FIDUS INVESTMENT Corp 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are subject to financial market risks, including changes in interest rates. Changes in interest rates affect both our cost of funding and the valuation of our investment portfolio. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us. In the future, our investment income may also be affected by changes in various interest rates, including LIBOR and prime rates, to the extent of any debt investments that include floating interest rates. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. As of December 31, 2020 and 2019, 22 and 17 portfolio companies’ debt investments, respectively, bore interest at a variable rate, which represented $230.9 million and $181.3 million of our portfolio on a fair value basis, respectively, and the remainder of our debt portfolio was comprised entirely of fixed rate investments. Our pooled SBA debentures and our Public Notes bear interest at fixed rates. Our Credit Facility bears interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if (x) no equity interests are included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero. Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio. 77 Table of Contents The following table shows the approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of December 31, 2020 (dollars in millions): Basis Point Increase (Decrease) Interest Income Increase (Decrease) (1) (2) Interest Expense Increase (Decrease) (4) Net Increase (Decrease) Net Investment Income (3) (200) $ — $ — $ — $ — (150) — — — — (100) — — — — (50) — — — — 50 — — — — 100 0.2 — 0.2 0.2 150 0.7 — 0.7 0.6 200 1.5 — 1.5 1.2 250 2.7 — 2.7 2.2 300 3.8 — 3.8 3.0 (1) Certain of our variable rate debt investments have a LIBOR interest rate floor, which lessens the impact of decreases in interest rates . (2) Interest income calculated assuming three-month LIBOR rate as of December 31, 2020. (3) Includes the impact of income incentive fee at 20.0% on net increase (decrease) in net interest. (4) As of December 31, 2020, we did not have any borrowings outstanding under our Credit Facility, and our remaining debt obligations all carry fixed interest rates. Item 8. Consolidated Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page Reports of Independent Registered Public Accounting Firm 79 Consolidated Financial Statements 82 Consolidated Statements of Assets and Liabilities as of December 31, 2020 and 2019 82 Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018 83 Consolidated Statements of Changes in Net Assets for the Years Ended December 31, 2020, 2019 and 2018 84 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 85 Consolidated Schedules of Investments as of December 31, 2020 and 2019 86 Notes to Consolidated Financial Statements 96 78 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Fidus Investment Corporation and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated statements of assets and liabilities of Fidus Investment Corporation and subsidiaries (collectively, the Company), including the consolidated schedules of investments, as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes, which include the senior securities table, to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 25, 2021, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 and 2019, by correspondence with the custodians, portfolio companies or agents or by other appropriate procedures where replies from custodians, portfolio companies or agents were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of level 3 investments As discussed in Notes 2 and 4 to the consolidated financial statements, the Company measures substantially all of its investments at fair value using unobservable inputs and assumptions as there is no readily available market value. Due to the use of unobservable inputs in determining fair value, these investments are classified as level 3 within the fair value hierarchy and total $742,869 thousand as of December 31, 2020. We identified the valuation of certain level 3 investments as a critical audit matter because of certain significant assumptions management makes in determining the estimate, including the selected valuation techniques, revenue or EBITDA multiples, and discount rates. Auditing management’s valuation techniques and assumptions of revenue and EBITDA multiples and the discount rate involved a high degree of auditor judgment and increased audit effort, including the use of valuation specialists, as changes in these assumptions could have a significant impact on the fair value of the level 3 investments. 79 Table of Contents Our audit procedures related to the Company’s valuation of level 3 investments included the following, among others: • We obtained an understanding of the relevant controls related to the Company’s process to determine fair value of its level 3 investments, including controls over the Company’s methods and selection of significant unobservable inputs, and tested such controls for operating effectiveness. • We evaluated the appropriateness of management’s valuation techniques, such as the discounted cash flow or enterprise value, and management’s asset coverage analysis. We also evaluated whether assumptions used by management, including revenue or EBITDA multiples and discount rates, were reasonable by comparing these inputs to market information obtained from external sources. For a selection of investments, we utilized valuation specialists to perform this evaluation. • For a select number of investments, we utilized the valuation specialists to develop an independent fair value estimate which was compared to management’s estimate. • We evaluated the Company’s historical ability to estimate fair value by comparing the fair value as estimated by management against sale transactions, where applicable. Transfers of Financial Assets As discussed in Note 2 to the consolidated financial statements, the Company follows the appropriate accounting principles when determining if there has been a sale or disposition of a portfolio investment. The fair value of the Company’s level 3 investments was $742,869 thousand as of December 31, 2020 and net loss on investments was $8,123 thousand for the year ended December 31, 2020. We identified the transfer of financial assets as a critical audit matter as management’s assessment of the accounting principles that determine if a financial transfer occurred is complex and requires that management make significant judgments, including determining (1) if assets are legally isolated from the Company, (2) if there is continuing involvement of the Company and (3) if third party constraints provide a more than trivial benefit to the Company. Auditing management’s determination of whether the transfer should be accounted for as a sale or secured borrowing involved a high degree of auditor judgment and increased audit effort, including the use of subject matter experts, as changes in management’s judgments could change the conclusion reached. Our audit procedures related to the Company’s transfer of financial assets analysis included the following, among others: • We obtained an understanding of the relevant controls related to the Company’s process to determine if a transfer of financial assets occurred and tested such controls for operating effectiveness. • We evaluated the Company’s determination of sale or secured borrowing by evaluating the following factors: (1) if the transferred assets were isolated from the Company, (2) if there is continuing involvement of the Company, and (3) if third party constraints provide a more than trivial benefit to the Company. • We inspected legal documents and correspondence with custodians, portfolio companies or agents in order to evaluate whether the criteria for sale treatment under the accounting principles was met. For selected transactions, we involved a subject matter expert to assist with this evaluation. /s/ RSM US LLP We have served as the Company’s auditor since 2007. Chicago, Illinois February 25, 2021 80 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Fidus Investment Corporation and Subsidiaries Opinion on the Internal Control Over Financial Reporting We have audited Fidus Investment Corporation and Subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of assets and liabilities of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations for each of the three years in the period ended December 31, 2020, and the related notes to the consolidated financial statements and our report dated February 25, 2021 expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ RSM US LLP Chicago, Illinois February 25, 2021 81 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Statements of Assets and Liabilities (in thousands, except shares and per share data) December 31, 2020 December 31, 2019 ASSETS Investments, at fair value: Control investments (cost: $32,969 and $27,718, respectively) $ 28,253 $ 21,820 Affiliate investments (cost: $31,836 and $56,328, respectively) 81,394 121,555 Non-control/non-affiliate investments (cost: $622,222 and $620,453, respectively) 633,222 623,544 Total investments, at fair value (cost: $687,027 and $704,499, respectively) 742,869 766,919 Cash and cash equivalents 124,308 15,012 Interest receivable 7,548 6,331 Prepaid expenses and other assets 1,015 1,177 Total assets $ 875,740 $ 789,439 LIABILITIES SBA debentures, net of deferred financing costs (Note 6) $ 144,004 $ 153,802 Notes, net of deferred financing costs (Note 6) 300,294 176,901 Borrowings under Credit Facility, net of deferred financing costs (Note 6) (1,048 ) 23,899 Accrued interest and fees payable 3,500 3,505 Base management fee payable – due to affiliate 3,244 3,334 Income incentive fee payable – due to affiliate 2,610 1,497 Capital gains incentive fee payable – due to affiliate 11,031 12,715 Administration fee payable and other – due to affiliate 576 487 Taxes payable 275 547 Accounts payable and other liabilities 494 442 Total liabilities 464,980 377,129 Commitments and contingencies (Note 7) NET ASSETS Common stock, $0.001 par value (100,000,000 shares authorized, 24,437,400 and 24,463,119 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively) 24 24 Additional paid-in capital 365,793 366,061 Total distributable earnings 44,943 46,225 Total net assets 410,760 412,310 Total liabilities and net assets $ 875,740 $ 789,439 Net asset value per common share $ 16.81 $ 16.85 See Notes to Consolidated Financial Statements. 82 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Statements of Operations (in thousands, except shares and per share data) Years Ended December 31, 2020 2019 2018 Investment Income: Interest income Control investments $ 1,889 $ 848 $ 246 Affiliate investments 3,511 5,257 6,868 Non-control/non-affiliate investments 68,095 56,070 53,769 Total interest income 73,495 62,175 60,883 Payment-in-kind interest income Control investments 1,748 2,122 661 Affiliate investments 287 388 698 Non-control/non-affiliate investments 2,625 6,590 5,216 Total payment-in-kind interest income 4,660 9,100 6,575 Dividend income Control investments — — — Affiliate investments 837 1,454 3,454 Non-control/non-affiliate investments 1,630 (30 ) 556 Total dividend income 2,467 1,424 4,010 Fee income Control investments — 349 — Affiliate investments 120 49 125 Non-control/non-affiliate investments 4,372 3,926 4,735 Total fee income 4,492 4,324 4,860 Interest on idle funds and other income 9 83 97 Total investment income 85,123 77,106 76,425 Expenses: Interest and financing expenses 19,678 17,072 12,659 Base management fee 12,932 12,399 11,365 Incentive fee - income 8,952 7,445 9,413 Incentive fee (reversal) - capital gains (1,684 ) 3,299 2,938 Administrative service expenses 1,720 1,583 1,462 Professional fees 2,090 1,553 1,343 Other general and administrative expenses 1,348 1,286 1,467 Total expenses before income incentive fee waiver 45,036 44,637 40,647 Incentive fee waiver - income (423 ) — — Total expenses, net of income incentive fee waiver 44,613 44,637 40,647 Net investment income before income taxes 40,510 32,469 35,778 Income tax provision (benefit) 862 500 720 Net investment income 39,648 31,969 35,058 Net realized and unrealized gains (losses) on investments: Net realized gains (losses): Control investments — (1,268 ) — Affiliate investments 24,655 (64 ) 10,786 Non-control/non-affiliate investments (25,623 ) 161 (21,055 ) Total net realized gain (loss) on investments (968 ) (1,171 ) (10,269 ) Income tax (provision) benefit from realized gains on investments (577 ) (121 ) (758 ) Net change in unrealized appreciation (depreciation): Control investments 1,182 (2,021 ) (2,306 ) Affiliate investments (15,669 ) 13,100 20,477 Non-control/non-affiliate investments 7,909 7,109 7,547 Total net change in unrealized appreciation (depreciation) on investments (6,578 ) 18,188 25,718 Net gain (loss) on investments (8,123 ) 16,896 14,691 Realized losses on extinguishment of debt (299 ) (399 ) (297 ) Net increase in net assets resulting from operations $ 31,226 $ 48,466 $ 49,452 Per common share data: Net investment income per share-basic and diluted $ 1.62 $ 1.31 $ 1.43 Net increase in net assets resulting from operations per share — basic and diluted $ 1.28 $ 1.98 $ 2.02 Dividends declared per share $ 1.33 $ 1.60 $ 1.60 Weighted average number of shares outstanding — basic and diluted 24,442,431 24,463,119 24,471,730 See Notes to Consolidated Financial Statements. 83 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Statements of Changes in Net Assets (in thousands, except shares) Common Stock Total distributable earnings Total net assets Number of shares Par value Additional paid-in capital Balances at December 31, 2017 24,507,940 $ 24 $ 370,796 $ 22,453 $ 393,273 Repurchases of common stock under Stock Repurchase Program (Note 8) (44,821 ) (0 ) * (582 ) — (582 ) Net investment income — — — 35,058 35,058 Net realized gain (loss) on investments, net of taxes — — — (11,027 ) (11,027 ) Net unrealized appreciation (depreciation) on investments — — — 25,718 25,718 Realized losses on extinguishment of debt — — — (297 ) (297 ) Dividends declared — — — (39,158 ) (39,158 ) Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles — — (3,526 ) 3,526 — Balances at December 31, 2018 24,463,119 $ 24 $ 366,688 $ 36,273 $ 402,985 Net investment income — — — 31,969 31,969 Net realized gain (loss) on investments, net of taxes — — — (788 ) (788 ) Net unrealized appreciation (depreciation) on investments — — — 17,684 17,684 Realized losses on extinguishment of debt — — — (399 ) (399 ) Dividends declared — — — (39,141 ) (39,141 ) Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles — — (627 ) 627 — Balances at December 31, 2019 24,463,119 $ 24 $ 366,061 $ 46,225 $ 412,310 Repurchases of common stock under Stock Repurchase Program (Note 8) (25,719 ) (0 ) * (268 ) — (268 ) Net investment income — — — 39,648 39,648 Net realized gain (loss) on investments, net of taxes — — — (1,545 ) (1,545 ) Net unrealized appreciation (depreciation) on investments — — — (6,578 ) (6,578 ) Realized losses on extinguishment of debt (299 ) (299 ) Dividends declared — — — (32,508 ) (32,508 ) Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles — — (2,042 ) 2,042 — Balances at December 31, 2020 24,437,400 $ 24 $ 363,751 $ 46,985 $ 410,760 * amount is greater than zero but less than one See Notes to Consolidated Financial Statements. 84 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Statements of Cash Flows (in thousands) Years Ended December 31, 2020 2019 2018 Cash Flows from Operating Activities: Net increase in net assets resulting from operations $ 31,226 $ 48,466 $ 49,452 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 6,578 (18,188 ) (25,718 ) Net realized (gain) loss on investments 968 1,171 10,269 Interest and dividend income paid-in-kind (4,660 ) (9,100 ) (6,662 ) Accretion of original issue discount (297 ) (72 ) (775 ) Accretion of loan origination fees (1,344 ) (1,023 ) (984 ) Purchase of investments (189,996 ) (219,173 ) (212,264 ) Proceeds from sales and repayments of investments 210,774 120,600 188,255 Proceeds from loan origination fees 2,027 1,848 1,205 Realized losses on extinguishment of debt 299 399 297 Amortization of deferred financing costs 2,271 1,852 1,370 Changes in operating assets and liabilities: Interest receivable (1,217 ) 1,197 (117 ) Prepaid expenses and other assets 130 156 (412 ) Accrued interest and fees payable (5 ) 692 100 Base management fee payable – due to affiliate (90 ) 407 341 Income incentive fee payable – due to affiliate 1,113 (1,288 ) 631 Capital gains incentive fee (reversal) – due to (from) affiliate (1,684 ) 3,300 2,938 Administration fee payable and other – due to affiliate 89 13 (88 ) Taxes payable (272 ) (256 ) 303 Accounts payable and other liabilities 52 271 7 Net cash provided by (used for) operating activities 55,962 (68,728 ) 8,148 Cash Flows from Financing Activities: Proceeds received from SBA debentures 6,000 7,500 27,000 Repayments of SBA debentures (16,500 ) (41,000 ) (67,300 ) Proceeds received from issuance of Notes 125,000 132,250 50,000 Proceeds received from (repayments of) borrowings under Credit Facility, net (25,000 ) (11,500 ) 25,000 Payment of deferred financing costs (3,390 ) (6,384 ) (2,665 ) Dividends paid to stockholders, including expenses (32,508 ) (39,141 ) (39,158 ) Repurchases of common stock under Stock Repurchase Program (268 ) — (582 ) Net cash provided by (used for) financing activities 53,334 41,725 (7,705 ) Net increase (decrease) in cash and cash equivalents 109,296 (27,003 ) 443 Cash and cash equivalents: Beginning of period 15,012 42,015 41,572 End of period $ 124,308 $ 15,012 $ 42,015 Supplemental disclosure of cash flow information : Cash payments for interest $ 17,412 $ 14,527 $ 11,189 Cash payments for taxes, net of tax refunds received $ 1,711 $ 877 $ 1,175 See Notes to Consolidated Financial Statements. 