FIDUS INVESTMENT Corp - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2022

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission file number 814-00861

Fidus Investment Corporation

(Exact Name of Registrant as Specified in its Charter)


Maryland	27-5017321
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1603 Orrington Avenue, Suite 1005 Evanston, Illinois	60201
(Address of Principal Executive Offices)	(Zip Code)

(847) 859-3940

(Registrant’s telephone number, including area code)

________________

n/a

(Former name, former address and former fiscal year, if changed since last report)

_______________

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	FDUS	The NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company ☐

Emerging growth company ☐

(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of May 3, 2022, the Registrant had outstanding 24,437,400 shares of common stock, $0.001 par value.

FIDUS INVESTMENT CORPORATION

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q


	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Consolidated Statements of Assets and Liabilities — March 31, 2022 (unaudited) and December 31, 2021	3
	Consolidated Statements of Operations — three months ended March 31, 2022 (unaudited) and 2021 (unaudited)	4
	Consolidated Statements of Changes in Net Assets — three months ended March 31, 2022 (unaudited) and 2021 (unaudited)	5
	Consolidated Statements of Cash Flows — three months ended March 31, 2022, (unaudited) and 2021 (unaudited)	6
	Consolidated Schedules of Investments — March 31, 2022 (unaudited) and December 31, 2021	7
	Notes to Consolidated Financial Statements (unaudited)	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	52
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	54
Item 1A.	Risk Factors.	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	54
Item 3.	Defaults Upon Senior Securities.	54
Item 4.	Mine Safety Disclosures.	54
Item 5.	Other Information.	54
Item 6.	Exhibits.	55
Signatures		56
Exhibit Index

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)


	March 31,
	2022			December 31,
	(unaudited)			2021
ASSETS
Investments, at fair value:
Control investments (cost: $6,832 and $6,833, respectively)	$	2,150		$	2,151
Affiliate investments (cost: $46,542 and $55,519, respectively)		122,428			137,284
Non-control/non-affiliate investments (cost: $666,602 and $559,434, respectively)		687,417			579,689
Total investments, at fair value (cost: $719,976 and $621,786, respectively)		811,995			719,124
Cash and cash equivalents		86,113			169,417
Interest receivable		10,318			8,231
Prepaid expenses and other assets		580			413
Total assets	$	909,006		$	897,185
LIABILITIES
SBA debentures, net of deferred financing costs (Note 6)	$	124,803		$	103,978
Notes, net of deferred financing costs (Note 6)		245,290			245,016
Borrowings under Credit Facility, net of deferred financing costs (Note 6)		(483	)		(595	)
Secured Borrowings		17,443			17,637
Accrued interest and fees payable		3,615			4,668
Base management fee payable, net of base management fee waiver – due to affiliate		3,268			3,135
Income incentive fee payable – due to affiliate		1,053			2,622
Capital gains incentive fee payable – due to affiliate		23,361			29,227
Administration fee payable and other – due to affiliate		420			668
Taxes (receivable) payable		2,043			2,410
Accounts payable and other liabilities		1,691			655
Total liabilities	$	422,504		$	409,421
Commitments and contingencies (Note 7)
NET ASSETS
Common stock, $0.001 par value (100,000,000 shares authorized, 24,437,400 and 24,437,400 shares
issued and outstanding at March 31, 2022 and December 31, 2021, respectively)	$	24		$	24
Additional paid-in capital		361,807			361,807
Total distributable earnings		124,671			125,933
Total net assets		486,502			487,764
Total liabilities and net assets	$	909,006		$	897,185
Net asset value per common share	$	19.91		$	19.96

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Operations (unaudited)

(in thousands, except shares and per share data)


	Three Months Ended
	March 31,
	2022			2021
Investment Income:
Interest income
Control investments	$	-		$	593
Affiliate investments		884			848
Non-control/non-affiliate investments		16,197			17,697
Total interest income		17,081			19,138
Payment-in-kind interest income
Control investments		-			341
Affiliate investments		30			111
Non-control/non-affiliate investments		517			516
Total payment-in-kind interest income		547			968
Dividend income
Control investments		-			-
Affiliate investments		656			-
Non-control/non-affiliate investments		33			93
Total dividend income		689			93
Fee income
Control investments		-			400
Affiliate investments		137			183
Non-control/non-affiliate investments		2,061			2,508
Total fee income		2,198			3,091
Interest on idle funds		3			-
Total investment income		20,518			23,290
Expenses:
Interest and financing expenses		4,412			5,194
Base management fee		3,343			3,176
Incentive fee - income		1,053			2,669
Incentive fee (reversal) - capital gains		270			91
Administrative service expenses		422			413
Professional fees		515			323
Other general and administrative expenses		287			345
Total expenses before base management fee waiver		10,302			12,211
Base management fee waiver		(76	)		-
Total expenses, net of base management fee waiver		10,226			12,211
Net investment income before income taxes		10,292			11,079
Income tax provision (benefit)		(46	)		(2	)
Net investment income		10,338			11,081
Net realized and unrealized gains (losses) on investments:
Net realized gains (losses):
Control investments		139			957
Affiliate investments		324			-
Non-control/non-affiliate investments		6,405			2,259
Total net realized gain (loss) on investments		6,868			3,216
Income tax (provision) benefit from realized gains on investments		1			-
Net change in unrealized appreciation (depreciation):
Control investments		-			892
Affiliate investments		(5,879	)		3,952
Non-control/non-affiliate investments		560			(5,423	)
Total net change in unrealized appreciation (depreciation) on investments		(5,319	)		(579	)
Net gain (loss) on investments		1,550			2,637
Realized losses on extinguishment of debt		(198	)		(2,180	)
Net increase (decrease) in net assets resulting from operations	$	11,690		$	11,538
Per common share data:
Net investment income per share-basic and diluted	$	0.42		$	0.45
Net increase in net assets resulting from operations per share — basic and diluted	$	0.48		$	0.47
Dividends declared per share	$	0.53		$	0.38
Weighted average number of shares outstanding — basic and diluted		24,437,400			24,437,400

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Changes in Net Assets (unaudited)

(in thousands, except shares)


	Common Stock				Additional		Total
	Number of		Par		paid-in		distributable			Total net
	shares		value		capital		earnings			assets
Balances at December 31, 2020		24,437,400	$	24	$	363,751	$	46,985		$	410,760
Net investment income		—		—		—		11,081			11,081
Net realized gain (loss) on investments, net of taxes		—		—		—		3,216			3,216
Net unrealized appreciation (depreciation) on investments		—		—		—		(579	)		(579	)
Realized losses on extinguishment of debt		—		—		—		(2,180	)		(2,180	)
Dividends declared		—		—		—		(9,286	)		(9,286	)
Balances at March 31, 2021		24,437,400	$	24	$	363,751	$	49,237		$	413,012
Balances at December 31, 2021		24,437,400	$	24	$	361,807	$	125,933		$	487,764
Net investment income		—		—		—		10,338			10,338
Net realized gain (loss) on investments, net of taxes		—		—		—		6,869			6,869
Net unrealized appreciation (depreciation) on investments		—		—		—		(5,319	)		(5,319	)
Realized losses on extinguishment of debt		—		—		—		(198	)		(198	)
Dividends declared		—		—		—		(12,952	)		(12,952	)
Balances at March 31, 2022		24,437,400	$	24	$	361,807	$	124,671		$	486,502

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	Three Months Ended March 31,
	2022			2021
Cash Flows from Operating Activities:
Net increase (decrease) in net assets resulting from operations	$	11,690		$	11,538
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used for) operating activities:
Net change in unrealized (appreciation) depreciation on investments		5,319			579
Net realized (gain) loss on investments		(6,868	)		(3,216	)
Interest and dividend income paid-in-kind		(547	)		(968	)
Accretion of original issue discount		(23	)		(597	)
Accretion of loan origination fees		(280	)		(747	)
Purchase of investments		(114,428	)		(63,107	)
Proceeds from sales and repayments of investments		23,185			98,565
Proceeds from loan origination fees		771			476
Realized losses on extinguishment of debt		198			2,180
Amortization of deferred financing costs		524			583
Changes in operating assets and liabilities:
Interest receivable		(2,087	)		457
Prepaid expenses and other assets		(167	)		(652	)
Accrued interest and fees payable		(1,053	)		(533	)
Base management fee payable, net of base management fee waiver – due to affiliate		133			(68	)
Income incentive fee payable – due to affiliate		(1,569	)		59
Capital gains incentive fee (reversal) – due to (from) affiliate		(5,866	)		91
Administration fee payable and other – due to affiliate		(248	)		(382	)
Taxes payable		(367	)		(700	)
Accounts payable and other liabilities		1,036			(57	)
Net cash provided by (used for) operating activities		(90,647	)		43,501
Cash Flows from Financing Activities:
Proceeds received from SBA debentures		41,500			6,000
Repayments of SBA debentures		(20,000	)		(19,200	)
Principal payments on Notes		—			(100,000	)
Proceeds received from (repayments of) borrowings under Credit Facility, net		—			15,000
Proceeds received from (repayments of) Secured Borrowings, net		(194	)		—
Payment of deferred financing costs		(1,011	)		(148	)
Dividends paid to stockholders, including expenses		(12,952	)		(9,286	)
Net cash provided by (used for) financing activities		7,343			(107,634	)
Net increase (decrease) in cash and cash equivalents		(83,304	)		(64,133	)
Cash and cash equivalents:
Beginning of period		169,417			124,308
End of period	$	86,113		$	60,175
Supplemental disclosure of cash flow information:
Cash payments for interest	$	4,941		$	5,144
Cash payments for taxes, net of tax refunds received	$	320		$	698

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2022

(in thousands, except shares)


Portfolio Company (a)(b)		Variable Index	Rate (e)	Investment		Principal				Fair		Percent of
Investment Type (c)	Industry	Spread / Floor (d)	Cash/PIK	Date (f)	Maturity	Amount		Cost		Value (g)		Net Assets

Control Investments (t)
Hilco Plastics Holdings, LLC (dba Hilco Technologies) (n)	Component Manufacturing
Common Equity (Units N/A)				4/6/2021				$	—	$	—		0	%

Mesa Line Services, LLC (n)	Utilities: Services
Common Equity (10 shares) (j)				4/22/2021					—		2,150		1	%

US GreenFiber, LLC (n)	Building Products Manufacturing
Second Lien Debt (j)(y)			10.00%/3.00%	7/3/2014	8/30/2024	$	5,226		5,223		—
Common Equity (2,522 units) (h)(j)				7/3/2014					585		—
Common Equity (425,508 units) (j)				8/30/2019					1		—
Common Equity (1,022,813 units) (h)(j)				7/1/2020					1,023		—
									6,832		—		0	%

Total Control Investments								$	6,832	$	2,150		1	%

Affiliate Investments (l)
Applegate Greenfiber Intermediate Inc. (fka US GreenFiber, LLC)	Building Products Manufacturing
Subordinated Debt (j)			10.00%/0.00%	12/31/2021	12/31/2027	$	9,602	$	9,602	$	9,602
Common Equity (5,690units) (h) (j)				12/31/2021					5,690.00		5,690.00
Common Equity (7,113 units) (h) (j)				12/31/2021					7,113.00		7,113.00
Common Equity (2,012units) (h) (j)				12/31/2021					-		-
									22,405		22,405		4	%

FAR Research Inc. (n)	Specialty Chemicals
Common Equity (1,396 units)				3/31/2014					—		28		0	%

Medsurant Holdings, LLC	Healthcare Services
Preferred Equity (84,997 units) (h)(j)				4/12/2011					716		842
Warrant (252,588 units) (h)(j)(m)				4/12/2011					2,258		2,857
									2,974		3,699		1	%
Mirage Trailers LLC (n)	Utility Equipment Manufacturing
Common Equity (2,500,000 shares)				11/25/2015					—		—		0	%

Pfanstiehl, Inc.	Healthcare Products
Common Equity (4,250 units) (j)				3/29/2013					425		59,297		12	%

Pinnergy, Ltd.	Oil & Gas Services
Common Equity - Class A-2 (42,500 units) (j)				10/13/2016					3,000		18,440		4	%

Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)	Aerospace & Defense Manufacturing
First Lien Debt (k)(ag)		(L + 5.50%) / (1.00%)	6.50%/0.00%	2/12/2021	2/11/2026		13,000		12,926		13,000
Common Equity (41,290 units) (j)				2/12/2021					2,609		801
Common Equity (12,035 units) (j)				8/25/2021					1,203		1,204
									16,738		15,005		3	%
Steward Holding LLC (dba Steward Advanced Materials)	Aerospace & Defense Manufacturing
Common Equity (1,000,000 units)				11/12/2015					1,000		3,554		1	%

Total Affiliate Investments								$	46,542	$	122,428		25	%

Non-control/Non-affiliate Investments
2KDirect, Inc. (dba iPromote)	Information Technology Services
First Lien Debt (k)		(L + 6.75%) / (0.50%)	7.25%/0.00%	6/25/2021	6/25/2026	$	12,837	$	12,764	$	12,837
First Lien Debt (j)(aa)		(L + 6.75%) / (0.50%)	7.25%/0.00%	7/30/2021	6/25/2026		3,950		3,950		3,950
Common Equity (1,000,000 units)				6/25/2021					1,000		688
									17,714		17,475		4	%
Acendre Midco, Inc.	Information Technology Services
First Lien Debt (j)		(L + 7.75%) / (0.50%)	8.25%/0.00%	10/6/2021	10/6/2026		5,500		5,485		5,485
First Lien Debt (j)		(L + 7.75%) / (0.50%)	8.25%/0.00%	10/6/2021	10/6/2026		12,500		12,440		12,439
Revolving Loan ($1,000 unfunded commitment) (j)(i)				10/6/2021					—		—
Common Equity (500,000 shares) (j)				10/6/2021					371		371
Warrant (150,000 shares) (j)(m)				10/6/2021					129		129
									18,425		18,424		4	%
Aeronix Inc.	Aerospace & Defense Manufacturing
First Lien Debt (ai)		(L + 5.88%) / (0.50%)	6.38%/0.00%	6/11/2021	6/11/2026		14,250		14,170		14,250
Common Equity (549 units)				6/11/2021					593		684
									14,763		14,934		3	%
Allredi, LLC (fka Marco Group International OpCo, LLC)	Industrial Cleaning & Coatings
Second Lien Debt			10.50%/2.25%	3/2/2020	9/2/2026		10,314		10,246		8,431
Common Equity (570,636 units) (h)(j)				7/21/2017					637		—
Common Equity (39,443 units) (h)(j)				11/24/2021					22		14
									10,905		8,445		2	%
American AllWaste LLC (dba WasteWater Transport Services)	Environmental Industries
First Lien Debt (j)(p)		(L + 6.15%) / (1.00%)	7.15%/0.00%	6/28/2021	6/28/2026		20,500		20,293		20,500
First Lien Debt (j)(o)		(L + 3.75%) / (1.00%)	4.75%/0.00%	6/28/2021	6/28/2026		330		330		330
Preferred Equity (500 units) (h)(j)				5/31/2018					500		456
Preferred Equity (207 units) (h)(j)				8/6/2019					250		195
Preferred Equity (141 units) (h)(j)				11/2/2020					171		133
Preferred Equity (74 units) (h)(j)				12/29/2021					97		78
									21,641		21,692		5	%
AOM Intermediate Holdco, LLC (dba AllOver Media)	Information Technology Services
First Lien Debt (aq)		(S + 6.50%) / (0.75%)	7.25%/0.00%	2/1/2022	2/1/2027		10,000		9,927		9,927
Common Equity (750 units) (h)(j)				2/1/2022					750		750
									10,677		10,677		2	%
Applied Data Corporation	Information Technology Services
First Lien Debt (k)(v)		(L + 6.25%) / (1.50%)	7.75%/0.00%	11/6/2020	11/6/2025		11,500		11,444		11,500
Common Equity (22 units)				11/6/2020					15		102
Preferred Equity (1,104,539 units)				11/6/2020					1,105		1,224
									12,564		12,826		3	%
Argo Turboserve Corporation	Business Services
Second Lien Debt (j)		(L + 10.75%) / (2.00%)	12.75%/0.00%	12/26/2018	6/28/2023		11,625		11,604		11,625		2	%

Auto CRM LLC (dba Dealer Holdings)	Information Technology Services
First Lien Debt (j)		(P + 5.50%) / (3.25%)	8.75%/0.85%	10/1/2021	10/1/2026		7,532		7,465		7,465
Subordinated Debt (j)			0.00%/12.75%	10/1/2021	12/31/2026		533		529		528
Common Equity (500 units) (j)				10/1/2021					500		500
									8,494		8,493		2	%
AVC Investors, LLC (dba Auveco)	Specialty Distribution
Common Equity (5,000 units) (j)				1/3/2018					382		799		0	%

B&B Roadway and Security Solutions, LLC (n)	Component Manufacturing
Common Equity (50,000 units) (h)(j)				2/27/2018					—		—		0	%

Bandon Fitness (Texas), Inc.	Retail


Common Equity (545,810 units) (j)				8/9/2019			931		3,254	1	%

BCM One Group Holdings, Inc.	Information Technology Services
Subordinated Debt (j)			10.25%/0.00%	11/17/2021	11/17/2028	11,333	11,272		11,272	2	%

Bedford Precision Parts LLC	Specialty Distribution
First Lien Debt (j)(s)		(L + 6.25%) / (1.00%)	7.25%/0.00%	3/12/2019	3/12/2024	4,472	4,458		4,472
Common Equity (500,000 units) (h)(j)				3/12/2019			500		364
							4,958		4,836	1	%
Cardback Intermediate, LLC (dba Chargeback Gurus)	Information Technology Services
First Lien Debt (j)(ah)		(L + 6.50%) / (0.75%)	7.25%/0.00%	8/10/2021	8/10/2026	13,779	13,711		13,779
Common Equity (495 shares) (j)				8/10/2021			125		—
Preferred Equity (495 shares) (j)				8/10/2021			125		248
							13,961		14,027	3	%
Cardboard Box LLC (dba Anthony's Coal Fired Pizza)	Restaurants
Common Equity (521,021 units) (j)(ao)				12/15/2015			521		55
Preferred Equity (1,043,133 units) (j)(ao)				12/6/2019			96		283
							617		338	0	%
CIH Intermediate, LLC	Business Services
Subordinated Debt (k)			10.00%/1.00%	3/3/2022	3/3/2028	13,647	13,513		13,512
Common Equity (563 shares) (j)				3/3/2022			400		400
Preferred Equity (563 shares) (j)				3/3/2022			400		400
							14,313		14,312	3	%
Combined Systems, Inc.	Aerospace & Defense Manufacturing
First Lien Debt		(L + 10.00%) / (2.00%)	12.00%/0.00%	1/31/2020	1/31/2025	6,991	6,958		7,061
Revolving Loan ($605 unfunded commitment) (j)(ac)		(L + 12.00%) / (2.00%)	14.00%/0.00%	1/31/2020	1/31/2025	3,395	3,381		3,395
							10,339		10,456	2	%
Comply365, LLC	Aerospace & Defense Manufacturing
First Lien Debt (ad)		(L + 8.00%) / (1.00%)	9.00%/0.00%	12/11/2020	12/11/2025	8,562	8,454		8,562
Common Equity (1,000,000 units)				12/11/2020			1,000		1,400
							9,454		9,962	2	%
CRS Solutions Holdings, LLC (dba CRS Texas)	Business Services
Common Equity (538,875 units) (h)(j)				3/14/2018			621		596	0	%

