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TABLE OF CONTENTS

 

Filed Pursuant to Rule 497

Registration Statement No. 333-223483

 

 

Supplement, dated November 2, 2018

to

Prospectus, dated April 27, 2018,

Prospectus Supplement, dated May 8, 2018

and

Prospectus Supplement, dated May 10, 2018

 

This supplement contains information which amends, supplements or modifies certain information contained in the Prospectus of Main Street Capital Corporation (the “Company”) dated April 27, 2018 (the “Prospectus”), as supplemented by the Prospectus Supplement dated May 8, 2018 (the “DSPP Prospectus Supplement”) and the Prospectus Supplement dated May 10, 2018 (the “ATM Prospectus Supplement” and, together with the DSPP Prospectus Supplement, the “Prospectus Supplements”), each as further supplemented from time to time including hereby. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus Supplements or Prospectus, as applicable.

 

Investing in our common stock involves a high degree of risk, and should be considered highly speculative. See “Risk Factors” beginning on page 15 of the Prospectus, “Supplementary Risk Factors” beginning on page S-6 of the DSPP Prospectus Supplement and in Annex A hereto to read about factors you should consider, including the risk of leverage and dilution, before investing in our common stock.

 

STATUS OF OUR OFFERINGS

 

On May 10, 2018, we established an at-the-market program to which the ATM Prospectus Supplement relates and through which we may sell, from time to time and at our sole discretion up to 4,500,000 shares of our common stock. As of the date hereof, we have sold 1,347,142 shares of our common stock for net proceeds of approximately $51.8 million, after commissions to the Sales Agents on shares sold and offering costs, under the at-the-market program. As a result, 3,152,858 shares of our common stock remain available for sale under the at-the-market program.

 

On July 18, 2017, we established a Dividend Reinvestment and Direct Stock Purchase Plan (the “Plan”), which includes the direct stock purchase feature to which the DSPP Prospectus Supplement relates.  We are offering up to 1,000,000 shares of our common stock pursuant to the DSPP Prospectus Supplement, and, from May 8, 2018 through the date hereof, we have sold 4,867 shares of our common stock for gross proceeds of approximately $0.2 million thereunder. As a result, 995,133 shares of our common stock remain available for sale under the DSPP Prospectus Supplement.

 

FORM 10-Q

 

On November 2, 2018, we filed our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 (the “Report”) with the Securities and Exchange Commission. We have attached the Report as Annex A to this supplement.

 


 

Annex A

 


Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)    

ý

 

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

For the quarterly period ended September 30, 2018

OR

o

 

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

For the transition period from:                             to                              

Commission File Number: 001-33723

Main Street Capital Corporation
(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)
  41-2230745
(I.R.S. Employer
Identification No.)

1300 Post Oak Boulevard, 8th Floor
Houston, TX
(Address of principal executive offices)

 

77056
(Zip Code)

(713) 350-6000
(Registrant's telephone number including area code)

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

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

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

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

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o

Emerging growth company o

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

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

        The number of shares outstanding of the issuer's common stock as of November 1, 2018 was 60,993,821.

   


Table of Contents


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.

 

Consolidated Financial Statements

   

 

Consolidated Balance Sheets—September 30, 2018 (unaudited) and December 31, 2017

  1

 

Consolidated Statements of Operations (unaudited)—Three and nine months ended September 30, 2018 and 2017

  2

 

Consolidated Statements of Changes in Net Assets (unaudited)—Nine months ended September 30, 2018 and 2017

  3

 

Consolidated Statements of Cash Flows (unaudited)—Nine months ended September 30, 2018 and 2017

  4

 

Consolidated Schedule of Investments (unaudited)—September 30, 2018

  5

 

Consolidated Schedule of Investments—December 31, 2017

  31

 

Notes to Consolidated Financial Statements (unaudited)

  56

 

Consolidated Schedules of Investments in and Advances to Affiliates (unaudited)—Nine months ended September 30, 2018 and 2017

  99

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  109

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  132

Item 4.

 

Controls and Procedures

  133


PART II
OTHER INFORMATION

Item 1.

 

Legal Proceedings

  134

Item 1A.

 

Risk Factors

  134

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

  134

Item 6.

 

Exhibits

  134

 

Signatures

  135

Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Balance Sheets

(dollars in thousands, except shares and per share amounts)

 
  September 30,
2018
  December 31,
2017
 
 
  (Unaudited)
   
 

ASSETS

             

  

             

Investments at fair value:

             

Control investments (cost: $717,220 and $530,034 as of September 30, 2018 and December 31, 2017, respectively)

  $ 967,128   $ 750,706  

Affiliate investments (cost: $389,450 and $367,317 as of September 30, 2018 and December 31, 2017, respectively)

    373,444     338,854  

Non-Control/Non-Affiliate investments (cost: $1,105,048 and $1,107,447 as of September 30, 2018 and December 31, 2017, respectively)

    1,086,301     1,081,745  

Total investments (cost: $2,211,718 and $2,004,798 as of September 30, 2018 and December 31, 2017, respectively)

    2,426,873     2,171,305  

  

             

Cash and cash equivalents

    50,303     51,528  

Interest receivable and other assets

    37,339     36,343  

Receivable for securities sold

    5,363     2,382  

Deferred financing costs (net of accumulated amortization of $6,329 and $5,600 as of September 30, 2018 and December 31, 2017, respectively)

    4,585     3,837  

Total assets

  $ 2,524,463   $ 2,265,395  

LIABILITIES

             

Credit facility

 
$

250,000
 
$

64,000
 

SBIC debentures (par: $345,800 and $295,800 as of September 30, 2018 and December 31, 2017, respectively)

    337,931     288,483  

4.50% Notes due 2022 (par: $185,000 as of both September 30, 2018 and December 31, 2017)

    182,471     182,015  

4.50% Notes due 2019 (par: $175,000 as of both September 30, 2018 and December 31, 2017)

    174,157     173,616  

6.125% Notes (par: $90,655 as of December 31, 2017)

        89,057  

Accounts payable and other liabilities

    19,252     20,168  

Payable for securities purchased

    22,425     40,716  

Interest payable

    6,731     5,273  

Dividend payable

    11,889     11,146  

Deferred tax liability, net

    14,165     10,553  

Total liabilities

    1,019,021     885,027  

  

             

Commitments and contingencies (Note M)

             

NET ASSETS

   
 
   
 
 

Common stock, $0.01 par value per share (150,000,000 shares authorized; 60,962,505 and 58,660,680 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively)

   
610
   
586
 

Additional paid-in capital

    1,396,256     1,310,780  

Accumulated net investment income, net of cumulative dividends of $770,516 and $662,563 as of September 30, 2018 and December 31, 2017, respectively

    13,155     7,921  

Accumulated net realized gain from investments (accumulated net realized gain from investments of $65,808 before cumulative dividends of $135,871 as of September 30, 2018 and accumulated net realized gain from investments of $64,576 before cumulative dividends of $124,690 as of December 31, 2017)

    (70,063 )   (60,114 )

Net unrealized appreciation, net of income taxes

    165,484     121,195  

Total net assets

    1,505,442     1,380,368  

Total liabilities and net assets

  $ 2,524,463   $ 2,265,395  

NET ASSET VALUE PER SHARE

  $ 24.69   $ 23.53  

   

The accompanying notes are an integral part of these consolidated financial statements

1


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Operations

(dollars in thousands, except shares and per share amounts)

(Unaudited)

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2018   2017   2018   2017  

INVESTMENT INCOME:

                         

Interest, fee and dividend income:

                         

Control investments

  $ 18,926   $ 15,145   $ 64,756   $ 42,720  

Affiliate investments

    9,643     10,134     27,230     29,601  

Non-Control/Non-Affiliate investments           

    29,694     26,507     82,089     77,623  

Total investment income

    58,263     51,786     174,075     149,944  

EXPENSES:

                         

Interest

    (10,884 )   (9,420 )   (31,982 )   (26,820 )

Compensation

    (5,798 )   (4,777 )   (16,962 )   (13,762 )

General and administrative

    (2,951 )   (2,748 )   (9,023 )   (8,748 )

Share-based compensation

    (2,147 )   (2,476 )   (6,883 )   (7,542 )

Expenses allocated to the External Investment Manager

    1,592     1,664     5,336     4,816  

Total expenses

    (20,188 )   (17,757 )   (59,514 )   (52,056 )

NET INVESTMENT INCOME

    38,075     34,029     114,561     97,888  

NET REALIZED GAIN (LOSS):

   
 
   
 
   
 
   
 
 

Control investments

        (2,848 )   4,681     259  

Affiliate investments

    1,898     (9,896 )   1,898     12,920  

Non-Control/Non-Affiliate investments           

    7,340     2,038     (3,825 )   14,663  

Realized loss on extinguishment of debt           

            (2,896 )   (5,217 )

Total net realized gain (loss)

    9,238     (10,706 )   (142 )   22,625  

NET UNREALIZED APPRECIATION (DEPRECIATION):

                         

Control investments

    30,285     14,171     33,357     31,217  

Affiliate investments

    3,135     8,783     16,997     (18,013 )

Non-Control/Non-Affiliate investments           

    (8,159 )   (6,586 )   (3,264 )   (17,562 )

SBIC debentures

    (53 )   (221 )   1,296     5,408  

Total net unrealized appreciation

    25,208     16,147     48,386     1,050  

INCOME TAXES:

                         

Federal and state income, excise and other taxes

    (759 )   (799 )   (793 )   (2,489 )

Deferred taxes

    (3,022 )   (3,772 )   (3,304 )   (9,894 )

Income tax provision

    (3,781 )   (4,571 )   (4,097 )   (12,383 )

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ 68,740   $ 34,899   $ 158,708   $ 109,180  

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

  $ 0.63   $ 0.60   $ 1.91   $ 1.74  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE—BASIC AND DILUTED

  $ 1.13   $ 0.61   $ 2.65   $ 1.94  

DIVIDENDS PAID PER SHARE:

                         

Regular monthly dividends

  $ 0.570   $ 0.555   $ 1.710   $ 1.665  

Supplemental dividends

            0.275     0.275  

Total dividends

  $ 0.570   $ 0.555   $ 1.985   $ 1.940  

WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED

    60,807,096     57,109,104     59,836,527     56,140,953  

   

The accompanying notes are an integral part of these consolidated financial statements

2


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Changes in Net Assets

(dollars in thousands, except shares)

(Unaudited)

 
   
   
   
   
  Accumulated
Net Realized
Gain From
Investments,
Net of
Dividends
  Net Unrealized
Appreciation
from
Investments,
Net of Income
Taxes
   
 
 
  Common Stock    
   
   
 
 
   
  Accumulated
Net Investment
Income, Net
of Dividends
   
 
 
  Number of
Shares
  Par
Value
  Additional
Paid-In
Capital
  Total Net
Asset Value
 

Balances at December 31, 2016

    54,354,857   $ 543   $ 1,143,883   $ 19,033   $ (58,887 ) $ 96,909   $ 1,201,481  

Public offering of common stock, net of offering costs

   
3,119,581
   
31
   
118,087
   
   
   
   
118,118
 

Share-based compensation

            7,542                 7,542  

Purchase of vested stock for employee payroll tax withholding

    (113,371 )   (1 )   (4,350 )               (4,351 )

Investment through issuance of unregistered shares

    11,464         442                 442  

Dividend reinvestment

    158,301     2     6,085                 6,087  

Amortization of directors' deferred compensation

            488                 488  

Issuance of restricted stock, net of forfeited shares

    225,361     2     (2 )                

Dividends to stockholders

                (82,605 )   (26,716 )       (109,321 )

Net increase (decrease) resulting from operations

                92,671     27,842     (11,333 )   109,180  

Balances at September 30, 2017

    57,756,193   $ 577   $ 1,272,175   $ 29,099   $ (57,761 ) $ 85,576   $ 1,329,666  

Balances at December 31, 2017

    58,660,680   $ 586   $ 1,310,780   $ 7,921   $ (60,114 ) $ 121,195   $ 1,380,368  

Public offering of common stock, net of offering costs

   
1,907,519
   
19
   
72,318
   
   
   
   
72,337
 

Share-based compensation

            6,883                 6,883  

Purchase of vested stock for employee payroll tax withholding

    (109,693 )   (1 )   (4,076 )               (4,077 )

Dividend reinvestment

    253,125     3     9,720                 9,723  

Amortization of directors' deferred compensation

            634                 634  

Issuance of restricted stock, net of forfeited shares

    250,874     3     (3 )                

Dividends to stockholders

                (107,953 )   (11,181 )       (119,134 )

Net increase resulting from operations

                113,187     1,232     44,289     158,708  

Balances at September 30, 2018

    60,962,505   $ 610   $ 1,396,256   $ 13,155   $ (70,063 ) $ 165,484   $ 1,505,442  

   

The accompanying notes are an integral part of these consolidated financial statements

3


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 
  Nine Months Ended
September 30,
 
 
  2018   2017  

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net increase in net assets resulting from operations

  $ 158,708   $ 109,180  

Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:

             

Investments in portfolio companies

    (766,483 )   (743,695 )

Proceeds from sales and repayments of debt investments in portfolio companies

    480,738     527,562  

Proceeds from sales and return of capital of equity investments in portfolio companies

    71,010     80,078  

Net unrealized appreciation

    (48,386 )   (1,050 )

Net realized (gain) loss

    142     (22,625 )

Accretion of unearned income

    (11,253 )   (12,403 )

Payment-in-kind interest

    (1,760 )   (4,122 )

Cumulative dividends

    (1,735 )   (2,711 )

Share-based compensation expense

    6,883     7,542  

Amortization of deferred financing costs

    2,482     2,022  

Deferred tax provision

    3,304     9,894  

Changes in other assets and liabilities:

             

Interest receivable and other assets

    (1,170 )   (2,848 )

Interest payable

    1,458     (494 )

Accounts payable and other liabilities

    (282 )   640  

Deferred fees and other

    2,969     2,050  

Net cash used in operating activities

    (103,375 )   (50,980 )

CASH FLOWS FROM FINANCING ACTIVITIES

   
 
   
 
 

Proceeds from public offering of common stock, net of offering costs

    72,337     118,118  

Dividends paid

    (108,668 )   (102,347 )

Proceeds from issuance of SBIC debentures

    54,000     60,000  

Repayments of SBIC debentures

    (4,000 )   (25,200 )

Redemption of 6.125% Notes

    (90,655 )    

Proceeds from credit facility

    516,000     394,000  

Repayments on credit facility

    (330,000 )   (382,000 )

Payment of deferred issuance costs and SBIC debenture fees

    (2,787 )   (1,576 )

Purchases of vested stock for employee payroll tax withholding

    (4,077 )   (4,351 )

Net cash provided by financing activities

    102,150     56,644  

Net increase (decrease) in cash and cash equivalents

    (1,225 )   5,664  

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    51,528     24,480  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 50,303   $ 30,144  

Supplemental cash flow disclosures:

             

Interest paid

  $ 27,948   $ 25,200  

Taxes paid

  $ 4,725   $ 3,162  

Non-cash financing activities:

             

Shares issued pursuant to the DRIP

  $ 9,723   $ 6,087  

   

The accompanying notes are an integral part of these consolidated financial statements

4


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Control Investments(5)

     

 

 

 

                   

                               

Access Media Holdings, LLC(10)

  July 22, 2015  

Private Cable Operator

                       

         

10% PIK Secured Debt (Maturity—July 22, 2020)(14)(19)

  $ 23,828   $ 23,828   $ 15,120  

         

Preferred Member Units (9,279,000 units)(27)

          9,173     (487 )

         

Member Units (45 units)

          1      

                      33,002     14,633  

                               

ASC Interests, LLC

  August 1, 2013  

Recreational and Educational Shooting Facility

                       

         

11% Secured Debt (Maturity—July 31, 2020)

    1,650     1,617     1,617  

         

Member Units (1,500 units)

          1,500     1,370  

                      3,117     2,987  

                               

ATS Workholding, LLC(10)

  March 10, 2014  

Manufacturer of Machine Cutting Tools and Accessories

                       

         

5% Secured Debt (Maturity—November 16, 2021)

    4,772     4,374     4,374  

         

Preferred Member Units (3,725,862 units)

          3,726     3,726  

                      8,100     8,100  

                               

Bond-Coat, Inc.

  December 28, 2012  

Casing and Tubing Coating Services

                       

         

12% Secured Debt (Maturity—December 28, 2020)

    11,596     11,343     11,596  

         

Common Stock (57,508 shares)

          6,350     9,370  

                      17,693     20,966  

                               

Brewer Crane Holdings, LLC

  January 9, 2018  

Provider of Crane Rental and Operating Services

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.10%, Secured Debt (Maturity—January 9, 2023)(9)

    9,672     9,586     9,586  

         

Preferred Member Units (2,950 units)(8)

          4,280     4,280  

                      13,866     13,866  

Café Brazil, LLC

  April 20, 2004  

Casual Restaurant Group

                       

         

Member Units (1,233 units)(8)

          1,742     4,780  

                               

California Splendor Holdings LLC

  March 30, 2018  

Processor of Frozen Fruits

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.38%, Secured Debt (Maturity—March 30, 2023)(9)

    14,991     14,818     14,818  

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.38%, Secured Debt (Maturity—March 30, 2023)(9)

    28,000     27,744     27,744  

         

Preferred Member Units (6,157 units)(8)

          10,775     10,775  

                      53,337     53,337  

                               

CBT Nuggets, LLC

  June 1, 2006  

Produces and Sells IT Training Certification Videos

                       

         

Member Units (416 units)(8)

          1,300     62,090  

                               

5


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Chamberlin Holding LLC

  February 26, 2018  

Roofing and Waterproofing Specialty Contractor

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.38%, Secured Debt (Maturity—February 26, 2023)(9)

    21,600     21,405     21,405  

         

Member Units (4,347 units)(8)

          11,440     17,790  

                      32,845     39,195  

                               

Charps, LLC

  February 3, 2017  

Pipeline Maintenance and Construction

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.10%, Secured Debt (Maturity—February 3, 2022)(9)

    1,600     1,587     1,587  

         

12% Secured Debt (Maturity—February 3, 2022)

    15,900     15,783     15,783  

         

Preferred Member Units (1,600 units)

          400     1,050  

                      17,770     18,420  

                               

Clad-Rex Steel, LLC

  December 20, 2016  

Specialty Manufacturer of Vinyl-Clad Metal

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.60%, Secured Debt (Maturity—December 20, 2021)(9)

    12,480     12,392     12,480  

         

Member Units (717 units)(8)

          7,280     10,380  

         

10% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity—December 20, 2036)

    1,167     1,156     1,167  

         

Member Units (Clad-Rex Steel RE Investor, LLC) (800 units)

          210     280  

                      21,038     24,307  

                               

CMS Minerals Investments

  January 30, 2015  

Oil & Gas Exploration & Production

                       

         

Member Units (CMS Minerals II, LLC) (100 units)(8)

          2,891     2,591  

                               

Copper Trail Fund Investments(12)(13)

  July 17, 2017  

Investment Partnership

                       

         

LP Interests (CTMH, LP) (Fully diluted 38.8%)

          872     872  

         

LP Interests (Copper Trail Energy Fund I, LP) (Fully diluted 30.1%)(8)

          3,270     3,499  

                      4,142     4,371  

                               

Datacom, LLC

  May 30, 2014  

Technology and Telecommunications Provider

                       

         

8% Secured Debt (Maturity—May 30, 2019)(14)

    1,800     1,800     1,690  

         

10.50% PIK Secured Debt (Maturity—May 30, 2019)(14)(19)

    12,511     12,479     10,560  

         

Class A Preferred Member Units

          1,294      

         

Class B Preferred Member Units (6,453 units)

          6,030      

                      21,603     12,250  

                               

Digital Products Holdings LLC

  April 1, 2018  

Designer and Distributor of Consumer Electronics

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.13%, Secured Debt (Maturity—April 1, 2023)(9)

    26,070     25,828     25,828  

         

Preferred Member Units (3,451 shares)(8)

          8,466     8,466  

                      34,294     34,294  

                               

6


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Direct Marketing Solutions, Inc.

  February 13, 2018  

Provider of Omni-Channel Direct Marketing Services

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.13%, Secured Debt (Maturity—February 13, 2023)(9)

    18,252     18,073     18,073  

         

Preferred Stock (8,400 shares)

          8,400     11,780  

                      26,473     29,853  

                               

Gamber-Johnson Holdings, LLC

  June 24, 2016  

Manufacturer of Ruggedized Computer Mounting Systems

                       

         

LIBOR Plus 8.00% (Floor 2.00%), Current Coupon 10.10%, Secured Debt (Maturity—June 24, 2021)(9)

    22,526     22,378     22,526  

         

Member Units (8,619 units)(8)

          14,844     40,120  

                      37,222     62,646  

                               

Garreco, LLC

  July 15, 2013  

Manufacturer and Supplier of Dental Products

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity—March 31, 2020)(9)

    5,362     5,335     5,335  

         

Member Units (1,200 units)

          1,200     1,940  

                      6,535     7,275  

                               

GRT Rubber Technologies LLC

  December 19, 2014  

Manufacturer of Engineered Rubber Products

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.10%, Secured Debt (Maturity—December 19, 2019)(9)

    10,101     10,071     10,101  

         

Member Units (5,879 units)(8)

          13,065     32,040  

                      23,136     42,141  

                               

Guerdon Modular Holdings, Inc.

  August 13, 2014  

Multi-Family and Commercial Modular Construction Company

                       

         

13% Secured Debt (Maturity—March 1, 2019)

    12,588     12,548     11,978  

         

Preferred Stock (404,998 shares)

          1,140      

         

Common Stock (212,033 shares)

          2,983      

         

Warrants (6,208,877 equivalent shares; Expiration—April 25, 2028; Strike price—$0.01 per unit)

               

                      16,671     11,978  

                               

Gulf Manufacturing, LLC

  August 31, 2007  

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

         

Member Units (438 units)(8)

          2,980     11,690  

                               

Gulf Publishing Holdings, LLC

  April 29, 2016  

Energy Industry Focused Media and Publishing

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.60%, Secured Debt (Maturity—September 30, 2020)(9)

    160     160     160  

         

12.5% Secured Debt (Maturity—April 29, 2021)

    12,666     12,588     12,588  

         

Member Units (3,681 units)

          3,681     4,570  

                      16,429     17,318  

                               

Harborside Holdings, LLC

  March 20, 2017  

Real Estate Holding Company

                       

         

Member units (100 units)

          6,306     9,500  

                               

7


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Harris Preston Fund Investments(12)(13)

  October 1, 2017  

Investment Partnership

                       

         

LP Interests (2717 MH, L.P.) (Fully diluted 49.3%)

          1,040     1,133  

                               

Harrison Hydra-Gen, Ltd.

  June 4, 2010  

Manufacturer of Hydraulic Generators

                       

         

Common Stock (107,456 shares)(8)

          718     7,570  

                               

HW Temps LLC

  July 2, 2015  

Temporary Staffing Solutions

                       

         

LIBOR Plus 13.00% (Floor 1.00%), Current Coupon 15.10%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,932     9,932  

         

Preferred Member Units (3,200 units)(8)

          3,942     3,942  

                      13,874     13,874  

                               

IDX Broker, LLC

  November 15, 2013  

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

         

11.5% Secured Debt (Maturity—November 15, 2020)

    14,500     14,401     14,500  

         

Preferred Member Units (5,607 units)(8)

          5,952     12,470  

                      20,353     26,970  

                               

Jensen Jewelers of Idaho, LLC

  November 14, 2006  

Retail Jewelry Store

                       

         

Prime Plus 6.75% (Floor 2.00%), Current Coupon 11.75%, Secured Debt (Maturity—November 14, 2019)(9)

    3,505     3,482     3,505  

         

Member Units (627 units)(8)

          811     5,090  

                      4,293     8,595  

                               

KBK Industries, LLC

  January 23, 2006  

Manufacturer of Specialty Oilfield and Industrial Products

                       

         

Member Units (325 units)(8)

          783     7,100  

                               

Lamb Ventures, LLC

  May 30, 2008  

Aftermarket Automotive Services Chain

                       

         

11% Secured Debt (Maturity—July 1, 2022)

    8,339     8,303     8,339  

         

Preferred Equity (non-voting)

          400     400  

         

Member Units (742 units)

          5,273     6,730  

         

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—March 31, 2027)

    432     428     432  

         

Member Units (Lamb's Real Estate Investment I, LLC) (1,000 units)(8)

          625     630  

                      15,029     16,531  

                               

Market Force Information, LLC

  July 28, 2017  

Provider of Customer Experience Management Services

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.32%, Secured Debt (Maturity—July 28, 2022)(9)

    400     400     400  

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.32%, Secured Debt (Maturity—July 28, 2022)(9)

    22,800     22,615     22,615  

         

Member Units (657,113 units)

          14,700     14,250  

                      37,715     37,265  

                               

8


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

MH Corbin Holding LLC

  August 31, 2015  

Manufacturer and Distributor of Traffic Safety Products

                       

         

10% Current / 3% PIK Secured Debt (Maturity—August 31, 2020)(19)

    12,147     11,999     11,999  

         

Preferred Member Units (4,000 shares)

          6,000     4,500  

                      17,999     16,499  

                               

Mid-Columbia Lumber Products, LLC

  December 18, 2006  

Manufacturer of Finger-Jointed Lumber Products

                       

         

10% Secured Debt (Maturity—January 15, 2020)

    1,750     1,745     1,745  

         

12% Secured Debt (Maturity—January 15, 2020)

    3,900     3,875     3,875  

         

Member Units (7,874 units)

          3,001     3,860  

         

9.5% Secured Debt (Mid-Columbia Real Estate, LLC) (Maturity—May 13, 2025)

    757     757     757  

         

Member Units (Mid-Columbia Real Estate, LLC) (500 units)(8)

          790     1,470  

                      10,168     11,707  

                               

MSC Adviser I, LLC(16)

  November 22, 2013  

Third Party Investment Advisory Services

                       

         

Member Units (Fully diluted 100.0%)(8)

              70,148  

                               

Mystic Logistics Holdings, LLC

  August 18, 2014  

Logistics and Distribution Services Provider for Large Volume Mailers

                       

         

12% Secured Debt (Maturity—August 15, 2019)

    7,536     7,496     7,496  

         

Common Stock (5,873 shares)

          2,720     710  

                      10,216     8,206  

                               

NAPCO Precast, LLC

  January 31, 2008  

Precast Concrete Manufacturing

                       

         

LIBOR Plus 8.50%, Current Coupon 10.82%, Secured Debt (Maturity—May 31, 2019)

    11,475     11,457     11,475  

         

Member Units (2,955 units)(8)

          2,975     13,280  

                      14,432     24,755  

                               

NexRev LLC

  February 28, 2018  

Provider of Energy Efficiency Products & Services

                       

         

10% Secured Debt (Maturity—February 28, 2023)

    17,440     17,281     17,281  

         

Preferred Member Units (86,400,000 units)(8)

          6,880     7,890  

                      24,161     25,171  

                               

NRI Clinical Research, LLC

  September 8, 2011  

Clinical Research Service Provider

                       

         

14% Secured Debt (Maturity—June 8, 2022)

    6,900     6,748     6,900  

         

Warrants (251,723 equivalent units; Expiration—June 8, 2027; Strike price—$0.01 per unit)

          252     500  

         

Member Units (1,454,167 units)

          765     2,500  

                      7,765     9,900  

                               

9


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NRP Jones, LLC

  December 22, 2011  

Manufacturer of Hoses, Fittings and Assemblies

                       

         

12% Secured Debt (Maturity—March 20, 2023)

    6,376     6,376     6,376  

         

Member Units (65,962 units)(8)

          3,717     5,370  

                      10,093     11,746  

                               

NuStep, LLC

  January 31, 2017  

Designer, Manufacturer and Distributor of Fitness Equipment

                       

         

12% Secured Debt (Maturity—January 31, 2022)

    20,600     20,448     20,448  

         

Preferred Member Units (406 units)

          10,200     10,200  

                      30,648     30,648  

                               

OMi Holdings, Inc.

  April 1, 2008  

Manufacturer of Overhead Cranes

                       

         

Common Stock (1,500 shares)(8)

          1,080     15,480  

                               

Pegasus Research Group, LLC

  January 6, 2011  

Provider of Telemarketing and Data Services

                       

         

Member Units (460 units)

          1,290     8,250  

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—October 31, 2022)(9)(24)

                   

                               

PPL RVs, Inc.

  June 10, 2010  

Recreational Vehicle Dealer

                       

         

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 9.34%, Secured Debt (Maturity—November 15, 2021)(9)

    15,100     14,999     15,100  

         

Common Stock (1,962 shares)(8)

          2,150     11,780  

                      17,149     26,880  

                               

Principle Environmental, LLC (d/b/a TruHorizon Environmental Solutions)

  February 1, 2011  

Noise Abatement Service Provider

                       

         

13% Secured Debt (Maturity—April 30, 2020)

    7,477     7,384     7,477  

         

Preferred Member Units (19,631 units)(8)

          4,600     13,090  

         

Warrants (1,018 equivalent units; Expiration—January 31, 2021; Strike price—$0.01 per unit)

          1,200     780  

                      13,184     21,347  

                               

Quality Lease Service, LLC

  June 8, 2015  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

Zero Coupon Secured Debt (Maturity—June 8, 2021)

    7,341     7,341     6,450  

         

Member Units (1,000 units)

          3,968     4,370  

                      11,309     10,820  

                               

River Aggregates, LLC

  March 30, 2011  

Processor of Construction Aggregates

                       

         

Zero Coupon Secured Debt (Maturity—June 30, 2018)(17)

    750     750     722  

         

Member Units (1,150 units)

          1,150     4,610  

         

Member Units (RA Properties, LLC) (1,500 units)

          369     2,730  

                      2,269     8,062  

                               

10


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Tedder Industries, LLC

  August 31, 2018  

Manufacturer of Firearm Holsters and Accessories

                       

         

12% Secured Debt (Maturity—August 31, 2023)

    16,400     16,240     16,240  

         

Preferred Member Units (440 units)

          7,476     7,476  

                      23,716     23,716  

                               

The MPI Group, LLC

  October 2, 2007  

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

         

9% Secured Debt (Maturity—October 2, 2018)

    2,924     2,924     1,110  

         

Series A Preferred Units (2,500 units)

          2,500      

         

Warrants (1,424 equivalent units; Expiration—July 1, 2024; Strike price—$0.01 per unit)

          1,096      

         

Member Units (MPI Real Estate Holdings, LLC) (100 units)(8)

          2,300     2,480  

                      8,820     3,590  

                               

Vision Interests, Inc.

  June 5, 2007  

Manufacturer / Installer of Commercial Signage

                       

         

13% Secured Debt (Maturity—December 23, 2018)

    2,314     2,311     2,311  

         

Series A Preferred Stock (3,000,000 shares)

          3,000     3,740  

         

Common Stock (1,126,242 shares)

          3,706     280  

                      9,017     6,331  

                               

Ziegler's NYPD, LLC

  October 1, 2008  

Casual Restaurant Group

                       

         

6.5% Secured Debt (Maturity—October 1, 2019)

    1,000     998     1,000  

         

12% Secured Debt (Maturity—October 1, 2019)

    425     425     425  

         

14% Secured Debt (Maturity—October 1, 2019)

    2,750     2,750     2,750  

         

Warrants (587 equivalent units; Expiration—October 1, 2019; Strike price—$0.01 per unit)

          600      

         

Preferred Member Units (10,072 units)

          2,834     2,071  

                      7,607     6,246  

Subtotal Control Investments (64.2% of net assets at fair value)

  $ 717,220   $ 967,128  

11


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Affiliate Investments(6)

     

 

 

 

                   

                               

AFG Capital Group, LLC

  November 7, 2014  

Provider of Rent-to-Own Financing Solutions and Services

                       

         

Warrants (42 equivalent units; Expiration—November 7, 2024; Strike price—$0.01 per unit)

        $ 259   $ 940  

         

Preferred Member Units (186 units)(8)

          1,200     3,940  

                      1,459     4,880  

                               

Barfly Ventures, LLC(10)

  August 31, 2015  

Casual Restaurant Group

                       

         

12% Secured Debt (Maturity—August 31, 2020)

    9,817     9,669     9,808  

         

Options (2 equivalent units)

          397     730  

         

Warrant (1 equivalent unit; Expiration—August 31, 2025; Strike price—$1.00 per unit)

          473     410  

                      10,539     10,948  

                               

BBB Tank Services, LLC

  April 8, 2016  

Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.10%, Secured Debt (Maturity—April 8, 2018)(9)(17)

    650     633     633  

         

17% Secured Debt (Maturity—April 8, 2021)

    4,000     3,898     3,898  

         

Member Units (800,000 units)

          800     470  

                      5,331     5,001  

                               

Boccella Precast Products LLC

  June 30, 2017  

Manufacturer of Precast Hollow Core Concrete

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.34%, Secured Debt (Maturity—June 30, 2022)(9)

    16,284     16,143     16,284  

         

Member Units (2,160,000 units)(8)

          2,160     4,960  

                      18,303     21,244  

                               

Boss Industries, LLC

  July 1, 2014  

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

         

Preferred Member Units (2,242 units)(8)

          2,203     5,830  

                               

Bridge Capital Solutions Corporation

  April 18, 2012  

Financial Services and Cash Flow Solutions Provider

                       

         

13% Secured Debt (Maturity—July 25, 2021)

    7,500     6,130     6,130  

         

Warrants (82 equivalent shares; Expiration—July 25, 2026; Strike price—$0.01 per share)

          2,132     4,020  

         

13% Secured Debt (Mercury Service Group, LLC) (Maturity—July 25, 2021)

    1,000     994     1,000  

         

Preferred Member Units (Mercury Service Group, LLC) (17,742 units)(8)

          1,000     1,000  

                      10,256     12,150  

                               

12


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Buca C, LLC

  June 30, 2015  

Casual Restaurant Group

                       

         

LIBOR Plus 9.25% (Floor 1.00%), Current Coupon 11.36%, Secured Debt (Maturity—June 30, 2020)(9)

    19,404     19,327     19,327  

         

Preferred Member Units (6 units; 6% cumulative)(8)(19)

          4,365     4,365  

                      23,692     23,692  

                               

CAI Software LLC

  October 10, 2014  

Provider of Specialized Enterprise Resource Planning Software

                       

         

12% Secured Debt (Maturity—October 10, 2019)

    3,283     3,272     3,283  

         

Member Units (65,356 units)(8)

          654     2,620  

                      3,926     5,903  

                               

Chandler Signs Holdings, LLC(10)

  January 4, 2016  

Sign Manufacturer

                       

         

12% Current / 1% PIK Secured Deb (Maturity—July 4, 2021)(19)

    4,534     4,508     4,534  

         

Class A Units (1,500,000 units)

          1,500     2,260  

                      6,008     6,794  

                               

Charlotte Russe, Inc(11)

  May 28, 2013  

Fast-Fashion Retailer to Young Women

                       

         

8.50% Secured Debt (Maturity—February 2, 2023)

    7,952     7,952     7,065  

         

Common Stock (19,041 shares)

          3,141     3,141  

                      11,093     10,206  

                               

Condit Exhibits, LLC

  July 1, 2008  

Tradeshow Exhibits / Custom Displays Provider

                       

         

Member Units (3,936 units)(8)

          100     1,950  

                               

Congruent Credit Opportunities Funds(12)(13)

  January 24, 2012  

Investment Partnership

                       

         

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)

          5,210     855  

         

LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%)(8)

          20,428     21,181  

                      25,638     22,036  

                               

Dos Rios Partners(12)(13)

  April 25, 2013  

Investment Partnership

                       

         

LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)

          5,846     7,256  

         

LP Interests (Dos Rios Partners—A, LP) (Fully diluted 6.4%)

          1,856     2,304  

                      7,702     9,560  

                               

East Teak Fine Hardwoods, Inc.

