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TABLE OF CONTENTS

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 June 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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
(do not check if
smaller reporting company)
  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 August 2, 2018 was 60,581,858.

   


Table of Contents


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.

 

Consolidated Financial Statements

   

 

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

  1

 

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

  2

 

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

  3

 

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

  4

 

Consolidated Schedule of Investments (unaudited)—June 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)—Six months ended June 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


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Balance Sheets

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

 
  June 30,
2018
  December 31,
2017
 
 
  (Unaudited)
   
 

ASSETS

             

  

             

Investments at fair value:

             

Control investments (cost: $694,340 and $530,034 as of June 30, 2018 and December 31, 2017, respectively)

  $ 913,963   $ 750,706  

Affiliate investments (cost: $360,559 and $367,317 as of June 30, 2018 and December 31, 2017, respectively)

    341,416     338,854  

Non-Control/Non-Affiliate investments (cost: $1,119,660 and $1,107,447 as of June 30, 2018 and December 31, 2017, respectively)

    1,108,752     1,081,745  

Total investments (cost: $2,174,559 and $2,004,798 as of June 30, 2018 and December 31, 2017, respectively)

    2,364,131     2,171,305  

  

             

Cash and cash equivalents

    40,484     51,528  

Interest receivable and other assets

    38,743     36,343  

Receivable for securities sold

    13,295     2,382  

Deferred financing costs (net of accumulated amortization of $6,101 and $5,600 as of June 30, 2018 and December 31, 2017, respectively)

    4,692     3,837  

Total assets

  $ 2,461,345   $ 2,265,395  

LIABILITIES

             

Credit facility

 
$

289,000
 
$

64,000
 

SBIC debentures (par: $313,800 and $295,800 as of June 30, 2018 and December 31, 2017, respectively)

    306,418     288,483  

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

    182,319     182,015  

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

    173,977     173,616  

6.125% Notes (par: $0 and $90,655 as of June 30, 2018 and December 31, 2017, respectively)

        89,057  

Accounts payable and other liabilities

    16,599     20,168  

Payable for securities purchased

    17,889     40,716  

Interest payable

    5,477     5,273  

Dividend payable

    11,477     11,146  

Deferred tax liability, net

    10,835     10,553  

Total liabilities

    1,013,991     885,027  

  

             

Commitments and contingencies (Note M)

             

NET ASSETS

   
 
   
 
 

Common stock, $0.01 par value per share (150,000,000 shares authorized; 60,400,572 and 58,660,680 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively)

   
603
   
586
 

Additional paid-in capital

    1,371,983     1,310,780  

Accumulated net investment income, net of cumulative dividends of $746,766 and $662,563 as of June 30, 2018 and December 31, 2017, respectively                 

    (1,168 )   7,921  

Accumulated net realized gain from investments (accumulated net realized gain from investments of $56,570 before cumulative dividends of $124,690 as of June 30, 2018 and accumulated net realized gain from investments of $64,576 before cumulative dividends of $124,690 as of December 31, 2017)

    (68,120 )   (60,114 )

Net unrealized appreciation, net of income taxes

    144,056     121,195  

Total net assets

    1,447,354     1,380,368  

Total liabilities and net assets

  $ 2,461,345   $ 2,265,395  

NET ASSET VALUE PER SHARE

  $ 23.96   $ 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
June 30,
  Six Months Ended
June 30,
 
 
  2018   2017   2018   2017  

INVESTMENT INCOME:

                         

Interest, fee and dividend income:

                         

Control investments

  $ 23,875   $ 14,590   $ 45,830   $ 27,576  

Affiliate investments

    8,515     9,568     17,587     19,468  

Non-Control/Non-Affiliate investments

    27,479     26,113     52,395     51,116  

Total investment income

    59,869     50,271     115,812     98,160  

EXPENSES:

                         

Interest

    (10,833 )   (8,793 )   (21,098 )   (17,400 )

Compensation

    (5,673 )   (4,555 )   (11,164 )   (8,985 )

General and administrative

    (3,097 )   (3,060 )   (6,071 )   (6,000 )

Share-based compensation

    (2,432 )   (2,798 )   (4,735 )   (5,067 )

Expenses allocated to the External Investment Manager

    1,678     1,628     3,744     3,152  

Total expenses

    (20,357 )   (17,578 )   (39,324 )   (34,300 )

NET INVESTMENT INCOME

    39,512     32,693     76,488     63,860  

NET REALIZED GAIN (LOSS):

   
 
   
 
   
 
   
 
 

Control investments

    (8,413 )   3,789     4,681     3,108  

Affiliate investments

        (115 )       22,816  

Non-Control/Non-Affiliate investments

    (5,531 )   7,307     (11,165 )   12,625  

Realized loss on extinguishment of debt

    (1,522 )       (2,896 )   (5,217 )

Total net realized gain (loss)

    (15,466 )   10,981     (9,380 )   33,332  

NET UNREALIZED APPRECIATION (DEPRECIATION):

                         

Control investments

    26,046     5,166     3,072     17,046  

Affiliate investments

    (376 )   (674 )   13,862     (26,796 )

Non-Control/Non-Affiliate investments

    7,041     (3,127 )   4,895     (10,976 )

SBIC debentures

    (10 )   (36 )   1,348     5,629  

Total net unrealized appreciation (depreciation)

    32,701     1,329     23,177     (15,097 )

INCOME TAXES:

                         

Federal and state income, excise and other taxes

    852     (438 )   (34 )   (1,690 )

Deferred taxes

    (2,148 )   (1,736 )   (282 )   (6,122 )

Income tax provision

    (1,296 )   (2,174 )   (316 )   (7,812 )

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ 55,451   $ 42,829   $ 89,969   $ 74,283  

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

  $ 0.66   $ 0.58   $ 1.29   $ 1.15  

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

  $ 0.93   $ 0.76   $ 1.52   $ 1.33  

DIVIDENDS PAID PER SHARE:

                         

Regular monthly dividends

  $ 0.570   $ 0.555   $ 1.140   $ 1.110  

Supplemental dividends

    0.275     0.275     0.275     0.275  

Total dividends

  $ 0.845   $ 0.830   $ 1.415   $ 1.385  

WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED

    59,828,751     56,166,782     59,343,199     55,648,854  

   

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)

 
  Common Stock    
   
  Accumulated
Net Realized
Gain From
Investments,
Net of Dividends
  Net Unrealized
Appreciation from
Investments,
Net of Income
Taxes
   
 
 
   
  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

   
2,104,424
   
22
   
78,412
   
   
   
   
78,434
 

Share-based compensation

            5,067                 5,067  

Purchase of vested stock for employee payroll tax withholding

    (113,371 )   (1 )   (4,346 )               (4,347 )

Investment through issuance of unregistered shares

    11,464         442                 442  

Dividend reinvestment

    115,807     1     4,403                 4,404  

Amortization of directors' deferred compensation

            326                 326  

Issuance of restricted stock, net of forfeited shares

    225,152     2     (2 )                

Dividends to stockholders

                (54,925 )   (22,420 )       (77,345 )

Net increase (decrease) resulting from operations

                58,643     38,549     (22,909 )   74,283  

Balances at June 30, 2017

    56,698,333   $ 567   $ 1,228,185   $ 22,751   $ (42,758 ) $ 74,000   $ 1,282,745  

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

   
1,432,185
   
14
   
53,748
   
   
   
   
53,762
 

Share-based compensation

            4,735                 4,735  

Purchase of vested stock for employee payroll tax withholding

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

Dividend reinvestment

    168,426     2     6,379                 6,381  

Amortization of directors' deferred compensation

            419                 419  

Issuance of restricted stock, net of forfeited shares

    248,974     2     (2 )                

Dividends to stockholders

                (84,203 )           (84,203 )

Net increase (decrease) resulting from operations

                75,114     (8,006 )   22,861     89,969  

Balances at June 30, 2018

    60,400,572   $ 603   $ 1,371,983   $ (1,168 ) $ (68,120 ) $ 144,056   $ 1,447,354  

   

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)

 
  Six Months Ended
June 30,
 
 
  2018   2017  

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net increase in net assets resulting from operations

  $ 89,969   $ 74,283  

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:

             

Investments in portfolio companies

    (528,015 )   (471,548 )

Proceeds from sales and repayments of debt investments in portfolio companies          

    281,802     380,005  

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

    42,955     54,352  

Net unrealized (appreciation) depreciation

    (23,177 )   15,097  

Net realized (gain) loss

    9,380     (33,332 )

Accretion of unearned income

    (6,945 )   (9,091 )

Payment-in-kind interest

    (952 )   (3,125 )

Cumulative dividends

    (1,069 )   (1,789 )

Share-based compensation expense

    4,735     5,067  

Amortization of deferred financing costs

    1,685     1,324  

Deferred tax provision

    282     6,122  

Changes in other assets and liabilities:

             

Interest receivable and other assets

    (3,560 )   420  

Interest payable

    204     (289 )

Accounts payable and other liabilities

    (3,149 )   (3,058 )

Deferred fees and other

    2,162     1,224  

Net cash provided by (used in) operating activities

    (133,693 )   15,662  

CASH FLOWS FROM FINANCING ACTIVITIES

   
 
   
 
 

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

    53,762     78,434  

Dividends paid

    (77,492 )   (72,505 )

Proceeds from issuance of SBIC debentures

    22,000     46,400  

Repayments of SBIC debentures

    (4,000 )   (25,200 )

Redemption of 6.125% Notes

    (90,655 )    

Proceeds from credit facility

    427,000     251,000  

Repayments on credit facility

    (202,000 )   (291,000 )

Payment of deferred issuance costs and SBIC debenture fees

    (1,889 )   (1,125 )

Purchases of vested stock for employee payroll tax withholding

    (4,077 )   (4,347 )

Net cash provided by (used in) financing activities

    122,649     (18,343 )

Net decrease in cash and cash equivalents

    (11,044 )   (2,681 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    51,528     24,480  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 40,484   $ 21,799  

Supplemental cash flow disclosures:

             

Interest paid

  $ 19,147   $ 16,304  

Taxes paid

  $ 4,075   $ 2,785  

Non-cash financing activities:

             

Shares issued pursuant to the DRIP

  $ 6,381   $ 4,404  

   

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

4


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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 (8,977,500 units)

          8,871      

         

Member Units (45 units)

          1      

                      32,700     15,120  

                               

ASC Interests, LLC

  August 1, 2013  

Recreational and Educational Shooting Facility

                       

         

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

    1,650     1,649     1,649  

         

Member Units (1,500 units)

          1,500     1,370  

                      3,149     3,019  

                               

ATS Workholding, LLC(10)

  March 10, 2014  

Manufacturer of Machine Cutting Tools and Accessories

                       

         

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

    4,605     4,179     4,179  

         

Preferred Member Units (3,725,862 units)

          3,726     3,726  

                      7,905     7,905  

                               

Bond-Coat, Inc.

  December 28, 2012  

Casing and Tubing Coating Services

                       

         

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

    11,596     11,319     11,319  

         

Common Stock (57,508 shares)

          6,350     9,370  

                      17,669     20,689  

                               

Brewer Crane Holdings, LLC

  January 9, 2018  

Provider of Crane Rental and Operating Services

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.98%, Secured Debt (Maturity—January 9, 2023)(9)

    9,796     9,706     9,706  

         

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

          4,280     4,280  

                      13,986     13,986  

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)

    9,271     9,157     9,157  

         

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

    28,000     27,733     27,733  

         

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

          10,775     10,775  

                      47,665     47,665  

                               

CBT Nuggets, LLC

  June 1, 2006  

Produces and Sells IT Training Certification Videos

                       

         

Member Units (416 units)(8)

          1,300     64,040  

                               

5


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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     21,397     21,397  

         

Member Units (4,347 units)(8)

          11,440     11,440  

                      32,837     32,837  

                               

Charps, LLC

  February 3, 2017  

Pipeline Maintenance and Construction

                       

         

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

    15,900     15,762     15,762  

         

Preferred Member Units (1,600 units)

          400     1,190  

                      16,162     16,952  

                               

Clad-Rex Steel, LLC

  December 20, 2016  

Specialty Manufacturer of Vinyl-Clad Metal

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.48%, Secured Debt (Maturity—December 20, 2021)(9)

    12,880     12,783     12,880  

         

Member Units (717 units)(8)

          7,280     9,780  

         

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

    1,173     1,161     1,173  

         

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

          210     280  

                      21,434     24,113  

                               

CMS Minerals Investments

  January 30, 2015  

Oil & Gas Exploration & Production

                       

         

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

          3,036     2,736  

                               

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     3,270  

                      4,142     4,142  

                               

Datacom, LLC

  May 30, 2014  

Technology and Telecommunications Provider

                       

         

8% Secured Debt (Maturity—May 30, 2018)(14)(17)

    1,800     1,800     1,800  

         

5.25% Current / 5.25% PIK Secured Debt (Maturity—May 30, 2019)(14)(19)

    12,511     12,479     10,560  

         

Class A Preferred Member Units

          1,181      

         

Class B Preferred Member Units (6,453 units)

          6,030      

                      21,490     12,360  

                               

Digital Products Holdings LLC

  April 1, 2018  

Designer and Distributor of Consumer Electronics

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity—April 1, 2023)(9)

    26,400     26,146     26,146  

         

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

          8,800     8,800  

                      34,946     34,946  

                               

6


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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 13.00%, Secured Debt (Maturity—February 13, 2023)(9)

    18,487     18,298     18,298  

         

Preferred Stock (8,400 shares)

          8,400     8,400  

                      26,698     26,698  

                               

Gamber-Johnson Holdings, LLC

  June 24, 2016  

Manufacturer of Ruggedized Computer Mounting Systems

                       

         

LIBOR Plus 9.00% (Floor 2.00%), Current Coupon 11.00%, Secured Debt (Maturity—June 24, 2021)(9)

    22,910     22,748     22,910  

         

Member Units (8,619 units)(8)

          14,844     33,380  

                      37,592     56,290  

                               

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     5,331     5,331  

         

Member Units (1,200 units)

          1,200     1,940  

                      6,531     7,271  

                               

GRT Rubber Technologies LLC

  December 19, 2014  

Manufacturer of Engineered Rubber Products

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.98%, Secured Debt (Maturity—December 19, 2019)(9)

    10,782     10,744     10,782  

         

Member Units (5,879 units)(8)

          13,065     25,450  

                      23,809     36,232  

                               

Guerdon Modular Holdings, Inc.

