FIDUS INVESTMENT Corp: Form 10-Q for the period ended Jun 30, 2026

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, 2025, filed with the SEC on February 26, 2026. 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;
• 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;
• 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;
• an economic downturn and its impacts on the ability of our portfolio companies to operate and the investment opportunities available to us;
• the impact of geopolitical conditions, including ongoing conflict between Ukraine and Russia, ongoing conflicts in the Middle East, the ongoing turmoil in Europe, and U.S. and China relations, and its impact on financial market volatility, global economic markets, and various sectors, industries and markets for commodities globally;
• the uncertainty associated with the imposition of tariffs and trade barriers and changes in trade policies and its impact on our portfolio companies and our financial condition;
• 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;
• the ability of the Investment Advisor to locate suitable investments for us and to monitor and administer our investments;
• 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 SBIC Funds to operate as an SBIC;
• the timing, form and amount of any dividend distributions;
• the impact of interest rate volatility and the elevated level of inflation on our business and portfolio companies;
• 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 and significant disruptions to our portfolio companies, including supply chain disruptions, labor shortages, and uncertainty associated with the imposition of tariffs, 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 could impair our lending and investment activities;
• interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy;
• the elevated level of 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, 2025, 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, 2025, filed with the SEC on February 26, 2026. 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 Fidus Mezzanine Capital, L.P. (“Fund I”) and membership interests of Fidus Mezzanine Capital GP, LLC, its general partner, resulting in Fund I becoming our wholly-owned 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. We commenced operations of Fidus Mezzanine Capital II, L.P. (“Fund II”), Fidus Mezzanine Capital III, L.P. (“Fund III”), and Fidus Mezzanine Capital IV, L.P. (“Fund IV” and together with Fund III, the “SBIC Funds”), each a wholly owned subsidiary, on March 29, 2013, April 18, 2018, and November 28, 2023, respectively.

Fund III and Fund IV received their SBIC licenses on March 21, 2019 and September 30, 2024, respectively. We plan to continue to operate Fund III and Fund IV as SBICs, subject to SBA approval, and to utilize the proceeds of the sale of SBA-guaranteed debentures to enhance returns to our stockholders. Fund I and Fund II completed their wind-down plans, can no longer issue additional SBA debentures, and relinquished their SBIC licenses on March 20, 2020 and March 7, 2024, respectively. We have also made, and continue to make, investments directly through FIC. We believe that utilizing FIC and the SBIC Funds as investment vehicles provides us with access to a broader array of investment opportunities.

We have certain wholly-owned subsidiaries (the “Taxable Subsidiaries”), each of which generally holds one or more of our portfolio investments listed on the consolidated schedules of investments, and have elected to be treated as corporations for U.S. federal income tax purposes and are thus subject to U.S. federal income tax imposed at corporate rates. 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 classified 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 income tax purposes, and each Taxable Subsidiary will be subject to U.S. federal income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations.

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 PRIME or SOFR 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 investments 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:

• organization;
• calculating our net asset value (including the cost and expenses of any independent valuation firm);
• fees and expenses incurred by the Investment Advisor under the Investment Advisory Agreement or payable to third parties, including agents, consultants or other advisors, in monitoring financial and legal affairs for us and in monitoring our investments and performing due diligence on our prospective portfolio companies or otherwise relating to, or associated with, evaluating and making investments, including “dead deal” costs;
• interest payable on debt, if any, incurred to finance our investments;
• offerings of our common stock and other securities;
• investment advisory fees and management fees;
• 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);
• transfer agent, dividend agent and custodial fees and expenses;
• federal and state registration fees;
• all costs of registration and listing our shares on any securities exchange;
• U.S. federal, state and local taxes;
• Independent Directors’ fees and expenses;
• costs of preparing and filing reports or other documents required by the SEC or other regulators including printing costs;
• costs of any reports, proxy statements or other notices to stockholders, including printing and mailing costs;
• our allocable portion of any fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;
• direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs;
• proxy voting expenses; and
• 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 six months ended June 30, 2026 and 2025, we invested $216.7 million and $210.0 million, respectively, in debt and equity investments including six and eleven new portfolio companies, respectively. During the six months ended June 30, 2026 and 2025, we received proceeds from sales or repayments, including principal, return of capital dividends and net realized gains (losses), of $112.2 million and $166.6 million, respectively, including an exit of one portfolio company and five portfolio companies, respectively. The following table summarizes purchases of investments and sales and repayments of investments by type for the six months ended June 30, 2026 and 2025 (dollars in millions).