85 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2020 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread /Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Control Investments (t) FDS Avionics Corp. (dba Flight Display Systems) Aerospace & Defense Manufacturing Second Lien Debt 6.00%/9.00% 11/5/2014 12/31/2021 $ 4,836 $ 4,836 $ 4,836 Revolving Loan ($30 unfunded commitment) 6.00%/9.00% 4/12/2018 12/31/2021 286 286 286 Common Equity (7,478 shares) (j) 11/10/2017 748 — Preferred Equity (2,550 shares) 12/26/2019 2,550 2,269 8,420 7,391 2 % US GreenFiber, LLC Building Products Manufacturing Second Lien Debt (j) 8.00%/5.00% 7/3/2014 8/30/2024 15,382 15,378 13,078 Second Lien Debt (j) 8.50%/6.50% 11/9/2018 8/30/2024 5,028 5,028 5,183 Second Lien Debt (j) 8.50%/6.50% 8/10/2020 8/30/2024 2,533 2,533 2,601 Common Equity (2,522 units) (h)(j) 7/3/2014 586 — Common Equity (425,508 units) (j) 8/30/2019 1 — Common Equity (1,022,813 units) (h)(j) 7/1/2020 1,023 — 24,549 20,862 5 % Total Control Investments $ 32,969 $ 28,253 7 % Affiliate Investments (l) FAR Research Inc. (n) Specialty Chemicals Common Equity (1,396 units) 3/31/2014 $ — $ 28 0 % Fiber Materials, Inc. (n) Aerospace & Defense Manufacturing Common Equity (10 units) 11/30/2016 — 41 0 % Medsurant Holdings, LLC Healthcare Services Second Lien Debt (j) 14.00%/0.00% 12/18/2015 3/10/2022 8,031 8,028 8,091 Preferred Equity (63,331 units) (h)(j) 4/12/2011 673 620 Warrant (252,588 units) (h)(j)(m) 4/12/2011 2,258 2,249 10,959 10,960 3 % Mirage Trailers LLC Utility Equipment Manufacturing Second Lien Debt (k) (L + 10.00%) / (1.00%) 11.00%/5.00% 11/25/2015 11/25/2021 6,410 6,483 6,410 Common Equity (2,500,000 shares) (o) 11/25/2015 2,188 84 8,671 6,494 2 % Pfanstiehl, Inc. Healthcare Products Common Equity (4,250 units) (j) 3/29/2013 425 33,505 8 % Pinnergy, Ltd. Oil & Gas Services Common Equity—Class A-2 (42,500 units) (j) 10/13/2016 3,000 20,589 5 % Steward Holding LLC (dba Steward Advanced Materials) Aerospace & Defense Manufacturing Second Lien Debt 12.00%/1.50% 11/12/2015 10/31/2021 7,783 7,781 7,783 Common Equity (1,000,000 units) 11/12/2015 1,000 1,994 8,781 9,777 2 % Total Affiliate Investments $ 31,836 $ 81,394 20 % 86 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2020 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Non-control/Non-affiliate Investments Frontline Food Services, LLC (f/k/a Accent Food Services, LLC) Vending Equipment Manufacturing Preferred Equity (Class A Units) (46 units) (j) 12/31/2020 $ 2,000 $ 2,000 Common Equity (Class B Units) (124 units) (j) 12/31/2020 — — Preferred Equity (Class C Units) (100 units) (j) 12/31/2020 — — 2,000 2,000 0 % Allied 100 Group, Inc. Healthcare Products Subordinated Debt (k) 11.25%/0.00% 7/31/2019 5/26/2023 21,500 21,432 21,500 Common Equity (625,000 units) (j) 11/26/2014 625 1,087 22,057 22,587 5 % Allredi, LLC (fka Marco Group International OpCo, LLC) Industrial Cleaning & Coatings Second Lien Debt 10.50%/1.75% 3/2/2020 9/2/2026 10,080 9,993 7,761 Common Equity (570,636 units) (h)(j) 7/21/2017 637 275 10,630 8,036 2 % Alzheimer’s Research and Treatment Center, LLC Healthcare Services First Lien Debt (j)(w) (L + 5.75%) / (2.00%) 7.75%/0.00% 10/23/2018 10/23/2023 6,500 6,471 6,584 Common Equity (500 units) (h)(j) 10/23/2018 500 766 6,971 7,350 2 % American AllWaste LLC (dba WasteWater Transport Services) Environmental Industries Second Lien Debt (j) (L + 11.00%) / (2.00%) 13.00%/0.00% 5/31/2018 11/30/2023 17,503 17,434 17,503 Preferred Equity (500 units) (h)(j) 5/31/2018 500 241 Preferred Equity (207 units) (h)(j) 8/6/2019 250 226 Preferred Equity (141 units) (h)(j) 11/2/2020 171 171 18,355 18,141 4 % Applied Data Corporation Information Technology Services First Lien Debt (v) (L + 6.25%) / (1.50%) 7.75%/0.00% 11/6/2020 11/6/2025 8,000 7,949 7,949 Common Equity (22 units) 11/6/2020 — — Preferred Equity (1,070,614 units) 11/6/2020 1,071 1,071 9,020 9,020 2 % Argo Turboserve Corporation Business Services Second Lien Debt (j) (L + 10.75%) / (2.00%) 12.75%/0.00% 12/26/2018 6/28/2023 13,031 12,990 13,031 3 % AVC Investors, LLC (dba Auveco) Specialty Distribution Second Lien Debt (k) 11.50%/0.00% 1/3/2018 7/3/2023 22,500 22,448 22,500 Common Equity (5,000 units) (j) 1/3/2018 487 464 22,935 22,964 6 % B&B Roadway and Security Solutions, LLC Component Manufacturing Second Lien Debt 11.25%/4.00% 2/27/2018 1/1/2022 10,910 10,890 10,782 Common Equity (50,000 units) (h)(j) 2/27/2018 497 — 11,387 10,782 3 % Bandon Fitness (Texas), Inc. Retail First Lien Debt (j)(z) (L + 6.50%) / (2.25%) 8.75%/0.25% 8/9/2019 8/9/2024 14,680 14,289 15,591 Common Equity (545,810 units) (j) 8/9/2019 931 554 15,220 16,145 4 % BCM One Group Holdings, Inc. Information Technology Services Subordinated Debt (k) 11.00%/0.00% 1/3/2019 7/3/2024 30,000 29,887 30,000 Common Equity (1,281 shares) 1/3/2019 48 458 Preferred Equity (74 shares) 1/3/2019 736 737 30,671 31,195 8 % Bedford Precision Parts LLC Specialty Distribution First Lien Debt (j)(s) (L + 6.25%) / (2.00%) 8.25%/0.00% 3/12/2019 3/12/2024 4,531 4,507 4,531 Common Equity (500,000 units) (h)(j) 3/12/2019 500 263 5,007 4,794 1 % Cardboard Box LLC (dba Anthony’s Coal Fired Pizza) Restaurants Common Equity (521,021 units) (j) 12/15/2015 521 — Preferred Equity (1,043,133 units) (j) 12/6/2019 96 34 617 34 0 % Combined Systems, Inc. Aerospace & Defense Manufacturing First Lien Debt (L + 10.00%) / (2.00%) 12.00%/0.00% 1/31/2020 1/31/2025 7,600 7,553 7,600 Revolving Loan ($1,050 unfunded commitment) (j)(ac) (L + 9.00%) / (2.00%) 11.00%/0.00% 1/31/2020 1/31/2025 2,950 2,930 2,950 10,483 10,550 3 % Comply365, LLC Aerospace & Defense Manufacturing First Lien Debt (ad) (L + 8.00%) / (1.00%) 9.00%/0.00% 12/11/2020 12/11/2025 10,000 9,855 9,855 Common Equity (1,000,000 units) 12/11/2020 1,000 1,000 10,855 10,855 3 % CRS Solutions Holdings, LLC (dba CRS Texas) Business Services Second Lien Debt 10.50%/1.50% 3/14/2018 4/30/2024 11,305 11,270 11,305 Common Equity (450,382 units) (h)(j) 3/14/2018 488 321 11,758 11,626 3 % Dataguise, Inc. Information Technology Services First Lien Debt (j) 11.00%/0.00% 12/31/2020 12/31/2023 20,000 19,900 19,900 Common Equity (909 shares) (j) 12/31/2020 1,500 1,500 21,400 21,400 5 % Diversified Search LLC Business Services First Lien Debt (k)(r) (L + 8.00%) / (1.75%) 9.75%/0.00% 2/7/2019 2/7/2024 17,355 17,159 17,355 Common Equity (573 units) (h)(j) 2/7/2019 593 494 17,752 17,849 4 % EBL, LLC (EbLens) Retail Second Lien Debt (j)(p) 12.00%/1.00% 7/13/2017 1/13/2023 9,253 9,214 5,454 Common Equity (75,000 units) (j) 7/13/2017 750 — 9,964 5,454 1 % 87 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2020 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets ECM Industries, LLC Component Manufacturing Subordinated Debt (j) 11.50%/0.00% 4/30/2020 5/23/2026 11,500 11,295 11,500 Common Equity (1,000,000 units) (h)(j) 4/30/2020 1,000 1,562 12,295 13,062 3 % Elements Brands, LLC Consumer Products First Lien Debt 12.25%/0.00% 12/31/2020 12/31/2025 6,000 5,967 5,967 Revolving Loan ($838 unfunded commitment) (i)(j) 12.25%/0.00% 12/31/2020 12/31/2025 2,162 2,146 2,146 8,113 8,113 2 % French Transit, LLC Consumer Products First Lien Debt (j) (L + 10.00%) / (2.25%) 12.25%/0.00% 6/21/2019 6/21/2024 4,116 4,088 4,116 1 % Global Plasma Solutions, Inc. Component Manufacturing Common Equity (947 shares) (j) 9/21/2018 — 9,995 2 % Gurobi Optimization, LLC Information Technology Services Common Equity (3 shares) 12/19/2017 592 1,660 0 % Haematologic Technologies, Inc. Healthcare Services First Lien Debt (x) (L + 8.25%) / (2.00%) 10.25%/0.00% 10/11/2019 10/11/2024 5,500 5,469 5,500 Common Equity (549 units) (h)(j) 10/11/2019 549 255 6,018 5,755 1 % Hallmark Health Care Solutions, Inc. Healthcare Services First Lien Debt (j)(ae) (L + 7.25%) / (1.50%) 8.75%/0.00% 12/4/2020 12/4/2025 8,500 8,437 8,437 Common Equity (750,000 units) (j) 12/4/2020 750 750 9,187 9,187 2 % Healthfuse, LLC Healthcare Services First Lien Debt (af) (L + 7.25%) / (1.00%) 8.25%/0.00% 11/13/2020 11/13/2025 6,000 5,960 5,960 Preferred Equity (197,980 units) 11/13/2020 750 750 6,710 6,710 2 % Hilco Plastics Holdings, LLC (dba Hilco Technologies) Component Manufacturing Second Lien Debt (j) 11.50%/1.50% 9/23/2016 12/31/2019 10,301 10,301 8,878 Revolving Loan (j) (L + 6.50%) / (0.00%) 6.65%/0.00% 12/20/2019 12/15/2019 5,962 5,962 5,962 First Lien Debt (j) (L + 6.95%) / (0.00%) 7.10%/0.00% 12/20/2019 12/15/2019 5,092 5,092 5,092 Preferred Equity (1,000,000 units) (h)(j) 4/18/2018 1,000 — Common Equity (72,507 units) (h)(j) 9/23/2016 473 — 22,828 19,932 5 % Hub Acquisition Sub, LLC (dba Hub Pen) Promotional products Second Lien Debt (k) 13.00%/0.00% 3/23/2016 3/31/2023 25,000 24,976 24,106 Common Equity (3,750 units) 3/23/2016 131 283 Preferred Equity (868 units) (j) 10/16/2020 154 158 25,261 24,547 6 % IBH Holdings, LLC (fka Inflexxion, Inc.) Business Services Common Equity (150,000 units) 6/20/2018 — 235 0 % Ipro Tech, LLC Information Technology Services First Lien Debt (j)(u) (L + 8.50%) / (2.00%) 10.50%/0.00% 6/30/2020 6/30/2025 2,469 1,923 2,469 1 % K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.) (n) Industrial Cleaning & Coatings Second Lien Debt (j) 0.00%/10.00% 1/28/2019 1/28/2021 2,140 2,140 2,140 1 % The Kyjen Company, LLC (dba Outward Hound) Consumer Products Second Lien Debt (k) 12.00%/0.00% 12/8/2017 6/8/2024 15,000 14,960 15,000 Common Equity (765 shares) (j) 12/8/2017 765 841 15,725 15,841 4 % LNG Indy, LLC (dba Kinetrex Energy) Oil & Gas Distribution Second Lien Debt (k) 11.50%/1.50% 12/28/2016 11/12/2021 10,127 10,108 10,127 Common Equity (500 units) 12/28/2016 500 959 10,608 11,086 3 % Mesa Line Services, LLC Utilities: Services Second Lien Debt (j) 10.50%/0.50% 11/30/2017 8/1/2024 17,511 17,442 17,511 Common Equity (981 shares) (j) 11/30/2017 1,148 1,076 18,590 18,587 5 % Midwest Transit Equipment, Inc. Transportation services Warrant (7,192 shares) (j)(m) 6/23/2017 180 118 Warrant (4.79% of Junior Subordinated Notes) (j)(q) 6/23/2017 190 248 370 366 0 % NGT Acquisition Holdings, LLC (dba Techniks Industries) Component Manufacturing Common Equity (378 units) (j) 5/24/2017 500 227 0 % OMC Investors, LLC (dba Ohio Medical Corporation) Healthcare Products Second Lien Debt 12.00%/0.00% 1/15/2016 6/30/2022 10,000 9,985 10,000 Common Equity (5,000 units) 1/15/2016 462 869 10,447 10,869 3 % 88 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2020 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Palisade Company, LLC Information Technology Services Common Equity (50 shares) (j) 11/15/2018 500 630 0 % Palmetto Moon, LLC Retail First Lien Debt (j) 11.50%/2.50% 11/3/2016 10/31/2021 4,779 4,773 4,779 Common Equity (499 units) (j) 11/3/2016 494 159 5,267 4,938 1 % Pool & Electrical Products, LLC Specialty Distribution Second Lien Debt (j) 11.75%/0.00% 10/28/2020 4/28/2027 12,000 11,883 11,883 Common Equity (15,000 units) (h)(j) 10/28/2020 1,500 1,500 13,383 13,383 3 % Power Grid Components, Inc. Specialty Distribution Second Lien Debt (k) 11.00%/1.00% 4/12/2018 12/2/2025 22,433 22,357 22,433 Preferred Equity (392 shares) (j) 4/12/2018 392 509 Preferred Equity (48 shares) (j) 12/2/2019 48 63 Common Equity (10,622 shares) (j) 4/12/2018 462 740 23,259 23,745 6 % Prime AE Group, Inc. Business Services First Lien Debt (j) (L + 6.25%) / (2.00%) 8.25%/0.00% 11/25/2019 11/25/2024 6,833 6,683 6,833 Preferred Equity (500,000 shares) (j) 11/25/2019 500 566 7,183 7,399 2 % Revenue Management Solutions, LLC Information Technology Services Common Equity (113 shares) 1/4/2017 1,125 3,081 1 % Rhino Assembly Company, LLC Specialty Distribution Second Lien Debt (k) 12.00%/1.50% 8/11/2017 2/11/2023 10,682 10,655 10,682 Delayed Draw Commitment ($875 unfunded commitment) (i)(j) 12.00%/1.00% 8/11/2017 5/17/2022 — — — Common Equity (Class A Units) (8,864 units) (h)(j) 8/11/2017 944 629 Preferred Equity (Units N/A) (h)(j) 12/10/2020 136 137 Common Equity (Class F Units) (355 units) (h)(j) 12/10/2020 — — 11,735 11,448 3 % Road Safety Services, Inc. Business Services Second Lien Debt 11.25%/1.50% 9/18/2018 3/18/2024 10,379 10,351 10,379 Common Equity (655 units) 9/18/2018 621 882 10,972 11,261 3 % Rohrer Corporation Packaging Subordinated Debt (j) 10.50%/1.00% 10/1/2018 4/1/2024 14,017 13,976 14,017 Common Equity (400 shares) (j) 7/18/2016 780 1,591 14,756 15,608 4 % Routeware, Inc. Information Technology Services First Lien Debt (k)(aa) (L + 7.00%) / (1.75%) 8.75%/0.00% 2/7/2020 2/7/2025 14,888 14,814 14,888 4 % SES Investors, LLC (dba SES Foam) Building Products Manufacturing Second Lien Debt 13.00%/0.00% 9/8/2016 12/29/2022 1,000 997 1,000 Common Equity (6,000 units) (h)(j) 9/8/2016 537 1,869 1,534 2,869 1 % Software Technology, LLC Information Technology Services Subordinated Debt (k) 11.00%/0.00% 12/23/2016 6/23/2023 10,000 9,980 10,000 Common Equity (6 shares) 12/23/2016 646 942 10,626 10,942 3 % Specialized Elevator Services Holdings, LLC Business Services First Lien Debt (j)(y) (L + 5.25%) / (2.00%) 7.25%/0.00% 5/7/2019 5/3/2024 12,889 12,782 12,889 Common Equity (596 units) (j) 5/8/2019 596 647 13,378 13,536 3 % SpendMend LLC Business Services Common Equity (1,000,000 units) 1/8/2018 972 1,915 0 % TransGo, LLC Component Manufacturing Common Equity (500 units) (j) 2/28/2017 474 996 0 % The Tranzonic Companies Specialty Distribution Subordinated Debt (j) 10.00%/1.00% 3/27/2018 3/27/2025 7,001 6,959 7,001 Preferred Equity (5,653 units) (j) 3/27/2018 565 730 Common Equity (1 units) (j) 3/27/2018 — 683 7,524 8,414 2 % UBEO, LLC Business Services Subordinated Debt (j) 11.00%/0.00% 4/3/2018 10/3/2024 13,893 13,814 13,893 Common Equity (705,000 units) (h)(j) 4/3/2018 668 661 14,482 14,554 3 % United Biologics, LLC Healthcare Services Preferred Equity (98,377 units) (h)(j) 4/1/2012 1,008 — Warrant (57,469 units) (j)(m) 3/5/2012 566 — 1,574 — 0 % Virginia Tile Company, LLC Specialty Distribution Second Lien Debt (j) 12.25%/0.00% 12/19/2014 4/7/2022 12,000 11,998 12,000 Common Equity (17 units) (j) 12/19/2014 342 521 12,340 12,521 3 % Western’s Smokehouse, LLC Consumer Products First Lien Debt (j)(ab) (L + 6.50%) / (1.25%) 7.75%/0.00% 2/28/2020 12/23/2024 10,000 9,876 10,000 2 % 89 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2020 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Wheel Pros, Inc. Specialty Distribution Second Lien Debt (j) (L + 9.00%) / (1.00%) 10.00%/0.00% 11/10/2020 11/10/2028 20,000 19,411 19,411 Preferred Equity (347,222 units) (j) 5/15/2019 301 1,031 19,712 20,442 5 % Worldwide Express Operations, LLC Transportation services Second Lien Debt (j) (L + 8.00%) / (1.00%) 9.00%/0.00% 2/27/2017 2/3/2025 20,000 19,791 20,000 Common Equity (2,000 units) (h)(j) 2/27/2017 1,478 1,942 21,269 21,942 5 % Total Non-control/Non-affiliate Investments $ 622,222 $ 633,222 154 % Total Investments $ 687,027 $ 742,869 181 % (a) See Note 3 to the consolidated financial statements for portfolio composition by geographic location. (b) Equity ownership may be held in shares or units of companies related to the portfolio companies. (c) All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted. (d) Variable rate investments bear interest at a rate indexed to LIBOR (L), which is reset monthly, bimonthly, quarterly, or semi-annually. Certain variable rate investments also include a LIBOR interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of December 31, 2020. (e) Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of December 31, 2020. Generally, payment-in-kind interest can be paid-in-kind or all in cash. (f) Investment date represents the date of the initial investment in the security. (g) The Company’s investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the board of directors, using significant unobservable Level 3 inputs. (h) Investment is held by a taxable subsidiary of the Company. (i) The disclosed commitment represents the unfunded amount as of December 31, 2020. The Company is earning 0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded. (j) Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (k) The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (l) As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of this portfolio company because it owns 5% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated Person are detailed in Note 3 to the consolidated financial statements. (m) Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any. (n) Investment in portfolio company that has sold its operations and is in the process of winding down. (o) Income producing. Maturity date, if any, represents mandatory redemption date. (p) Investment was on PIK-only non-accrual status as of December 31, 2020, meaning the Company has ceased recognizing PIK interest income on the investment. (q) Warrant entitles the Company to purchase 4.79% of the outstanding principal of Junior Subordinated Notes prior to exercise, and is non-income producing. (r) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 5.92% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (s) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.34% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (t) As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and “Control” this portfolio company because it owns 25% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control are detailed in Note 3 to the consolidated financial statements. (u) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.50% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (v) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.25% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (w) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.27% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (x) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.13% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (y) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.93% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (z) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.21% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (aa) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 2.84% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (ab) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 2.95% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (ac) The disclosed commitment represents the unfunded amount as of December 31, 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. (ad) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.33% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (ae) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.31% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (af) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.03% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. See Notes to Consolidated Financial Statements. 