  August 13, 2014  

Multi-Family and Commercial Modular Construction Company

                       

         

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

    12,588     12,526     11,956  

         

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)

               

                      16,649     11,956  

                               

Gulf Manufacturing, LLC

  August 31, 2007  

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

         

Member Units (438 units)(8)

          2,980     11,150  

                               

Gulf Publishing Holdings, LLC

  April 29, 2016  

Energy Industry Focused Media and Publishing

                       

         

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.48%, Secured Debt (Maturity—September 30, 2020)(9)

    160     160     160  

         

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

    12,666     12,582     12,582  

         

Member Units (3,681 units)

          3,681     4,570  

                      16,423     17,312  

                               

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)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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%)

          786     879  

                               

Harrison Hydra-Gen, Ltd.

  June 4, 2010  

Manufacturer of Hydraulic Generators

                       

         

Common Stock (107,456 shares)(8)

          718     6,840  

                               

HW Temps LLC

  July 2, 2015  

Temporary Staffing Solutions

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.98%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,927     9,927  

         

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

          3,942     3,942  

                      13,869     13,869  

                               

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)

    14,650     14,540     14,650  

         

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

          5,952     11,550  

                      20,492     26,200  

                               

Jensen Jewelers of Idaho, LLC

  November 14, 2006  

Retail Jewelry Store

                       

         

Prime Plus 6.75% (Floor 2.00%), Current Coupon 11.50%, Secured Debt (Maturity—November 14, 2019)(9)

    3,655     3,626     3,655  

         

Member Units (627 units)(8)

          811     4,600  

                      4,437     8,255  

                               

KBK Industries, LLC

  January 23, 2006  

Manufacturer of Specialty Oilfield and Industrial Products

                       

         

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

    5,900     5,870     5,900  

         

Member Units (325 units)(8)

          783     5,620  

                      6,653     11,520  

                               

Lamb Ventures, LLC

  May 30, 2008  

Aftermarket Automotive Services Chain

                       

         

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

    8,339     8,300     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     570  

                      15,026     16,471  

                               

Market Force Information, LLC

  July 28, 2017  

Provider of Customer Experience Management Services

                       

         

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.30%, Secured Debt (Maturity—July 28, 2022)(9)

    22,800     22,606     22,606  

         

Member Units (657,113 units)

          14,700     14,360  

                      37,306     36,966  

                               

8


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

MH Corbin Holding LLC

  August 31, 2015  

Manufacturer and Distributor of Traffic Safety Products

                       

         

10% Secured Debt (Maturity—August 31, 2020)

    12,250     12,083     12,083  

         

Preferred Member Units (4,000 shares)

          6,000     6,000  

                      18,083     18,083  

                               

Mid-Columbia Lumber Products, LLC

  December 18, 2006  

Manufacturer of Finger-Jointed Lumber Products

                       

         

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

    1,750     1,744     1,750  

         

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

    3,900     3,871     3,871  

         

Member Units (7,874 units)

          3,001     2,171  

         

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

    768     768     768  

         

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

          790     1,470  

                      10,174     10,030  

                               

MSC Adviser I, LLC(16)

  November 22, 2013  

Third Party Investment Advisory Services

                       

         

Member Units (Fully diluted 100.0%)(8)

              62,667  

                               

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     7,485     7,485  

         

Common Stock (5,873 shares)

          2,720     4,120  

                      10,205     11,605  

                               

NAPCO Precast, LLC

  January 31, 2008  

Precast Concrete Manufacturing

                       

         

LIBOR Plus 8.50%, Current Coupon 10.80%, Secured Debt (Maturity—May 31, 2019)

    11,475     11,451     11,475  

         

Member Units (2,955 units)(8)

          2,975     12,730  

                      14,426     24,205  

                               

NexRev LLC

  February 28, 2018  

Provider of Energy Efficiency Products & Services

                       

         

11% Secured Debt (Maturity—February 28, 2023)

    17,440     17,274     17,274  

         

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

          6,880     6,880  

                      24,154     24,154  

                               

NRI Clinical Research, LLC

  September 8, 2011  

Clinical Research Service Provider

                       

         

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

    6,900     6,741     6,770  

         

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  

                      7,758     9,770  

                               

9


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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     4,750  

                      10,093     11,126  

                               

NuStep, LLC

  January 31, 2017  

Designer, Manufacturer and Distributor of Fitness Equipment

                       

         

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

    20,600     20,438     20,438  

         

Preferred Member Units (406 units)

          10,200     10,200  

                      30,638     30,638  

                               

OMi Holdings, Inc.

  April 1, 2008  

Manufacturer of Overhead Cranes

                       

         

Common Stock (1,500 shares)(8)

          1,080     14,810  

                               

Pegasus Research Group, LLC

  January 6, 2011  

Provider of Telemarketing and Data Services

                       

         

Member Units (460 units)(8)

          1,290     9,590  

                               

PPL RVs, Inc.

  June 10, 2010  

Recreational Vehicle Dealer

                       

         

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 9.31%, Secured Debt (Maturity—November 15, 2021)(9)

    15,600     15,489     15,600  

         

Common Stock (1,962 shares)(8)

          2,150     11,030  

                      17,639     26,630  

                               

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     7,371     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  

                      13,171     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)

          3,643     5,713  

                      10,984     12,163  

                               

River Aggregates, LLC

  March 30, 2011  

Processor of Construction Aggregates

                       

         

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

    750     750     750  

         

Member Units (1,150 units)

          1,150     4,610  

         

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

          369     2,670  

                      2,269     8,030  

                               

10


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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     2,924     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)

    2,814     2,806     2,806  

         

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

          3,000     3,360  

         

Common Stock (1,126,242 shares)

          3,706     129  

                      9,512     6,295  

                               

Ziegler's NYPD, LLC

  October 1, 2008  

Casual Restaurant Group

                       

         

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

    1,000     997     997  

         

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—September 29, 2018; Strike price—$0.01 per unit)

          600      

         

Preferred Member Units (10,072 units)

          2,834     2,359  

                      7,606     6,531  

Subtotal Control Investments (63.1% of net assets at fair value)

  $ 694,340   $ 913,963  

11


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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   $ 900  

         

Preferred Member Units (186 units)(8)

          1,200     3,760  

                      1,459     4,660  

                               

Barfly Ventures, LLC(10)

  August 31, 2015  

Casual Restaurant Group

                       

         

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

    9,450     9,301     9,440  

         

Options (2 equivalent units)

          397     800  

         

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

          473     450  

                      10,171     10,690  

                               

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 11.98%, Secured Debt (Maturity—April 8, 2021)(9)

    650     632     632  

         

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

    4,000     3,890     3,890  

         

Member Units (800,000 units)

          800     470  

                      5,322     4,992  

                               

Boccella Precast Products LLC

  June 30, 2017  

Manufacturer of Precast Hollow Core Concrete

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.31%, Secured Debt (Maturity—June 30, 2022)(9)

    16,742     16,594     16,742  

         

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

          2,160     5,220  

                      18,754     21,962  

                               

Boss Industries, LLC

  July 1, 2014  

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

         

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

          2,160     5,270  

                               

Bridge Capital Solutions Corporation

  April 18, 2012  

Financial Services and Cash Flow Solutions Provider

                       

         

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

    7,500     6,044     6,044  

         

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     993     1,000  

         

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

          1,000     1,000  

                      10,169     12,064  

                               

12


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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 11.25%, Secured Debt (Maturity—June 30, 2020)(9)

    19,704     19,616     19,616  

         

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

          4,299     4,299  

                      23,915     23,915  

                               

CAI Software LLC

  October 10, 2014  

Provider of Specialized Enterprise Resource Planning Software

                       

         

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

    3,843     3,827     3,843  

         

Member Units (65,356 units)(8)

          654     2,850  

                      4,481     6,693  

                               

Chandler Signs Holdings, LLC(10)

  January 4, 2016  

Sign Manufacturer

                       

         

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

    4,523     4,494     4,523  

         

Class A Units (1,500,000 units)

          1,500     2,180  

                      5,994     6,703  

                               

Charlotte Russe, Inc(11)

  May 28, 2013  

Fast-Fashion Retailer to Young Women

                       

         

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

    7,972     7,972     7,085  

         

Common Stock (19,041 shares)

          3,141     3,141  

                      11,113     10,226  

                               

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)

          5,210     741  

         

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

          21,883     22,874  

                      27,093     23,615  

                               

Dos Rios Partners(12)(13)

  April 25, 2013  

Investment Partnership

                       

         

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

          5,846     7,046  

         

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

          1,856     2,237  

                      7,702     9,283  

                               

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%)

          461     413  

                               

Freeport Financial Funds(12)(13)

  June 13, 2013  

Investment Partnership

                       

         

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

          5,974     5,742  

         

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

          8,558     8,506  

                      14,532     14,248  

                               

13


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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)

    12,333     12,333     11,382  

         

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

          400      

                      12,733     11,382  

                               

Harris Preston Fund Investments(12)(13)

  August 9, 2017  

Investment Partnership

                       

         

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

          1,460     1,460  

                               

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     14,188     14,300  

         

Preferred Member Units (226 units)(8)

          2,850     6,220  

         

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

          150     330  

                      17,188     20,850  

                               

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     3,380  

         

Member Units (318,462 units)(8)

          2,236     7,070  

                      5,236     10,450  

                               

I-45 SLF LLC(12)(13)

  October 20, 2015  

Investment Partnership

                       

         

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

          16,200     16,687  

                               

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 10.82%, Secured Debt (Maturity—June 7, 2022)(9)

    20,800     20,612     20,612  

         

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

          4,855     5,570  

                      25,467     26,182  

                               

OnAsset Intelligence, Inc.

  April 18, 2011  

Provider of Transportation Monitoring / Tracking Products and Services

                       

         

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

    5,406     5,406     5,406  

         

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

    50     50     50  

         

Preferred Stock (912 shares)

          1,981      

         

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

          1,919      

                      9,356     5,456  

                               

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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)

    12,385     12,351     12,351  

         

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

          1,740     3,480  

         

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

          3,927     290  

                      18,018     16,121  

                               

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     1,620  

                               

UniTek Global Services, Inc.(11)

  April 15, 2011  

Provider of Outsourced Infrastructure Services

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.60%, Secured Debt (Maturity—January 13, 2019)(9)

    8,069     8,066     8,069  

         

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

    931     931     931  

         

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

          3,137     3,137  

         

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

          7,869     7,869  

         

Common Stock (1,075,992 shares)

              1,220  

                      20,003     21,226  

                               

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     890  

         

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

          4,000     2,360  

                      4,717     3,250  

                               

Valley Healthcare Group, LLC

  December 29, 2015  

Provider of Durable Medical Equipment

                       

         

LIBOR Plus 10.50% (Floor 0.50%), Current Coupon 12.48%, Secured Debt (Maturity—December 29, 2020)(9)

    11,646     11,577     11,646  

         

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

          1,600     2,300  

                      13,177     13,946  

                               

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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)

    19,272     18,054     18,054  

         

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     871  

                      34,927     33,222  

Subtotal Affiliate Investments (23.6% of net assets at fair value)

  $ 360,559   $ 341,416  

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Non-Control/Non-Affiliate Investments(7)

                   

                               

AAC Holdings, Inc.(11)(13)

  June 30, 2017  

Substance Abuse Treatment Service Provider

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 9.11%, Secured Debt (Maturity—June 30, 2023)(9)

  $ 14,688   $ 14,406   $ 14,908  

                               

Adams Publishing Group, LLC(10)

  November 19, 2015  

Local Newspaper Operator

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.33%, Secured Debt (Maturity—November 3, 2020)(9)

    9,281     9,082     9,281  

                               

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 9.67%, Secured Debt (Maturity—December 31, 2022)(9)

    12,916     12,689     12,755  

                               

Aethon United BR LP(10)

  September 8, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.78%, Secured Debt (Maturity—September 8, 2023)(9)

    3,438     3,391     3,391  

                               

Allflex Holdings III Inc.(11)

  July 18, 2013  

Manufacturer of Livestock Identification Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.36%, Secured Debt (Maturity—July 19, 2021)(9)

    13,455     13,401     13,522  

                               

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 10.33%, Secured Debt (Maturity—October 10, 2018)(9)

    422     414     414  

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.33%, Secured Debt (Maturity—April 10, 2023)(9)

    11,250     11,036     11,036  

                      11,450     11,450  

                               

American Scaffold Holdings, Inc.(10)

  June 14, 2016  

Marine Scaffolding Service Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.83%, Secured Debt (Maturity—March 31, 2022)(9)

    6,844     6,770     6,810  

                               

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 8.86%, Secured Debt (Maturity—December 8, 2021)(9)

    15,592     15,023     15,153  

                               

Anchor Hocking, LLC(11)

  April 2, 2012  

Household Products Manufacturer

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.32%, Secured Debt (Maturity—June 4, 2020)(9)

    2,242     2,207     2,247  

                               

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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 10.98%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

         

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

    14,416     14,352     14,352  

                      16,752     16,752  

                               

Arcus Hunting LLC(10)

  January 6, 2015  

Manufacturer of Bowhunting and Archery Products and Accessories

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.31%, Secured Debt (Maturity—November 13, 2019)(9)

    16,068     15,996     16,068  

                               

Arise Holdings, Inc.(10)

  March 12, 2018  

Tech-Enabled Business Process Outsourcing

                       

         

Preferred Stock (1,000,000 shares)

          1,000     1,000  

                               

ATI Investment Sub, Inc.(11)

  July 11, 2016  

Manufacturer of Solar Tracking Systems

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.34%, Secured Debt (Maturity—June 22, 2021)(9)

    6,864     6,741     6,856  

                               