(1) For the six months ended June 30, 2026 and 2025, first lien debt includes unitranche securities, which account for 48.5% and 58.4% of purchases, respectively. For the six months ended June 30, 2026 and 2025, first lien debt includes unitranche securities, which account for 27.7% and 22.6% of repayments, respectively.

As of June 30, 2026, the fair value of our investment portfolio totaled $1.4 billion and consisted of 100 active portfolio companies and eight portfolio companies that have sold their underlying operations. As of June 30, 2026, 61 portfolio companies’ debt investments bore interest at a variable rate, which represented $930.6 million, or 72.4%, 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 $28.5 million as of June 30, 2026. As of June 30, 2026, our average active portfolio company investment at amortized cost was $14.0 million, which excludes investments in eight portfolio companies that have sold their underlying operations.

As of December 31, 2025, the fair value of our investment portfolio totaled $1.3 billion and consisted of 97 active portfolio companies and six portfolio companies that have sold their underlying operations. As of December 31, 2025, 58 portfolio companies’ debt investments bore interest at a variable rate, which represented $890.1 million, or 75.3%, 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 $25.5 million as of December 31, 2025. As of December 31, 2025, our average active portfolio company investment at amortized cost was $13.4 million, which excludes investments in six portfolio companies that have sold their underlying operations.

The weighted average yield on debt investments as of June 30, 2026 and December 31, 2025 was 12.5% and 12.6%, 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 as of June 30, 2026 and December 31, 2025, including the accretion of OID and debt investment origination fees, but excluding investments on non-accrual status and investments recorded as a secured borrowing.

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):

(1) Includes unitranche investments, which account for 50.4% and 51.7% of our portfolio on a fair value and cost basis as of June 30, 2026, respectively. Includes unitranche investments, which account for 48.3% and 49.3% of our portfolio on a fair value and cost basis as of December 31, 2025, respectively.

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.

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

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:

• 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.
• 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.
• 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.
• 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.
• 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.

We also have observed, and continue to observe, supply chain disruptions, labor and resource shortages, commodity inflation, elements of financial market instability (including elevated interest rates), changes to U.S. tariff and trade policies and uncertainty relating to such changes, an uncertain economic outlook for the United States (which may include a recession), and elements of geopolitical instability (including the ongoing war in Ukraine, U.S. and China relations, and ongoing conflicts in the Middle East). In the event that the U.S. economy enters into a protracted recession, it is possible that the results of certain U.S. middle market companies could experience deterioration. We are closely monitoring the effect of such market volatility may have on our portfolio companies and our investment activities. We also are maintaining close communications with our portfolio companies and have also increased oversight of credits in vulnerable industries to mitigate any decline in loan 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 June 30, 2026 and December 31, 2025 (dollars in millions):

Based on our investment rating system, the weighted average rating of our portfolio as of June 30, 2026 and December 31, 2025 was 2.0 and 2.0, respectively, on a fair value basis and 2.1 and 2.2, respectively, on a cost basis.

Non-Accrual

As of June 30, 2026 and December 31, 2025, we had debt investments in one portfolio company and two portfolio companies, respectively, on non-accrual status (dollars in millions).

(1) The Company exited its debt investment in such portfolio company and did not hold such investment as of June 30, 2026.

Discussion and Analysis of Results of Operations

Comparison of three and six months ended June 30, 2026 and 2025

Investment Income

Below is a summary of the changes in total investment income for the three months ended June 30, 2026 as compared to the same period in 2025 (dollars in millions, percent change calculated based on underlying dollar amounts in thousands):

(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 June 30, 2026, total investment income was $43.5 million, an increase of $3.5 million or 8.8%, from $40.0 million of total investment income for the three months ended June 30, 2025. As reflected in the table above, the increase is primarily attributable to the following:

• $5.3 million increase in total interest income (which includes a $1.0 million increase in payment-in-kind ("PIK") interest income) resulting from an increase in average debt investment balances, partially offset by a decrease in weighted average yield on debt investment balances outstanding during 2026 as compared to the same period in 2025.
• $0.3 million increase in dividend income due to an increase in distributions received from equity investments during 2026 as compared to the same period in 2025.
• $1.8 million decrease in fee income resulting from a decrease in prepayment and origination fees during 2026 as compared to the same period in 2025.
• $0.3 million decrease in interest on idle funds due to a decrease in average cash balances outstanding during 2026 as compared to the same period in 2025.

