FSCO

1. Q4 2025 net return 1.69%, 2025 total return 10.89%, outperforming senior secured loans and high yield. Portfolio weighted to first lien senior secured loans. 2. Delivered attractive monthly distribution, annualized yield ~11.4% based on NAV and 14.6% based on market price as of Feb 20, 2026. 3. Deployed $182 million in Q4, net investment activity $541 million in 2025. 4. Completed issuance of $200 million fixed-rate term preferred securities in Oct 2025. 5. Favor private credit for better relative value, made five new private credit investments in Q4, ~90% new investment activity in privately originated investments, 97% in first lien senior secured loans.

Believe portfolio is built for long-term durability. Target businesses with strong cash flows, modest leverage. Focus on senior debt investments with strong structural protections. Compete in lower and core middle market. Able to allocate across private and public markets dynamically to seek attractive risk-adjusted returns.

FSEO delivered a net return of 1.69% based on the fund's net asset value in Q4 2025, with net total return for 2025 at 10.89%. Portfolio was highly weighted to first lien senior secured loans (83% of fair value as of Dec 31, 2025). Fund paid ~20 cents per share in distributions, net investment income 12 cents per share. Deployed $182 million in Q4, net investment activity $541 million in 2025. Software exposure 8.8% as of Dec 31, 2025.

Exposure to second lien term loan of MBS Services Holdings was largest detractor in Q4 due to weakness in its operations amid film and TV production slowdown. Recovery rates for high-yield bonds and loans fell to multi-year lows. Covenant Lite structures migrating higher, though still rare for borrowers below $50 million EBITDA. Geopolitical and economic uncertainty, AI risk as potential disruptor.

Q: Walk us through current exposure to software and software adjacent credits, how defined and change quarter over quarter?

A: Software is 8.8% of portfolio, no large individual investments. Defined by business embeddedness and switching costs, avoided ARR loans.

Q: How positioning portfolio to balance income generation vs downside protection?

A: Portfolio mostly floating rate, focused on interest rate path, tilts to private credit for better returns.

Q: Current sector allocation and investment team constructive on?

A: Defensively positioned, top exposures consumer services, commercial/professional services, healthcare, focus on AI-benefiting investments.

Q: New investment opportunities, spread structures, covenants?

A: Subtle improvements, highly selective, prefer primary market, maintain underwriting discipline.

Q: Leverage levels and flexibility?

A: Maintain conservative approach, ~20% debt to equity, balance income and balance sheet.

Q: Early signs of stress?

A: Not really, pleased with portfolio credit quality, except idiosyncratic situation.

Q: Public vs private credit relative value?

A: Better opportunities in private credit, focus on public market dislocations.