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

  June 30, 2015  

Provider of Radio Frequency Management Equipment

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.33% / 1.00% PIK, Current Coupon Plus PIK 9.33%, Secured Debt (Maturity—June 11, 2021)(9)(19)

    14,239     13,919     13,491  

                               

BigName Commerce, LLC(10)

  May 11, 2017  

Provider of Envelopes and Complimentary Stationery Products

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.56%, Secured Debt (Maturity—May 11, 2022)(9)

    2,524     2,500     2,500  

                               

Binswanger Enterprises, LLC(10)

  March 10, 2017  

Glass Repair and Installation Service Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.34%, Secured Debt (Maturity—March 9, 2022)(9)

    14,561     14,335     14,467  

         

Member Units (1,050,000 units)

          1,050     1,100  

                      15,385     15,567  

                               

Bluestem Brands, Inc.(11)

  December 19, 2013  

Multi-Channel Retailer of General Merchandise

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.69%, Secured Debt (Maturity—November 6, 2020)(9)

    11,751     11,608     7,756  

                               

Brainworks Software, LLC(10)

  August 12, 2014  

Advertising Sales and Newspaper Circulation Software

                       

         

Prime Plus 9.25% (Floor 3.25%), Current Coupon 14.25%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,713     6,581  

                               

18


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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     10,360  

         

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

          1,000     1,063  

                      13,000     11,423  

                               

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 7.07%, Secured Debt (Maturity—May 15, 2025)

    7,500     7,389     7,425  

                               

Cadence Aerospace LLC(10)

  November 14, 2017  

Aerostructure Manufacturing

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.86%, Secured Debt (Maturity—November 14, 2023)(9)

    14,963     14,825     14,963  

                               

California Pizza Kitchen, Inc.(11)

  August 29, 2016  

Casual Restaurant Group

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.10%, Secured Debt (Maturity—August 23, 2022)(9)

    12,805     12,768     12,568  

                               

CDHA Management, LLC(10)

  December 5, 2016  

Dental Services

                       

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.64%, Secured Debt (Maturity—December 5, 2021)(9)

    5,412     5,359     5,411  

                               

Central Security Group, Inc.(11)

  December 4, 2017  

Security Alarm Monitoring Service Provider

                       

         

LIBOR Plus 5.63% (Floor 1.00%), Current Coupon 7.72%, Secured Debt (Maturity—October 6, 2021)(9)

    7,941     7,922     7,981  

                               

Cenveo Corporation(11)

  September 4, 2015  

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

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.04%, Secured Debt (Maturity—November 2, 2018)(9)

    6,089     6,059     6,028  

         

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

    19,130     17,126     6,887  

                      23,185     12,915  

                               

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  

                               

19


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Clickbooth.com, LLC(10)

  December 5, 2017  

Provider of Digital Advertising Performance Marketing Solutions

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.81%, Secured Debt (Maturity—December 5, 2022)(9)

    2,963     2,908     2,908  

                               

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 7.99%, Secured Debt (Maturity—June 30, 2023)(9)

    10,885     10,834     10,858  

         

Member Units (42,207 units)

          4,221     4,221  

                      15,055     15,079  

                               

CTVSH, PLLC(10)

  August 3, 2017  

Emergency Care and Specialty Service Animal Hospital

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.30%, Secured Debt (Maturity—August 3, 2022)(9)

    11,550     11,451     11,451  

                               

Darr Equipment LP(10)

  April 15, 2014  

Heavy Equipment Dealer

                       

         

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

    7,265     7,265     7,265  

         

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

          474     10  

                      7,739     7,275  

                               

Digital River, Inc.(11)

  February 24, 2015  

Provider of Outsourced e-Commerce Solutions and Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.34%, Secured Debt (Maturity—February 12, 2021)(9)

    10,146     10,059     10,133  

                               

Drilling Info Holdings, Inc.

  November 20, 2009  

Information Services for the Oil and Gas Industry

                       

         

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

              15,990  

                               

DTE Enterprises, LLC(10)

  April 13, 2018  

Industrial Powertrain Repair and Services

                       

         

LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.85%, Secured Debt (Maturity—April 13, 2023)(9)

    13,795     13,516     13,516  

         

Class AA Preferred Member Units (non-voting)

          724     724  

         

Class A Preferred Member Units (776,316 units)

          776     776  

                      15,016     15,016  

                               

20


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

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)

          3,460     1,596  

         

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)

          4,383     3,631  

         

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

          7,101     7,164  

         

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

          5,864     4,964  

         

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

          3,207     2,908  

                      26,087     21,385  

                               

EPIC Y-Grade Services, LP(11)

  June 22, 2018  

NGL Transportation & Storage

                       

         

LIBOR Plus 5.50%, Current Coupon 7.59%, Secured Debt (Maturity—June 13, 2024)

    17,500     17,151     17,237  

                               

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 10.34%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,889     5,882  

                               

Extreme Reach, Inc.(11)

  March 31, 2015  

Integrated TV and Video Advertising Platform

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.35%, Secured Debt (Maturity—February 7, 2020)(9)

    13,307     13,297     13,324  

                               

Felix Investments Holdings II(10)

  August 9, 2017  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.87%, Secured Debt (Maturity—August 9, 2022)(9)

    3,333     3,273     3,273  

                               

Flavors Holdings Inc.(11)

  October 15, 2014  

Global Provider of Flavoring and Sweetening Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.08%, Secured Debt (Maturity—April 3, 2020)(9)

    12,345     11,999     11,481  

                               

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)

    9,242     9,176     9,277  

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.86%, Secured Debt (Maturity—April 29, 2022)(9)

    3,915     3,782     3,969  

                      12,958     13,246  

                               

21


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

GoWireless Holdings, Inc.(11)

  December 31, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.59%, Secured Debt (Maturity—December 22, 2024)(9)

    17,775     17,607     17,642  

                               

Grupo Hima San Pablo, Inc.(11)

  March 7, 2013  

Tertiary Care Hospitals

                       

         

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 9.36%, Secured Debt (Maturity—July 31, 2018)(9)

    4,750     4,750     3,654  

         

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

    2,055     2,040     226  

                      6,790     3,880  

                               

Hojeij Branded Foods, LLC(10)

  July 28, 2015  

Multi-Airport, Multi-Concept Restaurant Operator

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.36%, Secured Debt (Maturity—July 20, 2022)(9)

    12,412     12,304     12,412  

                               

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 8.17%, Secured Debt (Maturity—January 28, 2020)

    5,188     4,534     4,896  

         

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.58%, Secured Debt (Maturity—January 28, 2021)(9)

    8,416     8,020     8,206  

                      12,554     13,102  

                               

Hostway Corporation(11)

  December 27, 2013  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 5.25% (Floor 1.25%), Current Coupon 7.34% / 0.50% PIK, Current Coupon Plus PIK 7.84%, Secured Debt (Maturity—December 13, 2019)(9)(19)

    30,655     30,005     29,966  

                               

Houghton Mifflin Harcourt Publishers Inc.(11)(13)

  May 3, 2017  

Provider of Educational Print and Digital Services

                       

         

LIBOR Plus 3.00% (Floor 1.00%), Current Coupon 5.09%, Secured Debt (Maturity—May 28, 2021)(9)

    15,224     14,345     14,269  

                               

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 9.33%, Secured Debt (Maturity—March 29, 2023)(9)

    41,022     40,143     40,143  

                               

Hydrofarm Holdings LLC(10)

  May 18, 2017  

Wholesaler of Horticultural Products

                       

         

LIBOR Plus 7.00%, Current Coupon 8.89%, Secured Debt (Maturity—May 12, 2022)

    6,623     6,516     5,927  

                               

iEnergizer Limited(11)(13)(21)

  May 8, 2013  

Provider of Business Outsourcing Solutions

                       

         

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 8.10%, Secured Debt (Maturity—May 1, 2019)(9)

    10,785     10,642     10,785  

                               

22


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Implus Footcare, LLC(10)

  June 1, 2017  

Provider of Footwear and Related Accessories

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.84%, Secured Debt (Maturity—April 30, 2021)(9)

    19,219     18,994     19,121  

                               

Industrial Services Acquisition, LLC(10)

  June 17, 2016  

Industrial Cleaning Services

                       

         

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

    4,715     4,646     4,498  

         

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

          90     90  

         

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

          900     210  

                      5,636     4,798  

                               

Inn of the Mountain Gods Resort and Casino(11)

  October 30, 2013  

Hotel & Casino Owner & Operator

                       

         

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

    11,149     10,671     10,564  

                               

irth Solutions, LLC

  December 29, 2010  

Provider of Damage Prevention Information Technology Services

                       

         

Member Units (27,893 units)

          1,441     2,070  

                               

Isagenix International, LLC(11)

  June 21, 2018  

Direct Marketer of Health & Wellness Products

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 8.08%, Secured Debt (Maturity—June 14, 2025)(9)

    6,429     6,365     6,445  

                               

JAB Wireless, Inc.(10)

  May 2, 2018  

Fixed Wireless Broadband Provider

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—May 2, 2023)(9)

    15,000     14,853     14,853  

                               

Jacent Strategic Merchandising, LLC(10)

  September 16, 2015  

General Merchandise Distribution

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.82%, Secured Debt (Maturity—September 16, 2020)(9)

    10,853     10,807     10,853  

                               

Jackmont Hospitality, Inc.(10)

  May 26, 2015  

Franchisee of Casual Dining Restaurants

                       

         

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.73%, Secured Debt (Maturity—May 26, 2021)(9)

    4,217     4,208     4,217  

                               

Jacuzzi Brands LLC(11)

  June 30, 2017  

Manufacturer of Bath and Spa Products

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.09%, Secured Debt (Maturity—June 28, 2023)(9)

    3,900     3,832     3,939  

                               

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     13,316     12,361  

                               

23


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Larchmont Resources, LLC(11)

  August 13, 2013  

Oil & Gas Exploration & Production

                       

         

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.33%, PIK Secured Debt (Maturity—August 7, 2020)(9)(19)

    2,505     2,505     2,480  

         

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

          353     778  

                      2,858     3,258  

                               

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

  January 25, 2013  

Investment Partnership

                       

         

LP Interests (Fully diluted 2.3%)

          2,069     4,483  

                               

Logix Acquisition Company, LLC(10)

  June 24, 2016  

Competitive Local Exchange Carrier

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.84%, Secured Debt (Maturity—December 22, 2024)(9)

    9,679     9,481     9,727  

                               

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)

          73     56  

                      198     113  

                               

LSF9 Atlantis Holdings, LLC(11)

  May 17, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—May 1, 2023)(9)

    9,899     9,875     9,819  

                               

Lulu's Fashion Lounge, LLC(10)

  August 31, 2017  

Fast Fashion E-Commerce Retailer

                       

         

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.09%, Secured Debt (Maturity—August 28, 2022)(9)

    12,869     12,529     13,255  

                               

Messenger, LLC(10)

  December 5, 2014  

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.59%, Secured Debt (Maturity—September 9, 2020)(9)

    16,717     16,650     16,717  

                               

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     1,400  

                               

NBG Acquisition Inc(11)

  April 28, 2017  

Wholesaler of Home Décor Products

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.95%, Secured Debt (Maturity—April 26, 2024)(9)

    4,347     4,285     4,347  

                               

New Era Technology, Inc.(10)

  July 3, 2018  

Managed Services and Hosting Provider

                       

         

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.58%, Secured Debt (Maturity—June 22, 2023)(9)

    6,711     6,576     6,576  

                               

24


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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 8.34%, Secured Debt (Maturity—July 14, 2022)(9)

    19,914     19,559     20,070  

                               

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     18,220     18,220  

                               

North American Lifting Holdings, Inc.(11)

  February 26, 2015  

Crane Service Provider

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.83%, Secured Debt (Maturity—November 27, 2020)(9)

    7,705     7,000     7,401  

                               

Novetta Solutions, LLC(11)

  June 21, 2017  

Provider of Advanced Analytics Solutions for Defense Agencies

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.10%, Secured Debt (Maturity—October 17, 2022)(9)

    15,558     15,126     15,130  

                               

NTM Acquisition Corp.(11)

  July 12, 2016  

Provider of B2B Travel Information Content

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.58%, Secured Debt (Maturity—June 7, 2022)(9)

    4,542     4,507     4,548  

                               

Ospemifene Royalty Sub LLC (QuatRx)(10)

  July 8, 2013  

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

         

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

    5,026     5,026     987  

                               

Paris Presents Incorporated(11)

  February 5, 2015  

Branded Cosmetic and Bath Accessories

                       

         

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 10.84%, Secured Debt (Maturity—December 31, 2021)(9)

    4,500     4,474     4,517  

                               

Permian Holdco 2, Inc.(11)

  February 12, 2013  

Storage Tank Manufacturer

                       

         

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

    369     369     369  

         

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

          799     920  

         

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

               

                      1,168     1,289  

                               

Pernix Therapeutics Holdings, Inc.(10)

  August 18, 2014  

Pharmaceutical Royalty

                       

         

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

    3,031     3,031     1,958  

                               

Pier 1 Imports, Inc.(11)

  February 20, 2018  

Decorative Home Furnishings Retailer

                       

         

LIBOR Plus 3.50% (Floor 1.00%), Current Coupon 5.95%, Secured Debt (Maturity—April 30, 2021)(9)

    9,812     9,119     9,003  

                               

25


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  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     4  

                      342     4  

                               

PPC/SHIFT LLC(10)

  December 22, 2016  

Provider of Digital Solutions to Automotive Industry

                       

         

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 8.31%, Secured Debt (Maturity—December 22, 2021)(9)

    6,470     6,368     6,470  

                               

PricewaterhouseCoopers Public Sector LLP(11)

  May 24, 2018  

Provider of Consulting Services to Governments

                       

         

LIBOR Plus 7.50%, Current Coupon 9.48%, Secured Debt (Maturity—May 1, 2026)

    8,000     7,960     8,050  

                               

Prowler Acquisition Corp.(11)

  February 11, 2014  

Specialty Distributor to the Energy Sector

                       

         

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.83%, Secured Debt (Maturity—January 28, 2020)(9)

    19,820     18,529     19,621  

                               

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)

    8,817     8,817     8,817  

                               