Below is a summary of the changes in total investment income for the six months ended June 30, 2026 as compared to the same period in 2025 (dollars in millions):

(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 six months ended June 30, 2026, total investment income was $91.0 million, an increase of $14.5 million or 19.0%, from the $76.5 million of total investment income for the six months ended June 30, 2025. As reflected in the table above, the increase is primarily attributable to the following:

• $10.2 million increase in total interest income (which includes a $1.9 million increase in PIK interest income) resulting from an increase in average debt investment balances, partially offset by a decrease in weighted average yield on debt investment balances outstanding during 2026 as compared to the same period in 2025.
• $0.8 million decrease in dividend income due to a decrease in distributions received from equity investments during 2026 as compared to the same period in 2025.
• $5.0 million increase in fee income primarily related to a ‘one-time’ fee from a portfolio company debt refinancing, partially offset by a decrease in prepayment and origination fees during 2026 as compared to the same period in 2025.
• $0.1 million increase in interest on idle funds due to an increase in average cash balances outstanding during 2026 as compared to the same period in 2025.

Expenses

Below is a summary of the changes in total expenses, including income tax provision, for the three months ended June 30, 2026 as compared to the same period in 2025 (dollars in millions, percent change calculated based on underlying dollar amounts in thousands):

(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 June 30, 2026, total expenses, including the base management fee waiver and income tax provision, were $24.8 million, an increase of $3.5 million or 16.2%, from the $21.3 million of total expenses, including the base management fee waiver and income tax provision, for the three months ended June 30, 2025. As reflected in the table above, changes across the periods were primarily attributable to the following:

• $3.2 million increase in interest and financing expenses due to an increase in the weighted average interest rate of our debt outstanding and an increase in weighted average borrowings outstanding during 2026 as compared to the same period in 2025.
• $1.1 million net increase in the base management fee, including the base management fee waiver, due to higher average total assets during 2026 as compared to the same period in 2025.
• $0.2 million decrease in the income incentive fee due to a decrease in pre-incentive fee net investment income during 2026 as compared to the same period in 2025.
• $1.1 million decrease in the accrued capital gains incentive fee due to a net $5.4 million decrease in net gain on investments and realized losses on extinguishment of debt during 2026 as compared to the same period in 2025.
• $0.4 million increase in professional fees due to increased proxy solicitation fees during 2026 as compared to the same period in 2025.

Below is a summary of the changes in total expenses, including income tax provision, for the six months ended June 30, 2026 as compared to the same period in 2025 (dollars in millions):

(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 six months ended June 30, 2026, total expenses, including the base management fee waiver and income tax provision, were $47.7 million, an increase of $8.1 million or 20.4%, from the $39.6 million of total expenses, including the base management fee waiver and income tax provision, for the six months ended June 30, 2025. As reflected in the table above, changes across periods were primarily attributable to the following:

• $6.1 million increase in interest and financing expenses due to an increase in the weighted average interest rate of our debt outstanding and an increase in weighted average borrowings outstanding during 2026 as compared to 2025.
• $2.2 million net increase in base management fee, including the base management fee waiver, due to higher average total assets during 2026 as compared to 2025.
• $1.0 million net increase in the income incentive fee due to an increase in pre-incentive fee net investment income during 2026 as compared to the same period in 2025.
• $2.3 million decrease in the accrued capital gains incentive fee due to a net $(11.6) million decrease in net gain on investments and realized losses on extinguishment of debt during 2026 as compared to the same period in 2025.
• $0.8 million increase in professional fees due to increased proxy solicitation fees, legal, audit and tax compliance expenses during 2026 as compared to 2025.

Net Investment Income

Net investment income increased by $0.0 million, or 0.3%, to $18.7 million during the three months ended June 30, 2026 as compared to the same period in 2025, as a result of the $3.5 million increase in total investment income, offset by the $3.5 million increase in total expenses, including base management fee waiver and income tax provision.

