or any of its agencies or officers has approved any ownership interest to be issued by us or any

obligation that we or any of our subsidiaries may incur.

Sarbanes-Oxley Act of 2002

Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, imposes a wide variety of regulatory requirements on publicly held companies and their insiders.

The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, imposes a wide variety of regulatory requirements on publicly held companies and

their insiders.

Many of these requirements affect us.

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pursuant to Rule 13a-15 under the Exchange Act, our management must

prepare an annual report regarding its assessment of our internal control over financial reporting, which must be audited by our independent registered public accounting firm;

prepare an annual report regarding its assessment of our internal control over financial reporting;

pursuant to Item 308 of Regulation S-K and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these

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loss, or the Annual Distribution Requirement.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4.0% U.S.

excise tax on such income.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4.0% nondeductible

federal excise tax on such income.

In such case, we must distribute any such carryover taxable income through a distribution declared prior to filing the final tax return for the year in which we generated such taxable income.

Even if we maintain our status

as a RIC, we generally will be subject to corporate-level U.S.

maintain our status as a RIC, we generally will be subject to corporate-level U.S.

federal income tax on our undistributed taxable income and could be subject to U.S.

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unless we distribute in a timely manner an amount at least equal to the sum of (1) 98.0% of our investment company taxable income for each calendar year, (2) 98.2% of our capital gain net income for the

one-year period ending October 31 in that calendar year (or, if we so elect, for that calendar year) and (3) any income and capital gain net income that we recognized but were distributed in the

preceding calendar year and on which we paid no U.S.

one-year period ending October 31 in that calendar year (or, if we so elect, for that calendar year) and (3) any income and capital gain net income that we recognized in preceding years, but were not

distributed during such years, and on which we paid no U.S.

federal income tax.

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We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this

If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S.

federal income tax.

Furthermore, a portfolio company in which we invest may face financial difficulty that requires us to

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Diversification Tests.

If the partnership, however, is not treated as a qualified publicly traded partnership, then the consequences of an investment in

the partnership will depend upon the amount and type of income and assets of the partnership allocable to us.

The income derived from such investments may not be qualifying income for purposes of

the 90% Income Test and, therefore, could adversely affect our tax treatment as a RIC.

We intend to monitor our investments in equity securities of entities that are treated as partnerships for U.S.

federal income tax purposes to prevent our

disqualification as a RIC.

If the partnership, however, is not treated as a qualified publicly traded partnership, then the consequences of an investment in the partnership will depend upon the amount and type of income and assets of the

partnership allocable to us.

The income derived from such investments may not be qualifying income for purposes of the 90% Income Test and, therefore, could adversely affect our tax treatment as a RIC.

We intend to monitor our investments in equity

securities of entities that are treated as partnerships for U.S.

federal income tax purposes to prevent our disqualification as a RIC.

We may invest in preferred securities or other securities the U.S.

federal income tax treatment of which

may not be clear or may be subject to recharacterization by the Internal Revenue Service (IRS).

To the extent the tax treatment of such securities or the income from such securities differs from the expected tax treatment, it could

affect the timing or character of income recognized, requiring us to purchase or sell securities, or otherwise change our portfolio, in order to comply with the tax rules applicable to RICs under Subchapter M of the Code.

federal income tax

treatment of which may not be clear or may be subject to recharacterization by the Internal Revenue Service (IRS).

To the extent the tax treatment of such securities or the income from such securities differs from the expected tax

treatment, it could affect the timing or character of income recognized, requiring us to purchase or sell securities, or otherwise change our portfolio, in order to comply with the tax rules applicable to RICs under Subchapter M of the Code.

We may make distributions that are payable in cash or shares of our stock at the election of each stockholder.

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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-K

Item 1. Business