Dataguise, Inc.	Information Technology Services
First Lien Debt (j)			11.00%/0.00%	12/31/2020	12/31/2023	19,800	19,742		19,800
Common Equity (909 shares) (j)				12/31/2020			1,500		1,527
							21,242		21,327	4	%
Diversified Search LLC	Business Services
First Lien Debt (k)(r)		(S + 6.50%) / (1.00%)	7.50%/0.00%	2/7/2019	2/7/2024	24,155	23,964		24,155
Common Equity (573 units) (h)(j)				2/7/2019			593		816
							24,557		24,971	5	%
EBL, LLC (EbLens)	Retail
Second Lien Debt (j)			12.00%/1.00%	7/13/2017	1/13/2023	9,351	9,333		9,067
Common Equity (75,000 units) (j)				7/13/2017			750		—
							10,083		9,067	2	%
ECM Industries, LLC	Component Manufacturing
Common Equity (1,000,000 units) (h)(j)				4/30/2020			243		1,289	0	%

Elements Brands, LLC	Consumer Products
First Lien Debt			12.25%/0.00%	12/31/2020	12/31/2025	5,700	5,675		5,700
Revolving Loan ($3,000 unfunded commitment) (j)(i)			12.25%/0.00%	12/31/2020	12/31/2025	—	(13	)	—
							5,662		5,700	1	%
Fishbowl Solutions, LLC	Information Technology Services
First Lien Debt (ar)		(S + 7.75%) / (1.00%)	8.75%/0.00%	3/25/2022	3/25/2027	14,500	14,392		14,392	3	%

Frontline Food Services, LLC (f/k/a Accent Food Services, LLC) (n)	Vending Equipment Manufacturing
Preferred Equity (Class A Units) (46 units) (j)				12/31/2020			—		—
Common Equity (Class B Units) (124 units) (j)				12/31/2020			—		—
Preferred Equity (Class C Units) (100 units) (j)				12/31/2020			—		—
							—		—	0	%
Global Plasma Solutions, Inc.	Component Manufacturing
Common Equity (947 shares) (j)				9/21/2018			52		1,271	0	%

GP&C Operations, LLC (dba Garlock Printing and Converting)	Component Manufacturing
First Lien Debt (w)		(L + 7.25%) / (1.00%)	8.25%/0.00%	1/22/2021	1/22/2026	11,000	10,874		11,000
Common Equity (515,625 units) (h)(j)				1/22/2021			516		335
							11,390		11,335	2	%
Green Cubes Technology, LLC (dba Green Cubes)	Information Technology Services
First Lien Debt (j)		(L + 13.00%) / (0.00%)	13.51%/0.00%	12/17/2021	12/17/2024	13,000	12,934		12,934	3	%

Gurobi Optimization, LLC	Information Technology Services
Common Equity (3 shares)				12/19/2017			605		2,403	1	%

Haematologic Technologies, Inc.	Healthcare Services
First Lien Debt (x)		(L + 8.25%) / (2.00%)	10.25%/0.00%	10/11/2019	10/11/2024	5,378	5,357		4,945
Common Equity (630 units) (h)(j)				10/11/2019			630		87
							5,987		5,032	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	8,420	8,373		8,420
Common Equity (750,000 units) (j)				12/4/2020			750		2,849
							9,123		11,269	2	%
Healthfuse, LLC	Healthcare Services
First Lien Debt (af)		(L + 7.25%) / (1.00%)	8.25%/0.00%	11/13/2020	11/13/2025	5,219	5,190		5,219
Preferred Equity (197,980 units)				11/13/2020			750		1,180
							5,940		6,399	1	%
Hub Acquisition Sub, LLC (dba Hub Pen)	Promotional products
Second Lien Debt (k)			13.50%/0.00%	3/23/2016	3/31/2023	25,000	24,988		23,139
Common Equity (3,750 units)				3/23/2016			114		—
Preferred Equity (868 units) (j)				10/16/2020			150		105
							25,252		23,244	5	%
IBH Holdings, LLC (fka Inflexxion, Inc.)	Business Services
Common Equity (150,000 units)				6/20/2018			—		487	0	%

Ipro Tech, LLC	Information Technology Services
First Lien Debt (j)(u)		(L + 7.00%) / (1.00%)	8.00%/1.00%	6/30/2020	7/28/2025	19,477	18,589		19,477
Preferred Equity (j)				7/28/2021			682		1,023
							19,271		20,500	4	%
ISI PSG Holdings, LLC (dba Incentive Solutions, Inc.)	Business Services
First Lien Debt (j)(aj)		(L + 7.50%) / (0.50%)	8.00%/0.00%	4/5/2021	4/5/2026	12,340	12,255		12,340
First Lien Debt (j)(an)		(L + 7.50%) / (0.50%)	8.00%/0.00%	6/30/2021	4/5/2026	13,163	13,163		13,163
Common Equity (256,964 units) (h)(j)				4/5/2021			500		702
							25,918		26,205	5	%
K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.) (n)	Industrial Cleaning & Coatings
Second Lien Debt (j) (y)			0.00%/10.00%	1/28/2019	1/28/2023	2,368	2,368		2,225	1	%

The Kyjen Company, LLC (dba Outward Hound)	Consumer Products
Common Equity (855 shares) (j)				12/8/2017			933		1,586	0	%

Level Education Group, LLC (dba CE4Less)	Business Services
First Lien Debt (ak)		(L + 6.75%) / (0.50%)	7.25%/0.00%	4/1/2021	4/1/2026	5,397	5,364		5,397
Common Equity (1,000,000 units) (j)				4/1/2021			1,000		1,296
							6,364		6,693	1	%
LifeSpan Biosciences, Inc.	Healthcare Products
Subordinated Debt (j)			11.50%/0.00%	3/19/2021	9/19/2026	16,000	15,935		16,000
Common Equity (100 shares) (j)				3/19/2021			1,000		1,025


							16,935		17,025	4	%
Micronics Filtration Holdings, Inc. (dba Micronics Engineered Filtration Group, Inc.)	Component Manufacturing
First Lien Debt (k) (as)		(S + 5.50%) / (0.50%)	6.00%/0.00%	2/17/2022	2/17/2027	21,000	20,846		20,846
Common Equity (14,400 units) (j)				2/17/2022			1,440		1,440
							22,286		22,286	5	%
Midwest Transit Equipment, Inc.	Transportation services
Warrant (7,192 shares) (j)(m)				6/23/2017			180		144
Warrant (4.79% of Junior Subordinated Notes) (j)(q)				6/23/2017			190		269
							370		413	0	%
Mobilewalla, Inc.	Information Technology Services
First Lien Debt (j)		(L + 11.50%) / (0.50%)	12.02%/0.00%	12/17/2021	12/17/2024	5,715	5,689		5,689	1	%

Netbase Solutions, Inc. (dba Netbase Quid)	Information Technology Services
First Lien Debt (k)(ap)		(P + 5.50%) / (3.25%)	8.75%/1.50%	11/18/2021	11/18/2025	16,708	16,596		16,596	4	%

NGT Acquisition Holdings, LLC (dba Techniks Industries)	Component Manufacturing
Common Equity (378 units) (j)				5/24/2017			500		182	0	%

OMC Investors, LLC (dba Ohio Medical Corporation)	Healthcare Products
Second Lien Debt			13.00%/0.00%	1/26/2021	6/30/2024	5,000	4,967		5,000
Common Equity (5,000 units)				1/15/2016			209		675
							5,176		5,675	1	%
Palisade Company, LLC	Information Technology Services
Common Equity (50 shares) (j)				11/15/2018			500		1,521	0	%

Palmetto Moon, LLC	Retail
Common Equity (499 units) (j)				11/3/2016			265		948	0	%

Pool & Electrical Products, LLC (n)	Specialty Distribution
Common Equity (15,000 units) (h)(j)				10/28/2020			549		4,466	1	%

Power Grid Components, Inc.	Specialty Distribution
Second Lien Debt (k)			11.00%/1.00%	4/12/2018	12/2/2025	17,614	17,558		17,614
Preferred Equity (392 shares) (j)				4/12/2018			392		578
Preferred Equity (48 shares) (j)				12/2/2019			48		71
Common Equity (10,622 shares) (j)				4/12/2018			462		207
							18,460		18,470	4	%
PowerGrid Services Acquisition, LLC	Utilities: Services
Second Lien Debt (j)		(L + 9.50%) / (1.00%)	10.50%/0.00%	9/21/2021	3/21/2029	10,831	10,781		10,831
Common Equity (5,000 units) (h)(j)				9/21/2021			500		493
							11,281		11,324	2	%
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	6,000	5,897		6,000
Preferred Equity (900,000 shares) (j)				11/25/2019			900		454
							6,797		6,454	1	%
Pugh Lubricants, LLC (n)	Specialty Distribution
Common Equity (3,062 units) (h)(j)				11/10/2016			—		—	0	%

Quest Software US Holdings Inc.	Information Technology Services
Second Lien Debt (j)		(S + 7.50%) / (0.50%)	8.00%/0.00%	3/1/2022	2/1/2030	15,000	14,777		14,777	3	%

Rhino Assembly Company, LLC	Specialty Distribution
Second Lien Debt (k)			11.50%/0.00%	8/11/2017	2/11/2026	14,851	14,834		14,851
Common Equity (Class A Units) (10,915 units) (h)(j)				8/11/2017			1,125		1,418
Preferred Equity (Units N/A) (h)(j)				12/10/2020			268		289
Common Equity (Class F Units) (710 units) (h)(j)				12/10/2020			—		—
							16,227		16,558	3	%
Road Safety Services, Inc.	Business Services
Second Lien Debt			11.25%/2.00%	9/18/2018	9/18/2025	15,603	15,561		15,603
Common Equity (779 units)				9/18/2018			1,121		1,322
							16,682		16,925	4	%
SES Investors, LLC (dba SES Foam)	Building Products Manufacturing
Common Equity (6,000 units) (h)(j)				9/8/2016			404		5,094	1	%

Suited Connector LLC	Information Technology Services
Second Lien Debt (j)			12.00%/0.00%	10/29/2021	6/1/2028	16,000	15,924		15,924
Common Equity (7,500 units) (h)(j)				12/1/2021			750		750
							16,674		16,674	4	%
Tedia Company, LLC	Healthcare Products
First Lien Debt (j)		(S + 7.75%) / (1.00%)	8.75%/0.00%	3/4/2022	3/4/2027	15,600	15,514		15,514
Revolving Loan ($4,000 unfunded commitment) (j)(i)		(S + 7.75%) / (1.00%)	8.75%/0.00%	3/4/2022	3/4/2027	—	(22	)	—
Delayed Draw Commitment ($3,000 unfunded commitment) (j)(ac)		(S + 7.75%) / (1.00%)	8.75%/0.00%	3/4/2022	3/4/2027	—	(17	)	—
Subordinated Debt (j)			7.25%/7.25%	3/4/2022	9/4/2027	2,514	2,499		2,499
Preferred Equity (Series A) (1,000 units) (h)(j)				3/4/2022			1,000		1,000
							18,974		19,013	4	%
TransGo, LLC	Component Manufacturing
Common Equity (500 units) (j)				2/28/2017			428		1,994	1	%

The Tranzonic Companies	Specialty Distribution
Preferred Equity (5,653 units) (j)				3/27/2018			565		822
Common Equity (1 units) (j)				3/27/2018			—		585
							565		1,407	0	%
UBEO, LLC	Business Services
Common Equity (705,000 units) (h)(j)				4/3/2018			645		897	0	%

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	%
UPG Company, LLC	Component Manufacturing
First Lien Debt (j)(al)		(S + 8.25%) / (0.50%)	8.75%/0.00%	6/21/2021	6/21/2024	16,700	16,603		16,700	4	%

Virginia Tile Company, LLC	Specialty Distribution
Common Equity (17 units) (j)				12/19/2014			342		996	0	%

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	9,625	9,540		9,625	2	%

Winona Foods, Inc.	Specialty Distribution
First Lien Debt (j)(am)		(L + 12.00%) / (1.00%)	13.00%/0.00%	4/1/2021	4/1/2026	4,000	3,886		4,000
First Lien Debt		(L + 13.00%) / (1.00%)	14.01%/0.00%	4/1/2021	4/1/2026	7,000	6,958		7,000
							10,844		11,000	2	%
Wonderware Holdings, LLC (dba CORE Business Technologies)	Information Technology Services
First Lien Debt ($1,720 unfunded commitment) (k)(z)		(L + 7.25%) / (1.00%)	8.25%/0.00%	2/10/2021	2/9/2026	6,780	6,743		6,780	1	%

Worldwide Express Operations, LLC	Transportation services
Second Lien Debt (j)		(L + 7.00%) / (0.75%)	7.75%/0.00%	8/2/2021	7/26/2029	20,000	19,403		20,000
Common Equity (795,000) (j)				7/21/2021			795		736
Common Equity (752,380 units) (h)(j)				7/26/2021			225		578
							20,423		21,314	4	%
Xeeva, Inc.	Information Technology Services
First Lien Debt (j)		(L + 10.50%) / (1.50%)	12.00%/0.00%	2/11/2021	2/11/2026	8,900	8,860		8,900	2	%

Zonkd, LLC	Component Manufacturing
First Lien Debt (j)		(L + 10.00%) / (1.00%)	12.00%/0.00%	3/18/2022	3/18/2027	5,000	4,773		4,773


Delayed Draw Commitment ($1,000 unfunded commitment) (j)(at)	(L + 10.00%) / (1.00%)	12.00%/0.00%	3/18/2022	3/18/2027	—		—		—
Common Equity (4,987 units) (h)(j)			3/18/2022				169		169
							4,942		4,942	1	%

Total Non-control/Non-affiliate Investments						$	666,602	$	687,417	141	%

Total Investments						$	719,976	$	811,995	167	%

(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), Prime (P) or SOFR (S), which are reset monthly, bimonthly, quarterly, or semi-annually. Certain variable rate investments also include a LIBOR, Prime or SOFR interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR, Prime or SOFR floor, if any, as of March 31, 2022.

(e) Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of March 31, 2022. 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) Except as otherwise noted, the Company’s investment portfolio is comprised 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 March 31, 2022. The Company is earning 0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded.

(j) Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company's obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(k) The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company's obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(l) As defined in the 1940 Act, the Company is deemed to be an "Affiliated Person" of this portfolio company because it owns 5% or more of the portfolio company's outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated Person are detailed in Note 3 to the consolidated financial statements.

(m) Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

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

(o) The Company sold a participating interest of approximately $0.3 million in aggregate principal amount of the portfolio company’s first lien senior secured term loan. As the transaction did not qualify as a “true sale” in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company recorded a corresponding secured borrowing in the Consolidated Statements of Assets and Liabilities.

(p) 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 4.02% 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.

(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 4.49% 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 2.54% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(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 cash interest amount of 2.98% and PIK interest amount of 0.99% 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 3.82% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(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 6.26% 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 2.79% 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) Investment was on non-accrual status as of March 31, 2022.

(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 5.68% 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.

(aa) The Company sold a participating interest of approximately $4.0 million in aggregate principal amount of the portfolio company’s first lien senior secured term loan. As the transaction did not qualify as a “true sale” in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company recorded a corresponding secured borrowing in the Consolidated Statements of Assets and Liabilities.

(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 3.26% 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 March 31, 2022. 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 3.27% 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.

(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 3.53% 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 3.50% 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.

(ag) 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 5.55% 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.

(ah) 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 1.74% 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.

(ai) 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 5.34% 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.

(aj) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.11% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ak) 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 4.83% 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.

(al) 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 3.21% 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.

(am) 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 6.74% 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.

(an) The Company sold a participating interest of approximately $13.5 million in aggregate principal amount of the portfolio company’s first lien senior secured term loan. As the transaction did not qualify as a “true sale” in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company recorded a corresponding secured borrowing in the Consolidated Statements of Assets and Liabilities.

(ao) The investment is treated as a non-qualifying asset under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Under the 1940 Act, the Company can not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of December 31, 2021, total non-qualifying assets at fair value represented 0.04% of the Company's total assets calculated in accordance with the 1940 Act.

(ap) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional cash interest amount of 2.25% and PIK interest amount of 1.87% 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.

(aq) 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 4.79% 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.

(ar) 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 2.72% 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.

(as) 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 4.97% 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.

(at) The disclosed commitment represents the unfunded amount as of March 31, 2022. The Company is earning 2.00% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate earned on the outstanding, funded balance of the commitment.

See Notes to Consolidated Financial Statements (unaudited).