Net investment income increased by $6.4 million, or 17.6%, to $43.3 million during the six months ended June 30, 2026 as compared to the same period in 2025, as a result of the $14.5 million increase in total investment income, partially offset by the $8.1 million increase in total expenses, including base management fee waiver and income tax provision.

Net Gain (Loss) on Investments

For the three and six months ended June 30, 2026, the total net realized gain/(loss) on investments, before income tax (provision)/benefit, was $6.4 million and $(5.8) million, respectively. Income tax (provision) benefit from realized gains on investments was $(0.3) million and $(0.4) million for the three and six months ended June 30, 2026. We realize a gain/(loss) on our equity investments primarily when we either sell our equity investment or the underlying portfolio company is sold. Realized gains (losses) for the three and six months ended June 30, 2026 are summarized below (dollars in millions):

(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).

For the three and six months ended June 30, 2025, the total net realized gain/(loss) on investments, before income tax (provision)/benefit, was $(7.6) million and $5.7 million. Income tax (provision) benefit from realized gains on investments was $(0.1) million and $(1.9) million for the three and six months ended June 30, 2025. We realize a gain/(loss) on our equity investments primarily when we either sell our equity investment or the underlying portfolio company is sold. Realized gains (losses) for the three and six months ended June 30, 2025 are summarized below (dollars in millions):

(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 and six months ended June 30, 2026 and 2025, we recorded a net change in unrealized appreciation (depreciation) on investments attributable to the following (dollars in millions):

Net Increase in Net Assets Resulting From Operations

Net increase (decrease) in net assets resulting from operations during the three months ended June 30, 2026 and 2025 was $20.0 million and $25.3 million, respectively, as a result of the events described above.

Net increase (decrease) in net assets resulting from operations during the six months ended June 30, 2026 and 2025 was $39.8 million and $44.9 million, respectively, as a result of the events described above.

Liquidity and Capital Resources

As of June 30, 2026, we had $37.6 million in cash and cash equivalents, $1.7 million in restricted cash, and our net assets totaled $738.5 million. We believe that our current cash and cash equivalents on hand, restricted cash, our SPV 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 debt and equity securities (including the ATM Program (as defined below)) 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 six months ended June 30, 2026, we repaid $7.0 million of SBA debentures relating to Fund III that would have matured during the period March 1, 2033 through September 1, 2033. Our remaining outstanding SBA debentures begin to mature in 2029 and subsequent years through 2036, which will require repayment on or before the respective maturity dates. In light of current market conditions, we will continually evaluate our overall liquidity position and take proactive steps to maintain that position based on the current circumstances. This “Financial Liquidity and Capital Resources” section should be read in conjunction with the notes of our consolidated financial statements.

Cash Flows

For the six months ended June 30, 2026, we experienced a net decrease in cash, cash equivalents and restricted cash in the amount of $40.4 million. During that period, we made net payments of $74.5 million of cash for operating activities, which included the funding of $216.7 million of investments that was partially offset by proceeds received from sales and repayments of investments of $112.2 million. During the same period, we received gross proceeds from the issuance of the June 2029 Notes of $120.0 million, redeemed $125.0 million in aggregate principal amount of the November 2026 Notes, received proceeds from the issuances of SBA debentures of $65.5 million, repaid SBA debentures relating to Fund III of $7.0 million, received net proceeds of $28.8 million from our SPV Credit Facility, received repayments of $0.9 million on our secured borrowings, paid cash dividends to stockholders of $43.3 million, and made payment of deferred financing costs related to our debt financings of $4.0 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

Both Fund III and Fund IV are licensed to operate as an SBIC, and have the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the SBA regulations, an SBIC can have outstanding at any time debentures guaranteed by the SBA in an amount up to twice its regulatory capital. Subject to SBA approval, 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 $250.0 million, whichever is less. For two or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $475.0 million, subject to SBA approval. The SBA may limit the amount that may be drawn each year under the SBA debenture commitments, and each issuance of leverage is conditioned on such SBIC Fund’s full compliance, as determined by the SBA, with the terms and conditions under SBA regulations. SBA debentures have fixed interest rates that approximate prevailing 10-year Treasury Note rates plus a spread and have a maturity of ten years with interest payable semi-annually. The principal amount of the SBA debentures is not required to be paid before maturity but may be pre-paid at any time. As of June 30, 2026, Fund III and Fund IV had $139.5 million and $156.5 million in outstanding SBA debentures, respectively. Subject to SBA regulatory requirements and approval of SBA debenture commitments, FMC IV may access up to $93.5 million of additional SBA debentures under the SBIC debenture program. For more information on the SBA debentures, please refer to Note 6. Debt to our consolidated financial statements.

