Fidus Investment Corporation (NASDAQ: FDUS) (“Fidus” or the
“Company”), provider of customized debt and equity financing
solutions, primarily to lower middle-market companies based in the
United States, announced today a $1.65 deemed distribution to
shareholders of record as of December 31, 2022 and the U.S. federal
income tax treatment of its 2022 dividends.
Deemed Distribution
of $1.65 per
share
The Company announced a deemed distribution of $1.65 per share
(a total of $40,800,850) attributable to common stockholders of
record as of the close of business on December 31, 2022. We have
provided a number of questions and answers below regarding deemed
distributions generally, as we believe the concept of deemed
distributions may be new to many of our stockholders.
U.S. Federal Income
Tax Treatment of
2022 Dividends
In addition, Fidus paid dividends totaling $2.00
per share that are attributable to the tax year ended December 31,
2022, with approximately 40.64% of those dividends comprised of
long-term capital gains, approximately 55.65% of those dividends
comprised of ordinary income, and approximately 3.71% of those
dividends comprised of qualified dividends. Long-term capital gains
and qualified dividends (subject to certain limitations) paid to
non-corporate taxpayers (including individuals) may qualify for
favorable treatment under the Internal Revenue Code of 1986, as
amended ("IRC") and, for 2022, will generally be subject to a
maximum 20% U.S. federal income tax rate (plus a 3.8% Medicare
surtax, if applicable). The Company has posted information
regarding the U.S. federal income tax characteristics of its
dividends that are attributable to the 2022 tax year (the "2022
Form 1099 Information") on its website
(https://investor.fdus.com/stock-information/dividends-splits).
The amounts shown in the table below represent the final
classification of the Company’s 2022 dividends. This information
supersedes any estimated information you may have received during
the year. Calendar year 2022 distributions are classified as
follows:
Form 1099-DIV Reporting |
Box 1a |
Box 1a and Box 1b |
Box 2a |
Non-U.S. Shareholder |
Non-U.S. Shareholder |
|
Record Date |
Payment Date |
Dividend Per Share |
Non-Qualified Ordinary Dividend Per Share (i) |
Qualified Dividend Per Share (i), (ii) |
Capital Gains Per Share (iii) |
% of Interest-Related and Short-Term Capital Gain
(iv) |
% of Dividend Exempt from U.S. Withholding Tax
(v) |
|
|
|
|
|
|
|
|
|
|
3/11/2022 |
3/25/2022 |
$ |
0.5300 |
$ |
0.2671 |
$ |
0.0237 |
$ |
0.2393 |
50.390% |
50.390% |
|
6/10/2022 |
6/24/2022 |
$ |
0.4300 |
$ |
0.2167 |
$ |
0.0192 |
$ |
0.1941 |
50.390% |
50.390% |
|
9/9/2022 |
9/23/2022 |
$ |
0.4300 |
$ |
0.2176 |
$ |
0.0191 |
$ |
0.1934 |
50.599% |
50.599% |
|
12/2/2022 |
12/16/2022 |
$ |
0.6100 |
$ |
0.4117 |
$ |
0.0123 |
$ |
0.1861 |
67.487% |
67.487% |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
2.0000 |
$ |
1.1130 |
$ |
0.0742 |
$ |
0.8128 |
|
|
|
|
|
|
|
|
|
|
|
|
% of Total Dividends Paid Per Share |
|
100.000% |
|
55.649% |
|
3.711% |
|
40.640% |
55.692% |
55.692% |
|
|
|
|
|
|
|
|
|
|
(i) Form 1099-DIV Box 1a includes the combined amounts of the
columns "Ordinary Dividend Per Share" and "Qualified Dividends Per
Share," contained within table above.
(ii) The portion of the dividend reported in Box 1a treated as
Qualified Dividend is reported on Form 1099-DIV in Box 1b.
(iii) Net Capital Gain Dividend is reported on Form 1099-DIV in
Box 2a.
(iv) The Company designates the above percentages of each of the
total dividends by payment date as Interest-Related Dividend and
Short-Term Capital Gain Dividend in accordance with IRC Sections
871(k) and 881(e).
(v) The percentages designate the portion of the Company’s
dividends received by Non-U.S. Residents and Foreign Corporation
Shareholders that constitute Interest-Related Dividends, Short-Term
Capital Gains Dividends, and Net Capital Gain Dividends to total
amount of the dividends derived which generally are exempt from
U.S. withholding tax for these periods for Non-U.S. Residents and
Foreign Corporation Shareholders.