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2021

(in thousands, except shares)


Portfolio Company (a)(b)		Variable Index	Rate (e)	Investment		Principal				Fair		Percent of
Investment Type (c)	Industry	Spread / Floor (d)	Cash/PIK	Date (f)	Maturity	Amount		Cost		Value (g)		Net Assets

Control Investments (t)
Hilco Plastics Holdings, LLC (dba Hilco Technologies) (n)	Component Manufacturing
Common Equity (Units N/A)				4/6/2021				$	—	$	—		0	%

Mesa Line Services, LLC (n)	Utilities: Services
Common Equity (10 shares) (j)				4/22/2021					—		2,151		0	%

US GreenFiber, LLC (n)	Building Products Manufacturing
Second Lien Debt (j)(y)			10.00%/3.00%	7/3/2014	8/30/2024	$	5,226		5,223		—
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		—
									6,833		—		0	%

Total Control Investments								$	6,833	$	2,151		0	%

Affiliate Investments (l)
Applegate Greenfiber Intermediate Inc. (fka US GreenFiber, LLC)	Building Products Manufacturing
Subordinated Debt (j)			5.00%/5.00%	12/31/2021	12/31/2027	$	9,602	$	9,602	$	9,602
Common Equity (5,690units) (j)				12/31/2021					5,690		5,690
Common Equity (7,113 units) (j)				12/31/2021					7,113		7,113
Common Equity (2,012units) (j)				12/31/2021					-		-
									22,405		22,405		4	%

FAR Research Inc. (n)	Specialty Chemicals
Common Equity (1,396 units)				3/31/2014					—		28		0	%

Medsurant Holdings, LLC	Healthcare Services
Preferred Equity (84,997 units) (h)(j)				4/12/2011					716		833
Warrant (252,588 units) (h)(j)(m)				4/12/2011					2,258		2,829
									2,974		3,662		1	%
Mirage Trailers LLC	Utility Equipment Manufacturing
Second Lien Debt (k)		(L + 10.00%) / (1.00%)	11.00%/5.00%	11/25/2015	4/30/2022		6,705		6,793		6,705
Common Equity (2,500,000 shares)				11/25/2015					2,188		3,970
									8,981		10,675		2	%
Pfanstiehl, Inc.	Healthcare Products
Common Equity (4,250 units) (j)				3/29/2013					425		57,639		12	%

Pinnergy, Ltd.	Oil & Gas Services
Common Equity - Class A-2 (42,500 units) (j)				10/13/2016					3,000		21,178		4	%

Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)	Aerospace & Defense Manufacturing
First Lien Debt (k)(ag)		(L + 5.50%) / (1.00%)	6.50%/0.00%	2/12/2021	2/11/2026		13,000		12,921		13,000
Common Equity (41,290 units) (j)				2/12/2021					2,609		4,129
Common Equity (12,035 units) (j)				8/25/2021					1,204		1,230
									16,734		18,359		4	%
Steward Holding LLC (dba Steward Advanced Materials)	Aerospace & Defense Manufacturing
Common Equity (1,000,000 units)				11/12/2015					1,000		3,338		1	%

Total Affiliate Investments								$	55,519	$	137,284		28	%

Non-control/Non-affiliate Investments
2KDirect, Inc. (dba iPromote)	Information Technology Services
First Lien Debt (k)		(L + 6.75%) / (0.50%)	7.25%/0.00%	6/25/2021	6/25/2026	$	12,919	$	12,841	$	12,919
First Lien Debt (aa)(j)		(L + 6.75%) / (0.50%)	7.25%/0.00%	7/30/2021	6/25/2026		3,975		3,975		3,975
Common Equity (1,000,000 units)				6/25/2021					1,000		806
									17,816		17,700		4	%
Acendre Midco, Inc.	Information Technology Services
First Lien Debt (j)		(L + 7.75%) / (0.50%)	8.25%/0.00%	10/6/2021	10/6/2026		5,500		5,485		5,485
First Lien Debt (j)		(L + 7.75%) / (0.50%)	8.25%/0.00%	10/6/2021	10/6/2026		12,500		12,436		12,436
Revolving Loan ($1,000 unfunded commitment) (i)(j)				10/6/2021					—		—
Common Equity (500,000 shares) (j)				10/6/2021					371		371
Warrant (150,000 shares) (j)(m)				10/6/2021					129		129
									18,421		18,421		4	%
Aeronix Inc.	Aerospace & Defense Manufacturing
First Lien Debt (ai)		(L + 5.88%) / (0.50%)	6.38%/0.00%	6/11/2021	6/11/2026		14,250		14,165		14,250
Common Equity (500 units)				6/11/2021					500		742
									14,665		14,992		3	%
Allredi, LLC (fka Marco Group International OpCo, LLC)	Industrial Cleaning & Coatings
Second Lien Debt			10.50%/1.75%	3/2/2020	9/2/2026		10,260		10,189		8,317
Common Equity (570,636 units) (h)(j)				7/21/2017					637		166
Common Equity (39,443 units) (h)(j)				11/24/2021					22		65
									10,848		8,548		2	%
American AllWaste LLC (dba WasteWater Transport Services)	Environmental Industries
First Lien Debt (j)(p)		(L + 6.15%) / (1.00%)	7.15%/0.00%	6/28/2021	6/28/2026		20,500		20,281		20,281
First Lien Debt (j)(o)		(L + 3.75%) / (1.00%)	4.75%/0.00%	6/28/2021	12/31/2022		330		330		330
Preferred Equity (500 units) (h)(j)				5/31/2018					500		439
Preferred Equity (207 units) (h)(j)				8/6/2019					250		187
Preferred Equity (141 units) (h)(j)				11/2/2020					171		128
Preferred Equity (74 units) (h)(j)				12/29/2021					97		97
									21,629		21,462		4	%
Applied Data Corporation	Information Technology Services
First Lien Debt (k)(v)		(L + 6.25%) / (1.50%)	7.75%/0.00%	11/6/2020	11/6/2025		11,500		11,441		11,500
Common Equity (22 units)				11/6/2020					15		111
Preferred Equity (1,104,539 units)				11/6/2020					1,105		1,194
									12,561		12,805		3	%
Argo Turboserve Corporation	Business Services
Second Lien Debt (j)		(L + 12.00%) / (2.00%)	14.00%/0.00%	12/26/2018	6/28/2023		11,906		11,881		11,906		2	%

Auto CRM LLC (dba Dealer Holdings)	Information Technology Services
First Lien Debt (j)		(P + 5.50%) / (3.25%)	8.75%/0.85%	10/1/2021	10/1/2026		7,516		7,445		7,445
Subordinated Debt (j)			0.00%/12.75%	10/1/2021	12/31/2026		516		512		512
Common Equity (500 units) (j)				10/1/2021					500		500
									8,457		8,457		2	%
AVC Investors, LLC (dba Auveco)	Specialty Distribution
Common Equity (5,000 units) (j)				1/3/2018					382		751		0	%

B&B Roadway and Security Solutions, LLC (n)	Component Manufacturing
Common Equity (50,000 units) (h)(j)				2/27/2018					—		—		0	%

Bandon Fitness (Texas), Inc.	Retail
Common Equity (545,810 units) (j)				8/9/2019					931		1,533		0	%

BCM One Group Holdings, Inc.	Information Technology Services


Subordinated Debt (j)			10.25%/0.00%	11/17/2021	11/17/2028	10,000	9,950	9,950	2	%

Bedford Precision Parts LLC	Specialty Distribution
First Lien Debt (j)(s)		(L + 6.25%) / (1.00%)	7.25%/0.00%	3/12/2019	3/12/2024	4,531	4,514	4,531
Common Equity (500,000 units) (h)(j)				3/12/2019			500	358
							5,014	4,889	1	%
Cardback Intermediate, LLC (dba Chargeback Gurus)	Information Technology Services
First Lien Debt (j)(ah)		(L + 6.75%) / (0.75%)	7.50%/0.00%	8/10/2021	8/10/2026	14,000	13,928	13,928
Common Equity (495 shares) (j)				8/10/2021			125	125
Preferred Equity (495 shares) (j)				8/10/2021			125	125
							14,178	14,178	3	%
Cardboard Box LLC (dba Anthony's Coal Fired Pizza)	Restaurants
Common Equity (521,021 units) (j)(ao)				12/15/2015			521	74
Preferred Equity (1,043,133 units) (j)(ao)				12/6/2019			96	283
							617	357	0	%
Combined Systems, Inc.	Aerospace & Defense Manufacturing
First Lien Debt		(L + 11.00%) / (2.00%)	13.00%/0.00%	1/31/2020	1/31/2025	7,091	7,055	7,119
Revolving Loan ($605 unfunded commitment) (j)(ac)		(L + 10.00%) / (2.00%)	15.00%/0.00%	1/31/2020	1/31/2025	3,395	3,380	3,395
							10,435	10,514	2	%
Comply365, LLC	Aerospace & Defense Manufacturing
First Lien Debt (ad)		(L + 8.00%) / (1.00%)	9.00%/0.00%	12/11/2020	12/11/2025	8,562	8,447	8,562
Common Equity (1,000,000 units)				12/11/2020			1,000	1,341
							9,447	9,903	2	%
CRS Solutions Holdings, LLC (dba CRS Texas)	Business Services
Common Equity (538,875 units) (h)(j)				3/14/2018			621	686	0	%

Dataguise, Inc.	Information Technology Services
First Lien Debt (j)			11.00%/0.00%	12/31/2020	12/31/2023	19,850	19,783	19,800
Common Equity (909 shares) (j)				12/31/2020			1,500	1,528
							21,283	21,328	4	%
Diversified Search LLC	Business Services
First Lien Debt (k)(r)		(L + 6.50%) / (1.00%)	7.50%/0.00%	2/7/2019	2/7/2024	18,355	18,190	18,355
Common Equity (573 units) (h)(j)				2/7/2019			593	797
							18,783	19,152	4	%
EBL, LLC (EbLens)	Retail
Second Lien Debt (j)			12.00%/1.00%	7/13/2017	1/13/2023	9,326	9,305	9,036
Common Equity (75,000 units) (j)				7/13/2017			750	230
							10,055	9,266	2	%
ECM Industries, LLC	Component Manufacturing
Common Equity (1,000,000 units) (h)(j)				4/30/2020			243	1,397	0	%

Elements Brands, LLC	Consumer Products
First Lien Debt			12.25%/0.00%	12/31/2020	12/31/2025	5,775	5,748	5,775
Revolving Loan ($838 unfunded commitment) (i)(j)			12.25%/0.00%	12/31/2020	12/31/2025	2,162	2,149	2,162
							7,897	7,937	2	%
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	1,431
Common Equity (Class B Units) (124 units) (j)				12/31/2020			—	—
Preferred Equity (Class C Units) (100 units) (j)				12/31/2020			—	—
							2,000	1,431	0	%
Global Plasma Solutions, Inc.	Component Manufacturing
Common Equity (947 shares) (j)				9/21/2018			52	2,097	0	%

GP&C Operations, LLC (dba Garlock Printing and Converting)	Component Manufacturing
First Lien Debt (w)		(L + 7.25%) / (1.00%)	8.25%/0.00%	1/22/2021	1/22/2026	11,000	10,866	11,000
Common Equity (515,625 units) (h)(j)				1/22/2021			516	432
							11,382	11,432	2	%
Green Cubes Technology, LLC (dba Green Cubes)	Information Technology Services
First Lien Debt (j)		(L + 13.00%) / (0.00%)	13.21%/0.00%	12/17/2021	12/17/2024	13,000	12,928	12,928	3	%

Gurobi Optimization, LLC	Information Technology Services
Common Equity (3 shares)				12/19/2017			607	2,569	1	%

Haematologic Technologies, Inc.	Healthcare Services
First Lien Debt (x)		(L + 8.25%) / (2.00%)	10.25%/0.00%	10/11/2019	10/11/2024	5,378	5,355	4,945
Common Equity (630 units) (h)(j)				10/11/2019			630	120
							5,985	5,065	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	8,440	8,390	8,440
Common Equity (750,000 units) (j)				12/4/2020			750	2,068
							9,140	10,508	2	%
Healthfuse, LLC	Healthcare Services
First Lien Debt (af)		(L + 7.25%) / (1.00%)	8.25%/0.00%	11/13/2020	11/13/2025	5,940	5,908	5,940
Preferred Equity (197,980 units)				11/13/2020			750	920
							6,658	6,860	1	%
Hub Acquisition Sub, LLC (dba Hub Pen)	Promotional products
Second Lien Debt (k)			13.50%/0.00%	3/23/2016	3/31/2023	25,000	24,986	22,501
Common Equity (3,750 units)				3/23/2016			114	—
Preferred Equity (868 units) (j)				10/16/2020			150	—
							25,250	22,501	5	%
IBH Holdings, LLC (fka Inflexxion, Inc.)	Business Services
Common Equity (150,000 units)				6/20/2018			—	203	0	%

Ipro Tech, LLC	Information Technology Services
First Lien Debt (j)(u)		(L + 7.00%) / (1.00%)	8.00%/1.00%	6/30/2020	7/28/2025	19,380	18,429	19,012
Preferred Equity (682,075 units) (j)				7/28/2021			682	682
							19,111	19,694	4	%
ISI PSG Holdings, LLC (dba Incentive Solutions, Inc.)	Business Services
First Lien Debt (j)(aj)		(L + 7.50%) / (0.50%)	8.00%/0.00%	4/5/2021	4/5/2026	12,483	12,394	12,404
First Lien Debt (j)(an)		(L + 7.50%) / (0.50%)	8.00%/0.00%	6/30/2021	4/5/2026	13,331	13,331	13,247
Common Equity (256,964 units) (h)(j)				4/5/2021			500	592
							26,225	26,243	5	%
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	1/28/2023	2,368	2,368	2,368	1	%

The Kyjen Company, LLC (dba Outward Hound)	Consumer Products
Common Equity (855 shares) (j)				12/8/2017			933	1,465	0	%

Level Education Group, LLC (dba CE4Less)	Business Services
First Lien Debt (ak)		(L + 6.75%) / (0.50%)	7.25%/0.00%	4/1/2021	4/1/2026	5,431	5,396	5,431
Common Equity (1,000,000 units) (j)				4/1/2021			1,000	1,313
							6,396	6,744	1	%
LifeSpan Biosciences, Inc.	Healthcare Products
Subordinated Debt (j)			11.50%/0.00%	3/19/2021	9/19/2026	16,000	15,931	16,000
Common Equity (100 shares) (j)				3/19/2021			1,000	981
							16,931	16,981	4	%
Midwest Transit Equipment, Inc.	Transportation services
Warrant (7,192 shares) (j)(m)				6/23/2017			180	—
Warrant (4.79% of Junior Subordinated Notes) (j)(q)				6/23/2017			190	246
							370	246	0	%
Mobilewalla, Inc.	Information Technology Services
First Lien Debt (j)		(L + 11.50%) / (0.50%)	12.00%/0.00%	12/17/2021	12/17/2024	5,715	5,687	5,687	1	%

Netbase Solutions, Inc. (dba Netbase Quid)	Information Technology Services
First Lien Debt (k)(ap)		(P + 5.50%) / (3.25%)	8.75%/1.50%	11/18/2021	11/18/2025	16,568	16,448	16,448	4	%


NGT Acquisition Holdings, LLC (dba Techniks Industries)	Component Manufacturing
Common Equity (378 units) (j)				5/24/2017				500		204	0	%

OMC Investors, LLC (dba Ohio Medical Corporation)	Healthcare Products
Second Lien Debt			13.00%/0.00%	1/26/2021	6/30/2024	5,000		4,963		5,000
Common Equity (5,000 units)				1/15/2016				209		743
								5,172		5,743	1	%
Palisade Company, LLC	Information Technology Services
Common Equity (50 shares) (j)				11/15/2018				500		1,224	0	%

Palmetto Moon, LLC	Retail
Common Equity (499 units) (j)				11/3/2016				265		895	0	%

Pool & Electrical Products, LLC (n)	Specialty Distribution
Common Equity (15,000 units) (h)(j)				10/28/2020				549		4,466	1	%

Power Grid Components, Inc.	Specialty Distribution
Second Lien Debt (k)			11.00%/1.00%	4/12/2018	12/2/2025	17,570		17,510		17,570
Preferred Equity (392 shares) (j)				4/12/2018				392		564
Preferred Equity (48 shares) (j)				12/2/2019				48		70
Common Equity (10,622 shares) (j)				4/12/2018				462		259
								18,412		18,463	4	%
PowerGrid Services Acquisition, LLC	Utilities: Services
Second Lien Debt (j)		(L + 9.50%) / (1.00%)	10.50%/0.00%	9/21/2021	3/21/2029	10,831		10,779		10,779
Common Equity (5,000 units) (h)(j)				9/21/2021				500		500
								11,279		11,279	2	%
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	6,167		6,055		6,167
Preferred Equity (900,000 shares) (j)				11/25/2019				900		462
								6,955		6,629	2	%
Pugh Lubricants, LLC (n)	Specialty Distribution
Common Equity (3,062 units) (h)(j)				11/10/2016				—		—	0	%

Rhino Assembly Company, LLC	Specialty Distribution
Second Lien Debt (k)			12.00%/1.00%	8/11/2017	2/11/2023	13,804		13,791		13,804
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				925		1,115
Preferred Equity (Units N/A) (h)(j)				12/10/2020				268		282
Common Equity (Class W Units) (710 units) (h)(j)				12/10/2020				—		—
								14,984		15,201	3	%
Road Safety Services, Inc.	Business Services
Second Lien Debt			11.25%/2.00%	9/18/2018	9/18/2025	15,525		15,481		15,525
Common Equity (779 units)				9/18/2018				1,121		1,285
								16,602		16,810	4	%
SES Investors, LLC (dba SES Foam)	Building Products Manufacturing
Common Equity (6,000 units) (h)(j)				9/8/2016				404		4,089	1	%

SpendMend LLC	Business Services
Common Equity (1,000,000 units)				1/8/2018				994		6,257	1	%

Suited Connector LLC	Information Technology Services
Second Lien Debt (j)			12.00%/0.00%	10/29/2021	6/1/2028	16,000		15,921		15,921
Common Equity (7,500 units) (h)(j)				12/1/2021				750		750
								16,671		16,671	3	%
TransGo, LLC	Component Manufacturing
Common Equity (500 units) (j)				2/28/2017				428		1,878	1	%

The Tranzonic Companies	Specialty Distribution
Preferred Equity (5,653 units) (j)				3/27/2018				565		802
Common Equity (1 units) (j)				3/27/2018				—		1,231
								565		2,033	1	%
UBEO, LLC	Business Services
Common Equity (705,000 units) (h)(j)				4/3/2018				645		884	0	%

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	%
UPG Company, LLC	Component Manufacturing
First Lien Debt (j)(al)		(L + 8.25%) / (0.50%)	8.75%/0.00%	6/21/2021	6/21/2024	12,000		11,922		12,000	3	%

Virginia Tile Company, LLC	Specialty Distribution
Common Equity (17 units) (j)				12/19/2014				342		933	0	%

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	9,625		9,532		9,625	2	%

Winona Foods, Inc.	Specialty Distribution
First Lien Debt (j)(am)		(L + 12.00%) / (1.00%)	13.00%/0.00%	4/1/2021	4/1/2026	4,000		3,879		4,000
First Lien Debt		(L + 13.00%) / (1.00%)	14.00%/0.00%	4/1/2021	4/1/2026	7,000		6,955		7,000
								10,834		11,000	2	%
Wonderware Holdings, LLC (dba CORE Business Technologies)	Information Technology Services
First Lien Debt ($2,000 unfunded commitment) (k)(z)		(L + 7.25%) / (1.00%)	8.25%/0.00%	2/10/2021	2/9/2026	6,500		6,460		6,500	1	%

Worldwide Express Operations, LLC	Transportation services
Second Lien Debt (j)		(L + 7.00%) / (0.75%)	7.75%/0.00%	8/2/2021	7/26/2029	20,000		19,383		19,383
Common Equity (795,000) (j)				7/21/2021				795		795
Common Equity (752,380 units) (h)(j)				7/26/2021				225		225
								20,403		20,403	4	%
Xeeva, Inc.	Information Technology Services
First Lien Debt (j)		(L + 10.50%) / (1.50%)	12.00%/0.00%	2/11/2021	2/11/2026	8,900		8,857		8,900	2	%

Total Non-control/Non-affiliate Investments							$	559,434	$	579,689	119	%

Total Investments							$	621,786	$	719,124	147	%

(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) or Prime (P), which are reset monthly, bimonthly, quarterly, or semi-annually. Certain variable rate investments also include a LIBOR or Prime interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR or Prime floor, if any, as of December 31, 2021.

(e) Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of December 31, 2021. 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.

(h) Investment is held by a taxable subsidiary of the Company.