Revolving Credit Facility

On June 16, 2014, we entered into a senior secured revolving credit agreement (as amended from time to time, the "Revolving Credit Agreement" and the senior secured revolving credit facility thereunder, the “Revolving Credit Facility”) with ING Capital LLC (“ING”), as the administrative agent, collateral agent, and lender. The Revolving Credit Facility was secured by certain portfolio investments held by us, except for the assets held by the SBIC Funds.

Concurrently with entering into the SPV Credit Agreement (as described below), on October 16, 2025, we terminated in full (i) the Revolving Credit Agreement and (ii) the amended and restated guarantee, pledge and security agreement, dated as of April 24, 2019 (as amended from time to time, the “Guarantee and Security Agreement”), by and among us, as borrower, the subsidiary guarantors party thereto, ING, as revolving administrative agent, each financing agent and designated indebtedness holder party thereto, and ING, as collateral agent. The Revolving Credit Agreement and the Guarantee and Security Agreement were terminated concurrently with the satisfaction of all our obligations and liabilities to the lending parties thereunder, including, without limitation, payments of principal and interest, other fees, breakage costs and other amounts owing to the lending parties.

The total commitments available under the Revolving Credit Facility were $140.0 million. Under the Revolving Credit Agreement, we paid a commitment fee that varied depending on the size of the unused portion of the Revolving Credit Facility: 2.500% to 2.675% per annum on the unused portion of the Revolving Credit Facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the Revolving Credit Facility between the total commitments and the 35% minimum utilization.

SPV Credit Facility

On October 16, 2025, we entered into a credit and security agreement (the “SPV Credit Agreement”) relating to a special purpose vehicle credit facility (the “SPV Credit Facility”) by and among FIC Funding, LLC (the “SPV”), as borrower, us, as servicer and equityholder, ING, as administrative agent (the “Administrative Agent”) and lead arranger, Western Alliance Trust Company, N.A., as custodian, collateral agent, and collateral administrator, and the lenders from time to time parties thereto. The SPV Credit Facility is secured primarily by a pledge of 100% of the equity interest in the SPV held by the Company and the SPV’s assets, which consist of certain bank loans or securities. The SPV Credit Facility provides for $175.0 million of initial commitments, and has an accordion feature that allows for an increase of the total commitments to up to $250.0 million, subject to certain conditions (including the consent of the Administrative Agent). On December 22, 2025, the total commitments available under the SPV Credit Facility was increased from $175.0 million to $225.0 million pursuant to the accordion feature. The SPV Credit Facility has a reinvestment period until October 16, 2029 and matures on October 16, 2030. The advances under the SPV Credit Facility bear interest, subject to our election, on a per annum basis equal to one-month Term SOFR plus 0.11448% and an applicable margin ranging from 2.500% to 2.675%. The SPV pays a commitment fee that varies depending on the size of the unused portion of the SPV Credit Facility: (1) if the utilized portion of the aggregate commitments as of the close of business on such day is less than 35% of the aggregate commitments (the “Minimum Utilization Amount”), the commitment fee will equal the sum of (a) the then applicable margin multiplied by (i) the Minimum Utilization Amount minus (ii) the aggregate outstanding principal balance of the advances on such day and (b) 0.50% multiplied by 65% of the commitments and (2) if the utilized portion of the aggregate commitments is greater than or equal to the Minimum Utilization Amount, the commitment fee will equal 0.50% multiplied by the unused amount of the commitments.

Amounts available to borrow under the SPV Credit Facility are subject to a minimum borrowing/collateral base that applies an advance rate to certain investments held by the SPV. The SPV is subject to limitations with respect to the investments securing the

SPV 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 SPV Credit Facility is secured primarily by a pledge of 100% of the equity interest in the SPV held by us and the SPV’s assets, which consist of certain bank loans or securities.