  April 13, 2006  

Distributor of Hardwood Products

                       

         

Common Stock (6,250 shares)(8)

          480     560  

                               

EIG Fund Investments(12)(13)

  November 6, 2015  

Investment Partnership

                       

         

LP Interests (EIG Global Private Debt Fund—A, L.P.) (Fully diluted 11.1%)(8)

          489     441  

                               

Freeport Financial Funds(12)(13)

  June 13, 2013  

Investment Partnership

                       

         

LP Interests (Freeport Financial SBIC Fund LP) (Fully diluted 9.3%)(8)

          5,974     5,861  

         

LP Interests (Freeport First Lien Loan Fund III LP) (Fully diluted 6.0%)(8)

          8,558     8,383  

                      14,532     14,244  

                               

13


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Gault Financial, LLC (RMB Capital, LLC)

  November 21, 2011  

Purchases and Manages Collection of Healthcare and other Business Receivables

                       

         

8% Secured Debt (Maturity—January 1, 2019)

    12,033     12,033     11,310  

         

Warrants (29,032 equivalent units; Expiration—February 9, 2022; Strike price—$0.01 per unit)

          400      

                      12,433     11,310  

                               

Harris Preston Fund Investments(12)(13)

  August 9, 2017  

Investment Partnership

                       

         

LP Interests (HPEP 3, L.P.) (Fully diluted 8.2%)

          1,733     1,733  

                               

Hawk Ridge Systems, LLC(13)

  December 2, 2016  

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

         

10.5% Secured Debt (Maturity—December 2, 2021)

    14,300     14,194     14,300  

         

Preferred Member Units (226 units)(8)

          2,850     7,010  

         

Preferred Member Units (HRS Services, ULC) (226 units)

          150     370  

                      17,194     21,680  

                               

Houston Plating and Coatings, LLC

  January 8, 2003  

Provider of Plating and Industrial Coating Services

                       

         

8% Unsecured Convertible Debt (Maturity—May 1, 2022)

    3,000     3,000     3,480  

         

Member Units (318,462 units)(8)

          2,236     7,490  

                      5,236     10,970  

                               

I-45 SLF LLC(12)(13)

  October 20, 2015  

Investment Partnership

                       

         

Member Units (Fully diluted 20.0%; 24.4% profits interest)(8)

          16,200     16,622  

                               

L.F. Manufacturing Holdings, LLC(10)

  December 23, 2013  

Manufacturer of Fiberglass Products

                       

         

Member Units (2,179,001 units)

          2,019     2,060  

                               

Meisler Operating LLC

  June 7, 2017  

Provider of Short-term Trailer and Container Rental

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.84%, Secured Debt (Maturity—June 7, 2022)(9)

    20,480     20,302     20,302  

         

Member Units (Milton Meisler Holdings LLC) (48,555 units)

          4,855     5,571  

                      25,157     25,873  

                               

OnAsset Intelligence, Inc.

  April 18, 2011  

Provider of Transportation Monitoring / Tracking Products and Services

                       

         

12% PIK Secured Debt (Maturity—June 30, 2021)(19)

    5,572     5,572     5,572  

         

10% PIK Unsecured Debt (Maturity—June 30, 2021)(19)

    51     51     51  

         

Preferred Stock (912 shares)

          1,981      

         

Warrants (5,333 equivalent shares; Expiration—April 18, 2021; Strike price—$0.01 per share)

          1,919      

                      9,523     5,623  

                               

14


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

OPI International Ltd.(13)

  November 30, 2010  

Provider of Man Camp and Industrial Storage Services

                       

         

Common Stock (20,766,317 shares)

          1,371      

                               

PCI Holding Company, Inc.

  December 18, 2012  

Manufacturer of Industrial Gas Generating Systems

                       

         

12% Current / 3% PIK Secured Debt (Maturity—March 31, 2019)(19)

    12,153     12,130     12,130  

         

Preferred Stock (1,740,000 shares) (non-voting)

          1,740     3,180  

         

Preferred Stock (1,500,000 shares)

          3,927      

                      17,797     15,310  

                               

Rocaceia, LLC (Quality Lease and Rental Holdings, LLC)

  January 8, 2013  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

12% Secured Debt (Maturity—January 8, 2018)(14)(15)

    30,785     30,281     250  

         

Preferred Member Units (250 units)

          2,500      

                      32,781     250  

                               

Salado Acquisition, LLC(10)

  June 27, 2016  

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

         

Class A Preferred Units (2,000,000 units)(8)

          2,000     1,360  

                               

SI East, LLC

  August 31, 2018  

Rigid Industrial Packaging Manufacturing

                       

         

10.25% Current, Secured Debt (Maturity—August 31, 2023)

    35,250     34,869     34,869  

         

Preferred Member Units (157 units)

          6,000     6,000  

                      40,869     40,869  

                               

Slick Innovations, LLC

  September 13, 2018  

Text Message Marketing Platform

                       

         

14% Current, Secured Debt (Maturity—September 13, 2023)

    7,200     6,950     6,950  

         

Member Units (70,000 units)

          700     700  

         

Warrants (18,084 equivalent units; Expiration—September 13, 2028; Strike price—$0.01 per unit)

          181     181  

                      7,831     7,831  

                               

UniTek Global Services, Inc.(11)

  April 15, 2011  

Provider of Outsourced Infrastructure Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.89%, Secured Debt (Maturity—August 20, 2024)(9)

    2,500     2,476     2,476  

         

Preferred Stock (1,731,044 shares; 19% cumulative)(8)(19)

          1,772     1,772  

         

Preferred Stock (2,596,567 shares; 19% cumulative)(8)(19)

          3,290     3,290  

         

Preferred Stock (4,935,377 shares; 13.5% cumulative)(8)(19)

          8,140     8,140  

         

Common Stock (1,075,992 shares)

              3,290  

                      15,678     18,968  

                               

15


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Universal Wellhead Services Holdings, LLC(10)

  October 30, 2014  

Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry

                       

         

Preferred Member Units (UWS Investments, LLC) (716,949 units; 14% cumulative)(8)(19)

          777     920  

         

Member Units (UWS Investments, LLC) (4,000,000 units)

          4,000     2,211  

                      4,777     3,131  

                               

Volusion, LLC

  January 26, 2015  

Provider of Online Software-as-a-Service eCommerce Solutions

                       

         

11.5% Secured Debt (Maturity—January 26, 2020)

    19,272     18,227     18,227  

         

8% Unsecured Convertible Debt (Maturity—November 16, 2023)

    297     297     297  

         

Preferred Member Units (4,876,670 units)

          14,000     14,000  

         

Warrants (1,831,355 equivalent units; Expiration—January 26, 2025; Strike price—$0.01 per unit)

          2,576     1,891  

                      35,100     34,415  

Subtotal Affiliate Investments (24.8% of net assets at fair value)

  $ 389,450   $ 373,444  

16


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Non-Control/Non-Affiliate Investments(7)

                   

                               

AAC Holdings, Inc.(11)

  June 30, 2017  

Substance Abuse Treatment Service Provider

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.09%, Secured Debt (Maturity—June 30, 2023)(9)

  $ 14,594   $ 14,326   $ 14,813  

                               

Adams Publishing Group, LLC(10)

  November 19, 2015  

Local Newspaper Operator

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.84%, Secured Debt (Maturity—July 3, 2023)(9)

    8,321     8,160     8,160  

         

Prime Plus 4.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—July 3, 2023)(9)

    2,950     2,855     2,855  

                      11,015     11,015  

                               

ADS Tactical, Inc.(10)

  March 7, 2017  

Value-Added Logistics and Supply Chain Provider to the Defense Industry

                       

         

LIBOR Plus 6.25% (Floor 0.75%), Current Coupon 8.49%, Secured Debt (Maturity—July 26, 2023)(9)

    16,458     16,296     16,296  

                               

Aethon United BR LP(10)

  September 8, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.88%, Secured Debt (Maturity—September 8, 2023)(9)

    4,063     4,009     4,009  

                               

Allen Media, LLC.(11)

  September 18, 2018  

Operator of Cable Television Networks

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.81%, Secured Debt (Maturity—August 30, 2023)(9)

    17,143     16,647     16,800  

                               

Allflex Holdings III Inc.(11)

  July 18, 2013  

Manufacturer of Livestock Identification Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.35%, Secured Debt (Maturity—July 19, 2021)(9)

    13,120     13,072     13,198  

                               

American Nuts, LLC(10)

  April 10, 2018  

Roaster, Mixer and Packager of Bulk Nuts and Seeds

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.34%, Secured Debt (Maturity—October 10, 2018)(9)

    422     414     414  

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.34%, Secured Debt (Maturity—April 10, 2023)(9)

    11,222     11,019     11,019  

                      11,433     11,433  

                               

American Scaffold Holdings, Inc.(10)

  June 14, 2016  

Marine Scaffolding Service Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.89%, Secured Debt (Maturity—March 31, 2022)(9)

    6,750     6,681     6,716  

                               

17


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

American Teleconferencing Services, Ltd.(11)

  May 19, 2016  

Provider of Audio Conferencing and Video Collaboration Solutions

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.84%, Secured Debt (Maturity—December 8, 2021)(9)

    15,158     14,633     14,674  

                               

Apex Linen Service, Inc.

  October 30, 2015  

Industrial Launderers

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.10%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

         

16% Secured Debt (Maturity—October 30, 2022)

    14,416     14,355     14,355  

                      16,755     16,755  

                               

APTIM Corp.(11)

  August 17, 2018  

Engineering, Construction & Procurement

                       

         

7.75% Secured Debt (Maturity—June 15, 2025)

    6,952     6,148     5,979  

                               

Arcus Hunting LLC(10)

  January 6, 2015  

Manufacturer of Bowhunting and Archery Products and Accessories

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.34%, Secured Debt (Maturity—November 13, 2019)(9)

    17,117     17,059     17,117  

                               

Arise Holdings, Inc.(10)

  March 12, 2018  

Tech-Enabled Business Process Outsourcing

                       

         

Preferred Stock (1,000,000 shares)

          1,000     1,264  

                               

ASC Ortho Management Company, LLC(10)

  August 31, 2018  

Provider of Orthopedic Services

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.81%, Secured Debt (Maturity—August 31, 2023)(9)

    4,660     4,553     4,553  

         

13.25% PIK Secured Debt (Maturity—December 1, 2023)(19)

    1,571     1,533     1,533  

                      6,086     6,086  

                               

ATI Investment Sub, Inc.(11)

  July 11, 2016  

Manufacturer of Solar Tracking Systems

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.49%, Secured Debt (Maturity—June 22, 2021)(9)

    5,624     5,544     5,556  

                               

ATX Networks Corp.(11)(13)(21)

  June 30, 2015  

Provider of Radio Frequency Management Equipment

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.39% / 1.00% PIK, Current Coupon Plus PIK 9.39%, Secured Debt (Maturity—June 11, 2021)(9)(19)

    14,235     13,921     13,523  

                               

Berry Aviation, Inc.(10)

  July 6, 2018  

Charter Airline Services

                       

         

10.50% Current / 1.5% PIK, Secured Debt (Maturity—January 6, 2024)(19)

    4,468     4,425     4,425  

         

Preferred Member Units (Berry Acquisition, LLC) (1,548,387 units; 8% cumulative)(8)(19)

          1,578     1,578  

                      6,003     6,003  

                               

18


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

BigName Commerce, LLC(10)

  May 11, 2017  

Provider of Envelopes and Complimentary Stationery Products

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.59%, Secured Debt (Maturity—May 11, 2022)(9)

    2,493     2,470     2,470  

                               

Binswanger Enterprises, LLC(10)

  March 10, 2017  

Glass Repair and Installation Service Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity—March 9, 2022)(9)

    14,465     14,252     14,465  

         

Member Units (1,050,000 units)

          1,050     1,330  

                      15,302     15,795  

                               

Bluestem Brands, Inc.(11)

  December 19, 2013  

Multi-Channel Retailer of General Merchandise

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.74%, Secured Debt (Maturity—November 6, 2020)(9)

    11,563     11,435     7,718  

                               

Brainworks Software, LLC(10)

  August 12, 2014  

Advertising Sales and Newspaper Circulation Software

                       

         

Prime Plus 9.25% (Floor 3.25%), Current Coupon 14.50%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,718     6,585  

                               

Brightwood Capital Fund Investments(12)(13)

  July 21, 2014  

Investment Partnership

                       

         

LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.6%)(8)

          12,000     10,551  

         

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.6%)(8)

          1,500     1,563  

                      13,500     12,114  

                               

Brundage-Bone Concrete Pumping, Inc.(11)

  August 18, 2014  

Construction Services Provider

                       

         

10.375% Secured Debt (Maturity—September 1, 2023)

    3,000     2,988     3,187  

                               

BW NHHC Holdco Inc.(11)

  May 30, 2018  

Full-Continuum Provider of Home Health Services

                       

         

LIBOR Plus 5.00%, Current Coupon 7.16%, Secured Debt (Maturity—May 15, 2025)

    7,500     7,392     7,373  

                               

Cadence Aerospace LLC(10)

  November 14, 2017  

Aerostructure Manufacturing

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.82%, Secured Debt (Maturity—November 14, 2023)(9)

    19,568     19,391     19,528  

                               

California Pizza Kitchen, Inc.(11)

  August 29, 2016  

Casual Restaurant Group

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.39%, Secured Debt (Maturity—August 23, 2022)(9)

    12,805     12,770     12,484  

                               

19


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Central Security Group, Inc.(11)

  December 4, 2017  

Security Alarm Monitoring Service Provider

                       

         

LIBOR Plus 5.63% (Floor 1.00%), Current Coupon 7.87%, Secured Debt (Maturity—October 6, 2021)(9)

    7,920     7,903     7,970  

                               

Cenveo Corporation(11)

  September 4, 2015  

Provider of Digital Marketing Agency Services

                       

         

Libor Plus 9.00% (Floor 1.00%), Current Coupon 11.12%, Secured Debt (Maturity—June 7, 2023)(9)

    6,370     6,118     6,243  

         

Common Stock (177,130 shares)

          5,309     5,535  

                      11,427     11,778  

                               

Clarius BIGS, LLC(10)

  September 23, 2014  

Prints & Advertising Film Financing

                       

         

15% PIK Secured Debt (Maturity—January 5, 2015)(14)(17)

    2,924     2,924     82  

                               

Clickbooth.com, LLC(10)

  December 5, 2017  

Provider of Digital Advertising Performance Marketing Solutions

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.84%, Secured Debt (Maturity—December 5, 2022)(9)

    2,944     2,892     2,892  

                               

Construction Supply Investments, LLC(10)

  December 29, 2016  

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—June 30, 2023)(9)

    10,583     10,535     10,556  

         

Member Units (42,207 units)

          4,221     4,290  

                      14,756     14,846  

                               

CTVSH, PLLC(10)

  August 3, 2017  

Emergency Care and Specialty Service Animal Hospital

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity—August 3, 2022)(9)

    11,400     11,307     11,307  

                               

Darr Equipment LP(10)

  April 15, 2014  

Heavy Equipment Dealer

                       

         

11.5% Current / 1% PIK Secured Debt (Maturity—June 22, 2023)(19)

    7,284     7,284     7,284  

         

Warrants (915,734 equivalent units; Expiration—December 23, 2023; Strike price—$1.50 per unit)

          474     10  

                      7,758     7,294  

                               

Digital River, Inc.(11)

  February 24, 2015  

Provider of Outsourced e-Commerce Solutions and Services

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.59%, Secured Debt (Maturity—February 12, 2021)(9)

    10,146     10,067     10,146  

                               

20


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

DTE Enterprises, LLC(10)

  April 13, 2018  

Industrial Powertrain Repair and Services

                       

         

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.84%, Secured Debt (Maturity—April 13, 2023)(9)

    13,242     12,985     12,985  

         

Class AA Preferred Member Units (non-voting)

          724     724  

         

Class A Preferred Member Units (776,316 units)(8)

          776     776  

                      14,485     14,485  

                               

Dynamic Communities, LLC(10)

  July 17, 2018  

Developer of Business Events and Online Community Groups

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.39%, Secured Debt (Maturity—July 17, 2023)(9)

    5,600     5,490     5,490  

                               

Elite SEM INC.(10)

  August 31, 2018  

Provider of Digital Marketing Agency Services

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.82%, Secured Debt (Maturity—February 1, 2022)(9)(23)

    6,875     6,741     6,741  

                               

EnCap Energy Fund Investments(12)(13)

  December 28, 2010  

Investment Partnership

                       

         

LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8)

          3,573     1,809  

         

LP Interests (EnCap Energy Capital Fund VIII Co- Investors, L.P.) (Fully diluted 0.4%)(8)

          2,072     1,122  

         

LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8)

          4,394     3,459  

         

LP Interests (EnCap Energy Capital Fund X, L.P.) (Fully diluted 0.1%)(8)

          7,488     7,551  

         

LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 0.8%)(8)

          5,881     4,400  

         

LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.2%)(8)

          5,311     5,012  

                      28,719     23,353  

                               

EPIC Y-Grade Services, LP(11)

  June 22, 2018  

NGL Transportation & Storage

                       

         

LIBOR Plus 5.50%, Current Coupon 7.74%, Secured Debt (Maturity—June 13, 2024)

    17,500     17,163     17,084  

                               

Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11)(13)

  May 5, 2014  

Technology-based Performance Support Solutions

                       

         

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 10.49%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,895     5,944  

                               

Extreme Reach, Inc.(11)

  March 31, 2015  

Integrated TV and Video Advertising Platform

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—February 7, 2020)(9)

    17,237     17,226     17,285  

                               

21


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Felix Investments Holdings II(10)

  August 9, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.84%, Secured Debt (Maturity—August 9, 2022)(9)

    3,333     3,276     3,276  

                               

Flavors Holdings Inc.(11)

  October 15, 2014  

Global Provider of Flavoring and Sweetening Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.14%, Secured Debt (Maturity—April 3, 2020)(9)

    12,345     12,045     11,759  

                               

GI KBS Merger Sub LLC(11)

  November 10, 2014  

Outsourced Janitorial Services to Retail/Grocery Customers

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.32%, Secured Debt (Maturity—October 29, 2021)(9)

    9,218     9,157     9,253  

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.84%, Secured Debt (Maturity—April 29, 2022)(9)

    3,915     3,789     3,969  

                      12,946     13,222  

                               

GoWireless Holdings, Inc.(11)

  December 31, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity—December 22, 2024)(9)

    17,550     17,388     17,199  

                               

Grupo Hima San Pablo, Inc.(11)

  March 7, 2013  

Tertiary Care Hospitals

                       

         

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 9.34%, Secured Debt (Maturity—October 15, 2018)(9)

    4,750     4,750     3,745  

         

13.75% Secured Debt (Maturity—October 15, 2018)

    2,055     2,040     226  

                      6,790     3,971  

                               

Hojeij Branded Foods, LLC(10)

  July 28, 2015  

Multi-Airport, Multi- Concept Restaurant Operator

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.35%, Secured Debt (Maturity—July 20, 2022)(9)

    12,382     12,280     12,382  

                               

Hoover Group, Inc.(10)(13)

  October 21, 2016  

Provider of Storage Tanks and Related Products to the Energy and Petrochemical Markets

                       

         

LIBOR Plus 6.00%, Current Coupon 8.31%, Secured Debt (Maturity—January 28, 2020)

    5,388     4,838     5,289  

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.56%, Secured Debt (Maturity—January 28, 2021)(9)

    8,395     8,033     8,311  

                      12,871     13,600  

                               

Hostway Corporation(11)

  December 27, 2013  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 5.25% (Floor 1.25%), Current Coupon 7.59% / 0.50% PIK, Current Coupon Plus PIK 8.09%, Secured Debt (Maturity—December 13, 2019)(9)(19)

    30,695     30,151     30,004  

                               

22


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Hunter Defense Technologies, Inc.(10)

  March 29, 2018  

Provider of Military and Commercial Shelters and Systems

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.39%, Secured Debt (Maturity—March 29, 2023)(9)

    29,584     29,042     29,288  

                               

Hydrofarm Holdings LLC(10)

  May 18, 2017  

Wholesaler of Horticultural Products

                       

         

LIBOR Plus 10.00%, Current Coupon 3.62% / 8.45% PIK, Current Coupon Plus PIK 12.07% Secured Debt (Maturity—May 12, 2022)(19)

    7,078     6,976     6,334  

                               

iEnergizer Limited(11)(13)(21)

  May 8, 2013  

Provider of Business Outsourcing Solutions

                       

         

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (Maturity—May 1, 2019)(9)

    15,081     14,985     15,100  

                               

Implus Footcare, LLC(10)

  June 1, 2017  

Provider of Footwear and Related Accessories

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.14%, Secured Debt (Maturity—April 30, 2021)(9)

    18,870     18,664     18,791  

                               

Industrial Services Acquisition, LLC(10)

  June 17, 2016  

Industrial Cleaning Services

                       

         

6% Current / 7% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    4,799     4,733     4,586  

         

Preferred Member Units (Industrial Services Investments, LLC) (144 units; 10% cumulative)(8)(19)

          92     92  

         

Member Units (Industrial Services Investments, LLC) (900 units)

          900     210  

                      5,725     4,888  

                               

Inn of the Mountain Gods Resort and Casino(11)

  October 30, 2013  

Hotel & Casino Owner & Operator

                       

         

9.25% Secured Debt (Maturity—November 30, 2020)

    7,832     7,438     7,539  

                               

Intermedia Holdings, Inc.(11)

  August 3, 2018  

Unified Communications as a Service

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.36%, Secured Debt (Maturity—July 19, 2025)(9)

    11,571     11,458     11,626  

                               

irth Solutions, LLC

  December 29, 2010  

Provider of Damage Prevention Information Technology Services

                       

         

Member Units (27,893 units)

          1,441     2,580  

                               

Isagenix International, LLC(11)

  June 21, 2018  

Direct Marketer of Health & Wellness Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.14%, Secured Debt (Maturity—June 14, 2025)(9)

    6,348     6,286     6,364  

                               

JAB Wireless, Inc.(10)

  May 2, 2018  

Fixed Wireless Broadband Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.12%, Secured Debt (Maturity—May 2, 2023)(9)

    14,925     14,785     14,785  

                               

23


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Jacent Strategic Merchandising, LLC(10)

  September 16, 2015  

General Merchandise Distribution

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.82%, Secured Debt (Maturity—September 16, 2020)(9)

    10,779     10,739     10,779  

                               

Jackmont Hospitality, Inc.(10)

  May 26, 2015  

Franchisee of Casual Dining Restaurants

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.99%, Secured Debt (Maturity—May 26, 2021)(9)

    4,217     4,209     4,217  

                               

Jacuzzi Brands LLC(11)

  June 30, 2017  

Manufacturer of Bath and Spa Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.24%, Secured Debt (Maturity—June 28, 2023)(9)

    3,875     3,810     3,914  

                               

Joerns Healthcare, LLC(11)

  April 3, 2013  

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.31% Secured Debt (Maturity—May 9, 2020)(9)

    13,387     13,325     12,450  

                               

Larchmont Resources, LLC(11)

  August 13, 2013  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.32%, PIK Secured Debt (Maturity—August 7, 2020)(9)(19)

    2,575     2,575     2,550  

         

Member Units (Larchmont Intermediate Holdco, LLC) (2,828 units)

          353     778  

                      2,928     3,328  

                               

LKCM Headwater Investments I, L.P.(12)(13)

  January 25, 2013  

Investment Partnership

                       

         

LP Interests (Fully diluted 2.3%)(8)

          1,780     3,501  

                               

Logix Acquisition Company, LLC(10)

  June 24, 2016  

Competitive Local Exchange Carrier

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.99%, Secured Debt (Maturity—December 22, 2024)(9)

    9,654     9,462     9,726  

                               

Looking Glass Investments, LLC(12)(13)

  July 1, 2015  

Specialty Consumer Finance

                       

         

Member Units (2.5 units)

          125     57  

         

Member Units (LGI Predictive Analytics LLC) (190,712 units)

          61     45  

                      186     102  

                               

LSF9 Atlantis Holdings, LLC(11)

  May 17, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.12%, Secured Debt (Maturity—May 1, 2023)(9)

    9,836     9,816     9,529  

                               

Lulu's Fashion Lounge, LLC(10)

  August 31, 2017  

Fast Fashion E-Commerce Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.24%, Secured Debt (Maturity—August 28, 2022)(9)

    12,614     12,294     12,866  

                               

24


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

MHVC Acquisition Corp.(11)

  May 8, 2017  

Provider of differentiated information solutions, systems engineering, and analytics

                       

         

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 7.64%, Secured Debt (Maturity—April 29, 2024)(9)

    11,475     11,440     11,432  

                               

NBG Acquisition Inc(11)

  April 28, 2017  

Wholesaler of Home Décor Products

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 8.09%, Secured Debt (Maturity—April 26, 2024)(9)

    4,319     4,260     4,362  

                               

New Era Technology, Inc.(10)

  June 30, 2018  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity—June 22, 2023)(9)

    6,231     6,112     6,112  

                               

New Media Holdings II LLC(11)(13)

  June 10, 2014  

Local Newspaper Operator

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.49%, Secured Debt (Maturity—July 14, 2022)(9)

    19,864     19,524     20,044  

                               

NNE Partners, LLC(10)

  March 2, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 8.00%, Current Coupon 10.32%, Secured Debt (Maturity—March 2, 2022)

    18,375     18,229     18,229  

                               

North American Lifting Holdings, Inc.(11)

  February 26, 2015  

Crane Service Provider

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.89%, Secured Debt (Maturity—November 27, 2020)(9)

    7,705     7,066     7,518  

                               

Novetta Solutions, LLC(11)

  June 21, 2017  

Provider of Advanced Analytics Solutions for Defense Agencies

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—October 17, 2022)(9)

    15,518     15,109     15,072  

                               

NTM Acquisition Corp.(11)

  July 12, 2016  

Provider of B2B Travel Information Content

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.49%, Secured Debt (Maturity—June 7, 2022)(9)

    4,481     4,452     4,486  

                               

Ospemifene Royalty Sub LLC (QuatRx)(10)

  July 8, 2013  

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

         

11.5% Secured Debt (Maturity—November 15, 2026)(14)

    4,998     4,998     960  

                               

Permian Holdco 2, Inc.(11)

  February 12, 2013  

Storage Tank Manufacturer

                       

         

14% PIK Unsecured Debt (Maturity—October 15, 2021)(19)

    382     382     382  

         

Preferred Stock (Permian Holdco 1, Inc.) (154,558 units)

          799     920  

                      1,181     1,302  

                               

Pernix Therapeutics Holdings, Inc.(10)

  August 18, 2014  

Pharmaceutical Royalty

                       

         

12% Secured Debt (Maturity—August 1, 2020)

    3,031     3,031     2,037  

                               

25


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Pier 1 Imports, Inc.(11)

  February 20, 2018  

Decorative Home Furnishings Retailer

                       

         

LIBOR Plus 3.50% (Floor 1.00%), Current Coupon 5.89%, Secured Debt (Maturity—April 30, 2021)(9)

    9,761     9,121     8,004  

                               

Point.360(10)

  July 8, 2015  

Fully Integrated Provider of Digital Media Services

                       

         

Warrants (65,463 equivalent shares; Expiration—July 7, 2020; Strike price—$0.75 per share)

          69      

         

Common Stock (163,658 shares)

          273     5  

                      342     5  

                               

PricewaterhouseCoopers Public Sector LLP(11)

  May 24, 2018  

Provider of Consulting Services to Governments

                       

         

LIBOR Plus 7.50%, Current Coupon 9.74%, Secured Debt (Maturity—May 1, 2026)

    8,000     7,961     8,040  

                               

Prowler Acquisition Corp.(11)

  February 11, 2014  

Specialty Distributor to the Energy Sector

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.79%, Secured Debt (Maturity—January 28, 2020)(9)

    20,081     18,979     19,981  

                               

PT Network, LLC(10)

  November 1, 2013  

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.84%, Secured Debt (Maturity—November 30, 2021)(9)

    8,732     8,732     8,732  

                               

Research Now Group, Inc. and Survey Sampling International, LLC(11)

  December 31, 2017  

Provider of Outsourced Online Surveying

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.74%, Secured Debt (Maturity—December 20, 2024)(9)

    13,399     12,783     13,482  

                               

Resolute Industrial, LLC(10)

  July 26, 2017  

HVAC Equipment Rental and Remanufacturing

                       

         

Member Units (601 units)

          750     920  

                               

RGL Reservoir Operations Inc.(11)(13)(21)

  August 25, 2014  

Oil & Gas Equipment and Services

                       

         

1% Current / 9% PIK Secured Debt (Maturity—December 21, 2024)(19)

    721     407     360  

                               

RM Bidder, LLC(10)

  November 12, 2015  

Scripted and Unscripted TV and Digital Programming Provider

                       

         

Warrants (327,532 equivalent units; Expiration—October 20, 2025; Strike price—$14.28 per unit)

          425      

         

Member Units (2,779 units)

          46     17  

                      471     17  

                               

SAFETY Investment Holdings, LLC

  April 29, 2016  

Provider of Intelligent Driver Record Monitoring Software and Services

                       

         

Member Units (2,000,000 units)

          2,000     1,770  

                               

26


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Salient Partners L.P.(11)

  June 25, 2015  

Provider of Asset Management Services

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.99%, Secured Debt (Maturity—June 9, 2021)(9)

    7,500     7,464     7,464  

                               

SiTV, LLC(11)

  September 26, 2017  

Cable Networks Operator

                       

         

10.375% Secured Debt (Maturity—July 1, 2019)

    10,429     7,146     6,049  

                               

SMART Modular Technologies, Inc.(10)(13)

  August 18, 2017  

Provider of Specialty Memory Solutions

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.60%, Secured Debt (Maturity—August 9, 2022)(9)

    19,000     18,777     19,095  

                               

Sorenson Communications, Inc.(11)

  June 7, 2016  

Manufacturer of Communication Products for Hearing Impaired

                       

         

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.14%, Secured Debt (Maturity—April 30, 2020)(9)

    13,131     13,087     13,202  

                               

Staples Canada ULC(10)(13)(21)

  September 14, 2017  

Office Supplies Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.75%, Secured Debt (Maturity—September 12, 2023)(9)(22)

    19,468     19,133     18,154  

                               

Strike, LLC(11)

  December 12, 2016  

Pipeline Construction and Maintenance Services

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.59%, Secured Debt (Maturity—November 30, 2022)(9)

    9,125     8,911     9,262  

                               

Synagro Infrastructure Company, Inc(11)

  August 29, 2013  

Waste Management Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.74%, Secured Debt (Maturity—August 22, 2020)(9)

    11,662     11,333     10,204  

                               

TE Holdings, LLC(11)

  December 5, 2013  

Oil & Gas Exploration & Production

                       

         

Member Units (97,048 units)

          970     102  

                               

Tectonic Holdings, LLC

  May 15, 2017  

Financial Services Organization

                       

         

Member Units (200,000 units)(8)

          2,000     2,370  

                               

TeleGuam Holdings, LLC(11)

  June 26, 2013  

Cable and Telecom Services Provider

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,615     7,808  

                               

TGP Holdings III LLC (11)

  September 30, 2017  

Outdoor Cooking & Accessories

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.89%, Secured Debt (Maturity—September 25, 2025)(9)

    5,500     5,431     5,466  

                               

The Pasha Group(11)

  February 2, 2018  

Diversified Logistics and Transportation Provided

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.70%, Secured Debt (Maturity—January 26, 2023)(9)

    11,328     11,020     11,491  

                               

27


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

TMC Merger Sub Corp.(11)

  December 22, 2016  

Refractory & Maintenance Services Provider

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—October 31, 2022)(9)(24)

    17,320     17,204     17,449  

                               

TOMS Shoes, LLC(11)

  November 13, 2014  

Global Designer, Distributor, and Retailer of Casual Footwear

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.81%, Secured Debt (Maturity—October 30, 2020)(9)

    4,838     4,637     3,855  

                               

Turning Point Brands, Inc.(10)(13)

  February 17, 2017  

Marketer/Distributor of Tobacco Products

                       

         

LIBOR Plus 7.00%, Current Coupon 9.15%, Secured Debt (Maturity—March 7, 2024)

    8,500     8,421     8,670  

                               

TVG-I-E CMN ACQUISITION, LLC(10)

  November 3, 2016  

Organic Lead Generation for Online Postsecondary Schools

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.49%, Secured Debt (Maturity—November 3, 2021)(9)

    16,024     15,761     16,024  

                               

U.S. TelePacific Corp.(11)

  September 14, 2016  

Provider of Communications and Managed Services

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.39%, Secured Debt (Maturity—May 2, 2023)(9)

    18,491     18,337     18,237  

                               

VIP Cinema Holdings, Inc.(11)

  March 9, 2017  

Supplier of Luxury Seating to the Cinema Industry

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—March 1, 2023)(9)

    7,400     7,371     7,451  

                               

Vistar Media, Inc.(10)

  February 17, 2017  

Operator of Digital Out-of-Home Advertising Platform

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.39%, Secured Debt (Maturity—February 16, 2022)(9)

    3,263     3,034     3,088  

         

Warrants (70,207 equivalent shares; Expiration—February 17, 2027; Strike price—$0.01 per share)

          331     790  

                      3,365     3,878  

                               

Wireless Vision Holdings, LLC(10)

  September 29, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 10.99%, Secured Debt (Maturity—September 29, 2022)(9)(28)

    12,835     12,597     12,597  

                               

YS Garments, LLC(11)

  August 22, 2018  

Designer and Provider of Branded Activewear

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.17% Secured Debt (Maturity—August 9, 2024)(9)

    15,000     14,852     14,850  

                               

28


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(26)
  Business Description
  Type of Investment(2)(3)(25)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Zilliant Incorporated

  June 15, 2012  

Price Optimization and Margin Management Solutions

                       

         

Preferred Stock (186,777 shares)

          154     260  

         

Warrants (952,500 equivalent shares; Expiration—June 15, 2022; Strike price—$0.001 per share)

          1,071     1,190  

                      1,225     1,450  

Subtotal Non-Control/Non-Affiliate Investments (72.2% of net assets at fair value)

  $ 1,105,048   $ 1,086,301  

Total Portfolio Investments, September 30, 2018

  $ 2,211,718   $ 2,426,873  

(1)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note B for a description of Lower Middle Market portfolio investments. All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(2)
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

(3)
See Note C for a summary of geographic location of portfolio companies.

(4)
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.

(5)
Control investments are defined by the Investment Company Act of 1940, as amended ("1940 Act") as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained.

(6)
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as Control investments.

(7)
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at September 30, 2018. As noted in this schedule, 67% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.25%, with a weighted-average LIBOR floor of approximately 1.04%.

(10)
Private Loan portfolio investment. See Note B for a description of Private Loan portfolio investments.

(11)
Middle Market portfolio investment. See Note B for a description of Middle Market portfolio investments.

(12)
Other Portfolio investment. See Note B for a description of Other Portfolio investments.

(13)
Investment is not a qualifying asset as defined under Section 55 (a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

(14)
Non-accrual and non-income producing investment.

(15)
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investments in this portfolio company will not be finally determined until such process is complete. As noted in footnote(14), our debt investments in this portfolio company are on non-accrual status.

(16)
External Investment Manager. Investment is not encumbered as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(17)
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.

(18)
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further discussion.

(19)
PIK interest income and cumulative dividend income represent income not paid currently in cash.

(20)
All portfolio company headquarters are based in the United States, unless otherwise noted.

(21)
Portfolio company headquarters are located outside of the United States.

(22)
In connection with the Company's debt investment in Staples Canada ULC to help mitigate any potential adverse change in foreign exchange rates during the term of the Company's investment, the Company entered into a forward foreign currency contract with Cadence Bank to lend $23.6 million Canadian Dollars and receive $18.0 million U.S. Dollars with a settlement date of September 12, 2019. The unrealized depreciation on the forward foreign currency contract is $0.4 million as of September 30, 2018.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 6.00% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

29


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2018

(dollars in thousands)

(unaudited)

(24)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such lower rate.

(25)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities."

(26)
Investment date represents the date of initial investment in the portfolio company.