90 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2019 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Control Investments (t) FDS Avionics Corp. (dba Flight Display Systems) Aerospace & Defense Manufacturing Second Lien Debt 6.00%/9.00% 11/5/2014 12/31/2021 $ 4,420 $ 4,418 $ 4,227 Revolving Loan ($30 unfunded commitment) 6.00%/9.00% 4/12/2018 12/31/2021 261 261 261 Common Equity (7,478 shares) (j) 11/10/2017 748 — Preferred Equity (2,550 shares) 12/26/2019 2,550 915 7,977 5,403 1 % US Green Fiber, LLC Building Products Manufacturing Second Lien Debt (k) 7.00%/6.00% 7/3/2014 8/30/2024 14,498 14,494 11,757 Second Lien Debt (k) 7.50%/7.50% 11/9/2018 8/30/2024 4,660 4,660 4,660 Common Equity (2,522 units) (h)(j) 7/3/2014 586 — Common Equity (425,508 units) (j) 8/30/2019 1 — 19,741 16,417 4 % Total Control Investments $ 27,718 $ 21,820 5 % Affiliate Investments (I) FAR Research Inc. (n) Specialty Chemicals Common Equity (1,396 units) 3/31/2014 $ — $ 28 0 % Fiber Materials, Inc. Aerospace & Defense Manufacturing Common Equity (10 units) 11/30/2016 645 10,449 3 % Medsurant Holdings, LLC Healthcare Services Second Lien Debt 13.00%/0.00% 12/18/2015 6/30/2020 8,823 8,814 8,823 Preferred Equity (126,662 units) (h) 4/12/2011 1,346 1,780 Warrant (505,176 units) (h)(m) 4/12/2011 4,516 6,377 14,676 16,980 4 % M icrobiology Research Associates, Inc. Healthcare Services Subordinated Debt 11.00%/1.50% 5/13/2015 3/13/2022 8,930 8,921 8,930 Common Equity (1,625,731 units) (j) 5/13/2015 1,939 2,681 10,860 11,611 3 % Mirage Trailers LLC Utility Equipment Manufacturing Second Lien Debt (k) (L + 8.50%) / (1.00%) 10.20%/4.50% 11/25/2015 11/25/2020 6,250 6,253 6,250 Common Equity (2,500,000 shares) (o) 11/25/2015 2,184 968 8,437 7,218 2 % Pfanstiehl, Inc. Healthcare Products Subordinated Debt 10.50%/0.00% 3/29/2013 9/29/2022 6,208 6,201 6,208 Common Equity (8,500 units) (j) 3/29/2013 850 26,614 7,051 32,822 8 % Pinnergy, Ltd. Oil & Gas Services Common Equity - Class A-2 (42,500 units) (k) 10/13/2016 3,000 29,831 Common Equity - Class B (1,000 units) (k) 10/13/2016 3,000 3,147 6,000 32,978 8 % Steward Holding LLC (dba Steward Advanced Materials) Aerospace & Defense Manufacturing Second Lien Debt 12.00%/1.50% 11/12/2015 5/12/2021 7,667 7,659 7,667 Common Equity (1,000,000 units) 11/12/2015 1,000 1,802 8,659 9,469 2 % Total Affiliate Investments $ 56,328 $ 121,555 30 % 91 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2019 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Non-control/Non-affiliate Investments Accent Food Services, LLC Vending Equipment Manufacturing Second Lien Debt (k)(p) 10.00%/5.00% 11/30/2016 5/30/2022 $ 33,842 $ 33,760 $ 31,626 Subordinated Debt (j)(p) 0.00%/17.00% 6/28/2019 5/30/2022 1,567 1,567 1,441 Common Equity (7,885 units) (h)(j) 11/30/2016 800 227 36,127 33,294 8 % Allied 100 Group, Inc. Healthcare Products Subordinated Debt (k) 11.25%/0.00% 7/31/2019 5/26/2023 21,500 21,405 21,405 Common Equity (1,250,000 units) (j) 11/26/2014 1,250 1,465 22,655 22,870 6 % Alzheimer’s Research and Treatment Center, LLC Healthcare Services First Lien Debt (j)(w) (L + 5.75%) / (2.00%) 7.75%/0.00% 10/23/2018 10/23/2023 6,500 6,461 6,500 Common Equity (1,000 units) (h)(j) 10/23/2018 1,000 1,406 7,461 7,906 2 % American AllWaste LLC (dba WasteWater Transport Services) Environmental Industries Second Lien Debt (j) (L + 11.00%) / (2.00%) 13.00%/0.00% 5/31/2018 11/30/2023 17,503 17,411 17,503 Preferred Equity (500 units) (h)(j) 5/31/2018 500 540 Preferred Equity (207 units) (h)(j) 8/6/2019 250 250 18,161 18,293 4 % Argo Turboserve Corporation Business Services Second Lien Debt (j) (L + 9.75%) / (2.00%) 11.84%/0.00% 12/26/2018 6/28/2023 14,156 14,098 14,156 3 % AVC Investors, LLC (dba Auveco) Specialty Distribution Second Lien Debt (k) 11.50%/0.00% 1/3/2018 7/3/2023 22,500 22,427 22,500 Common Equity (5,000 units) (j) 1/3/2018 490 776 22,917 23,276 6 % B&B Roadway and Security Solutions, LLC Component Manufacturing Second Lien Debt 10.50%/3.50% 2/27/2018 8/27/2023 10,493 10,456 9,569 Common Equity (50,000 units) (h)(j) 2/27/2018 500 200 10,956 9,769 2 % Bandon Fitness (Texas), Inc. Retail First Lien Debt (j)(z) (L + 6.00%) / (2.25%) 8.25%/0.00% 8/9/2019 8/9/2024 13,250 12,785 12,785 Common Equity (497,549 units) (j) 8/9/2019 849 849 13,634 13,634 3 % BCC Group Holdings, Inc. Information Technology Services Subordinated Debt 11.00%/1.00% 1/28/2019 4/11/2023 18,167 18,027 18,167 Common Equity (451 shares) 1/28/2019 232 167 Preferred Equity (14 shares) 1/28/2019 143 143 18,402 18,477 4 % BCM One Group Holdings, Inc. Information Technology Services Subordinated Debt (k) 11.00%/0.00% 1/3/2019 7/3/2024 27,000 26,888 27,000 Common Equity (2,286 shares) 1/3/2019 2 332 Preferred Equity (133 shares) 1/3/2019 1,330 1,330 28,220 28,662 7 % Bedford Precision Parts LLC Specialty Distribution First Lien Debt (j)(s) (L + 6.25%) / (2.00%) 8.25%/0.00% 3/12/2019 3/12/2024 5,000 4,969 5,000 Common Equity (500,000 units) (h)(j) 3/12/2019 500 445 5,469 5,445 1 % Cardboard Box LLC (dba Anthony’s Coal Fired Pizza) Restaurants Common Equity (521,021 units) (j) 12/15/2015 521 113 Preferred Equity (99,889 units) (j) 12/6/2019 49 146 570 259 0 % ControlScan, Inc. Information Technology Services Subordinated Debt (j) 11.00%/0.00% 7/28/2017 1/28/2023 6,750 6,731 6,750 Common Equity (3,704 shares) (j) 7/28/2017 4 624 Preferred Equity (100 shares) (j) 7/28/2017 996 996 7,731 8,370 2 % CRS Solutions Holdings, LLC (dba CRS Texas) Business Services Second Lien Debt 10.50%/1.00% 3/14/2018 9/14/2023 9,166 9,136 9,166 Common Equity (750,000 units) (h)(j) 3/14/2018 750 822 9,886 9,988 2 % Diversified Search LLC Business Services First Lien Debt (k)(r) (L + 5.75%) / (1.75%) 7.69%/0.00% 2/7/2019 2/7/2024 15,155 14,939 15,155 Common Equity (573 units) (h)(j) 2/7/2019 593 724 15,532 15,879 4 % EBL, LLC (EbLens) Retail Second Lien Debt (j) 12.00%/1.00% 7/13/2017 1/13/2023 9,484 9,433 9,484 Common Equity (75,000 units) (j) 7/13/2017 750 669 10,183 10,153 3 % 92 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2019 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets French Transit, LLC Consumer Products First Lien Debt (j) (L + 9.00%) / (2.25%) 11.25%/0.00% 6/21/2019 6/21/2024 $ 8,000 $ 7,964 $ 8,000 Revolving Loan ($1,000 unfunded commitment) (j)(u) (L + 9.00%) / (2.25%) 11.25%/0.00% 6/21/2019 6/21/2024 — (4 ) — 7,960 8,000 2 % Global Plasma Solutions, Inc. Component Manufacturing First Lien Debt (j)(v) (L + 5.00%) / (2.00%) 7.10%/0.00% 9/21/2018 9/21/2023 7,071 7,013 7,071 Preferred Equity (947 shares) (j) 9/21/2018 360 399 Common Equity (947 shares) (j) 9/21/2018 15 161 7,388 7,631 2 % Gurobi Optimization, LLC Information Technology Services Common Equity (5 shares) 12/19/2017 1,500 3,382 1 % Haematologic Technologies, Inc. Healthcare Services First Lien Debt (x) (L + 7.25%) / (2.00%) 9.25%/0.00% 10/11/2019 10/11/2024 5,500 5,461 5,461 Common Equity (500 units) (j) 10/11/2019 500 500 5,961 5,961 1 % Hilco Plastics Holdings, LLC (dba Hilco Technologies) Component Manufacturing Second Lien Debt 11.50%/1.50% 9/23/2016 12/31/2019 10,116 10,116 9,057 Revolving Loan (j) (L + 6.50%) / (0.00%) 8.26%/0.00% 12/20/2019 12/15/2019 5,962 5,962 5,962 First Lien Debt (j) (L + 6.95%) / (0.00%) 8.66%/0.00% 12/20/2019 12/15/2019 4,812 4,812 4,812 First Lien Debt (j) (L + 6.95%) / (0.00%) 8.64%/0.00% 12/20/2019 12/15/2019 1,815 1,815 1,815 Preferred Equity (1,000,000 units) (h)(j) 4/18/2018 1,000 — Common Equity (72,507 units) (h)(j) 9/23/2016 473 — 24,178 21,646 5 % Hoonuit, LLC Information Technology Services First Lien Debt (L + 9.25%) / (2.25%) 11.50%/0.00% 6/7/2019 6/7/2024 7,165 7,121 7,165 Preferred Equity (610 units) (h)(j) 6/20/2019 1/1/2022 250 279 7,371 7,444 2 % Hub Acquisition Sub, LLC (dba Hub Pen) Promotional products Second Lien Debt (k) 12.25%/0.00% 3/23/2016 9/23/2021 25,000 24,947 25,000 Common Equity (7,500 units) 3/23/2016 263 1,488 25,210 26,488 6 % Hunter Defense Technologies, Inc. Aerospace & Defense Manufacturing First Lien Debt (j) (L + 7.00%) / (1.00%) 8.94%/0.00% 9/27/2018 3/29/2023 9,246 9,174 9,246 2 % IBH Holdings, LLC (fka Inflexxion, Inc.) Business Services Common Equity (150,000 units) 6/20/2018 — — 0 % K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.) (n) Industrial Cleaning & Coatings Second Lien Debt 0.00%/10.00% 1/28/2019 1/28/2021 2,309 2,309 2,309 1 % The Kyjen Company, LLC (dba Outward Hound) Consumer Products Second Lien Debt (k) 12.00%/0.00% 12/8/2017 6/8/2024 15,000 14,948 13,024 Common Equity (765 shares) (j) 12/8/2017 765 609 15,713 13,633 3 % LNG Indy, LLC (dba Kinetrex Energy) Oil & Gas Distribution Second Lien Debt (k) 11.50%/0.00% 12/28/2016 11/12/2021 5,000 4,991 5,000 Common Equity (1,000 units) 12/28/2016 1,000 1,264 5,991 6,264 2 % Marco Group International OpCo, LLC Industrial Cleaning & Coatings Second Lien Debt 10.50%/0.75% 7/21/2017 1/21/2023 12,225 12,192 12,120 Common Equity (960,482 units) (h)(j) 7/21/2017 960 1,063 13,152 13,183 3 % Mesa Line Services, LLC Utilities: Services Second Lien Debt (j) 10.50%/1.75% 11/30/2017 8/1/2024 17,221 17,133 17,221 Common Equity (981 shares) (j) 11/30/2017 1,148 961 18,281 18,182 4 % Midwest Transit Equipment, Inc. Transportation services Warrant (14,384 shares) (j)(m) 6/23/2017 361 1,244 Warrant (9.59% of Junior Subordinated Notes) (j)(q) 6/23/2017 381 467 742 1,711 0 % NGT Acquisition Holdings, LLC (dba Techniks Industries) Component Manufacturing Common Equity (378 units) (j) 5/24/2017 500 155 0 % OMC Investors, LLC (dba Ohio Medical Corporation) Healthcare Products Second Lien Debt 12.00%/0.00% 1/15/2016 7/15/2021 10,000 9,972 10,000 Common Equity (5,000 units) 1/15/2016 500 475 10,472 10,475 3 % 93 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2019 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread / Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Palisade Company, LLC Information Technology Services Subordinated Debt (j) 11.75%/0.00% 11/15/2018 5/15/2024 $ 6,500 $ 6,474 $ 6,500 Common Equity (100 shares) (j) 11/15/2018 1,000 901 7,474 7,401 2 % Palmetto Moon, LLC Retail First Lien Debt 11.50%/2.50% 11/3/2016 10/31/2021 4,963 4,949 4,963 Common Equity (499 units) (j) 11/3/2016 494 67 5,443 5,030 1 % Power Grid Components, Inc. Specialty Distribution Second Lien Debt (k) 11.00%/1.00% 4/12/2018 12/2/2025 22,207 22,115 22,207 Preferred Equity (392 shares) (j) 4/12/2018 392 459 Preferred Equity (48 shares) (j) 12/2/2019 48 57 Common Equity (10,622 shares) (j) 4/12/2018 462 610 23,017 23,333 6 % Prime AE Group, Inc. Business Services First Lien Debt (j) (L + 6.25%) / (2.00%) 8.25%/0.00% 11/25/2019 11/25/2024 7,500 7,312 7,312 Preferred Equity (500,000 shares) (j) 11/25/2019 500 500 7,812 7,812 2 % Pugh Lubricants, LLC Specialty Distribution Second Lien Debt (k) 12.25%/0.00% 11/10/2016 5/10/2022 23,581 23,521 23,581 Common Equity (6,125 units) (h)(j) 11/10/2016 576 1,199 24,097 24,780 6 % Revenue Management Solutions, LLC Information Technology Services Common Equity (2,250,000 shares) 1/4/2017 2,250 5,120 1 % Rhino Assembly Company, LLC Specialty Distribution Second Lien Debt (k) 12.00%/1.00% 8/11/2017 2/11/2023 11,440 11,402 10,101 Delayed Draw Commitment ($875 unfunded commitment) (i)(j) 12.00%/1.00% 8/11/2017 5/17/2022 — — — Preferred Equity (8,864 units) (h)(j) 8/11/2017 944 499 12,346 10,600 3 % Road Safety Services, Inc. Business Services Second Lien Debt 11.25%/1.50% 9/18/2018 3/18/2024 10,222 10,185 10,222 Common Equity (655 units) 9/18/2018 621 680 10,806 10,902 3 % Rohrer Corporation Packaging Subordinated Debt (j) 10.50%/1.00% 10/1/2018 4/1/2024 13,875 13,822 13,875 Common Equity (400 shares) 7/18/2016 780 1,256 14,602 15,131 4 % SES Investors, LLC (dba SES Foam) Building Products Manufacturing Second Lien Debt 13.00%/0.00% 9/8/2016 12/29/2020 3,095 3,082 3,095 Common Equity (6,000 units) (h)(j) 9/8/2016 567 856 3,649 3,951 1 % Software Technology, LLC Information Technology Services Subordinated Debt (k) 11.00%/0.00% 12/23/2016 6/23/2023 10,000 9,972 10,000 Common Equity (12 shares) 12/23/2016 1,291 1,578 11,263 11,578 3 % Specialized Elevator Services Holdings, LLC Business Services First Lien Debt (j)(y) (L + 5.25%) / (2.00%) 7.25%/0.00% 5/7/2019 5/3/2024 7,080 6,985 7,080 Common Equity (500 units) (j) 5/8/2019 500 554 7,485 7,634 2 % SpendMend LLC Business Services Second Lien Debt (k) 11.00%/1.00% 1/8/2018 7/8/2023 10,491 10,456 10,491 Common Equity (1,000,000 units) 1/8/2018 1,000 1,400 11,456 11,891 3 % TransGo, LLC Component Manufacturing Common Equity (1,000 units) 2/28/2017 998 1,005 0 % The Tranzonic Companies Specialty Distribution Subordinated Debt (j) 10.00%/1.50% 3/27/2018 3/27/2025 6,922 6,870 6,922 Preferred Equity (5,653 units) (j) 3/27/2018 565 663 Common Equity (1 units) (j) 3/27/2018 — 26 7,435 7,611 2 % UBEO, LLC Business Services Subordinated Debt (j) 11.00%/0.00% 4/3/2018 10/3/2024 13,893 13,792 13,645 Common Equity (705,000 units) (h)(j) 4/3/2018 705 811 14,497 14,456 4 % United Biologics, LLC Healthcare Services Preferred Equity (98,377 units) (h)(j) 4/1/2012 1,008 24 Warrant (57,469 units) (m) 3/5/2012 566 20 1,574 44 0 % Vanguard Dealer Services, L.L.C. (n) Business Services Common Equity (6,000 units) 7/30/2015 — 22 Common Equity (2,380 units) (j) 2/2/2018 — 9 — 31 0 % 94 Table of Contents FIDUS INVESTMENT CORPORATION Consolidated Schedule of Investments December 31, 2019 (in thousands, except shares) Portfolio Company (a)(b) Investment Type (c) Industry Variable Index Spread/Floor (d) Rate (e) Cash/PIK Investment Date (f) Maturity Principal Amount Cost Fair Value (g) Percent of Net Assets Virginia Tile Company, LLC Specialty Distribution Second Lien Debt (k) 12.25%/0.00% 12/19/2014 4/7/2022 $ 12,000 $ 11,989 $ 12,000 Common Equity (17 units) 12/19/2014 342 860 12,331 12,860 3 % Wheel Pros, Inc. Specialty Distribution Second Lien Debt (j) (L + 8.50%) / (0.00%) 10.30%/0.00% 5/17/2019 4/4/2026 20,000 19,818 20,000 Preferred Equity (694,444 units) (j) 5/15/2019 1,500 1,781 21,318 21,781 5 % Worldwide Express Operations, LLC Transportation services Second Lien Debt (j) (L + 8.00%) / (1.00%) 9.90%/0.00% 2/27/2017 2/3/2025 20,000 19,740 20,000 Common Equity (4,000 units) (h)(j) 2/27/2017 2,956 4,452 22,696 24,452 6 % Total Non-control/Non-affiliate Investments $ 620,453 $ 623,544 151 % Total Investments $ 704,499 $ 766,919 186 % (a) See Note 3 to the consolidated financial statements for portfolio composition by geographic location. (b) Equity ownership may be held in shares or units of companies related to the portfolio companies. (c) All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted. (d) Variable rate investments bear interest at a rate indexed to LIBOR (L), which is reset monthly, bimonthly, quarterly, or semi-annually. Certain variable rate investments also include a LIBOR interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of December 31, 2019 (e) Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of December 31, 2019. Generally, payment-in-kind interest can be paid-in-kind or all in cash. (f) Investment date represents the date of the initial investment in the security. (g) The Company’s investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the board of directors, using significant unobservable Level 3 inputs. (h) Investment is held by a Taxable Subsidiary of the Company. (i) The disclosed commitment represents the unfunded amount as of December 31, 2019. The Company is earning 0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded. (j) Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (k) The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements). (l) As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of this portfolio company because it owns 5% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated Person are detailed in Note 3 to the consolidated financial statements. (m) Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any. (n) Investment in portfolio company that has sold its operations and is in the process of winding down. (o) Income producing. Maturity date, if any, represents mandatory redemption date. (p) Investment was on non-accrual status as of December 31, 2019, meaning the Company has ceased recognizing interest income on the investment. (q) Warrant entitles the Company to purchase 9.59% of the outstanding principal of Junior Subordinated Notes prior to exercise, and is non-income producing. (r) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.70% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (s) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.95% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (t) As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and “Control” this portfolio company because it owns 25% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control are detailed in Note 3 to the consolidated financial statements. (u) The disclosed commitment represents the unfunded amount as of December 31, 2019. The Company is earning 0.75% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate earned on the outstanding, funded balance of the commitment. (v) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.32% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (w) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.95% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (x) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 2.73% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (y) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.68% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. (z) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.41% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder. See Notes to Consolidated Financial Statements. 