We and the SPV have made customary representations and warranties and we are required to comply with various covenants, reporting requirements and other customary requirements. These covenants are subject to important limitations and exceptions that are described in the documents governing the SPV Credit Facility. As of June 30, 2026, we were in compliance in all material respects with the terms of the SPV Credit Agreement.

Notes

The unsecured notes described below are our direct unsecured obligations, rank pari passu with our other outstanding and future unsecured unsubordinated indebtedness and are effectively or structurally subordinated to all of our existing and future secured indebtedness, including borrowings under the SPV Credit Facility and the SBA debentures.

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, based on a public offering price of 100.00% of par, after deducting underwriting discounts of $2.5 million and offering expenses of $0.4 million, were $122.1 million. The maturity date of the January 2026 Notes was January 31, 2026, and the January 2026 Notes bore interest at a rate of 4.75%. On May 21, 2025, we redeemed $25.0 million of the $125.0 million aggregate principal amount on the January 2026 Notes, resulting in a realized loss on extinguishment of debt of $0.1 million. On November 3, 2025, we fully redeemed the remaining $100.0 million in aggregate principal amount of the January 2026 Notes, resulting in a realized loss on extinguishment of debt of $0.1 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”. 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 offering expenses of $0.3 million, were $122.2 million. The maturity date of the November 2026 Notes was November 15, 2026 and the November 2026 Notes bore interest at a rate of 3.50%. On June 29, 2026, we fully redeemed the $125.0 million in aggregate principal amount of the November 2026 Notes, resulting in a realized loss on extinguishment of debt of $0.2 million.

On March 19, 2025, we closed the offering of $100.0 million in aggregate principal amount of our 6.75% notes due 2030, or the “Existing March 2030 Notes”. The total net proceeds to us from the Existing March 2030 Notes, based on a public offering price of 99.29954% of par, after deducting underwriting discounts of $2.0 million and offering expenses of $0.4 million, was $96.9 million. On October 3, 2025, we issued an additional $100.0 million in aggregate principal amount of the 6.75% notes due 2030 (the “Additional March 2030 Notes” and together with the Existing March 2030 Notes, the “March 2030 Notes”). The total net proceeds to us from the Additional March 2030 Notes, based on a public offering price of 100.705% of par, after deducting underwriting discounts of $1.5 million and offering expenses of $0.3 million, was $98.9 million. The Additional March 2030 Notes are treated as a single series with the Existing March 2030 Notes under the indenture and have the same terms as the Initial March 2030 Notes (except the issue date, the offering price and the initial interest payment date). Upon issuance of the Additional March 2030 Notes, the outstanding aggregate principal amount of the March 2030 Notes was $200.0 million. The March 2030 Notes will mature on March 19, 2030 and bear interest at a rate of 6.75%. The March 2030 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 before September 19, 2029 (the date falling six months prior to maturity) and at par thereafter. Interest on the March 2030 Notes is payable on March 19 and September 19 of each year. We do not intend to list the March 2030 Notes on any securities exchange or automated dealer quotation system.

On May 29, 2026, we closed the private placement of $120.0 million in aggregate principal amount of our 6.625% senior unsecured notes due 2029, or the “June 2029 Notes”, in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The total net proceeds to us from the June 2029 Notes, based on an issue price of 99.45% of par, after deducting the placement agent fee of $1.5 million and estimated offering expenses of $0.3 million were approximately $117.6 million. The June 2029 Notes will mature on June 1, 2029 and bear interest at a rate of 6.625%. Interest on the June 2029 Notes is payable on June 1 and December 1 of each year, beginning December 1, 2026. The June 2029 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 before March 1, 2029 (the date falling three months prior to maturity) and at par thereafter. In connection with the issuance and sale of the June 2029 Notes, we entered into a registration rights agreement, dated as of May 29, 2026 (the “Registration Rights Agreement”), with the institutional purchasers (the “Purchasers”). Pursuant to the Registration Rights Agreement, we are obligated to file with the SEC a registration statement with respect to an offer to exchange the June 2029 Notes for a new issue of debt securities registered under the Securities Act with terms substantially identical to those of the June 2029 Notes (except for provisions relating to transfer restrictions and payment of additional interest) and to use our commercially reasonable efforts to consummate such exchange offer on the earliest practicable date after the registration statement has been declared effective but in no event later than 365 days after the initial issuance of the June 2029 Notes. If we fail to satisfy our registration obligations under the Registration Rights Agreement, we will be required to pay additional interest to the holder of the June 2029 Notes. We do not intend to list the June 2029 Notes on any securities exchange or automated dealer quotation system.