Non-U.S. residents and foreign corporation
shareholders ("Non-U.S. Shareholders") in a Regulated Investment
Company ("RIC",) such as Fidus, are exempt from U.S. withholding
tax on both "interest-related" dividends and short-term capital
gains in accordance with the IRC sections 871(k) and 881(e). In
addition, Non-U.S. Shareholders in a RIC are also exempt from U.S.
withholding tax on long-term capital gains. Approximately 55.69% of
Fidus’s 2022 dividends relate to interest, short-term capital gains
and long-term capital gains.
Dividends distributed to Non-U.S. Shareholders may have been
withheld to pay U.S. federal income tax. Non-U.S. Shareholders
should contact their tax advisor with any questions regarding this
information, and its application to any claim for refund of taxes
paid to the U.S. Internal Revenue Service (“IRS”).
What is a
deemed distribution?
For U.S. federal income tax purposes, we have elected to be
treated as a RIC under Subchapter M of the IRC. To continue to
qualify as a RIC for U.S. federal income tax purposes and obtain
favorable RIC tax treatment, we must meet certain requirements,
including certain minimum distribution requirements. Subchapter M
provides the Company with three choices regarding distributing its
net long-term capital gains: (i) it can retain such gains and pay
U.S. federal income tax on the amount retained, (ii) it can pay out
the gains as a cash distribution to its stockholders, or (iii) it
can elect to retain these gains but designate them as a deemed
distribution to shareholders of record as of the end of the taxable
year.
The Company has elected to retain a portion of its net long-term
capital gains and designate a deemed distribution of $1.65 per
share to the Company’s common stockholders of record as of the
close of business on December 31, 2022. When the Company designates
a deemed distribution, instead of a cash distribution paid to
common stockholders, the Company pays U.S. federal income tax at
corporate rates (currently 21%) on the retained net long-term
capital gains on behalf of common stockholders. In turn, common
stockholders are deemed to have received a capital gain dividend
and are deemed to have paid the tax that is actually paid by the
Company. As a result, common stockholders receive a tax credit that
they can use to offset their U.S. federal income tax on the deemed
distribution or for other purposes, including claiming a refund, as
appropriate. Common stockholders also increase their adjusted tax
basis in their shares of the Company by the amount of the deemed
distribution, net of U.S. federal income taxes paid by the Company
and deemed paid by the stockholder. The tax effect is the same as
if the capital gains had been distributed to the Company’s common
stockholders in cash, who then elected to reinvest their proceeds,
net of the tax paid by the Company (i.e., 79% of the amount
received after the 21% tax is applied).
What are the
tax consequences
of the deemed
distribution to
me as a
stockholder?
The following example generally illustrates the U.S. federal
income tax treatment for the Company and its common stockholders of
record on December 31, 2022, with regard to the $1.65 per share net
long-term capital gain to be retained by the Company and designated
as a deemed distribution:
- The Company will pay U.S. federal income tax of 21% on the
undistributed net long-term capital gain on behalf of common
stockholders in the amount of $0.3465 per share.
- All stockholders will receive a U.S. federal income tax credit
equal to their allocable share of the 21% U.S. federal income tax
paid by the Company on the undistributed long-term capital gain.
- Stockholders that are subject to U.S. federal income tax
generally can use that credit to offset their U.S. federal income
tax liabilities for the stockholder’s taxable year in which the
last day of the Company's taxable year falls (generally, the 2022
taxable year for stockholders that are individuals or otherwise
have a calendar-year taxable year) and can claim a refund on their
U.S. federal income tax return (for example on Form 1040) to the
extent of any unused credit.
- Stockholders who hold their shares in tax-deferred accounts can
receive a refund from the IRS for the taxes paid on their behalf by
having their custodians file an IRS Form 990-T with the IRS. It
typically takes several months for custodians to receive the refund
and deposit it into stockholders’ accounts.
- Other tax-exempt stockholders can also receive refunds for the
taxes paid on their behalf on the deemed distribution by filing IRS
Form 990-T.
- Stockholders that are not U.S. tax residents should consult
their own tax advisors as to the effect of the deemed distribution
and the taxes paid on their behalf in their individual
circumstances.