95 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Note 1. Organization and Nature of Business Fidus Investment Corporation (“FIC,” and together with its subsidiaries, the “Company”), a Maryland corporation, operates as an externally managed, closed-end, non-diversified business development company (“BDC”) under the Investment Company Act of 1940, as amended (“1940 Act”). FIC completed its initial public offering, or IPO, in June 2011. In addition, for federal income tax purposes, the Company elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company provides customized debt and equity financing solutions to lower middle-market companies, and may make investments directly or through its two wholly-owned investment company subsidiaries, Fidus Mezzanine Capital II, L.P. (“Fund II”) and Fidus Mezzanine Capital III, L.P. (“Fund III”). The Funds are licensed by the U.S. Small Business Administration (the “SBA”) as small business investment companies (“SBIC”). The SBIC licenses allow the Funds to obtain leverage by issuing SBA-guaranteed debentures (“SBA debentures”), subject to the issuance of leverage commitments by the SBA and other customary procedures. As SBICs, the Funds are subject to a variety of regulations and oversight by the SBA under the Small Business Investment Act of 1958, as amended (the “SBIC Act”), concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments. We believe that utilizing both FIC and the Funds as investment vehicles provides us with access to a broader array of investment opportunities. Given our access to lower cost capital through the SBA’s SBIC debenture program, we expect that 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 $350,000. Fund II and Fund III are not registered under the 1940 Act and rely on the exclusion from the definition of investment company contained in Section 3(c)(7) of the 1940 Act. The Company pays a quarterly base management fee and an incentive fee to Fidus Investment Advisors, LLC, our investment advisor (the “Investment Advisor” or “Fidus Investment Advisors”) under an investment advisory agreement (the “Investment Advisory Agreement”). Note 2. Significant Accounting Policies Basis of presentation: The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) pursuant to the requirements for reporting on Form 10-K, Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies (“ASC 946”), and Articles 6 or 10 of Regulation S-X. In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications that are necessary for the fair presentation of financial results as of and for the periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. Use of estimates: The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Consolidation: Pursuant to Article 6 of Regulation S-X and ASC 946, the Company will generally not consolidate its investments in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. As a result, the consolidated financial statements of the Company include only the accounts of the Company and its wholly-owned subsidiaries, including the Funds. All significant intercompany balances and transactions have been eliminated. Investment risks: The Company’s investments are subject to a variety of risks. These risks may include, but are not limited to the following: • Market risk - In contrast to investment-grade bonds (the market prices of which change primarily as a reaction to changes in interest rates), the market prices of high-yield bonds (which are also affected by changes in interest rates) are influenced much more by credit factors and financial results of the issuer as well as general economic factors that influence the financial markets as a whole. The portfolio companies in which the Company invests may be unseasoned, unprofitable and/or have little established operating history or earnings. These companies may also lack technical, marketing, financial, and other resources or may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team, as compared to larger, more established entities. The failure of a single product, service or distribution channel, or the loss or the ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such companies. Furthermore, these companies may be more vulnerable to competition and to overall economic conditions than larger, more established entities. 96 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) • Credit risk - Credit risk represents the risk that the Company would incur if the counterparties failed to perform pursuant to the terms of their agreements with the Company. Issues of high-yield debt securities in which the Company invests are more likely to default on interest or principal than are issues of investment-grade securities. • Liquidity risk - Liquidity risk represents the possibility that the Company may not be able to sell its investments quickly or at a reasonable price (given the lack of an established market). • Interest rate risk - Interest rate risk represents the likelihood that a change in interest rates could have an adverse impact on the fair value of an interest-bearing financial instrument. • Prepayment risk - Certain of the Company’s debt investments allow for prepayment of principal without penalty. Downward changes in market interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the debt investments and making the instrument less likely to be an income producing instrument through the stated maturity date. • Off-Balance sheet risk - Some of the Company’s financial instruments contain off-balance sheet risk. Generally, these financial instruments represent future commitments to purchase other financial instruments at defined terms at defined future dates. See Note 7 for further details. Fair value of financial instruments: The Company measures and discloses fair value with respect to substantially all of its financial instruments in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. See Note 4 to the consolidated financial statements for further discussion regarding the fair value measurements and hierarchy. Investment classification: The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in those companies where the Company owns more than 25% of the voting securities of such company or has rights to maintain greater than 50% of the board representation. Under the 1940 Act, “Affiliate Investments” are defined as investments in those companies where the Company owns between 5% and 25% of the voting securities of such company. “Non-Control/Non-Affiliate Investments” are those that neither qualify as Control Investments nor Affiliate Investments. Segments: In accordance with ASC Topic 280 — Segment Reporting , the Company has determined that it has a single reporting segment and operating unit structure. Cash and cash equivalents: Cash and cash equivalents are highly liquid investments with an original maturity of three months or less at the date of acquisition. The Company places its cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits. The Company does not believe its cash balances are exposed to any significant credit risk. Deferred financing costs: Deferred financing costs consist of fees and expenses paid in connection with the Credit Facility (as defined in Note 6), Notes (as defined in Note 6), and SBA debentures. Deferred financing costs are capitalized and amortized to interest and financing expenses over the term of the debt agreement using the effective interest method. Unamortized deferred financing costs are presented as an offset to the corresponding debt liabilities on the consolidated statements of assets and liabilities. Realized losses on extinguishment of debt: Upon the repayment of debt obligations which are deemed to be extinguishments, the difference between the principal amount due at maturity adjusted for any unamortized deferred financing costs is recognized as a loss (i.e., the unamortized deferred financing costs are recognized as a loss upon extinguishment of the underlying debt obligation). In 2019, the Company elected to change the manner in which it presents the derecognition of unamortized deferred financing costs upon extinguishment of the related debt obligation. Previously, the Company classified the extinguishment as a component of interest and financing expenses on the consolidated statements of operations. Comparative prior periods presented have been reclassified retrospectively to conform to the revised presentation. There is no change in historical net increase in net assets resulting from operations due to this change in presentation. Deferred offering costs: Deferred offering costs include registration expenses related to shelf filings. These expenses primarily consist of U.S. Securities and Exchange Commission (“SEC”) registration fees, legal fees and accounting fees incurred. These expenses are included in prepaid expenses and other assets on the consolidated statements of assets and liabilities. Upon the completion of an equity offering or a debt offering, the deferred expenses are charged to additional paid-in capital or deferred financing costs, respectively. If no offering is completed prior to the expiration of the registration statement, the deferred costs are charged to expense. 97 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Realized gains or losses and unrealized appreciation or depreciation on investments: Realized gains or losses on investments are recorded upon the sale or disposition of a portfolio investment and are calculated as the difference between the net proceeds from the sale or disposition and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation on the consolidated statements of operations includes changes in the fair value of investments from the prior period, as determined in good faith by the Company’s board of directors (the “Board”) through the application of the Company’s valuation policy, as well as reclassifications of any prior period unrealized appreciation or depreciation on exited investments to realized gains or losses on investments. Interest and dividend income: Interest and dividend income is recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt. Dividend income is recorded as dividends are declared or at the point an obligation exists for the portfolio company to make a distribution, and is generally recognized when received. Distributions from portfolio companies are evaluated to determine if the distribution is a distribution of earnings or a return of capital. Distributions of earnings are included in dividend income while a return of capital is recorded as a reduction in the cost basis of the investment. Estimates are adjusted as necessary after the relevant tax forms are received from the portfolio company. PIK income: Certain of the Company’s investments contain a payment-in-kind (“PIK”) income provision. The PIK income, computed at the contractual rate specified in the applicable investment agreement, is added to the principal balance of the investment, rather than being paid in cash, and recorded as interest or dividend income, as applicable, on the consolidated statements of operations. Generally, PIK can be paid-in-kind or all in cash. The Company stops accruing PIK income when there is reasonable doubt that PIK income will be collected. PIK income that has been contractually capitalized to the principal balance of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the investment (with corresponding adjustments to unrealized depreciation, as applicable). PIK income is included in the Company’s taxable income and, therefore, affects the amount the Company is required to pay to shareholders in the form of dividends in order to maintain the Company’s tax treatment as a RIC and to avoid corporate federal income tax, even though the Company has not yet collected the cash. Non-accrual: Debt investments or preferred equity investments (for which the Company is accruing PIK dividends) are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on full non-accrual status. Interest and dividend payments received on non-accrual investments may be recognized as interest or dividend income or may be applied to the investment principal balance based on management’s judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in management’s judgment, payments are likely to remain current. Origination and closing fees: The Company also typically receives debt investment origination or closing fees in connection with such investments. Such debt investment origination and closing fees are capitalized as unearned income and offset against investment cost basis on the consolidated statements of assets and liabilities and accreted into interest income over the life of the investment. Upon the prepayment of a debt investment, any unaccreted debt investment origination and closing fees are accelerated into interest income. Warrants : In connection with the Company’s debt investments, the Company will sometimes receive warrants or other equity-related securities from the borrower (“Warrants”). The Company determines the cost basis of Warrants based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and Warrants received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the Warrants is treated as original issue discount (“OID”), and accreted into interest income using the effective interest method over the term of the debt investment. Upon the prepayment of a debt investment, any unaccreted OID is accelerated into interest income. Fee income : Transaction fees earned in connection with the Company’s investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including structuring and advisory services, provided to portfolio companies. The Company recognizes income from fees for providing such structuring and advisory services when the services are rendered or the transactions are completed. Upon the prepayment of a debt investment, any prepayment penalties are recorded as fee income when earned. In 2020, the Company elected to change the manner in which it presents the recognition of management services fees income. Previously, the Company classified management services fees as a component of interest on idle funds and other income on the Consolidated Statement of Operations. Comparative prior periods presented have been reclassified retrospectively to conform to the revised presentation. There is no change in historical net increase in net assets resulting from operations due to this change in presentation. 98 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Partial loan and equity sales: The Company follows the guidance in ASC 860, Transfers and Servicing, when accounting for loan (debt investment) participations, equity assignments and other partial loan sales. Such guidance requires a participation, assignment or other partial loan or equity sale to meet the definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations, assignments or other partial loan or equity sales which do not meet the definition of a participating interest should remain on the Company’s consolidated statements of assets and liabilities and the proceeds recorded as a secured borrowing until the definition is met. Management has determined that all participations, assignments and other partial loan or equity sale transactions entered into by the Company have met the definition of a participating interest. Accordingly, the Company uses sale treatment in accounting for such transactions. Income taxes: The Company has elected to be treated as a RIC under Subchapter M of the Code, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to stockholders. To maintain the tax treatment of a RIC, the Company is required to timely distribute to its stockholders at least 90.0% of “investment company taxable income,” as defined by Subchapter M of the Code, each year. Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year; however, the Company will pay a 4.0% excise tax if it does not distribute at least 98.0% of the current year’s ordinary taxable income. Any such carryover taxable income must be distributed through a dividend declared prior to the later of the date on which the final tax return related to the year in which the Company generated such taxable income is filed or the 15 th day of the 10 th month following the close of such taxable year. In addition, the Company will be subject to federal excise tax if it does not distribute at least 98.2% of its net capital gains realized, computed for any one year period ending October 31. In the future, the Funds may be limited by provisions of the SBIC Act and SBA regulations governing SBICs from making certain distributions to FIC that may be necessary to enable FIC to make the minimum distributions required to maintain the tax treatment of a RIC. The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which generally holds one or more of the Company’s portfolio investments listed on the consolidated schedules of investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investment in the portfolio company investments owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies that are taxed as partnerships for U.S. federal income tax purposes (such as entities organized as limited liability companies (“LLCs”) or other forms of pass through entities) while complying with the “source-of-income” requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate income tax purposes, and each Taxable Subsidiary will be subject to U.S. federal corporate income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations. U.S. federal income tax regulations differ from GAAP, and as a result, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized under GAAP. Differences may be permanent or temporary. Permanent differences may arise as a result of, among other items, a difference in the book and tax basis of certain assets and nondeductible federal income taxes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. ASC Topic 740 — Accounting for Uncertainty in Income Taxes (“ASC Topic 740”) provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be respected by the applicable tax authorities. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits included in the income tax provision, if any. There were no material uncertain income tax positions at December 31, 2020 and 2019. The Company’s tax returns are generally subject to examination by U.S. federal and most state tax authorities for a period of three years from the date the respective returns are filed, and, accordingly, the Company’s 2017 through 2019 tax years remain subject to examination. Dividends to stockholders: Dividends to stockholders are recorded on the record date with respect to such distributions. The amount, if any, to be distributed to stockholders, is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, may be distributed at least annually, although the Company may decide to retain such capital gains for investment. The determination of the tax attributes for the Company’s distributions is made annually, and is based upon the Company’s taxable income and distributions paid to its stockholders for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax characterization of the Company’s distributions generally includes both ordinary income and capital gains but may also include qualified dividends or return of capital. 99 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the Company’s stockholders who have not “opted out” of the DRIP at least two days prior to the dividend payment date will have their cash dividend automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the Company’s common stock on a date determined by the Board. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased by the DRIP plan administrator before any associated brokerage or other costs. See Note 9 to the consolidated financial statements regarding dividend declarations and distributions. Earnings and net asset value per share: The earnings per share calculations for the years ended December 31, 2020, 2019 and 2018, are computed utilizing the weighted average shares outstanding for the period. Net asset value per share is calculated using the number of shares outstanding as of the end of the period. Stock Repurchase Program: The Company has an open market stock repurchase program (the “Stock Repurchase Program”) under which the Company may acquire up to $5,000 of its outstanding common stock. Under the Stock Repurchase Program, the Company may, but is not obligated to, repurchase outstanding common stock in the open market from time to time provided that the Company complies with the prohibitions under its insider trading policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market value and timing constraints. The timing, manner, price and amount of any share repurchases will be determined by the Company’s management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate considerations. On October 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 the Company to repurchase any specific number of shares and the Company cannot assure that any shares will be repurchased under the Stock Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time. During the years ended December 31, 2020 and 2018, the Company repurchased 25,719 and 44,821 shares, respectively, of common stock on the open market for $268 and $582, respectively. The Company did not make any repurchases of common stock during the year ended December 31, 2019. Refer to Note 8 for additional information concerning stock repurchases. Recent accounting pronouncements: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Changes to the Disclosure Requirements for Fair Value Measurement , which is intended to improve fair value disclosure requirements by removing disclosures that are not cost-beneficial, clarifying disclosures’ specific requirements, and adding relevant disclosure requirements. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the ASU effective January 1, 2020. No significant changes to the fair value disclosures were necessary in the notes to the consolidated financial statements in order to comply with ASU 2018-13. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “ Reference Rate Reform (Topic 848), ” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is evaluating the potential impact that the adoption of ASU 2020-04 will have on the Company’s 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 2002. The Final Rule applies to annual report filings due on or after April 27, 2020. As a result, the Company is no longer an accelerated filer. 100 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) SEC Rule 1-02(w)(2) Update: In May 2020, the SEC adopted rule amendments that will impact the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or certain acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules adopt a new definition of “significant subsidiary” applicable only to investment companies that (i) modifies the investment test and the income test, and (ii) eliminates the asset test currently in the definition of “significant subsidiary” in Rule 1-02(w) of Regulation S-X. The new Rule 1-02(w)(2) of Regulation S-X is intended to more accurately capture those portfolio companies that are more likely to materially impact the financial condition of an investment company. The Final Rules became effective on January 1, 2021, but voluntary compliance is permitted in advance of the effective date. The Company has elected to early adopt this rule change as of December 31, 2020. SEC Regulation S-K Update: In November 2020, the SEC issued a final rule that modernized and simplifies Management’s Discussion and Analysis of Financial Condition and Results of Operations and certain financial disclosure requirements in Regulation S-K (the “Amendments”). Specifically, the Amendments: (i) eliminate Item 301 of Regulation S-K (Selected Financial Data); (ii) simplify Item 302 of Regulation S-K (Supplementary Financial Information); and (iii) amend certain aspects of Item 303 of Regulation S-K (Managements Discussion and Analysis of Financial Condition and Results of Operations). The Amendments became effective on February 10, 2021 and compliance will be required for the registrant’s fiscal year ending on or after August 9, 2021. Early adoption of the Amendments is permitted on an item-by-item basis after the effective date; however, a registrant must fully comply with each adopted item in its entirety. The Company is currently evaluating the impact of the Amendments on its consolidated financial statements. Note 3. Portfolio Company Investments The Company’s portfolio investments principally consist of secured and unsecured debt, equity warrants and direct equity investments in privately held companies. The debt investments may or may not be secured by either a first or second lien on the assets of the portfolio company. The debt investments generally bear interest at fixed rates, and generally mature between five and seven years from the original investment. In connection with a debt investment, the Company also may receive nominally priced equity warrants and/or make a direct equity investment in the portfolio company. The Company’s warrants or equity investments may be investments in a holding company related to the portfolio company. In addition, the Company periodically makes equity investments in its portfolio companies through Taxable Subsidiaries. In both situations, the investment is generally reported under the name of the operating company on the consolidated schedules of investments. As of December 31, 2020, the Company had active investments in 66 portfolio companies and residual investments in three portfolio companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $742,869 and the weighted average effective yield on the Company’s debt investments was 12.2% as of such date. As of December 31, 2020, the Company held equity investments in 88.4% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 5.8%. 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, 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 Company’s 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 Company’s debt investments is not the same as a return on investment for its stockholders but, rather, relates to a portion of the Company’s investment portfolio and is calculated before the payment of all of the Company’s and its subsidiaries’ fees and expenses. The weighted average yields were computed using the effective interest rates for debt investments at cost as of December 31, 2020 and 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 years ended December 31, 2020, 2019 and 2018 totaled $189,996, $219,173, and $212,264, respectively. Proceeds from sales and repayments, including principal, return of capital distributions and realized gains, of portfolio investments for the years ended December 31, 2020, 2019 and 2018 totaled $210,774, $120,600, and $188,255 respectively. 101 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Investments by type with corresponding percentage of total portfolio investments consisted of the following: Fair Value Cost December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Second Lien Debt $ 332,154 44.7 % $ 383,077 49.9 % $ 341,947 49.7 % $ 392,196 55.7 % Subordinated Debt 107,911 14.5 140,843 18.4 107,343 15.6 140,670 20.0 First Lien Debt 187,353 25.2 108,327 14.1 184,585 26.9 107,718 15.3 Equity 112,836 15.2 126,564 16.5 49,958 7.3 58,091 8.2 Warrants 2,615 0.4 8,108 1.1 3,194 0.5 5,824 0.8 Royalty Rights — — — — — — — — Total $ 742,869 100.0 % $ 766,919 100.0 % $ 687,027 100.0 % $ 704,499 100.0 % All investments made by the Company as of December 31, 2020 and 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 company’s business. Fair Value Cost December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Midwest $ 225,745 30.4 % $ 208,248 27.1 % $ 189,560 27.6 % $ 181,353 25.7 % Southeast 153,291 20.6 159,959 20.9 129,974 18.9 138,142 19.6 Northeast 123,268 16.6 154,713 20.2 127,833 18.6 142,054 20.2 West 108,673 14.6 76,251 9.9 109,221 15.9 76,587 10.9 Southwest 131,892 17.8 167,748 21.9 130,439 19.0 166,363 23.6 Total $ 742,869 100.0 % $ 766,919 100.0 % $ 687,027 100.0 % $ 704,499 100.0 % The following table shows portfolio composition by type and by geographic region at fair value as a percentage of net assets. By Type By Geographic Region December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Second Lien Debt 80.9 % 92.8 % Midwest 55.0 % 50.5 % Subordinated Debt 26.3 34.2 Southeast 37.3 38.8 First Lien Debt 45.6 26.3 Northeast 30.0 37.5 Equity 27.5 30.7 West 26.5 18.5 Warrants 0.6 2.0 Southwest 32.1 40.7 Royalty Rights — — Total 180.9 % 186.0 % Total 180.9 % 186.0 % As of December 31, 2020 and 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 December 31, 2020 and 2019, the Company had no portfolio company investments that represented more than 5% of our total assets. 102 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) As of December 31, 2020 and 2019, the Company had debt investments in one portfolio company on non-accrual status: December 31, 2020 December 31, 2019 Portfolio Company Fair Value Cost Fair Value Cost Frontline Food Services, LLC (f/k/a Accent Food Services, LLC) $ — (1) $ — (1) $ 33,067 $ 35,327 EBL, LLC (EbLens) 5,454 (2) 9,214 (2) — (3) — (3) Total $ 5,454 $ 9,214 $ 33,067 $ 35,327 (1) Portfolio company was no longer held at period end. (2) 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. (3) Portfolio company debt investments were not on non-accrual status at period end. Consolidated Schedule of Investments In and Advances To Affiliates The table below represents the fair value of control and affiliate investments as of December 31, 2019 and any additions and reductions made to such investments during the year ended December 31, 2020, including the total investment income earned on such investments during the period. Year Ended December 31, 2020 Portfolio Company (1) December 31, 2020 Principal Amount - Debt Investments December 31, 2019 Fair Value Gross Additions (2) Gross Reductions (3) December 31, 2020 Fair Value Net Realized Gains (Losses) (4) Net Change in Unrealized Appreciation (Depreciation) Interest Income Payment-in- kind Interest Income Dividend Income Fee Income Control Investments FDS Avionics Corp. (dba Flight Display Systems) $ 5,122 $ 5,403 $ 1,988 $ — $ 7,391 $ — $ 1,545 $ 298 $ 442 $ — $ — US GreenFiber, LLC 22,943 16,417 5,830 (1,385 ) 20,862 — (363 ) 1,591 1,306 — — Total Contrrol Investments $ 28,065 $ 21,820 $ 7,818 $ (1,385 ) $ 28,253 $ — $ 1,182 $ 1,889 $ 1,748 $ — $ — Affiliate Investments FAR Research Inc. $ — $ 28 $ — $ — $ 28 $ — $ — $ — $ — $ — $ — Fiber Materials, Inc. — 10,449 9,681 (20,089 ) 41 9,681 (9,762 ) — — 354 — Medsurant Holdings, LLC 8,031 16,980 1,721 (7,741 ) 10,960 1,714 (2,304 ) 1,145 — — 79 Microbiology Research Associates, Inc. (5) — 11,611 21 (11,632 ) — — (751 ) 84 11 — — Mirage Trailers LLC 6,410 7,218 235 (959 ) 6,494 — (959 ) 718 159 5 16 Pfanstiehl, Inc. — 32,822 20,128 (19,445 ) 33,505 12,812 7,309 630 — 478 — Pinnergy, Ltd. — 32,978 301 (12,690 ) 20,589 301 (9,388 ) — — — — Steward Holding LLC (dba Steward Advanced Materials) 7,783 9,469 308 — 9,777 — 186 934 117 — 25 Total Affiliate Investments $ 22,224 $ 121,555 $ 32,395 $ (72,556 ) $ 81,394 $ 24,508 $ (15,669 ) $ 3,511 $ 287 $ 837 $ 120 (1) The investment type, industry, ownership detail for equity investments, and if the investment is income producing is disclosed in the consolidated schedule of investments. (2) Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest and PIK dividend income, accretion of OID and origination fees, and net unrealized appreciation recognized during the period. Gross additions also include transfers of portfolio companies into the control or affiliate classification during the period, as applicable. (3) Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and net unrealized (depreciation) recognized during the period. Gross reductions also include include transfers of portfolio companies out of the control or affiliate classification during the period, as applicable. (4) The schedule does not reflect realized gains or losses on escrow receivables for investments which were previously exited and were not held during the period presented. Gains and losses on escrow receivables are classified in the consolidated statements of operations according to the control classification at the time the investment was exited. Escrow receivables are presented in prepaid expenses and other assets on the consolidated statements of assets and liabilities. (5) Portfolio company was transferred to Non-control/Non-affiliate investments from Affiliate investments during the twelve months ended December 31, 2020. Note 4. Fair Value Measurements Investments The Board has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with ASC Topic 820 and consistent with the requirements of the 1940 Act. Fair value is the price, determined at the measurement date, that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available or reliable, valuation techniques described below are applied. Under ASC Topic 820, portfolio investments recorded at fair value in the consolidated financial statements are classified within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value, as defined below: Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets as of the measurement date. Level 2 — Inputs include quoted prices for similar assets in active markets, or that are quoted prices for identical or similar assets in markets that are not active and inputs that are observable, either directly or indirectly, for substantially the full term, if applicable, of the investment. Level 3 — Inputs include those that are both unobservable and significant to the overall fair value measurement. An investment’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the Board, using Level 3 inputs. The degree of judgment exercised by the Board in determining fair value is greatest for investments classified as Level 3 inputs. Due to the inherent uncertainty of determining the fair values of investments that do not have readily available market values, the Board’s estimate of fair values may differ significantly from the values that would have been used had a ready market for the securities existed, and those differences may be material. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the amounts ultimately realized on these investments to be materially different than the valuations currently assigned. 103 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) With respect to investments for which market quotations are not readily available, the Board undertakes a multi-step valuation process each quarter, as described below: • the quarterly valuation process begins with each portfolio company or investment being initially evaluated and rated by the investment professionals of the Investment Advisor responsible for the portfolio investment; • preliminary valuation conclusions are then documented and discussed with the investment committee of the Investment Advisor; • the Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of our portfolio investments for which market quotations are not readily available. Each portfolio company investment is generally appraised by the valuation firm(s) at least once every calendar year and each new portfolio company investment is appraised at least once in the twelve-month period following the initial investment. In certain instances, the Company may determine that it is not cost-effective, and as a result it is not in the Company’s stockholders’ best interest, to request the independent appraisal of certain portfolio company investments. Such instances include, but are not limited to, situations where the Company determines that the fair value of the portfolio company investment is relatively insignificant to the fair value of the total portfolio. The Board consulted with the independent valuation firm(s) in arriving at the Company’s determination of fair value for 12 and 13 of its 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 December 31, 2020 and 2019, respectively) as of December 31, 2020 and 2019, respectively. • the audit committee of the Board reviews the preliminary valuations of the Investment Advisor and of the independent valuation firm(s) and responds and supplements the valuation recommendations to reflect any comments; and • the Board discusses these valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of the Investment Advisor, the independent valuation firm(s) and the audit committee. In making the good faith determination of the value of portfolio investments, the Board starts with the cost basis of the security. The transaction price is typically the best estimate of fair value at inception. When evidence supports a subsequent change to the carrying value from the original transaction price, adjustments are made to reflect the expected exit values. Consistent with the policies and methodologies adopted by the Board, the Company performs detailed valuations of its debt and equity investments, including an analysis on the Company’s unfunded debt investment commitments, using both the market and income approaches as appropriate. Under the market approach, the Company typically uses the enterprise value methodology to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which the Company derives a single estimate of enterprise value. Under the income approach, the Company typically prepares and analyzes discounted cash flow models to estimate the present value of future cash flows of either an individual debt investment or of the underlying portfolio company itself. The Company evaluates investments in portfolio companies using the most recent portfolio company financial statements and forecasts. The Company also consults with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues. For the Company’s debt investments, the primary valuation technique used to estimate the fair value is the discounted cash flow method. However, if there is deterioration in credit quality or a debt investment is in workout status, the Company may consider other methods in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. The Company’s discounted cash flow models estimate a range of fair values by applying an appropriate discount rate to the future cash flow streams of its debt investments, based on future interest and principal payments as set forth in the associated debt investment