Secured Borrowing

As of June 30, 2026, the carrying value of secured borrowings totaled $11.1 million and the fair value of the associated loans included in investments was $11.1 million. As of December 31, 2025, the carrying value of secured borrowings totaled $12.0 million and the fair value of the associated loans included in investments was $12.0 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 defined in ASC 860 (see Note 2. Significant Accounting Policies - Partial loan and equity sales to our consolidated financial statements for more information). 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 7.838% and 7.917% as of June 30, 2026 and December 31, 2025, respectively.

As of June 30, 2026, the weighted average stated interest rates for our SBA debentures and the Notes were 4.463% and 6.703%, respectively. As of June 30, 2026, we had $112.4 million of unutilized commitment under our SPV Credit Facility, and we were subject to a 0.500% fee on such amount. As of June 30, 2026, the weighted average stated interest rate on total debt outstanding was 5.776%.

As a BDC, we are generally required to meet an asset coverage ratio of at least 150% (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, effective as of April 29, 2020. We also have received exemptive relief from the U.S. Securities and Exchange Commission (“SEC”) to allow us to exclude the senior securities issued by the SBIC Funds and any future SBIC subsidiary 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 June 24, 2026, our stockholders approved a proposal to authorize 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 24, 2027 or the date of our 2027 Annual Meeting of Stockholders. Our stockholders specified that the cumulative number of shares sold pursuant to such authority during such period may not exceed 25% of our then outstanding common stock immediately prior to each such sale.

Equity ATM Program

On November 10, 2022, the Company established the at-the-market program (the “ATM Program”), pursuant to which the Company may offer and sell, from time to time through Raymond James & Associates, Inc. and B. Riley Securities, Inc., each as sales agents, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million. On August 11, 2023, the Company increased the maximum amount of shares to be sold through the ATM Program to $150.0 million from $50.0 million. On February 29, 2024, the Company increased the maximum amount of shares to be sold through the ATM Program to $300.0 million from $150.0 million. On March 2, 2026, the Company increased the maximum amount of shares to be sold through the ATM Program to $400.0 million from $300.0 million. Cumulative to June 30, 2026, the Company has sold 13,300,342 shares of common stock under the ATM Program at a weighted-average price of $19.94, raising $265.2 million of gross proceeds. Net proceeds were $261.8 million after commissions to the sales agents on shares sold. As of June 30, 2026, the Company had $134.8 million available under the ATM Program.

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. Most recently, on November 3, 2025, the Board extended the Stock Repurchase Program through December 31, 2026, 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 and six months ended June 30, 2026 and 2025. Refer to Note 8. Common Stock 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 relating to investment valuations and transfers of financial assets are set forth below. See Note 2. Significant Accounting Policies to our consolidated financial statements for more information regarding our critical accounting policies relating to revenue recognition.

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 quotation, the fair value of our investments may differ significantly from the values that would have been used had a readily available market quotation 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;
• 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.

Our Board consulted with the independent third-party valuation firm(s) in arriving at our determination of fair value for 22 and 21 of our portfolio company investments representing 26.4% and 26.7% of the total portfolio investments at fair value (exclusive of new portfolio company investments made during the three months ended June 30, 2026 and December 31, 2025, respectively) as of June 30, 2026 and December 31, 2025, respectively.

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 investments, 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.

Transfers of Financial Assets

Partial loan and equity sales. We follow 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 our consolidated statements of assets and liabilities and the proceeds recorded as a secured borrowing until the definition is met.

