1. A specialized bank for private middle-market companies.

2. Like a private equity firm, but primarily lending money to mid-sized private businesses.

• First Lien Debt Financing: Providing senior secured loans that have the highest priority claim on a company's assets.
• Second Lien Debt Financing: Offering secured loans that are subordinate to first lien debt in terms of claim priority.
• Unitranche Debt Financing: Delivering a blended debt facility that combines both senior and junior debt into a single instrument.
• Mezzanine Debt Financing: Supplying a hybrid form of financing that includes both debt and equity characteristics, typically subordinated.
• Equity Investments: Making direct ownership investments in private companies, often alongside debt financing.

Stellus Capital Investment Corporation (SCM) is a business development company (BDC) that specializes in providing debt and equity financing to private middle-market companies. Therefore, its "customers" are the various companies that receive capital investments from SCM.

Due to the nature of its business model, SCM maintains a diversified portfolio of investments across numerous private companies. This strategy typically means SCM does not have a small number of "major customers" that account for a disproportionately large share of its revenue, unlike businesses that sell products or services to a concentrated client base. Its income is generated from interest payments, dividends, and capital gains across its broad and varied investment portfolio.

Furthermore, all of SCM's portfolio companies are private entities, meaning they do not have public stock symbols. As such, while SCM continuously invests in and manages relationships with a multitude of private companies, it does not identify or disclose "major customers" by name and public symbol in the traditional sense.

Robert T. Ladd, Chairman, President, and Chief Executive Officer

Mr. Ladd has over 40 years of experience in investing, finance, and restructuring. He currently serves as Managing Partner and Chief Investment Officer of Stellus Capital Management and as Chairman, CEO, and President of Stellus Private Credit BDC. Prior to co-founding Stellus Capital Management in 2012 through a spin-out, Mr. Ladd led the Direct Capital Group at the D. E. Shaw group from 2004 to 2012, where the team deployed over $5 billion. His previous roles include serving as president of Duke Energy North America, LLC, and president and CEO of Duke Capital Partners, LLC, a merchant banking subsidiary, from 2000 to 2004. He was also a partner at Arthur Andersen LLP, where he led the worldwide corporate restructuring practice and U.S. corporate finance practice. Earlier in his career, he held various senior leadership positions at First City Bancorporation of Texas, Inc., and its subsidiaries. Stellus Capital's portfolio companies are substantially backed by private equity firms.

W. Todd Huskinson, Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary

Mr. Huskinson is a founding partner of Stellus Capital Management and has over 35 years of experience in finance, accounting, and operations. From 2005 to 2012, he was a director in the D. E. Shaw group's Direct Capital Group. Before joining the D. E. Shaw group, he was a Managing Director at BearingPoint (formerly KPMG Consulting), leading the Houston office's middle-market management consulting practice. Prior to that, Mr. Huskinson was a partner at Arthur Andersen, LLP, where he worked in audit, corporate finance, and consulting. He is a certified public accountant.

Dean D'Angelo, Co-Head of Private Credit

Mr. D'Angelo is a founding partner of Stellus Capital Management and serves as Co-Head of Private Credit and a member of the Investment Committee.

Joshua T. Davis, Co-Head of Private Credit

Mr. Davis is a founding partner of Stellus Capital Management and serves as Co-Head of Private Credit and a member of the Investment Committee.

Robert Collins, Head of Growth Capital Strategy

Mr. Collins has over 20 years of experience in private credit, private equity, and investment banking. He joined Stellus at its formation in 2012 and previously worked with the team at the D. E. Shaw group since 2004. His past experience includes positions at Bain Capital, Morgan Stanley, and Robertson Stephens.

The key risks to Stellus Capital Investment (SCM) are primarily centered around the inherent nature of its business as a Business Development Company (BDC) specializing in private middle-market debt investments.

1. Credit Risk and Borrower Defaults: Stellus Capital Investment specializes in providing financing to private middle-market companies, often through first lien, second lien, unitranche, and mezzanine debt. These types of companies, typically with EBITDA between $5 million and $50 million, are generally less established and carry a higher credit risk compared to larger, more mature businesses. The company's exposure to second lien, unitranche, and mezzanine debt means it holds positions lower in the capital structure, which inherently carry higher risk and lower recovery potential in the event of a borrower default. There is an observed "rising credit deterioration risk across the middle-market" that puts pressure on maintaining dividends for BDCs.
2. Interest Rate Sensitivity and Impact of Declining Rates: A significant portion of Stellus Capital Investment's portfolio, specifically 90%, consists of floating-rate loans. While this structure can be advantageous during periods of rising interest rates, it exposes the company to declining income and loan repricing pressures if base interest rates fall. A sustained decrease in interest rates would directly impact the net investment income (NII) generated by SCM's portfolio, potentially affecting its profitability and ability to sustain dividend distributions.
3. Dividend Sustainability and Reliance on External Capital: Stellus Capital Investment, as a BDC, is generally required to distribute at least 90% of its taxable income to shareholders to maintain its tax status. This regulatory requirement, coupled with the company's historical tendency to pay out more than it earns, raises concerns about the long-term sustainability of its dividend. The high payout ratio limits the amount of capital that can be retained for reinvestment and growth, making the company highly dependent on external capital markets, which can be challenging, particularly if its stock trades below its net asset value.