(i) The disclosed commitment represents the unfunded amount as of December 31, 2021. 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.

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

(p) 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 4.07% 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.

(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 4.84% 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.

(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 2.64% 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.

(u) In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional cash interest amount of 2.99% and PIK interest amount of 1.00% 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 7.56% 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 7.05% 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 2.81% 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) Investment was on PIK only non-accrual status as of December 31, 2021, meaning the Company has ceased recognizing PIK interest income on the investment.

(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 5.70% 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.

(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 3.43% 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, 2021. 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 3.29% 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.

(ag) 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 5.60% 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.

(ai) 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 4.86% 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.

(al) 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 3.46% 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.

(am) 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 7.54% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

See Notes to Consolidated Financial Statements.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Note 1. Organization and Nature of Business

Fidus Investment Corporation (“FIC,” and together with its subsidiaries, the “Company”), a Maryland corporation, operates as an externally managed, closed-end, non-diversified business development company (“BDC”) under the Investment Company Act of 1940, as amended (“1940 Act”). FIC completed its initial public offering, or IPO, in June 2011. In addition, for U.S. federal income tax purposes, the Company has elected, and intends to qualify annually, 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”) (collectively, Fund II and Fund III are referred to as the “Funds”). The Funds are licensed by the U.S. Small Business Administration (the “SBA”) as small business investment companies (“SBIC”). The SBIC licenses allow the Funds to obtain leverage by issuing SBA-guaranteed debentures (“SBA debentures”), subject to the issuance of leverage commitments by the SBA and other customary procedures. As SBICs, the Funds are subject to regulations of 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 earlier of the end of the Funds' investment period, if applicable, or 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-Q, Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies (“ASC 946”), and Articles 6 or 10 of Regulation S-X. In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications that are necessary for the fair presentation of financial results as of and for the periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. The current period’s results of operation are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2021.

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

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

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.

•

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 SBA debentures, the Credit Facility and the Notes (as defined in Note 6). 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).

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

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

financing costs, respectively. If no offering is completed prior to the expiration of the registration statement, the deferred costs are charged to expense.

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 are 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.

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

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

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. For these partial loan sales, the interest earned on the entire loan balance is recorded within “interest income” and the interest earned by the buyer in the partial loan sale is recorded within “interest and financing expenses” in the accompanying consolidated statements of operations.

Income taxes: The Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to stockholders. To maintain the tax treatment of a RIC, the Company is required to timely distribute to its stockholders at least 90.0% of “investment company taxable income,” as defined by Subchapter M of the Code, each year. Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year; however, the Company will pay a 4.0% excise tax if it does not distribute at least 98.0% of the current year’s ordinary taxable income. Any such carryover taxable income must be distributed through a dividend declared prior to the later of the date on which the final tax return related to the year in which the Company generated such taxable income is filed or the 15th day of the 10th month following the close of such taxable year. In addition, the Company will be subject to federal excise tax if it does not distribute at least 98.2% of its net capital gains realized, computed for any one year period ending October 31.

In the future, the Funds may be limited by provisions of the SBIC Act and SBA regulations governing SBICs from making certain distributions to FIC that may be necessary to enable FIC to make the minimum distributions required to maintain the tax treatment of a RIC.

The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which generally holds one or more of the Company’s portfolio investments listed on the consolidated schedules of investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investment in the portfolio company investments owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies that are taxed as partnerships for U.S. federal income tax purposes (such as entities organized as limited liability companies (“LLCs”) or other forms of pass through entities) while complying with the “source-of-income” requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate income tax purposes, and each Taxable Subsidiary will be subject to U.S. federal corporate income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations.

U.S. federal income tax regulations differ from GAAP, and as a result, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized under GAAP. Differences may be permanent or temporary. Permanent differences may arise as a result of, among other items, a difference in the book and tax basis of certain assets and nondeductible federal income taxes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

ASC Topic 740 — Accounting for Uncertainty in Income Taxes (“ASC Topic 740”) provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be respected by the applicable tax authorities. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits included in the income tax provision, if any. There were no material uncertain income tax positions at March 31, 2022 and December 31, 2021. 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 2018 through 2020 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.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(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 three months ended March 31, 2022 and 2021, 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 (the “Exchange Act”), 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 November 1, 2021, the Board extended the Stock Repurchase Program through December 31, 2022, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not require the Company to repurchase any specific number of shares and the Company cannot assure that any shares will be repurchased under the Stock Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time. The Company did not make any repurchases of common stock during the three months ended March 31, 2022 and 2021. Refer to Note 8 for additional information concerning stock repurchases.

Recent accounting pronouncement:

SEC Regulation S-K Update:

In November 2020, the SEC issued a final rule that modernized and simplifies Management's Discussion and Analysis 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 (Management's 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 registrants' 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 adopted the Amendments on the effective date which did not have a material impact on the Company’s 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 primarily 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 or variable 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 March 31, 2022, the Company had active investments in 74 portfolio companies and residual investments in ten portfolio companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $811,995 and the weighted average effective yield on the Company’s debt investments was 11.9% as of such date. As of March 31, 2022, the Company held equity investments in 82.1% of its portfolio companies and the average fully diluted equity ownership in those portfolio companies was 4.3%.

As of December 31, 2021, the Company had active investments in 70 portfolio companies and residual investments in eight portfolio companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $719,124 and the

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

weighted average effective yield on the Company’s debt investments was 12.3% as of such date. As of December 31, 2021, the Company held equity investments in 82.1% of its portfolio companies and the average fully diluted equity ownership in those portfolio companies was 4.7%.

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 March 31, 2022 and December 31, 2021, including accretion of OID and debt investment origination fees, but excluding investments on non-accrual status and investments recorded as a secured borrowing, if any.

Purchases of debt and equity investments for the three months ended March 31, 2022 and 2021 totaled $114,428 and $63,107, respectively. Proceeds from sales and repayments, including principal, return of capital distributions and realized gains, of portfolio investments for the three months ended March 31, 2022 and 2021 totaled $23,185 and $98,565, respectively.

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


	Fair Value								Cost
	March 31,				December 31,				March 31,				December 31,
	2022				2021				2022				2021
First Lien Debt(1)	$	428,317	52.8	%	$	354,922	49.4	%	$	425,881	59.1	%	$	353,306	56.8	%
Second Lien Debt		169,087	20.8			158,815	22.1			177,567	24.7			168,573	27.1
Subordinated Debt		53,413	6.6			36,064	5.0			53,350	7.4			35,995	5.8
Equity		157,779	19.4			166,119	23.1			59,855	8.3			60,589	9.8
Warrants		3,399	0.4			3,204	0.4			3,323	0.5			3,323	0.5
Total	$	811,995	100.0	%	$	719,124	100.0	%	$	719,976	100.0	%	$	621,786	100.0	%

(1)

Includes unitranche investments, which account for 42.4% and 47.6% of our portfolio on a fair value and cost basis as of March 31, 2022, respectively. Includes unitranche investments, which account for 40.2% and 46.3% of our portfolio on a fair value and cost basis as of December 31, 2021, respectively.

All investments made by the Company as of March 31, 2022 and December 31, 2021 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
	March 31,				December 31,				March 31,				December 31,
	2022				2021				2022				2021
Midwest	$	195,699	24.1	%	$	157,222	21.9	%	$	132,203	18.4	%	$	89,865	14.5	%
Southeast		239,559	29.5			219,988	30.6			223,348	31.0			197,380	31.7
Northeast		135,107	16.6			126,569	17.6			134,782	18.7			127,809	20.6
West		124,736	15.4			105,918	14.7			120,296	16.7			100,098	16.1
Southwest		116,894	14.4			109,427	15.2			109,347	15.2			106,634	17.1
Total	$	811,995	100.0	%	$	719,124	100.0	%	$	719,976	100.0	%	$	621,786	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
	March 31,			December 31,				March 31,			December 31,
	2022			2021				2022			2021
First Lien Debt		88.0	%		72.8	%	Midwest		40.2	%		32.2	%
Second Lien Debt		34.8			32.6		Southeast		49.3			45.1
Subordinated Debt		11.0			7.4		Northeast		27.8			26.0
Equity		32.4			34.0		West		25.6			21.7
Warrants		0.7			0.6		Southwest		24.0			22.4
Total		166.9	%		147.4	%	Total		166.9	%		147.4	%

As of March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, the Company's investment in Pfanstiehl, Inc. totaled $59,297 and $57,639 or 6.5% and 6.4% of total assets, respectively.

As of March 31, 2022, the Company had debt investments in two portfolio companies on non-accrual status. As of December 31, 2021, the Company had a debt investment in one portfolio company on non-accrual status.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)


	March 31, 2022				December 31, 2021
	Fair				Fair
Portfolio Company	Value		Cost		Value			Cost
US GreenFiber, LLC	$	—	$	5,223	$	—	(2)	$	5,223	(2)
K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.)		2,225		2,368		—	(1)		—	(1)
Total	$	2,225	$	7,591	$	—		$	5,223


(1)	Portfolio company debt investment was not on non-accrual status as of December 31, 2021.
(2)	Portfolio company was on PIK-only non-accrual status at December 31, 2021, meaning the Company has ceased recognizing PIK interest income on the investment.

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, 2021 and any additions and reductions made to such investments during the three months ended March 31, 2022, the ending fair value as of March 31, 2022, and the total investment income earned on such investments during the period.


												Three Months Ended March 31, 2022
Portfolio Company (1)	March 31, 2022 Principal Amount - Debt Investments		December 31, 2021 Fair Value		Gross Additions (2)		Gross Reductions (3)			March 31, 2022 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
Hilco Plastics Holdings, LLC (dba Hilco Technologies)	$	—	$	—	$	-	$	-		$	—	$	—	$	—		$	-	$	—	$	-	$	—
Mesa Line Services, LLC		—		2,151		499		(500	)		2,150		500		-			-		-		—		—
US GreenFiber, LLC		5,226		-		-		—			—		—		-			-		-		—		—
Total Control Investments	$	5,226	$	2,151	$	499	$	(500	)	$	2,150	$	500	$	-		$	-	$	-	$	-	$	-
Affiliate Investments
Applegate Greenfiber Intermediate Inc. (fka US GreenFiber, LLC)	$	9,602	$	22,405	$	12,803	$	(12,803	)	$	22,405	$	—	$	—		$	240	$	—	$	—	$	—
FAR Research Inc.		—		28		—		—			28		—		—			—		—		—		—
Medsurant Holdings, LLC		—		3,662		37		-			3,699		—		37			-		—		—		-
Mirage Trailers LLC		-		10,675		355		(11,030	)		-		324		(1,694	)		248		29		-		132
Pfanstiehl, Inc.		—		57,639		1,658		—			59,297		—		1,657			—		—		—		—
Pinnergy, Ltd.		—		21,178		-		(2,738	)		18,440		—		(2,738	)		—		—		656		—
Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)		13,000		18,359		5		(3,359	)		15,005		—		(3,358	)		396		—		—		5
Steward Holding LLC (dba Steward Advanced Materials)		—		3,338		216		-			3,554		—		217			-		1		—		—
Total Affiliate Investments	$	22,602	$	137,284	$	15,074	$	(29,930	)	$	122,428	$	324	$	(5,879	)	$	884	$	30	$	656	$	137


(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 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.

The table below represents the fair value of control and affiliate investments as of December 31, 2020 and any additions and reductions made to such investments during the year ended December 31, 2021, including the total investment income earned on such investments during the period.


												Year Ended Ended December 31, 2021
Portfolio Company (1)	December 31, 2021 Principal Amount - Debt Investments		December 31, 2020 Fair Value		Gross Additions (2)		Gross Reductions (3)			December 31, 2021 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
Hilco Plastics Holdings, LLC (dba Hilco Technologies)(6)	$	—	$	—	$	1,577	$	(1,577	)	$	—	$	(881	)	$	—		$	308	$	—	$	568	$	—
Mesa Line Services, LLC (6)		—		—		32,708		(30,557	)		2,151		20,445			2,150			951		903		—		1,472
Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)(5)		—		7,391		1,986		(9,377	)		—		957			1,028			90		—		—		400
US GreenFiber, LLC		5,226		20,862		5,214		(26,076	)		—		—			(3,144	)		2,386		1,214		—		—
Total Control Investments	$	5,226	$	28,253	$	41,485	$	(67,587	)	$	2,151	$	20,521		$	34		$	3,735	$	2,117	$	568	$	1,872
Affiliate Investments
Applegate Greenfiber Intermediate Inc. (fka US GreenFiber, LLC)	$	9,602	$	-	$	22,405	$	—		$	22,405	$	—		$	—		$	—	$	—	$	—	$	—
FAR Research Inc.		—		28		—		—			28		—			—			—		—		—		—
Fiber Materials, Inc.		—		41		94		(135	)		-		94			(42	)		—		—		—		—
Medsurant Holdings, LLC		—		10,960		733		(8,031	)		3,662		—			687			331		—		—		91
Mirage Trailers LLC		6,705		6,494		4,225		(44	)		10,675		—			3,871			761		338		110		—
Pfanstiehl, Inc.		—		33,505		24,134		—			57,639		—			24,135			—		—		1,062		—
Pinnergy, Ltd.		—		20,589		589		—			21,178		—			589			—		—		—		—
Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)(5)		13,000		—		18,452		(93	)		18,359		—			1,626			1,142		—		—		294
Steward Holding LLC (dba Steward Advanced Materials)		—		9,777		1,373		(7,812	)		3,338		—			1,341			461		30		—		—
Total Affiliate Investments	$	29,307	$	81,394	$	72,005	$	(16,115	)	$	137,284	$	94		$	32,207		$	2,695	$	368	$	1,172	$	385

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)


(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 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 Affiliate investments from Control investments during the year ended December 31, 2021.
(6)	Portfolio company was transferred to Control investments from Non-control/Non-affiliate investments during the year ended December 31, 2021.

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.

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,

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

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 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.

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.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

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 three months ended March 31, 2022 and 2021.

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 three months ended March 31, 2022 and 2021:


	First Lien			Second Lien			Subordinated
	Debt			Debt			Debt			Equity			Warrants		Total
Balance, December 31, 2020	$	187,353		$	332,154		$	107,911		$	112,836		$	2,615	$	742,869
Net realized gains (losses) on investments		-			-			—			3,216			-		3,216
Net change in unrealized appreciation (depreciation) on investments		(2,356	)		(4,240	)		(92	)		6,072			37		(579	)
Purchase of investments		36,900			6,500			16,000			3,707			—		63,107
Proceeds from sales and repayments of investments		(26,471	)		(40,403	)		(24,039	)		(7,652	)		—		(98,565	)
Interest and dividend income paid-in-kind		30			897			41			—			—		968
Proceeds from loan origination fees		(346	)		(50	)		(80	)		—			—		(476	)
Accretion of loan origination fees		563			91			93			—			—		747
Accretion of original issue discount		-			597			—			—			—		597
Balance, March 31, 2021	$	195,673		$	295,546		$	99,834		$	118,179		$	2,652	$	711,884
Balance, December 31, 2021	$	354,922		$	158,815		$	36,064		$	165,762		$	3,204	$	718,767
Net realized gains (losses) on investments		—			—			—			6,868			—		6,868
Net change in unrealized appreciation (depreciation) on investments		823			1,277			(5	)		(7,590	)		195		(5,300	)
Purchase of investments		76,710			15,795			17,470			4,453			—		114,428
Proceeds from sales and repayments of investments		(4,027	)		(7,106	)		-			(12,052	)		—		(23,185	)
Interest and dividend income paid-in-kind		252			254			41			-			—		547
Proceeds from loan origination fees		(602	)		(4	)		(165	)		—			—		(771	)
Accretion of loan origination fees		238			34			8			—			—		280
Accretion of original issue discount		1			22			—			—			—		23
Balance, March 31, 2022	$	428,317		$	169,087		$	53,413		$	157,441		$	3,399	$	811,657

Net change in unrealized appreciation/(depreciation) of $(123) for the three months ended March 31, 2022, was attributable to Level 3 investments held at March 31, 2022. Net change in unrealized appreciation/(depreciation) of $1,018 for the three months ended March 31, 2021 was attributable to Level 3 investments held at March 31, 2021.

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 March 31, 2022 and December 31, 2021. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.


	Fair Value at		Valuation	Unobservable	Range
	March 31, 2022		Techniques	Inputs	(weighted average)(1)
Debt investments:
First Lien Debt	$	395,484	Discounted cash flow	Weighted average cost of capital	4.0% - 21.8% (11.7%)
		23,933	Enterprise value	Asset Coverage	1.1x - 1.3x (1.2x)
		8,900	Enterprise value	Revenue multiples	3.0x - 3.0x (3.0x)

Second Lien Debt		155,237	Discounted cash flow	Weighted average cost of capital	8.0% - 23.9% (13.6%)
		13,850	Enterprise value	Asset Coverage	0.9x - 1.5x (1.4x)

Subordinated Debt		53,413	Discounted cash flow	Weighted average cost of capital	8.8% - 13.5% (11.2%)

Equity investments:
Equity		148,444	Enterprise value	EBITDA multiples	3.3x - 17.5x (7.3x)
		8,997	Enterprise value	Revenue multiples	3.5x - 9.3x (6.8x)

Warrants		3,270	Enterprise value	EBITDA multiples	4.5x - 6.0x (5.8x)
		129	Enterprise value	Revenue multiples	4.5x - 4.5x (4.5x)

(1)

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

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)


	Fair Value at		Valuation	Unobservable	Range
	December 31, 2021		Techniques	Inputs	(weighted average)(1)
Debt investments:
First Lien Debt	$	335,022	Discounted cash flow	Weighted average cost of capital	4.0% - 21.6% (12.2%)
		11,000	Enterprise value	Asset Coverage	1.2x - 1.2x (1.2x)
		8,900	Enterprise value	Revenue multiples	4.5x - 4.5x (4.5x)

Second Lien Debt		144,541	Discounted cash flow	Weighted average cost of capital	7.8% - 25.0% (14.4%)
		14,274	Enterprise value	Asset Coverage	1.0x - 1.4x (1.4x)

Subordinated Debt		36,064	Discounted cash flow	Weighted average cost of capital	10.0% - 13.5% (11.1%)

Equity investments:
Equity		162,681	Enterprise value	EBITDA multiples	3.5x - 23.8x (8.2x)
		3,081	Enterprise value	Revenue multiples	3.5x - 9.3x (6.2x)

Warrants		3,075	Enterprise value	EBITDA multiples	4.5x - 6.0x (5.9x)
		129	Enterprise value	Revenue multiples	4.5x - 4.5x (4.5x)

(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 Notes (as defined in Note 6) are recorded at their respective carrying values.

The following tables summarize the carrying value and fair value of the Company’s debt obligations as of March 31, 2022 and December 31, 2021.