agreements. The Company prepares a weighted average cost of capital for use in the discounted cash flow model for each investment, based on factors including, but not limited to: current pricing and credit metrics for similar proposed or executed investment transactions of private companies; the portfolio company’s historical financial results and outlook; and the portfolio company’s current leverage and credit quality as compared to leverage and credit quality as of the date the investment was made. The Company may also consider the following factors when determining the fair value of debt investments: the portfolio company’s ability to make future scheduled payments; prepayment penalties and other fees; estimated remaining life; the nature and realizable value of any collateral securing such debt investment; and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made. The Company estimates the remaining life of its debt investments to generally be the legal maturity date of the instrument, as the Company generally intends to hold its debt investments to maturity. However, if the Company has information available to it that the debt investment is expected to be repaid in the near term, it would use an estimated remaining life based on the expected repayment date. 104 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) For the Company’s equity investments, including equity and warrants, the Company generally uses a market approach, including valuation methodologies consistent with industry practice, to estimate the enterprise value of portfolio companies. Typically, the enterprise value of a private company is based on multiples of EBITDA, net income, revenues, or in limited cases, book value. In estimating the enterprise value of a portfolio company, the Company analyzes various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio company’s historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. The Company may also utilize an income approach when estimating the fair value of its equity securities, either as a primary methodology if consistent with industry practice or if the market approach is otherwise not applicable, or as a supporting methodology to corroborate the fair value ranges determined by the market approach. The Company typically prepares and analyzes discounted cash flow models based on projections of the future free cash flows (or earnings) of the portfolio company. The Company considers various factors, including, but not limited to, the portfolio company’s projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public. The fair value of the Company’s royalty rights are calculated based on projected future cash flows and the specific provisions contained in the pertinent agreements. The determination of the fair value of such royalty rights is not a significant component of the Company’s valuation process. Changes in valuation techniques may occur on a quarterly or annual basis due to changes in market conditions, new information becoming available or development of new markets. The Company assesses changes in valuation techniques on an individual portfolio company basis if it results in a measurement that is equally or more representative of fair value given the circumstances. The Company reviews the fair value hierarchy classifications on a quarterly basis. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur. There were no transfers among Levels 1, 2, and 3 during the years ended December 31, 2020 and 2019. 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 years ended December 31, 2020 and 2019: Second Lien Debt Subordinated Debt First Lien Debt Equity Warrants Royalty Rights Total Balance, December 31, 2018 $ 366,517 $ 104,225 $ 51,790 $ 106,707 $ 13,743 $ — $ 642,982 Net realized gains (losses) on investments — (38 ) (13,804 ) 9,923 2,933 (185 ) (1,171 ) Net change in unrealized appreciation (depreciation) on investments 4,337 1,848 1,050 15,248 (4,480 ) 185 18,188 Purchase of investments 54,245 70,036 83,990 10,902 — — 219,173 Proceeds from sales and repayments of investments (50,358 ) (36,095 ) (13,838 ) (16,221 ) (4,088 ) — (120,600 ) Interest and dividend income paid-in-kind 7,944 1,025 131 — — — 9,100 Proceeds from loan origination fees (189 ) (435 ) (1,224 ) — — — (1,848 ) Accretion of loan origination fees 531 277 210 5 — — 1,023 Accretion of original issue discount 50 — 22 — — — 72 Transfers between classifications — — — — — — — Balance, December 31, 2019 $ 383,077 $ 140,843 $ 108,327 $ 126,564 $ 8,108 $ — $ 766,919 Net realized gains (losses) on investments (35,227 ) — (3 ) 32,392 1,870 — (968 ) Net change in unrealized appreciation (depreciation) on investments (674 ) 395 2,159 (5,595 ) (2,863 ) — (6,578 ) Purchase of investments 54,900 14,500 109,901 10,695 — — 189,996 Proceeds from sales and repayments of investments (74,465 ) (48,326 ) (32,260 ) (51,223 ) (4,500 ) — (210,774 ) Interest and dividend income paid-in-kind 4,088 424 148 — — — 4,660 Proceeds from loan origination fees (278 ) (260 ) (1,489 ) — — — (2,027 ) Accretion of loan origination fees 508 335 498 3 — — 1,344 Accretion of original issue discount 225 — 72 — — — 297 Transfers between classifications — — — — — — — Balance, December 31, 2020 $ 332,154 $ 107,911 $ 187,353 $ 112,836 $ 2,615 $ — $ 742,869 Net change in unrealized appreciation/(depreciation) of ($6,559) and $10,995 for the years ended December 31, 2020 and 2019, respectively, was attributable to Level 3 investments held at December 31, 2020 and 2019, respectively. The following tables summarize the significant unobservable inputs by valuation technique used to determine the fair value of the Company’s Level 3 debt and equity investments as of December 31, 2020 and 2019. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values. 105 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Fair Value at December 31, 2020 Valuation Techniques Unobservable Inputs Range (weighted average) (1) Debt investments: Second Lien Debt $ 306,405 Discounted cash flow Weighted average cost of capital 9.3% - 27.0% (14.0%) 5,454 Enterprise value EBITDA multiples 3.9x - 3.9x (3.9x) 5,123 Enterprise value Revenue multiples 2.1x - 2.1x (2.1x) 15,172 Enterprise value Asset Coverage 1.2x - 1.2x (1.2x) Subordinated Debt 107,911 Discounted cash flow Weighted average cost of capital 11.5% - 12.0% (11.7%) First Lien Debt 183,238 Discounted cash flow Weighted average cost of capital 6.8% - 16.3% (10.3%) 4,115 Enterprise value Asset Coverage 1.8x - 1.8x (1.8x) Equity investments: Equity 110,568 Enterprise value EBITDA multiples 3.9x - 15.3x (8.1x) 2,268 Enterprise value Revenue multiples 2.1x - 2.1x (2.1x) Warrants 2,615 Enterprise value EBITDA multiples 4.5x - 6.5x (6.2x) (1) Unobservable inputs were weighted by the relative fair value of the instruments. Fair Value at December 31, 2019 Valuation Techniques Unobservable Inputs Range (weighted average) (1) Debt investments: Second Lien Debt $ 364,351 Discounted cash flow Weighted average cost of capital 10.3% - 18.2% (13.2%) 16,417 Enterprise value EBITDA multiples 5.3x - 5.3x (5.3x) 2,309 Enterprise value Asset Coverage 1.2x - 1.2x (1.2x) Subordinated Debt 140,843 Discounted cash flow Weighted average cost of capital 10.9% - 21.6% (12.0%) First Lien Debt 101,162 Discounted cash flow Weighted average cost of capital 8.4% - 14.8% (11.8%) 7,165 Enterprise value Revenue multiples 4.4x - 4.4x (4.4x) Equity investments: Equity 125,370 Enterprise value EBITDA multiples 3.5x - 20.7x (8.5x) 1,194 Enterprise value Revenue multiples 1.2x - 4.4x (2.0x) Warrants 8,108 Enterprise value EBITDA multiples 4.0x - 7.0x (6.6x) (1) 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. The significant unobservable inputs used in determining fair value under the enterprise value technique are revenue and EBITDA multiples, as well as asset coverage. Significant increases (or decreases) in these inputs could result in significantly higher (or lower) fair value estimates. Other Financial Assets and Liabilities ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments such as cash and cash equivalents, interest receivable and accounts payable and other liabilities approximate the fair value of such items due to the short maturity of such instruments. The Company’s borrowings under the Credit Facility (as defined in Note 6), SBA debentures, and Public Notes (as defined in Note 6) are recorded at their respective carrying values. 106 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) The following tables summarize the carrying value and fair value of the Company’s debt obligations as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Carrying Value (1) Fair Value Carrying Value (1) Fair Value SBA debentures (2) $ 147,000 $ 147,000 $ 157,500 $ 157,500 Credit Facility borrowings (3) — — 25,000 25,000 2023 Notes (4) 50,000 50,620 50,000 51,900 February 2024 Notes (4) 69,000 69,745 69,000 72,422 November 2024 Notes (4) 63,250 64,389 63,250 65,148 2026 Notes (5) 125,000 125,000 — — Total $ 454,250 $ 456,754 $ 364,750 $ 371,970 (1) Carrying value represents the outstanding principal balance of the debt obligation. (2) The fair value of SBA debentures and 2026 Notes is estimated by discounting the remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the debentures, which are Level 3 inputs under ASC Topic 820. (3) The fair value of borrowings under the Credit Facility, if valued under ASC Topic 820, are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model. (4) The Public Notes, if valued under ASC Topic 820, are valued using available market quotes, which is a Level 1 input. (5) The 2026 Notes fair value is equal to the offering price entered into on December 16, 2020. The following table summarizes the inputs used to value the Company’s debt obligations if measured at fair value as of December 31, 2020 and 2019. Fair Value Valuation Inputs December 31, 2020 December 31, 2019 Level 1 $ 184,754 $ 189,470 Level 2 — — Level 3 272,000 182,500 Total $ 456,754 $ 371,970 Note 5. Related Party Transactions Investment Advisory Agreement: The Company has entered into an Investment Advisory Agreement with the Investment Advisor. On June 4, 2020, the Board approved the renewal of the Investment Advisory Agreement through June 20, 2021. Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board, the Investment Advisor provides investment advisory services to the Company. For providing these services, the Investment Advisor receives a fee, consisting of two components — a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% based on the average value of total assets (other than cash or cash equivalents, but including assets purchased with borrowed amounts) at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears. The base management fee under the Investment Advisory Agreement for the years ended December 31, 2020, 2019 and 2018 totaled $12,932, $12,399 and $11,365, respectively. As of December 31, 2020 and 2019, the base management fee payable was $3,244 and $3,334, respectively. The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the quarter. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement (defined below) and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee and excise taxes on realized gains). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as market discount, original issue discount, debt instruments with PIK income, preferred stock with PIK dividends and zero-coupon securities), accrued income the Company has not yet received in cash. The Investment Advisor is not under any obligation to reimburse the Company for any part of the incentive fee it receives that was based on accrued interest that the Company never collects. 107 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Pre-incentive fee net investment income does not include any realized capital gains, taxes associated with such realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where the Company incurs a loss. For example, if the Company generates pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to a net loss on investments. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed “hurdle rate” of 2.0% per quarter. If market interest rates rise, the Company may be able to invest funds in debt instruments that provide for a higher return, which would increase the Company’s pre-incentive fee net investment income and make it easier for the Investment Advisor to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income. The Company pays the Investment Advisor an incentive fee with respect to pre-incentive fee net investment income in each calendar quarter as follows: • no incentive fee in any calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle rate of 2.0%; • 100.0% of the Company’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5% in any calendar quarter. This portion of the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.5%) is referred to as the “catch-up” provision. The catch-up is meant to provide the Investment Advisor with 20.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 2.5% in any calendar quarter; and • 20.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 2.5% in any calendar quarter. The sum of the calculations above equals the income incentive fee. The income incentive fee is appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the calendar quarter. The income incentive fee for the years ended December 31, 2020, 2019 and 2018 totaled $8,952, $7,445, and $9,413, respectively. The Investment Advisor, in consultation with the Board, agreed to voluntarily waive $423 of the income incentive fee for the year ended December 31, 2020. There was no income incentive fee waiver for the year ended December 31, 2019 or 2018. As of December 31, 2020 and 2019, the income incentive fee payable was $2,610 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 (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.0% of the net capital gains as of the end of the fiscal year. In determining the capital gains incentive fee to be paid in cash to the Investment Advisor, the Company calculates the cumulative aggregate realized capital gains and losses since the Formation Transactions (realized capital gains and losses include realized gains and losses on investments, net of income tax provision from realized gains on investments, and realized losses on extinguishment of debt), and the aggregate unrealized capital depreciation on investments as of the date of the calculation. At the end of the applicable year, the amount of capital gains that serves as the basis for the calculation of the capital gains incentive fee to be paid equals the cumulative aggregate realized capital gains on investments, less cumulative aggregate realized capital losses on investments, less aggregate unrealized capital depreciation on investments, and less cumulative aggregate realized losses on extinguishment of debt. If this number is positive at the end of such year, then the capital gains incentive fee to be paid in cash for such year equals 20.0% of such amount, less the aggregate amount of any capital gains incentive fees paid in all prior years. As of December 31, 2020 and 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 December 31, 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 plus (iii) realized losses on extinguishment of debt decreases during a period, the Company will reverse any excess capital gains incentive fee previously accrued such that the amount of capital gains incentive fee accrued is no more than 20.0% of the sum of (i) net realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments plus (iii) realized losses on extinguishment of debt. The capital gains incentive fee accrued (reversed) during the years ended December 31, 2020, 2019 and 2018 was ($1,684), $3,299 and $2,938, respectively. As of December 31, 2020 and 2019, the accrued capital gains incentive fee payable was $11,031 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 Company’s outstanding voting securities, 108 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) 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”). Independent Directors. The Investment Advisory Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, by the Investment Advisor and may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. The holders of a majority of the Company’s outstanding voting securities may also terminate the Investment Advisory Agreement without penalty. 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 Company’s allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs. Under the Administration Agreement, the Investment Advisor also provides managerial assistance to those portfolio companies to which the Company is required to provide such assistance and the Company reimburses the Investment Advisor for fees and expenses incurred with providing such services. In addition, the Company reimburses the Investment Advisor for fees and expenses incurred while performing due diligence on the Company’s prospective portfolio companies, including “dead deal” expenses . Under the Administration Agreement, administrative service expenses for the years ended December 31, 2020, 2019 and 2018 were $1,720, $1,583 and $1,462, respectively. As of December 31, 2020 and 2019, the accrued administrative service expense was $593 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. (“FEF I”). 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. Note 6. Debt Revolving Credit Facility : On June 16, 2014, FIC entered into a senior secured revolving credit agreement (the “Credit Facility”) with ING Capital LLC (“ING”), as the administrative agent, collateral agent, and lender. The Credit Facility is secured by certain portfolio investments held by the Company, but portfolio investments held by the Funds are not collateral for the Credit Facility. On April 24, 2019, the Company entered into an Amended & Restated Senior Secured Revolving Credit Agreement (the “Amended Credit Agreement”) among the Company, as borrower, the lenders party thereto, and ING Capital LLC, as administrative agent. The Amended Credit Agreement amends, restates, and replaces the Credit Facility. 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%, (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. 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. 