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 7.11%, Secured Debt (Maturity—August 7, 2021)(9)

    15,272     15,134     15,349  

                               

Radiology Partners, Inc.(10)

  January 25, 2018  

Radiology Practice Providing Scan Interpretations

                       

         

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.59%, Secured Debt (Maturity—December 4, 2023)(9)

    9,731     9,638     9,761  

                               

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 7.86%, Secured Debt (Maturity—December 20, 2024)(9)

    13,466     12,830     13,264  

                               

26


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Resolute Industrial, LLC(10)

  July 26, 2017  

HVAC Equipment Rental and Remanufacturing

                       

         

LIBOR Plus 7.62% (Floor 1.00%), Current Coupon 9.92%, Secured Debt (Maturity—July 26, 2022)(9)(24)

    17,088     16,799     16,799  

         

Member Units (601 units)

          750     830  

                      17,549     17,629  

                               

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     396  

                               

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     16  

                      471     16  

                               

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 10.59%, Secured Debt (Maturity—June 9, 2021)(9)

    11,739     11,525     11,563  

                               

SiTV, LLC(11)

  September 26, 2017  

Cable Networks Operator

                       

         

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

    10,429     7,098     6,179  

                               

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

  August 18, 2017  

Provider of Specialty Memory Solutions

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.62%, Secured Debt (Maturity—August 9, 2022)(9)

    13,875     13,635     13,806  

                               

Sorenson Communications, Inc.(11)

  June 7, 2016  

Manufacturer of Communication Products for Hearing Impaired

                       

         

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.09%, Secured Debt (Maturity—April 30, 2020)(9)

    13,199     13,148     13,257  

                               

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)

    19,865     19,510     18,160  

                               

27


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

Strike, LLC(11)

  December 12, 2016  

Pipeline Construction and Maintenance Services

                       

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.45%, Secured Debt (Maturity—November 30, 2022)(9)

    9,375     9,149     9,527  

         

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity—May 30, 2019)(9)

    409     395     411  

                      9,544     9,938  

                               

Synagro Infrastructure Company, Inc(11)

  August 29, 2013  

Waste Management Services

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.83%, Secured Debt (Maturity—August 22, 2020)(9)

    11,662     11,292     10,671  

                               

TE Holdings, LLC(11)

  December 5, 2013  

Oil & Gas Exploration & Production

                       

         

Member Units (97,048 units)

          970     107  

                               

Tectonic Holdings, LLC

  May 15, 2017  

Financial Services Organization

                       

         

Member Units (200,000 units)(8)

          2,000     2,320  

                               

TeleGuam Holdings, LLC(11)

  June 26, 2013  

Cable and Telecom Services Provider

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.59%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,611     7,808  

                               

TGP Holdings III LLC(11)

  September 30, 2017  

Outdoor Cooking & Accessories

                       

         

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.83%, Secured Debt (Maturity—September 25, 2025)(9)

    5,000     4,930     5,075  

                               

The Pasha Group(11)

  February 2, 2018  

Diversified Logistics and Transportation Provided

                       

         

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.64%, Secured Debt (Maturity—January 26, 2023)(9)

    11,719     11,386     11,895  

                               

TMC Merger Sub Corp.(11)

  December 22, 2016  

Refractory & Maintenance Services Provider

                       

         

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.38%, Secured Debt (Maturity—October 31, 2022)(9)(25)

    17,432     17,309     17,563  

                               

TOMS Shoes, LLC(11)

  November 13, 2014  

Global Designer, Distributor, and Retailer of Casual Footwear

                       

         

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.59%, Secured Debt (Maturity—October 30, 2020)(9)

    4,838     4,615     3,679  

                               

Turning Point Brands, Inc.(10)(13)

  February 17, 2017  

Marketer/Distributor of Tobacco Products

                       

         

LIBOR Plus 7.00%, Current Coupon 9.05%, Secured Debt (Maturity—March 7, 2024)

    8,500     8,418     8,670  

                               

28


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

Portfolio Company(1)(20)
  Investment Date(27)
  Business Description
  Type of Investment(2)(3)(26)
  Principal(4)
  Cost(4)
  Fair Value(18)
 
   

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 8.34%, Secured Debt (Maturity—November 3, 2021)(9)

    16,195     15,917     16,195  

                               

U.S. TelePacific Corp.(11)

  September 14, 2016  

Provider of Communications and Managed Services

                       

         

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 7.33%, Secured Debt (Maturity—May 2, 2023)(9)

    19,883     19,710     19,617  

                               

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 8.34%, Secured Debt (Maturity—March 1, 2023)(9)

    7,500     7,469     7,573  

                               

Vistar Media, Inc.(10)

  February 17, 2017  

Operator of Digital Out-of-Home Advertising Platform

                       

         

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.32%, Secured Debt (Maturity—February 16, 2022)(9)

    3,263     3,021     3,075  

         

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

          331     600  

                      3,352     3,675  

                               

Wireless Vision Holdings, LLC(10)

  September 29, 2017  

Provider of Wireless Telecommunications Carrier Services

                       

         

LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 10.89%, Secured Debt (Maturity—September 29, 2022)(9)(23)

    12,867     12,616     12,616  

                               

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 (76.6% of net assets at fair value)

        $ 1,119,660   $ 1,108,752  

Total Portfolio Investments, June 30, 2018

        $ 2,174,559   $ 2,364,131  

(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.

29


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2018

(dollars in thousands)

(unaudited)

(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 June 30, 2018. As noted in this schedule, 69% 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 $24.1 million Canadian Dollars and receive $19.8 million U.S. Dollars with a settlement date of September 12, 2018. The unrealized appreciation on the forward foreign currency contract is $1.4 million as of June 30, 2018. 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 8.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(24)
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.

(25)
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.

(26)
All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities."

(27)
Investment date represents the date of initial investment in the portfolio company.

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  

                               

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)
 
   

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

  July 17, 2017  

Investment Partnership

                       

         

LP Interests (Fully diluted 30.1%)

          2,500     2,500  

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  

                               

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)
 
   

Harrison Hydra-Gen, Ltd.

  June 4, 2010  

Manufacturer of Hydraulic Generators

                       

         

Common Stock (107,456 shares)

          718     3,580  

                               

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      

                               

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)
 
   

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  

                               

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  

                               

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)
 
   

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  

                               

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  

                               

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)
 
   

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  

                               

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  

                               

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)
 
   

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  

                               

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  

                               

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)
 
   

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  

                               

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  

                               

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)
 
   

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      

                               

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  

                               

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)
 
   

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  

                               

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)

  January 30, 2015  

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  

                               

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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.

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MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2017

(dollars in thousands)

(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 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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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 six months ended June 30, 2018 and 2017, cash flows for the six months ended June 30, 2018 and 2017, and financial position as of June 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 six months ended June 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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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    Portfolio Investment Classification

        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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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 26 LMM portfolio companies for the six months ended June 30, 2018, representing approximately 39% of the total LMM portfolio at fair value as of June 30, 2018, and on a total of 27 LMM portfolio companies for the six months ended June 30, 2017, representing approximately 39% of the total LMM portfolio at fair value as of June 30, 2017. Excluding its investments in new LMM portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment decision as of June 30, 2018 and 2017, as applicable, and its investments in the LMM portfolio companies that were not reviewed because their equity is publicly traded, which represented one LMM portfolio company as of June 30, 2017, or they hold 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 six months ended June 30, 2018 and 2017 was 47% and 45% of the total LMM portfolio at fair value as of June 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 94% and 95% of the Middle Market portfolio investments as of June 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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 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 16 Private Loan portfolio companies for the six months ended June 30, 2018, representing approximately 37% of the total Private Loan portfolio at fair value as of June 30, 2018, and on a total of 13 Private Loan portfolio companies for the six months ended June 30, 2017, representing approximately 39% of the total Private Loan portfolio at fair value as of June 30, 2017. Excluding its investments in new Private Loan portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment decision as of June 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 six months ended June 30, 2018 and 2017 was 58% and 59% of the total Private Loan portfolio at fair value as of June 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 4.6% and 4.8% of Main Street's Investment Portfolio at fair value as of June 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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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. 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 June 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 June 30, 2018, cash balances totaling $37.0 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,

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

and if Main Street otherwise does not expect the debtor to be able to service all of its debt or other 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 June 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 June 30, 2018 and 2017, (i) approximately 0.6% and 3.0%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 0.8% and 1.8%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash. For the six months ended June 30, 2018 and 2017, (i) approximately 0.8% and 3.2%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 0.9% 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.

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(Unaudited)

        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
June 30,
  Six Months Ended
June 30,
 
 
  2018   2017   2018   2017  
 
  (dollars in thousands)
 

Interest, fee and dividend income:

                         

Interest income

  $ 44,265   $ 39,065   $ 83,878   $ 77,528  

Dividend income

    13,680     8,128     27,511     15,110  

Fee income

    1,924     3,078     4,423     5,522  

Total interest, fee and dividend income

  $ 59,869   $ 50,271   $ 115,812   $ 98,160  

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.

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(Unaudited)

        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 June 30, 2018 and 2017, approximately 3.0% and 3.6%, 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. For the six months ended June 30, 2018 and 2017, approximately 2.9% and 3.6%, 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

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(Unaudited)

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 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.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 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 new 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 new 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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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.

        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 new 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 new accounting standard on Main Street's consolidated financial statements was not material.

        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.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    Fair Value Hierarchy

        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).

        Investments recorded on Main Street's balance sheet are categorized based on the inputs to the valuation techniques as follows:

            Level 1—Investments whose values are based on unadjusted quoted prices for identical assets in an active market that Main Street has the ability to access (examples include investments in active exchange-traded equity securities and investments in most U.S. government and agency securities).

            Level 2—Investments whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the investment. Level 2 inputs include the following:

      Quoted prices for similar assets in active markets (for example, investments in restricted stock);

      Quoted prices for identical or similar assets in non-active markets (for example, investments in thinly traded public companies);

      Pricing models whose inputs are observable for substantially the full term of the investment (for example, market interest rate indices); and

      Pricing models whose inputs are derived principally from, or corroborated by, observable market data through correlation or other means for substantially the full term of the investment.

            Level 3—Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (for example, investments in illiquid securities issued by privately held companies). These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the investment.

        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.

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(Unaudited)

        As of June 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 June 30, 2018 and December 31, 2017.

        As of June 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 June 30, 2018 and December 31, 2017.

        As of June 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 June 30, 2018 and December 31, 2017.

        As of June 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 June 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:

    Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;

    Current and projected financial condition of the portfolio company;

    Current and projected ability of the portfolio company to service its debt obligations;

    Type and amount of collateral, if any, underlying the investment;

    Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/EBITDA ratio) applicable to the investment;

    Current liquidity of the investment and related financial ratios (e.g., current ratio and quick ratio);

    Pending debt or capital restructuring of the portfolio company;

    Projected operating results of the portfolio company;

    Current information regarding any offers to purchase the investment;

    Current ability of the portfolio company to raise any additional financing as needed;

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(Unaudited)

    Changes in the economic environment which may have a material impact on the operating results of the portfolio company;

    Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company;

    Qualitative assessment of key management;

    Contractual rights, obligations or restrictions associated with the investment; and

    Other factors deemed relevant.

        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 June 30, 2018 and December 31, 2017:

Type of Investment
  Fair Value
as of
June 30, 2018
(in thousands)
  Valuation
Technique
  Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 706,761   Discounted cash flow   WACC   10.9% - 23.5%     13.9%     14.2%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.8x - 8.5x(2)     7.1x     6.0x  

Debt investments

  $ 1,007,780   Discounted cash flow   Risk adjusted discount factor   7.4% - 17.0%(2)     11.5%     11.5%  

            Expected principal recovery percentage   2.8% - 100.0%     99.8%     100.0%  

Debt investments

  $ 649,590   Market approach   Third-party quote   11.0 - 106.3              

Total Level 3 investments

  $ 2,364,131                          

(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%.

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(Unaudited)

(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.

(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 six month periods ended June 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
June 30,
2018
 

Debt

  $ 1,518,297   $   $ (305,877 ) $ 435,477   $ 20,129   $ (7,515 ) $ (3,141 ) $ 1,657,370  

Equity

    641,493         (36,898 )   70,121     (16,075 )   33,744     3,141     695,526  

Equity Warrant

    11,515                     (280 )       11,235  

  $ 2,171,305   $   $ (342,775 ) $ 505,598   $ 4,054   $ 25,949   $   $ 2,364,131  

(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
June 30,
2017
 

Debt

  $ 1,427,823   $   $ (401,100 ) $ 463,717   $ 4,917   $ (9,987 ) $ (6,056 ) $ 1,479,314  

Equity

    549,453         (14,318 )   45,446     (27,523 )   23,578     6,056     582,692  

Equity Warrant

    17,550         (2,802 )   331     (2,688 )   379         12,770  

  $ 1,994,826   $   $ (418,220 ) $ 509,494   $ (25,294 ) $ 13,970   $   $ 2,074,776  

(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.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        As of June 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.

        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 SBIC debentures as of June 30, 2018 and December 31, 2017 (amounts in thousands):

Type of Instrument
  Fair Value as of
June 30, 2018
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 44,634   Discounted cash flow   Estimated market interest rates   5.0% - 5.7%     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 six month periods ended June 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
June 30, 2018
 

SBIC debentures at fair value

  $ 48,608   $ (4,000 ) $ 1,374   $   $ (1,348 ) $ 44,634  

 

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
June 30, 2017
 

SBIC debentures at fair value

  $ 74,803   $ (25,200 ) $ 5,217   $   $ (5,629 ) $ 49,191  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        At June 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 June 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

  $ 1,084,897   $   $   $ 1,084,897  

Middle Market portfolio investments

    591,600             591,600  

Private Loan portfolio investments

    516,836             516,836  

Other Portfolio investments

    108,131             108,131  

External Investment Manager

    62,667             62,667  

Total investments

  $ 2,364,131   $   $   $ 2,364,131  

SBIC debentures at fair value

  $ 44,634   $   $   $ 44,634  

 

 
   
  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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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.