Related Party Transactions

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

• 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. Related Party Transactions to our consolidated financial statements. The Investment Advisor, in consultation with the Board, agreed to voluntarily waive $0.1 million and $0.1 million of the base management fees on any assets accounted for as secured borrowings as defined under GAAP for the three and six months ended June 30, 2026, respectively, and $0.1 million and $0.1 million for the three and six months ended June 30, 2025, respectively.
• Fidus Group Holdings, LLC (“Holdings”), a limited liability company organized under the laws of Delaware, is the parent company of Fidus Investment Advisors. Edward H. Ross, our Chairman and Chief Executive Officer, and Thomas C. Lauer, our President, are managers of Holdings.
• 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. Related Party Transactions to our consolidated financial statements.
• 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.”

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 the SBIC Funds and any future SBIC subsidiary 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. Our Investment Advisor and its affiliates has received 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) of 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 July 24, 2026, we issued an additional $7.5 million in SBA debentures, which will bear interest at a fixed interim interest rate of 4.746% until the pooling date in September 2026.

On July 31, 2026, we exited our second lien and subordinated debt investments in Virtex Enterprises, LP, which had been on non-accrual status and previously written down. We received payment of $0.2 million, resulting in an aggregate realized loss of $11.0 million.

On August 3, 2026, our Board declared a regular quarterly dividend of $0.43 per share and a supplemental dividend of $0.07 per share payable on September 29, 2026, to stockholders of record as of September 15, 2026.

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. Uncertainty with respect to interest rates, inflationary pressures, geopolitical conditions, and new tariffs and trade barriers, and the effects of this volatility has materially impacted and could continue to materially impact our market risks. 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. The prices of securities held by us may decline in response to certain events, including those directly involving the companies in which we invest and conditions affecting the general economy, including: overall market changes, including an increase in market volatility; legislative reform; local, regional, national or global political, social or economic instability; and interest rate volatility.

In the future, our investment income may also be affected by changes in various interest rates, including SOFR and prime rates, to the extent of any debt investments that include floating interest rates. The Federal Reserve reduced interest rates by 0.25% in each of September, October and December of 2025, bringing the benchmark rate to the 3.50% to 3.75% range. The Federal Reserve has maintained this range at each of its meetings in 2026. In considering the extent and timing of additional rate cuts in the future, the Federal Reserve stated that it will carefully assess incoming data relating to inflationary pressures and the unemployment rate, the evolving economic outlook, and the balance of risks. There can be no assurance regarding the magnitude or timing of future federal funds rate adjustments in either direction. In an elevated interest rate environment, 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. Conversely, sustained reductions in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in base rates, such as SOFR are not offset by a corresponding increase in the spread over such base rate that we earn on any portfolio investments, a decrease 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 such base rate. See Item 1A. "Risk Factors – Changes in interest rates will affect our cost of capital and net investment income” and “Risk Factors – 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.

As of June 30, 2026 and December 31, 2025, the debt investments in 61 and 58 portfolio companies, respectively, bore interest at a variable rate, which represented $930.6 million, or 72.4%, and $890.1 million, or 75.3%, 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 unsecured notes bear interest at fixed rates. Our SPV Credit Facility bears interest, at our election, at a rate per annum equal to one-month Term SOFR plus 0.11448% and an applicable margin of 2.675% (or 2.50% after satisfying certain step-down conditions, with commensurate reductions in the applicable margins for alternate base rate loans). We pay a commitment fee that varies depending on the size of the unused portion of the SPV Credit Facility: (1) if the utilized portion of the aggregate commitments as of the close of business on such day is less than 35% of the aggregate commitments (the “Minimum Utilization Amount”), the commitment fee will equal the sum of (a) the then applicable margin multiplied by (i) the Minimum Utilization Amount minus (ii) the aggregate outstanding principal balance of the advances on such day and (b) 0.50% multiplied by 65% of the commitments and (2) if the utilized portion of the aggregate commitments is greater than or equal to the Minimum Utilization Amount, the commitment fee will equal 0.50% multiplied by the unused amount of the commitments.

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.

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 June 30, 2026 (dollars in millions):

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

(2) Interest income calculated assuming three-month SOFR, and PRIME rate as of June 30, 2026.

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

(4) As of June 30, 2026, we had $112.7 million in borrowings outstanding under our SPV Credit Facility.

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 second quarter of 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed under "Item 1A. Risk Factors” previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 26, 2026, which are incorporated herein by reference. The risk factors therein 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.