(27)
Investment has an unfunded commitment as of September 30, 2018 (see Note M). The fair value of the investment includes the impact of the fair value of any unfunded commitments

(28)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 8.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

30


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Control Investments(5)

     

 

 

 

                   

                               

Access Media Holdings, LLC(10)

  July 22, 2015  

Private Cable Operator

                       

         

5% Current / 5% PIK Secured Debt (Maturity—July 22, 2020)(19)

  $ 23,828   $ 23,828   $ 17,150  

         

Preferred Member Units (8,248,500 units)

          8,142      

         

Member Units (45 units)

          1      

                      31,971     17,150  

                               

ASC Interests, LLC

  August 1, 2013  

Recreational and Educational Shooting Facility

                       

         

11% Secured Debt (Maturity—July 31, 2018)

    1,800     1,795     1,795  

         

Member Units (1,500 units)

          1,500     1,530  

                      3,295     3,325  

                               

ATS Workholding, LLC(10)

  March 10, 2014  

Manufacturer of Machine Cutting Tools and Accessories

                       

         

5% Secured Debt (Maturity—November 16, 2021)

    3,726     3,249     3,249  

         

Preferred Member Units (3,725,862 units)

          3,726     3,726  

                      6,975     6,975  

                               

Bond-Coat, Inc.

  December 28, 2012  

Casing and Tubing Coating Services

                       

         

12% Secured Debt (Maturity—December 28, 2017)(17)

    11,596     11,596     11,596  

         

Common Stock (57,508 shares)

          6,350     9,370  

                      17,946     20,966  

                               

Café Brazil, LLC

  April 20, 2004  

Casual Restaurant Group

                       

         

Member Units (1,233 units)(8)

          1,742     4,900  

                               

CBT Nuggets, LLC

  June 1, 2006  

Produces and Sells IT Training Certification Videos

                       

         

Member Units (416 units)(8)

          1,300     89,560  

                               

Charps, LLC

  February 3, 2017  

Pipeline Maintenance and Construction

                       

         

12% Secured Debt (Maturity—February 3, 2022)

    18,400     18,225     18,225  

         

Preferred Member Units (1,600 units)

          400     650  

                      18,625     18,875  

                               

Clad-Rex Steel, LLC

  December 20, 2016  

Specialty Manufacturer of Vinyl-Clad Metal

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.86%, Secured Debt (Maturity—December 20, 2021)(9)

    13,280     13,168     13,280  

         

Member Units (717 units)(8)

          7,280     9,500  

         

10% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity—December 20, 2036)

    1,183     1,171     1,183  

         

Member Units (Clad-Rex Steel RE Investor, LLC) (800 units)

          210     280  

                      21,829     24,243  

                               

CMS Minerals Investments

  January 30, 2015  

Oil & Gas Exploration & Production

                       

         

Member Units (CMS Minerals II, LLC) (100 units)(8)

          3,440     2,392  

                               

Copper Trail Energy Fund I, LP(12)(13)

  July 17, 2017  

Investment Partnership

                       

         

LP Interests (Fully diluted 30.1%)

          2,500     2,500  

                               

31


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Datacom, LLC

  May 30, 2014  

Technology and Telecommunications Provider

                       

         

8% Secured Debt (Maturity—May 30, 2018)

    1,575     1,575     1,575  

         

5.25% Current / 5.25% PIK Secured Debt (Maturity—May 30, 2019)(19)

    12,349     12,311     11,110  

         

Class A Preferred Member Units

          1,181     730  

         

Class B Preferred Member Units (6,453 units)

          6,030      

                      21,097     13,415  

                               

Gamber-Johnson Holdings, LLC

  June 24, 2016  

Manufacturer of Ruggedized Computer Mounting Systems

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.36%, Secured Debt (Maturity—June 24, 2021)(9)

    23,400     23,213     23,400  

         

Member Units (8,619 units)(8)

          14,844     23,370  

                      38,057     46,770  

                               

Garreco, LLC

  July 15, 2013  

Manufacturer and Supplier of Dental Products

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.34%, Secured Debt (Maturity—March 31, 2020)(9)

    5,483     5,443     5,443  

         

Member Units (1,200 units)

          1,200     1,940  

                      6,643     7,383  

                               

GRT Rubber Technologies LLC

  December 19, 2014  

Manufacturer of Engineered Rubber Products

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity—December 19, 2019)(9)

    11,603     11,550     11,603  

         

Member Units (5,879 units)(8)

          13,065     21,970  

                      24,615     33,573  

                               

Gulf Manufacturing, LLC

  August 31, 2007  

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

         

Member Units (438 units)(8)

          2,980     10,060  

                               

Gulf Publishing Holdings, LLC

  April 29, 2016  

Energy Industry Focused Media and Publishing

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.86%, Secured Debt (Maturity—September 30, 2020)(9)

    80     80     80  

         

12.5% Secured Debt (Maturity—April 29, 2021)

    12,800     12,703     12,703  

         

Member Units (3,681 units)

          3,681     4,840  

                      16,464     17,623  

                               

Harborside Holdings, LLC

  March 20, 2017  

Real Estate Holding Company

                       

         

Member units (100 units)

          6,206     9,400  

                               

Harris Preston Fund Investments(12)(13)

  October 1, 2017  

Investment Partnership

                       

         

LP Interests (2717 MH, L.P.) (Fully diluted 49.3%)

          536     536  

                               

Harrison Hydra-Gen, Ltd.

  June 4, 2010  

Manufacturer of Hydraulic Generators

                       

         

Common Stock (107,456 shares)

          718     3,580  

                               

32


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

HW Temps LLC

  July 2, 2015  

Temporary Staffing Solutions

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.36%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,918     9,918  

         

Preferred Member Units (3,200 units)

          3,942     3,940  

                      13,860     13,858  

                               

Hydratec, Inc.

  November 1, 2007  

Designer and Installer of Micro-Irrigation Systems

                       

         

Common Stock (7,095 shares)(8)

          7,095     15,000  

                               

IDX Broker, LLC

  November 15, 2013  

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

         

11.5% Secured Debt (Maturity—November 15, 2020)

    15,250     15,116     15,250  

         

Preferred Member Units (5,607 units)(8)

          5,952     11,660  

                      21,068     26,910  

                               

Jensen Jewelers of Idaho, LLC

  November 14, 2006  

Retail Jewelry Store

                       

         

Prime Plus 6.75% (Floor 2.00%), Current Coupon 11.00%, Secured Debt (Maturity—November 14, 2019)(9)

    3,955     3,917     3,955  

         

Member Units (627 units)(8)

          811     5,100  

                      4,728     9,055  

                               

KBK Industries, LLC

  January 23, 2006  

Manufacturer of Specialty Oilfield and Industrial Products

                       

         

10% Secured Debt (Maturity—September 28, 2020)

    375     372     375  

         

12.5% Secured Debt (Maturity—September 28, 2020)

    5,900     5,867     5,900  

         

Member Units (325 units)(8)

          783     4,420  

                      7,022     10,695  

                               

Lamb Ventures, LLC

  May 30, 2008  

Aftermarket Automotive Services Chain

                       

         

11% Secured Debt (Maturity—July 1, 2022)

    9,942     9,890     9,942  

         

Preferred Equity (non-voting)

          400     400  

         

Member Units (742 units)(8)

          5,273     6,790  

         

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—March 31, 2027)

    432     428     432  

         

Member Units (Lamb's Real Estate Investment I, LLC) (1,000 units)(8)

          625     520  

                      16,616     18,084  

                               

Marine Shelters Holdings, LLC

  December 28, 2012  

Fabricator of Marine and Industrial Shelters

                       

         

12% PIK Secured Debt (Maturity—December 28, 2017)(14)

    3,131     3,078      

         

Preferred Member Units (3,810 units)

          5,352      

                      8,430      

                               

Market Force Information, LLC

  July 28, 2017  

Provider of Customer Experience Management Services

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.48%, Secured Debt (Maturity—July 28, 2022)(9)

    23,360     23,143     23,143  

         

Member Units (657,113 units)

          14,700     14,700  

                      37,843     37,843  

                               

33


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

MH Corbin Holding LLC

  August 31, 2015  

Manufacturer and Distributor of Traffic Safety Products

                       

         

13% Secured Debt (Maturity—August 31, 2020)

    12,600     12,526     12,526  

         

Preferred Member Units (4,000 shares)

          6,000     6,000  

                      18,526     18,526  

                               

Mid-Columbia Lumber Products, LLC

  December 18, 2006  

Manufacturer of Finger-Jointed Lumber Products

                       

         

10% Secured Debt (Maturity—January 15, 2020)

    1,398     1,390     1,390  

         

12% Secured Debt (Maturity—January 15, 2020)

    3,900     3,863     3,863  

         

Member Units (5,714 units)

          2,405     1,575  

         

9.5% Secured Debt (Mid-Columbia Real Estate, LLC) (Maturity—May 13, 2025)

    791     791     791  

         

Member Units (Mid-Columbia Real Estate, LLC) (500 units)(8)

          790     1,290  

                      9,239     8,909  

                               

MSC Adviser I, LLC(16)

  November 22, 2013  

Third Party Investment Advisory Services

                       

         

Member Units (Fully diluted 100.0%)(8)

              41,768  

                               

Mystic Logistics Holdings, LLC

  August 18, 2014  

Logistics and Distribution Services Provider for Large Volume Mailers

                       

         

12% Secured Debt (Maturity—August 15, 2019)

    7,768     7,696     7,696  

         

Common Stock (5,873 shares)

          2,720     6,820  

                      10,416     14,516  

                               

NAPCO Precast, LLC

  January 31, 2008  

Precast Concrete Manufacturing

                       

         

LIBOR Plus 8.50%, Current Coupon 9.98%, Secured Debt (Maturity—May 31, 2019)

    11,475     11,439     11,475  

         

Member Units (2,955 units)(8)

          2,975     11,670  

                      14,414     23,145  

                               

NRI Clinical Research, LLC

  September 8, 2011  

Clinical Research Service Provider

                       

         

LIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.00%, Secured Debt (Maturity—January 15, 2018)(9)

    400     400     400  

         

14% Secured Debt (Maturity—January 15, 2018)

    3,865     3,865     3,865  

         

Warrants (251,723 equivalent units; Expiration—September 8, 2021; Strike price—$0.01 per unit)

          252     500  

         

Member Units (1,454,167 units)

          765     2,500  

                      5,282     7,265  

                               

NRP Jones, LLC

  December 22, 2011  

Manufacturer of Hoses, Fittings and Assemblies

                       

         

12% Secured Debt (Maturity—March 20, 2023)

    6,376     6,376     6,376  

         

Member Units (65,208 units)(8)

          3,717     3,250  

                      10,093     9,626  

                               

34


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

NuStep, LLC

  January 31, 2017  

Designer, Manufacturer and Distributor of Fitness Equipment

                       

         

12% Secured Debt (Maturity—January 31, 2022)

    20,600     20,420     20,420  

         

Preferred Member Units (406 units)

          10,200     10,200  

                      30,620     30,620  

                               

OMi Holdings, Inc.

  April 1, 2008  

Manufacturer of Overhead Cranes

                       

         

Common Stock (1,500 shares)(8)

          1,080     14,110  

                               

Pegasus Research Group, LLC

  January 6, 2011  

Provider of Telemarketing and Data Services

                       

         

Member Units (460 units)(8)

          1,290     10,310  

                               

PPL RVs, Inc.

  June 10, 2010  

Recreational Vehicle Dealer

                       

         

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 8.34%, Secured Debt (Maturity—November 15, 2021)(9)

    16,100     15,972     16,100  

         

Common Stock (1,962 shares)(8)

          2,150     12,440  

                      18,122     28,540  

                               

Principle Environmental, LLC (d/b/a TruHorizon Environmental Solutions)

  February 1, 2011  

Noise Abatement Service Provider

                       

         

13% Secured Debt (Maturity—April 30, 2020)

    7,477     7,347     7,477  

         

Preferred Member Units (19,631 units)

          4,600     11,490  

         

Warrants (1,018 equivalent units; Expiration—January 31, 2021; Strike price—$0.01 per unit)

          1,200     650  

                      13,147     19,617  

                               

Quality Lease Service, LLC

  June 8, 2015  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

Zero Coupon Secured Debt (Maturity—June 8, 2020)

    7,341     7,341     6,950  

         

Member Units (1,000 units)

          2,868     4,938  

                      10,209     11,888  

                               

River Aggregates, LLC

  March 30, 2011  

Processor of Construction Aggregates

                       

         

Zero Coupon Secured Debt (Maturity—June 30, 2018)

    750     707     707  

         

Member Units (1,150 units)

          1,150     4,610  

         

Member Units (RA Properties, LLC) (1,500 units)

          369     2,559  

                      2,226     7,876  

                               

SoftTouch Medical Holdings LLC

  October 31, 2014  

Provider of In-Home Pediatric Durable Medical Equipment

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity—October 31, 2019)(9)

    7,140     7,110     7,140  

         

Member Units (4,450 units)(8)

          4,930     10,089  

                      12,040     17,229  

                               

35


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

The MPI Group, LLC

  October 2, 2007  

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

         

9% Secured Debt (Maturity—October 2, 2018)

    2,924     2,923     2,410  

         

Series A Preferred Units (2,500 units)

          2,500      

         

Warrants (1,424 equivalent units; Expiration—July 1, 2024; Strike price—$0.01 per unit)

          1,096      

         

Member Units (MPI Real Estate Holdings, LLC) (100 units)(8)

          2,300     2,389  

                      8,819     4,799  

                               

Uvalco Supply, LLC

  January 2, 2008  

Farm and Ranch Supply Store

                       

         

9% Secured Debt (Maturity—January 1, 2019)

    348     348     348  

         

Member Units (1,867 units)(8)

          3,579     3,880  

                      3,927     4,228  

                               

Vision Interests, Inc.

  June 5, 2007  

Manufacturer / Installer of Commercial Signage

                       

         

13% Secured Debt (Maturity—December 23, 2018)

    2,814     2,797     2,797  

         

Series A Preferred Stock (3,000,000 shares)

          3,000     3,000  

         

Common Stock (1,126,242 shares)

          3,706      

                      9,503     5,797  

                               

Ziegler's NYPD, LLC

  October 1, 2008  

Casual Restaurant Group

                       

         

6.5% Secured Debt (Maturity—October 1, 2019)

    1,000     996     996  

         

12% Secured Debt (Maturity—October 1, 2019)

    300     300     300  

         

14% Secured Debt (Maturity—October 1, 2019)

    2,750     2,750     2,750  

         

Warrants (587 equivalent units; Expiration—September 29, 2018; Strike price—$0.01 per unit)

          600      

         

Preferred Member Units (10,072 units)

          2,834     3,220  

                      7,480     7,266  

Subtotal Control Investments (54.4% net assets at fair value)

  $ 530,034   $ 750,706  

36


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Affiliate Investments(6)

     

 

 

 

                   

                               

AFG Capital Group, LLC

  November 7, 2014  

Provider of Rent-to-Own Financing Solutions and Services

                       

         

Warrants (42 equivalent units; Expiration—November 7, 2024; Strike price—$0.01 per unit)

        $ 259   $ 860  

         

Preferred Member Units (186 units)(8)

          1,200     3,590  

                      1,459     4,450  

                               

Barfly Ventures, LLC(10)

  August 31, 2015  

Casual Restaurant Group

                       

         

12% Secured Debt (Maturity—August 31, 2020)

    8,715     8,572     8,715  

         

Options (2 equivalent units)

          397     920  

         

Warrant (1 equivalent unit; Expiration—August 31, 2025; Strike price—$1.00 per unit)

          473     520  

                      9,442     10,155  

                               

BBB Tank Services, LLC

  April 8, 2016  

Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.36%, Secured Debt (Maturity—April 8, 2021)(9)

    800     778     778  

         

15% Secured Debt (Maturity—April 8, 2021)

    4,000     3,876     3,876  

         

Member Units (800,000 units)

          800     500  

                      5,454     5,154  

                               

Boccella Precast Products LLC

  June 30, 2017  

Manufacturer of Precast Hollow Core Concrete

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.34%, Secured Debt (Maturity—June 30, 2022)(9)

    16,400     16,230     16,400  

         

Member Units (2,160,000 units)

          2,160     3,440  

                      18,390     19,840  

                               

Boss Industries, LLC

  July 1, 2014  

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

         

Preferred Member Units (2,242 units)(8)

          2,080     3,930  

                               

Bridge Capital Solutions Corporation

  April 18, 2012  

Financial Services and Cash Flow Solutions Provider

                       

         

13% Secured Debt (Maturity—July 25, 2021)

    7,500     5,884     5,884  

         

Warrants (63 equivalent shares; Expiration—July 25, 2026; Strike price—$0.01 per share)

          2,132     3,520  

         

13% Secured Debt (Mercury Service Group, LLC) (Maturity—July 25, 2021)

    1,000     992     1,000  

         

Preferred Member Units (Mercury Service Group, LLC) (17,742 units)(8)

          1,000     1,000  

                      10,008     11,404  

                               

Buca C, LLC

  June 30, 2015  

Casual Restaurant Group

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.63%, Secured Debt (Maturity—June 30, 2020)(9)

    20,304     20,193     20,193  

         

Preferred Member Units (6 units; 6% cumulative)(8)(19)

          4,177     4,172  

                      24,370     24,365  

                               

37


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

CAI Software LLC

  October 10, 2014  

Provider of Specialized Enterprise Resource Planning Software

                       

         

12% Secured Debt (Maturity—October 10, 2019)

    4,083     4,060     4,083  

         

Member Units (65,356 units)(8)

          654     3,230  

                      4,714     7,313  

                               

Chandler Signs Holdings, LLC(10)

  January 4, 2016  

Sign Manufacturer

                       

         

12% Secured Debt (Maturity—July 4, 2021)

    4,500     4,468     4,500  

         

Class A Units (1,500,000 units)(8)

          1,500     2,650  

                      5,968     7,150  

                               

Condit Exhibits, LLC

  July 1, 2008  

Tradeshow Exhibits / Custom Displays Provider

                       

         

Member Units (3,936 units)(8)

          100     1,950  

                               

Congruent Credit Opportunities Funds(12)(13)

  January 24, 2012  

Investment Partnership

                       

         

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)(8)

          5,730     1,515  

         

LP Interests (Congruent Credit Opportunities Fund III, LP) (Fully diluted 17.4%)(8)

          17,869     18,632  

                      23,599     20,147  

                               

Dos Rios Partners(12)(13)

  April 25, 2013  

Investment Partnership

                       

         

LP Interests (Dos Rios Partners, LP) (Fully diluted 20.2%)

          5,996     7,165  

         

LP Interests (Dos Rios Partners—A, LP) (Fully diluted 6.4%)

          1,904     1,889  

                      7,900     9,054  

                               

Dos Rios Stone Products LLC(10)

  June 27, 2016  

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

         

Class A Preferred Units (2,000,000 units)(8)

          2,000     1,790  

                               

East Teak Fine Hardwoods, Inc.

  April 13, 2006  

Distributor of Hardwood Products

                       

         

Common Stock (6,250 shares)(8)

          480     630  

                               

EIG Fund Investments(12)(13)

  November 6, 2015  

Investment Partnership

                       

         

LP Interests (EIG Global Private Debt Fund-A, L.P.) (Fully diluted 11.1%)(8)

          1,103     1,055  

                               

Freeport Financial Funds(12)(13)

  June 13, 2013  

Investment Partnership

                       

         

LP Interests (Freeport Financial SBIC Fund LP) (Fully diluted 9.3%)(8)

          5,974     5,614  

         

LP Interests (Freeport First Lien Loan Fund III LP) (Fully diluted 6.0%)(8)

          8,558     8,506  

                      14,532     14,120  

                               

Gault Financial, LLC (RMB Capital, LLC)

  November 21, 2011  

Purchases and Manages Collection of Healthcare and other Business Receivables

                       

         

10.5% Secured Debt (Maturity—January 1, 2019)

    12,483     12,483     11,532  

         

Warrants (29,032 equivalent units; Expiration—February 9, 2022; Strike price—$0.01 per unit)

          400      

                      12,883     11,532  

                               

38


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Guerdon Modular Holdings, Inc.

  August 13, 2014  

Multi-Family and Commercial Modular Construction Company

                       

         

13% Secured Debt (Maturity—August 13, 2019)

    10,708     10,632     10,632  

         

Preferred Stock (404,998 shares)

          1,140      

         

Common Stock (212,033 shares)

          2,983      

                      14,755     10,632  

                               

Harris Preston Fund Investments(12)(13)

  October 1, 2017  

Investment Partnership

                       

         

LP Interests (HPEP 3, L.P.) (Fully diluted 9.9%)

          943     943  

                               

Hawk Ridge Systems, LLC(13)

  December 2, 2016  

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

         

11% Secured Debt (Maturity—December 2, 2021)

    14,300     14,175     14,300  

         

Preferred Member Units (226 units)(8)

          2,850     3,800  

         

Preferred Member Units (HRS Services, ULC) (226 units)(8)

          150     200  

                      17,175     18,300  

                               

Houston Plating and Coatings, LLC

  January 8, 2003  

Provider of Plating and Industrial Coating Services

                       

         

8% Unsecured Convertible Debt (Maturity—May 1, 2022)

    3,000     3,000     3,200  

         

Member Units (315,756 units)

          2,179     6,140  

                      5,179     9,340  

                               

I-45 SLF LLC(12)(13)

  October 20, 2015  

Investment Partnership

                       

         

Member Units (Fully diluted 20.0%; 24.4% profits interest)(8)

          16,200     16,841  

                               

L.F. Manufacturing Holdings, LLC(10)

  December 23, 2013  

Manufacturer of Fiberglass Products

                       

         

Member Units (2,179,001 units)

          2,019     2,000  

                               

Meisler Operating LLC

  June 7, 2017  

Provider of Short-term Trailer and Container Rental

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.84%, Secured Debt (Maturity—June 7, 2022)(9)

    16,800     16,633     16,633  

         

Member Units (Milton Meisler Holdings LLC) (31,976 units)

          3,200     3,390  

                      19,833     20,023  

                               

OnAsset Intelligence, Inc.

  April 18, 2011  

Provider of Transportation Monitoring / Tracking Products and Services

                       

         

12% PIK Secured Debt (Maturity—June 30, 2021)(19)

    5,094     5,094     5,094  

         

10% PIK Unsecured Debt (Maturity—June 30, 2021)(19)

    48     48     48  

         

Preferred Stock (912 shares)

          1,981      

         

Warrants (5,333 equivalent shares; Expiration—April 18, 2021; Strike price—$0.01 per share)

          1,919      

                      9,042     5,142  

                               

OPI International Ltd.(13)

  November 30, 2010  

Provider of Man Camp and Industrial Storage Services

                       

         

Common Stock (20,766,317 shares)

          1,371      

                               

39


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

PCI Holding Company, Inc.

  December 18, 2012  

Manufacturer of Industrial Gas Generating Systems

                       

         

12% Secured Debt (Maturity—March 31, 2019)

    12,650     12,593     12,593  

         

Preferred Stock (1,740,000 shares) (non-voting)

          1,740     2,610  

         

Preferred Stock (1,500,000 shares; 20% cumulative)(8)(19)

          3,927     890  

                      18,260     16,093  

                               

Rocaceia, LLC (Quality Lease and Rental Holdings, LLC)

  January 8, 2013  

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

         

12% Secured Debt (Maturity—January 8, 2018)(14)(15)

    30,785     30,281     250  

         

Preferred Member Units (250 units)

          2,500      

                      32,781     250  

                               

Tin Roof Acquisition Company

  November 13, 2013  

Casual Restaurant Group

                       

         

12% Secured Debt (Maturity—November 13, 2018)

    12,783     12,722     12,722  

         

Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8)(19)

          3,027     3,027  

                      15,749     15,749  

                               

UniTek Global Services, Inc.(11)

  April 15, 2011  

Provider of Outsourced Infrastructure Services

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.20%, Secured Debt (Maturity—January 13, 2019)(9)

    8,535     8,529     8,535  

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.20% / 1.00% PIK, Current Coupon Plus PIK 10.20%, Secured Debt (Maturity—January 13, 2019)(9)(19)

    137     137     137  

         

15% PIK Unsecured Debt (Maturity—July 13, 2019)(19)

    865     865     865  

         

Preferred Stock (2,596,567 shares; 19% cumulative)(8)(19)

          2,858     2,850  

         

Preferred Stock (4,935,377 shares; 13.5% cumulative)(8)(19)

          7,361     7,320  

         

Common Stock (1,075,992 shares)

              2,490  

                      19,750     22,197  

                               

Universal Wellhead Services Holdings, LLC(10)

  October 30, 2014  

Provider of Wellhead Equipment, Designs, and Personnel to the Oil & Gas Industry

                       

         

Preferred Member Units (UWS Investments, LLC) (716,949 units)

          717     830  

         

Member Units (UWS Investments, LLC) (4,000,000 units)

          4,000     1,910  

                      4,717     2,740  

                               

Valley Healthcare Group, LLC

  December 29, 2015  

Provider of Durable Medical Equipment

                       

         

LIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.86%, Secured Debt (Maturity—December 29, 2020)(9)

    11,766     11,685     11,685  

         

Preferred Member Units (Valley Healthcare Holding, LLC) (1,600 units)

          1,600     1,600  

                      13,285     13,285  

                               

40


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Volusion, LLC

  January 26, 2015  

Provider of Online Software-as-a-Service eCommerce Solutions

                       

         

11.5% Secured Debt (Maturity—January 26, 2020)

    16,734     15,200     15,200  

         

Preferred Member Units (4,876,670 units)

          14,000     14,000  

         

Warrants (1,831,355 equivalent units; Expiration—January 26, 2025; Strike price—$0.01 per unit)

          2,576     2,080  

                      31,776     31,280  

Subtotal Affiliate Investments (24.5% net assets at fair value)

  $ 367,317   $ 338,854  

41


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Non-Control/Non-Affiliate Investments(7)

 

 

                   

                               

AAC Holdings, Inc.(11)

  June 30, 2017  

Substance Abuse Treatment Service Provider

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.13%, Secured Debt (Maturity—June 30, 2023)(9)

  $ 11,751   $ 11,475   $ 11,810  

                               

Adams Publishing Group, LLC(10)

  November 19, 2015  

Local Newspaper Operator

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity—November 3, 2020)(9)

    10,341     10,116     10,147  

                               

ADS Tactical, Inc.(10)

  March 7, 2017  

Value-Added Logistics and Supply Chain Provider to the Defense Industry

                       

         

LIBOR Plus 7.50% (Floor 0.75%), Current Coupon 9.19%, Secured Debt (Maturity—December 31, 2022)(9)

    13,014     12,767     12,833  

                               

Aethon United BR LP(10)

  September 8, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.15%, Secured Debt (Maturity—September 8, 2023)(9)

    3,438     3,388     3,388  

                               

Ahead, LLC(10)

  November 13, 2015  

IT Infrastructure Value Added Reseller

                       

         

LIBOR Plus 6.50%, Current Coupon 8.20%, Secured Debt (Maturity—November 2, 2020)

    11,061     10,848     11,130  

                               

Allflex Holdings III Inc.(11)

  July 18, 2013  

Manufacturer of Livestock Identification Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.36%, Secured Debt (Maturity—July 19, 2021)(9)

    13,846     13,781     13,955  

                               

American Scaffold Holdings, Inc.(10)

  June 14, 2016  

Marine Scaffolding Service Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.19%, Secured Debt (Maturity—March 31, 2022)(9)

    7,031     6,947     6,996  

                               

American Teleconferencing Services, Ltd.(11)

  May 19, 2016  

Provider of Audio Conferencing and Video Collaboration Solutions

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.90%, Secured Debt (Maturity—December 8, 2021)(9)

    10,582     9,934     10,443  

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.85%, Secured Debt (Maturity—June 6, 2022)(9)

    3,714     3,589     3,507  

                      13,523     13,950  

                               

Anchor Hocking, LLC(11)

  April 2, 2012  

Household Products Manufacturer

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.49%, Secured Debt (Maturity—June 4, 2020)(9)

    2,254     2,211     2,248  

         

Member Units (440,620 units)

          4,928     3,745  

                      7,139     5,993  

                               

42


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Apex Linen Service, Inc.

  October 30, 2015  

Industrial Launderers

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

         

16% Secured Debt (Maturity—October 30, 2022)

    14,416     14,347     14,347  

                      16,747     16,747  

                               

Arcus Hunting LLC.(10)

  January 6, 2015  

Manufacturer of Bowhunting and Archery Products and Accessories

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.34%, Secured Debt (Maturity—November 13, 2019)(9)

    15,391     15,294     15,391  

                               

ATI Investment Sub, Inc.(11)

  July 11, 2016  

Manufacturer of Solar Tracking Systems

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.82%, Secured Debt (Maturity—June 22, 2021)(9)

    7,364     7,215     7,346  

                               

ATX Networks Corp.(11)(13)(21)

  June 30, 2015  

Provider of Radio Frequency Management Equipment

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33% / 1.00% PIK, Current Coupon Plus PIK 8.33%, Secured Debt (Maturity—June 11, 2021)(9)(19)

    9,567     9,454     9,507  

                               

Berry Aviation, Inc.(10)

  July 6, 2018  

Airline Charter Service Operator

                       

         

13.75% Secured Debt (Maturity—January 30, 2020)

    5,627     5,598     5,627  

         

Common Stock (553 shares)

          400     1,010  

                      5,998     6,637  

                               

BigName Commerce, LLC(10)

  May 11, 2017  

Provider of Envelopes and Complimentary Stationery Products

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.59%, Secured Debt (Maturity—May 11, 2022)(9)

    2,488     2,461     2,461  

                               

Binswanger Enterprises, LLC(10)

  March 10, 2017  

Glass Repair and Installation Service Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.69%, Secured Debt (Maturity—March 9, 2022)(9)

    15,325     15,060     15,192  

         

Member Units (1,050,000 units)

          1,050     1,000  

                      16,110     16,192  

                               

Bluestem Brands, Inc.(11)

  December 19, 2013  

Multi-Channel Retailer of General Merchandise

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.07%, Secured Debt (Maturity—November 6, 2020)(9)

    12,127     11,955     8,540  

                               

Brainworks Software, LLC(10)

  August 12, 2014  

Advertising Sales and Newspaper Circulation Software

                       

         

Prime Plus 9.25% (Floor 3.25%), Current Coupon 13.75%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,705     6,573  

                               

43


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Brightwood Capital Fund Investments(12)(13)

  July 21, 2014  

Investment Partnership

                       

         

LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.6%)(8)

          12,000     10,328  

         

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.8%)(8)

          1,000     1,063  

                      13,000     11,391  

                               

Brundage-Bone Concrete Pumping, Inc.(11)

  August 18, 2014  

Construction Services Provider

                       

         

10.375% Secured Debt (Maturity—September 1, 2023)

    3,000     2,987     3,180  

                               

Cadence Aerospace LLC(10)

  November 14, 2017  

Aerostructure Manufacturing

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.91%, Secured Debt (Maturity—November 14, 2023)(9)

    15,000     14,853     14,853  

                               

CapFusion, LLC(13)

  March 25, 2016  

Non-Bank Lender to Small Businesses

                       

         

13% Secured Debt (Maturity—March 25, 2021)(14)

    6,705     5,645     1,871  

                               

California Pizza Kitchen, Inc.(11)

  August 29, 2016  

Casual Restaurant Group

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—August 23, 2022)(9)

    12,902     12,862     12,677  

                               

CDHA Management, LLC(10)

  December 5, 2016  

Dental Services

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.76%, Secured Debt (Maturity—December 5, 2021)(9)

    5,365     5,303     5,365  

                               

Central Security Group, Inc.(11)

  December 4, 2017  

Security Alarm Monitoring Service Provider

                       

         

LIBOR Plus 5.63% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity—October 6, 2021)(9)

    7,481     7,462     7,518  

                               

Cenveo Corporation(11)

  September 4, 2015  

Provider of Commercial Printing, Envelopes, Labels, and Printed Office Products

                       

         

6% Secured Debt (Maturity—August 1, 2019)

    19,130     17,126     13,582  

                               

Charlotte Russe, Inc(11)

  May 28, 2013  

Fast-Fashion Retailer to Young Women

                       

         

LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.89%, Secured Debt (Maturity—May 22, 2019)(9)

    19,041     16,473     7,807  

                               

Clarius BIGS, LLC(10)

  September 23, 2014  

Prints & Advertising Film Financing

                       

         

15% PIK Secured Debt (Maturity—January 5, 2015)(14)(17)

    2,924     2,924     85  

                               

Clickbooth.com, LLC(10)

  December 5, 2017  

Provider of Digital Advertising Performance Marketing Solutions

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.01%, Secured Debt (Maturity—December 5, 2022)(9)

    3,000     2,941     2,941  

                               

44


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Construction Supply Investments, LLC(10)

  December 29, 2016  

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—June 30, 2023)(9)

    7,125     7,090     7,090  

         

Member Units (28,000 units)

          3,723     3,723  

                      10,813     10,813  

                               

CTVSH, PLLC(10)

  August 3, 2017  

Emergency Care and Specialty Service Animal Hospital

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.48%, Secured Debt (Maturity—August 3, 2022)(9)

    11,850     11,739     11,739  

                               

Darr Equipment LP(10)

  April 15, 2014  

Heavy Equipment Dealer

                       

         

11.5% Current / 1% PIK Secured Debt (Maturity—June 22, 2023)(19)

    7,229     7,229     7,229  

         

Warrants (915,734 equivalent units; Expiration—December 23, 2023; Strike price—$1.50 per unit)

          474     10  

                      7,703     7,239  

                               

Digital River, Inc.(11)

  February 24, 2015  

Provider of Outsourced e-Commerce Solutions and Services

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.08%, Secured Debt (Maturity—February 12, 2021)(9)

    9,313     9,266     9,337  

                               

Drilling Info Holdings, Inc.