The addressable markets for Stellus Capital Investment (SCM), which specializes in debt and equity investments in private middle-market companies with an EBITDA between $5 million and $50 million in the U.S. and Canada, are substantial.

United States Market

• Private Debt/Credit Market: The U.S. private credit market, which largely caters to middle-market firms, was approximately $1.3 trillion in 2026 and $1.34 trillion as of Q2 2024. Lenders focusing on companies with less than $50 million in EBITDA comprise 90% of the direct lending market, a dominant strategy within private credit. The "lower middle market" specifically focuses on U.S. companies with EBITDA between $5 million and $50 million.
• Private Equity Market: The U.S. private equity middle market recorded a deal value of $410.7 billion in 2025. Middle-market companies are often defined by annual revenues between $10 million and $1 billion.

Canadian Market

• Private Debt/Credit Market: In Canada, the alternative lending and private debt market, which services middle-market companies, was estimated at approximately C$544 billion in Q3 2023 (representing 40% of the C$1.36 trillion total loans). Canadian mid-market businesses are generally comparable in size to the U.S. lower middle market companies.
• Private Equity Market: The Canadian private equity market experienced a record-breaking C$56.5 billion in deal value during the first nine months of 2025. A significant portion of this activity, with 86% of deals below C$25 million and mid-market transactions (valued under C$250 million) accounting for 85% of deals with disclosed values, demonstrates a strong focus on the middle market.

Stellus Capital Investment (symbol: SCM) is expected to drive future revenue growth over the next 2-3 years through several key strategies and market dynamics:

1. Expanded Origination Channels and Deal Flow through Ridgepost Capital Partnership: The acquisition of Stellus Capital Management, SCM's external manager, by Ridgepost Capital is anticipated to significantly enhance deal flow and broaden origination channels. This partnership is expected to open new sponsor relationships and increase investment opportunities, particularly from private equity relationships that SCM does not currently access. The transaction is projected to close in mid-2026, with the full benefits of increased investment opportunities expected to materialize as the partnership matures in the second half of 2026.
2. Continued Realization of Equity Co-investment Gains: While primarily focused on debt financing, SCM often includes corresponding equity investments in its deals. These equity co-investments have historically generated substantial realized gains, contributing significantly to the company's total realized income. Management expects continued equity realizations, indicating this will remain a component of revenue growth.
3. Favorable Market Conditions in the Lower Middle Market Private Credit Sector: Stellus Capital Investment operates within the private middle-market, and its leadership believes there is considerable opportunity for growth in the private credit space, especially within the lower middle market segment. This indicates an expectation that the broader market environment will support increased investment activity and, consequently, revenue growth for SCM.

Share Repurchases

• Stellus Capital Investment Corporation announced a $20 million share buyback program in March 2026, with the authorization expected to remain in place for at least one year.
• The company views repurchasing shares at current price levels as a compelling opportunity to generate meaningful value for shareholders.

Share Issuance

• In September 2025, Stellus Capital Investment Corporation priced a public offering of $50.0 million aggregate principal amount of 7.25% notes due 2030.
• The company anticipates exploring opportunities for raising additional capital through public and private equity offerings in the future.

Inbound Investments

• In Q3 2025, the company amended and extended its revolving credit facility, increasing the commitment from $315 million to $335 million and extending the maturity to September 2030.
• Stellus Capital Management, the company's external manager, agreed to be purchased by Ridgepost Capital in February 2026, a strategic development anticipated to provide complementary resources, expertise, and relationships, potentially expanding deal flow and origination opportunities for Stellus Capital Investment.

Outbound Investments

• During 2024, Stellus Capital made $221.2 million in new investments across 21 new and 29 existing portfolio companies, while receiving $151.8 million from repayments.
• For the fiscal year ending December 31, 2025, the company deployed $194.1 million into new and existing portfolio companies, growing its portfolio to $1.008 billion across 115 companies.
• In Q4 2025, the company funded $52.1 million in investments but experienced $54.0 million in repayments, resulting in a net negative investment activity of $1.9 million for the quarter.