	March 31, 2022(5)				December 31, 2021(5)
	Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value
SBA debentures (2)	$	128,500	$	128,500	$	107,000	$	107,000
Credit Facility borrowings (3)		—		—		—		—
January 2026 Notes (4)		125,000		125,247		125,000		125,258
November 2026 Notes (4)		125,000		125,163		125,000		125,171
Total	$	378,500	$	378,910	$	357,000	$	357,429

(1)

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

(2)

The fair value of the SBA debentures is estimated by discounting the remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the debentures, which are Level 3 inputs under ASC Topic 820.

(3)

The fair value of borrowings under the Credit Facility, if valued under ASC Topic 820, are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

(4)

The fair value of the January 2026 and November 2026 Notes are estimated by discounting the remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date, which are Level 3 inputs under ASC Topic 820.

(5)

Totals exclude $17,443 and $17,637 of Secured Borrowings as of March 31, 2022 and December 31, 2021, respectively.

The following table summarizes the inputs used to value the Company’s debt obligations if measured at fair value as of March 31, 2022 and December 31, 2021.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)


	Fair Value
	March 31,		December 31,
Valuation Inputs	2022		2021
Level 1	$	—	$	—
Level 2		—		—
Level 3		378,910		357,429
Total	$	378,910	$	357,429

Note 5. Related Party Transactions

Investment Advisory Agreement: The Company has entered into an Investment Advisory Agreement with the Investment Advisor. On June 10, 2021, the Board approved the renewal of the Investment Advisory Agreement through June 20, 2022. 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 Board of Directors accepted a voluntary, non-contractual, and unconditional waiver from the Investment Advisor to exclude any investments recorded as secured borrowings as defined under GAAP from the base management fee payable as of March 31, 2022. The base management fee is payable quarterly in arrears. The base management fee under the Investment Advisory Agreement was $3,343 for the three months ended March 31, 2022, and $3,176 for the three months ended March 31, 2021. The base management fee waiver was $76 for the three months ended March 31, 2022. There was no base management fee waiver for the three months ended March 31, 2021. As of March 31, 2022 and December 31, 2021, the base management fee payable (net of the base management fee waiver) was $3,268 and $3,135, 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.

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

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.5%) is referred to as the “catch-up” provision. The catch-up is meant to provide the Investment Advisor with 20.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 2.5% in any calendar quarter; and

•

20.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 2.5% in any calendar quarter.

The sum of the calculations above equals the income incentive fee. The income incentive fee is appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the calendar quarter. The income incentive fee was $1,053 for the three months ended March 31, 2022 and $2,669 for the three months ended March 31, 2021. As of March 31, 2022 and December 31, 2021, the income incentive fee payable was $1,053 and $2,622, 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 March 31, 2022 and December 31, 2021, the capital gains incentive fee payable in cash was $1,094 and $6,136, respectively (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 March 31, 2022 was $6,484.

In addition, the Company accrues, but does not pay in cash, a capital gains incentive fee in connection with any unrealized capital appreciation on investments, as applicable. If, on a cumulative basis, the sum of (i) net realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments plus (iii) realized losses on extinguishment of debt decreases during a period, the Company will reverse any excess capital gains incentive fee previously accrued such that the amount of capital gains incentive fee accrued is no more than 20.0% of the sum of (i) net realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments plus (iii) realized losses on extinguishment of debt. The capital gains incentive fee accrued (reversed) during the three months ended March 31, 2022 was $270 and $91 for the three months ended March 31, 2021. As of March 31, 2022 and December 31, 2021, the accrued capital gains incentive fee payable was $23,361 and $29,227, respectively.

Unless terminated earlier as described below, the Investment Advisory Agreement will continue in effect from year to year if approved annually by the Board or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, and, in either case, if also approved by a majority of the directors who are not “interested persons” of the Company, as such term is defined under Section 2(a)(19) of the 1940 Act (the “Independent Directors”). The Investment Advisory Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, by the Investment Advisor and may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. The holders of a majority of the 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 10, 2021, the Board approved the renewal of the Administration Agreement through June 20, 2022. Under the Administration Agreement, the Investment Advisor furnishes the Company with office facilities and equipment, provides clerical, bookkeeping, and record keeping services at such facilities and provides the Company with other administrative services necessary to conduct its day-to-day operations. The Company reimburses the Investment Advisor for the allocable portion of overhead expenses incurred in performing its obligations under the Administration Agreement, including rent and the Company’s allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs. Under the Administration Agreement, the Investment Advisor also provides managerial assistance to those portfolio companies to which the Company is required to provide such assistance and the Company reimburses the Investment Advisor for fees and expenses incurred with providing such services. In addition, the Company reimburses the Investment Advisor for fees and expenses incurred while performing due diligence on the Company’s prospective portfolio companies, including “dead deal” expenses. Under the Administration Agreement, administrative service expenses for the three months ended March 31, 2022 were $422 and $413 for the three months ended March 31, 2021. As of March 31, 2022 and December 31, 2021, the accrued administrative service expense payable was $429 and $634, respectively.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

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. 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 Agreement" and the senior secured revolving credit facility, 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 Agreement. On June 26, 2020, the Company amended the Amended Credit Agreement, but 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.

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 March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, approved and unused SBA debenture commitments were $21,500 and $63,000, 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 March 31, 2022 and December 31, 2021, the Company’s issued and outstanding SBA debentures mature as follows:

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)


Pooling	Maturity	Fixed			March 31,		December 31,
Date (1)	Date	Interest Rate			2022		2021
3/25/2015	3/1/2025		3.277	%	$	11,500	$	22,500
3/23/2016	3/1/2026		3.267			1,500		1,500
3/23/2016	3/1/2026		3.249			2,500		2,500
9/21/2016	9/1/2026		2.793			500		500
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		3.534			—		9,000
9/25/2019	9/1/2029		2.377			7,500		7,500
3/25/2020	3/1/2030		2.172			6,000		6,000
9/22/2021	9/1/2031		1.398			11,500		11,500
3/23/2022	3/1/2032		3.209			43,500		12,000
(2)	(2)	(2)				10,000		—
Total outstanding SBA debentures					$	128,500	$	107,000


(1)	The SBA has two scheduled pooling dates for debentures (in March and in September). Certain debentures funded during the reporting periods may not be pooled until the subsequent pooling date.
(2)	The Company issued $10,000 in SBA debentures which will pool in September 2022. Until the pooling date, the debentures bear interest at a fixed rate interim interest rate of 1.86%. The Company expects the current interim interest rate will reset to a higher long-term fixed rate on the 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. On January 19, 2021, the Company redeemed $50,000 in aggregate principal amount of the issued and outstanding 2023 Notes, resulting in a realized loss on extinguishment of debt of approximately $794.

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. On February 16, 2021, the Company 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 November 2, 2021, we fully redeemed the remaining $19,000 in aggregate principal amount on the issued and outstanding February 2024 Notes, resulting in a realized loss on extinguishment of debt of approximately $313.

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” (collectively with the 2023 Notes and the 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. On November 2, 2021, we fully redeemed $63,250 in aggregate principal amount on the issued and outstanding November 2024 Notes, resulting in a realized loss on extinguishment of debt of approximately $1,311.

On December 23, 2020, the Company closed the offering of $125,000 in aggregate principal amount of its 4.75% notes due 2026, or the “January 2026 Notes”. The total net proceeds to the Company from the January 2026 Notes after deducting underwriting discounts of $2,500 and estimated offering expenses of approximately $400, were approximately $122,100. The January 2026 Notes will mature on January 31, 2026 and bear interest at a rate of 4.75%. The January 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 and at par thereafter. Interest on the January 2026 Notes is payable on January 31 and July 31 of each year. The Company does not intend to list the January 2026 Notes on any securities exchange or automated dealer quotation system.

On October 8, 2021, the Company closed the offering of $125,000 in aggregate principal amount of its 3.50% notes due 2026, or the “November 2026 Notes” (collectively with the Public Notes and the January 2026 Notes, the “Notes”). The total net proceeds to the Company from the November 2026 Notes, based on a public offering price of 99.996% of par, after deducting underwriting discounts

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

of $2,505 and estimated offering expenses of approximately $400, were approximately $122,095. The November 2026 Notes will mature on November 15, 2026 and bear interest at a rate of 3.50%. The November 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 and at par thereafter. Interest on the November 2026 Notes is payable on May 15 and November 15 of each year, beginning May 15, 2022. The Company does not intend to list the November 2026 Notes on any securities exchange or automated dealer quotation system.

Each of the Notes are unsecured obligations of the Company and rank pari passu with the Company’s existing and 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.

Secured Borrowing

As of March 31, 2022, the carrying value of secured borrowings totaled $17,443 and the fair value of the associated loans included in investments was $17,443. As of December 31, 2021, the carrying value of secured borrowings totaled $17,637 and the fair value of the associated loans included in investments was $17,522. These secured borrowings were created as a result of our completion of partial loan sales of certain unitranche loan assets that did not meet the definition of a “participating interest.” As a result, sale treatment was not permitted and these partial loan sales were treated as secured borrowings. The weighted average interest rate on our secured borrowings was approximately 4.5% and 4.4% as of March 31, 2022, and December 31, 2021, respectively.

As of March 31, 2022, and December 31, 2021, the aggregate amount outstanding of the senior securities (including secured borrowings) issued by the Company was $267,443 and $267,637, respectively, for which our asset coverage was 281.9% and 282.2%, respectively. 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 on June 30, 2014. 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 three months ended March 31, 2022 and 2021 which are included in interest and financing expenses on the consolidated statements of operations, were as follows:


	Three Months Ended March 31, 2022															Three Months Ended March 31, 2021
	SBA debentures			Credit Facility			Secured Borrowings			Notes			Total			SBA debentures			Credit Facility			Secured Borrowings		Notes			Total
Stated interest expense	$	739		$	363		$	208		$	2,578		$	3,888		$	1,133		$	362		$	-	$	3,116		$	4,611
Amortization of deferred financing costs		138			112			-			274			524			130			112			-		341			583
Total interest and financing expenses	$	877		$	475		$	208		$	2,852		$	4,412		$	1,263		$	474		$	-	$	3,457		$	5,194
Weighted average stated interest rate, period end		2.846	%		3.125	%		4.497	%		4.125	%		3.726	%		3.102	%		4.117	%	N/A			5.055	%		4.282	%
Unused commitment fee rate, period end	N/A				1.375	%	N/A			N/A				1.375	%	N/A				1.088	%	N/A		N/A				1.088	%

Realized Losses on Extinguishment of Debt

During the three months ended March 31, 2022 and 2021, the Company prepaid $20,000 and $19,200 of SBA debentures, respectively, which were scheduled to mature on dates ranging from 2025 to 2028 and 2025 to 2028, respectively. As a result of the prepayments, the Company recognized realized losses on extinguishment of debt of $198 and $305, respectively, equal to the write-off of the related unamortized deferred financing costs, during the three months ended March 31, 2022 and 2021.

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 the Notes as of March 31, 2022 and December 31, 2021 were as follows:

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)


	March 31, 2022												December 31, 2021
	SBA			Credit									SBA			Credit
	debentures			Facility			Notes			Total			debentures			Facility			Notes			Total
SBA debenture commitment fees	$	2,500		$	—		$	—		$	2,500		$	2,500		$	—		$	—		$	2,500
SBA debenture leverage fees		5,549			—			—			5,549			4,538			—			—			4,538
Credit Facility upfront fees		—			3,238			—			3,238			—			3,238			—			3,238
Notes underwriting discounts		—			—			5,005			5,005			—			—			5,005			5,005
Notes debt issue costs		—			—			685			685			—			—			685			685
Total deferred financing costs		8,049			3,238			5,690			16,977			7,038			3,238			5,690			15,966
Less: accumulated amortization		(4,352	)		(2,755	)		(980	)		(8,087	)		(4,016	)		(2,643	)		(706	)		(7,365	)
Unamortized deferred financing costs	$	3,697		$	483		$	4,710		$	8,890		$	3,022		$	595		$	4,984		$	8,601

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 March 31, 2022 and December 31, 2021:


	March 31, 2022(1)												December 31, 2021(1)
	SBA			Credit									SBA			Credit
	debentures			Facility			Notes			Total			debentures			Facility			Notes			Total
Outstanding debt	$	128,500		$	—		$	250,000		$	378,500		$	107,000		$	—		$	250,000		$	357,000
Less: unamortized deferred financing costs		(3,697	)		(483	)		(4,710	)		(8,890	)		(3,022	)		(595	)		(4,984	)		(8,601	)
Debt, net of deferred financing costs	$	124,803		$	(483	)	$	245,290		$	369,610		$	103,978		$	(595	)	$	245,016		$	348,399

(1)

Total excludes $17,443 and $17,637 of Secured Borrowings as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the Company’s debt liabilities are scheduled to mature as follows (1):


	SBA		Credit		Secured
Year	debentures		Facility (2)		Borrowings		Notes		Total
2022	$	—	$	—	$	—	$	—	$	—
2023		—		—		—		—		—
2024		—		—		—		—		—
2025		11,500		—		—		—		11,500
2026		4,500		—		17,443		250,000		271,943
Thereafter		112,500		—		—		—		112,500
Total	$	128,500	$	—	$	17,443	$	250,000	$	395,943


(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 Credit Facility matures on April 24, 2023.

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 $17,177 and $8,170 as of March 31, 2022 and December 31, 2021, respectively. Such outstanding commitments are summarized in the following table:


	March 31, 2022						December 31, 2021
	Total			Unfunded			Total			Unfunded
Portfolio Company - Investment	Commitment			Commitment			Commitment			Commitment
Acendre Midco, Inc. - Revolving Loan	$	1,000		$	1,000		$	1,000		$	1,000
Combined Systems, Inc. - Revolving Loan		4,000			605			4,000			605
Elements Brands, LLC - Revolving Loan		3,000			3,000			3,000			838
Rhino Assembly Company, LLC - Delayed Draw Commitment		-			-			875			875
Safety Products Group, LLC - Common Equity (Units)		2,852	(1)		2,852	(1)		2,852	(1)		2,852	(1)
Tedia Company, LLC - Revolving Loan		4,000			4,000			—			—
Tedia Company, LLC - Delayed Draw Term Loan		3,000			3,000			—			—
Wonderware Holdings, LLC (dba CORE Business Technologies) - Delayed Draw Term Loan		2,000			1,720			2,000			2,000
Zonkd, LLC - Delayed Draw Term Loan		1,000			1,000			—			—
Total	$	20,852		$	17,177		$	13,727		$	8,170

(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.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

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 three months ended March 31, 2022 and 2021.

Common Stock ATM Program

On August 21, 2014, the Company entered into an equity distribution agreement with Raymond James & Associates, Inc. and Robert W. Baird & Co. Incorporated through which the Company could sell, by means of at-the-market offerings from time to time, shares of the Company’s common stock having an aggregate offering price of up to $50,000 (the “ATM Program”). There were no issuances of common stock under the ATM program during the last two fiscal years and for the three months ended March 31, 2022.

Stock Repurchase Program

As described in Note 2, the Company has a Stock Repurchase Program under which the Company may acquire up to $5,000 of its outstanding common stock. The Company did not make any repurchases of common stock during the three months ended March 31, 2022 and 2021.

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

The Company had 24,437,400 shares of common stock outstanding as of March 31, 2022 and December 31, 2021.

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Note 9. Dividends and Distributions

The Company’s dividends and distributions are recorded on the record date. The following table summarizes the dividends paid during the last two fiscal years and for the three months ended March 31, 2022.


									DRIP						DRIP
Date	Record	Payment	Amount		Total		Cash		Shares			DRIP			Share
Declared	Date	Date	Per Share		Distribution		Distribution		Value			Shares			Issue Price
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	$	—			—
Year Ended December 31, 2021:
2/09/2021	3/12/2021	3/26/2021	$	0.31	$	7,575	$	7,575	$	—	(3)		—	(3)		—
2/09/2021 (2)	3/12/2021	3/26/2021		0.07		1,711		1,711		—	(3)		—	(3)		—
5/03/2021	6/14/2021	6/28/2021		0.31		7,576		7,576		—	(3)		—	(3)		—
5/03/2021 (2)	6/14/2021	6/28/2021		0.08		1,955		1,955		—	(3)		—	(3)		—
8/02/2021	9/14/2021	9/28/2021		0.32		7,820		7,820		—	(3)		—	(3)		—
8/02/2021 (2)	9/14/2021	9/28/2021		0.06		1,466		1,466		—	(3)		—	(3)		—
8/02/2021 (1)	9/14/2021	9/28/2021		0.04		977		977		—	(3)		—	(3)		—
11/01/2021	12/3/2021	12/17/2021		0.32		7,820		7,820		—	(3)		—	(3)		—
11/01/2021 (2)	12/3/2021	12/17/2021		0.04		978		978		—	(3)		—	(3)		—
11/01/2021 (1)	12/3/2021	12/17/2021	0.05		1222		1222			—	(3)		—	(3)		—
			$	1.60	$	39,100	$	39,100	$	—			—
Three months ended March 31, 2022:
2/15/2022	3/11/2022	3/25/2022	$	0.36	$	8,797	$	8,797	$	—	(3)		—	(3)		—
2/15/2022 (2)	3/11/2022	3/25/2022		0.17		4,154		4,154		—	(3)		—	(3)		—
			$	0.53	$	12,951	$	12,951	$	—			—


(1)	Special dividend
(2)	Supplemental dividend
(3)	During the three months ended March 31, 2022 and the years ended December 31, 2021 and 2020, the Company directed the DRIP 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:


	Number of
	Shares		Average
	Purchased		Price Paid		Total
Fiscal Year Ended December 31, 2020:	and Reissued		Per Share		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


	Number of
	Shares		Average
	Purchased		Price Paid		Total
Year Ended December 31, 2021:	and Reissued		Per Share		Amount Paid
January 1, 2021 through March 31, 2021		15,562	$	15.62	$	243
April 1, 2021 through June 30, 2021		17,042		17.20		293
July 1, 2021 through September 30, 2021		18,201		17.82		324
October 1, 2021 through December 31, 2021		18,283		17.42		318
Total		69,088	$	17.05	$	1,178


	Number of
	Shares		Average
	Purchased		Price Paid		Total
Three months ended March 31, 2022:	and Reissued		Per Share		Amount Paid
January 1, 2022 through March 31, 2022		20,380	$	20.51	$	418
Total		20,380	$	20.51	$	418

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Note 10. Financial Highlights

The following is a schedule of financial highlights for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022			2021
Per share data:
Net asset value at beginning of period	$	19.96		$	16.81
Net investment income (1)		0.42			0.45
Net realized gain (loss) on investments, net of tax (provision) (1)		0.29			0.13
Net unrealized appreciation (depreciation) on investments (1)		(0.22	)		(0.02	)
Realized losses on extinguishment of debt (1)		(0.01	)		(0.09	)
Total increase from investment operations (1)		0.48			0.47
Accretive (dilutive) effect of share issuances and repurchases		-			-
Dividends to stockholders		(0.53	)		(0.38	)
Distributions from capital gains		-			-
Taxes paid on deemed distributions		-			-
Other (11)		-			-
Net asset value at end of period	$	19.91		$	16.90
Market value at end of period	$	20.18		$	15.55
Shares outstanding at end of period		24,437,400			24,437,400
Weighted average shares outstanding during the period		24,437,400			24,437,400
Net assets at end of period	$	486,502		$	413,012
Average net assets (6)	$	487,133		$	411,886
Ratios to average net assets:
Total expenses (2)(4)(10)		8.4	%		11.9	%
Net investment income (5)		8.5	%		10.8	%
Total return based on market value (3)		15.7	%		24.6	%
Total return based on net asset value (8)		2.4	%		2.8	%
Portfolio turnover ratio (9)		12.0	%		34.8	%
Supplemental Data:
Average debt outstanding (7)	$	385,290		$	405,150
Average debt per share (1)	$	15.77		$	16.58


(1)	Weighted average per share data.
(2)	Annualized with the exception of income tax (provision) benefit from realized gains on investments.
(3)	Total return based on market value equals the change in the market value of the Company’s common stock per share during the period divided by the market value per share at the beginning of the period, and assumes reinvestment of dividends at prices obtained by our dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.
(4)	The total expenses to average net assets ratio is calculated using (i) the “total expenses, net of base management waiver”, (ii) the “income tax provision (benefit)”, and (iii) the “income tax (provision) benefit from realized gains on investments” captions, as presented on the consolidated statements of operations.
(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, including secured borrowings, 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)	Annualized.
(10)	The following are schedules of supplemental expense ratios to average net assets:


	Three Months Ended March 31,
Ratio to average net assets:	2022			2021
Expenses other than incentive fee (2)		7.3	%		9.2	%
Incentive fee (9)		1.1	%		2.7	%
Total expenses (2)(4)		8.4	%		11.9	%

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)


	Three Months Ended March 31,
Ratio to average net assets:	2022			2021
Total expenses, before base management fee waiver (2)		8.5	%		11.9	%
Base management fee waiver (9)		(0.1	%)		0.0	%
Total expenses (2)(4)		8.4	%		11.9	%


(11)	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.