  November 20, 2009  

Information Services for the Oil and Gas Industry

                       

         

Common Stock (3,788,865 shares)(8)

              8,610  

                               

EnCap Energy Fund Investments(12)(13)

  December 28, 2010  

Investment Partnership

                       

         

LP Interests (EnCap Energy Capital Fund VIII, L.P.) (Fully diluted 0.1%)(8)

          3,906     2,202  

         

LP Interests (EnCap Energy Capital Fund VIII Co- Investors, L.P.) (Fully diluted 0.4%)

          2,227     1,549  

         

LP Interests (EnCap Energy Capital Fund IX, L.P.) (Fully diluted 0.1%)(8)

          4,305     3,720  

         

LP Interests (EnCap Energy Capital Fund X, L.P.) (Fully diluted 0.1%)(8)

          6,277     6,225  

         

LP Interests (EnCap Flatrock Midstream Fund II, L.P.) (Fully diluted 0.8%)(8)

          6,138     6,116  

         

LP Interests (EnCap Flatrock Midstream Fund III, L.P.) (Fully diluted 0.2%)

          3,458     3,828  

                      26,311     23,640  

                               

Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft)(11)(13)

  May 5, 2014  

Technology-based Performance Support Solutions

                       

         

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.82%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,878     6,244  

                               

45


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Extreme Reach, Inc.(11)

  March 31, 2015  

Integrated TV and Video Advertising Platform

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.95%, Secured Debt (Maturity—February 7, 2020)(9)

    10,411     10,397     10,398  

                               

Felix Investments Holdings II(10)

  August 9, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.90%, Secured Debt (Maturity—August 9, 2022)(9)

    3,333     3,267     3,267  

                               

Flavors Holdings Inc.(11)

  October 15, 2014  

Global Provider of Flavoring and Sweetening Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.44%, Secured Debt (Maturity—April 3, 2020)(9)

    13,076     12,616     12,128  

                               

GI KBS Merger Sub LLC(11)

  November 10, 2014  

Outsourced Janitorial Services to Retail/Grocery Customers

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.48%, Secured Debt (Maturity—October 29, 2021)(9)

    6,807     6,733     6,833  

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.88%, Secured Debt (Maturity—April 29, 2022)(9)

    3,915     3,769     3,793  

                      10,502     10,626  

                               

GoWireless Holdings, Inc.(11)

  December 31, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.16%, Secured Debt (Maturity—December 22, 2024)(9)

    18,000     17,820     17,865  

                               

Grace Hill, LLC(10)

  August 29, 2014  

Online Training Tools for the Multi-Family Housing Industry

                       

         

Prime Plus 5.25% (Floor 1.00%), Current Coupon 9.75%, Secured Debt (Maturity—August 15, 2019)(9)

    1,215     1,208     1,215  

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.58%, Secured Debt (Maturity—August 15, 2019)(9)

    11,407     11,356     11,407  

                      12,564     12,622  

                               

Great Circle Family Foods, LLC(10)

  March 25, 2015  

Quick Service Restaurant Franchise

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.34%, Secured Debt (Maturity—October 28, 2019)(9)

    7,219     7,187     7,219  

                               

Grupo Hima San Pablo, Inc.(11)

  March 7, 2013  

Tertiary Care Hospitals

                       

         

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (Maturity—January 31, 2018)(9)

    4,750     4,748     3,541  

         

13.75% Secured Debt (Maturity—July 31, 2018)

    2,055     2,040     226  

                      6,788     3,767  

                               

46


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

GST Autoleather, Inc.(11)

  July 21, 2014  

Automotive Leather Manufacturer

                       

         

PRIME Plus 6.50% (Floor 2.25%), Current Coupon 11.00%, Secured Debt (Maturity—April 5, 2018)(9)

    7,578     7,500     7,500  

         

PRIME Plus 6.50% (Floor 2.00%), Current Coupon 11.00%, Secured Debt (Maturity—July 10, 2020)(9)

    15,619     15,120     11,813  

                      22,620     19,313  

                               

Guitar Center, Inc.(11)

  April 10, 2014  

Musical Instruments Retailer

                       

         

6.5% Secured Debt (Maturity—April 15, 2019)

    16,625     16,009     15,378  

                               

Hojeij Branded Foods, LLC(10)

  July 28, 2015  

Multi-Airport, Multi- Concept Restaurant Operator

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—July 20, 2022)(9)

    12,137     12,022     12,137  

                               

Hoover Group, Inc.(10)(13)

  October 21, 2016  

Provider of Storage Tanks and Related Products to the Energy and Petrochemical Markets

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.70%, Secured Debt (Maturity—January 28, 2021)(9)

    8,460     7,986     7,783  

                               

Hostway Corporation(11)

  December 27, 2013  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.44%, Secured Debt (Maturity—December 13, 2019)(9)

    20,150     19,796     19,621  

         

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.44%, Secured Debt (Maturity—December 13, 2018)(9)

    12,406     11,575     11,692  

                      31,371     31,313  

                               

Hunter Defense Technologies, Inc.(11)

  August 14, 2014  

Provider of Military and Commercial Shelters and Systems

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity—August 5, 2019)(9)

    20,224     19,851     19,997  

                               

Hydrofarm Holdings LLC(10)

  May 18, 2017  

Wholesaler of Horticultural Products

                       

         

LIBOR Plus 7.00%, Current Coupon 8.49%, Secured Debt (Maturity—May 12, 2022)

    6,708     6,588     6,699  

                               

iEnergizer Limited(11)(13)(21)

  May 8, 2013  

Provider of Business Outsourcing Solutions

                       

         

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.57%, Secured Debt (Maturity—May 1, 2019)(9)

    11,005     10,764     10,977  

                               

Implus Footcare, LLC(10)

  June 1, 2017  

Provider of Footwear and Related Accessories

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.44%, Secured Debt (Maturity—April 30, 2021)(9)

    19,372     19,115     19,243  

                               

47


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Indivior Finance LLC(11)(13)

  March 20, 2015  

Specialty Pharmaceutical Company Treating Opioid Dependence

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—December 18, 2022)(9)

    1,176     1,171     1,182  

                               

Industrial Services Acquisition, LLC(10)

  June 17, 2016  

Industrial Cleaning Services

                       

         

11.25% Current / 0.75% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    4,553     4,478     4,553  

         

Member Units (Industrial Services Investments, LLC) (900,000 units)

          900     810  

                      5,378     5,363  

                               

Inn of the Mountain Gods Resort and Casino(11)

  October 30, 2013  

Hotel & Casino Owner & Operator

                       

         

9.25% Secured Debt (Maturity—November 30, 2020)

    6,249     5,994     5,687  

                               

iPayment, Inc.(11)

  June 25, 2015  

Provider of Merchant Acquisition

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.62%, Secured Debt (Maturity—April 11, 2023)(9)

    11,970     11,861     12,090  

                               

iQor US Inc.(11)

  April 17, 2014  

Business Process Outsourcing Services Provider

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.69%, Secured Debt (Maturity—April 1, 2021)(9)

    990     983     986  

                               

irth Solutions, LLC

  December 29, 2010  

Provider of Damage Prevention Information Technology Services

                       

         

Member Units (27,893 units)

          1,441     1,920  

                               

Jacent Strategic Merchandising, LLC(10)

  September 16, 2015  

General Merchandise Distribution

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.01%, Secured Debt (Maturity—September 16, 2020)(9)

    11,110     11,054     11,110  

                               

Jackmont Hospitality, Inc.(10)

  May 26, 2015  

Franchisee of Casual Dining Restaurants

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.32%, Secured Debt (Maturity—May 26, 2021)(9)

    4,390     4,379     4,390  

                               

Jacuzzi Brands LLC(11)

  June 30, 2017  

Manufacturer of Bath and Spa Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity—June 28, 2023)(9)

    3,950     3,876     3,980  

                               

Joerns Healthcare, LLC(11)

  April 3, 2013  

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.48% Secured Debt (Maturity—May 9, 2020)(9)

    13,387     13,299     12,472  

                               

48


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Keypoint Government Solutions, Inc.(10)

  April 17, 2017  

Provider of Pre-Employment Screening Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.35%, Secured Debt (Maturity—April 18, 2024)(9)

    12,031     11,921     12,031  

                               

Larchmont Resources, LLC(11)

  August 13, 2013  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.53%, PIK Secured Debt (Maturity—August 7, 2020)(9)(19)

    2,418     2,418     2,394  

         

Member Units (Larchmont Intermediate Holdco, LLC) (2,828 units)

          353     976  

                      2,771     3,370  

                               

LKCM Headwater Investments I, L.P.(12)(13)

  January 25, 2013  

Investment Partnership

                       

         

LP Interests (Fully diluted 2.3%)

          2,500     4,234  

                               

Logix Acquisition Company, LLC(10)

  June 24, 2016  

Competitive Local Exchange Carrier

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.28%, Secured Debt (Maturity—August 9, 2024)(9)

    10,135     9,921     9,921  

                               

Looking Glass Investments, LLC(12)(13)

  July 1, 2015  

Specialty Consumer Finance

                       

         

Member Units (2.5 units)

          125     57  

         

Member Units (LGI Predictive Analytics LLC) (190,712 units)(8)

          108     92  

                      233     149  

                               

LSF9 Atlantis Holdings, LLC(11)

  May 17, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity—May 1, 2023)(9)

    2,963     2,931     2,978  

                               

Lulu's Fashion Lounge, LLC(10)

  August 31, 2017  

Fast Fashion E-Commerce Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.57%, Secured Debt (Maturity—August 28, 2022)(9)

    13,381     12,993     13,531  

                               

Messenger, LLC(10)

  December 5, 2014  

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity—September 9, 2020)(9)

    17,331     17,249     17,331  

                               

Minute Key, Inc.

  September 19, 2014  

Operator of Automated Key Duplication Kiosks

                       

         

Warrants (1,437,409 equivalent shares; Expiration—May 20, 2025; Strike price—$0.01 per share)

          280     1,170  

                               

NBG Acquisition Inc(11)

  April 28, 2017  

Wholesaler of Home Décor Products

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity—April 26, 2024)(9)

    4,402     4,336     4,452  

                               

49


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

New Media Holdings II LLC(11)(13)

  June 10, 2014  

Local Newspaper Operator

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity—July 14, 2022)(9)

    17,715     17,342     17,864  

                               

NNE Partners, LLC(10)

  March 2, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 8.00%, Current Coupon 9.49%, Secured Debt (Maturity—March 2, 2022)

    11,958     11,854     11,854  

                               

North American Lifting Holdings, Inc.(11)

  February 26, 2015  

Crane Service Provider

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.19%, Secured Debt (Maturity—November 27, 2020)(9)

    7,745     6,913     7,256  

                               

Novetta Solutions, LLC(11)

  June 21, 2017  

Provider of Advanced Analytics Solutions for Defense Agencies

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.70%, Secured Debt (Maturity—October 17, 2022)(9)

    14,636     14,189     14,239  

                               

NTM Acquisition Corp.(11)

  July 12, 2016  

Provider of B2B Travel Information Content

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.94%, Secured Debt (Maturity—June 7, 2022)(9)

    6,186     6,126     6,155  

                               

Ospemifene Royalty Sub LLC (QuatRx)(10)

  July 8, 2013  

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

         

11.5% Secured Debt (Maturity—November 15, 2026)(14)

    5,071     5,071     1,198  

                               

P.F. Chang's China Bistro, Inc.(11)

  September 6, 2017  

Casual Restaurant Group

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.51%, Secured Debt (Maturity—September 1, 2022)(9)

    4,988     4,846     4,715  

                               

Paris Presents Incorporated(11)

  February 5, 2015  

Branded Cosmetic and Bath Accessories

                       

         

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity—December 31, 2021)(9)

    4,500     4,471     4,477  

                               

Parq Holdings Limited Partnership(11)(13)(21)

  December 22, 2014  

Hotel & Casino Operator

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.19%, Secured Debt (Maturity—December 17, 2020)(9)

    7,481     7,399     7,528  

                               

Permian Holdco 2, Inc.(11)

  February 12, 2013  

Storage Tank Manufacturer

                       

         

14% PIK Unsecured Debt (Maturity—October 15, 2021)(19)

    306     306     306  

         

Preferred Stock (Permian Holdco 1, Inc.) (154,558 units)

          799     980  

         

Common Stock (Permian Holdco 1, Inc.) (154,558 units)

              140  

                      1,105     1,426  

                               

Pernix Therapeutics Holdings, Inc.(10)

  August 18, 2014  

Pharmaceutical Royalty

                       

         

12% Secured Debt (Maturity—August 1, 2020)

    3,129     3,129     1,971  

                               

50


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Point.360(10)

  July 8, 2015  

Fully Integrated Provider of Digital Media Services

                       

         

Warrants (65,463 equivalent shares; Expiration—July 7, 2020; Strike price—$0.75 per share)

          69      

         

Common Stock (163,658 shares)

          273     11  

                      342     11  

                               

PPC/SHIFT LLC(10)

  December 22, 2016  

Provider of Digital Solutions to Automotive Industry

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.69%, Secured Debt (Maturity—December 22, 2021)(9)

    6,869     6,748     6,869  

                               

Prowler Acquisition Corp.(11)

  February 11, 2014  

Specialty Distributor to the Energy Sector

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.19%, Secured Debt (Maturity—January 28, 2020)(9)

    12,830     11,332     12,253  

                               

PT Network, LLC(10)

  November 1, 2013  

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.86%, Secured Debt (Maturity—November 30, 2021)(9)

    8,553     8,553     8,553  

                               

QBS Parent, Inc.(11)

  August 12, 2014  

Provider of Software and Services to the Oil & Gas Industry

                       

         

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 6.13%, Secured Debt (Maturity—August 7, 2021)(9)

    14,272     14,114     14,165  

                               

Research Now Group, Inc. and Survey Sampling International, LLC(11)

  December 31, 2017  

Provider of Outsourced Online Surveying

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.13%, Secured Debt (Maturity—December 20, 2024)(9)

    13,500     12,826     12,826  

                               

Resolute Industrial, LLC(10)

  July 26, 2017  

HVAC Equipment Rental and Remanufacturing

                       

         

LIBOR Plus 7.62% (Floor 1.00%), Current Coupon 8.95%, Secured Debt (Maturity—July 26, 2022)(9)(25)

    17,088     16,770     16,770  

         

Member Units (601 units)

          750     750  

                      17,520     17,520  

                               

RGL Reservoir Operations Inc.(11)(13)(21)

  August 25, 2014  

Oil & Gas Equipment and Services

                       

         

1% Current / 9% PIK Secured Debt (Maturity—December 21, 2024)(19)

    721     407     407  

                               

RM Bidder, LLC(10)

  November 12, 2015  

Scripted and Unscripted TV and Digital Programming Provider

                       

         

Warrants (327,532 equivalent units; Expiration—October 20, 2025; Strike price—$14.28 per unit)

          425      

         

Member Units (2,779 units)

          46     20  

                      471     20  

                               

51


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

SAFETY Investment Holdings, LLC

  April 29, 2016  

Provider of Intelligent Driver Record Monitoring Software and Services

                       

         

Member Units (2,000,000 units)

          2,000     1,670  

                               

Salient Partners L.P.(11)

  June 25, 2015  

Provider of Asset Management Services

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.85%, Secured Debt (Maturity—June 9, 2021)(9)

    10,081     9,870     9,778  

                               

SiTV, LLC(11)

  September 26, 2017  

Cable Networks Operator

                       

         

10.375% Secured Debt (Maturity—July 1, 2019)

    10,429     7,006     7,040  

                               

SMART Modular Technologies, Inc.(10)(13)

  August 18, 2017  

Provider of Specialty Memory Solutions

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.66%, Secured Debt (Maturity—August 9, 2022)(9)

    14,625     14,351     14,552  

                               

Sorenson Communications, Inc.(11)

  June 7, 2016  

Manufacturer of Communication Products for Hearing Impaired

                       

         

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.00%, Secured Debt (Maturity—April 30, 2020)(9)

    13,234     13,170     13,341  

                               

Staples Canada ULC(10)(13)(21)

  September 14, 2017  

Office Supplies Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.43%, Secured Debt (Maturity—September 12, 2023)(9)(22)

    20,000     19,617     18,891  

                               

Strike, LLC(11)

  December 12, 2016  

Pipeline Construction and Maintenance Services

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—November 30, 2022)(9)

    9,500     9,250     9,643  

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.45%, Secured Debt (Maturity—May 30, 2019)(9)

    2,500     2,479     2,513  

                      11,729     12,156  

                               

Subsea Global Solutions, LLC(10)

  March 17, 2015  

Underwater Maintenance and Repair Services

                       

         

LIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (Maturity—March 17, 2020)(9)

    7,687     7,637     7,687  

                               

Synagro Infrastructure Company, Inc(11)

  August 29, 2013  

Waste Management Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity—August 22, 2020)(9)

    9,161     8,933     8,608  

                               

Tectonic Holdings, LLC

  May 15, 2017  

Financial Services Organization

                       

         

Member Units (200,000 units)(8)

          2,000     2,320  

                               

TE Holdings, LLC(11)

  December 5, 2013  

Oil & Gas Exploration & Production

                       

         

Member Units (97,048 units)

          970     158  

                               

52


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

TeleGuam Holdings, LLC(11)

  June 26, 2013  

Cable and Telecom Services Provider

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.07%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,602     7,808  

                               

TGP Holdings III LLC (11)

  September 30, 2017  

Outdoor Cooking & Accessories

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.69%, Secured Debt (Maturity—September 25, 2024)(9)

    6,898     6,820     6,969  

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.19%, Secured Debt (Maturity—September 25, 2025)(9)

    5,000     4,927     5,075  

                      11,747     12,044  

                               

The Container Store, Inc.(11)

  August 22, 2017  

Operator of Stores Offering Storage and Organizational Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity—August 15, 2021)(9)

    9,938     9,660     9,652  

                               

TMC Merger Sub Corp.(11)

  December 22, 2016  

Refractory & Maintenance Services Provider

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.88%, Secured Debt (Maturity—October 31, 2022)(9)(26)

    17,653     17,516     17,741  

                               

TOMS Shoes, LLC(11)

  November 13, 2014  

Global Designer, Distributor, and Retailer of Casual Footwear

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.98%, Secured Debt (Maturity—October 30, 2020)(9)

    4,875     4,610     2,901  

                               

Turning Point Brands, Inc.(10)(13)

  February 17, 2017  

Marketer/Distributor of Tobacco Products

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.61%, Secured Debt (Maturity—May 17, 2022)(9)(25)

    8,436     8,364     8,605  

                               

TVG-I-E CMN ACQUISITION, LLC(10)

  November 3, 2016  

Organic Lead Generation for Online Postsecondary Schools

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.56%, Secured Debt (Maturity—November 3, 2021)(9)

    8,170     8,031     8,170  

                               

Tweddle Group, Inc.(11)

  November 15, 2016  

Provider of Technical Information Services to Automotive OEMs

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.38%, Secured Debt (Maturity—October 21, 2022)(9)

    6,114     6,011     6,023  

                               

U.S. TelePacific Corp.(11)

  September 14, 2016  

Provider of Communications and Managed Services

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.69%, Secured Debt (Maturity—May 2, 2023)(9)

    20,703     20,507     19,862  

                               

53


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

Portfolio Company(1)(20)
  Investment Date(28)
  Business Description
  Type of Investment(2)(3)(27)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

US Joiner Holding Company(11)

  April 23, 2014  

Marine Interior Design and Installation

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity—April 16, 2020)(9)

    13,465     13,366     13,398  

                               

VIP Cinema Holdings, Inc.(11)

  March 9, 2017  

Supplier of Luxury Seating to the Cinema Industry

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity—March 1, 2023)(9)

    7,700     7,666     7,777  

                               

Vistar Media, Inc.(10)

  February 17, 2017  

Operator of Digital Out-of-Home Advertising Platform

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.69%, Secured Debt (Maturity—February 16, 2022)(9)

    3,319     3,048     3,102  

         

Warrants (70,207 equivalent shares; Expiration—February 17, 2027; Strike price—$0.01 per share)

          331     499  

                      3,379     3,601  

                               

Wellnext, LLC(10)

  May 23, 2016  

Manufacturer of Supplements and Vitamins

                       

         

LIBOR Plus 10.10% (Floor 1.00%), Current Coupon 11.67%, Secured Debt (Maturity—July 21, 2022)(9)(23)

    9,930     9,857     9,930  

                               

Wireless Vision Holdings, LLC(10)

  September 29, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 10.27%, Secured Debt (Maturity—September 29, 2022)(9)(24)

    12,932     12,654     12,654  

                               

Wirepath LLC(11)

  August 16, 2017  

E-Commerce Provider into Connected Home Market

                       

         

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.87%, Secured Debt (Maturity—August 5, 2024)(9)

    4,988     4,964     5,055  

                               

Zilliant Incorporated

  June 15, 2012  

Price Optimization and Margin Management Solutions

                       

         

Preferred Stock (186,777 shares)

          154     260  

         

Warrants (952,500 equivalent shares; Expiration—June 15, 2022; Strike price—$0.001 per share)

          1,071     1,189  

                      1,225     1,449  

Subtotal Non-Control/Non-Affiliate Investments (78.4% of net assets at fair value)

  $ 1,107,447   $ 1,081,745  

Total Portfolio Investments, December 31, 2017

  $ 2,004,798   $ 2,171,305  

(1)
All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note B for a description of Lower Middle Market portfolio investments. All of the Company's investments, unless otherwise noted, are encumbered either as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(2)
Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

(3)
See Note C for a summary of geographic location of portfolio companies.

(4)
Principal is net of repayments. Cost is net of repayments and accumulated unearned income.

(5)
Control investments are defined by the Investment Company Act of 1940, as amended ("1940 Act") as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained.

(6)
Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as Control investments.

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

(7)
Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at December 31, 2017. As noted in this schedule, 67% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.25%, with a weighted-average LIBOR floor of approximately 1.02%.

(10)
Private Loan portfolio investment. See Note B for a description of Private Loan portfolio investments.

(11)
Middle Market portfolio investment. See Note B for a description of Middle Market portfolio investments.

(12)
Other Portfolio investment. See Note B for a description of Other Portfolio investments.

(13)
Investment is not a qualifying asset as defined under Section 55 (a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.

(14)
Non-accrual and non-income producing investment.

(15)
Portfolio company is in a bankruptcy process and, as such, the maturity date of our debt investments in this portfolio company will not be finally determined until such process is complete. As noted in footnote(14), our debt investments in this portfolio company are on non-accrual status.

(16)
External Investment Manager. Investment is not encumbered as security for the Company's Credit Agreement or in support of the SBA-guaranteed debentures issued by the Funds.

(17)
Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.

(18)
Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C for further discussion.

(19)
PIK interest income and cumulative dividend income represent income not paid currently in cash.

(20)
All portfolio company headquarters are based in the United States, unless otherwise noted.

(21)
Portfolio company headquarters are located outside of the United States.

(22)
In connection with the Company's debt investment in Staples Canada ULC to help mitigate any potential adverse change in foreign exchange rates during the term of the Company's investment, the Company entered into a forward foreign currency contract with Cadence Bank to lend $24.2 million Canadian Dollars and receive $20.0 million U.S. Dollars with a settlement date of September 12, 2018. The unrealized appreciation on the forward foreign currency contract is $0.7 million as of December 31, 2017. This unrealized appreciation is offset by the foreign currency translation depreciation on the investment.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(24)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 8.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(25)
As part of the credit agreement with the portfolio company, the Company is entitled to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. The rate the Company receives per the Credit Agreement is the same as the rate reflected in the Consolidated Schedule of Investments above.

(26)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such lower rate.

(27)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities."

(28)
Investment date represents the date of initial investment in the portfolio company.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A—ORGANIZATION AND BASIS OF PRESENTATION

1.     Organization

        Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.

        MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF"), Main Street Capital II, LP ("MSC II") and Main Street Capital III, LP ("MSC III" and, collectively with MSMF and MSC II, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees, but instead directly incurs the operating costs associated with employing investment and portfolio management professionals.

        MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies ("External Parties") and receives fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser under the Investment Advisers Act of 1940, as amended. Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.

        MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.

        MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes.

        Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our," the "Company" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

2.     Basis of Presentation

        Main Street's consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services—Investment Companies ("ASC 946"). For each of the periods presented herein, Main Street's consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of Main Street's investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments and the investment in the External Investment Manager (see Note C—Fair Value Hierarchy for Investments and Debentures—Portfolio Composition—Investment Portfolio Composition for additional discussion of Main Street's Investment Portfolio and definitions for the terms Private Loan and Other Portfolio). Main Street's results of operations for the three and nine months ended September 30, 2018 and 2017, cash flows for the nine months ended September 30, 2018 and 2017, and financial position as of September 30, 2018 and December 31, 2017, are presented on a consolidated basis. The effects of all intercompany transactions between Main Street and its consolidated subsidiaries have been eliminated in consolidation. Certain reclassifications have been made to prior period balances to conform with the current presentation.

        The accompanying unaudited consolidated financial statements of Main Street are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2018 and 2017 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and ASC 946, Main Street is precluded from consolidating other entities in which Main Street has equity investments, including those in which it has a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if Main Street holds a controlling interest in an operating company that provides all or substantially all of its services directly to Main Street or to its portfolio companies. Accordingly, as noted above, MSCC's consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. Main Street has determined that all of its portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, Main Street's Investment Portfolio is carried on the consolidated balance sheet at fair value, as discussed further in Note B, with any adjustments to fair value recognized as "Net Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Main Street classifies its Investment Portfolio in accordance with the requirements of the 1940 Act. Under the 1940 Act, (a) "Control Investments" are defined as investments in which Main Street owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation, (b) "Affiliate Investments" are defined as investments in which Main Street owns between 5% and 25% of the voting securities and does not have rights to maintain greater than 50% of the board representation, and (c) "Non-Control/Non-Affiliate Investments" are defined as investments that are neither Control Investments nor Affiliate Investments.

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.     Valuation of the Investment Portfolio

        Main Street accounts for its Investment Portfolio at fair value. As a result, Main Street follows the provisions of ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires Main Street to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact.

        Main Street's portfolio strategy calls for it to invest primarily in illiquid debt and equity securities issued by privately held, LMM companies and more liquid debt securities issued by Middle Market companies that are generally larger in size than the LMM companies. Main Street categorizes some of its investments in LMM companies and Middle Market companies as Private Loan portfolio investments, which are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's portfolio also includes Other Portfolio investments which primarily consist of investments that are not consistent with the typical profiles for its LMM portfolio investments, Middle Market portfolio investments or Private Loan portfolio investments, including investments which may be managed by third parties. Main Street's portfolio investments may be subject to restrictions on resale.

        LMM investments and Other Portfolio investments generally have no established trading market while Middle Market securities generally have established markets that are not active. Private Loan investments may include investments which have no established trading market or have established markets that are not active. Main Street determines in good faith the fair value of its Investment Portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved by its Board of Directors and in accordance with the 1940 Act. Main Street's valuation policies and processes are intended to provide a consistent basis for determining the fair value of Main Street's Investment Portfolio.

        For LMM portfolio investments, Main Street generally reviews external events, including private mergers, sales and acquisitions involving comparable companies, and includes these events in the valuation process by using an enterprise value waterfall methodology ("Waterfall") for its LMM equity

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

investments and an income approach using a yield-to-maturity model ("Yield-to-Maturity") for its LMM debt investments. For Middle Market portfolio investments, Main Street primarily uses quoted prices in the valuation process. Main Street determines the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on its understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. For Middle Market and Private Loan portfolio investments in debt securities for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value the investment in a current hypothetical sale using the Yield-to-Maturity valuation method. For its Other Portfolio equity investments, Main Street generally calculates the fair value of the investment primarily based on the net asset value ("NAV") of the fund and adjusts the fair value for other factors that would affect the fair value of the investment. All of the valuation approaches for Main Street's portfolio investments estimate the value of the investment as if Main Street were to sell, or exit, the investment as of the measurement date.

        These valuation approaches consider the value associated with Main Street's ability to control the capital structure of the portfolio company, as well as the timing of a potential exit. For valuation purposes, "control" portfolio investments are composed of debt and equity securities in companies for which Main Street has a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors. For valuation purposes, "non-control" portfolio investments are generally composed of debt and equity securities in companies for which Main Street does not have a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company's board of directors.

        Under the Waterfall valuation method, Main Street estimates the enterprise value of a portfolio company using a combination of market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the portfolio company or third-party valuations of the portfolio company, and then performs a waterfall calculation by allocating the enterprise value over the portfolio company's securities in order of their preference relative to one another. The enterprise value is the fair value at which an enterprise could be sold in a transaction between two willing parties, other than through a forced or liquidation sale. Typically, privately held companies are bought and sold based on multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA"), cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise value is derived. In estimating the enterprise value of a portfolio company, Main Street analyzes various factors including the portfolio company's historical and projected financial results. Due to SEC deadlines for Main Street's quarterly and annual financial reporting, the operating results of a portfolio company used in the current period valuation are generally the results from the period ended three months prior to such valuation date and may include unaudited, projected, budgeted or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in its determination. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, Main Street also analyzes the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, Main Street allocates the enterprise

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

value to investments in order of the legal priority of the various components of the portfolio company's capital structure. In applying the Waterfall valuation method, Main Street assumes the loans are paid off at the principal amount in a change in control transaction and are not assumed by the buyer, which Main Street believes is consistent with its past transaction history and standard industry practices.

        Under the Yield-to-Maturity valuation method, Main Street also uses the income approach to determine the fair value of debt securities based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of the portfolio company. Main Street's estimate of the expected repayment date of its debt securities is generally the maturity date of the instrument, as Main Street generally intends to hold its loans and debt securities to maturity. The Yield-to-Maturity analysis also considers changes in leverage levels, credit quality, portfolio company performance and other factors. Main Street will generally use the value determined by the Yield-to-Maturity analysis as the fair value for that security; however, because of Main Street's general intent to hold its loans to maturity, the fair value will not exceed the principal amount of the debt security valued using the Yield-to-Maturity valuation method. A change in the assumptions that Main Street uses to estimate the fair value of its debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair value. If there is deterioration in credit quality or if a debt security is in workout status, Main Street may consider other factors in determining the fair value of the debt security, including the value attributable to the debt security from the enterprise value of the portfolio company or the proceeds that would most likely be received in a liquidation analysis.

        Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, Main Street measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date and adjusts the investment's fair value for factors known to Main Street that would affect that fund's NAV, including, but not limited to, fair values for individual investments held by the fund if Main Street holds the same investment or for a publicly traded investment. In addition, in determining the fair value of the investment, Main Street considers whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of Main Street's investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding Main Street's ability to realize the full NAV of its interests in the investment fund.

        Pursuant to its internal valuation process and the requirements under the 1940 Act, Main Street performs valuation procedures on each of its portfolio investments quarterly. In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its LMM portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations, recommendations and an assurance certification regarding the Company's determinations of the fair value of its LMM portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each LMM portfolio company at least once every calendar year, and for Main Street's investments in new LMM portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, Main Street may determine that it is not cost-effective, and as a result is not in its stockholders' best interest, to consult with the nationally recognized independent

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

financial advisory services firm on its investments in one or more LMM portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a LMM portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at Main Street's determination of fair value on its investments in a total of 40 LMM portfolio companies for the nine months ended September 30, 2018, representing approximately 62% of the total LMM portfolio at fair value as of September 30, 2018, and on a total of 38 LMM portfolio companies for the nine months ended September 30, 2017, representing approximately 65% of the total LMM portfolio at fair value as of September 30, 2017. Excluding its investments in LMM portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment as of September 30, 2018 and 2017, as applicable, and its LMM portfolio investments related to real estate for which a third-party appraisal is obtained on at least an annual basis, the percentage of the LMM portfolio reviewed and certified by its independent financial advisory services firm for the nine months ended September 30, 2018 and 2017 was 73% and 72% of the total LMM portfolio at fair value as of September 30, 2018 and 2017, respectively.

        For valuation purposes, all of Main Street's Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, Main Street uses observable inputs to determine the fair value of these investments through obtaining third-party quotes or other independent pricing. For Middle Market portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Middle Market debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current hypothetical sale using the Waterfall valuation method. Because the vast majority of the Middle Market portfolio investments are typically valued using third-party quotes or other independent pricing services (including 92% and 95% of the Middle Market portfolio investments as of September 30, 2018 and December 31, 2017, respectively), Main Street does not generally consult with any financial advisory services firms in connection with determining the fair value of its Middle Market investments.

        For valuation purposes, all of Main Street's Private Loan portfolio investments are non-control investments. For Private Loan portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Private Loan debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Private Loan equity investments in a current hypothetical sale using the Waterfall valuation method.

        In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its Private Loan portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations and an assurance certification regarding the Company's determinations of the fair value of its Private Loan portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each Private Loan portfolio company at least once every calendar year, and for Main Street's investments in new Private Loan portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

instances, Main Street may determine that it is not cost-effective, and as a result is not in its stockholders' best interest, to consult with the nationally recognized independent financial advisory services firm on its investments in one or more Private Loan portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a Private Loan portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at its determination of fair value on its investments in a total of 17 Private Loan portfolio companies for the nine months ended September 30, 2018, representing approximately 43% of the total Private Loan portfolio at fair value as of September 30, 2018, and on a total of 19 Private Loan portfolio companies for the nine months ended September 30, 2017, representing approximately 44% of the total Private Loan portfolio at fair value as of September 30, 2017. Excluding its investments in Private Loan portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment as of September 30, 2018 and 2017, as applicable, and its investments in its Private Loan portfolio companies that were not reviewed because the investment is valued based upon third-party quotes or other independent pricing, the percentage of the Private Loan portfolio reviewed and certified by its independent financial advisory services firm for the nine months ended September 30, 2018 and 2017 was 67% and 74% of the total Private Loan portfolio at fair value as of September 30, 2018 and 2017, respectively.

        For valuation purposes, all of Main Street's Other Portfolio investments are non-control investments. Main Street's Other Portfolio investments comprised 4.5% and 4.8% of Main Street's Investment Portfolio at fair value as of September 30, 2018 and December 31, 2017, respectively. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily available. For its Other Portfolio equity investments, Main Street generally determines the fair value of these investments using the NAV valuation method. For its Other Portfolio debt investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Other Portfolio debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method. For its Other Portfolio debt investments for which third-party quotes or other independent pricing are available and appropriate, Main Street determines the fair value of these investments through obtaining third-party quotes or other independent pricing to the extent that these inputs are available and appropriate to determine fair value.

        For valuation purposes, Main Street's investment in the External Investment Manager is a control investment. Market quotations are not readily available for this investment, and as a result, Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach. In estimating the enterprise value, Main Street analyzes various factors, including the entity's historical and projected financial results, as well as its size, marketability and performance relative to the population of market comparables. This valuation approach estimates the value of the investment as if Main Street were to sell, or exit, the investment. In addition, Main Street considers its ability to control the capital structure of the company, as well as the timing of a potential exit, in connection with determining the fair value of the External Investment Manager.

        Due to the inherent uncertainty in the valuation process, Main Street's determination of fair value for its Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. Main Street determines the fair value of each individual investment and records changes in fair value as unrealized appreciation or depreciation.

        Main Street uses an internally developed portfolio investment rating system in connection with its investment oversight, portfolio management and analysis and investment valuation procedures for its LMM portfolio companies. This system takes into account both quantitative and qualitative factors of the LMM portfolio company and the investments held therein.

        The Board of Directors of Main Street has the final responsibility for overseeing, reviewing and approving, in good faith, Main Street's determination of the fair value for its Investment Portfolio, as well as its valuation procedures, consistent with 1940 Act requirements. Main Street believes its Investment Portfolio as of September 30, 2018 and December 31, 2017 approximates fair value as of those dates based on the markets in which Main Street operates and other conditions in existence on those reporting dates.

2.     Use of Estimates

        The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates under different conditions or assumptions. Additionally, as explained in Note B.1., the consolidated financial statements include investments in the Investment Portfolio whose values have been estimated by Main Street with the oversight, review and approval by Main Street's Board of Directors in the absence of readily ascertainable market values. Because of the inherent uncertainty of the Investment Portfolio valuations, those estimated values may differ materially from the values that would have been determined had a ready market for the securities existed.

3.     Cash and Cash Equivalents

        Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase. Cash and cash equivalents are carried at cost, which approximates fair value.

        At September 30, 2018, cash balances totaling $46.3 million exceeded Federal Deposit Insurance Corporation insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company's cash deposits are held at large established high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote.

4.     Interest, Dividend and Fee Income

        Main Street records interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with Main Street's valuation policies, Main Street evaluates accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if Main Street otherwise does not expect the debtor to be able to service all of its debt or other

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(Unaudited)

obligations, Main Street will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is sold or written off, Main Street removes it from non-accrual status.

        As of September 30, 2018, Main Street's total Investment Portfolio had five investments on non-accrual status, which comprised approximately 1.2% of its fair value and 3.5% of its cost. As of December 31, 2017, Main Street's total Investment Portfolio had five investments on non-accrual status, which comprised approximately 0.2% of its fair value and 2.3% of its cost.

        Main Street holds certain debt and preferred equity instruments in its Investment Portfolio that contain payment-in-kind ("PIK") interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the PIK interest and cumulative dividends in cash. Main Street stops accruing PIK interest and cumulative dividends and writes off any accrued and uncollected interest and dividends in arrears when it determines that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2018 and 2017, (i) approximately 1.4% and 1.9%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.1% and 1.8%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2018 and 2017, (i) approximately 1.0% and 2.7%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.8%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash.

        Main Street may periodically provide services, including structuring and advisory services, to its portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the financing.

        A presentation of the investment income Main Street received from its Investment Portfolio in each of the periods presented is as follows:

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2018   2017   2018   2017  
 
  (dollars in thousands)
 

Interest, fee and dividend income:

                         

Interest income

  $ 46,351   $ 39,814   $ 130,229   $ 117,340  

Dividend income

    8,510     10,088     36,021     25,198  

Fee income

    3,402     1,884     7,825     7,406  

Total interest, fee and dividend income

  $ 58,263   $ 51,786   $ 174,075   $ 149,944  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

5.     Deferred Financing Costs

        Deferred financing costs include commitment fees and other costs related to Main Street's multi-year revolving credit facility (the "Credit Facility", as discussed further in Note F) and its notes (as discussed further in Note G), as well as the commitment fees and leverage fees (approximately 3.4% of the total commitment and draw amounts, as applicable) on the SBIC debentures (as discussed further in Note E) which are not accounted for under the fair value option under ASC 825 (as discussed further in Note B.11.). Deferred financing costs in connection with the Credit Facility are capitalized as an asset. Deferred financing costs in connection with all other debt arrangements not using the fair value option are a direct deduction from the related debt liability.