        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 June 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $1.7 million and $1.6 million, respectively. Main Street's total expenses for the six months ended June 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $3.7 million and $3.2 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 six months ended June 30, 2018 and 2017, Main Street did not record investment income from any single portfolio company in excess of 10% of total investment income.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The following tables provide a summary of Main Street's investments in the LMM, Middle Market and Private Loan portfolios as of June 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 June 30, 2018  
 
  LMM(a)   Middle
Market
  Private
Loan
 
 
  (dollars in millions)
 

Number of portfolio companies

    70     57     54  

Fair value

  $ 1,084.9   $ 591.6   $ 516.8  

Cost

  $ 909.6   $ 608.0   $ 543.2  

% of portfolio at cost—debt

    68.6%     97.3%     93.6%  

% of portfolio at cost—equity

    31.4%     2.7%     6.4%  

% of debt investments at cost secured by first priority lien

    98.4%     89.4%     94.4%  

Weighted-average annual effective yield(b)

    12.2%     9.4%     9.8%  

Average EBITDA(c)

  $ 5.0   $ 91.1   $ 42.0  

(a)
At June 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 38%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of June 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 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 four LMM portfolio companies and three Private Loan portfolio

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    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 June 30, 2018, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $108.1 million in fair value and approximately $113.7 million in cost basis and which comprised approximately 4.6% 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 June 30, 2018, there was no cost basis in this investment and the investment had a fair value of approximately $62.7 million, which comprised approximately 2.7% 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.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        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 June 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  June 30,
2018
  December 31,
2017
 

First lien debt

    78.8%     79.0%  

Equity

    15.6%     15.3%  

Second lien debt

    4.4%     4.5%  

Equity warrants

    0.7%     0.7%  

Other

    0.5%     0.5%  

    100.0%     100.0%  

 

Fair Value:
  June 30,
2018
  December 31,
2017
 

First lien debt

    71.1%     70.5%  

Equity

    23.9%     24.4%  

Second lien debt

    4.1%     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 June 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

Cost:
  June 30,
2018
  December 31,
2017
 

Southwest

    28.3%     26.1%  

West

    24.0%     20.7%  

Midwest

    21.8%     22.3%  

Northeast

    14.4%     15.2%  

Southeast

    9.0%     12.8%  

Canada

    1.6%     1.9%  

Other Non-United States

    0.9%     1.0%  

    100.0%     100.0%  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)


Fair Value:
  June 30,
2018
  December 31,
2017
 

Southwest

    29.8%     26.8%  

West

    25.5%     23.7%  

Midwest

    20.9%     20.3%  

Northeast

    13.4%     14.6%  

Southeast

    8.1%     11.9%  

Canada

    1.5%     1.8%  

Other Non-United States

    0.8%     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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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

as of June 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  June 30,
2018
  December 31,
2017
 

Construction & Engineering

    7.7%     6.4%  

Energy Equipment & Services

    7.0%     6.9%  

Machinery

    5.5%     5.2%  

Commercial Services & Supplies

    5.4%     4.5%  

Media

    5.4%     4.4%  

Diversified Telecommunication Services

    5.0%     4.1%  

IT Services

    4.3%     3.9%  

Hotels, Restaurants & Leisure

    4.2%     6.2%  

Aerospace & Defense

    4.0%     3.3%  

Food Products

    3.9%     1.9%  

Health Care Providers & Services

    3.8%     2.9%  

Specialty Retail

    3.7%     5.3%  

Internet Software & Services

    3.7%     3.4%  

Electronic Equipment, Instruments & Components

    3.7%     3.4%  

Leisure Equipment & Products

    2.8%     3.0%  

Professional Services

    2.7%     3.7%  

Oil, Gas & Consumable Fuels

    2.6%     1.6%  

Computers & Peripherals

    2.5%     2.8%  

Software

    2.4%     2.5%  

Communications Equipment

    2.1%     2.3%  

Diversified Consumer Services

    2.1%     1.6%  

Distributors

    1.8%     1.9%  

Building Products

    1.8%     1.9%  

Construction Materials

    1.8%     1.7%  

Health Care Equipment & Supplies

    1.3%     2.0%  

Internet & Catalog Retail

    1.2%     1.3%  

Road & Rail

    1.2%     1.0%  

Diversified Financial Services

    0.7%     1.6%  

Auto Components

    0.3%     1.9%  

Real Estate Management & Development

    0.3%     1.0%  

Other(1)

    5.1%     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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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Fair Value:
  June 30,
2018
  December 31,
2017
 

Construction & Engineering

    7.6%     6.3%  

Machinery

    7.1%     6.4%  

Energy Equipment & Services

    6.8%     6.2%  

Diversified Consumer Services

    4.9%     5.9%  

Commercial Services & Supplies

    4.6%     4.1%  

Media

    4.6%     3.8%  

IT Services

    4.3%     4.0%  

Diversified Telecommunication Services

    4.3%     3.4%  

Specialty Retail

    4.0%     5.3%  

Hotels, Restaurants & Leisure

    4.0%     5.9%  

Aerospace & Defense

    3.8%     3.1%  

Health Care Providers & Services

    3.6%     2.8%  

Food Products

    3.6%     1.8%  

Internet Software & Services

    3.5%     3.2%  

Computers & Peripherals

    3.2%     3.0%  

Electronic Equipment, Instruments & Components

    3.2%     2.8%  

Leisure Equipment & Products

    2.7%     2.9%  

Professional Services

    2.5%     3.5%  

Software

    2.5%     2.5%  

Oil, Gas & Consumable Fuels

    2.4%     1.5%  

Construction Materials

    2.1%     1.9%  

Communications Equipment

    2.0%     2.2%  

Distributors

    1.6%     1.8%  

Building Products

    1.6%     1.8%  

Health Care Equipment & Supplies

    1.2%     2.1%  

Road & Rail

    1.2%     1.0%  

Internet & Catalog Retail

    1.0%     1.1%  

Diversified Financial Services

    0.9%     1.6%  

Air Freight & Logistics

    0.5%     1.0%  

Real Estate Management & Development

    0.4%     1.1%  

Auto Components

    0.3%     1.6%  

Other(1)

    4.0%     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 June 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 June 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 six months ended June 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, except for the External Investment Manager for the six months ended June 30, 2018. As such, the External Investment Manager was considered a significant subsidiary. The summarized financial information for the External Investment Manager is included in Note D.

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 June 30, 2018 and 2017, the External Investment Manager earned $2.9 million and $2.7 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the six months ended June 30, 2018 and 2017, the External Investment Manager earned $5.7 million and $5.3 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

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Notes to Consolidated Financial Statements (Continued)

(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 June 30, 2018 and 2017, Main Street allocated $1.7 million and $1.6 million of total expenses, respectively, to the External Investment Manager. For the six months ended June 30, 2018 and 2017, Main Street allocated $3.7 million and $3.2 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 June 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 six months ended June 30, 2018 and 2017, the total contribution to Main Street's net investment income was $5.3 million and $4.6 million, respectively.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Summarized financial information from the separate financial statements of the External Investment Manager as of June 30, 2018 and December 31, 2017 and for the three and six months ended June 30, 2018 and 2017 is as follows:

 
  As of
June 30,
  As of
December 31,
 
 
  2018   2017  
 
  (dollars in thousands)
 

Cash

  $   $  

Accounts receivable—HMS Income

    2,870     2,863  

Total assets

  $ 2,870   $ 2,863  

Accounts payable to MSCC and its subsidiaries

  $ 1,854   $ 1,963  

Dividend payable to MSCC and its subsidiaries

    1,016     900  

Equity

         

Total liabilities and equity

  $ 2,870   $ 2,863  

 

 
  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2018   2017   2018   2017  
 
  (dollars in thousands)
 

Management fee income

  $ 2,879   $ 2,674   $ 5,695   $ 5,294  

Expenses allocated from MSCC or its subsidiaries:

                         

Salaries, share-based compensation and other personnel costs

    (1,059 )   (1,026 )   (2,412 )   (1,945 )

Other G&A expenses

    (619 )   (602 )   (1,332 )   (1,207 )

Total allocated expenses

    (1,678 )   (1,628 )   (3,744 )   (3,152 )

Pre-tax income

    1,201     1,046     1,951     2,142  

Tax expense

    (185 )   (320 )   (362 )   (722 )

Net income

  $ 1,016   $ 726   $ 1,589   $ 1,420  

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 $313.8 million and $295.8 million at June 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 six months ended June 30, 2018, Main Street issued $22.0 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, leaving $32.2 million of remaining capacity under Main Street's SBIC licenses. 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

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(Unaudited)

expects 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. The weighted-average annual interest rate on the SBIC debentures was 3.7% and 3.6% as of June 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 June 30, 2018 was approximately 5.7 years. For the three months ended June 30, 2018 and 2017, Main Street recognized interest expense attributable to the SBIC debentures of $3.2 million and $2.5 million, respectively. For the six months ended June 30, 2018 and 2017, Main Street recognized interest expense attributable to the SBIC debentures of $6.1 million and $4.9 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 June 30, 2018, the recorded value of the SBIC debentures was $306.4 million which consisted of (i) $44.6 million recorded at fair value, or $1.4 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 $147.8 million that was net of unamortized debt issuance costs of $2.0 million and (iii) $118.0 million par value of SBIC debentures held in MSC III with a recorded value of $114.0 million that was net of unamortized debt issuance costs of $4.0 million. As of June 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 $282.3 million, or $31.5 million less than the $313.8 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 to provide for an increase in total commitments from $585.0 million to $655.0 million and to increase the diversified group of lenders to sixteen 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 (2.1% as of June 30, 2018) plus (i) 1.875% (or the applicable base rate (Prime Rate of 5.00% as of June 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 extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        At June 30, 2018, Main Street had $289.0 million in borrowings outstanding under the Credit Facility. As of June 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 $2.7 million for the three months ended June 30, 2018 and 2017, respectively, and $4.7 million and $5.2 million for the six month periods ended June 30, 2018 and 2017, respectively. As of June 30, 2018, the interest rate on the Credit Facility was 3.9%. The average interest rate was 3.8% and 3.6% for the three and six months ended June 30, 2018. As of June 30, 2018, Main Street was in compliance with all financial covenants of the Credit Facility.

NOTE G—NOTES

    6.125% 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 for the three months ended June 30, 2018, $1.5 million of interest expense related to the 6.125% Notes, including amortization of unamortized deferred issuance costs, for the three months ended June 30, 2017 and $1.5 million and $2.9 million for the six months ended June 30, 2018 and 2017, respectively.

    4.50% Notes due 2019

        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, 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 June 30, 2018, the outstanding balance of the 4.50% Notes due 2019 was $175.0 million and the recorded value of

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

$174.0 million was net of unamortized debt issuance costs of $1.0 million. As of June 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 for each of the three months ended June 30, 2018 and 2017, and $4.3 million for each of the six months ended June 30, 2018 and 2017.

        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 June 30, 2018, Main Street was in compliance with these covenants.

    4.50% Notes due 2022

        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 June 30, 2018, the outstanding balance of the 4.50% Notes due 2022 was $185.0 million and the recorded value of $182.3 million was net of unamortized debt issuance costs of $2.7 million. As of June 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 $184.5 million. Main Street recognized interest expense related to the 4.50% Notes due 2022, including amortization of unamortized deferred issuance costs, of $2.3 million and $4.5 million for the three and six months ended June 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 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 June 30, 2018, Main Street was in compliance with these covenants.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE H—FINANCIAL HIGHLIGHTS

 
  Six Months Ended
June 30,
 
 
  2018   2017  

Per Share Data:

             

NAV at the beginning of the period

  $ 23.53   $ 22.10  

Net investment income(1)

    1.29     1.15  

Net realized gain (loss)(1)(2)

    (0.16 )   0.60  

Net unrealized appreciation (depreciation)(1)(2)

    0.40     (0.27 )

Income tax provision(1)(2)

    (0.01 )   (0.15 )

Net increase in net assets resulting from operations(1)

    1.52     1.33  

Dividends paid from net investment income

    (1.42 )   (0.98 )

Distributions from capital gains

        (0.41 )

Total dividends paid

    (1.42 )   (1.39 )

Accretive effect of stock offerings (issuing shares above NAV per share)

    0.33     0.55  

Accretive effect of DRIP issuance (issuing shares above NAV per share)

    0.04     0.03  

Other(3)

    (0.04 )    

NAV at the end of the period

  $ 23.96   $ 22.62  

(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 certain per share data based on the shares outstanding as of a period end or transaction date.
 
  Six Months Ended June 30,  
 
  2018   2017  
 
  (dollars in thousands)
 

NAV at end of period

  $ 1,447,354   $ 1,282,745  

Average NAV

  $ 1,408,107   $ 1,242,720  

Average outstanding debt

  $ 911,317   $ 826,169  

Ratio of total expenses, including income tax expense, to average NAV(1)(2)

    2.82%     3.39%  

Ratio of operating expenses to average NAV(2)(3)

    2.79%     2.76%  

Ratio of operating expenses, excluding interest expense, to average NAV(2)(3)

    1.29%     1.36%  

Ratio of net investment income to average NAV(2)

    5.43%     5.14%  

Portfolio turnover ratio(2)

    13.94%     20.26%  

Total investment return(2)(4)

    –0.56%     8.46%  

Total return based on change in NAV(2)(5)

    6.52%     6.18%  

(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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

    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.

NOTE I—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

        Main Street paid regular monthly dividends of $0.19 per share for each month of January through June 2018, totaling $33.8 million, or $0.57 per share, for the three months ended June 30, 2018, and $67.3 million, or $1.14 per share, for the six months ended June 30, 2018. The second quarter 2018 regular monthly dividends represent a 2.7% increase from the regular monthly dividends paid for the second 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 $31.0 million, or $0.555 per share, for the three months ended June 30, 2017, and $61.4 million, or $1.110 per share, for the six months ended June 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.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        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.

        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 six months ended June 30, 2018 and 2017.