Note 11. Subsequent Events

On April 1, 2022, the Company invested $8,500 in first lien debt and made a commitment up to $1,000 of additional first lien debt of Choice Technology Solutions, LLC (dba Choice Merchant Solutions, LLC), a leading omnichannel global payments platform.

On April 13, 2022, the Company invested $11,002 in second lien debt of Virtex Enterprises, LP, a leading vertically integrated electronic manufacturing services provider.

On April 19, 2022, the Company exited its debt investment in Comply365, LLC. The Company received payment in full of $8,760 on its first lien debt, which includes a prepayment fee.

On April 21, 2022, the Company exited its equity investment in TransGo, LLC. The Company received a distribution on its common equity investment for a realized gain of approximately $1,923.

On May 2, 2022, the Board declared a regular quarterly dividend of $0.36 per share and a supplemental dividend of $0.07 per share payable on June 24, 2022, to stockholders of record as of June 10, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Fidus Investment Corporation’s consolidated financial statements and related notes appearing in our annual report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 3, 2022. The information contained in this section should also be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

Except as otherwise specified, references to “we,” “us,” “our,” “Fidus” and “FIC” refer to Fidus Investment Corporation and its consolidated subsidiaries.

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Fidus Investment Corporation, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects” and variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

•

our future operating results and the uncertainties associated with the continued impact of the COVID-19 pandemic thereon;

•

changes in the financial and lending markets;

•

our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

•

the impact of investments that we expect to make;

•

our contractual arrangements and relationships with third parties;

•

the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

•

the ability of our portfolio companies to achieve their objectives;

•

our expected financing and investments;

•

the adequacy of our cash resources and working capital;

•

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

•

the ability of the Investment Advisor to locate suitable investments for us and to monitor and administer our investments and the impacts of the COVID-19 pandemic thereon;

•

the ability of our investment advisor to attract and retain highly talented professionals;

•

our regulatory structure and tax treatment;

•

our ability to operate as a BDC and a RIC and each of the Funds to operate as an SBIC;

•

the timing, form and amount of any dividend distributions;

•

the impact of interest rate volatility, including the decommissioning of LIBOR, and inflation on our business;

•

the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

•

our ability to recover unrealized losses.

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

•

an economic downturn, including as a result of the current COVID-19 pandemic, and significant disruptions to our portfolio companies, including supply chain disruptions and labor shortages, could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

•

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

•

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

•

inflation could adversely affect our business, results of operations and financial condition of our portfolio companies, which may, in turn, impact the valuation of such portfolio companies; and

•

the risks, uncertainties and other factors we identify in Item 1A. – Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2021, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new debt investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in Item 1.A – Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 3, 2022. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

Overview

General and Corporate Structure

We provide customized debt and equity financing solutions to lower middle-market companies, which we define as U.S. based companies having revenues between $10.0 million and $150.0 million. Our investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Our investment strategy includes partnering with business owners, management teams and financial sponsors by providing customized financing for ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. We seek to maintain a diversified portfolio of investments in order to help mitigate the potential effects of adverse economic events related to particular companies, regions or industries.

FIC was formed as a Maryland corporation on February 14, 2011. We completed our initial public offering, or IPO, in June 2011. On June 20, 2011, FIC acquired all of the limited partnership interests of Fund I and membership interests of Fidus Mezzanine Capital GP, LLC, its general partner, resulting in Fund I becoming our wholly-owned SBIC subsidiary. Immediately following the acquisition, we and Fund I elected to be treated as business development companies, or BDCs, under the 1940 Act and our investment activities have been managed by Fidus Investment Advisors, LLC, our investment advisor, and supervised by our board of directors, a majority of whom are independent of us. On March 29, 2013, we commenced operations of a second wholly-owned subsidiary, Fund II. On April 18, 2018, we commenced operations of a third wholly-owned subsidiary, Fund III.

Fund II and Fund III received their SBIC licenses on May 28, 2013, and March 21, 2019, respectively. We plan to continue to operate the Funds as SBICs, subject to SBA approval, and to utilize the proceeds of the sale of SBA-guaranteed debentures to enhance returns to our stockholders. As of September 9, 2019, Fund I completed a wind-down plan, relinquished its SBIC license, and can no longer issue additional SBA debentures. We have also made, and continue to make, investments directly through FIC. We believe that utilizing FIC and the Funds as investment vehicles provides us with access to a broader array of investment opportunities

We have certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which generally holds one or more of our portfolio investments listed on the consolidated schedules of investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that our consolidated financial statements reflect our investment in the portfolio company investments owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit us to hold equity investments in portfolio companies that are taxed as partnerships for U.S. federal income tax purposes (such as entities organized as limited liability companies (“LLCs”) or other forms of pass through entities) while complying with the “source-of-income” requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with us for U.S. federal corporate income tax purposes, and each Taxable Subsidiary will be subject to U.S. federal corporate income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations.

COVID-19 Update

On March 11, 2020, the World Health Organization declared the novel coronavirus, or COVID-19, as a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. We have been closely monitoring, and will continue to monitor, the impact of the COVID-19 pandemic, including the Delta and Omicron and other variants, and its impact on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence and underwriting processes, and financial markets. Given the fluidity of the pandemic, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position or cash flows at this time. Further, the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in turn impact the valuation of our investments. We believe our portfolio companies have taken, and continue to take, immediate actions to effectively and efficiently respond to the challenges posed by COVID-19 and related orders imposed by state and local governments, including developing liquidity plans supported by internal cash reserves, and shareholder support. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns and cancellations of events, restrictions on travel, significant reduction in demand for certain goods and services, reductions in business activity and financial transactions, supply chain disruptions, labor difficulties and shortages, commodity inflation and elements of economic and financial market instability in the United States and globally. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

Investments

We seek to create a diversified investment portfolio that primarily includes debt investments and, to a lesser extent, equity securities. Our investments typically range between $5.0 million to $35.0 million per portfolio company, although this investment size may vary proportionately with the size of our capital base. Our investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. We may

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

First Lien Debt. We structure some of our investments as senior secured or first lien debt investments. First lien debt investments are secured by a first priority lien on existing and future assets of the borrower and may take the form of term loans or revolving lines of credit. First lien debt is typically senior on a lien basis to other liabilities in the issuer’s capital structure and has the benefit of a first-priority security interest in assets of the issuer. The security interest ranks above the security interest of any second lien lenders in those assets. Our first lien debt may include stand-alone first lien loans, “last out” first lien loans, or “unitranche” loans. Stand-alone first lien loans are traditional first lien loans. All lenders in the facility have equal rights to the collateral that is subject to the first-priority security interest. “Last out” first lien loans have a secondary priority behind super-senior “first out” first lien loans in the collateral securing the loans in certain circumstances. The arrangements for a “last out” first lien loan are set forth in an “agreement among lenders,” which provides lenders with “first out” and “last out” payment streams based on a single lien on the collateral. Since the “first out” lenders generally have priority over the “last out” lenders for receiving payment under certain specified events of default, or upon the occurrence of other triggering events under intercreditor agreements or agreements among lenders, the “last out” lenders bear a greater risk and, in exchange, receive a higher effective interest rate, through arrangements among the lenders, than the “first out” lenders or lenders in stand-alone first lien loans. Agreements among lenders also typically provide greater voting rights to the “last out” lenders than the intercreditor agreements to which second lien lenders often are subject.

Many of our debt investments also include excess cash flow sweep features, whereby principal repayment may be required before maturity if the portfolio company achieves certain defined operating targets. Additionally, our debt investments typically have principal prepayment penalties in the early years of the debt investment. The majority of our debt investments provide for a variable interest rate, generally with a LIBOR floor.

Second Lien Debt. Some of our debt investments take the form of second lien debt, which includes senior subordinated notes. Second lien debt investments obtain security interests in the assets of the portfolio company as collateral in support of the repayment of such loans. Second lien debt typically is senior on a lien basis to other liabilities in the issuer’s capital structure and has the benefit of a security interest over assets of the issuer, though ranking junior to first lien debt secured by those assets. First lien lenders and second lien lenders typically have separate liens on the collateral, and an intercreditor agreement provides the first lien lenders with priority over the second lien lenders’ liens on the collateral. These loans typically provide for no contractual loan amortization, with all amortization deferred until loan maturity, and may include payment-in-kind (“PIK”) interest, which increases the principal balance over the term and, coupled with the deferred principal payment provision, increases credit risk exposure over the life of the loan.

Subordinated Debt. These investments are typically structured as unsecured, subordinated notes. Structurally, subordinated debt usually ranks subordinate in priority of payment to first lien and second lien debt and may not have the benefit of financial covenants common in first lien and second lien debt. Subordinated debt may rank junior as it relates to proceeds in certain liquidations where it does not have the benefit of a lien in specific collateral held by creditors (typically first lien and/or second lien) who have a perfected security interest in such collateral. However, subordinated debt ranks senior to common and preferred equity in an issuer’s capital structure. These loans typically have relatively higher fixed interest rates (often representing a combination of cash pay and PIK interest) and amortization of principal deferred to maturity. The PIK feature (meaning a feature allowing for the payment of interest in the form of additional principal amount of the loan instead of in cash), which effectively operates as negative amortization of loan principal, coupled with the deferred principal payment provision, increases credit risk exposure over the life of the loan.

Equity Securities. Our equity securities typically consist of either a direct minority equity investment in common or preferred stock or membership/partnership interests of a portfolio company, or we may receive warrants to buy a minority equity interest in a portfolio company in connection with a debt investment. Warrants we receive with our debt investments typically require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. Our equity investments are typically not control-oriented investments, and in many cases, we acquire equity securities as part of a group of private equity investors in which we are not the lead investor. We may structure such equity investments to include provisions protecting our rights as a minority-interest holder, as well as a “put,” or right to sell such securities back to the issuer, upon the occurrence of specified events. In many cases, we may also seek to obtain registration rights in connection with these equity interests, which may include demand and “piggyback” registration rights. Our equity investments typically are made in connection with debt investments to the same portfolio companies.

Revenues: We generate revenue in the form of interest and fee income on debt investments and dividends, if any, on equity investments. Our debt investments, whether in the form of second lien, subordinated or first lien loans, typically have terms of five to seven years and most bear interest at fixed or variable rates. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we may receive repayments of some of our debt investments prior to their scheduled maturity dates, which may include prepayment penalties. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity may reflect the proceeds of sales of securities. In

some cases, our investments provide for deferred interest payments or PIK interest. The principal amount of debt investments and any accrued but unpaid interest generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, amendment, or structuring fees and fees for providing managerial assistance. Debt investment origination fees, OID and market discount or premium, if any, are capitalized, and we accrete or amortize such amounts into interest income. We record prepayment penalties on debt investments as fee income when earned. Interest and dividend income is recorded on the accrual basis to the extent that we expect to collect such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt investment. Dividend income is recorded as dividends are declared or at the point an obligation exists for the portfolio company to make a distribution, and is generally recognized when received. Distributions of earnings from portfolio companies are evaluated to determine if the distribution is a distribution of earnings or a return of capital. Distributions of earnings are included in dividend income while a return of capital is recorded as a reduction in the cost basis of the investment. Estimates are adjusted as necessary after the relevant tax forms are received from the portfolio company. Debt investments or preferred equity investments (for which we are accruing PIK dividends) are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Interest and dividend payments received on non-accrual investments may be recognized as interest or dividend income or may be applied to the investment principal balance based on management’s judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in management’s judgment, payments are likely to remain current. See “Critical Accounting Policies and Use of Estimates – Revenue Recognition.”

We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the cost basis of the investment, without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

Expenses: All investment professionals of the Investment Advisor and/or its affiliates, when and to the extent engaged in providing investment advisory and management services to us, and the compensation and routine overhead expenses allocable to personnel who provide these services to us, are provided and paid for by the Investment Advisor and not by us. We bear all other out-of-pocket costs and expenses of our operations and transactions, including, without limitation, those relating to:

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organization;

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

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

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

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offerings of our common stock and other securities;

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investment advisory fees and management fees;

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

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transfer agent, dividend agent and custodial fees and expenses;

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federal and state registration fees;

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

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U.S. federal, state and local taxes;

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Independent Directors’ fees and expenses;

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

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

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

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

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proxy voting expenses; and

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all other expenses reasonably incurred by us or the Investment Advisor in connection with administering our business.

Portfolio Composition, Investment Activity and Yield

During the three months ended March 31, 2022 and 2021, we invested $114.4 million and $63.1 million, respectively, in debt and equity investments including seven and four new portfolio companies, respectively. During the three months ended March 31, 2022 and 2021, we received proceeds from sales or repayments, including principal, return of capital dividends and net realized gains (losses), of $23.2 million and $98.6 million, respectively, including exits of one and three portfolio companies, respectively. The following table summarizes investment purchases and sales and repayments of investments by type for the three months ended March 31, 2022 and 2021 (dollars in millions).


	Purchases of Investments								Sales and Repayments of Investments
	2022				2021				2022						2021
First Lien Debt(1)	$	76.7	67.0	%	$	36.9	58.5	%	$	4.0		17.2		%	$	26.5	26.9	%
Second Lien Debt		15.8	13.9			6.5	10.2			7.2		31.1				40.4	41.0
Subordinated Debt		17.4	15.2			16.0	25.4			(0.2	)	(0.9	)			24.0	24.3
Equity		4.5	3.9			3.7	5.9			12.2		52.6				7.7	7.8
Warrants		—	—			—	—			—		—				—	—
Total	$	114.4	100.0	%	$	63.1	100.0	%	$	23.2		100.0		%	$	98.6	100.0	%

(1) For the three months ended March 31, 2022 and 2021, includes unitranche securities, which account for 49.2% and 43.6% of purchases, respectively. For the three months ended March 31, 2022 and 2021, includes unitranche securities, which account for 7.1% and 22.1% of repayments, respectively.

As of March 31, 2022, the fair value of our investment portfolio totaled $812.0 million and consisted of 74 active portfolio companies and ten portfolio companies that have sold their underlying operations. As of March 31, 2022, 37 portfolio companies’ debt investments bore interest at a variable rate, which represented $460.1 million, or 70.7%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments. Overall, the portfolio had net unrealized appreciation of $92.0 million as of March 31, 2022. As of March 31, 2022, our average active portfolio company investment at amortized cost was $9.7 million, which excludes investments in the ten portfolio companies that have sold their underlying operations.

As of December 31, 2021, the fair value of our investment portfolio totaled $719.1 million and consisted of 70 active portfolio companies and eight portfolio companies that have sold their underlying operations. As of December 31, 2021, 32 portfolio companies’ debt investments bore interest at a variable rate, which represented $376.0 million, or 68.4%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments. Overall, the portfolio had net unrealized appreciation of $97.3 million as of December 31, 2021. As of December 31, 2021, our average active portfolio company investment at amortized cost was $8.8 million, which excludes investments in the eight portfolio companies that have sold their underlying operations.

The weighted average yield on debt investments as of March 31, 2022 and December 31, 2021 was 11.9% and 12.3%, respectively. The weighted average yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our and our subsidiaries’ fees and expenses. The weighted average yields were computed using the effective interest rates for debt investments at cost including the accretion of OID and debt investment origination fees, but excluding investments on non-accrual status, if any.

The following table shows the portfolio composition by investment type at fair value and cost and as a percentage of total investments (dollars in millions):


	Fair Value								Cost
	March 31,				December 31,				March 31,				December 31,
	2022				2021				2022				2021
First Lien Debt(1)	$	428.3	52.8	%	$	354.9	49.4	%	$	425.9	59.1	%	$	353.3	56.8	%
Second Lien Debt		169.1	20.8			158.8	22.1			177.5	24.7			168.6	27.1
Subordinated Debt		53.4	6.6			36.1	5.0			53.4	7.4			36.0	5.8
Equity		157.8	19.4			166.1	23.1			59.9	8.3			60.6	9.8
Warrants		3.4	0.4			3.2	0.4			3.3	0.5			3.3	0.5
Total	$	812.0	100.0	%	$	719.1	100.0	%	$	720.0	100.0	%	$	621.8	100.0	%

(1) Includes unitranche investments, which account for 42.4% and 47.6% of our portfolio on a fair value and cost basis as of March 31, 2022, respectively. Includes unitranche investments, which account for 40.2% and 46.3% of our portfolio on a fair value and cost basis as of December 31, 2021, respectively.

All investments made by us as of March 31, 2022 and December 31, 2021 were made in portfolio companies headquartered in the U.S. The following table shows portfolio composition by geographic region at fair value and cost and as a percentage of total investments (dollars in millions). The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business.