6.     Equity Offering Costs

        The Company's offering costs are charged against the proceeds from equity offerings when the proceeds are received.

7.     Unearned Income—Debt Origination Fees and Original Issue Discount and Discounts / Premiums to Par Value

        Main Street capitalizes debt origination fees received in connection with financings and reflects such fees as unearned income netted against the applicable debt investments. The unearned income from the fees is accreted into income based on the effective interest method over the life of the financing.

        In connection with its portfolio debt investments, Main Street sometimes receives nominal cost warrants or warrants with an exercise price below the fair value of the underlying equity (together, "nominal cost equity") that are valued as part of the negotiation process with the particular portfolio company. When Main Street receives nominal cost equity, Main Street allocates its cost basis in its investment between its debt security and its nominal cost equity at the time of origination based on amounts negotiated with the particular portfolio company. The allocated amounts are based upon the fair value of the nominal cost equity, which is then used to determine the allocation of cost to the debt security. Any discount recorded on a debt investment resulting from this allocation is reflected as unearned income, which is netted against the applicable debt investment, and accreted into interest income based on the effective interest method over the life of the debt investment. The actual collection of this interest is deferred until the time of debt principal repayment.

        Main Street may also purchase debt securities at a discount or at a premium to the par value of the debt security. In the case of a purchase at a discount, Main Street records the investment at the par value of the debt security net of the discount, and the discount is accreted into interest income based on the effective interest method over the life of the debt investment. In the case of a purchase at a premium, Main Street records the investment at the par value of the debt security plus the premium, and the premium is amortized as a reduction to interest income based on the effective interest method over the life of the debt investment.

        To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the interest income. For the three months ended September 30, 2018 and 2017, approximately 3.1% and 3.8%, respectively, of Main Street's total investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

premium reduction. For the nine months ended September 30, 2018 and 2017, approximately 3.0% and 3.7%, respectively, of Main Street's total investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any premium reduction.

8.     Share-Based Compensation

        Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measures the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

9.     Income Taxes

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) the filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The Taxable Subsidiaries primarily hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in Main Street's consolidated financial statements.

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements, and as a result of the tax sharing

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

agreement with its Taxable Subsidiary owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the External Investment Manager's separate financial statements.

        In December 2017, the "Tax Cuts and Jobs Act" legislation was enacted. The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a U.S. federal corporate income tax rate reduction from 35% to 21% and other changes. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. As such, Main Street has accounted for the tax effects as a result of the enactment of the Tax Cuts and Jobs Act beginning with the period ended December 31, 2017.

        The Taxable Subsidiaries and the External Investment Manager use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided, if necessary, against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

10.   Net Realized Gains or Losses and Net Unrealized Appreciation or Depreciation

        Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net unrealized appreciation or depreciation reflects the net change in the fair value of the Investment Portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.

11.   Fair Value of Financial Instruments

        Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Main Street believes that the carrying amounts of its financial instruments, consisting of cash and cash equivalents, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments.

        As part of Main Street's acquisition of the majority of the equity interests of MSC II in January 2010 (the "MSC II Acquisition"), Main Street elected the fair value option under ASC 825, Financial Instruments ("ASC 825"), relating to accounting for debt obligations at their fair value, for the MSC II SBIC debentures acquired as part of the acquisition accounting related to the MSC II Acquisition and values those obligations as discussed further in Note C. In order to provide for a more consistent basis

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

of presentation, Main Street has continued to elect the fair value option for SBIC debentures issued by MSC II subsequent to the MSC II Acquisition. When the fair value option is elected for a given SBIC debenture, the deferred loan costs associated with the debenture are fully expensed in the current period to "Net Unrealized Appreciation (Depreciation)—SBIC debentures" as part of the fair value adjustment. Interest incurred in connection with SBIC debentures which are valued at fair value is included in interest expense.

12.   Earnings per Share

        Basic and diluted per share calculations are computed utilizing the weighted-average number of shares of common stock outstanding for the period. In accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded pursuant to Main Street's equity compensation plans are participating securities and, therefore, are included in the basic earnings per share calculation. As a result, for all periods presented, there is no difference between diluted earnings per share and basic earnings per share amounts.

13.   Recently Issued or Adopted Accounting Standards

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The guidance is effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Substantially all of Main Street's income is not within the scope of ASU 2014-09. For those income items that are within the scope (primarily fee income), Main Street has similar performance obligations as compared with deliverables and separate units of account previously identified. As a result, Main Street's timing of its income recognition remains the same and the adoption of the standard was not material.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early application is permitted. While Main Street continues to assess the effect of adoption, Main Street currently believes the most significant change relates to the recognition of a new right-of-use asset and lease liability on its consolidated balance sheet for its office space operating lease. Main Street currently has one operating lease for office space and does not expect a significant change in the leasing activity between now and adoption. See further discussion of the operating lease obligation in Note M.

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein. Early application is permitted. The impact of the adoption of this accounting standard on Main Street's consolidated financial statements was not material.

        In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which is intended to improve fair value and defined benefit disclosure requirements by removing disclosures that are not cost-beneficial, clarifying disclosures' specific requirements, and adding relevant disclosure requirements. The amendments take effect for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Main Street is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by Main Street as of the specified effective date. Main Street believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.

NOTE C—FAIR VALUE HIERARCHY FOR INVESTMENTS AND DEBENTURES—PORTFOLIO COMPOSITION

        ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Main Street accounts for its investments at fair value.

        In accordance with ASC 820, Main Street has categorized its investments based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Investments recorded on Main Street's balance sheet are categorized based on the inputs to the valuation techniques as follows:

        As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Main Street conducts reviews of fair value hierarchy classifications on a quarterly basis. During the classification process, Main Street may determine that it is appropriate to transfer investments between fair value hierarchy Levels. These transfers occur when Main Street has concluded that it is appropriate for the classification of an individual asset to be changed due to a change in the factors used to determine the selection of the Level. Any such changes are deemed to be effective during the quarter in which the transfer occurs.

        As of September 30, 2018 and December 31, 2017, all of Main Street's LMM portfolio investments consisted of illiquid securities issued by privately held companies. As a result, the fair value determination for all of Main Street's LMM portfolio investments primarily consisted of unobservable inputs. As a result, all of Main Street's LMM portfolio investments were categorized as Level 3 as of September 30, 2018 and December 31, 2017.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        As of September 30, 2018 and December 31, 2017, Main Street's Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Middle Market portfolio investments were categorized as Level 3 as of September 30, 2018 and December 31, 2017.

        As of September 30, 2018 and December 31, 2017, Main Street's Private Loan portfolio investments primarily consisted of investments in interest-bearing secured debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Private Loan portfolio investments were categorized as Level 3 as of September 30, 2018 and December 31, 2017.

        As of September 30, 2018 and December 31, 2017, Main Street's Other Portfolio investments consisted of illiquid securities issued by privately held companies. The fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main Street's Other Portfolio investments were categorized as Level 3 as of September 30, 2018 and December 31, 2017.

        The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The significant unobservable inputs used in the fair value measurement of Main Street's LMM equity securities, which are generally valued through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these approaches is determined to not be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital ("WACC"). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. On the contrary, significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of Main Street's LMM, Middle Market, Private Loan and Other Portfolio debt securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (described in Note B.1.—Valuation of the Investment Portfolio) and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tables below.

        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 portfolio investments as of September 30, 2018 and December 31, 2017:

Type of Investment
  Fair Value
as of
September 30, 2018
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 747,195   Discounted cash flow   WACC   10.0% - 23.3%     13.7%     14.2%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.7x - 8.3x(2)     6.9x     6.0x  

Debt investments

  $ 1,038,326   Discounted cash flow   Risk adjusted discount factor   7.4% - 16.5%(2)     11.8%     11.6%  

            Expected principal recovery percentage   2.8% - 100.0%     99.7%     100.0%  

Debt investments

  $ 641,352   Market approach   Third-party quote   11.0 - 106.3              

Total Level 3 investments

  $ 2,426,873                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 3.9x - 15.0x and the range for risk adjusted discount factor is 4.9% - 35.0%.

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.


Type of Investment
  Fair Value
as of
December 31, 2017
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 653,008   Discounted cash flow   WACC   11.1% - 23.2%     13.7%     14.0%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.3x - 8.5x(2)     7.3x     6.0x  

Debt investments

  $ 858,816   Discounted cash flow   Risk adjusted discount factor   6.7% - 16.1%(2)     11.2%     11.0%  

            Expected principal recovery percentage   2.9% - 100.0%     99.8%     100.0%  

Debt investments

  $ 659,481   Market approach   Third-party quote   11.0 - 106.0              

Total Level 3 investments

  $ 2,171,305                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 4.0x - 17.5x and the range for risk adjusted discount factor is 4.3% - 30.0%.

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

        The following tables provide a summary of changes in fair value of Main Street's Level 3 portfolio investments for the nine month periods ended September 30, 2018 and 2017 (amounts in thousands):

Type of Investment
  Fair Value
as of
December 31,
2017
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2018
 

Debt

  $ 1,518,297   $   $ (512,532 ) $ 656,376   $ 33,724   $ (7,737 ) $ (8,450 ) $ 1,679,678  

Equity

    641,493         (40,920 )   92,855     (34,943 )   69,034     8,450     735,969  

Equity Warrant

    11,515         (280 )   181     (1,120 )   930         11,226  

  $ 2,171,305   $   $ (553,732 ) $ 749,412   $ (2,339 ) $ 62,227   $   $ 2,426,873  

(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.


Type of Investment
  Fair Value
as of
December 31,
2016
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2017
 

Debt

  $ 1,427,823   $   $ (556,538 ) $ 701,633   $ 12,988   $ (16,362 ) $ (6,056 ) $ 1,563,488  

Equity

    549,453         (41,250 )   68,286     (27,562 )   39,244     6,873     595,044  

Equity Warrant

    17,550         (3,261 )   331     (1,542 )   (812 )   (817 )   11,449  

  $ 1,994,826   $   $ (601,049 ) $ 770,250   $ (16,116 ) $ 22,070   $   $ 2,169,981  

(1)
Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.

        As of September 30, 2018 and December 31, 2017, the fair value determination for the SBIC debentures recorded at fair value primarily consisted of unobservable inputs. As a result, the SBIC debentures which are recorded at fair value were categorized as Level 3. Main Street determines the fair value of these instruments primarily using a Yield-to-Maturity approach that analyzes the discounted cash flows of interest and principal for each SBIC debenture recorded at fair value based on estimated market interest rates for debt instruments of similar structure, terms, and maturity. Main Street's estimate of the expected repayment date of principal for each SBIC debenture recorded at fair value is the legal maturity date of the instrument. The significant unobservable inputs used in the fair value measurement of Main Street's SBIC debentures recorded at fair value are the estimated market interest rates used to fair value each debenture using the yield valuation technique described above. Significant increases (decreases) in the estimated market interest rates in isolation would result in a significantly lower (higher) fair value measurement.

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(Unaudited)

        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 SBIC debentures as of September 30, 2018 and December 31, 2017 (amounts in thousands):

Type of Instrument
  Fair Value as of
September 30, 2018
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 44,686   Discounted cash flow   Estimated market interest rates   5.1% - 5.8%     5.3%  

 

Type of Instrument
  Fair Value as of
December 31, 2017
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 48,608   Discounted cash flow   Estimated market interest rates     4.9% - 5.5%     5.1%  

        The following tables provide a summary of changes for the Level 3 SBIC debentures recorded at fair value for the nine month periods ended September 30, 2018 and 2017 (amounts in thousands):

Type of Instrument
  Fair Value as of
December 31, 2017
  Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30, 2018
 

SBIC debentures at fair value

  $ 48,608   $ (4,000 ) $ 1,374   $   $ (1,296 ) $ 44,686  

 

Type of Instrument
  Fair Value as of
December 31, 2016
  Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30, 2017
 

SBIC debentures at fair value

  $ 74,803   $ (25,200 ) $ 5,217   $   $ (5,408 ) $ 49,412  

        At September 30, 2018 and December 31, 2017, Main Street's investments and SBIC debentures at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At September 30, 2018
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 1,149,008   $   $   $ 1,149,008  

Middle Market portfolio investments

    607,666             607,666  

Private Loan portfolio investments

    490,841             490,841  

Other Portfolio investments

    109,210             109,210  

External Investment Manager

    70,148             70,148  

Total investments

  $ 2,426,873   $   $   $ 2,426,873  

SBIC debentures at fair value

  $ 44,686   $   $   $ 44,686  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At December 31, 2017
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 948,196   $   $   $ 948,196  

Middle Market portfolio investments

    609,256             609,256  

Private Loan portfolio investments

    467,475             467,475  

Other Portfolio investments

    104,610             104,610  

External Investment Manager

    41,768             41,768  

Total investments

  $ 2,171,305   $   $   $ 2,171,305  

SBIC debentures at fair value

  $ 48,608   $   $   $ 48,608  

Investment Portfolio Composition

        Main Street's LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Main Street's LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, generally bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, Main Street receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.

        Main Street's Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in Main Street's LMM portfolio. Main Street's Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $3 million to $20 million. Main Street's Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Main Street's private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Main Street's other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, Main Street may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds. For Other Portfolio investments, Main Street generally receives distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten year period.

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(Unaudited)

        Main Street's external asset management business is conducted through its External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. Main Street entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, Main Street shares employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities. Main Street allocates the related expenses to the External Investment Manager pursuant to the sharing agreement. Main Street's total expenses for the three months ended September 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $1.6 million and $1.7 million, respectively. Main Street's total expenses for the nine months ended September 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $5.3 million and $4.8 million, respectively.

        Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level of new investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be highly concentrated among several portfolio companies. For the three and nine months ended September 30, 2018 and 2017, Main Street did not record investment income from any single portfolio company in excess of 10% of total investment income.

        The following tables provide a summary of Main Street's investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2018  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    70     58     54  

Fair value

  $ 1,149.0   $ 607.7   $ 490.8  

Cost

  $ 965.4   $ 613.4   $ 517.3  

% of portfolio at cost—debt

    69.2%     96.1%     92.9%  

% of portfolio at cost—equity

    30.8%     3.9%     7.1%  

% of debt investments at cost secured by first priority lien

    98.5%     89.0%     92.7%  

Weighted-average annual effective yield(b)

    12.2%     9.4%     10.1%  

Average EBITDA(c)

  $ 4.6   $ 89.7   $ 46.2  

(a)
At September 30, 2018, Main Street had equity ownership in approximately 99% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 39%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2018, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street's investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.


 
  As of December 31, 2017  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    70     62     54  

Fair value

  $ 948.2   $ 609.3   $ 467.5  

Cost

  $ 776.5   $ 629.7   $ 489.2  

% of portfolio at cost—debt

    67.1%     97.3%     93.6%  

% of portfolio at cost—equity

    32.9%     2.7%     6.4%  

% of debt investments at cost secured by first priority lien

    98.1%     90.5%     94.5%  

Weighted-average annual effective yield(b)

    12.0%     9.0%     9.2%  

Average EBITDA(c)

  $ 4.4   $ 78.3   $ 39.6  

(a)
At December 31, 2017, Main Street had equity ownership in approximately 97% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 39%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2017, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will realize on its investment because it does not reflect Main Street's expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including six LMM portfolio companies, one Middle Market portfolio company and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street's investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

        As of September 30, 2018, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $109.2 million in fair value and approximately $115.7 million in cost basis and which comprised approximately 4.5% of Main Street's Investment Portfolio at fair value. As of December 31, 2017, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $104.6 million in fair value and approximately $109.4 million in cost basis and which comprised approximately 4.8% of Main Street's Investment Portfolio at fair value.

        As discussed further in Note A.1., Main Street holds an investment in the External Investment Manager, a wholly owned subsidiary that is treated as a portfolio investment. As of September 30,

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(Unaudited)

2018, there was no cost basis in this investment and the investment had a fair value of approximately $70.1 million, which comprised approximately 2.9% of Main Street's Investment Portfolio at fair value. As of December 31, 2017, there was no cost basis in this investment and the investment had a fair value of approximately $41.8 million, which comprised approximately 1.9% of Main Street's Investment Portfolio at fair value.

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30, 2018   December 31, 2017  

First lien debt

    77.7%     79.0%  

Equity

    16.4%     15.3%  

Second lien debt

    4.8%     4.5%  

Equity warrants

    0.7%     0.7%  

Other

    0.4%     0.5%  

    100.0%     100.0%  

 

Fair Value:
  September 30, 2018   December 31, 2017  

First lien debt

    69.9%     70.5%  

Equity

    24.8%     24.4%  

Second lien debt

    4.4%     4.1%  

Equity warrants

    0.5%     0.6%  

Other

    0.4%     0.4%  

    100.0%     100.0%  

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2018 and December 31, 2017 (this information excludes the Other

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(Unaudited)

Portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

Cost:
  September 30, 2018   December 31, 2017  

West

    26.9%     20.7%  

Southwest

    26.6%     26.1%  

Midwest

    18.5%     22.3%  

Northeast

    14.3%     15.2%  

Southeast

    11.0%     12.8%  

Canada

    1.6%     1.9%  

Other Non-United States

    1.1%     1.0%  

    100.0%     100.0%  

 

Fair Value:
  September 30, 2018   December 31, 2017  

West

    28.2%     23.7%  

Southwest

    27.9%     26.8%  

Midwest

    18.0%     20.3%  

Northeast

    13.6%     14.6%  

Southeast

    9.9%     11.9%  

Canada

    1.4%     1.8%  

Other Non-United States

    1.0%     0.9%  

    100.0%     100.0%  

        Main Street's LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by industry at cost and fair value

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(Unaudited)

as of September 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30, 2018   December 31, 2017  

Construction & Engineering

    7.4%     6.4%  

Energy Equipment & Services

    6.6%     6.9%  

Media

    6.5%     4.4%  

IT Services

    5.2%     3.9%  

Commercial Services & Supplies

    5.0%     4.5%  

Diversified Telecommunication Services

    4.9%     4.1%  

Machinery

    4.6%     5.2%  

Aerospace & Defense

    4.4%     3.3%  

Hotels, Restaurants & Leisure

    4.0%     6.2%  

Food Products

    4.0%     1.9%  

Internet Software & Services

    3.9%     3.4%  

Leisure Equipment & Products

    3.9%     3.0%  

Specialty Retail

    3.6%     5.3%  

Electronic Equipment, Instruments & Components

    3.6%     3.4%  

Health Care Providers & Services

    3.3%     2.9%  

Professional Services

    2.7%     3.7%  

Computers & Peripherals

    2.7%     2.8%  

Oil, Gas & Consumable Fuels

    2.6%     1.6%  

Software

    2.0%     2.5%  

Communications Equipment

    2.0%     2.3%  

Containers & Packaging

    1.9%     0.0%  

Distributors

    1.7%     1.9%  

Building Products

    1.7%     1.9%  

Construction Materials

    1.7%     1.7%  

Road & Rail

    1.2%     1.0%  

Internet & Catalog Retail

    1.1%     1.3%  

Diversified Financial Services

    0.7%     1.6%  

Health Care Equipment & Supplies

    0.6%     2.0%  

Diversified Consumer Services

    0.4%     1.6%  

Real Estate Management & Development

    0.3%     1.0%  

Auto Components

    0.0%     1.9%  

Other(1)

    5.8%     6.4%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

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(Unaudited)

Fair Value:
  September 30, 2018   December 31, 2017  

Construction & Engineering

    7.7%     6.3%  

Machinery

    6.6%     6.4%  

Energy Equipment & Services

    5.7%     6.2%  

Media

    5.7%     3.8%  

IT Services

    5.1%     4.0%  

Commercial Services & Supplies

    4.7%     4.1%  

Diversified Telecommunication Services

    4.1%     3.4%  

Aerospace & Defense

    4.1%     3.1%  

Specialty Retail

    3.9%     5.3%  

Hotels, Restaurants & Leisure

    3.8%     5.9%  

Food Products

    3.8%     1.8%  

Internet Software & Services

    3.7%     3.2%  

Leisure Equipment & Products

    3.7%     2.9%  

Computers & Peripherals

    3.6%     3.0%  

Health Care Providers & Services

    3.1%     2.8%  

Diversified Consumer Services

    3.0%     5.9%  

Electronic Equipment, Instruments & Components

    3.0%     2.8%  

Professional Services

    2.5%     3.5%  

Oil, Gas & Consumable Fuels

    2.4%     1.5%  

Software

    2.2%     2.5%  

Construction Materials

    2.0%     1.9%  

Communications Equipment

    1.9%     2.2%  

Containers & Packaging

    1.8%     0.0%  

Distributors

    1.6%     1.8%  

Building Products

    1.5%     1.8%  

Road & Rail

    1.2%     1.0%  

Internet & Catalog Retail

    0.9%     1.1%  

Diversified Financial Services

    0.9%     1.6%  

Health Care Equipment & Supplies

    0.6%     2.1%  

Air Freight & Logistics

    0.6%     1.0%  

Real Estate Management & Development

    0.4%     1.1%  

Auto Components

    0.0%     1.6%  

Other(1)

    4.2%     4.4%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

        At September 30, 2018 and December 31, 2017, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.

Unconsolidated Significant Subsidiaries

        In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, Main Street must determine which of its unconsolidated controlled portfolio companies, if any, are considered "significant subsidiaries." In evaluating these unconsolidated controlled portfolio companies, there are three tests utilized to

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

determine if any of Main Street's Control Investments (as defined in Note A, including those unconsolidated portfolio companies defined as Control Investments in which Main Street does not own greater than 50% of the voting securities) are considered significant subsidiaries: the investment test, the asset test and the income test. The income test is measured by dividing the absolute value of the combined total of total investment income, net realized gain (loss) and net unrealized appreciation (depreciation) of each Control Investment for the period being tested by the absolute value of Main Street's pre-tax income for the same period. Rule 3-09 of Regulation S-X, as interpreted by the SEC, requires Main Street to include separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which Main Street owns greater than 50% of the voting securities) in an annual report if any of the three tests exceed 20% of Main Street's total investments at fair value, total assets or total income, respectively. Rule 4-08(g) of Regulation S-X requires summarized financial information of a Control Investment in an annual report if any of the three tests exceeds 10% of Main Street's annual total amounts and Rule 10-01(b)(1) of Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20% of Main Street's year-to-date total amounts.

        As of September 30, 2018 and December 31, 2017, Main Street had no single investment that represented greater than 20% of its total Investment Portfolio at fair value and no single investment whose total assets represented greater than 20% of its total assets. After performing the income test for the nine months ended September 30, 2018 and 2017, Main Street determined that no single Control Investment had income that represented greater than 20% of Main Street's total income.

NOTE D—EXTERNAL INVESTMENT MANAGER

        As discussed further in Note A.1., the External Investment Manager provides investment management and other services to External Parties. The External Investment Manager is accounted for as a portfolio investment of MSCC since the External Investment Manager conducts all of its investment management activities for External Parties.

        During May 2012, Main Street entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-listed BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow it to own a registered investment adviser, Main Street assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on MSCC's ability to meet the source-of-income requirement necessary for it to maintain its RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. The External Investment Manager has conditionally agreed to waive a limited amount of the historical incentive fees otherwise earned. During the three months ended September 30, 2018 and 2017, the External Investment Manager earned $3.0 million and $2.8 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2018 and 2017, the External Investment Manager earned $8.7 million and $8.1 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

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(Unaudited)

        The investment in the External Investment Manager is accounted for using fair value accounting, with the fair value determined by Main Street and approved, in good faith, by Main Street's Board of Directors. Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach (see further discussion in Note B.1.). Any change in fair value of the investment in the External Investment Manager is recognized on Main Street's consolidated statements of operations in "Net Unrealized Appreciation (Depreciation)—Control investments."

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. Main Street owns the External Investment Manager through the Taxable Subsidiary to allow MSCC to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The taxable income, or loss, of the External Investment Manager may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. As a result of the above described financial reporting and tax treatment, the External Investment Manager provides for any income tax expense, or benefit, and any tax assets or liabilities in its separate financial statements.

        Main Street shares employees with the External Investment Manager and allocates costs related to such shared employees to the External Investment Manager generally based on a combination of the direct time spent, new investment origination activity and assets under management, depending on the nature of the expense. For the three months ended September 30, 2018 and 2017, Main Street allocated $1.6 million and $1.7 million of total expenses, respectively, to the External Investment Manager. For the nine months ended September 30, 2018 and 2017, Main Street allocated $5.3 million and $4.8 million of total expenses, respectively, to the External Investment Manager. The total contribution of the External Investment Manager to Main Street's net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income received from the External Investment Manager. For the three months ended September 30, 2018 and 2017, the total contribution to Main Street's net investment income was $2.7 million and $2.4 million, respectively. For the nine months ended September 30, 2018 and 2017, the total contribution to Main Street's net investment income was $8.0 million and $6.9 million, respectively.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Summarized financial information from the separate financial statements of the External Investment Manager as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017 is as follows:

 
  As of
September 30,
  As of
December 31,
 
 
  2018   2017  
 
  (dollars in thousands)
 

Cash

  $   $  

Accounts receivable—HMS Income

    2,974     2,863  

Total assets

  $ 2,974   $ 2,863  

Accounts payable to MSCC and its subsidiaries

  $ 1,902   $ 1,963  

Dividend payable to MSCC and its subsidiaries

    1,072     900  

Equity

         

Total liabilities and equity

  $ 2,974   $ 2,863  

 

 
  Three Months
Ended Sept 30,
  Nine Months Ended
September 30,
 
 
  2018   2017   2018   2017  
 
  (dollars in thousands)
 

Management fee income

  $ 2,972   $ 2,789   $ 8,667   $ 8,083  

Expenses allocated from MSCC or its subsidiaries:

                         

Salaries, share-based compensation and other personnel costs

    (974 )   (1,033 )   (3,386 )   (2,978 )

Other G&A expenses

    (618 )   (631 )   (1,950 )   (1,838 )

Total allocated expenses

    (1,592 )   (1,664 )   (5,336 )   (4,816 )

Pre-tax income

    1,380     1,125     3,331     3,267  

Tax expense

    (308 )   (413 )   (670 )   (1,135 )

Net income

  $ 1,072   $ 712   $ 2,661   $ 2,132  

NOTE E—SBIC DEBENTURES

        Under existing SBIC regulations, SBA approved SBICs under common control have the ability to issue debentures guaranteed by the SBA up to a regulatory maximum amount of $350.0 million. Main Street, through the funds, has an effective maximum amount of $346.0 million following the prepayment of $4.0 million of existing SBIC debentures as discussed below. SBIC debentures payable were $345.8 million and $295.8 million at September 30, 2018 and December 31, 2017, respectively. SBIC debentures provide for interest to be paid semiannually, with principal due at the applicable 10-year maturity date of each debenture. During the nine months ended September 30, 2018, Main Street issued $54.0 million of SBIC debentures and opportunistically prepaid $4.0 million of existing SBIC debentures as part of an effort to manage the maturity dates of the oldest SBIC debentures. As a result of this prepayment, Main Street recognized a realized loss of $1.4 million due to the previously recognized gain recorded as a result of recording the MSC II debentures at fair value on the date of the acquisition of the majority interests of MSC II. The effect of the realized loss is offset by the reversal of all previously recognized unrealized depreciation due to fair value adjustments since the date of the acquisition. Main Street expects to issue new SBIC debentures under the SBIC program in

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(Unaudited)

the future in an amount up to the regulatory maximum amount for affiliated SBIC funds. The weighted-average annual interest rate on the SBIC debentures was 3.7% and 3.6% as of September 30, 2018 and December 31, 2017, respectively. The first principal maturity due under the existing SBIC debentures is in 2019, and the weighted-average remaining duration as of September 30, 2018 was approximately 5.9 years. For the three months ended September 30, 2018 and 2017, Main Street recognized interest expense attributable to the SBIC debentures of $3.2 million and $2.7 million, respectively. For the nine months ended September 30, 2018 and 2017, Main Street recognized interest expense attributable to the SBIC debentures of $9.3 million and $7.7 million, respectively. Main Street has incurred upfront leverage and other miscellaneous fees of approximately 3.4% of the debenture principal amount. In accordance with SBA regulations, the Funds are precluded from incurring additional non-SBIC debt without the prior approval of the SBA.

        As of September 30, 2018, the recorded value of the SBIC debentures was $337.9 million which consisted of (i) $44.7 million recorded at fair value, or $1.3 million less than the $46.0 million par value of the SBIC debentures issued in MSC II, (ii) $149.8 million par value of SBIC debentures outstanding held in MSMF, with a recorded value of $147.9 million that was net of unamortized debt issuance costs of $1.9 million and (iii) $150.0 million par value of SBIC debentures held in MSC III with a recorded value of $145.4 million that was net of unamortized debt issuance costs of $4.6 million. As of September 30, 2018, if Main Street had adopted the fair value option under ASC 825 for all of its SBIC debentures, Main Street estimates the fair value of its SBIC debentures would be approximately $305.9 million, or $39.9 million less than the $345.8 million face value of the SBIC debentures.

NOTE F—CREDIT FACILITY

        Main Street maintains the Credit Facility to provide additional liquidity to support its investment and operational activities. The Credit Facility was amended and restated during June 2018 and further amended in July 2018 to provide for an increase in total commitments from $585.0 million to $680.0 million and to increase the diversified group of lenders to seventeen lenders, eliminate interest rate adjustments subject to Main Street's maintenance of an investment grade rating and extend the final maturity by two years to September 2023. The amended Credit Facility also contains an upsized accordion feature which allows Main Street to increase the total commitments under the facility to up to $800.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear interest, subject to Main Street's election, on a per annum basis at a rate equal to the applicable LIBOR rate (2.3% as of September 30, 2018) plus (i) 1.875% (or the applicable base rate (Prime Rate of 5.25% as of September 30, 2018) plus 0.875%) as long as Main Street meets certain agreed upon excess collateral and maximum leverage requirements or (ii) 2.0% (or the applicable base rate plus 1.0%) otherwise. Main Street pays unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding the equity ownership or assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio (tangible net worth to Credit Facility borrowings) of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2023, and contains two, one-year

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(Unaudited)

extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval.

        At September 30, 2018, Main Street had $250.0 million in borrowings outstanding under the Credit Facility. As of September 30, 2018, if Main Street had adopted the fair value option under ASC 825 for its Credit Facility, Main Street estimates its fair value would approximate its recorded value. Main Street recognized interest expense related to the Credit Facility, including unused commitment fees and amortization of deferred issuance costs, of $3.3 million and $3.1 million for the three months ended September 30, 2018 and 2017, respectively, and $8.1 million and $8.3 million for the nine month periods ended September 30, 2018 and 2017, respectively. As of September 30, 2018, the interest rate on the Credit Facility was 4.0%. The average interest rate was 4.0% and 3.7% for the three and nine months ended September 30, 2018, respectively. As of September 30, 2018, Main Street was in compliance with all financial covenants of the Credit Facility.

NOTE G—NOTES

        In April 2013, Main Street issued $92.0 million, including the underwriters full exercise of their option to purchase additional principal amounts to cover over-allotments, in aggregate principal amount of 6.125% Notes due 2023 (the "6.125% Notes"). The 6.125% Notes bore interest at a rate of 6.125% per year payable quarterly on January 1, April 1, July 1 and October 1 of each year. The total net proceeds to Main Street from the 6.125% Notes, after underwriting discounts and estimated offering expenses payable, were approximately $89.0 million. On April 2, 2018, Main Street redeemed the entire principal amount of the issued and outstanding 6.125% Notes effective April 1, 2018 (the "Redemption Date"). The 6.125% Notes were redeemed at par value, plus the accrued and unpaid interest thereon from January 1, 2018, through, but excluding, the Redemption Date. As part of the redemption, Main Street recognized a realized loss on extinguishment of debt of $1.5 million in the second quarter of 2018 related to the write-off of the related unamortized deferred financing costs. Main Street recognized no interest expense related to the 6.125% Notes, including amortization of unamortized deferred issuance costs, for the three months ended September 30, 2018, $1.5 million for the three months ended September 30, 2017 and $1.5 million and $4.4 million for the nine months ended September 30, 2018 and 2017, respectively.

        In November 2014, Main Street issued $175.0 million in aggregate principal amount of 4.50% unsecured notes due 2019 (the "4.50% Notes due 2019") at an issue price of 99.53%. The 4.50% Notes due 2019 are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2019; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2019 mature on December 1, 2019, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make-whole provisions. The 4.50% Notes due 2019 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes due 2019,

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

resulting from the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $171.2 million. Main Street may from time to time repurchase the 4.50% Notes due 2019 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2018, the outstanding balance of the 4.50% Notes due 2019 was $175.0 million and the recorded value of $174.2 million was net of unamortized debt issuance costs of $0.8 million. As of September 30, 2018, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes due 2019, Main Street estimates its fair value would be approximately $176.6 million. Main Street recognized interest expense related to the 4.50% Notes due 2019, including amortization of unamortized deferred issuance costs, of $2.1 million and $6.4 million for the three and nine months ended September 30, 2018 and 2017, respectively.

        The indenture governing the 4.50% Notes due 2019 (the "4.50% Notes due 2019 Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 4.50% Notes due 2019 and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2019 Indenture. As of September 30, 2018, Main Street was in compliance with these covenants.

        In November 2017, Main Street issued $185.0 million in aggregate principal amount of 4.50% unsecured notes due 2022 (the "4.50% Notes due 2022") at an issue price of 99.16%. The 4.50% Notes due 2022 are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2022; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2022 mature on December 1, 2022, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make-whole provisions. The 4.50% Notes due 2022 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes due 2022, resulting from the issue price and after underwriting discounts and estimated offering expenses payable, were approximately $182.2 million. Main Street may from time to time repurchase the 4.50% Notes due 2022 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2018, the outstanding balance of the 4.50% Notes due 2022 was $185.0 million and the recorded value of $182.5 million was net of unamortized debt issuance costs of $2.5 million. As of September 30, 2018, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes due 2022, Main Street estimates its fair value would be approximately $183.3 million. Main Street recognized interest expense related to the 4.50% Notes due 2022, including amortization of unamortized deferred issuance costs, of $2.2 million and $6.7 million for the three and nine months ended September 30, 2018, respectively.

        The indenture governing the 4.50% Notes due 2022 (the "4.50% Notes due 2022 Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as

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(Unaudited)

modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 4.50% Notes due 2022 and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2022 Indenture. As of September 30, 2018, Main Street was in compliance with these covenants.

NOTE H—FINANCIAL HIGHLIGHTS

 
  Nine Months Ended
September 30,
 
 
  2018   2017  

Per Share Data:

             

NAV at the beginning of the period

  $ 23.53   $ 22.10  

Net investment income(1)

    1.91     1.74  

Net realized gain (loss)(1)(2)

        0.40  

Net unrealized appreciation(1)(2)

    0.81     0.02  

Income tax provision(1)(2)

    (0.07 )   (0.22 )

Net increase in net assets resulting from operations(1)

    2.65     1.94  

Dividends paid from net investment income

    (1.80 )   (1.46 )

Distributions from capital gains

    (0.19 )   (0.48 )

Total dividends paid

    (1.99 )   (1.94 )

Impact of the net change in monthly dividends declared prior to the end of the period and paid in the subsequent period

    (0.01 )   (0.01 )

Accretive effect of stock offerings (issuing shares above NAV per share)

    0.44     0.84  

Accretive effect of DRIP issuance (issuing shares above NAV per share)

    0.06     0.04  

Other(3)

    0.01     0.05  

NAV at the end of the period

  $ 24.69   $ 23.02  

Market value at the end of the period

  $ 38.50   $ 39.75  

Shares outstanding at the end of the period

    60,962,505     57,756,193  

(1)
Based on weighted-average number of common shares outstanding for the period.

(2)
Net realized gains or losses, net unrealized appreciation or depreciation, and income taxes can fluctuate significantly from period to period.