109 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) 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 December 31, 2020 and 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 December 31, 2020 and 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 Company’s full compliance, as determined by the SBA, with the terms and conditions set forth in the SBIC Act. As of December 31, 2020 and 2019, the Company’s issued and outstanding SBA debentures mature as follows: Pooling Date (1) Maturity Date Fixed Interest Rate December 31, 2020 December 31, 2019 9/24/2014 9/1/2024 3.775 % $ — $ 1,000 3/25/2015 3/1/2025 3.277 22,500 22,500 9/23/2015 9/1/2025 3.571 16,700 16,700 3/23/2016 3/1/2026 3.267 1,500 1,500 3/23/2016 3/1/2026 3.249 21,800 21,800 9/21/2016 9/1/2026 2.793 500 500 3/29/2017 3/1/2027 3.587 10,000 10,000 9/20/2017 9/1/2027 3.260 1,000 1,000 9/20/2017 9/1/2027 3.190 33,000 33,000 3/21/2018 3/1/2028 3.859 16,000 16,000 3/21/2018 3/1/2028 3.534 10,500 15,500 9/19/2018 9/1/2028 3.895 — 9,500 9/19/2018 9/1/2028 4.220 — 1,000 9/25/2019 9/1/2029 2.377 7,500 7,500 3/25/2020 3/1/2030 2.172 6,000 — Total outstanding SBA debentures $ 147,000 $ 157,500 (1) The SBA has two scheduled pooling dates for debentures (in March and in September). Certain debentures funded during the reporting periods may not be pooled until the subsequent pooling date. Notes: On February 2, 2018, the Company closed the public offering of approximately $43,478 in aggregate principal amount of its 5.875% notes due 2023, or the “2023 Notes.” On February 22, 2018, the underwriters exercised their option to purchase an additional $6,522 in aggregate principal of the 2023 Notes. The total net proceeds to the Company from the 2023 Notes, including the exercise of the underwriters’ option, after deducting underwriting discounts of approximately $1,500 and offering expenses of $438, were approximately $48,062. The 2023 Notes mature on February 1, 2023 and bear interest at a rate of 5.875%. The 2023 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after February 1, 2020. Interest on the 2023 Notes is payable quarterly on February 1, May 1, August 1 and November 1 of each year. The 2023 Notes are listed on the NASDAQ Global Select Market under the trading symbol “FDUSL.” On February 8, 2019, the Company closed the public offering of approximately $60,000 in aggregate principal amount of its 6.000% notes due 2024, or the “February 2024 Notes.” On February 19, 2019, the underwriters exercised their option to purchase an additional $9,000 in aggregate principal of the February 2024 Notes. The total net proceeds to the Company from the February 2024 Notes, including the exercise of the underwriters’ option, after deducting underwriting discounts of approximately $2,070 and estimated offering expenses of $409, were approximately $66,521. 110 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) The February 2024 Notes mature on February 15, 2024 and bear interest at a rate of 6.000%. The February 2024 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after February 15, 2021. Interest on the February 2024 Notes is payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning May 15, 2019. The February 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol “FDUSZ.” 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 estimated 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 Company’s option on or after November 1, 2021. Interest on the November 2024 Notes is payable quarterly on February 1, May 1, August 1 and November 1 of each year, beginning February 1, 2020. The November 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol “FDUSG.” On December 23, 2020, the Company closed the offering of approximately $125,000 in aggregate principal amount of its 4.75% notes due 2026, or the “2026 Notes” (collectively with the Public Notes, the “Notes”). The total net proceeds to the Company from the 2026 Notes after deducting underwriting discounts of approximately $2,500 and estimated offering expenses of $400, were approximately $122,100. The 2026 Notes will mature on January 31, 2026 and bear interest at a rate of 4.75%. The 2026 Notes may be redeemed in whole or in part at any time or from time to time at our option subject to a make whole provision if redeemed more than three months prior to maturity. Interest on the 2026 Notes is payable on January 31 and July 31 of each year, beginning July 31, 2021. The Company does not intent to list the 2026 Notes on any securities exchange or automated dealer quotation system. The Notes are unsecured obligations of the Company and rank pari passu with the Company’s future unsecured indebtedness; effectively subordinated to all of the Company’s existing and future secured indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, financing vehicles, or similar facilities the Company may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities. As of December 31, 2020, the aggregate amount outstanding of the senior securities issued by the Company was $307,250, for which our asset coverage was 233.7%. 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. Interest and Financing Expenses Interest and fees related to the Company’s debt for the years ended December 31, 2020, 2019 and 2018 which are included in interest and financing expenses on the consolidated statements of operations, were as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Year Ended December 31, 2018 SBA debentures Credit Facility Notes Total SBA debentures Credit Facility Notes Total SBA debentures Credit Facility Notes Total Stated interest expense $ 5,140 $ 1,642 $ 10,625 $ 17,407 $ 5,746 $ 2,144 $ 7,330 $ 15,220 $ 7,460 $ 1,145 $ 2,684 $ 11,289 Amortization of deferred financing costs 549 397 1,325 2,271 601 334 917 1,852 732 289 349 1,370 Total interest and financing expenses $ 5,689 $ 2,039 $ 11,950 $ 19,678 $ 6,347 $ 2,478 $ 8,247 $ 17,072 $ 8,192 $ 1,434 $ 3,033 $ 12,659 Weighted average stated interest rate, period end 3.297 % N/A (1) 5.342 % 4.680 % 3.392 % 4.788 % 5.749 % 4.665 % 3.344 % 6.000 % 5.875 % 4.149 % Unused commitment fee rate, period end N/A 1.375 % (1) N/A 1.375 % N/A 0.833 % N/A 0.833 % N/A 0.500 % N/A 0.500 % (1) Reflects the effective rate as of December 31, 2020 Realized Losses on Extinguishment of Debt During the years ended December 31, 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 years ended December 31, 2020 and 2019. 111 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Deferred Financing Costs Deferred financing costs are amortized into interest and financing expenses on the consolidated statements of operations using the effective interest method, over the term of the respective financing instrument. Deferred financing costs related to the SBA debentures, Credit Facility, and Notes as of December 31, 2020 and 2019 were as follows: December 31, 20203 December 31, 2019 SBA debentures Credit Facility Notes Total SBA debentures Credit Facility Notes Total SBA debenture commitment fees $ 1,750 $ — $ — $ 1,750 $ 1,750 $ — $ — $ 1,750 SBA debenture leverage fees 3,966 — — 3,966 3,820 — — 3,820 Credit Facility upfront fees — 3,238 — 3,238 — 2,894 — 2,894 Public Notes underwriting discounts — — 7,968 7,968 — — 5,468 5,468 Public Notes debt issue costs — — 1,579 1,579 — — 1,147 1,147 Total deferred financing costs 5,716 3,238 9,547 18,501 5,570 2,894 6,615 15,079 Less: accumulated amortization (2,720 ) (2,190 ) (2,591 ) (7,501 ) (1,872 ) (1,793 ) (1,266 ) (4,931 ) Unamortized deferred financing costs $ 2,996 $ 1,048 $ 6,956 $ 11,000 $ 3,698 $ 1,101 $ 5,349 $ 10,148 Unamortized deferred financing costs are presented as a direct offset to the SBA debentures, Credit Facility, and 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 December 31, 2020 and 2019: December 31, 2020 December 31, 2019 SBA debentures Credit Facility Notes Total SBA debentures Credit Facility Notes Total Outstanding debt $ 147,000 $ — $ 307,250 $ 454,250 $ 157,500 $ 25,000 $ 182,250 $ 364,750 Less: unamortized deferred financing costs (2,996 ) (1,048 ) (6,956 ) (11,000 ) (3,698 ) (1,101 ) (5,349 ) (10,148 ) Debt, net of deferred financing costs $ 144,004 $ (1,048 ) $ 300,294 $ 443,250 $ 153,802 $ 23,899 $ 176,901 $ 354,602 As of December 31, 2020, the Company’s debt liabilities are scheduled to mature as follows (1) : Year SBA debentures Credit Facility (2) Notes Total 2021 $ — $ — $ — $ — 2022 — — — — 2023 — — 50,000 50,000 2024 — — 132,250 132,250 2025 39,200 — — 39,200 Thereafter 107,800 — 125,000 232,800 Total $ 147,000 $ — $ 307,250 $ 454,250 (1) The table above presents scheduled maturities of the Company’s outstanding debt liabilities as of a point in time pursuant to the terms of those instruments. The timing of actual repayments of outstanding debt liabilities may not ultimately correspond with the scheduled maturity dates depending on the terms of the underlying instruments and the potential for earlier prepayments. (2) The Company’s Credit Facility matures on April 24, 2023. As of December 31, 2020, there were no outstanding borrowings under the Credit Facility. 112 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Information about our senior securities is shown in the following table for the years indicated in the table, unless otherwise noted. Class and Year Total Amount Outstanding Exclusive of Treasury Securities (1) Asset Coverage per Unit (2)(5) Involuntary Liquidation Preference per Unit (3) Average Market Value per Unit (4) (dollars in thousands) SBA debentures 2011 $ 104,000 $ 2,351 $ * $ N/A 2012 144,500 * * * N/A 2013 144,500 * * * N/A 2014 173,500 * * * N/A 2015 213,500 * * * N/A 2016 224,000 * * * N/A 2017 231,300 * * * N/A 2018 191,000 * * * N/A 2019 157,500 * * * N/A 2020 147,000 * * * N/A Credit Facility 2011 $ — $ N/A * $ N/A 2012 — N/A * N/A 2013 — N/A * N/A 2014 10,000 25,326 * N/A 2015 15,500 16,959 * N/A 2016 — N/A * N/A 2017 11,500 35,198 * N/A 2018 36,500 5,659 * N/A 2019 25,000 2,989 * N/A 2020 — 2,337 * N/A 2023 Notes 2018 $ 50,000 $ 5,659 * $ 25.74 2019 50,000 2,989 * 25.81 2020 50,000 2,337 * 24.12 February 2024 Notes 2019 $ 69,000 $ 2,989 * $ 25.97 2020 69,000 2,337 * 24.60 November 2024 Notes 2019 $ 63,250 $ 2,989 * $ 25.75 2020 63,250 2,337 * 23.20 2026 Notes 2020 $ 125,000 $ 2,337 * $ N/A (1) Total amount of each class of senior securities outstanding at the end of the period presented. (2) Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. (3) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. The “*” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities. (4) Not applicable to SBA debentures, Credit Facility, and 2026 Notes because these senior securities are not registered for public trading. The average market value per unit for the Public Notes is based on the average of the closing market price as of each quarter end during the fiscal year and the prior year end, as applicable, and is expressed per $1,000 of indebtedness. The Public Notes were issued in $25 increments. (5) We have excluded our SBA-guaranteed debentures from the asset coverage calculation (**) as of December 31, 2012 pursuant to the exemptive relief granted by the SEC in March 2012 that permits us to exclude such debentures from the definition of senior securities in the 200% asset coverage ratio (or 150% if we satisfy certain requirements) we are required to maintain under the 1940 Act. 113 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Note 7. Commitments and Contingencies Commitments: The Company had outstanding commitments to portfolio companies to fund various undrawn revolving loans, other debt investments and capital commitments totaling $5,645 and $4,757 as of December 31, 2020 and 2019, respectively. Such outstanding commitments are summarized in the following table: December 31, 2020 December 31, 2019 Portfolio Company - Investment Total Commitment Unfunded Commitment Total Commitment Unfunded Commitment Combined Systems, Inc. - Revolving Loan $ 4,000 $ 1,050 $ — $ — Elements Brands, LLC - Revolving Loan 3,000 838 — — FDS Avionics Corp. (dba Flight Display Systems) - Revolving Loan 250 30 250 30 French Transit, LLC- Revolving Loan — — 1,000 1,000 Rhino Assembly Company, LLC - Delayed Draw Commitment 875 875 875 875 Safety Products Group, LLC - Common Equity (Units) 2,852 (1) 2,852 (1) 2,852 (1) 2,852 (1) Total $ 10,977 $ 5,645 $ 4,977 $ 4,757 (1) Portfolio company was no longer held at period end. The commitment represents the Company’s maximum potential liability related to certain guaranteed obligations stemming from the prior sale of the portfolio company’s underlying operations. Additional detail for each of the commitments above is provided in the Company’s consolidated schedules of investments. The commitments are generally subject to the borrowers meeting certain criteria such as compliance with financial and nonfinancial covenants. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide indemnifications under certain circumstances. In addition, in connection with the disposition of an investment in a portfolio company, the Company may be required to make representations about the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business. The Company may also be required to indemnify the purchasers of such investment to the extent that any such representations are inaccurate. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company expects the risk of future obligation under these indemnifications to be remote. Legal proceedings: In the normal course of business, the Company may be subject to legal and regulatory proceedings that are generally incidental to its ongoing operations. While the outcome of any such legal proceedings cannot be predicted with certainty, the Company does not believe any such legal proceedings will have a material adverse effect on the Company’s consolidated financial statements. Note 8. Common Stock Public Offerings of Common Stock The following table summarizes the cumulative total shares issued, net proceeds received, and weighted average offering price in public offerings of the Company’s common stock since the IPO. Period Cumulative Number of Shares Cumulative Gross Proceeds Cumulative Underwriting Fees and Commissions and Offering Costs (1) Weighted Average Offering Price Cumulative since IPO 14,388,414 $ 236,597 $ 8,989 $ 16.44 (1) Fidus Investment Advisors, LLC agreed to bear a cumulative of $1,925 of underwriting fees and commissions and offering costs associated with these offerings (such amounts are not included in the number reported above). All such payments made by Fidus Investment Advisors, LLC are not subject to reimbursement by the Company. No shares have been issued for the last three years ended December 31, 2020, 2019, and 2018. Common Stock ATM Program On August 21, 2014, the Company entered into an equity distribution agreement with Raymond James & Associates, Inc. and Robert W. Baird & Co. Incorporated through which the Company could sell, by means of at-the-market offerings from time to time, shares of the Company’s common stock having an aggregate offering price of up to $50,000 (the “ATM Program”). There were no issuances of common stock under the ATM program during years ended December 31, 2020, 2019, and 2018. 114 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (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 stock. During the years ended December 31, 2020 and 2018, the Company repurchased 25,719 and 44,821 shares of common stock, respectively, on the open market for $268 and $582, respectively. The Company did not make any repurchases of common stock during the year ended December 31, 2019. The Company’s NAV per share increased by approximately $0.01 and $0.01 for the years ended December 31, 2020 and 2018, respectively, as a result of the share repurchases. The following table summarizes the Company’s share repurchases under the Stock Repurchase Program for the years ended December 31, 2020, 2019 and 2018: Years Ended December 31, Repurchases of Common Stock 2020 2019 2018 Number of shares repurchased 25,719 — 44,821 Cost of shares repurchased, including commissions $ 268 $ — $ 582 Weighted average price per share $ 10.37 $ — $ 12.94 Weighted average discount to net asset value at quarter end prior to repurchases 38.5 % N/A 19.4 % 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 December 31, 2020 and 2019, respectively. Note 9. Dividends and Distributions The Company’s dividends and distributions are recorded on the record date. The following table summarizes the dividends paid during the last three fiscal years. Date Declared Record Date Payment Date Amount Per Share Total Distribution Cash Distribution DRIP Shares Value DRIP Shares DRIP Share Issue Price Year Ended December 31, 2018: 2/13/2018 3/9/2018 3/23/2018 $ 0.39 $ 9,558 $ 9,558 $ — (3) — (3) — 4/30/2018 6/8/2018 6/22/2018 0.39 9,541 9,541 — (3) — (3) — 7/30/2018 9/7/2018 9/21/2018 0.39 9,540 9,540 — (3) — (3) — 10/30/2018 12/7/2018 12/21/2018 0.39 9,541 9,541 — (3) — (3) — 10/30/2018 (1) 12/7/2018 12/21/2018 0.04 978 978 — (3) — (3) — $ 1.60 $ 39,158 $ 39,158 $ — — Year Ended December 31, 2019: 1/31/2019 3/8/2019 3/22/2019 $ 0.39 $ 9,541 $ 9,541 $ — (3) — (3) — 4/29/2019 6/7/2019 6/21/2019 0.39 9,540 9,540 — (3) — (3) — 7/29/2019 9/6/2019 9/20/2019 0.39 9,541 9,541 — (3) — (3) — 10/29/2019 12/6/2019 12/20/2019 0.39 9,541 9,541 — (3) — (3) — 10/29/2019 (1) 12/6/2019 12/20/2019 0.04 978 978 — (3) — (3) — $ 1.60 $ 39,141 $ 39,141 $ — — Year Ended December 31, 2020: 2/14/2020 3/13/2020 3/27/2020 $ 0.39 $ 9,537 $ 9,537 $ — (3) — (3) — 4/29/2020 6/12/2020 6/26/2020 0.30 7,331 7,331 — (3) — (3) — 8/03/2020 9/11/2020 9/25/2020 0.30 7,331 7,331 — (3) — (3) — 10/26/2020 12/4/2020 12/18/2020 0.30 7,331 7,331 — (3) — (3) — 10/26/2020 (2) 12/4/2020 12/18/2020 0.04 978 978 — (3) — (3) — $ 1.33 $ 32,508 $ 32,508 $ — — (1) Special dividend. (2) Supplemental dividend (3) During the the years ended December 31, 2020, 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: 115 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Fiscal Year Ended December 31, 2018: Number of Shares Purchased and Reissued Average Price Paid Per Share Total Amount Paid January 1, 2018 through March 31, 2018 16,503 $ 12.97 $ 214 April 1, 2018 through June 30, 2018 16,216 14.48 235 July 1, 2018 through September 30, 2018 16,207 14.83 240 October 1, 2018 through December 31, 2018 29,152 11.85 346 Total 78,078 $ 13.25 $ 1,035 Fiscal Year Ended December 31, 2019: Number of Shares Purchased and Reissued Average Price Paid Per Share Total Amount Paid January 1, 2019 through March 31, 2019 21,855 $ 15.25 $ 333 April 1, 2019 through June 30, 2019 14,067 16.23 228 July 1, 2019 through September 30, 2019 15,289 15.35 235 October 1, 2019 through December 31, 2019 17,525 15.27 268 Total 68,736 $ 15.48 $ 1,064 Fiscal Year Ended December 31, 2020: Number of