 
  Six Months Ended
June 30,
 
 
  2018   2017  
 
  (estimated, dollars in thousands)
 

Net increase in net assets resulting from operations

  $ 89,969   $ 74,283  

Book tax difference from share-based compensation expense

    (5,833 )   (5,880 )

Net unrealized (appreciation) depreciation

    (23,177 )   15,097  

Income tax provision

    316     7,812  

Pre-tax book income not consolidated for tax purposes

    (9,465 )   (13,316 )

Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates

    19,913     2,941  

Estimated taxable income(1)

    71,723     80,937  

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

    (41,354 )   (56,438 )

Dividend payable as of period end and paid in the following period

    11,477     10,484  

Total distributions accrued or paid to common stockholders

  $ 84,203   $ 77,345  

(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,

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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.

        For the three months ended June 30, 2018, Main Street recognized a net income tax provision of $1.3 million, principally consisting of a deferred tax provision of $2.2 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, partially offset by a $0.9 million current tax benefit, which is primarily related to a benefit for current U.S. federal income and state taxes. For the six months ended June 30, 2018, Main Street recognized a net income tax provision of $0.3 million, principally consisting of a deferred tax provision of $0.3 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 $0.5 million accrual for excise tax on Main Street's estimated undistributed taxable income, partially offset by a $0.5 million benefit for current U.S. federal income and state taxes. For the three months ended June 30, 2017, Main Street recognized a net income tax provision of $2.2 million, principally consisting of a deferred tax provision of $1.7 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 $0.4 million current tax expense, which is primarily related to a $0.2 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.2 million provision for current U.S. federal income and state taxes. For the six months ended June 30, 2017, Main Street recognized a net income tax provision of $7.8 million, principally consisting of a deferred tax provision of $6.1 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 $1.7 million current tax expense, which is primarily related to a $1.1 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.6 million provision for current U.S. federal income and state taxes.

        The net deferred tax liability at June 30, 2018 was $10.8 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 June 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 2029 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.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 six months ended June 30, 2018, Main Street sold 1,428,596 shares of its common stock at a weighted-average price of $38.08 per share and raised $54.4 million of gross proceeds under the ATM Program. Net proceeds were $53.6 million after commissions to the selling agents on shares sold and offering costs. As of June 30, 2018, there were 3,625,892 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 six months ended June 30, 2018, $6.4 million of the total $83.9 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 168,426 newly issued shares. For the six months ended June 30, 2017, $4.4 million of the total $76.9 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 115,807 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

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

"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 Equity and Incentive Plan, net of shares forfeited, if any, and the remaining shares of restricted stock available for issuance as of June 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 )

Six Months ended June 30, 2018

    (242,474 )

Restricted stock available for issuance as of June 30, 2018

    2,272,300  

        As of June 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 )

Six Months ended June 30, 2018

    (6,376 )

Restricted stock available for issuance as of June 30, 2018

    274,122  

        For the three months ended June 30, 2018 and 2017, Main Street recognized total share-based compensation expense of $2.4 million and $2.8 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors and, for the six months ended June 30, 2018 and 2017, Main Street recognized total share-based compensation expense of $4.7 million and $5.1 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors.

        As of June 30, 2018, there was $15.2 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 2.2 years as of June 30, 2018.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE M—COMMITMENTS AND CONTINGENCIES

        At June 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. 

  $ 469  

EnCap Energy Capital Fund IX, L.P. 

    463  

EnCap Energy Capital Fund X, L.P. 

    3,005  

EnCap Energy Capital Fund VIII Co-Investors, L.P. 

    30  

EnCap Flatrock Midstream Fund II, L.P. 

    6,470  

EnCap Flatrock Midstream Fund III, L.P. 

    4,323  

  $ 14,760  

Brightwood Capital Fund Investments

   
 
 

Brightwood Capital Fund III, LP

  $ 3,000  

Brightwood Capital Fund IV, LP

    4,000  

  $ 7,000  

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. 

  $ 5,000  

EIG Fund Investments

 
$

4,669
 

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

  $ 1,754  

I-45 SLF LLC

 
$

800
 

Access Media Holdings, LLC

 
$

248
 

Total equity commitments

  $ 60,753  

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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:

       

Resolute Industrial, LLC

 
$

5,750
 

Radiology Partners, Inc. 

    5,254  

Hunter Defense Technologies, Inc. 

    5,168  

NexRev LLC

    4,000  

PT Network, LLC

    3,618  

Hojeij Branded Foods, LLC

    3,088  

California Splendor Holdings LLC

    2,729  

Hoover Group, Inc. 

    2,313  

Wireless Vision Holdings, LLC

    2,068  

NNE Partners, LLC

    2,042  

CDHA Management, LLC

    1,973  

Felix Investments Holdings II

    1,667  

Chamberlin Holding LLC

    1,600  

Direct Marketing Solutions, Inc. 

    1,600  

Hawk Ridge Systems, LLC

    1,600  

Market Force Information, LLC

    1,600  

Aethon United BR LP

    1,563  

IDX Broker, LLC

    1,500  

Lamb Ventures, LLC

    1,500  

Messenger, LLC

    1,370  

Meisler Operating LLC

    1,280  

American Nuts, LLC

    1,266  

Arcus Hunting LLC

    1,204  

Gamber-Johnson Holdings, LLC

    1,200  

NuStep, LLC

    1,200  

Barfly Ventures, LLC

    1,103  

Volusion, LLC

    1,075  

KBK Industries, LLC

    1,000  

NRI Clinical Research, LLC

    1,000  

Boccella Precast Products LLC

    982  

CTVSH, PLLC

    800  

DTE Enterprises RLOC

    750  

Jensen Jewelers of Idaho, LLC

    500  

PPC/SHIFT LLC

    500  

UniTek Global Services, Inc. 

    483  

Clad-Rex Steel, LLC

    400  

OnAsset Intelligence, Inc. 

    225  

ATS Workholding, LLC

    105  

BigName Commerce, LLC

    29  

Total loan commitments

  $ 67,105  

Total commitments

  $ 127,858  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        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 $0.1 million on the outstanding unfunded commitments as of June 30, 2018.

        Main Street has an operating lease for office space. Total rent expense incurred by Main Street for each of the three months ended June 30, 2018 and 2017 was $0.2 million. Total rent expense incurred by Main Street for the six months ended June 30, 2018 and 2017 was $0.4 million and $0.3 million, respectively.

        The following table shows future minimum payments under Main Street's operating lease as of June 30, 2018:

For the Years Ended December 31,
  Amount  

2018

  $ 346  

2019

    749  

2020

    763  

2021

    777  

2022

    791  

Thereafter

    4,239  

Total

  $ 7,665  

        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 June 30, 2018, Main Street had a receivable of approximately $2.9 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 $1.0 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,

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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 June 30, 2018, $5.8 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 Main Street's common stock. Including phantom stock units issued through dividend reinvestment, the phantom stock units outstanding as of June 30, 2018 represented 115,536 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

        During July 2018, Main Street expanded its total commitments under the Credit Facility from $655.0 million to $680.0 million. The $25.0 million increase in total commitments was the result of the addition of a new lender relationship, which further diversifies the Main Street lending group under the Credit Facility to a total of seventeen participants. The recent increase in total commitments was executed under the accordion feature of the Credit Facility which allows for an increase up to $800.0 million in total commitments under the facility from new and existing lenders on the same terms and conditions as the existing commitments.

        In July 2018, Main Street fully exited its remaining investment in Drilling Info Holdings, Inc. ("Drilling Info"), the leading software, data, and analytics platform for the energy value chain. Main Street made debt and equity investments in Drilling Info beginning in 2009 to support its acquisition growth strategy. Main Street's debt investment in Drilling Info was fully repaid and a majority portion of its equity interests in Drilling Info were redeemed during the first quarter of 2012, with Main Street recognizing a realized gain of $9.2 million. As part of this transaction, Main Street maintained a minority equity stake in Drilling Info. In July 2018, Main Street realized a gain of $15.5 million on the exit of its remaining equity investment in Drilling Info.

        During July 2018, Main Street declared regular monthly dividends of $0.195 per share for each month of October, November and December of 2018. These regular monthly dividends equal a total of $0.585 per share for the fourth quarter of 2018 and represent a 2.6% increase from the regular monthly dividends declared for the fourth quarter of 2017. Including the regular monthly dividends declared for the third and fourth quarters of 2018, Main Street will have paid $23.960 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
June 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)
  June 30,
2018
Fair
Value
 

Majority-owned investments

                                                   

Café Brazil, LLC

 

Member Units

 

(8)

 
$

 
$

(120

)

$

162
 
$

4,900
 
$

 
$

120
 
$

4,780
 

California Splendor Holdings LLC

  LIBOR Plus 8.00% (Floor 1.00%)   (9)             259         9,157         9,157  

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             1,189         27,733         27,733  

  Preferred Member Units   (9)             63         12,500     1,725     10,775  

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (5)         (15 )   763     13,280     15     415     12,880  

  Member Units   (5)         280     242     9,500     280         9,780  

  10% Secured Debt   (5)             59     1,183         10     1,173  

  Member Units   (5)                 280             280  

CMS Minerals Investments

  Member Units   (9)         748     54     2,392     748     404     2,736  

Direct Marketing Solutions, Inc.

  LIBOR Plus 11.00% (Floor 1.00%)   (9)             1,217         18,611     313     18,298  

  Preferred Stock   (9)             28         8,400         8,400  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 9.00% (Floor 2.00%)   (5)         (25 )   1,394     23,400     25     515     22,910  

  Member Units   (5)         10,010     619     23,370     10,010         33,380  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (8)         (15 )   618     11,603     15     836     10,782  

  Member Units   (8)         3,480     593     21,970     3,480         25,450  

Harborside Holdings, LLC

  Member Units   (8)                 9,400     100         9,500  

Harris Preston Fund Investments

  LP Interests (2717 MH, L.P.)   (8)         93         536     343         879  

Hydratec, Inc.

  Common Stock   (9)     7,922     (7,905 )   332     15,000         15,000      

IDX Broker, LLC

  11.5% Secured Debt   (9)         (24 )   890     15,250     24     624     14,650  

  Preferred Member Units   (9)         (110 )   137     11,660         110     11,550  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)   (9)         (10 )   226     3,955     10     310     3,655  

  Member Units   (9)         (500 )   130     5,100         500     4,600  

Lamb Ventures, LLC

  11% Secured Debt   (8)         (13 )   502     9,942     212     1,815     8,339  

  Preferred Equity   (8)                 400             400  

  Member Units   (8)         (60 )       6,790         60     6,730  

  9.5% Secured Debt   (8)             21     432             432  

  Member Units   (8)         50     10     520     50         570  

Mid-Columbia Lumber

  10% Secured Debt   (9)         6     91     1,390     360         1,750  

Products, LLC

  12% Secured Debt   (9)             243     3,863     8         3,871  

  Member Units   (9)             3     1,575     596         2,171  

  9.5% Secured Debt   (9)             37     791         23     768  

  Member Units   (9)         180     21     1,290     180         1,470  

MSC Adviser I, LLC

  Member Units   (8)         20,899     1,588     41,768     20,899         62,667  

Mystic Logistics Holdings, LLC

  12% Secured Debt   (6)             483     7,696     21     232     7,485  

  Common Stock   (6)         (2,700 )       6,820         2,700     4,120  

NexRev LLC

  11% Secured Debt   (8)             879         17,274         17,274  

  Preferred Member Units   (8)             20         6,880         6,880  

NRP Jones, LLC

  12% Secured Debt   (5)             385     6,376             6,376  

  Member Units   (5)         1,500         3,250     1,500         4,750  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)   (8)         (17 )   738     16,100     17     517     15,600  

  Common Stock   (8)         (1,410 )   53     12,440         1,410     11,030  

Principle Environmental, LLC

  13% Secured Debt   (8)         (24 )   514     7,477     24     24     7,477  

(d/b.a TruHorizon

  Preferred Member Units   (8)         1,600     1,104     11,490     1,600         13,090  

Environmental Solutions)

  Warrants   (8)         130         650     130         780  

Quality Lease Service, LLC

  Zero Coupon Secured Debt   (7)         (500 )       6,950         500     6,450  

  Member Units   (7)                 4,938     775         5,713  

The MPI Group, LLC

  9% Secured Debt   (7)         (1,301 )   133     2,410     1     1,301     1,110  

  Series A Preferred Units   (7)                              

  Warrants   (7)                              

  Member Units   (7)         90     34     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)
  June 30,
2018
Fair
Value
 

Vision Interests, Inc.

  13% Secured Debt   (9)             192     2,797     9         2,806  

  Series A Preferred Stock   (9)         360         3,000     360         3,360  

  Common Stock   (9)         130             129         129  

Ziegler's NYPD, LLC

  6.5% Secured Debt   (8)             34     996     1         997  

  12% Secured Debt   (8)             21     300     125         425  

  14% Secured Debt   (8)             194     2,750             2,750  

  Warrants   (8)                              

  Preferred Member Units   (8)         (860 )       3,220         861     2,359  

Other controlled investments

                                                   

Access Media Holdings, LLC

 

10% PIK Secured Debt

 

(5)

   
   
(2,030

)
 
   
17,150
   
   
2,030
   
15,120
 

  Preferred Member Units   (5)         (730 )           729     729      

  Member Units   (5)                              

ASC Interests, LLC

  11% Secured Debt   (8)             99     1,795     5     151     1,649  

  Member Units   (8)         (160 )       1,530         160     1,370  

ATS Workholding, LLC

  5% Secured Debt   (9)             158     3,249     930         4,179  

  Preferred Member Units   (9)                 3,726             3,726  

Bond-Coat, Inc.