(3)
Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted-average basic shares outstanding during the period and

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  Nine Months
Ended September 30,
 
 
  2018   2017  
 
  (dollars in thousands)
 

NAV at end of period

  $ 1,505,442   $ 1,329,666  

Average NAV

  $ 1,432,441   $ 1,264,457  

Average outstanding debt

  $ 927,962   $ 846,255  

Ratio of total expenses, including income tax expense, to average NAV(1)(2)

    4.44 %   5.10 %

Ratio of operating expenses to average NAV(2)(3)

    4.15 %   4.12 %

Ratio of operating expenses, excluding interest expense, to average NAV(2)(3)

    1.92 %   2.00 %

Ratio of net investment income to average NAV(2)

    8.00 %   7.74 %

Portfolio turnover ratio(2)

    23.12 %   28.31 %

Total investment return(2)(4)

    2.05 %   13.68 %

Total return based on change in NAV(2)(5)

    11.50 %   9.09 %

(1)
Total expenses are the sum of operating expenses and net income tax provision/benefit. Net income tax provision/benefit includes the accrual of net deferred tax provision/benefit relating to the net unrealized appreciation/depreciation on portfolio investments held in Taxable Subsidiaries and due to the change in the loss carryforwards, which are non-cash in nature and may vary significantly from period to period. Main Street is required to include net deferred tax provision/benefit in calculating its total expenses even though these net deferred taxes are not currently payable/receivable.

(2)
Not annualized.

(3)
Unless otherwise noted, operating expenses include interest, compensation, general and administrative and share-based compensation expenses, net of expenses allocated to the External Investment Manager.

(4)
Total investment return is based on the purchase of stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by Main Street's dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.

(5)
Total return is based on change in net asset value was calculated using the sum of ending net asset value plus dividends to stockholders and other non-operating changes during the period, as divided by the beginning net asset value. Non-operating changes include any items that affect net asset value other than the net increase in net assets resulting from operations, such as the effects of stock offerings, shares issued under the DRIP and equity incentive plans and other miscellaneous items.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE I—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

        Main Street paid regular monthly dividends of $0.19 per share for each month of January through September 2018, totaling $34.5 million, or $0.570 per share, for the three months ended September 30, 2018, and $101.8 million, or $1.71 per share, for the nine months ended September 30, 2018. The third quarter 2018 regular monthly dividends represent a 2.7% increase from the regular monthly dividends paid for the third quarter of 2017. Additionally, Main Street paid a $0.275 per share semi-annual supplemental dividend, totaling $16.6 million, in June 2018 compared to $15.6 million, or $0.275 per share, paid in June 2017. The regular monthly dividends equaled a total of approximately $31.5 million, or $0.555 per share, for the three months ended September 30, 2017, and $92.9 million, or $1.665 per share, for the nine months ended September 30, 2017.

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The determination of the tax attributes for Main Street's distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Listed below is a reconciliation of "Net increase in net assets resulting from operations" to taxable income and to total distributions declared to common stockholders for the nine months ended September 30, 2018 and 2017.

 
  Nine Months Ended
September 30,
 
 
  2018   2017  
 
  (estimated, dollars
in thousands)

 

Net increase in net assets resulting from operations

  $ 158,708   $ 109,180  

Book tax difference from share-based compensation expense

    (3,686 )   (3,352 )

Net unrealized appreciation

    (48,386 )   (1,050 )

Income tax provision

    4,097     12,383  

Pre-tax book loss not consolidated for tax purposes

    1,049     1,386  

Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates

    21,493     2,711  

Estimated taxable income(1)

    133,275     121,258  

Taxable income earned in prior year and carried forward for distribution in current year

    42,357     42,362  

Taxable income earned prior to period end and carried forward for distribution next period

    (68,387 )   (65,233 )

Dividend payable as of period end and paid in the following period

    11,889     10,934  

Total distributions accrued or paid to common stockholders

  $ 119,134   $ 109,321  

(1)
Main Street's taxable income for each period is an estimate and will not be finally determined until the company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate.

        The Taxable Subsidiaries primarily hold certain portfolio investments for Main Street. The Taxable Subsidiaries permit Main Street to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with Main Street for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in Main Street's consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in Main Street's consolidated financial statements.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        For the three months ended September 30, 2018, Main Street recognized a net income tax provision of $3.8 million, principally consisting of a deferred tax provision of $3.0 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, and a $0.8 million current tax expense, which is primarily related to a $0.5 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.3 million provision for current U.S. federal income and state taxes. For the nine months ended September 30, 2018, Main Street recognized a net income tax provision of $4.1 million, principally consisting of a deferred tax provision of $3.3 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, and a $0.8 million current tax expense, which is primarily related to a $1.0 million accrual for excise tax on Main Street's estimated undistributed taxable income, partially offset by a $0.2 million benefit for current U.S. federal income and state taxes. For the three months ended September 30, 2017, Main Street recognized a net income tax provision of $4.6 million, principally consisting of a deferred tax provision of $3.8 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, and a $0.8 million current tax expense, which is primarily related to a $0.5 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.3 million provision for current U.S. federal income and state taxes. For the nine months ended September 30, 2017, Main Street recognized a net income tax provision of $12.4 million, principally consisting of a deferred tax provision of $9.9 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, and $2.5 million current tax expense, which is primarily related to a $1.6 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.9 million provision for current U.S. federal income and state taxes.

        The net deferred tax liability at September 30, 2018 was $14.2 million compared to $10.6 million at December 31, 2017, primarily related to loss carryforwards, timing differences in net unrealized appreciation or depreciation and other temporary book-tax differences relating to portfolio investments held by the Taxable Subsidiaries. The net deferred tax liability as of December 31, 2017 equal to $10.6 million reflects a reduction of $2.8 million resulting from the decrease in the U.S. federal corporate income tax rate from 35% to 21% as enacted by the Tax Cuts and Jobs Act (see further discussion in Note B.9.). At September 30, 2018, for U.S. federal income tax purposes, the Taxable Subsidiaries had a net operating loss carryforward from prior years which, if unused, will expire in various taxable years from 2028 through 2037. Under the Tax Cuts and Jobs Act, any net operating losses generated in 2018 and future periods will have an indefinite carryforward. The timing and manner in which Main Street will utilize any loss carryforwards generated before December 31, 2017 may be limited in the future under the provisions of the Code.

NOTE J—COMMON STOCK

        Main Street maintains a program with certain selling agents through which it can sell shares of its common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the nine months ended September 30, 2018, Main Street sold 1,901,630 shares of its common stock at a

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

weighted-average price of $38.48 per share and raised $73.2 million of gross proceeds under the ATM Program. Net proceeds were $72.1 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2018, there were 3,152,858 shares available for sale under the ATM Program.

        During the year ended December 31, 2017, Main Street sold 3,944,972 shares of its common stock at a weighted-average price of $38.72 per share and raised $152.8 million of gross proceeds under the ATM Program. Net proceeds were $150.9 million after commissions to the selling agents on shares sold and offering costs.

NOTE K—DIVIDEND REINVESTMENT PLAN ("DRIP")

        Main Street's DRIP provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if Main Street declares a cash dividend, the company's stockholders who have not "opted out" of the DRIP by the dividend record date will have their cash dividend automatically reinvested into additional shares of MSCC common stock. The share requirements of the DRIP may be satisfied through the issuance of shares of common stock or through open market purchases of common stock. Newly issued shares will be valued based upon the final closing price of MSCC's common stock on the valuation date determined for each dividend by Main Street's Board of Directors. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased, before any associated brokerage or other costs. Main Street's DRIP is administered by its transfer agent on behalf of Main Street's record holders and participating brokerage firms. Brokerage firms and other financial intermediaries may decide not to participate in Main Street's DRIP but may provide a similar dividend reinvestment plan for their clients.

        For the nine months ended September 30, 2018, $9.7 million of the total $118.4 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 253,125 newly issued shares. For the nine months ended September 30, 2017, $6.1 million of the total $108.4 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 158,301 newly issued shares. The shares disclosed above relate only to Main Street's DRIP and exclude any activity related to broker-managed dividend reinvestment plans.

NOTE L—SHARE-BASED COMPENSATION

        Main Street accounts for its share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, Main Street measured the grant date fair value based upon the market price of its common stock on the date of the grant and amortizes the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

        Main Street's Board of Directors approves the issuance of shares of restricted stock to Main Street employees pursuant to the Main Street Capital Corporation 2015 Equity and Incentive Plan (the "Equity and Incentive Plan"). These shares generally vest over a three-year period from the grant date. The fair value is expensed over the service period, starting on the grant date. The following table summarizes the restricted stock issuances approved by Main Street's Board of Directors under the

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Equity and Incentive Plan, net of shares forfeited, if any, and the remaining shares of restricted stock available for issuance as of September 30, 2018.

Restricted stock authorized under the plan

    3,000,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (900 )

Year ended December 31, 2016

    (260,514 )

Year ended December 31, 2017

    (223,812 )

Nine Months ended September 30, 2018

    (244,285 )

Restricted stock available for issuance as of September 30, 2018

    2,270,489  

        As of September 30, 2018, the following table summarizes the restricted stock issued to Main Street's non-employee directors and the remaining shares of restricted stock available for issuance pursuant to the Main Street Capital Corporation 2015 Non-Employee Director Restricted Stock Plan. These shares are granted upon appointment or election to the board and vest on the day immediately preceding the annual meeting of stockholders following the respective grant date and are expensed over such service period.

Restricted stock authorized under the plan

    300,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (6,806 )

Year ended December 31, 2016

    (6,748 )

Year ended December 31, 2017

    (5,948 )

Nine Months ended September 30, 2018

    (6,376 )

Restricted stock available for issuance as of September 30, 2018

    274,122  

        For the three months ended September 30, 2018 and 2017, Main Street recognized total share-based compensation expense of $2.1 million and $2.5 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors and, for the nine months ended September 30, 2018 and 2017, Main Street recognized total share-based compensation expense of $6.9 million and $7.5 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors.

        As of September 30, 2018, there was $13.2 million of total unrecognized compensation expense related to Main Street's non-vested restricted shares. This compensation expense is expected to be recognized over a remaining weighted-average period of approximately 2.0 years as of September 30, 2018.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE M—COMMITMENTS AND CONTINGENCIES

        At September 30, 2018, Main Street had the following outstanding commitments (in thousands):

 
  Amount  

Investments with equity capital commitments that have not yet funded:

       

Congruent Credit Opportunities Funds

       

Congruent Credit Opportunities Fund II, LP

  $ 8,488  

Congruent Credit Opportunities Fund III, LP

    8,117  

  $ 16,605  

Encap Energy Fund Investments

   
 
 

EnCap Energy Capital Fund VIII, L.P. 

  $ 356  

EnCap Energy Capital Fund IX, L.P. 

    463  

EnCap Energy Capital Fund X, L.P. 

    2,619  

EnCap Energy Capital Fund VIII Co-Investors, L.P. 

    30  

EnCap Flatrock Midstream Fund II, L.P. 

    6,311  

EnCap Flatrock Midstream Fund III, L.P. 

    2,220  

  $ 11,999  

Brightwood Capital Fund Investments

   
 
 

Brightwood Capital Fund III, LP

  $ 3,000  

Brightwood Capital Fund IV, LP

    3,500  

  $ 6,500  

Freeport Fund Investments

   
 
 

Freeport First Lien Loan Fund III LP

  $ 3,942  

Freeport Financial SBIC Fund LP

    1,375  

  $ 5,317  

Harris Preston Fund Investments

   
 
 

HPEP 3, L.P. 

  $ 3,267  

EIG Fund Investments

 
$

4,693
 

LKCM Headwater Investments I, L.P. 

 
$

2,500
 

Dos Rios Partners

   
 
 

Dos Rios Partners, LP

  $ 1,594  

Dos Rios Partners—A, LP

    506  

  $ 2,100  

Copper Trail Fund Investments

   
 
 

Copper Trail Energy Fund I, LP

  $ 1,730  

I-45 SLF LLC

 
$

800
 

Access Media Holdings, LLC

 
$

486
 

Total equity commitments

  $ 55,997  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  Amount  

Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded:

       

SI East, LLC

   
7,500
 

NexRev LLC

    4,000  

PT Network, LLC

    3,618  

California Splendor Holdings LLC

    3,509  

Adams Publishing Group, LLC

    3,035  

Hoover Group, Inc. 

    2,113  

Wireless Vision Holdings, LLC

    2,068  

NNE Partners, LLC

    2,042  

Chamberlin Holding LLC

    1,600  

Direct Marketing Solutions, Inc. 

    1,600  

Hawk Ridge Systems, LLC

    1,600  

Meisler Operating LLC

    1,600  

Hojeij Branded Foods, LLC

    1,588  

IDX Broker, LLC

    1,500  

Lamb Ventures, LLC

    1,500  

Boccella Precast Products LLC

    1,440  

American Nuts, LLC

    1,266  

Gamber-Johnson Holdings, LLC

    1,200  

Volusion, LLC

    1,075  

NRI Clinical Research, LLC

    1,000  

Aethon United BR LP

    938  

CTVSH, PLLC

    800  

DTE Enterprises RLOC

    750  

ASC Ortho Management Company, LLC

    750  

Barfly Ventures, LLC

    735  

Jensen Jewelers of Idaho, LLC

    500  

UniTek Global Services, Inc. 

    500  

New Era Technology, Inc. 

    479  

Clad-Rex Steel, LLC

    400  

Dynamic Communities, LLC

    250  

ATS Workholding, LLC

    146  

Arcus Hunting LLC

    120  

BigName Commerce, LLC

    29  

Total loan commitments

  $ 51,251  

Total commitments

  $ 107,248  

        Main Street will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (which are typically through existing cash and cash equivalents and borrowings under the Credit Facility). Main Street follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments as necessary. The Company had total unrealized depreciation of $0.5 million on the outstanding unfunded commitments as of September 30, 2018.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Main Street has an operating lease for office space. Total rent expense incurred by Main Street for each of the three months ended September 30, 2018 and 2017 was $0.2 million. Total rent expense incurred by Main Street for each of the nine months ended September 30, 2018 and 2017 was $0.5 million.

        The following table shows future minimum payments under Main Street's operating lease as of September 30, 2018:

For the Years Ended December 31,
  Amount  

2018

  $ 184  

2019

    749  

2020

    763  

2021

    777  

2022

    791  

Thereafter

    4,239  

Total

  $ 7,503  

        Main Street may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to impose liability on Main Street in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, Main Street does not expect any current matters will materially affect its financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on Main Street's financial condition or results of operations in any future reporting period.

NOTE N—RELATED PARTY TRANSACTIONS

        As discussed further in Note D, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of Main Street's Investment Portfolio. At September 30, 2018, Main Street had a receivable of approximately $3.0 million due from the External Investment Manager which included (i) approximately $1.9 million related primarily to operating expenses incurred by MSCC or its subsidiaries as required to support the External Investment Manager's business and amounts due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion in Note D) and (ii) approximately $1.1 million of dividends declared but not paid by the External Investment Manager.

        In November 2015, Main Street's Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2018, $5.9 million of compensation and

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $3.3 million was deferred into phantom Main Street stock units, representing 97,344 shares of Main Street's common stock. Including phantom stock units issued through dividend reinvestment and net of any shares distributed, the phantom stock units outstanding as of September 30, 2018 represented 116,989 shares of Main Street's common stock. Any amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but are included in operating expenses and weighted-average shares outstanding in Main Street's consolidated statements of operations as earned.

NOTE O—SUBSEQUENT EVENTS

        In October 2018, Main Street declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2018. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that Main Street declared for the fourth quarter of 2018 of $0.195 per share for each of October, November and December 2018.

        During October 2018, Main Street declared regular monthly dividends of $0.195 per share for each month of January, February and March of 2019. These regular monthly dividends equal a total of $0.585 per share for the first quarter of 2019 and represent a 2.6% increase from the regular monthly dividends declared for the first quarter of 2018. Including the semi-annual supplemental dividend declared for December 2018 and the regular monthly dividends declared for the fourth quarter of 2018 and the first quarter of 2019, Main Street will have paid $24.820 per share in cumulative dividends since its October 2007 initial public offering.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments in and Advances to Affiliates
September 30, 2018
(dollars in thousands)
(unaudited)

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

Majority-owned investments

                                                   

Café Brazil, LLC

 

Member Units

 

(8)

 
$

 
$

(120

)

$

222
 
$

4,900
 
$

 
$

120
 
$

4,780
 

California Splendor Holdings LLC

  LIBOR Plus 8.00% (Floor 1.00%)   (9)             702         18,318     3,500     14,818  

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             2,084         27,744         27,744  

  Preferred Member Units   (9)             115         12,500     1,725     10,775  

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (5)         (24 )   1,148     13,280     24     824     12,480  

  Member Units   (5)         880     400     9,500     880         10,380  

  10% Secured Debt   (5)             88     1,183         16     1,167  

  Member Units   (5)                 280             280  

CMS Minerals Investments

  Member Units   (9)         748     83     2,392     748     549     2,591  

Direct Marketing Solutions, Inc.

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             1,872         18,621     548     18,073  

  Preferred Stock   (9)         3,380             11,780         11,780  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 9.00% (Floor 2.00%)   (5)         (40 )   1,997     23,400     40     914     22,526  

  Member Units   (5)         16,750     1,436     23,370     16,750         40,120  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (8)         (23 )   916     11,603     23     1,525     10,101  

  Member Units   (8)         10,070     979     21,970     10,070         32,040  

Harborside Holdings, LLC

  Member Units   (8)                 9,400     100         9,500  

Harris Preston Fund Investments

  LP Interests (2717 MH, L.P.)   (8)         93         536     597         1,133  

Hydratec, Inc.

  Common Stock   (9)     7,922     (7,905 )   332     15,000         15,000      

IDX Broker, LLC

  11.5% Secured Debt   (9)         (35 )   1,330     15,250     35     785     14,500  

  Preferred Member Units   (9)         810     206     11,660     810         12,470  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)   (9)         (15 )   338     3,955     15     465     3,505  

  Member Units   (9)         (10 )   190     5,100         10     5,090  

Lamb Ventures, LLC

  11% Secured Debt   (8)         (16 )   739     9,942     215     1,818     8,339  

  Preferred Equity   (8)                 400             400  

  Member Units   (8)         (60 )       6,790         60     6,730  

  9.5% Secured Debt   (8)             31     432             432  

  Member Units   (8)         110     20     520     110         630  

Mid-Columbia Lumber Products, LLC

  10% Secured Debt   (9)             136     1,390     355         1,745  

  12% Secured Debt   (9)             367     3,863     12         3,875  

  Member Units   (9)         1,689     5     1,575     2,285         3,860  

  9.5% Secured Debt   (9)             56     791         34     757  

  Member Units   (9)         180     39     1,290     180         1,470  

MSC Adviser I, LLC

  Member Units   (8)         28,380     2,661     41,768     28,380         70,148  

Mystic Logistics Holdings, LLC

  12% Secured Debt   (6)             726     7,696     32     232     7,496  

  Common Stock   (6)         (6,110 )       6,820         6,110     710  

NexRev LLC

  11% Secured Debt   (8)             1,346         17,281         17,281  

  Preferred Member Units   (8)         1,010     40         7,890         7,890  

NRP Jones, LLC

  12% Secured Debt   (5)             580     6,376             6,376  

  Member Units   (5)         2,120         3,250     2,120         5,370  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)   (8)         (28 )   1,118     16,100     28     1,028     15,100  

  Common Stock   (8)         (660 )   53     12,440         660     11,780  

Principle Environmental, LLC (d/b.a

  13% Secured Debt   (8)         (37 )   775     7,477     37     37     7,477  

TruHorizon Environmental Solutions)

  Preferred Member Units   (8)         1,600     1,282     11,490     1,600         13,090  

  Warrants   (8)         130         650     130         780  

Quality Lease Service, LLC

  Zero Coupon Secured Debt   (7)         (500 )       6,950         500     6,450  

  Member Units   (7)         (1,668 )       4,938     1,100     1,668     4,370  

Tedder Industries, LLC

  12%, Secured Debt   (9)             501         16,240         16,240  

  Member Units   (9)                     7,476         7,476  

The MPI Group, LLC

  9% Secured Debt   (7)         (1,301 )   201     2,410     1     1,301     1,110  

  Series A Preferred Units   (7)                              

  Warrants   (7)                              

  Member Units   (7)         90     92     2,389     91         2,480  

Uvalco Supply, LLC

  9% Secured Debt   (8)             7     348         348      

  Member Units   (8)     301     (301 )   898     3,880         3,880      

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Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

Vision Interests, Inc.

  13% Secured Debt   (9)             284     2,797     13     499     2,311  

  Series A Preferred Stock   (9)         280         3,000     740         3,740  

  Common Stock   (9)         740             280         280  

Ziegler's NYPD, LLC

  6.5% Secured Debt   (8)         2     51     996     4         1,000  

  12% Secured Debt   (8)             34     300     125         425  

  14% Secured Debt   (8)             292     2,750             2,750  

  Warrants   (8)                              

  Preferred Member Units   (8)         (1,150 )       3,220         1,149     2,071  

Other controlled investments

                                                   

Access Media Holdings, LLC

 

10% PIK Secured Debt

 

(5)

   
   
(2,030

)
 
13
   
17,150
   
   
2,030
   
15,120
 

  Preferred Member Units (12)   (5)         (1,517 )           1,030     1,517     (487 )

  Member Units   (5)                              

ASC Interests, LLC

  11% Secured Debt   (8)             148     1,795         178     1,617  

  Member Units   (8)         (160 )       1,530         160     1,370  

ATS Workholding, LLC

  5% Secured Debt   (9)             245     3,249     1,125         4,374  

  Preferred Member Units   (9)                 3,726             3,726  

Bond-Coat, Inc.

  12% Secured Debt   (8)         253     1,102     11,596             11,596  

  Common Stock   (8)                 9,370             9,370  

Brewer Crane Holdings, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             969         9,834     248     9,586  

  Preferred Member Units   (9)             87         4,280         4,280  

CBT Nuggets, LLC

  Member Units   (9)         (27,470 )   11,395     89,560         27,470     62,090  

Chamberlin Holding LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)             1,956         21,405         21,405  

  Member Units   (8)         6,350     1,367         17,790         17,790  

Charps, LLC

  LIBOR Plus 7.00% (Floor 1.00%)   (5)                     1,587         1,587  

  12% Secured Debt   (5)             1,587     18,225     58     2,500     15,783  

  Preferred Member Units   (5)         400         650     400         1,050  

Copper Trail Fund Investments

  LP Interests (CTMH, LP)   (9)             10         872         872  

  LP Interests (Copper Trail Energy Fund I, LP)   (9)         229     57     2,500     999         3,499  

Datacom, LLC

  8% Secured Debt   (8)         (110 )   33     1,575     225     110     1,690  

  10.50% PIK Secured Debt   (8)         (718 )   330     11,110     168     718     10,560  

  Class A Preferred Member Units   (8)         (843 )       730     113     843      

  Class B Preferred Member Units   (8)                              

Digital Products Holdings LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (5)             1,886         26,158     330     25,828  

  Preferred Member Units   (5)             100         8,800     334     8,466  

Garreco, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)             497     5,443     13     121     5,335  

  Member Units   (8)                 1,940             1,940  

Guerdon Modular Holdings, Inc.

  13% Secured Debt   (9)         (570 )   871     10,632     2,316     970     11,978  

  Preferred Stock   (9)                              

  Common Stock   (9)                              

  Warrants   (9)                              

Gulf Manufacturing, LLC

  Member Units   (8)         1,630     1,227     10,060     1,630         11,690  

Gulf Publishing Holdings, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (8)             9     80     160     80     160  

  12.5% Secured Debt   (8)             1,223     12,703     19     134     12,588  

  Member Units   (8)         (270 )       4,840         270     4,570  

Harrison Hydra-Gen, Ltd.

  Common Stock   (8)         3,990     120     3,580     3,990         7,570  

HW Temps LLC

  LIBOR Plus 11.00% (Floor 1.00%)   (6)             1,035     9,918     14         9,932  

  Preferred Member Units   (6)         2     135     3,940     2         3,942  

KBK Industries, LLC

  10% Secured Debt   (5)         (3 )   9     375     3     378      

  12.5% Secured Debt   (5)         (33 )   546     5,900     33     5,933      

  Member Units   (5)         2,680     756     4,420     2,680         7,100  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt   (8)     (3,361 )   3,078             3,361     3,361      

  Preferred Member Units   (8)     (5,352 )   5,352             5,352     5,352      

Market Force Information, LLC

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             16         680     280     400  

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             2,322     23,143     32     560     22,615  

  Member Units   (9)         (450 )       14,700         450     14,250  

MH Corbin Holding LLC

  10% Secured Debt   (5)             1,044     12,526         527     11,999  

  Preferred Member Units   (5)         (1,500 )   105     6,000         1,500     4,500  

NAPCO Precast, LLC

  LIBOR Plus 8.50%   (8)         (18 )   946     11,475     18     18     11,475  

  Member Units   (8)         1,610     1,024     11,670     1,610         13,280  

NRI Clinical Research, LLC

  14% Secured Debt   (9)         152     726     4,265     3,035     400     6,900  

  Warrants   (9)                 500             500  

  Member Units   (9)                 2,500             2,500  

NuStep, LLC

  12% Secured Debt   (5)             1,907     20,420     28         20,448  

  Preferred Member Units   (5)                 10,200             10,200  

OMi Holdings, Inc.

  Common Stock   (8)         1,370     1,128     14,110     1,370         15,480  

Pegasus Research Group, LLC

  Member Units   (8)         (2,060 )       10,310         2,060     8,250  

100


Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

River Aggregates, LLC

  Zero Coupon Secured Debt   (8)         (28 )   43     707     43     28     722  

  Member Units   (8)                 4,610             4,610  

  Member Units   (8)         171         2,559     171         2,730  

SoftTouch Medical Holdings LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (7)         (30 )   120     7,140     30     7,170      

  Member Units   (7)     5,171     (5,159 )   865     10,089         10,089      

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

                    25     (10,632 )            

Total Control investments

          $ 4,681   $ 33,357   $ 64,756   $ 750,706   $ 327,214   $ 121,424   $ 967,128  

Affiliate Investments

                                                   

                                                   

AFG Capital Group, LLC

 

Warrants

 

(8)

 
$

 
$

80
 
$

 
$

860
 
$

80
 
$

 
$

940
 

  Preferred Member Units   (8)         350     30     3,590     350         3,940  

Barfly Ventures, LLC

  12% Secured Debt   (5)         (4 )   859     8,715     1,097     4     9,808  

  Options   (5)         (190 )       920         190     730  

  Warrants   (5)         (110 )       520         110     410  

BBB Tank Services, LLC

  LIBOR Plus 10% (Floor 1.00%)   (8)             63     778     417     562     633  

  17% Secured Debt   (8)             511     3,876     22         3,898  

  Member Units   (8)         (30 )       500         30     470  

Boccella Precast Products LLC

  LIBOR Plus 8% (Floor 1.00%)   (6)         (29 )   1,442     16,400     2,188     2,304     16,284  

  Member Units   (6)         1,520     510     3,440     1,520         4,960  

Boss Industries, LLC

  Preferred Member Units   (5)         1,777     495     3,930     1,900         5,830  

Bridge Capital Solutions Corporation

  13% Secured Debt   (6)             1,011     5,884     246         6,130  

  Warrants   (6)         500         3,520     500         4,020  

  13% Secured Debt   (6)         (1 )   100     1,000     1     1     1,000  

  Preferred Member Units   (6)             83     1,000             1,000  

Buca C, LLC

  LIBOR Plus 9.25% (Floor 1.00%)   (7)             1,708     20,193     34     900     19,327  

  Preferred Member Units   (7)         5     188     4,172     193         4,365  

CAI Software LLC

  12% Secured Debt   (6)         (11 )   367     4,083     11     811     3,283  

  Member Units   (6)         (610 )   20     3,230         610     2,620  

Chandler Signs Holdings, LLC

  12% Secured Debt/1.00% PIK   (8)         (6 )   451     4,500     40     6     4,534  

  Class A Units   (8)         (390 )   45     2,650         390     2,260  

Charlotte Russe, Inc

  8.50% Secured Debt   (9)         7,779     458     7,807     16,658     17,400     7,065  

  Common Stock   (9)                     3,141         3,141  

Condit Exhibits, LLC

  Member Units   (9)             104     1,950             1,950  

Congruent Credit Opportunities Funds

  LP Interests (Fund II)   (8)         (140 )       1,515         660     855  

  LP Interests (Fund III)   (8)         (10 )   1,486     18,632     4,014     1,465     21,181  

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)   (8)         241         7,165     241     150     7,256  

  LP Interests (Dos Rios Partners—A, LP)   (8)         462         1,889     462     47     2,304  

East Teak Fine Hardwoods, Inc.

  Common Stock   (7)         (70 )   30     630         70     560  

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund—A, L.P.)   (8)             37     1,055     416     1,030     441  

Freeport Financial Funds

  LP Interests (Freeport Financial SBIC Fund LP)   (5)         247     102     5,614     247         5,861  

  LP Interests (Freeport First Lien Loan Fund III LP)   (5)         (123 )   660     8,506         123     8,383  

Gault Financial, LLC (RMB Capital, LLC)

  8% Secured Debt   (7)         228     734     11,532     228     450     11,310  

  Warrants   (7)                              

Harris Preston Fund Investments

  LP Interests (HPEP 3, L.P.)   (8)                 943     790         1,733  

Hawk Ridge Systems, LLC

  10.5% Secured Debt   (9)         (20 )   1,168     14,300     20     20     14,300  

  Preferred Member Units   (9)         3,210     352     3,800     3,210         7,010  

  Preferred Member Units   (9)         170         200     170         370  

Houston Plating and Coatings, LLC

  8% Unsecured Convertible Debt   (8)         280     182     3,200     280         3,480  

  Member Units   (8)         1,293     177     6,140     1,350         7,490  

I-45 SLF LLC

  Member Units   (8)         (219 )   2,154     16,841         219     16,622  

L.F. Manufacturing Holdings, LLC

  Member Units   (8)         60         2,000     60         2,060  

Meisler Operating LLC

  LIBOR Plus 8.50% (Floor 1.00%)   (5)             1,646     16,633     3,989     320     20,302  

  Member Units   (5)         525         3,390     2,181         5,571  

OnAsset Intelligence, Inc.

  12% PIK Secured Debt   (8)             477     5,094     478         5,572  

  10% PIK Secured Debt   (8)             4     48     3         51  

  Preferred Stock   (8)                              

  Warrants   (8)                              

OPI International Ltd.

  Common Stock   (8)                              

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Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2017
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2018
Fair
Value
 

PCI Holding Company, Inc.

  12% Current/3% PIK Secured Debt   (9)             1,639     12,593     513     976     12,130  

  Preferred Stock   (9)         (890 )       890         890      

  Preferred Stock   (9)         570         2,610     570         3,180  

Rocaceia, LLC (Quality Lease and Rental

  12% Secured Debt   (8)                 250             250  

Holdings, LLC)

  Preferred Member Units   (8)                              

Salado Acquisition, LLC

  Class A Preferred Units   (8)         (430 )   23     1,790         430     1,360  

SI East, LLC

  10.25% Current, Secured Debt   (7)             499         34,869         34,869  

  Preferred Member Units   (7)                     6,000         6,000  

Slick Innovations, LLC

  14.00% Current, Secured Debt   (6)             197         6,950         6,950  

  Warrants   (6)                     181         181  

  Preferred Member Units   (6)                     700         700  

Tin Roof Acquisition Company

  12% Secured Debt   (7)             841     12,722     561     13,283      

  Class C Preferred Stock   (7)             152     3,027     152     3,179      

UniTek Global Services, Inc.

  LIBOR Plus 5.50% (Floor 1.00%)   (6)             57         2,476         2,476  

  LIBOR Plus 8.50% (Floor 1.00%)   (6)         (6 )   819     8,535     6     8,541      

  LIBOR Plus 7.50% (Floor 1.00%)/1.00% PIK   (6)             7     137         137      

  15% PIK Unsecured Debt   (6)             122     865     87     952      

  Preferred Stock   (6)         41     780     7,320     820         8,140  

  Preferred Stock   (6)                     1,772         1,772  

  Preferred Stock   (6)         8     432     2,850     440         3,290  

  Common Stock   (6)         800     41     2,490     800         3,290  

Universal Wellhead Services Holdings, LLC

  Preferred Member Units   (8)         30     60     830     90         920  

  Member Units   (8)         300         1,910     301         2,211  

Valley Healthcare Group, LLC

  LIBOR Plus 10.50% (Floor 0.50%)   (8)             1,400     11,685     81     11,766      

  Preferred Member Units   (8)     1,898         58     1,600         1,600      

Volusion, LLC

  11.5% Secured Debt   (8)             2,074     15,200     3,027         18,227  

  8% Unsecured Convertible Debt   (8)             9         297         297  

  Preferred Member Units   (8)             1     14,000             14,000  

  Warrants   (8)         (190 )       2,080         189     1,891  

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

                    365     2,825              

Total Affiliate investments

          $ 1,898   $ 16,997   $ 27,230   $ 338,854   $ 107,230   $ 69,815   $ 373,444  

(1)
The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule of investments.

(2)
Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in "Amounts from investments transferred from other 1940 Act classifications during the period."

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.

(4)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.

(5)
Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $220,293. This represented 14.6% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $56,895. This represented 3.8% of net assets as of September 30, 2018.

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Table of Contents

(6)
Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $22,080. This represented 1.5% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $66,096. This represented 4.4% of net assets as of September 30, 2018.

(7)
Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $14,410. This represented 1.0% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $76,431. This represented 5.1% of net assets as of September 30, 2018.

(8)
Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $399,675. This represented 26.5% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $124,876. This represented 8.3% of net assets as of September 30, 2018.

(9)
Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of September 30, 2018 for control investments located in this region was $310,670. This represented 20.6% of net assets as of September 30, 2018. The fair value as of September 30, 2018 for affiliate investments located in this region was $49,146. This represented 3.3% of net assets as of September 30, 2018.

(10)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities," unless otherwise noted.

(11)
This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements. Supplemental information can be located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.

(12)
Investment has an unfunded commitment as of September 30, 2018 (see Note M). The fair value of the investment includes the impact of the fair value of any unfunded commitments.

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Table of Contents


Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
September 30, 2017
(dollars in thousands)
(unaudited)

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair
Value
 

Majority-owned investments

                                                   

Café Brazil, LLC

 

Member Units

 

(8)

 
$

 
$

(650

)

$

127
 
$

6,040
 
$

 
$

650
 
$

5,390
 

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00)   (5)         121     1,163     14,337     143     800     13,680  

  Member Units   (5)         1,240     311     7,280     1,240         8,520  

  10% Secured Debt   (5)             89     1,190         13     1,177  

  Member Units   (5)                 210             210  

CMS Minerals Investments

  Preferred Member Units   (8)     1,405     (1,578 )   96     3,682         3,682      

  Member Units   (8)         (461 )   185     3,381         799     2,582  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 11.00% (Floor 1.00%)   (5)         200     2,235     23,846     235     401     23,680  

  Member Units   (5)         4,040     353     18,920     4,040         22,960  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (8)         (25 )   996     13,274     25     1,269     12,030  

  Member Units   (8)         370     584     20,310     370         20,680  

Harborside Holdings, LLC

  Member Units   (8)         3,194             9,400         9,400  

Hydratec, Inc.