	Fair Value								Cost
	March 31,				December 31,				March 31,				December 31,
	2022				2021				2022				2021
Midwest	$	195.7	24.1	%	$	157.2	21.9	%	$	132.3	18.4	%	$	89.9	14.5	%
Southeast		239.6	29.5			220.0	30.6			223.3	31.0			197.4	31.7
Northeast		135.1	16.6			126.6	17.6			134.8	18.7			127.8	20.6
West		124.7	15.4			105.9	14.7			120.3	16.7			100.1	16.1
Southwest		116.9	14.4			109.4	15.2			109.3	15.2			106.6	17.1
Total	$	812.0	100.0	%	$	719.1	100.0	%	$	720.0	100.0	%	$	621.8	100.0	%

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


	Fair Value						Cost
	March 31,			December 31,			March 31,			December 31,
Name	2022			2021			2022			2021
Information Technology Services		29.0	%		27.0	%		32.1	%		30.6	%
Business Services		13.4			13.3			14.9			14.3
Healthcare Products		12.4			11.2			5.8			3.6
Component Manufacturing		7.4			4.1			7.8			4.0
Specialty Distribution		7.2			8.0			7.3			8.2
Aerospace & Defense Manufacturing		6.6			7.9			7.3			8.4
Building Products Manufacturing		3.4			3.7			4.1			4.8
Healthcare Services		3.3			3.6			3.6			4.2
Promotional Products		2.9			3.1			3.5			4.1
Environmental Industries		2.7			3.0			3.0			3.5
Transportation Services		2.7			2.9			2.9			3.3
Oil & Gas Services		2.3			2.9			0.4			0.5
Consumer Products		2.1			2.6			2.2			3.0
Utilities: Services		1.7			1.9			1.6			1.8
Retail		1.6			1.6			1.6			1.8
Industrial Cleaning & Coatings		1.3			1.5			1.8			2.1
Restaurants		0.0	(1)		0.0	(1)		0.1			0.1
Specialty Chemicals		—			—			0.0	(1)		0.0	(1)
Utility Equipment Manufacturing		—			1.5			—			1.4
Vending Equipment Manufacturing		—			0.2			—			0.3
Total		100.0	%		100.0	%		100.0	%		100.0	%

(1) Percentage is less than 0.1% of respective total.

Portfolio Asset Quality

In addition to various risk management and monitoring tools, the Investment Advisor uses an internally developed investment rating system to characterize and monitor the credit profile and our expected level of returns on each investment in our portfolio. We use a five-level numeric rating scale. The following is a description of the conditions associated with each investment rating:

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

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

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

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

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

As the COVID-19 pandemic continues to evolve, we are maintaining close communications with our portfolio companies to proactively assess and manage risks across our investment portfolio. We have also increased oversight and analysis of credits in vulnerable industries in an attempt to improve performance and reduce credit risk.

The following table shows the distribution of our investments on the 1 to 5 investment rating scale at fair value and cost as of March 31, 2022 and December 31, 2021 (dollars in millions):


	Fair Value								Cost
	March 31,				December 31,				March 31,				December 31,
Investment Rating	2022				2021				2022				2021
1	$	137.7	17.0	%	$	119.8	16.7	%	$	37.8	5.3	%	$	19.1	3.1	%
2		646.1	79.5			566.7	78.8			637.3	88.5			556.1	89.4
3		27.7	3.4			31.7	4.4			33.2	4.6			40.4	6.5
4		0.4	0.1			0.9	0.1			2.8	0.4			3.0	0.5
5		0.1	—			—	—			8.9	1.2			3.2	0.5
Total	$	812.0	100.0	%	$	719.1	100.0	%	$	720.0	100.0	%	$	621.8	100.0	%

Based on our investment rating system, the weighted average rating of our portfolio as of March 31, 2022 and December 31, 2021 was 1.9 and 1.9, respectively, on a fair value basis and 2.0 and 2.1, respectively, on a cost basis.

Non-Accrual

As of March 31, 2022, we had debt investments in two portfolio companies on non-accrual status. As of December 31, 2021, we had a debt investment in one portfolio company on non-accrual status (dollars in millions).


	March 31, 2022				December 31, 2021
	Fair				Fair
Portfolio Company	Value		Cost		Value			Cost
US GreenFiber, LLC	$	—	$	5.2	$	—	(2)	$	5.2	(2)
K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.)		2.2		2.4		—	(1)		—	(1)
Total	$	2.2	$	7.6	$	—		$	5.2

(1) Portfolio company debt investment was not on non-accrual status at December 31, 2021.

(2) Portfolio company was on PIK-only non-accrual status at December 31, 2021, meaning we ceased recognizing PIK interest income on the investment.

Discussion and Analysis of Results of Operations

Comparison of three months ended March 31, 2022 and 2021

Investment Income

Below is a summary of the changes in total investment income for the three months ended March 31, 2022 as compared to the same period in 2021 (dollars in millions, percent change calculated based on underlying dollar amounts in thousands):


	Three Months Ended March 31,
	2022		2021		$ Change			% Change (1)(2)
Interest income	$	17.1	$	19.1	$	(2.0	)		(10.7	%)
Payment-in-kind interest income		0.5		1.0		(0.5	)		(43.5	%)
Dividend income		0.7		0.1		0.6			640.9	%
Fee income		2.2		3.1		(0.9	)		(28.9	%)
Interest on idle funds and other income		—		—		—		NM
Total investment income	$	20.5	$	23.3	$	(2.8	)		(11.9	%)

(1) NM = Not meaningful

(2) Percent change calculated based on underlying dollar amounts in thousands as presented on the consolidated statements of operations.

For the three months ended March 31, 2022, total investment income was $20.5 million, a decrease of $2.8 million or (11.9%), from the $23.3 million of total investment income for the three months ended March 31, 2021. As reflected in the table above, the decrease is primarily attributable to the following:

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$2.5 million decrease in total interest income (which includes payment-in-kind interest income) resulting from a decrease in average debt investment balances and lower weighted average yield on debt investment balances outstanding, during 2022 as compared to 2021.

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$0.6 million increase in dividend income due to an increase in distributions received from equity investments.

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$0.9 million decrease in fee income resulting from a decrease in prepayment and amendment fees partially offset by an increase in origination fees during 2022 as compared to 2021.

Expenses

Below is a summary of the changes in total expenses, including income tax provision, for the three months ended March 31, 2022 as compared to the same period in 2021 (dollars in millions, percent change calculated based on underlying dollar amounts in thousands):


	Three Months Ended March 31,
	2022			2021		$ Change			% Change (1)(2)
Interest and financing expenses	$	4.4		$	5.2	$	(0.8	)		(15.1	%)
Base management fee		3.3			3.1		0.2			5.3	%
Incentive fee - income		1.1			2.7		(1.6	)		(60.5	%)
Incentive fee (reversal) - capital gains		0.3			0.1		0.2			196.7	%
Administrative service expenses		0.4			0.4		—		NM
Professional fees		0.5			0.4		0.1			59.4	%
Other general and administrative expenses		0.3			0.3		—		NM
Total expenses, before base management and income incentive fee waivers		10.3			12.2		(1.9	)		(15.6	%)
Base management and income incentive fee waivers		(0.1	)		—		(0.1	)	NM
Total expenses, before income tax provision		10.2			12.2		(2.0	)		(16.3	%)
Income tax provision (benefit)		—			—		—		NM
Total expenses, including income tax provision	$	10.2		$	12.2	$	(2.0	)		(16.6	%)

(1) NM = Not meaningful

(2) Percent change calculated based on underlying dollar amounts in thousands as presented on the consolidated statements of operations.

For the three months ended March 31, 2022, total expenses, including income tax provision, were $10.2 million, a decrease of $2.0 million or (16.6%), from the $12.2 million of total expenses for the three months ended March 31, 2021. As reflected in the table above, changes across periods were primarily attributable to the following:

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$0.8 million decrease in interest and financing expenses due to a decrease in average borrowings outstanding and the weighted average interest rate during 2022 as compared to 2021.

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$0.1 million net increase in base management fee, including the base management fee waiver, due to higher average total assets during 2022 as compared to 2021.

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$1.6 million net decrease in the income incentive fee due to a $2.2 million decrease in pre-incentive fee net investment income during 2022 as compared to 2021.

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$0.2 million increase in the accrued capital gains incentive fee due to a $1.1 million decrease in net gain on investments (net realized gains (losses), plus net change in unrealized appreciation (depreciation) on investments), plus a $2.0 million decrease in realized losses on extinguishment of debt during 2022 as compared to the same period in 2021.

•

$0.1 million increase in professional fees due to increased legal, audit and tax compliance costs during 2022 as compared to 2021.

Net Investment Income

Net investment income decreased by $0.8 million, or (6.7%), to $10.3 million during the three months ended March 31, 2022 as compared to the same period in 2021, as a result of the $2.8 decrease in total investment income, partially offset by the $2.0 million decrease in total expenses, including base management fee waivers and income tax provision.

Net Gain (Loss) on Investments

For the three months ended March 31, 2022, the total net realized gain/(loss) on investments, before income tax (provision)/benefit, was $6.9 million. There was no income tax (provision) benefit from realized gains on investments for the three months ended March 31, 2022. We realize a gain/(loss) on our equity investments primarily when we either sell our equity investment or the underlying portfolio company is sold. Significant realized gains (losses) for the three months ended March 31, 2022 are summarized below (dollars in millions):


		Net Realized
Portfolio Company	Realization Event (1)	Gains (Losses)
Software Technology, LLC	Escrow distribution	$	—
Frontline Food Services, LLC (f/k/a Accent Food Services, LLC)	Sale of portfolio company		0.2
Revenue Management Solutions, LLC	Escrow distribution		0.1
SpendMend LLC	Exit of portfolio company		6.2
FDS Avionics Corp.	Escrow distribution		(0.4	)
Mesa Line Services, LLC	Escrow liability release		0.5
Mirage Trailers LLC	Sale of portfolio company		0.3
Net realized gain (loss) on investments			6.9
Income tax (provision) benefit from realized gains on investments			—
Net realized gain (loss), net of income tax provision, on investments		$	6.9

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

For the three months ended March 31, 2021, the total net realized gain/(loss) on investments, before income tax (provision)/benefit, was $3.2 million. There was no income tax (provision) benefit from realized gains on investments for the three months ended March 31, 2021. We realize a gain/(loss) on our equity investments primarily when we either sell our equity investment or the underlying portfolio company is sold. Significant realized gains (losses) for the three months ended March 31, 2021 are summarized below (dollars in millions):


		Net Realized
Portfolio Company	Realization Event (1)	Gains (Losses)
Software Technology, LLC	Exit of portfolio company	$	1.4
Rohrer Corporation	Exit of portfolio company		0.9
Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)	Sale of portfolio company		1.0
Other			(0.1	)
Net realized gain (loss) on investments			3.2
Income tax provision from realized gains on investments			—
Net realized gain (loss), net of income tax provision, on investments		$	3.2

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

During the three months ended March 31, 2022 and 2021, we recorded a net change in unrealized appreciation (depreciation) on investments attributable to the following (dollars in millions):


	Three Months Ended March 31,
Unrealized Appreciation (Depreciation)	2022			2021
Exit, sale or restructuring of investments	$	(6.4	)	$	(1.6	)
Fair value adjustments to debt investments		2.0			(5.2	)
Fair value adjustments to equity investments		(0.9	)		6.2
Net change in unrealized appreciation (depreciation)	$	(5.3	)	$	(0.6	)

Net Increase in Net Assets Resulting From Operations

Net increase (decrease) in net assets resulting from operations during the three months ended March 31, 2022 and 2021 was $11.7 million and $11.5 million, respectively, as a result of the events described above.

Liquidity and Capital Resources

As of March 31, 2022, we had $86.1 million in cash and cash equivalents and our net assets totaled $486.5 million. We believe that our current cash and cash equivalents on hand, our Credit Facility, our continued access to SBA-guaranteed debentures, and our anticipated cash flows from investments will provide adequate capital resources with which to operate and finance our investment business and make distributions to our stockholders for at least the next 12 months. We intend to generate additional cash primarily from the future offerings of securities (including the “at-the-market” program) and future borrowings, as well as cash flows from operations, including income earned from investments in our portfolio companies. On both a short-term and long-term basis, our primary use of funds will be investments in portfolio companies and cash distributions to our stockholders. During the three months ended March 31, 2022, we repaid $20.0 million of SBA debentures which would have matured during the period March 1, 2025 through March 1, 2028. Our remaining outstanding SBA debentures continue to mature in 2025 and subsequent years through 2032, which will require repayment on or before the respective maturity dates. This “Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Updates” section above.

Cash Flows

For the three months ended March 31, 2022, we experienced a net decrease in cash and cash equivalents in the amount of $83.3 million. During that period, we made payments of $90.6 million of cash for operating activities, which included the funding of $114.4 million of investments which was partially offset by proceeds received from sales and repayments of investments of $23.2 million. During the same period, we received repayments of $0.2 million on our secured borrowings, made repayments of SBA debentures of $20.0 million; which were offset by proceeds from the issuances of SBA debentures of $41.5 million, paid cash dividends paid to stockholders of $13.0 million, and made payment of deferred financing costs related to our debt financings of $1.0 million.

Capital Resources

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

SBA debentures

The Funds are licensed SBICs, and have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC can have outstanding at any time debentures guaranteed by the SBA in an amount up to twice its regulatory capital. The SBA regulations currently limit the amount that is available to be borrowed by any SBIC and guaranteed by the SBA to 300.0% of an SBIC’s regulatory capital or $175.0 million, whichever is less. For two or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350.0 million. SBA debentures have fixed interest rates that approximate prevailing 10-year Treasury Note rates plus a spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the SBA debentures is not required to be paid before maturity but may be pre-paid at any time. As of March 31, 2022, Fund II and Fund III had $50.0 million and $78.5 million of outstanding SBA debentures, respectively. Subject to SBA regulatory requirements and approval, Fund III may access up to $96.5 million of additional SBA debentures under the SBIC debenture program. For more information on the SBA debentures, please refer to Note 6 to our consolidated financial statements.

Credit Facility

In June 2014, we entered into a senior secured revolving credit agreement (the "Credit Agreement") and the senior secured revolving credit facility (the "Credit Facility") to provide additional funding for our investment and operational activities. On April 24, 2019, we entered into the Amended Credit Agreement, which amends, restates, and replaces the Credit Agreement. On June 26, 2020, the Company amended the Amended Credit Agreement, but the material terms were unchanged. Among other revisions, the amendment to the Amended Credit Agreement modifies certain covenants therein, including to amend the minimum consolidated interest coverage ratio to be 2.25 to 1.00 for the four quarter period ending on June 30, 2020, 2.00 to 1.00 for the four quarter periods ending on each of September 30, 2020 and December 31, 2020, and 1.75 to 1.00 for each four quarter period ending at the end of each quarter thereafter. The Credit Facility is secured by substantially all of our assets, excluding the assets of the Funds.

Under the Amended Credit Agreement, (i) revolving commitments by lenders were increased from $90.0 million to $100.0 million, with an accordion feature that allows for an increase in total commitments up to $250.0 million, subject to satisfaction of certain conditions at the time of any such future increase, (ii) the maturity date of the Credit Facility was extended from June 16, 2019 to April 24, 2023, and (iii) borrowings under the Credit Facility bear interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if (x) no equity interests are included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero. We pay a commitment fee that varies depending on the size of the unused portion of the Credit Facility: 3.00% per annum on the unused portion of the Credit Facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the Credit Facility between the total commitments and the 35% minimum utilization. The Amended Credit Agreement also modifies certain covenants in the Credit Facility, including to provide for a minimum asset coverage ratio of 2.00 to 1 (on a regulatory basis). The Credit Facility is secured by a first priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries.

Amounts available to borrow under the Credit Facility are subject to a minimum borrowing/collateral base that applies an advance rate to certain investments held by us, excluding investments held by the Funds. We are subject to limitations with respect to the investments securing the Credit Facility, including, but not limited to, restrictions on sector concentrations, loan size, payment frequency and status and collateral interests, as well as restrictions on portfolio company leverage, which may also affect the borrowing base and therefore amounts available to borrow.

We have made customary representations and warranties and we are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility. As of March 31, 2022, we were in compliance with all covenants of the Credit Facility and there were no borrowings outstanding under the Credit Facility.

Notes

On February 2, 2018, we closed the public offering of approximately $43.5 million in aggregate principal amount of our 5.875% notes due 2023, or the “2023 Notes.” On February 22, 2018, the underwriters exercised their option to purchase an additional $6.5 million in aggregate principal of the 2023 Notes. The total net proceeds to us from the 2023 Notes, including the exercise of the

underwriters’ option, after deducting underwriting discounts of approximately $1.5 million and offering expenses of $0.4 million, were approximately $48.1 million. On January 19, 2021, we redeemed $50.0 million in the aggregate principal amount on the issued and outstanding 2023 Notes, resulting in a realized loss on extinguishment of debt of approximately $0.8 million.

On February 8, 2019, we closed the public offering of approximately $60.0 million in aggregate principal amount of our 6.000% notes due 2024, or the “February 2024 Notes”. On February 19, 2019, the underwriters exercised their option to purchase an additional $9.0 million in aggregate principal of the February 2024 Notes. The total net proceeds to us from the February 2024 Notes, including the exercise of the underwriters’ option, after deducting underwriting discounts of approximately $2.1 million and estimated offering expenses of $0.4 million, were approximately $66.5 million. On February 16, 2021, we redeemed $50.0 million of the $69.0 million in aggregate principal amount on the February 2024 Notes, resulting in a realized loss on extinguishment of debt of approximately $1.1 million. On November 2, 2021, we fully redeemed the remaining $19.0 million in aggregate principal amount on the issued and outstanding February 2024 Notes, resulting in a realized loss on extinguishment of debt of approximately $0.3 million.

On October 16, 2019, we closed the public offering of approximately $55.0 million in aggregate principal amount of our 5.375% notes due 2024, or the “November 2024 Notes” (and collectively with the 2023 Notes and the February 2024 Notes, the “Public Notes”). On October 23, 2019, the underwriters exercised their option to purchase an additional $8.3 million in aggregate principal of the November 2024 Notes. The total net proceeds to us from the November 2024 Notes, including the exercise of the underwriters’ option, after deducting underwriting discounts of approximately $1.9 million and estimated offering expenses of $0.3 million, were approximately $61.1 million. On November 2, 2021, we fully redeemed the $63.3 million in aggregate principal amount on the issued and outstanding November 2024 Notes, resulting in a realized loss on extinguishment of debt of approximately $1.3 million.

On December 23, 2020, we closed the offering of $125.0 million in aggregate principal amount of our 4.75% notes due 2026, or the “January 2026 Notes”. The total net proceeds to us from the January 2026 Notes after deducting underwriting discounts of $2.5 million and estimated offering expenses of approximately $0.4 million, were approximately $122.1 million. The January 2026 Notes will mature on January 31, 2026 and bear interest at a rate of 4.75%. The January 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 and at par thereafter. Interest on the January 2026 Notes is payable on January 31 and July 31 of each year. We do not intend to list the January 2026 Notes on any securities exchange or automated dealer quotation system. As of March 31, 2022, the outstanding principal balance of the January 2026 Notes was approximately $125.0 million.