- Common stockholders will increase the adjusted tax basis in
their stock by $1.3035, equivalent to the deemed distribution of
$1.6500 per share less the $0.3465 per share in taxes paid on their
behalf.
Stockholders requiring further information about the impact of
the deemed distribution on their state and/or local taxes should
consult their tax advisors. The Company does not provide tax advice
to its stockholders.
Why did the
Company choose
to designate a
deemed distribution
rather than
declare a cash
dividend at this
time?
The Board of Directors, after careful review and deliberation,
determined that it is in the best interest of the Company and its
continued growth to designate a deemed distribution. The Company
will re-deploy the retained capital into income producing debt
assets, which will contribute to future net investment income
growth.
What are the
relevant distribution
dates for the
deemed distribution?
As there is no cash being paid out, there is no payment date for
the deemed distribution. However, the deemed distribution of
$1.6500 per share and corresponding tax credit are attributable to
common stockholders of record as of December 31, 2022.
Who will send
me the tax
information of
the deemed
distribution and
when will I
get this
information?
The deemed distribution is deemed paid to the stockholders of
record as of December 31, 2022. All relevant tax information will
be included in IRS Form 2439 (Notice to Shareholder of
Undistributed Long-Term Capital Gains), to be mailed in January
2023.
If you own your shares in “street name,” your brokerage firm or
bank will send you the tax information. If you own your shares
directly in your name, American Stock Transfer & Trust Company
LLC (AST), the Company’s transfer agent, will send you the tax
information. If you have not received the information by March
2023, you should contact your brokerage firm or bank and request
that information.
In addition, the Company has posted information regarding the
2022 deemed distribution (the "2022 Form 2439 Information") on its
website
(https://investor.fdus.com/stock-information/dividends-splits).
If I have
questions about
my individual
tax situation,
where can I
get them
answered?
The Company does not provide tax advice to its stockholders.
Please consult your personal tax advisor. We are providing these
questions and answers solely as a convenience to our
stockholders.
ABOUT FIDUS INVESTMENT
CORPORATION
Fidus Investment Corporation provides customized
debt and equity financing solutions to lower middle-market
companies, which management generally defines as U.S. based
companies with revenues between $10 million and $150 million. The
Company’s investment objective is to provide attractive
risk-adjusted returns by generating both current income from debt
investments and capital appreciation from equity related
investments. Fidus seeks to partner with business owners,
management teams and financial sponsors by providing customized
financing for change of ownership transactions, recapitalizations,
strategic acquisitions, business expansion and other growth
initiatives.
Fidus is an externally managed, closed-end,
non-diversified management investment company that has elected to
be treated as a business development company under the Investment
Company Act of 1940, as amended. In addition, for U.S. federal
income tax purposes, Fidus has elected to be treated as a RIC.
Fidus was formed in February 2011 to continue and expand the
business of Fidus Mezzanine Capital, L.P., which commenced
operations in May 2007 and is licensed by the U.S. Small Business
Administration as a Small Business Investment Company (SBIC).
FORWARD-LOOKING STATEMENTS
This press release may contain certain
forward-looking statements which are based upon current
expectations and are inherently uncertain, including, but not
limited to, statements about the future performance and financial
condition of the Company and future net investment income growth.
Any such statements, other than statements of historical fact, are
likely to be affected by other unknowable future events and
conditions, including elements of the future that are or are not
under the Company’s control, and that the Company may or may not
have considered, such as changes in the financial and lending
markets; the depending of the Company’s future success on the
general economy and its impact on the industries that the Company
invests; and the impact of interest rate volatility, including the
decommissioning of LIBOR and rising interest rates; accordingly,
such statements cannot be guarantees or assurances of any aspect of
future performance. Actual developments and results are highly
likely to vary materially from these estimates and projections of
the future as a result of a number of factors related to changes in
the markets in which the Company invests, changes in the
financial, capital, and lending markets, and other factors
described from time to time in the Company’s filings with the
Securities and Exchange Commission. Such statements speak only as
of the time when made and are based on information available to the
Company as of the date hereof and are qualified in their entirety
by this cautionary statement. The Company undertakes no obligation
to update any such statement now or in the future, except as
required by applicable law.
Company
Contact: |
Investor Relations Contact: |
Shelby E. Sherard |
Jody Burfening |
Chief Financial Officer |
LHA |
(847) 859-3940 |
(212) 838-3777 |
ssherard@fidusinv.com |
jburfening@lhai.com |
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