  12% Secured Debt   (8)             723     11,596         277     11,319  

  Common Stock   (8)                 9,370             9,370  

Brewer Crane Holdings, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (9)             665         9,830     124     9,706  

  Preferred Member Units   (9)             57         4,280         4,280  

CBT Nuggets, LLC

  Member Units   (9)         (25,520 )   10,994     89,560         25,520     64,040  

Chamberlin Holding LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)             1,263         21,397         21,397  

  Member Units   (8)             850         11,440         11,440  

Charps, LLC

  12% Secured Debt   (5)             1,064     18,225     37     2,500     15,762  

  Preferred Member Units   (5)         540         650     540         1,190  

Copper Trail Fund Investments

  LP Interests (CTMH, LP)   (9)             5         872         872  

  LP Interests (Copper Trail Energy Fund I, LP)   (9)             57     2,500     770         3,270  

Datacom, LLC

  8% Secured Debt   (8)             33     1,575     225         1,800  

  5.25% Current / 5.25% PIK Secured Debt   (8)         (718 )   330     11,110     168     718     10,560  

  Class A Preferred Member Units   (8)         (730 )       730         730      

  Class B Preferred Member Units   (8)                              

Digital Products Holdings LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (5)             1,066         26,146         26,146  

  Preferred Member Units   (5)             50         8,800         8,800  

Garreco, LLC

  LIBOR Plus 10.00% (Floor 1.00%)   (8)             329     5,443     9     121     5,331  

  Member Units   (8)                 1,940             1,940  

Guerdon Modular Holdings, Inc.

  13% Secured Debt   (9)         (570 )   429     10,632     2,294     970     11,956  

  Preferred Stock   (9)                              

  Common Stock   (9)                              

  Warrants   (9)                              

Gulf Manufacturing, LLC

  Member Units   (8)         1,090     882     10,060     1,090         11,150  

Gulf Publishing Holdings, LLC

  LIBOR Plus 9.50% (Floor 1.00%)   (8)             5     80     160     80     160  

  12.5% Secured Debt   (8)             812     12,703     13     134     12,582  

  Member Units   (8)         (270 )       4,840         270     4,570  

Harrison Hydra-Gen, Ltd.

  Common Stock   (8)         3,260     60     3,580     3,260         6,840  

HW Temps LLC

  LIBOR Plus 11.00% (Floor 1.00%)   (6)             652     9,918     9         9,927  

  Preferred Member Units   (6)         2     100     3,940     2         3,942  

KBK Industries, LLC

  10% Secured Debt   (5)             7     375         375      

  12.5% Secured Debt   (5)         (5 )   376     5,900     5     5     5,900  

  Member Units   (5)         1,200     462     4,420     1,200         5,620  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt   (8)     (3,361 )   3,077             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)             1,540     23,143     23     560     22,606  

  Member Units   (9)         (340 )       14,700         340     14,360  

MH Corbin Holding LLC

  10% Secured Debt   (5)             686     12,526         443     12,083  

  Preferred Member Units   (5)             70     6,000             6,000  

NAPCO Precast, LLC

  LIBOR Plus 8.50%   (8)         (12 )   622     11,475     12     12     11,475  

  Member Units   (8)         1,060     625     11,670     1,060         12,730  

NRI Clinical Research, LLC

  14% Secured Debt   (9)         30     470     4,265     2,905     400     6,770  

  Warrants   (9)                 500             500  

  Member Units   (9)                 2,500             2,500  

NuStep, LLC

  12% Secured Debt   (5)             1,264     20,420     18         20,438  

  Preferred Member Units   (5)                 10,200             10,200  

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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)
  June 30,
2018
Fair
Value
 

OMi Holdings, Inc.

  Common Stock   (8)         700     792     14,110     700         14,810  

Pegasus Research Group, LLC

  Member Units   (8)         (720 )       10,310         720     9,590  

River Aggregates, LLC

  Zero Coupon Secured Debt   (8)             43     707     43         750  

  Member Units   (8)                 4,610             4,610  

  Member Units   (8)         110         2,559     111         2,670  

SoftTouch Medical Holdings LLC

  LIBOR Plus 9.00% (Floor 1.00%)   (7)         (30 )   120     7,140     30     7,170      

  Member Units   (7)     5,171     (5,160 )   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   $ 3,072   $ 45,830   $ 750,706   $ 250,519   $ 97,894   $ 913,963  

Affiliate Investments

                                                   

AFG Capital Group, LLC

 

Warrants

 

(8)

 
$

 
$

40
 
$

 
$

860
 
$

40
 
$

 
$

900
 

  Preferred Member Units   (8)         170     20     3,590     170         3,760  

Barfly Ventures, LLC

  12% Secured Debt   (5)         (4 )   549     8,715     729     4     9,440  

  Options   (5)         (120 )       920         120     800  

  Warrants   (5)         (70 )       520         70     450  

BBB Tank Services, LLC

  LIBOR Plus 10% (Floor 1.00%)   (8)             41     778     416     562     632  

  17% Secured Debt   (8)             330     3,876     14         3,890  

  Member Units   (8)         (30 )       500         30     470  

Boccella Precast Products LLC

  LIBOR Plus 8% (Floor 1.00%)   (6)         (21 )   946     16,400     2,181     1,839     16,742  

  Member Units   (6)         1,780     481     3,440     1,780         5,220  

Boss Industries, LLC

  Preferred Member Units   (5)         1,260     377     3,930     1,340         5,270  

Bridge Capital Solutions

  13% Secured Debt   (6)             675     5,884     160         6,044  

Corporation

  Warrants   (6)         500         3,520     500         4,020  

  13% Secured Debt   (6)         (1 )   66     1,000     1     1     1,000  

  Preferred Member Units   (6)             58     1,000             1,000  

Buca C, LLC

  LIBOR Plus 9.25% (Floor 1.00%)   (7)             1,131     20,193     23     600     19,616  

  Preferred Member Units   (7)         5     122     4,172     127         4,299  

CAI Software LLC

  12% Secured Debt   (6)         (7 )   250     4,083     7     247     3,843  

  Member Units   (6)         (380 )   20     3,230         380     2,850  

Chandler Signs Holdings, LLC

  12% Secured Debt/1.00% PIK   (8)         (4 )   298     4,500     27     4     4,523  

  Class A Units   (8)         (470 )       2,650         470     2,180  

Charlotte Russe, Inc

  8.50% Secured Debt   (9)         7,779     285     7,807     16,658     17,380     7,085  

  Common Stock   (9)                     3,141         3,141  

Condit Exhibits, LLC

  Member Units   (9)             85     1,950             1,950  

Congruent Credit Opportunities

  LP Interests (Fund II)   (8)         (254 )       1,515         774     741  

Funds

  LP Interests (Fund III)   (8)         228     805     18,632     4,242         22,874  

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)   (8)         31         7,165     31     150     7,046  

  LP Interests (Dos Rios Partners—A, LP)   (8)         395         1,889     396     48     2,237  

East Teak Fine Hardwoods, Inc.

  Common Stock   (7)             33     630             630  

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund-A, L.P.)   (8)                 1,055     387     1,029     413  

Freeport Financial Funds

  LP Interests (Freeport Financial SBIC Fund LP)   (5)         128     204     5,614     128         5,742  

  LP Interests (Freeport First Lien Loan Fund III LP)   (5)             458     8,506             8,506  

Gault Financial, LLC (RMB

  8% Secured Debt   (7)             492     11,532         150     11,382  

Capital, LLC)

  Warrants   (7)                              

Harris Preston Fund Investments

  LP Interests (HPEP 3, L.P.)   (8)                 943     517         1,460  

Hawk Ridge Systems, LLC

  10.5% Secured Debt   (9)         (13 )   777     14,300     13     13     14,300  

  Preferred Member Units   (9)         2,420     89     3,800     2,420         6,220  

  Preferred Member Units   (9)         130         200     130         330  

Houston Plating and Coatings, LLC

  8% Unsecured Convertible Debt   (8)         180     121     3,200     180         3,380  

  Member Units   (8)         873     96     6,140     930         7,070  

I-45 SLF LLC

  Member Units   (8)         (154 )   1,409     16,841         154     16,687  

L.F. Manufacturing Holdings, LLC

  Member Units   (8)                 2,000             2,000  

Meisler Operating LLC

  LIBOR Plus 8.50% (Floor 1.00%)   (5)             1,063     16,633     3,979         20,612  

  Member Units   (5)         525         3,390     2,180         5,570  

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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)
  June 30,
2018
Fair
Value
 

OnAsset Intelligence, Inc.

  12% PIK Secured Debt   (8)             311     5,094     312         5,406  

  10% PIK Secured Debt   (8)             2     48     2         50  

  Preferred Stock   (8)                              

  Warrants   (8)                              

OPI International Ltd.

  Common Stock   (8)                              

PCI Holding Company, Inc.

  12% Current/3% PIK Secured Debt   (9)             1,165     12,593     409     651     12,351  

  Preferred Stock   (9)         (600 )       890         600     290  

  Preferred Stock   (9)         870         2,610     870         3,480  

Rocaceia, LLC (Quality Lease and

  12% Secured Debt   (8)                 250             250  

Rental Holdings, LLC)

  Preferred Member Units   (8)                              

Salado Acquisition, LLC

  Class A Preferred Units   (8)         (170 )   23     1,790         170     1,620  

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 8.50% (Floor 1.00%)   (6)         (3 )   442     8,535     3     469     8,069  

  LIBOR Plus 7.50% (Floor 1.00%)/1.00% PIK   (6)             4     137         137      

  15% PIK Unsecured Debt   (6)             70     865     66         931  

  Preferred Stock   (6)         41     508     7,320     549         7,869  

  Preferred Stock   (6)         8     280     2,850     287         3,137  

  Common Stock   (6)         (1,270 )       2,490         1,270     1,220  

Universal Wellhead Services

  Preferred Member Units   (8)         60         830     60         890  

Holdings, LLC

  Member Units   (8)         450         1,910     450         2,360  

Valley Healthcare Group, LLC

  LIBOR Plus 10.50% (Floor 0.50%)   (8)         69     805     11,685     81     120     11,646  

  Preferred Member Units   (8)         700         1,600     700         2,300  

Volusion, LLC

  11.5% Secured Debt   (8)             1,334     15,200     2,854         18,054  

  8% Unsecured Convertible Debt   (8)             3         297         297  

  Preferred Member Units   (8)             1     14,000             14,000  

  Warrants   (8)         (1,209 )       2,080         1,209     871  

Other

                                                   

Amounts related to investments transferred to or from other 1940 Act classification during the period

      (9)             365     2,825              

Total Affiliate investments

          $   $ 13,862   $ 17,587   $ 338,854   $ 50,500   $ 45,113   $ 341,416  

(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 June 30, 2018 for control investments located in this region was $218,788. This represented 15.1% of net assets as of June 30, 2018. The fair value as of June 30,

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    2018 for affiliate investments located in this region was $56,390. This represented 3.9% of net assets as of June 30, 2018.

(6)
Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2018 for control investments located in this region was $25,474. This represented 1.8% of net assets as of June 30, 2018. The fair value as of June 30, 2018 for affiliate investments located in this region was $61,945. This represented 4.3% of net assets as of June 30, 2018.

(7)
Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2018 for control investments located in this region was $15,753. This represented 1.1% of net assets as of June 30, 2018. The fair value as of June 30, 2018 for affiliate investments located in this region was $35,927. This represented 2.5% of net assets as of June 30, 2018.

(8)
Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of June 30, 2018 for control investments located in this region was $377,304. This represented 26.1% of net assets as of June 30, 2018. The fair value as of June 30, 2018 for affiliate investments located in this region was $138,007. This represented 9.5% of net assets as of June 30, 2018.

(9)
Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of June 30, 2018 for control investments located in this region was $276,644. This represented 19.1% of net assets as of June 30, 2018. The fair value as of June 30, 2018 for affiliate investments located in this region was $49,147. This represented 3.4% of net assets as of June 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.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
June 30, 2017
(dollars in thousands)

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)
  June 30,
2017
Fair
Value
 

Majority-owned investments

                                                     

Café Brazil, LLC

 

Member Units

   
(8

)

$

 
$

(650

)

$

110
 
$

6,040
 
$

 
$

650
 
$

5,390
 

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00)     (5 )           772     14,337     12     400     13,949  

  Member Units     (5 )       550     177     7,280     550         7,830  

  10% Secured Debt     (5 )           60     1,190         9     1,181  

  Member Units     (5 )               210             210  

CMS Minerals Investments

  Preferred Member Units     (8 )   1,405     (1,578 )   96     3,682         3,682      

  Member Units     (8 )       (565 )   103     3,381         753     2,628  

Gamber-Johnson

  LIBOR Plus 11.00% (Floor 1.00%)     (5 )       212     1,477     23,846     235     201     23,880  

Holdings, LLC

  Member Units     (5 )       3,160     300     18,920     3,160         22,080  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)     (8 )       (17 )   668     13,274     18     883     12,409  

  Member Units     (8 )       370     430     20,310     370         20,680  

Harborside Holdings, LLC

  Member Units     (8 )       3,194             9,400         9,400  

Hydratec, Inc.

  Common Stock     (9 )           911     15,640             15,640  

IDX Broker, LLC

  11.5% Secured Debt     (9 )       (13 )   665     10,950     13     613     10,350  

  Member Units     (9 )       1,590     136     7,040     1,590         8,630  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)     (9 )       (11 )   218     4,055     11     311     3,755  

  Member Units     (9 )           82     4,460             4,460  

Lamb Ventures, LLC

  LIBOR Plus 5.75%     (8 )           11         350     160     190  

  11% Secured Debt     (8 )           420     7,657         78     7,579  

  Preferred Equity     (8 )               400             400  

  Member Units     (8 )       340     40     5,990     340         6,330  

  9.5% Secured Debt     (8 )       4     43     1,170     432     1,170     432  

  Member Units     (8 )       (750 )   835     1,340         750     590  

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

  10% Secured Debt     (9 )           88     1,750             1,750  

Products, LLC

  12% Secured Debt     (9 )           235     3,900             3,900  

  Member Units     (9 )       (1,500 )   3     2,480         1,500     980  

  9.5% Secured Debt     (9 )           39     836         22     814  

  Member Units     (9 )       150     28     600     690         1,290  

MSC Adviser I, LLC

  Member Units     (8 )       6,487     1,420     30,617     6,487         37,104  

Mystic Logistics Holdings, LLC

  12% Secured Debt     (6 )       (29 )   568     9,176     29     1,173     8,032  

  Common Stock     (6 )       810         5,780     810         6,590  

NRP Jones, LLC

  8% Current / 4% PIK Secured Debt     (5 )           846     13,915     282         14,197  

  Warrants     (5 )               130             130  

  Member Units     (5 )               410             410  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)     (8 )       159     748     17,826     174         18,000  

  Common Stock     (8 )           100     11,780             11,780  

Principle Environmental, LLC

  12% Secured Debt     (8 )           245     4,060             4,060  

  12% Current / 2% PIK Secured Debt     (8 )           238     3,378     34         3,412  

  Preferred Member Units     (8 )   (63 )   1,303         5,370     1,303     63     6,610  

  Warrants     (8 )       70         270     70         340  

Quality Lease Service, LLC

  8% PIK Secured Debt     (7 )           273     7,068     273         7,341  

  Member Units     (7 )               3,188     1,199         4,387  

The MPI Group, LLC

  9% Secured Debt     (7 )       (303 )   133     2,922     1     303     2,620  

  Series A Preferred Units     (7 )                            

  Warrants     (7 )                            

  Member Units     (7 )       90     58     2,300     90         2,390  

Uvalco Supply, LLC

  9% Secured Debt     (8 )           33     872         236     636  

  Member Units     (8 )   69     (69 )   67     4,640         334     4,306  

Vision Interests, Inc.