  Common Stock   (9)         (160 )   1,343     15,640         160     15,480  

IDX Broker, LLC

  11.5% Secured Debt   (9)         (19 )   971     10,950     19     919     10,050  

  Member Units   (9)         1,960     136     7,040     1,960         9,000  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)   (9)         (16 )   331     4,055     516     466     4,105  

  Member Units   (9)             127     4,460             4,460  

Lamb Ventures, LLC

  11% Secured Debt   (8)             709     7,657     2,795     428     10,024  

  Preferred Equity   (8)                 400             400  

  Member Units   (8)         440     40     5,990     440         6,430  

  9.5% Secured Debt   (8)         4     54     1,170     432     1,170     432  

  Member Units   (8)         (820 )   850     1,340         820     520  

Lighting Unlimited, LLC

  8% Secured Debt   (8)             29     1,514         1,514      

  Preferred Equity   (8)     (434 )   24         410     24     434      

  Warrants   (8)     (54 )   54             54     54      

  Member Units   (8)     (100 )   100             100     100      

Mid-Columbia Lumber Products, LLC

  10% Secured Debt   (9)             133     1,750             1,750  

  12% Secured Debt   (9)             355     3,900             3,900  

  Member Units   (9)         (1,500 )   5     2,480         1,500     980  

  9.5% Secured Debt   (9)             59     836         34     802  

  Member Units   (9)         150     43     600     690         1,290  

MSC Adviser I, LLC

  Member Units   (8)         8,687     2,132     30,617     8,687         39,304  

Mystic Logistics Holdings, LLC

  12% Secured Debt   (6)         (42 )   824     9,176     42     1,450     7,768  

  Common Stock   (6)         810         5,780     810         6,590  

NRP Jones, LLC

  8% Current/4% PIK Secured Debt   (5)             1,302     13,915     1,122         15,037  

  Warrants   (5)         687         130     687     817      

  Member Units   (5)         33         410     850         1,260  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)   (8)         135     1,123     17,826     174     1,900     16,100  

  Common Stock   (8)             100     11,780             11,780  

Principle Environmental, LLC (d/b.a

  Zero Coupon Secured Debt   (8)             738     7,438         103     7,335  

TruHorizon Environmental Solutions)

  Preferred Member Units   (8)     (63 )   2,913         5,370     2,913     63     8,220  

  Warrants   (8)         150         270     150         420  

Quality Lease Service, LLC

  8% PIK Secured Debt   (7)         (391 )   273     7,068     273     391     6,950  

  Member Units   (7)                 3,188     1,650         4,838  

The MPI Group, LLC

  9% Secured Debt   (7)         (303 )   201     2,922     1     304     2,619  

  Series A Preferred Units   (7)                              

  Warrants   (7)                              

  Member Units   (7)         90     92     2,300     90         2,390  

Uvalco Supply, LLC

  9% Secured Debt   (8)             45     872         398     474  

  Member Units   (8)     69     (69 )   146     4,640         333     4,307  

Vision Interests, Inc.

  13% Secured Debt   (9)             285     2,814         20     2,794  

  Series A Preferred Stock   (9)                 3,000             3,000  

  Common Stock   (9)                              

104


Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair
Value
 

Ziegler's NYPD, LLC

  6.5% Secured Debt   (8)             51     994     1         995  

  12% Secured Debt   (8)             27     300             300  

  14% Secured Debt   (8)             292     2,750             2,750  

  Warrants   (8)         (50 )       240         50     190  

  Preferred Member Units   (8)         (700 )       4,100         700     3,400  

Other controlled investments

                                                   

                                                   

Access Media Holdings, LLC

 

5% Current/5% PIK Secured Debt

 

(5)

   
   
(1,125

)
 
1,768
   
19,700
   
865
   
1,125
   
19,440
 

  Preferred Member Units   (5)         (1,280 )       240     1,191     1,281     150  

  Member Units   (5)                              

Ameritech College Operations, LLC

  13% Secured Debt   (9)             96     1,003         1,003      

  13% Secured Debt   (9)             285     3,025         3,025      

  Preferred Member Units   (9)     (3,321 )       198     2,291     3,900     6,191      

ASC Interests, LLC

  11% Secured Debt   (8)         (8 )   164     2,100     8     183     1,925  

  Member Units   (8)         (860 )       2,680         860     1,820  

Bond-Coat, Inc.

  12% Secured Debt   (8)         (29 )   1,085     11,596     29     29     11,596  

  Common Stock   (8)         1,770         6,660     1,770         8,430  

CBT Nuggets, LLC

  Member Units   (9)         16,370     5,155     55,480     16,370         71,850  

Charps, LLC

  12% Secured Debt   (5)             1,794         19,017     800     18,217  

  Preferred Member Units   (5)                     400         400  

Copper Trail Energy Fund I, LP

  Member Units   (9)                     2,500         2,500  

Datacom, LLC

  8% Secured Debt   (8)             72     900     720     270     1,350  

  5.25% Current / 5.25% PIK Secured Debt   (8)         (116 )   963     11,049     437     116     11,370  

  Class A Preferred Member Units   (8)         (8 )       1,368         8     1,360  

  Class B Preferred Member Units   (8)         (1,529 )       1,529         1,529      

Garreco, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)             534     5,219     985     526     5,678  

  Member Units   (8)         680         1,150     680         1,830  

Gulf Manufacturing, LLC

  9% PIK Secured Debt   (8)             51     777         777      

  Member Units   (8)         1,910     281     8,770     1,910         10,680  

Gulf Publishing Holdings, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (8)             2         80         80  

  12% Secured Debt   (8)             1,142     9,911     2,786         12,697  

  Member Units   (8)         649     40     3,124     1,206         4,330  

Harrison Hydra-Gen, Ltd.

  Common Stock   (8)         (320 )       3,120         320     2,800  

Hawthorne Customs and Dispatch

  Member Units   (8)     (159 )   309         280     309     589      

Services, LLC

  Member Units   (8)     632     (825 )   127     2,040         2,040      

HW Temps LLC

  LIBOR Plus 13.00% (Floor 1.00%)   (6)             1,095     10,500     13     600     9,913  

  Preferred Member Units   (6)             105     3,940             3,940  

Indianapolis Aviation Partners, LLC

  15% Secured Debt   (8)             292     3,100         3,100      

  Warrants   (8)     2,385     (1,520 )       2,649         2,649      

KBK Industries, LLC

  10% Secured Debt   (5)             81     1,250     100     600     750  

  12.5% Secured Debt   (5)             571     5,889     11         5,900  

  Member Units   (5)         837     75     2,780     1,280         4,060  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt   (8)         (2,551 )       9,387         9,387      

  Preferred Member Units   (8)     (101 )                 100     100      

Market Force Information, LLC

  LIBOR Plus 7.00% (Floor 1.00%)   (9)             9         512         512  

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             767         23,293         23,293  

  Member Units   (9)                     14,700         14,700  

MH Corbin Holding LLC

  10% Secured Debt   (5)             1,003     13,197     21     524     12,694  

  Preferred Member Units   (5)             105     6,000             6,000  

NAPCO Precast, LLC

  LIBOR Plus 8.50%   (8)             621         11,433         11,433  

  Prime Plus 2.00% (Floor 7.00%)   (8)         (20 )   122     2,713     20     2,733      

  18% Secured Debt   (8)         (30 )   327     3,952     31     3,983      

  Member Units   (8)         (90 )   264     10,920         90     10,830  

NRI Clinical Research, LLC

  LIBOR Plus 6.50% (Floor 1.50%)   (9)             27     200     200         400  

  14% Secured Debt   (9)         (33 )   508     4,261     34     90     4,205  

  Warrants   (9)         (180 )       680         180     500  

  Member Units   (9)         38         2,462     360     322     2,500  

NuStep, LLC

  12% Secured Debt   (5)             2,003         20,411         20,411  

  Preferred Member Units   (5)                     10,200         10,200  

OMi Holdings, Inc.

  Common Stock   (8)         (340 )   672     13,080         340     12,740  

Pegasus Research Group, LLC

  Member Units   (8)         730     207     8,620     730         9,350  

River Aggregates, LLC

  Zero Coupon Secured Debt   (8)             59     627     59         686  

  Member Units   (8)         (190 )       4,600         190     4,410  

  Member Units   (8)                 2,510             2,510  

SoftTouch Medical Holdings LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (7)         (11 )   557     7,140     11     11     7,140  

  Member Units   (7)         370     758     9,170     370         9,540  

105


Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair
Value
 

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

                    (220 )   (9,919 )            

Total Control investments

          $ 259   $ 31,216   $ 42,720   $ 594,282   $ 178,985   $ 67,313   $ 715,873  

Affiliate Investments

                                                   

                                                   

AFG Capital Group, LLC

 

Warrants

 

(8)

 
$

 
$

80
 
$

 
$

670
 
$

80
 
$

 
$

750
 

  Member Units   (8)         380     26     2,750     380         3,130  

Barfly Ventures, LLC

  12% Secured Debt   (5)         154     734     5,827     2,862         8,689  

  Options   (5)         290         490     290         780  

  Warrants   (5)         160         280     160         440  

BBB Tank Services, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (8)             65     797             797  

  15% Secured Debt   (8)             463     3,991     4         3,995  

  Member Units   (8)         (220 )       800         220     580  

Boccella Precast Products LLC

  LIBOR Plus 10.0% (Floor 1.00%)   (6)             718         16,223         16,223  

  Member Units   (6)             7         2,160         2,160  

Boss Industries, LLC

  Preferred Member Units   (5)         786     266     2,800     930         3,730  

Bridge Capital Solutions Corporation

  13% Secured Debt   (6)             939     5,610     200         5,810  

  Warrants   (6)                 3,370             3,370  

  13% Secured Debt   (6)         (1 )   100     1,000     1     1     1,000  

  Preferred Member Units   (6)             75     1,000             1,000  

Buca C, LLC

  LIBOR Plus 7.25% (Floor 1.00%)   (7)         (167 )   1,420     22,671     40     1,633     21,078  

  Preferred Member Units   (7)         (728 )   177     4,660     177     727     4,110  

CAI Software LLC

  12% Secured Debt   (6)         (6 )   326     3,683     6     206     3,483  

  Member Units   (6)         560     59     2,480     560         3,040  

CapFusion, LLC

  13% Secured Debt   (5)         (3,582 )   1,401     13,202     138     6,662     6,678  

  Warrants   (5)         (1,200 )       1,200         1,200      

Chandler Signs Holdings, LLC

  12% Secured Debt   (8)         (5 )   415     4,500     5     5     4,500  

  Class A Units   (8)         (590 )   63     3,240         590     2,650  

Condit Exhibits, LLC

  Member Units   (9)             61     1,840             1,840  

Congruent Credit Opportunities Funds

  LP Interests (Fund II)   (8)         (3 )   2     1,518         3     1,515  

  LP Interests (Fund III)   (8)         418     1,144     16,181     2,533         18,714  

Daseke, Inc.

  12% Current / 2.5% PIK Secured Debt   (8)         (167 )   676     21,799     255     22,054      

  Common Stock   (8)     22,859     (18,849 )       24,063         24,063      

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)   (8)         1,502         4,925     1,502         6,427  

  LP Interests (Dos Rios Partners—A, LP)   (8)         445         1,444     445         1,889  

Dos Rios Stone Products LLC

  Class A Units   (8)         (200 )       2,070         200     1,870  

East Teak Fine Hardwoods, Inc.

  Common Stock   (7)         (230 )   50     860         230     630  

East West Copolymer & Rubber, LLC

  12% Current/2% PIK Secured Debt   (8)         (2,665 )       8,630         8,630      

  Warrants   (8)                              

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund—A, L.P.)   (8)     71     (48 )   90     2,804     352     2,909     247  

  LP Interests (EIG Traverse Co-Investment, L.P.)   (8)         (100 )   1,534     9,905         9,905      

Freeport Financial Fund Investments

  LP Interests (Freeport Financial SBIC Fund LP)   (5)         (101 )   306     5,620         101     5,519  

  LP Interests (Freeport First Lien Loan Fund III LP)   (5)         (52 )   503     4,763     2,796     52     7,507  

Gault Financial, LLC (RMB Capital, LLC)

  10.5% Current Secured Debt   (7)         1,016     976     11,079     1,017     454     11,642  

  Warrants   (7)                              

Glowpoint, Inc.

  12% Secured Debt   (6)     (6,450 )   4,951     685     3,997     5,003     9,000      

  Common Stock   (6)     (3,974 )   1,878         2,080     1,878     3,958      

Guerdon Modular Holdings, Inc.

  13% Secured Debt   (9)             1,084     10,594     28         10,622  

  Preferred Stock   (9)         (190 )       1,140         190     950  

  Common Stock   (9)         (80 )       80         80      

HPEP 3, L.P.

  LP Interests (HPEP 3, L.P.)   (8)                     943         943  

  LP Interests (2717 MH, L.P.)   (8)                     400         400  

Hawk Ridge Systems, LLC

  10% Secured Debt   (9)             774     9,901     16     500     9,417  

  Preferred Member Units   (9)         380     265     2,850     380         3,230  

  Preferred Member Units   (9)         20     6     150     20         170  

Houston Plating and Coatings, LLC

  8% Unsecured Convertible Debt   (8)         80     104         3,080         3,080  

  Member Units   (8)         810     4     4,000     1,560         5,560  

I-45 SLF LLC

  Member Units   (8)         311     2,148     14,586     2,311         16,897  

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Table of Contents

Company
  Investment(1)(10)(11)   Geography   Amount
of
Realized
Gain/
(Loss)
  Amount
of
Unrealized
Gain/
(Loss)
  Amount
of
Interest,
Fees or
Dividends
Credited
to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair
Value
 

Indianhead Pipeline Services, LLC

  12% Secured Debt   (5)             947     5,079     563     5,642      

  Preferred Member Units   (5)         (338 )   514     2,677     514     3,191      

  Warrants   (5)     134     459             459     459      

  Member Units   (5)     272     1             1     1      

L.F. Manufacturing Holdings, LLC

  Member Units   (8)         470         1,380     470         1,850  

Meisler Operating LLC

  LIBOR Plus 8.50% (Floor 1.00%)   (5)             818         16,626         16,626  

  Member Units   (5)                     3,200         3,200  

OnAsset Intelligence, Inc.

  12% PIK Secured Debt   (8)     (28 )       424     4,519     424         4,943  

  10% PIK Secured Debt   (8)             1         47         47  

  Preferred Stock   (8)                              

  Warrants   (8)                              

OPI International Ltd.

  10% Unsecured Debt   (8)     (86 )   (473 )   16     473         473      

  Common Stock   (8)         (1,600 )       1,600         1,600      

PCI Holding Company, Inc.

  12% Secured Debt   (9)         (102 )   1,522     13,000     333     427     12,906  

  Preferred Stock   (9)         (1,368 )   548     5,370     548     1,368     4,550  

  Preferred Stock   (9)         870             2,610         2,610  

Rocaceia, LLC (Quality Lease and Rental

  12% Secured Debt   (8)                 250             250  

Holdings, LLC)

  Preferred Member Units   (8)                              

Tin Roof Acquisition Company

  12% Secured Debt   (7)             1,248     13,385     49     501     12,933  

  Class C Preferred Stock   (7)             213     2,738     213         2,951  

UniTek Global Services, Inc.

  LIBOR Plus 8.50% (Floor 1.00%)   (6)         (4 )   507     5,021     3,518     4     8,535  

  LIBOR Plus 8.50% (Floor 1.00%)   (6)             33     824     3     690     137  

  15% PIK Unsecured Debt   (6)             94     745     88         833  

  Preferred Stock   (6)         (632 )   1,302     6,410     1,302     632     7,080  

  Preferred Stock   (6)         (5 )   207         2,725     5     2,720  

  Common Stock   (6)         (690 )       3,010         690     2,320  

Universal Wellhead Services Holdings, LLC

  Preferred Member Units   (8)         80         720     80         800  

  Member Units   (8)         620         610     620         1,230  

Valley Healthcare Group, LLC

  LIBOR Plus 12.50% (Floor 0.50%)   (8)             1,306     12,844     25     1,110     11,759  

  Preferred Member Units   (8)                 1,600             1,600  

Volusion, LLC

  11.5% Secured Debt   (8)             2,015     15,298     517     766     15,049  

  Preferred Member Units   (8)                 14,000             14,000  

  Warrants   (8)         (337 )       2,576         336     2,240  

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

            122         220     9,919              

Total Affiliate investments

          $ 12,920   $ (18,012 ) $ 29,601   $ 375,948   $ 83,670   $ 111,468   $ 338,231  

(1)
The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule of investments.

(2)
Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in "Amounts from investments transferred from other 1940 Act classifications during the period."

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.

(4)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.

(5)
Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2017 for control investments located in this

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Table of Contents

(6)
Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2017 for control investments located in this region was $28,211. This represented 2.1% of net assets as of September 30, 2017. The fair value as of September 30, 2017 for affiliate investments located in this region was $57,711. This represented 4.3% of net assets as of September 30, 2017.

(7)
Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of September 30, 2017 for control investments located in this region was $33,477. This represented 2.5% of net assets as of September 30, 2017. The fair value as of September 30, 2017 for affiliate investments located in this region was $53,344. This represented 4.0% of net assets as of September 30, 2017.

(8)
Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of September 30, 2017 for control investments located in this region was $291,368. This represented 21.9% of net assets as of September 30, 2017. The fair value as of September 30, 2017 for affiliate investments located in this region was $127,712. This represented 9.6% of net assets as of September 30, 2017.

(9)
Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of September 30, 2017 for control investments located in this region was $178,071. This represented 13.4% of net assets as of September 30, 2017. The fair value as of September 30, 2017 for affiliate investments located in this region was $46,295. This represented 3.5% of net assets as of September 30, 2017.

(10)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities," unless otherwise noted.

(11)
This schedule should be read in conjunction with the consolidated schedule of investments and notes to the consolidated financial statements. Supplemental information can be located within the schedule of investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.

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Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The information in this section contains forward-looking statements that involve risks and uncertainties. Please see "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the "SEC") on February 23, 2018, for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report and in the Annual Report on Form 10-K for the year ended December 31, 2017.

ORGANIZATION

        Main Street Capital Corporation ("MSCC") is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ("LMM") companies and debt capital to middle market ("Middle Market") companies. The portfolio investments of MSCC and its consolidated subsidiaries are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSCC seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its LMM portfolio. MSCC and its consolidated subsidiaries invest primarily in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States and in secured debt investments of Middle Market companies generally headquartered in the United States.

        MSCC was formed in March 2007 to operate as an internally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP ("MSMF"), Main Street Capital II, LP ("MSC II") and Main Street Capital III, LP ("MSC III" and, collectively with MSMF and MSC II, the "Funds"), and each of their general partners. The Funds are each licensed as a Small Business Investment Company ("SBIC") by the United States Small Business Administration ("SBA"). Because MSCC is internally managed, all of the executive officers and other employees are employed by MSCC. Therefore, MSCC does not pay any external investment advisory fees, but instead directly incurs the operating costs associated with employing investment and portfolio management professionals.

        MSC Adviser I, LLC (the "External Investment Manager") was formed in November 2013 as a wholly owned subsidiary of MSCC to provide investment management and other services to parties other than MSCC and its subsidiaries or their portfolio companies ("External Parties") and receives fee income for such services. MSCC has been granted no-action relief by the Securities and Exchange Commission ("SEC") to allow the External Investment Manager to register as a registered investment adviser under the Investment Advisers Act of 1940, as amended. Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements.

        MSCC has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.

        MSCC has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities (the "Taxable Subsidiaries"). The primary purpose of the Taxable Subsidiaries is to permit MSCC to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes.

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        Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our," the "Company" and "Main Street" refer to MSCC and its consolidated subsidiaries, which include the Funds and the Taxable Subsidiaries.

OVERVIEW

        Our principal investment objective is to maximize our portfolio's total return by generating current income from our debt investments and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. Our LMM companies generally have annual revenues between $10 million and $150 million, and our LMM portfolio investments generally range in size from $5 million to $50 million. Our Middle Market investments are made in businesses that are generally larger in size than our LMM portfolio companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $20 million. Our private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio.

        We seek to fill the financing gap for LMM businesses, which, historically, have had limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participations. Our ability to invest across a company's capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a "one stop" financing solution. Providing customized, "one stop" financing solutions is important to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.

        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for our LMM, Middle Market or Private Loan portfolio investments, including investments which may be managed by third parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement with the External Investment Manager to share

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employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities.

        The following tables provide a summary of our investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2018  
 
  LMM(a)   Middle
Market
  Private
Loan
 
 
  (dollars in millions)
 

Number of portfolio companies

    70     58     54  

Fair value

  $ 1,149.0   $ 607.7   $ 490.8  

Cost

  $ 965.4   $ 613.4   $ 517.3  

% of portfolio at cost—debt

    69.2%     96.1%     92.9%  

% of portfolio at cost—equity

    30.8%     3.9%     7.1%  

% of debt investments at cost secured by first priority lien

    98.5%     89.0%     92.7%  

Weighted-average annual effective yield(b)

    12.2%     9.4%     10.1%  

Average EBITDA(c)

  $ 4.6   $ 89.7   $ 46.2  

(a)
At September 30, 2018, we had equity ownership in approximately 99% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 39%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2018, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for

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  As of December 31, 2017  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    70     62     54  

Fair value

  $ 948.2   $ 609.3   $ 467.5  

Cost

  $ 776.5   $ 629.7   $ 489.2  

% of portfolio at cost—debt

    67.1%     97.3%     93.6%  

% of portfolio at cost—equity

    32.9%     2.7%     6.4%  

% of debt investments at cost secured by first priority lien

    98.1%     90.5%     94.5%  

Weighted-average annual effective yield(b)

    12.0%     9.0%     9.2%  

Average EBITDA(c)

  $ 4.4   $ 78.3   $ 39.6  

(a)
At December 31, 2017, we had equity ownership in approximately 97% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 39%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2017, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including six LMM portfolio companies, one Middle Market portfolio company and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

        As of September 30, 2018, we had Other Portfolio investments in eleven companies, collectively totaling approximately $109.2 million in fair value and approximately $115.7 million in cost basis and which comprised approximately 4.5% of our Investment Portfolio (as defined in "—Critical Accounting Policies—Basis of Presentation" below) at fair value. As of December 31, 2017, we had Other Portfolio investments in eleven companies, collectively totaling approximately $104.6 million in fair value and approximately $109.4 million in cost basis and which comprised approximately 4.8% of our Investment Portfolio at fair value.

        As previously discussed, the External Investment Manager is a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2018, there was no cost basis in this investment and the investment had a fair value of approximately $70.1 million, which comprised approximately 2.9% of our Investment Portfolio at fair value. As of December 31, 2017, there was no cost basis in this investment and the investment had a fair value of approximately $41.8 million, which comprised approximately 1.9% of our Investment Portfolio at fair value.

        Our portfolio investments are generally made through MSCC and the Funds. MSCC and the Funds share the same investment strategies and criteria, although they are subject to different

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regulatory regimes. An investor's return in MSCC will depend, in part, on the Funds' investment returns as they are wholly owned subsidiaries of MSCC.

        The level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals, our ability to identify new investment opportunities that meet our investment criteria, and our ability to consummate the identified opportunities. The level of new investment activity, and associated interest and fee income, will directly impact future investment income. In addition, the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long term, our growth and our operating results may be more limited during depressed economic periods. However, we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity, economic conditions and the performance of our individual portfolio companies. The changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results.

        Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio. For each of the three months ended September 30, 2018 and 2017, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.5% on an annualized basis. For the nine months ended September 30, 2018 and 2017, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.5% and 1.6%, respectively, on an annualized basis and 1.6% for the year ended December 31, 2017.

        During May 2012, we entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-listed BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow us to own a registered investment adviser, we assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on our ability to meet the source-of-income requirement necessary for us to maintain our RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. The External Investment Manager has conditionally agreed to waive a limited amount of the historical incentive fees otherwise earned. During the three months ended September 30, 2018 and 2017, the External Investment Manager earned $3.0 million and $2.8 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2018 and 2017, the External Investment Manager earned $8.7 million and $8.1 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

        During April 2014, we received an exemptive order from the SEC permitting co-investments by us and HMS Income in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. We have made, and in the future intend to continue to make, such co-investments with HMS Income in accordance with the conditions of the order. The order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is appropriate for HMS Income and, if it is appropriate, to propose an allocation of the investment opportunity between us and HMS Income. Because the External Investment Manager may

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receive performance-based fee compensation from HMS Income, this may provide it an incentive to allocate opportunities to HMS Income instead of us. However, both we and the External Investment Manager have policies and procedures in place to manage this conflict.

CRITICAL ACCOUNTING POLICIES

        Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For each of the periods presented herein, our consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of our investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in the External Investment Manager. Our results of operations for the three and nine months ended September 30, 2018 and 2017, cash flows for the nine months ended September 30, 2018 and 2017, and financial position as of September 30, 2018 and December 31, 2017, are presented on a consolidated basis. The effects of all intercompany transactions between us and our consolidated subsidiaries have been eliminated in consolidation. Certain reclassifications have been made to prior period balances to conform with the current presentation.

        Our accompanying unaudited consolidated financial statements are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2018 and 2017 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services—Investment Companies ("ASC 946"). Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and ASC 946, we are precluded from consolidating other entities in which we have equity investments, including those in which we have a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if we hold a controlling interest in an operating company that provides all or substantially all of its services directly to us or to any of our portfolio companies. Accordingly, as noted above, our consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. We have determined that all of our portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, our Investment Portfolio is carried on the consolidated balance sheet at fair value with any adjustments to fair value recognized as "Net Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

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        The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. As of both September 30, 2018 and December 31, 2017, our Investment Portfolio valued at fair value represented approximately 96% of our total assets. We are required to report our investments at fair value. We follow the provisions of Financial Accounting Standards Board ("FASB") ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact. See "Note B.1.—Valuation of the Investment Portfolio" in the notes to consolidated financial statements for a detailed discussion of our investment portfolio valuation process and procedures.

        Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation.

        Our Board of Directors has the final responsibility for overseeing, reviewing and approving, in good faith, our determination of the fair value for our Investment Portfolio and our valuation procedures, consistent with 1940 Act requirements. We believe our Investment Portfolio as of September 30, 2018 and December 31, 2017 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

        We record interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with our valuation policies, we evaluate accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service all of its debt or other obligations, we will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is sold or written off, we remove it from non-accrual status.

        We may periodically provide services, including structuring and advisory services, to our portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the financing.

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        We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2018 and 2017, (i) approximately 1.4% and 1.9%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.1% and 1.8%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2018 and 2017, (i) approximately 1.0% and 2.7%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.0% and 1.8%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.

        We account for our share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

        MSCC has elected to be treated for U.S. federal income tax purposes as a RIC. MSCC's taxable income includes the taxable income generated by MSCC and certain of its subsidiaries, including the Funds, which are treated as disregarded entities for tax purposes. As a RIC, MSCC generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that MSCC distributes to its stockholders. MSCC must generally distribute at least 90% of its "investment company taxable income" (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (i) filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

        The Taxable Subsidiaries primarily hold certain portfolio investments for us. The Taxable Subsidiaries permit us to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-of-income" requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with us for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in our consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSCC for income tax purposes and may

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generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at their normal corporate tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in our consolidated financial statements.

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC owned through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for its stand-alone financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the External Investment Manager are reflected in the External Investment Manager's separate financial statements.

        In December 2017, the "Tax Cuts and Jobs Act" legislation was enacted. The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a U.S. Federal corporate income tax rate reduction from 35% to 21% and other changes. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. As such, we have accounted for the tax effects as a result of the enactment of the Tax Cuts and Jobs Act beginning with the period ended December 31, 2017.

        The Taxable Subsidiaries and the External Investment Manager use the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided, if necessary, against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

        Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

INVESTMENT PORTFOLIO COMPOSITION

        Our LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Our LMM portfolio companies generally have annual revenues between $10 million and $150 million, and our LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, generally bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio companies, we receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $20 million. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of

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the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our Other Portfolio investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended September 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $1.6 million and $1.7 million, respectively. Our total expenses for the nine months ended September 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $5.3 million and $4.8 million, respectively. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income received from the External Investment Manager. For the three months ended September 30, 2018 and 2017, the total contribution to our net investment income was $2.7 million and $2.4 million, respectively. For the nine months ended September 30, 2018 and 2017, the total contribution to our net investment income was $8.0 million and $6.9 million, respectively.

        The following tables summarize the composition of our total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments as of September 30, 2018

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and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30,
2018
  December 31,
2017
 

First lien debt

    77.7%     79.0%  

Equity

    16.4%     15.3%  

Second lien debt

    4.8%     4.5%  

Equity warrants

    0.7%     0.7%  

Other

    0.4%     0.5%  

    100.0%     100.0%  

 

Fair Value:
  September 30,
2018
  December 31,
2017
 

First lien debt

    69.9%     70.5%  

Equity

    24.8%     24.4%  

Second lien debt

    4.4%     4.1%  

Equity warrants

    0.5%     0.6%  

Other

    0.4%     0.4%  

    100.0%     100.0%  

        Our LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments carry a number of risks including: (1) investing in companies which may have limited operating histories and financial resources; (2) holding investments that generally are not publicly traded and which may be subject to legal and other restrictions on resale; and (3) other risks common to investing in below investment grade debt and equity investments in our Investment Portfolio. Please see "Risk Factors—Risks Related to Our Investments" contained in our Form 10-K for the fiscal year ended December 31, 2017 and "Risk Factors" below for a more complete discussion of the risks involved with investing in our Investment Portfolio.

PORTFOLIO ASSET QUALITY

        As of September 30, 2018, our total Investment Portfolio had five investments on non-accrual status, which comprised approximately 1.2% of its fair value and 3.5% of its cost. As of December 31, 2017, our total Investment Portfolio had five investments on non-accrual status, which comprised approximately 0.2% of its fair value and 2.3% of its cost.

        The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In the event that the United States economy contracts, it is likely that the financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements, to an increase in defaults on our debt investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized appreciation on our equity investments. Consequently, we can provide no assurance that the performance of certain portfolio companies will not be negatively impacted by economic cycles or other conditions, which could also have a negative impact on our future results.

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DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

 
  Three Months Ended
September 30,
  Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 58,263   $ 51,786   $ 6,477     13%  

Total expenses

    (20,188 )   (17,757 )   (2,431 )   14%  

Net investment income

    38,075     34,029     4,046     12%  

Net realized gain (loss) from investments

    9,238     (10,706 )   19,944        

Net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    25,261     16,368     8,893        

SBIC debentures

    (53 )   (221 )   168        

Total net unrealized appreciation

    25,208     16,147     9,061        

Income tax provision

    (3,781 )   (4,571 )   790        

Net increase in net assets resulting from operations

  $ 68,740   $ 34,899   $ 33,841     97%  

 

 
  Three Months Ended
September 30,
  Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands, except
per share amounts)

 

Net investment income

  $ 38,075   $ 34,029   $ 4,046     12%  

Share-based compensation expense

    2,147     2,476     (329 )   –13%  

Distributable net investment income(a)

  $ 40,222   $ 36,505   $ 3,717     10%  

Net investment income per share—Basic and diluted

  $ 0.63   $ 0.60   $ 0.03     5%  

Distributable net investment income per share—Basic and diluted(a)

  $ 0.66   $ 0.64   $ 0.02     3%  

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

        For the three months ended September 30, 2018, total investment income was $58.3 million, a 13% increase over the $51.8 million of total investment income for the corresponding period of 2017. This comparable period increase was principally attributable to (i) a $6.5 million increase in interest income primarily related to (a) an increase in the average effective yields and higher average levels of portfolio debt investments and (b) increased activities involving existing Investment Portfolio debt investments

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and (ii) a $1.5 million increase in fee income, with these increases partially offset by a $1.6 million decrease in dividend income from Investment Portfolio equity investments. The $6.5 million increase in total investment income in the three months ended September 30, 2018 includes an increase of $2.0 million primarily related to higher accelerated prepayment, repricing and other activity for certain Private Loan Investment Portfolio debt investments, partially offset by a decrease of $1.7 million in dividend income that is considered less consistent on a recurring basis or non-recurring, when compared to the same period in the prior year.

        For the three months ended September 30, 2018, total expenses increased to $20.2 million from $17.8 million for the corresponding period of 2017. This comparable period increase in operating expenses was principally attributable to (i) a $1.5 million increase in interest expense, primarily due to a $2.2 million increase as a result of the issuance of our 4.50% Notes due 2022 in November 2017 and a $0.5 million increase from the SBIC debentures due to the higher average balance outstanding, with these increases partially offset by a decrease of $1.5 million resulting from the redemption of the 6.125% Notes effective April 1, 2018 (as discussed further below in "Liquidity and Capital Resources—Capital Resources") and (ii) a $1.0 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals, with these increases partially offset by a $0.3 million decrease in share-based compensation expense. The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets for each of the three months ended September 30, 2018 and 2017 was 1.5% on an annualized basis and 1.6% for the year ended December 31, 2017.

        Net investment income for the three months ended September 30, 2018 was $38.1 million, or a 12% increase, compared to net investment income of $34.0 million for the corresponding period of 2017. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses both as discussed above.

        For the three months ended September 30, 2018, distributable net investment income increased 10% to $40.2 million, or $0.66 per share, compared with $36.5 million, or $0.64 per share, in the corresponding period of 2017. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses both as discussed above. Distributable net investment income on a per share basis for the three months ended September 30, 2018 reflects (i) an increase of approximately $0.03 per share from the comparable period in 2017 related to the higher levels of accelerated prepayment, repricing and other activity for certain Investment Portfolio debt investments, offset by a decrease of approximately $0.03 per share in dividend income that is considered less consistent on a recurring basis or non-recurring and (ii) a greater number of average shares outstanding compared to the corresponding period in 2017 primarily due to shares issued through the ATM Program (as defined in "—Liquidity and Capital Resources—Capital Resources" below), shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan.

        The net increase in net assets resulting from operations during the three months ended September 30, 2018 was $68.7 million, or $1.13 per share, compared with $34.9 million, or $0.61 per share, during the three months ended September 30, 2017. This $33.8 million improvement from the prior year was primarily the result of (i) a $19.9 million improvement in the net realized gain (loss)

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from investments to a net realized gain of $9.2 million for the three months ended September 30, 2018, (ii) a $9.1 million increase in net unrealized appreciation from portfolio investments, including the impact of accounting reversals relating to realized gains/income (losses), (iii) a $4.0 million increase in net investment income as discussed above and (iv) a $0.8 million decrease in the income tax provision. The net realized gain from investments of $9.2 million for the three months ended September 30, 2018 was primarily the result of (i) the net realized gain of $17.3 million resulting primarily from gains on the exits of three LMM investments and other activity in the LMM portfolio, (ii) the realized gains of $2.7 million due to activity in our Other Portfolio and (iii) the realized gain of $1.4 million on other activity in the Private Loan portfolio, partially offset by the realized loss of $12.3 million on the restructure of one Middle Market investment.

        The following table provides a summary of the total net unrealized appreciation of $25.2 million for the three months ended September 30, 2018:

 
  Three Months Ended September 30, 2018  
 
  LMM(a)   Middle Market   Private Loan   Other   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period

  $ (16.5 ) $ 10.1   $ (2.1 ) $ (2.2 ) $ (10.7 )

Net unrealized appreciation relating to portfolio investments

    26.3     0.8     0.1     8.8 (b)   36.0  

Total net unrealized appreciation (depreciation) relating to portfolio investments

  $ 9.8   $ 10.9   $ (2.0 ) $ 6.6   $ 25.3  

Unrealized depreciation relating to SBIC debentures(c)

                            (0.1 )

Total net unrealized appreciation

                          $ 25.2  

(a)
LMM includes unrealized appreciation on 30 LMM portfolio investments and unrealized depreciation on 13 LMM portfolio investments.

(b)
Other includes $7.5 million of unrealized appreciation relating to the External Investment Manager and $1.3 million of net unrealized appreciation relating to the Other Portfolio.

(c)
Relates to unrealized depreciation on the SBIC debentures held by MSC II which are accounted for on a fair value basis.

        The income tax provision for the three months ended September 30, 2018 of $3.8 million principally consisted of a deferred tax provision of $3.0 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences, and other current tax expense of $0.8 million related to (i) a $0.5 million accrual for excise tax on our estimated undistributed taxable income and (ii) other current tax expense of $0.3 million related to accruals for current U.S. federal and state income taxes.