Shares Purchased and Reissued Average Price Paid Per Share Total Amount Paid January 1, 2020 through March 31, 2020 31,586 $ 7.58 $ 239 April 1, 2020 through June 30, 2020 21,904 9.04 198 July 1, 2020 through September 30, 2020 28,871 10.18 294 October 1, 2020 through December 31, 2020 20,222 12.91 261 Total 102,583 $ 9.67 $ 992 116 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Note 10. Financial Highlights The following is a schedule of financial highlights for the years ended December 31, 2020, 2019, 2018, 2017 and 2016: Years Ended December 31, 2020 2019 2018 2017 2016 Per share data: Net asset value at beginning of period $ 16.85 $ 16.47 $ 16.05 $ 15.76 $ 15.17 Net investment income (1) 1.62 1.31 1.43 1.44 1.45 Net realized gain (loss) on investments, net of tax (provision) (1) (0.06 ) (0.05 ) (0.45 ) 0.67 (0.77 ) Net unrealized appreciation (depreciation) on investments (1) (0.27 ) 0.74 1.05 (0.23 ) 1.59 Realized losses on extinguishment of debt (1) (0.01 ) (0.02 ) (0.01 ) (0.01 ) — Total increase from investment operations (1) 1.28 1.98 2.02 1.87 2.27 Accretive (dilutive) effect of share issuances and repurchases 0.01 — 0.01 0.02 (0.05 ) Dividends to stockholders (1.33 ) (1.60 ) (1.60 ) (1.60 ) (1.60 ) Other (2) — — (0.01 ) — (0.03 ) Net asset value at end of period $ 16.81 $ 16.85 $ 16.47 $ 16.05 $ 15.76 Market value at end of period $ 13.10 $ 14.84 $ 11.69 $ 15.18 $ 15.73 Shares outstanding at end of period 24,437,400 24,463,119 24,463,119 24,507,940 22,446,076 Weighted average shares outstanding during the period 24,442,431 24,463,119 24,471,730 23,527,188 18,283,715 Net assets at end of period $ 410,760 $ 412,310 $ 402,985 $ 393,273 $ 353,785 Average net assets (6) $ 392,866 $ 404,284 $ 398,440 $ 376,292 $ 289,453 Ratios to average net assets: Total expenses (4)(10) 11.4 % 11.0 % 10.2 % 9.2 % 11.5 % Net investment income (5) 10.1 % 7.9 % 8.8 % 9.0 % 9.2 % Total return based on market value (3) 1.0 % 37.6 % (15.8 %) 3.2 % 23.8 % Total return based on net asset value (8) 7.6 % 12.0 % 12.6 % 11.9 % 15.0 % Portfolio turnover ratio (3) 25.8 % 17.2 % 29.5 % 29.5 % 29.3 % Supplemental Data: Average debt outstanding (7) $ 385,350 $ 319,050 $ 271,560 $ 219,920 $ 221,200 Average debt per share (1) $ 15.77 $ 13.04 $ 11.10 $ 9.35 $ 12.10 (1) Weighted average per share data. (2) Represents the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date, or other rounding. (3) Total return based on market value for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 equals the change in the market value of the Company’s common stock per share during the period divided by the market value per share at the beginning of the period, and assumes reinvestment of dividends at prices obtained by our dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor. (4) The total expenses to average net assets ratio is calculated using the total expenses, net of income incentive fee waiver caption as presented on the consolidated statements of operations, which includes incentive fee and excludes the income tax provision. (5) The net investment income to average net assets ratio is calculated using the net investment income caption as presented on the consolidated statements of operations, which includes incentive fee. (6) Average net assets is calculated as the average of the net asset balances as of each quarter end during the fiscal year and the prior year end. (7) Average debt outstanding is calculated as the average of the outstanding debt balances as of each quarter end during the fiscal year and the prior year end. (8) Total return based on net asset value per share equals the change in net asset value per share during the period, plus dividends paid per share during the period, less other non-operating changes during the period, and divided by beginning net asset value per share for the period. Non-operating changes include any items that affect net asset value per share other than increase from investment operations, such as the effects of share issuances and repurchases and other miscellaneous items. (9) The ratio of waived incentive fees to average net assets was (0.11%) and zero for the years ended December 31, 2020 and 2019 through 2016, respectively. (10) The following is a schedule of supplemental expense ratios to average net assets: Years Ended December 31, Ratio to average net assets: 2020 2019 2018 2017 2016 Expenses other than incentive fee (4) 9.7 % 8.3 % 7.1 % 6.3 % 7.9 % Incentive fee, net of incentive fee waiver (4)(9) 1.7 % 2.7 % 3.1 % 2.9 % 3.6 % Total expenses (4) 11.4 % 11.0 % 10.2 % 9.2 % 11.5 % 117 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) Note 11. Selected Quarterly Financial Data (unaudited) March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Total investment income $ 19,983 $ 20,433 $ 21,077 $ 23,630 Net investment income 17,417 9,291 6,902 6,038 Net increase in net assets from operations (26,971 ) 7,973 20,707 29,517 Net investment income per share $ 0.71 $ 0.38 $ 0.28 $ 0.25 Net increase in net assets from operations per share $ (1.10 ) $ 0.33 $ 0.85 $ 1.20 Net asset value per share at end of period $ 15.37 $ 15.39 $ 15.94 $ 16.81 March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 Total investment income $ 20,330 $ 18,068 $ 19,201 $ 19,507 Net investment income 9,599 9,643 7,362 5,365 Net increase in net assets from operations 11,372 3,202 13,895 19,997 Net investment income per share $ 0.39 $ 0.39 $ 0.31 $ 0.22 Net increase in net assets from operations per share $ 0.46 $ 0.13 $ 0.57 $ 0.82 Net asset value per share at end of period $ 16.55 $ 16.29 $ 16.47 $ 16.85 Note 12. Income Taxes The Company has elected to be treated for federal income tax purposes as a RIC, whereby the Company generally will not pay corporate-level federal income taxes on any net ordinary income or capital gains that the Company distributes to its stockholders as dividends. The Company must generally distribute at least 90% of its investment company taxable income to maintain its RIC status. As part of maintaining RIC status, undistributed taxable income pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared prior to the later of the due date for filing of the federal income tax return (including extensions) for the prior year or the 15th day of the 10th month following the prior tax year. Such taxable income carried forward to the next tax year will be subject to excise tax equal to 4% of the amount by which (i) 98% of the Company’s ordinary income recognized during a calendar year and (ii) 98.2% of the Company’s long term capital gains, as defined by Subchapter M of the Code, recognized for the one year period ending October 31 st of a calendar year exceeds the respective distributions for the year. Excise tax is included as a component of income tax provision and income tax (provision) on realized gains on investments, depending on the character of the underlying taxable income (ordinary or capital gains), on the consolidated statements of operations. The Taxable Subsidiaries hold certain portfolio investments for the Company. The Taxable Subsidiaries are consolidated for financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in the Company’s consolidated financial statements. The principal purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies which are “pass through” entities for federal income tax purposes in order to comply with the “source-of-income” requirements contained in the RIC tax provisions of Subchapter M of the Code. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate income tax purposes, and each Taxable Subsidiary is subject to U.S. federal corporate income tax on its taxable income. The Taxable Subsidiaries are taxed as corporations and do not intend to qualify as a RIC pursuant to Subchapter M of the Code. As corporations, the Taxable Subsidiaries are obligated to pay federal, state and local income tax on taxable income, as applicable. Income earned and gains realized on the investment or investments held by the Taxable Subsidiary are taxable to such subsidiary. A tax provision for ordinary income, if any, is shown as income tax provision in the Consolidated Statements of Operations of the Company. A tax provision for realized and unrealized gains on investments is included as a reduction of realized and unrealized gains (losses) on investments in the Consolidated Statements of Operations of the Company. For the years ended December 31, 2020, 2019 and 2018, the Taxable Subsidiaries were subject to a 21% federal income tax rate. The Company classifies interest and penalties, if any, as a component of income tax provision on the consolidated statements of operations. Income tax expense at the Taxable Subsidiaries is included as a component of the income tax provisions, depending on the character of the underlying taxable income (ordinary or capital gains), on the consolidated statements of operations. For the years ended December 31, 2020, 2019 and 2018, income tax expense at the Taxable Subsidiaries was $628, $233, and $1,103, respectively. The Company and the Taxable Subsidiaries are also subject to various state and local income taxes. 118 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) The following table is a reconciliation of net increase in net assets resulting from operations on the consolidated statements of operations to taxable income and to total distributions declared to common stockholders for the years ended December 31, 2020, 2019 and 2018. 2020 (1) 2019 2018 Net increase in net assets resulting from operations $ 31,226 $ 48,466 $ 49,452 Net change in unrealized (appreciation) depreciation on investments 6,578 (18,188 ) (25,718 ) Permanent book income and tax income differences 1,810 1,133 2,257 Temporary book income and tax income differences (5,219 ) 6,439 (1,820 ) Capital loss carry forward (utilization) 4,496 1,089 15,347 Taxable income 38,891 38,939 39,518 Taxable income earned in prior year and carried forward for distribution in current year 15,432 15,634 14,005 Taxable Subsidiaries liquidating distributions 231 — 1,269 Taxable income earned in current period and carried forward for distribution in following year (22,046 ) (15,432 ) (15,634 ) Total distributions to common stockholders $ 32,508 $ 39,141 $ 39,158 (1) The Company’s taxable income for 2020 is an estimate and will not be finalized until the Company files its 2020 federal income tax returns in 2021. Therefore, the Company’s actual taxable income, and the Company’s actual taxable income that was earned in 2020 and carried forward for distribution in 2021, may be different than this estimate. For tax purposes, distributions paid to stockholders are reported as ordinary income, long term capital gains and return of capital, or a combination thereof. The tax character of distributions paid for the years ended December 31, 2020, 2019 and 2018 was as follows: 2020 2019 2018 Ordinary income $ 32,508 $ 39,141 $ 39,158 Long term capital gains — — — Return of capital — — — Total distributions to common stockholders $ 32,508 $ 39,141 $ 39,158 The Company estimates that it generated undistributed ordinary taxable income of approximately $22,046, or a total of $0.90 per share, during 2020 that will be carried forward and distributed in 2021. Ordinary dividend distributions from a RIC do not qualify for the preferential federal income tax rate on dividend income from certain domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The Company may distribute a portion of its realized net long term capital gains in excess of realized net short term capital losses to its stockholders, but may also decide to retain a portion, or all, of its net capital gains and elect to make a “deemed distribution” to its stockholders. For the years ended December 31, 2020, 2019 and 2018, the Company did not elect to designate retained net capital gains as a deemed distribution. As of December 31, 2020 and 2019, the tax basis components of distributable earnings were as follows: December 31, 2020 (1) December 31, 2019 Undistributed ordinary income $ 22,046 $ 15,432 Undistributed long term capital gains — — Unrealized appreciation (depreciation) (2) 55,842 62,420 Temporary book/tax differences (4,768 ) (9,988 ) Capital loss carry forward (26,135 ) (21,639 ) Total distributable earnings $ 46,985 $ 46,225 (1) The Company’s distributable earnings for 2020 is an estimate and will not be finally determined until the Company files its 2020 federal income tax returns in 2021. Therefore, the Company’s actual distributable earnings may be different than this estimate. For federal income tax purposes, the cost of investments owned at December 31, 2020 and 2019 was approximately $685,825 and $700,264, respectively. 119 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) December 31, 2020 (1) December 31, 2019 Tax-basis amortized cost of investments $ 685,825 $ 700,264 Tax-basis gross unrealized appreciation on investments 74,929 83,301 Tax-basis gross unrealized depreciation on investments (17,885 ) (16,646 ) Tax-basis net unrealized appreciation on investments 57,044 66,655 Fair value of investments $ 742,869 $ 766,919 (1) The Company’s tax-basis amortized cost of investments for 2020 is an estimate and will not be finally determined until 2021 when the Company receives the relevant tax forms from portfolio companies with equity investments. Therefore, the Company’s actual tax-basis amortized cost of investments may be different than this estimate. Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal tax regulations, which may differ from amounts determined in accordance with GAAP and those differences could be material. These permanent book-to-tax differences are reclassified on the consolidated statements of changes in net assets to reflect their tax character but have no impact on total net assets. The following permanent book-to-tax differences were reclassified on the consolidated statements of changes in net assets for the years ended December 31, 2020, 2019 and 2018. 2020 (1) 2019 2018 Additional paid-in capital (2) $ (2,042 ) $ (627 ) $ (3,526 ) Total distributable earnings 2,042 627 3,526 (1) The Company’s permanent book-to-tax reclassifications for 2020 are an estimate and will not be finalized until the Company files its 2020 federal income tax returns in 2021. Therefore, the Company’s actual permanent book-to-tax reclassifications may be different than this estimate. The Company adjusts such reclassifications in the following years when finalized, and such adjustments are reflected in the consolidated statements of changes in net assets and the consolidated statements of assets and liabilities. (2) Includes the reversal of unrealized (appreciation) depreciation that was recognized prior to the IPO of zero, $504, and zero for the years ended December 31, 2020, 2019 and 2018, respectively. Note 13. Subsequent Events On January 11, 2021, we exited our debt investment in Bandon Fitness (Texas), Inc. We received payment in full of $15,592 on our first lien debt, which includes a prepayment fee. On January 14, 2021, we exited our debt investment in Alzheimer’s Research and Treatment Center, LLC. We received payment in full of $6,585 on our first lien debt, which includes a prepayment fee. On January 19, 2021, we redeemed $50,000 of the aggregate principal amount on the 2023 Notes, resulting in a realized loss on extinguishment of debt of approximately $794. On January 22, 2021, we invested $11,000 in first lien debt and $516 in common equity of GP&C Operations, LLC (dba Garlock Printing and Converting), a converter of plastic film into flexible packaging solutions. On January 26, 2021, we exited our debt investment in Ohio Medical, LLC. We received payment in full of $10,000 on our second lien debt. We subsequently invested $5,000 in a new second lien debt investment in Ohio Medical, LLC. On February 9, 2021, the Board declared a regular quarterly dividend of $0.31 per share and a supplemental dividend of $0.07 per share payable March 26, 2021 to stockholders of record as of March 12, 2021. On February 10, 2021, we invested $6,500 in first lien debt and made a commitment up to $2,000 of additional first lien debt of Wonderware Holdings, LLC (dba CORE Business Technologies), a provider of revenue management and payments solutions for government, healthcare and education. On February 11, 2021, we invested $8,900 in first lien debt and made a commitment up to $400 of additional first lien debt of Xeeva, Inc., a global provider of intelligent, cloud-based indirect spend management software solutions. On February 12, 2021, we exited our debt and equity investments in FDS Avionics Corp. (dba Flight Display Systems). Flight Display Systems was acquired and combined with Calculex Inc. and Argon Corporation under a new holding company, Spectra A&D Holdings (“Spectra”). We received payment in full of $5,122 on our second lien and revolving debt. We sold our preferred and a portion of our common equity investments for a realized gain of approximately $958. In conjunction with the transaction, we invested $8,000 in first lien debt and $4,129 in preferred equity, of which $1,997 was rolled over from our original common equity investment in Flight Display Systems. 120 Table of Contents FIDUS INVESTMENT CORPORATION Notes to Consolidated Financial Statements (in thousands, except shares and per share data) On February 16, 2021, we redeemed $50,000 of the $69,000 aggregate principal amount on the February 2024 Notes, resulting in a realized loss on extinguishment of debt of approximately $1,081. On February 19, 2021, we exited our debt investment in Wheel Pros, Inc. We received payment in full of $20,400 on our second lien debt, which includes a prepayment fee. Subsequent to December 31, 2020, the global outbreak of the COVID-19 pandemic has adversely affected some of the Company’s investments and continues to have adverse consequences on the U.S. and global economies. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual portfolio companies, remains uncertain. At the time of this filing, there is no indication of a reportable subsequent event impacting the Company’s financial statements for the year ended December 31, 2020. The Company cannot predict the extent to which its financial condition and results of operations will be adversely affected at this time. The potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of COVID-19. The Company continues to observe and respond to the evolving COVID-19 environment and its potential impact on areas across its business. 121 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.