On October 8, 2021, we closed the offering of $125.0 million in aggregate principal amount of our 3.50% notes due 2026, or the “November 2026 Notes” (collectively with the Public Notes and the January 2026 Notes, the “Notes”). The total net proceeds to us from the November 2026 Notes, based on a public offering price of 99.996% of par, after deducting underwriting discounts of $2.5 million and estimated offering expenses of approximately $0.3 million, were approximately $122.2 million. The November 2026 Notes will mature on November 15, 2026 and bear interest at a rate of 3.50%. The November 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 and at par thereafter. Interest on the November 2026 Notes is payable on May 15 and November 15 of each year, beginning May 15, 2022. We do not intend to list the November 2026 Notes on any securities exchange or automated dealer quotation system. As of March 31, 2022, the outstanding principal balance of the November 2026 Notes was approximately $125.0 million.

Each of the Notes are unsecured obligations and rank pari passu with our existing and future unsecured indebtedness; effectively subordinated to all of our existing and future secured indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities we may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities.

Secured Borrowing

As of March 31, 2022, the carrying value of secured borrowings totaled $17.4 million and the fair value of the associated loans included in investments was $17.4 million. As of December 31, 2021, carrying value of secured borrowings totaled $17.6 million and the fair value of the associated loans included in investments was $17.5 million. These secured borrowings were created as a result of our completion of partial loan sales of certain unitranche loan assets that did not meet the definition of a “participating interest.” As a result, sale treatment was not permitted and these partial loan sales were treated as secured borrowings. The weighted average interest rate on our secured borrowings was approximately 4.497% and 4.392% as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the weighted average stated interest rates for our SBA debentures and Notes were 2.846% and 4.125%, respectively. As of March 31, 2022, we had $100.0 million of unutilized commitment under our Credit Facility, and we were subject to a 1.375% fee on such amount. As of March 31, 2022, the weighted average stated interest rate on total debt outstanding was 3.726%.

As a BDC, we are generally required to meet an asset coverage ratio of at least 150.0% (defined as the ratio which the value of our consolidated total assets, less all consolidated liabilities and indebtedness not represented by senior securities, bears to the aggregate amount of senior securities representing indebtedness), which includes borrowings and any preferred stock we may issue in the future. This requirement limits the amount that we may borrow. On April 29, 2019, our Board, including a majority of the non-interested directors, approved a minimum asset coverage ratio of 150% under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. As a result, we are subject to the 150% asset coverage ratio effective as of April 29, 2020. We have received exemptive relief from the U.S. Securities and Exchange Commission (“SEC”) to allow us to exclude the senior securities issued by the Funds from the definition of senior securities in the 150% asset coverage requirement applicable to the Company under the 1940 Act, which, in turn, will enable us to fund more investments with debt capital.

As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if the Board, including the Independent Directors, determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale. On July 14, 2021, our stockholders voted to allow us to sell or otherwise issue common stock at a price below net asset value per share for a period of one year ending on the earlier of June 14, 2022 or the date of our 2022 Annual Meeting of Stockholders. We are asking our stockholders to approve a similar proposal at our 2022 Annual Meeting of Stockholders on June 9, 2022. Our stockholders specified that the cumulative number of shares sold in each offering during the one-year period ending on the earlier of June 14, 2022 or the date of our 2022 Annual Meeting of Stockholders may not exceed 25.0% of our outstanding common stock immediately prior to each such sale.

Stock Repurchase Program

We have an open market stock repurchase program (the “Stock Repurchase Program”) under which we may acquire up to $5.0 million of our outstanding common stock. Under the Stock Repurchase Program, we may, but are not obligated to, repurchase outstanding common stock in the open market from time to time provided that we comply with the prohibitions under our insider trading policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market value and timing constraints. The timing, manner, price and amount of any share repurchases will be determined by our management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate considerations. On November 1, 2021, the Board extended the Stock Repurchase Program through December 31, 2022, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not require us to repurchase any specific number of shares and we cannot assure that any shares will be repurchased under the Stock Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time. We did not make any repurchases of common stock during the three months ended March 31, 2022 and 2021. Refer to Note 8 to our consolidated financial statements for additional information concerning stock repurchases.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements. We have identified investment valuation, revenue recognition and transfers of financial assets as our most critical accounting policies and estimates. We continuously evaluate our policies and estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

Valuation of Portfolio Investments

As a BDC, we report our assets and liabilities at fair value at all times consistent with GAAP and the 1940 Act. Accordingly, we are required to periodically determine the fair value of all of our portfolio investments.

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

With respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described below:

•

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

•

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

•

our board of directors engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of our portfolio investments for which market quotations are not readily available. Each portfolio company investment is generally appraised by the valuation firm(s) at least once every calendar year and each new portfolio company investment is appraised at least once in the twelve-month period following the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result it is not in our stockholders’ best interest, to request the independent appraisal of certain portfolio company investments. Such instances include, but are not limited to, situations where we determine that the fair value of the portfolio company investment is relatively insignificant to the fair value of the total portfolio. Our board of directors consulted with the independent valuation firm(s) in arriving at our determination of fair value for 18 and 17 of our portfolio company investments representing 21.4% and 21.8% of the total portfolio investments at fair value (exclusive of new portfolio company investments made during the three months ended March 31, 2022 and December 31, 2021, respectively) as of March 31, 2022 and December 31, 2021, respectively;

•

the audit committee of our board of directors 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

•

our board of directors discusses the valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of the Investment Advisor, the independent valuation firm(s) and the audit committee.

In making the good faith determination of the value of portfolio investments, we start with the cost basis of the security. The transaction price is typically the best estimate of fair value at inception. When evidence supports a subsequent change to the carrying value from the original transaction price, adjustments are made to reflect the expected exit values.

Consistent with the policies and methodologies adopted by the Board, we perform detailed valuations of our debt and equity investments, including an analysis on the Company’s unfunded debt investment commitments, using both the market and income approaches as appropriate. Under the market approach, we typically use the enterprise value methodology to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which we derive a single estimate of enterprise value. Under the income approach, we typically prepare and analyze discounted cash flow models to estimate the present value of future cash flows of either an individual debt investment or of the underlying portfolio company itself.

We evaluate investments in portfolio companies using the most recent portfolio company financial statements and forecasts. We also consult with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues.

For our debt investments the primary valuation technique used to estimate the fair value is the discounted cash flow method. However, if there is deterioration in credit quality or a debt investment is in workout status, we may consider other methods in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. Our discounted cash flow models estimate a range of fair values by applying an appropriate discount rate to the future cash flow streams of our debt investments, based on future interest and principal payments as set forth in the associated debt investment agreements. We prepare a weighted average cost of capital for use in the discounted cash flow model for each investment, based on factors including, but not limited to: current pricing and credit metrics for similar proposed or executed investment transactions of private companies; the portfolio company’s historical financial results and outlook; and the portfolio company’s current leverage and credit quality as compared to leverage and credit quality as of the date the investment was made. We may also consider the following factors when determining the fair value of debt investments: the portfolio company’s ability to make future scheduled payments; prepayment penalties and other fees; estimated remaining life; the nature and realizable value of any collateral securing such debt investment; and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made. We estimate the remaining life of our debt investments to generally be the legal maturity date of the instrument, as we generally intend to hold debt investments to maturity. However, if we have information available to us that the debt investment is expected to be repaid in the near term, we would use an estimated remaining life based on the expected repayment date.

For our equity investments, including equity securities and warrants, we generally use a market approach, including valuation methodologies consistent with industry practice, to estimate the enterprise value of portfolio companies. Typically, the enterprise value of a private company is based on multiples of EBITDA, net income, revenues, or in limited cases, book value. In estimating the enterprise value of a portfolio company, we analyze various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio company’s historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public.

We may also utilize an income approach when estimating the fair value of our equity securities, either as a primary methodology if consistent with industry practice or if the market approach is otherwise not applicable, or as a supporting methodology to corroborate the fair value ranges determined by the market approach. We typically prepare and analyze discounted cash flow models based on projections of the future free cash flows (or earnings) of the portfolio company. We consider various factors, including but not limited to the portfolio company’s projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainties with respect to the possible effect of such valuations, and any changes in such valuations, on the consolidated financial statements.

Revenue Recognition

Investments and related investment income. Realized gains or losses on investments are recorded upon the sale or disposition of a portfolio investment and are calculated as the difference between the net proceeds from the sale or disposition and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation on the consolidated statements of operations includes changes in the fair value of investments from the prior period, as determined by the Board through the application of our valuation policy, as well as reclassifications of any prior period unrealized appreciation or depreciation on exited investments to realized gains or losses on investments.

Interest and dividend income. Interest and dividend income are recorded on the accrual basis to the extent that we expect to collect such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt. Dividend income is recorded as dividends are declared or at the point an obligation exists for the portfolio company to make a distribution, and is generally recognized when received. Distributions from portfolio companies are evaluated to determine if the distribution is a distribution of earnings or a return of capital. Distributions of earnings are included in dividend income while a return of capital is recorded as a reduction in the cost basis of the investment. Estimates are adjusted as necessary after the relevant tax forms are received from the portfolio company.

PIK income. Certain of our investments contain a PIK income provision. The PIK income, computed at the contractual rate specified in the applicable investment agreement, is added to the principal balance of the investment, rather than being paid in cash, and recorded as interest or dividend income, as applicable, on the consolidated statements of operations. Generally, PIK can be paid-in-kind or all in cash. We stop accruing PIK income when there is reasonable doubt that PIK income will be collected. PIK income that has been contractually capitalized to the principal balance of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the investment (with corresponding adjustments to unrealized depreciation, as applicable). PIK income is included in our taxable income and, therefore, affects the amount we are required to pay to our stockholders in the form of dividends in order to maintain our tax treatment as a RIC and to avoid paying corporate-level U.S. federal income tax, even though we have not yet collected the cash.

Non-accrual. Debt investments or preferred equity investments (for which we are accruing PIK dividends) are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. 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 applied to the investment principal balance based on management’s judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in management’s judgment, are likely to remain current.

Warrants. In connection with our debt investments, we will sometimes receive warrants or other equity-related securities (Warrants). We determine the cost basis of Warrants based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and Warrants received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the Warrants is treated as OID and accreted into interest income using the effective interest method over the term of the debt investment. Upon the prepayment of a debt investment, any unaccreted OID is accelerated into interest income.

Fee income. All transaction fees earned in connection with our investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including structuring and advisory services, provided to portfolio companies. We recognize income from fees for providing such structuring and advisory services when the services are rendered or the transactions are completed. Upon the prepayment of a debt investment, any prepayment penalties are recorded as fee income when earned.

We also typically receive debt investment origination or closing fees in connection with investments. Such debt investment origination and closing fees are capitalized as unearned income and offset against investment cost basis on our consolidated

statements of assets and liabilities and accreted into interest income over the term of the investment. Upon the prepayment of a debt investment, any unaccreted debt investment origination and closing fees are accelerated into interest income.

Transfers of Financial Assets

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.

Recently Issued Accounting Standard

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 (Management's 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 adopted the Amendments on the effective date which did not have a material impact on the Company’s Consolidated Financial Statements.

Related Party Transactions

We have entered into a number of business relationships with affiliated or related parties, including the following:

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

•

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

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

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We entered into a license agreement with Fidus Partners, LLC, pursuant to which Fidus Partners, LLC has granted us a non-exclusive, royalty-free license to use the name “Fidus.”

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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, we 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 us. We will not receive any fees from FEF I for any services provided in our capacity as the General Partner of FEF I.

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The Investment Advisor, in consultation with the Board, agreed to voluntarily waive $0.1 million of the base management fees on any assets accounted for as secured borrowings as defined under GAAP for the three months ended March 31, 2022. There were no secured borrowings included in total assets for the three months ended March 31, 2021.

In connection with the IPO and our election to be regulated as a BDC, we applied for and received exemptive relief from the SEC on March 27, 2012 to allow us to take certain actions that would otherwise be prohibited by the 1940 Act, as applicable to BDCs. Effective June 30, 2014, pursuant to exemptive relief from the SEC, we are permitted to exclude the senior securities issued by Fund II and Fund III from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act.

While we may co-invest with investment entities managed by the Investment Advisor or its affiliates, to the extent permitted by the 1940 Act and the rules and regulations thereunder, the 1940 Act imposes significant limits on co-investment. On January 4, 2017, the SEC staff has granted us relief sought in an exemptive order that expands our ability to co-invest in portfolio companies with other funds managed by the Investment Advisor or its affiliates ("Affiliated Funds") in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) or the Independent Directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. However, neither we nor our affiliates are obligated to invest or co-invest when investment opportunities are referred to us or them.

In addition, we and our Investment Advisor have each adopted a joint code of ethics pursuant to Rule 17j-1 under the 1940 Act that governs the conduct of our and the Investment Advisor’s officers, directors and employees. Additionally, the Investment Advisor has adopted a code of ethics pursuant to Rule 204A-1 under the Advisers Act of 1940, as amended, and in accordance with Rule 17j-1(c) under the 1940 Act. We have also adopted a code of business conduct that is applicable to all officers, directors and employees of Fidus and our Investment Advisor. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.

Recent Developments

On April 1, 2022, we invested $8.5 million in first lien debt and made a commitment up to $1.0 million of additional first lien debt of Choice Technology Solutions, LLC (dba Choice Merchant Solutions, LLC), a leading omnichannel global payments platform.

On April 13, 2022, we invested $11.0 million in second lien debt of Virtex Enterprises, LP, a leading vertically integrated electronic manufacturing services provider.

On April 19, 2022, we exited our debt investment in Comply365, LLC. We received payment in full of $8.8 million on our first lien debt, which includes a prepayment fee.

On April 21, 2022, we exited our equity investment in TransGo, LLC. We received a distribution on our common equity investment for a realized gain of approximately $1.9 million.

On May 2, 2022, our Board declared a regular quarterly dividend of $0.36 per share and a supplemental dividend of $0.07 per share payable on June 24, 2022, to stockholders of record as of June 10, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. Changes in interest rates affect both our cost of funding and the valuation of our investment portfolio. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. In 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 the decommissioning of LIBOR and changes in alternate rates 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. Most recently, in March 2022, the Federal Reserve raised interest rates by 0.25%, the first increase since December 2018, and in March 2022 in response to an increase in inflation, and indicated that it would raise interest rates at each of the remaining six meetings in 2022 . See Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2021, such as "Changes in interest rates will affect our cost of capital and net investment income”, “Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies, which may, in turn, impact the valuation of such portfolio companies”, and “Changes relating to the discontinuation LIBOR may adversely affect the value of our portfolio of LIBOR-indexed, floating-rate debt securities”.

As of March 31, 2022 and December 31, 2021, 37 and 32 portfolio company’s debt investments, respectively, bore interest at a variable rate, which represented $460.1 million and $376.0 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 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.

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 March 31, 2022 (dollars in millions):


			Interest Income			Interest Expense
			Increase			Increase			Net Increase			Net Investment
Basis Point Increase (Decrease)			(Decrease) (1) (2)			(Decrease) (4)			(Decrease)			Income (3)
	(200	)	$	(0.9	)	$	(0.1	)	$	(0.8	)	$	(0.6	)
	(150	)		(0.9	)		(0.1	)		(0.8	)		(0.6	)
	(100	)		(0.9	)		(0.1	)		(0.8	)		(0.6	)
	(50	)		(0.8	)		(0.1	)		(0.7	)		(0.6	)
	50			1.9			0.1			1.8			1.4
	100			4.0			0.2			3.8			3.0
	150			6.3			0.2			6.1			4.9
	200			8.6			0.3			8.3			6.6
	250			10.9			0.4			10.5			8.4
	300			13.2			0.5			12.7			10.2

(1) Certain of our variable rate debt investments have a LIBOR, PRIME or SOFR interest rate floor, which lessens the impact of decreases in interest rates.

(2) Interest income calculated assuming three-month LIBOR and SOFR rate as of March 31, 2022.

(3) Includes the impact of income incentive fee at 20.0% on net increase (decrease) in net interest.

(4) As of March 31, 2022, we did not have any borrowings outstanding under our Credit Facility.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act) as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the first quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are not, and the Investment Advisor is not, currently subject to any material legal proceedings.

Item 1A. Risk Factors.

In addition to other information set forth in this report, you should carefully consider the “Risk Factors” discussed in our Form 10-K for the year ended December 31, 2021 and filed with the SEC on March 3, 2022, which are incorporated herein by reference. These Risk Factors could materially affect our business, financial condition and/or operating results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.


Number		Exhibit
3.1		Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(1) to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-172550) filed with the U.S. Securities and Exchange Commission on April 29, 2011 and incorporated herein by reference).

3.2		Bylaws of the Registrant (Filed as Exhibit (b)(1) to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-172550) filed with the U.S. Securities and Exchange Commission on April 29, 2011 and incorporated herein by reference).

4.1		Form of Stock Certificate of the Registrant (Filed as Exhibit (d) to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-172550) filed with the U.S. Securities and Exchange Commission on April 29, 2011 and incorporated herein by reference).

4.2		Agreement to Furnish Certain Instruments (Filed as Exhibit (f)(2) to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2 (File No. 333-172550) filed with the U.S. Securities and Exchange Commission on May 26, 2011 and incorporated herein by reference).

4.3		Form of Indenture (Filed as Exhibit (d)(5) to Post-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-202531) filed with the U.S. Securities and Exchange Commission on April 29, 2016 and incorporated herein by reference).

4.4		Fourth Supplemental Indenture dated as of December 23, 2020 between Fidus Investment Corporation and U.S. Bank National Association, as trustee (Filed as Exhibit 4.1 to the Registrant’s Current report on Form 8-K filed with the U.S. Securities and Exchange Commission on December 23, 2020 and incorporated herein by reference).

4.5		Form of Global Note with respect to the 4.75% Notes due 2026 (Filed as Exhibit 4.1 to the Registrant’s Current report on Form 8-K filed with the U.S. Securities and Exchange Commission on December 23, 2020 and incorporated herein by reference).

4.6		Fifth Supplemental Indenture dated as of October 8, 2021 between Fidus Investment Corporation and U.S. Bank National Association, as trustee (Filed as Exhibit 4.1 to the Registrant’s Current report on Form 8-K filed with the U.S. Securities and Exchange Commission on October 8, 2021 and incorporated herein by reference).

4.7		Form of Global Note with respect to the 3.50% Notes due 2026 (Filed as Exhibit 4.1 to the Registrant’s Current report on Form 8-K filed with the U.S. Securities and Exchange Commission on October 8, 2021 and incorporated herein by reference).

31.1		Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2		Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

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

*Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	FIDUS INVESTMENT CORPORATION

Date: May 5, 2022	/s/ EDWARD H. ROSS
	Edward H. Ross
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

Date: May 5, 2022	/s/ SHELBY E. SHERARD
	Shelby E. Sherard
	Chief Financial Officer (Principal Financial and Accounting Officer)