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  Nine Months Ended
September 30,
  Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 174,075   $ 149,944   $ 24,131     16%  

Total expenses

    (59,514 )   (52,056 )   (7,458 )   14%  

Net investment income

    114,561     97,888     16,673     17%  

Net realized gain from investments

    2,754     27,842     (25,088 )      

Net realized loss on extinguishment of debt

    (2,896 )   (5,217 )   2,321        

Net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    47,090     (4,358 )   51,448        

SBIC debentures

    1,296     5,408     (4,112 )      

Total net unrealized appreciation

    48,386     1,050     47,336        

Income tax provision

    (4,097 )   (12,383 )   8,286        

Net increase in net assets resulting from operations

  $ 158,708   $ 109,180   $ 49,528     45%  

 

 
  Nine Months Ended
September 30,
  Net Change
 
  2018   2017   Amount   %
 
  (dollars in thousands, except per share amounts)

Net investment income

  $ 114,561   $ 97,888   $ 16,673     17%

Share-based compensation expense

    6,883     7,542     (659 )   (9)%

Distributable net investment income(a)

  $ 121,444   $ 105,430   $ 16,014     15%

Net investment income per share—Basic and diluted

  $ 1.91   $ 1.74   $ 0.17     10%

Distributable net investment income per share—Basic and diluted(a)

  $ 2.03   $ 1.88   $ 0.15     8%

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

        For the nine months ended September 30, 2018, total investment income was $174.1 million, a 16% increase over the $149.9 million of total investment income for the corresponding period of 2017. This comparable period increase was principally attributable to (i) a $12.9 million net increase in interest income primarily related to an increase in the average effective yields and higher average levels of Investment Portfolio debt investments, partially offset by a decrease in interest income associated with prepayment, repricing and other activities involving existing Investment Portfolio debt investments,

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(ii) a $10.8 million increase in dividend income from Investment Portfolio equity investments and (iii) a $0.4 million increase in fee income. The $24.1 million increase in total investment income in the nine months ended September 30, 2018 includes $6.3 million related to elevated dividend income activity from certain Investment Portfolio equity investments that is considered to be less consistent on a recurring basis or non-recurring, partially offset by a decrease of $0.9 million related to lower accelerated prepayment, repricing and other activity for certain Investment Portfolio debt investments when compared to the same period in the prior year.

        For the nine months ended September 30, 2018, total expenses increased to $59.5 million from $52.1 million for the corresponding period of 2017. This comparable period increase in operating expenses was principally attributable to (i) a $5.2 million increase in interest expense, primarily due to (a) a $6.7 million increase as a result of the issuance of our 4.50% Notes due 2022 in November 2017 and (b) a $1.6 million increase from the SBIC debentures due to the higher average balance outstanding, with these increases partially offset by (a) a $2.9 million decrease from the redemption of the 6.125% Notes effective April 1, 2018 and (b) a $0.2 million decrease related to the Credit Facility due primarily to the lower average balance outstanding and (ii) a $3.2 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals, with these increases partially offset by (i) a $0.7 million decrease in share-based compensation expense and (ii) a $0.5 million increase in the expenses allocated to the External Investment Manager as a result of elevated non-recurring strategic activities at the External Investment Manager during the nine months ended September 30, 2018. The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets for the nine months ended September 30, 2018 was 1.5% on an annualized basis compared to 1.6% for each of the nine months ended September 30, 2017 and the year ended December 31, 2017.

        Net investment income for the nine months ended September 30, 2018 was $114.6 million, or a 17% increase, compared to net investment income of $97.9 million for the corresponding period of 2017. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses both as discussed above.

        For the nine months ended September 30, 2018, distributable net investment income increased 15% to $121.4 million, or $2.03 per share, compared with $105.4 million, or $1.88 per share, in the corresponding period of 2017. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses both as discussed above. Distributable net investment income on a per share basis for the nine months ended September 30, 2018 reflects (i) an increase of approximately $0.08 per share from the comparable period in 2017 attributable to the net effect of the elevated dividend income activity and decrease in the comparable levels of accelerated prepayment, repricing and other activity discussed above and (ii) a greater number of average shares outstanding compared to the corresponding period in 2017 primarily due to shares issued through the ATM Program (as defined in "—Liquidity and Capital Resources—Capital Resources" below), shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan.

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        The net increase in net assets resulting from operations during the nine months ended September 30, 2018 was $158.7 million, or $2.65 per share, compared with $109.2 million, or $1.94 per share, during the nine months ended September 30, 2017. This $49.5 million improvement from the prior year was primarily the result of (i) a $47.3 million increase in net unrealized appreciation (depreciation) from portfolio investments and SBIC debentures, including the impact of accounting reversals relating to realized gains/income (losses), (ii) a $16.7 million increase in net investment income as discussed above, (iii) a $8.3 million decrease in the income tax provision and (iv) a $2.3 million improvement in the net realized loss on extinguishment of debt, with these increases partially offset by a $25.1 million decrease in the net realized gain (loss) from investments to a total net realized gain from investments of $2.8 million for the nine months ended September 30, 2018. The net realized gain from investments of $2.8 million for the nine months ended September 30, 2018 was primarily the result of (i) the net realized gain of $16.0 million resulting from the net effect of gains on the exits of six LMM investments, partially offset by losses on the exits of two LMM investments and other activity in the LMM portfolio, (ii) the realized gains of $5.9 million due to activity in our Other Portfolio, and (iii) the realized gains of $2.8 million in our Private Loan portfolio which is primarily the result of (a) the realized gain of $1.4 million on the exit of one Private Loan investment and (b) the realized gain of $1.4 million on other activity in the Private Loan portfolio, with the effect of these net realized gains partially offset by (i) the net realized loss of $22.0 million in our Middle Market portfolio, which is primarily the result of (a) the realized losses of $17.6 million on the restructures of two Middle Market investments and (b) the realized losses of $4.4 million on the exits of two Middle Market investments.

        The following table provides a summary of the total net unrealized appreciation of $48.4 million for the nine months ended September 30, 2018:

 
  Nine Months Ended September 30, 2018  
 
  LMM(a)   Middle Market   Private Loan   Other   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period

  $ (25.0 ) $ 18.9   $ (4.2 ) $ (2.7 ) $ (13.0 )

Net unrealized appreciation (depreciation) relating to portfolio investments

    36.4     (3.9 )   (1.7 )   29.3 (b)   60.1  

Total net unrealized appreciation (depreciation) relating to portfolio investments

  $ 11.4   $ 15.0   $ (5.9 ) $ 26.6   $ 47.1  

Unrealized appreciation relating to SBIC debentures (c)

                            1.3  

Total net unrealized appreciation

                          $ 48.4  

(a)
LMM includes unrealized appreciation on 36 LMM portfolio investments and unrealized depreciation on 20 LMM portfolio investments.

(b)
Other includes $28.4 million of unrealized appreciation relating to the External Investment Manager and $0.9 million of net unrealized appreciation relating to the Other Portfolio.

(c)
Primarily relates to unrealized appreciation on the SBIC debentures held by MSC II which are accounted for on a fair value basis and includes $1.4 million of accounting reversals of previously

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        The income tax provision for the nine months ended September 30, 2018 of $4.1 million principally consisted of a deferred tax provision of $3.3 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences, and other current tax expense of $0.8 million related to a $1.0 million accrual for excise tax on our estimated undistributed taxable income, partially offset by other current tax benefit of $0.2 million related to accruals for current U.S. federal and state income taxes.

        For the nine months ended September 30, 2018, we experienced a net decrease in cash and cash equivalents in the amount of approximately $1.2 million, which is the net result of approximately $103.4 million of cash used in our operating activities and approximately $102.2 million of cash provided by our financing activities.

        The $103.4 million of cash used in our operating activities resulted primarily from (i) cash flows we generated from the operating profits earned through our operating activities totaling $109.1 million, which is our $121.4 million of distributable net investment income, excluding the non-cash effects of the accretion of unearned income of $11.3 million, payment-in-kind interest income of $1.8 million, cumulative dividends of $1.7 million and the amortization expense for deferred financing costs of $2.5 million, (ii) cash uses totaling $766.5 million for the funding of new portfolio company investments and settlement of accruals for portfolio investments existing as of December 31, 2017, and (iii) cash proceeds totaling $553.9 million which resulted from (a) $551.7 million related to the sales and repayments of debt investments and sales of and return on capital of equity investments, (b) $1.8 million related to decreases in other assets and (c) $0.4 million related to increases in payables and accruals.

        The $102.2 million of cash provided by our financing activities principally consisted of (i) $72.3 million in net cash proceeds from the ATM Program (described below), (ii) $186.0 million in net cash proceeds from the Credit Facility and (iii) $54.0 million in cash proceeds from issuance of SBIC debentures, partially offset by (i) $90.7 million for repurchase of the 6.125% Notes, (ii) $108.7 million in cash dividends paid to stockholders, (iii) $4.1 million for purchases of vested restricted stock from employees to satisfy their tax withholding requirements upon the vesting of such restricted stock, (iv) $4.0 million in repayment of SBIC debentures and (v) $2.8 million for payment of deferred debt issuance costs, SBIC debenture fees and other costs.

        As of September 30, 2018, we had $50.3 million in cash and cash equivalents and $430.0 million of unused capacity under the Credit Facility, which we maintain to support our investment and operating activities. As of September 30, 2018, our net asset value totaled $1,505.4 million, or $24.69 per share.

        The Credit Facility, which provides additional liquidity to support our investment and operational activities, was amended and restated during June 2018 and further amended in July 2018 to provide for an increase in total commitments from $585.0 million to $680.0 million and to increase the diversified group of lenders to seventeen lenders, eliminate interest rate adjustments subject to our maintenance of an investment grade rating and extend the final maturity by two years to September 2023. The amended Credit Facility also contains an upsized accordion feature which allows us to increase the total

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commitments under the facility to up to $800.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis at a rate equal to the applicable LIBOR rate (2.3% as of September 30, 2018) plus (i) 1.875% (or the applicable base rate (Prime Rate of 5.25% as of September 30, 2018) plus 0.875%) as long as we meet certain agreed upon excess collateral and maximum leverage requirements or (ii) 2.0% (or the applicable base rate plus 1.0%) otherwise. We pay unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding the equity ownership or assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio (tangible net worth to Credit Facility borrowings) of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2023, and contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval. As of September 30, 2018, we had $250.0 million in borrowings outstanding under the Credit Facility, the interest rate on the Credit Facility was 4.0% and we were in compliance with all financial covenants of the Credit Facility.

        Through the Funds, we have the ability to issue SBIC debentures guaranteed by the SBA at favorable interest rates and favorable terms and conditions. Under existing SBIC regulations, SBA approved SBICs under common control have the ability to issue debentures guaranteed by the SBA up to a regulatory maximum amount of $350.0 million. Through the Funds, we have an effective maximum amount of $346.0 million following the prepayment of $4.0 million of existing SBIC debentures as discussed below. During the nine months ended September 30, 2018, we issued $54.0 million of SBIC debentures and opportunistically prepaid $4.0 million of our existing SBIC debentures as part of an effort to manage the maturity dates of our oldest SBIC debentures. Debentures guaranteed by the SBA have fixed interest rates that equal prevailing 10-year Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semiannually. The principal amount of the debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. We expect to issue new SBIC debentures under the SBIC program in the future in an amount up to the regulatory maximum amount for affiliated SBIC funds. As of September 30, 2018, through our three wholly owned SBICs, we had $345.8 million of outstanding SBIC debentures guaranteed by the SBA, which bear a weighted-average annual fixed interest rate of approximately 3.7%, paid semiannually, and mature ten years from issuance. The first maturity related to our SBIC debentures occurs in 2019, and the weighted-average remaining duration is approximately 5.9 years as of September 30, 2018.

        In April 2013, we issued $92.0 million, including the underwriters' full exercise of their over-allotment option, in aggregate principal amount of the 6.125% Notes (the "6.125% Notes"). The 6.125% Notes bore interest at a rate of 6.125% per year payable quarterly on January 1, April 1, July 1 and October 1 of each year. The total net proceeds to us from the 6.125% Notes, after underwriting discounts and estimated offering expenses payable, were approximately $89.0 million. On April 2, 2018, we redeemed the entire principal amount of the issued and outstanding 6.125% Notes effective April 1, 2018 (the "Redemption Date"). The 6.125% Notes were redeemed at par value, plus the accrued and unpaid interest thereon from January 1, 2018, through, but excluding, the Redemption Date. As part of the redemption, we recognized a realized loss on extinguishment of debt of $1.5 million in the second quarter of 2018 related to the write-off of the related unamortized deferred financing costs.

        In November 2014, we issued $175.0 million in aggregate principal amount of 4.50% Notes (the "4.50% Notes due 2019") at an issue price of 99.53%. The 4.50% Notes due 2019 are unsecured

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obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2019; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2019 mature on December 1, 2019, and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. The 4.50% Notes due 2019 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year, beginning June 1, 2015. We may from time to time repurchase 4.50% Notes due 2019 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2018, the outstanding balance of the 4.50% Notes due 2019 was $175.0 million.

        The indenture governing the 4.50% Notes due 2019 (the "4.50% Notes due 2019 Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50% Notes due 2019 and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2019 Indenture.

        In November 2017, we issued $185.0 million in aggregate principal amount of 4.50% Notes (the "4.50% Notes due 2022") at an issue price of 99.16%. The 4.50% Notes due 2022 are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 4.50% Notes due 2022; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes due 2022 mature on December 1, 2022, and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. The 4.50% Notes due 2022 bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year, beginning June 1, 2018. We may from time to time repurchase 4.50% Notes due 2022 in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2018, the outstanding balance of the 4.50% Notes due 2022 was $185.0 million.

        The indenture governing the 4.50% Notes due 2022 (the "4.50% Notes due 2022 Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50% Notes due 2022 and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes due 2022 Indenture.

        We maintain a program with certain selling agents through which we can sell shares of our common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the nine months ended September 30, 2018, we sold 1,901,630 shares of our common stock at a weighted-average price of $38.48 per share and raised $73.2 million of gross proceeds under the ATM Program. Net proceeds were $72.1 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2018, there were 3,152,858 shares available for sale under the ATM Program.

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        During the year ended December 31, 2017, we sold 3,944,972 shares of our common stock at a weighted-average price of $38.72 per share and raised $152.8 million of gross proceeds under the ATM Program. Net proceeds were $150.9 million after commissions to the selling agents on shares sold and offering costs.

        We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, utilization of available borrowings under our Credit Facility, and a combination of future issuances of debt and equity capital. Our primary uses of funds will be investments in portfolio companies, operating expenses and cash distributions to holders of our common stock.

        We periodically invest excess cash balances into marketable securities and idle funds investments. The primary investment objective of marketable securities and idle funds investments is to generate incremental cash returns on excess cash balances prior to utilizing those funds for investment in our LMM, Middle Market and Private Loan portfolio investments. Marketable securities and idle funds investments generally consist of debt investments, independently rated debt investments, certificates of deposit with financial institutions, diversified bond funds and publicly traded debt and equity investments.

        If our common stock trades below our net asset value per share, we will generally not be able to issue additional common stock at the market price unless our stockholders approve such a sale and our Board of Directors makes certain determinations. We did not seek stockholder authorization to sell shares of our common stock below the then current net asset value per share of our common stock at our 2018 annual meeting of stockholders because our common stock price per share had been trading significantly above the net asset value per share of our common stock since 2011. We would therefore need future approval from our stockholders to issue shares below the then current net asset value per share.

        In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders, after consideration and application of our ability under the Code to carry forward certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200%. This requirement limits the amount that we may borrow. In January 2008, we received an exemptive order from the SEC to exclude SBA-guaranteed debt securities issued by MSMF and any other wholly owned subsidiaries of ours which operate as SBICs from the asset coverage requirements of the 1940 Act as applicable to us, which, in turn, enables us to fund more investments with debt capital.

        Although we have been able to secure access to additional liquidity, including through the Credit Facility, public debt issuances, leverage available through the SBIC program and equity offerings, there is no assurance that debt or equity capital will be available to us in the future on favorable terms, or at all.

        In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction

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price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The guidance is effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Substantially all of our income is not within the scope of ASU 2014-09. For those income items that are within the scope (primarily fee income), we have similar performance obligations as compared with deliverables and separate units of account previously identified. As a result, our timing of income recognition remains the same and the adoption of the standard was not material.

        In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early application is permitted. While we continue to assess the effect of adoption, we currently believe the most significant change relates to the recognition of a new right-of-use asset and lease liability on our consolidated balance sheet for our office space operating lease. We currently have one operating lease for office space and do not expect a significant change in our leasing activity between now and adoption. See further discussion of our operating lease obligation in "Note M—Commitments and Contingences" in the notes to the consolidated financial statements.

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein. Early application is permitted. The impact of the adoption of this accounting standard on our consolidated financial statements was not material.

        In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which is intended to improve fair value and defined benefit disclosure requirements by removing disclosures that are not cost-beneficial, clarifying disclosures' specific requirements, and adding relevant disclosure requirements. The amendments take effect for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact the adoption of this accounting standard will have on our consolidated financial statements and related disclosures.

        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of

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recently issued standards and any that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

        Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results, including periodic escalations in their costs for labor, raw materials and third-party services and required energy consumption.

        We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments include commitments to extend credit and fund equity capital and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. At September 30, 2018, we had a total of $107.2 million in outstanding commitments comprised of (i) 33 investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional commitments not yet funded and (ii) 11 investments with equity capital commitments that had not been fully called.

        As of September 30, 2018, the future fixed commitments for cash payments in connection with our SBIC debentures, the 4.50% Notes due 2019, the 4.50% Notes due 2022 and rent obligations under our office lease for each of the next five years and thereafter are as follows:

 
  2018   2019   2020   2021   2022   Thereafter   Total  

SBIC debentures

  $   $ 16,000   $ 55,000   $ 40,000   $ 5,000   $ 229,800   $ 345,800  

Interest due on SBIC debentures

        12,738     11,819     9,260     8,248     31,186     73,251  

4.50% Notes due 2019

        175,000                     175,000  

Interest due on 4.50% Notes due 2019

    3,938     7,875                     11,813  

4.50% Notes due 2022

                    185,000         185,000  

Interest due on 4.50% Notes due 2022

    4,163     8,325     8,325     8,325     8,325         37,463  

Operating Lease Obligation(1)

    184     749     763     777     791     4,239     7,503  

Total

  $ 8,285   $ 220,687   $ 75,907   $ 58,362   $ 207,364   $ 265,225   $ 835,830  

(1)
Operating Lease Obligation means a rent payment obligation under a lease classified as an operating lease and disclosed pursuant to FASB ASC 840, as may be modified or supplemented.

        As of September 30, 2018, we had $250.0 million in borrowings outstanding under our Credit Facility, and the Credit Facility is currently scheduled to mature in September 2023. The Credit Facility contains two, one-year extension options which could extend the maturity to September 2025, subject to lender approval. See further discussion of the Credit Facility terms in "—Liquidity and Capital Resources—Capital Resources."

        As discussed further above, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of our Investment Portfolio. At September 30, 2018, we had a receivable of approximately $3.0 million due from the External Investment Manager which included approximately $1.9 million primarily related to operating expenses incurred by us as

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required to support the External Investment Manager's business and amounts due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion above in "—Critical Accounting Policies—Income Taxes") and approximately $1.1 million of dividends declared but not paid by the External Investment Manager.

        In November 2015, our Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2018, $5.9 million of compensation and directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $3.3 million was deferred into phantom Main Street stock units, representing 97,344 shares of our common stock. Including phantom stock units issued through dividend reinvestment and net of any shares distributed, the phantom stock units outstanding as of September 30, 2018 represented 116,989 shares of our common stock. Any amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but are included in operating expenses and weighted-average shares outstanding in our consolidated statements of operations as earned.

        In October 2018, we declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2018. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that we declared for the fourth quarter of 2018 of $0.195 per share for each of October, November and December 2018.

        During October 2018, we declared regular monthly dividends of $0.195 per share for each month of January, February and March of 2019. These regular monthly dividends equal a total of $0.585 per share for the first quarter of 2019 and represent a 2.6% increase from the regular monthly dividends declared for the first quarter of 2018. Including the regular monthly dividends declared for the fourth quarter of 2018 and the first quarter of 2019, we will have paid $24.820 per share in cumulative dividends since our October 2007 initial public offering.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

        We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments. 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. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent that any debt investments include floating interest rates. The majority of our debt investments are made with either fixed interest rates or floating rates that are subject to contractual minimum interest rates for the term of the investment. As of September 30, 2018, approximately 72% of our debt investment portfolio (at cost) bore interest at floating rates, 93% of which were subject to contractual minimum interest rates. Our interest expense will be affected by changes in the published LIBOR rate in connection with our

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Credit Facility; however, the interest rates on our outstanding SBIC debentures, 4.50% Notes due 2019 and 4.50% Notes due 2022, which comprise the majority of our outstanding debt, are fixed for the life of such debt. As of September 30, 2018, we had not entered into any interest rate hedging arrangements. 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 September 30, 2018.

Basis Point Change
  Increase
(Decrease)
in Interest
Income
  (Increase)
Decrease
in Interest
Expense
  Increase
(Decrease) in Net
Investment
Income
  Increase
(Decrease) in Net
Investment
Income per Share
 
 
  (dollars in thousands)
   
 

(50)

  $ (6,301 ) $ 1,250   $ (5,051 ) $ (0.08 )

(25)

    (3,172 )   625     (2,547 )   (0.04 )

25

    3,185     (625 )   2,560     0.04  

50

    6,370     (1,250 )   5,120     0.08  

100

    12,740     (2,500 )   10,240     0.17  

200

    25,480     (5,000 )   20,480     0.34  

300

    38,220     (7,500 )   30,720     0.50  

400

    50,960     (10,000 )   40,960     0.67  

        The hypothetical results would also be impacted by the changes in the amount of debt outstanding under our Credit Facility (with an increase (decrease) in the debt outstanding under the Credit Facility resulting in an (increase) decrease in the hypothetical interest expense).

Item 4.    Controls and Procedures

        As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer, our President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based on that evaluation, our Chairman and Chief Executive Officer, our President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to us that is required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934. There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.

Item 1A.    Risk Factors

        There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017 that we filed with the SEC on February 23, 2018, and as updated in our registration statement on Form N-2 filed on April 27, 2018.

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

        During the three months ended September 30, 2018, we issued 84,699 shares of our common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value of the shares of common stock issued during the three months ended September 30, 2018 under the dividend reinvestment plan was approximately $3.3 million.

Item 6.    Exhibits

        Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):

Exhibit
Number
  Description of Exhibit
  14.1   Code of Business Conduct and Ethics.

 

31.1

 

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

31.2

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

32.1

 

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

32.2

 

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

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SIGNATURES

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

    Main Street Capital Corporation

Date: November 2, 2018

 

/s/ VINCENT D. FOSTER

Vincent D. Foster
Chairman and Chief Executive Officer
(principal executive officer)

Date: November 2, 2018

 

/s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
(principal financial officer)

Date: November 2, 2018

 

/s/ SHANNON D. MARTIN

Shannon D. Martin
Vice President and Chief Accounting Officer
(principal accounting officer)

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Exhibit 14.1

MAIN STREET CAPITAL CORPORATION

CODE OF BUSINESS CONDUCT AND ETHICS

October 2018



CODE OF BUSINESS CONDUCT AND ETHICS

TABLE OF CONTENTS

 
  Page  

Introduction

    1  

Purpose of the Code

    1  

Conflicts of Interest

    1  

Corporate Opportunities

    2  

Confidentiality

    2  

Fair Dealing

    2  

Protection and Proper Use of Company Assets

    2  

Compliance with Applicable Laws, Rules and Regulations

    2  

Equal Opportunity, Harassment

    3  

Political Activities

    3  

Loans

    3  

Accuracy of Company Records

    4  

Retaining Business Communications

    4  

Media Relations

    4  

Intellectual Property Information

    4  

Internet and E-mail Policy

    5  

Reporting Violations and Complaint Handling

    5  

Administration of the Code

    5  

Sanctions for Code Violations

    6  

Application/Waivers

    6  

Revisions and Amendments

    6  

Appendices

   
 
 

Code Acknowledgment

   
A-1
 

ii



CODE OF BUSINESS CONDUCT AND ETHICS

Introduction

        Ethics are important to Main Street Capital Corporation ("Main Street" or the "Company") and to its management. Main Street is committed to the highest ethical standards and to conducting its business with the highest level of integrity. This code of business conduct and ethics (the "Code") has been adopted by Main Street in order to establish applicable policies, guidelines, and procedures that promote ethical practices and conduct by Main Street and all its employees, officers, and directors.

        All officers, directors and employees of Main Street are responsible for maintaining this level of integrity and for complying with the policies contained in this Code. If you have a question or concern about what is proper conduct for you or anyone else, please raise these concerns with any member of management, or follow the procedures outlined in applicable sections of this Code.


Purpose of the Code

        This Code is intended to:

        All employees, as a condition of employment or continued employment, will acknowledge in writing that they have received a copy of this Code, read it, and understand that the Code contains our expectations regarding their conduct. All employees will receive any updates and updated versions of this Code and will be required to read and acknowledge such updates.


Conflicts of Interest

        You must avoid any conflict, or the appearance of a conflict, between your personal interests and our interests. A conflict exists when your personal interest in any way interferes with our interests, or when you take any action or have any interest that may make it difficult for you to perform your job objectively and effectively. For example, a conflict of interest probably exists if:

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Corporate Opportunities

        Each of us has a duty to advance the legitimate interests of Main Street when the opportunity to do so presents itself. Therefore, you may not:


Confidentiality

        You must not disclose confidential information regarding us, our affiliates, our lenders, our clients, or our other business partners, unless disclosure is authorized or required by law. Confidential information includes all non-public information that might be harmful to, or useful to the competitors of, Main Street, our affiliates, our lenders, our clients, or our other business partners. Even after you leave Main Street, this obligation continues until the information becomes publicly available.


Fair Dealing

        You must endeavor to deal fairly with our customers, suppliers and business partners, or any other companies or individuals with whom we do business or come into contact with, including fellow employees and our competitors. You must not take unfair advantage of these or other parties by means of:


Protection and Proper Use of Company Assets

        Our assets are to be used only for legitimate business purposes. You should protect our assets and ensure that they are used efficiently.

        Incidental personal use of telephones, fax machines, copy machines, personal computers and similar equipment is generally allowed if there is no significant added cost to us, it does not interfere with your work duties, and is not related to an illegal activity or to any outside business.


Compliance with Applicable Laws, Rules and Regulations

        Each of us has a duty to comply with all laws, rules and regulations that apply to our business. Highlighted below are some of the key compliance guidelines that must be followed.

2


        Please talk to our Chief Compliance Officer if you have any questions about how to comply with the above regulations and other laws, rules and regulations.

        In addition, we expect you to comply with all of our policies and procedures that apply to you. We may modify or update our policies and procedures in the future, and may adopt new policies and procedures from time to time. You are also expected to observe the terms of any confidentiality agreement, employment agreement or other similar agreement that applies to you.


Equal Opportunity, Harassment

        We are committed to providing equal opportunity in all of our employment practices including selection, hiring, promotion, transfer, and compensation of all qualified applicants and employees without regard to race, color, sex or gender, gender identity, sexual orientation, religion, age, national origin, handicap, disability, citizenship status, or any other status protected by law. With this in mind, there are certain behaviors that will not be tolerated. These include harassment, violence, intimidation, and discrimination of any kind involving race, color, religion, gender, gender identity, sexual orientation, age, national origin, citizenship status, handicap, disability, marital status, or any other status protected by law.


Political Activities

        Main Street encourages its employees to be actively involved in the civic affairs of the communities in which they live. When speaking on public issues, however, employees should do so only as individual citizens of the community and must be careful not to create the impression that they are acting for, or representing the views of, Main Street. Additionally, Main Street and its employees are prohibited from making any contribution or giving a gift to a state or local political candidate, official, party or organization that would be prohibited by applicable law. In order for the Company to determine whether a gift or political contribution may be prohibited, employees are required to provide advance notice to the Chief Compliance Officer in advance of a proposed contribution.

        The Chief Compliance Officer retains discretion to monitor all business activities between the Company and the provider or recipient of any gift or political contribution in connection with this policy. Any questions regarding this policy or the application of this policy should be directed to the Chief Compliance Officer or Chief Executive Officer.


Loans

        No employee may borrow funds from or become indebted to any person, business or company having business dealings or a relationship with Main Street, except with respect to customary personal loans (e.g., home mortgage loans, automobile loans, lines of credit, etc.), unless the arrangement is

3


disclosed in writing and receives prior written approval from the Chief Compliance Officer of the Company. No employee may use the Company's name, position in a particular market or goodwill to receive any benefit on loan transactions without the prior express written consent of the Chief Compliance Officer of the Company.


Accuracy of Company Records

        We require honest and accurate recording and reporting of information in order to make responsible business decisions. This includes such data as quality, safety, and personnel records, as well as financial records.

        All financial books, records and accounts must accurately reflect transactions and events, and conform both to required accounting principles and to our system of internal controls. No false or artificial entries may be made.


Retaining Business Communications

        The law requires us to maintain certain types of corporate records, usually for specified periods of time. Failure to retain those records for those minimum periods could subject us to penalties and fines, cause the loss of rights, obstruct justice, place us in contempt of court, or seriously disadvantage us in litigation.

        From time to time we establish retention or destruction policies in order to ensure legal compliance. We expect you to fully comply with any published records retention or destruction policies, provided that you should note the following exception: If you believe, or we inform you, that our records are relevant to any litigation or governmental action, or any potential litigation or action, then you must preserve those records until we determine the records are no longer needed. This exception supersedes any previously or subsequently established destruction policies for those records. If you believe that this exception may apply, or have any questions regarding the possible applicability of that exception, please contact our Chief Compliance Officer.


Media Relations

        We must speak with a unified voice in all dealings with the press and other media. As a result, our Chief Executive Officer, President, Chief Financial Officer, Executive Chairman or other designated persons will serve as our contact persons for media seeking information about Main Street. Any requests from the media must be referred to our Chief Executive Officer, President, Chief Financial Officer, Executive Chairman or other designated persons.


Intellectual Property Information

        Information generated in our business is a valuable asset. Protecting this information plays an important role in our growth and ability to compete. Such information includes business and research plans; objectives and strategies; trade secrets; unpublished financial information; salary and benefits data; lender and other business partner lists. Employees who have access to our intellectual property information are obligated to safeguard it from unauthorized access and:

4



Internet and E-Mail Policy

        We provide an e-mail system and Internet access to our employees to help them do their work. You may use the e-mail system and the Internet only for legitimate business purposes in the course of your duties. Incidental and occasional personal use is permitted, but never for personal gain or any improper use. Further, you are prohibited from discussing or posting information regarding Main Street in any external electronic forum, including Internet chat rooms or electronic bulletin boards or social media sites.


Reporting Violations and Complaint Handling

        You are responsible for compliance with the rules, standards and principles described in this Code. In addition, you should be alert to possible violations of the Code by Main Street's employees, officers and directors, and you are expected to report a violation promptly. Normally, reports should be made to one's immediate supervisor. Under some circumstances, it may be impractical or you may feel uncomfortable raising a matter with your supervisor. In those instances, you are encouraged to report through the Company's employee hotline or contact our Chief Compliance Officer who will investigate and report the matter to our Chief Executive Officer and/or Board of Directors, as the circumstance dictates. You will also be expected to cooperate in an investigation of a violation.

        Anyone who has a concern about our conduct, the conduct of an officer of Main Street or our accounting, internal accounting controls or auditing matters, may communicate that concern through the Company's employee hotline or to the Audit Committee of the Board of Directors by direct communication with our Chief Compliance Officer or by email or in writing. All reported concerns shall be forwarded to the Audit Committee and will be simultaneously addressed by our Chief Compliance Officer in the same way that other concerns are addressed by us. The status of all outstanding concerns forwarded to the Audit Committee will be reported on a quarterly basis by our Chief Compliance Officer. The Audit Committee may direct that certain matters be presented to the full board and may also direct special treatment, including the retention of outside advisors or counsel, for any concern reported to it.

        All reports will be investigated and whenever possible, requests for confidentiality shall be honored. And, while anonymous reports will be accepted, please understand that anonymity may hinder or impede the investigation of a report. All cases of questionable activity or improper actions will be reviewed for appropriate action, discipline or corrective actions. Whenever possible, we will keep confidential the identity of employees, officers or directors who are accused of violations, unless or until it has been determined that a violation has occurred.

        There will be no reprisal, retaliation or adverse action taken against any employee who, in good faith, reports or assists in the investigation of, a violation or suspected violation, or who makes an inquiry about the appropriateness of an anticipated or actual course of action. For the avoidance of doubt, nothing in this Code shall be interpreted as impeding an employee from communicating directly with the staff of the Securities and Exchange Commission about suspected securities law violations.

        In the case of a confidential, anonymous submission, employees should communicate their concerns through the Company's employee hotline or in writing and forward them in a sealed envelope to the Chair of the Audit Committee, in care of our Chief Compliance Officer, such envelope to be labeled with a legend such as: "To be opened by the Audit Committee only."


Administration of the Code

        The Chief Compliance Officer has overall responsibility for administering the Code and reporting on the administration of and compliance with the Code and related matters to our Board of Directors.

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Sanctions for Code Violations

        All violations of the Code will result in appropriate corrective action, up to and including dismissal. If the violation involves potentially criminal activity, the individual or individuals in question will be reported, as warranted, to the appropriate authorities.


Application/Waivers

        All of our directors, officers and employees are subject to this Code.

        Any amendment or waiver of the Code for an executive officer or member of our Board of Directors must be made by our Board of Directors and will be publicly disclosed in the manner required pursuant to Item 5.05 of Form 8-K.


Revisions and Amendments

        This Code may be revised, changed or amended at any time by our Board of Directors. Following any material revisions or updates, an updated version of this Code will be distributed to you, and will supersede the prior version of this Code effective upon distribution. We may ask you to sign an acknowledgement confirming that you have read and understood the revised version of the Code, and that you agree to comply with the provisions.

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APPENDIX A

Main Street Capital Corporation

Acknowledgment Regarding
Code of Business Conduct and Ethics

This acknowledgment is to be signed and returned to our Chief Compliance Officer and will be retained as part of your permanent personnel file.

        I have received a copy of Main Street Capital Corporation's Code of Business Conduct and Ethics, read it, and understand that the Code contains the expectations of Main Street Capital Corporation regarding conduct. I agree to observe the policies and procedures contained in the Code of Business Conduct and Ethics and have been advised that, if I have any questions or concerns relating to such policies or procedures, I understand that I have an obligation to report to the Audit Committee, Chairman or President or other such designated officer, any suspected violations of the Code of which I am aware. I also understand that the Code is issued for informational purposes and that it is not intended to create, nor does it represent, a contract of employment.

          

Name (Printed)

 

 

 

 

 

Signature

 

 

 

 

  

Date

Date Received:

 

 


 

 

Reviewed By:

 

  


 

 
    Date        

The failure to read and/or sign this acknowledgment in no way relieves you of your responsibility to comply with Main Street Capital Corporation's Code of Business Conduct and Ethics.

A-1



Exhibit 31.1

I, Vincent D. Foster, certify that:

1.
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2018 of Main Street Capital Corporation (the "registrant");

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated this November 2, 2018.

By:   /s/ VINCENT D. FOSTER

Vincent D. Foster
Chairman and Chief Executive Officer
   


Exhibit 31.2

I, Brent D. Smith, certify that:

1.
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2018 of Main Street Capital Corporation (the "registrant");

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated this November 2, 2018.

By:   /s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
   


Exhibit 32.1

Certification of Chief Executive Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

        In connection with the Quarterly Report of Main Street Capital Corporation (the "Registrant") on Form 10-Q for the quarter ended September 30, 2018 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Vincent D. Foster, the Chairman and Chief Executive Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

  /s/ VINCENT D. FOSTER

  Name:   Vincent D. Foster

  Date:   November 2, 2018


Exhibit 32.2

Certification of Chief Financial Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

        In connection with the Quarterly Report of Main Street Capital Corporation (the "Registrant") on Form 10-Q for the quarter ended September 30, 2018 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Brent D. Smith, the Chief Financial Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

  /s/ BRENT D. SMITH

  Name:   Brent D. Smith

  Date:   November 2, 2018