  13% Secured Debt     (9 )           188     2,814         24     2,790  

  Series A Preferred Stock     (9 )               3,000             3,000  

  Common Stock     (9 )                            

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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)
  June 30,
2017
Fair
Value
 

Ziegler's NYPD, LLC

  6.5% Secured Debt     (8 )           34     994     1         995  

  12% Secured Debt     (8 )           18     300             300  

  14% Secured Debt     (8 )           194     2,750             2,750  

  Warrants     (8 )       (30 )       240         30     210  

  Preferred Member Units     (8 )       (520 )       4,100         520     3,580  

Other controlled investments

 

 

   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Access Media Holdings, LLC

 

5% Current / 5% PIK Secured Debt

   
(5

)
 
   
(820

)
 
1,165
   
19,700
   
570
   
820
   
19,450
 

  Preferred Member Units     (5 )       (728 )       240     759     729     270  

  Member Units     (5 )                            

Ameritech College

  13% Secured Debt     (9 )           67     1,003     1         1,004  

Operations, LLC

  13% Secured Debt     (9 )           198     3,025             3,025  

  Preferred Member Units     (9 )       (3,281 )       2,291     3,900     3,281     2,910  

ASC Interests, LLC

  11% Secured Debt     (8 )       (5 )   118     2,100     5     105     2,000  

  Member Units     (8 )       (360 )       2,680         360     2,320  

Bond-Coat, Inc.

  12% Secured Debt     (8 )       (19 )   719     11,596     19     19     11,596  

  Common Stock     (8 )       1,170         6,660     1,170         7,830  

CBT Nuggets, LLC

  Member Units     (9 )       10,430     2,693     55,480     10,430         65,910  

Charps, LLC

  12% Secured Debt     (5 )           1,218         19,009     800     18,209  

  Preferred Member Units     (5 )                   400         400  

Datacom, LLC

  8% Secured Debt     (8 )           43     900     450     270     1,080  

  5.25% Current / 5.25% PIK Secured Debt     (8 )       282     634     11,049     604         11,653  

  Class A Preferred Member Units     (8 )       104         1,368     104         1,472  

  Class B Preferred Member Units     (8 )       (1,318 )       1,529         1,318     211  

Garreco, LLC

  LIBOR Plus 10.00% (Floor 1.00%)     (8 )           362     5,219     981     406     5,794  

  Member Units     (8 )       680         1,150     680         1,830  

Gulf Manufacturing, LLC

  9% PIK Secured Debt     (8 )           35     777             777  

  Member Units     (8 )       1,700     217     8,770     1,700         10,470  

Gulf Publishing Holdings, LLC

  12.5% Secured Debt     (8 )           728     9,911     2,781         12,692  

  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

  Member Units     (8 )               280             280  

Dispatch Services, LLC

  Member Units     (8 )           95     2,040             2,040  

HW Temps LLC

  LIBOR Plus 13.00% (Floor 1.00%)     (6 )           726     10,500     9     600     9,909  

  Preferred Member Units     (6 )           70     3,940             3,940  

Indianapolis Aviation

  15% Secured Debt     (8 )           292     3,100         3,100      

Partners, LLC

  Warrants     (8 )   2,385     (1,520 )       2,649         2,649      

KBK Industries, LLC

  10% Secured Debt     (5 )           59     1,250     100     410     940  

  12.5% Secured Debt     (5 )       4     378     5,889     11         5,900  

  Member Units     (5 )       767         2,780     1,210         3,990  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt     (8 )       (2,551 )       9,387         9,387      

  Preferred Member Units     (8 )   (100 )               100     100      

MH Corbin Holding LLC

  10% Secured Debt     (5 )           670     13,197     15     350     12,862  

  Preferred Member Units     (5 )           70     6,000             6,000  

NAPCO Precast, LLC

  LIBOR Plus 8.50%     (8 )           327         10,438         10,438  

  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 )       180     210     10,920     180         11,100  

NRI Clinical Research, LLC

  LIBOR Plus 6.50% (Floor 1.50%)     (9 )           19     200     200         400  

  14% Secured Debt     (9 )       (22 )   321     4,261     22     78     4,205  

  Warrants     (9 )               680             680  

  Member Units     (9 )               2,462         1     2,461  

NuStep, LLC

  12% Secured Debt     (5 )           1,362         20,402         20,402  

  Preferred Member Units     (5 )                   10,200         10,200  

OMi Holdings, Inc.

  Common Stock     (8 )       (340 )   432     13,080         340     12,740  

Pegasus Research Group, LLC

  Member Units     (8 )       (390 )       8,620         390     8,230  

River Aggregates, LLC

  Zero Coupon Secured Debt     (8 )           39     627     39         666  

  Member Units     (8 )       (190 )       4,600         190     4,410  

  Member Units     (8 )               2,510             2,510  

SoftTouch Medical

  LIBOR Plus 9.00% (Floor 1.00%)     (7 )       (7 )   366     7,140     7     7     7,140  

Holdings LLC

  Member Units     (7 )       369     535     9,170     370         9,540  

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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)
  June 30,
2017
Fair
Value
 

Other

                                                     

Amounts related to investments transferred to or from other 1940 Act classification during the period

                      (220 )   (9,919 )            

            $ 3,108   $ 17,046   $ 27,576   $ 594,282   $ 116,225   $ 48,713   $ 671,713  

Affiliate Investments

                                                     

AFG Capital Group, LLC

 

Warrants

   
(8

)

$

 
$

20
 
$

 
$

670
 
$

20
 
$

 
$

690
 

  Member Units     (8 )       100     16     2,750     100         2,850  

Barfly Ventures, LLC

  12% Secured Debt     (5 )       154     480     5,827     1,969         7,796  

  Options     (5 )       100         490     100         590  

  Warrants     (5 )       50         280     50         330  

BBB Tank Services, LLC

  LIBOR Plus 9.50% (Floor 1.00%)     (8 )           43     797             797  

  15% Secured Debt     (8 )           307     3,991     3         3,994  

  Member Units     (8 )               800             800  

Boccella Precast Products LLC

  LIBOR Plus 10.0% (Floor 1.00%)     (6 )           235         16,216         16,216  

  Member Units     (6 )                   2,160         2,160  

Boss Industries, LLC

  Preferred Member Units     (5 )       427     175     2,800     520         3,320  

Bridge Capital Solutions

  13% Secured Debt     (6 )           620     5,610     130         5,740  

Corporation

  Warrants     (6 )               3,370             3,370  

  13% Secured Debt     (6 )           66     1,000     1     1     1,000  

  Preferred Member Units     (6 )           50     1,000             1,000  

Buca C, LLC

  LIBOR Plus 7.25% (Floor 1.00%)     (7 )       (167 )   951     22,671     30     1,633     21,068  

  Preferred Member Units     (7 )       (728 )   115     4,660     116     728     4,048  

CAI Software LLC

  12% Secured Debt     (6 )       (5 )   217     3,683     5     205     3,483  

  Member Units     (6 )       340     49     2,480     340         2,820  

CapFusion, LLC

  13% Secured Debt     (5 )           1,043     13,202     102         13,304  

  Warrants     (5 )               1,200             1,200  

Chandler Signs Holdings, LLC

  12% Secured Debt     (8 )       (3 )   275     4,500     3     3     4,500  

  Class A Units     (8 )       (330 )   63     3,240         330     2,910  

Condit Exhibits, LLC

  Member Units     (9 )           36     1,840             1,840  

Congruent Credit

  LP Interests (Fund II)     (8 )       (141 )       1,518         141     1,377  

Opportunities Funds

  LP Interests (Fund III)     (8 )       281     768     16,181     2,396         18,577  

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 )       444         4,925     444         5,369  

  LP Interests (Dos Rios Partners—A, LP)     (8 )       129         1,444     129         1,573  

Dos Rios Stone Products LLC

  Class A Units     (8 )       (200 )       2,070         200     1,870  

East Teak Fine

  Common Stock     (7 )       (230 )   33     860         230     630  

Hardwoods, Inc.

                                                     

East West Copolymer &

  12% Current / 2% PIK Secured                                                  

Rubber, LLC

  Debt     (8 )       (5,630 )       8,630         5,630     3,000  

  Warrants     (8 )                            

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund-A, L.P.)     (8 )   71     (99 )   90     2,804     352     2,462     694  

  LP Interests (EIG Traverse Co-Investment, L.P.)     (8 )       504     543     9,905     504         10,409  

Freeport Financial Fund

  LP Interests (Freeport Financial                                                  

Investments

  SBIC Fund LP)     (5 )       (101 )   204     5,620         101     5,519  

  LP Interests (Freeport First Lien Loan Fund III LP)     (5 )       (52 )   289     4,763     2,796     52     7,507  

Gault Financial, LLC

  10.5% Current Secured Debt     (7 )       1,018     649     11,079     1,018     327     11,770  

(RMB Capital, LLC)

  Warrants     (7 )                            

Glowpoint, Inc.

  12% Secured Debt     (6 )       (1,311 )   555     3,997     14     1,311     2,700  

  Common Stock     (6 )       90         2,080     90         2,170  

Guerdon Modular

  13% Secured Debt     (9 )           719     10,594     18         10,612  

Holdings, Inc.

  Preferred Stock     (9 )               1,140             1,140  

  Common Stock     (9 )               80             80  

Hawk Ridge Systems, LLC

  10% Secured Debt     (9 )           513     9,901     8         9,909  

  Preferred Member Units     (9 )           221     2,850             2,850  

  Preferred Member Units     (9 )           6     150             150  

Houston Plating and

  8% Unsecured Convertible Debt     (8 )           42         3,000         3,000  

Coatings, LLC

  Member Units     (8 )       225     3     4,000     980         4,980  

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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)
  June 30,
2017
Fair
Value
 

I-45 SLF LLC

  Member Units     (8 )       579     1,435     14,586     2,579         17,165  

Indianhead Pipeline

  12% Secured Debt     (5 )           887     5,079     562     449     5,192  

Services, LLC

  Preferred Member Units     (5 )           198     2,677     198         2,875  

  Warrants     (5 )                            

  Member Units     (5 )                            

L.F. Manufacturing

  Member Units     (8 )               1,380             1,380  

Holdings, LLC

                                                     

Meisler Operating LLC

  LIBOR Plus 8.50% (Floor 1.00%)     (5 )           388         16,618         16,618  

  Member Units     (5 )                   3,200         3,200  

OnAsset Intelligence, Inc.

  12% PIK Secured Debt     (8 )   (29 )       277     4,519     277         4,796  

  10% PIK Secured Debt     (8 )                   45         45  

  Preferred Stock     (8 )                            

  Warrants     (8 )                            

OPI International Ltd.

  10% Unsecured Debt     (8 )   (85 )   (473 )   16     473         473      

  Common Stock     (8 )       (1,600 )       1,600         1,600      

PCI Holding Company, Inc.

  12% Secured Debt     (9 )       (20 )   1,112     13,000     320     20     13,300  

  Preferred Stock     (9 )       (854 )   354     5,370     354     854     4,870  

  Preferred Stock     (9 )       870             2,610         2,610  

Rocaceia, LLC (Quality Lease

  12% Secured Debt     (8 )               250             250  

and Rental Holdings, LLC)

  Preferred Member Units     (8 )                            

Tin Roof Acquisition Company

  12% Secured Debt     (7 )           832     13,385     32     336     13,081  

  Class C Preferred Stock     (7 )           139     2,738     140         2,878  

UniTek Global Services, Inc.

  LIBOR Plus 8.50% (Floor 1.00%)     (6 )       (3 )   290     5,021     3,517     3     8,535  

  LIBOR Plus 8.50% (Floor 1.00%)     (6 )           29     824     3     690     137  

  15% PIK Unsecured Debt     (6 )           62     745     57         802  

  Preferred Stock     (6 )       (458 )   889     6,410     888     458     6,840  

  Preferred Stock     (6 )           78         2,597         2,597  

  Common Stock     (6 )       (490 )       3,010         490     2,520  

Universal Wellhead Services

  Preferred Member Units     (8 )               720             720  

Holdings, LLC

  Member Units     (8 )               610             610  

Valley Healthcare Group, LLC

  LIBOR Plus 12.50% (Floor 0.50%)     (8 )           873     12,844     13     270     12,587  

  Preferred Member Units     (8 )               1,600             1,600  

Volusion, LLC

  11.5% Secured Debt     (8 )           1,337     15,298     333     423     15,208  

  Preferred Member Units     (8 )               14,000             14,000  

  Warrants     (8 )       (216 )       2,576         216     2,360  

Other

                                                     

Amounts related to investments transferred to or from other 1940 Act classification during the period

                      220     9,919              

            $ 22,816   $ (26,796 ) $ 19,468   $ 375,948   $ 68,212   $ 65,753   $ 368,488  

(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

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Table of Contents

    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 June 30, 2017 for control investments located in this region was $182,490. This represented 14.2% of net assets as of June 30, 2017. The fair value as of June 30, 2017 for affiliate investments located in this region was $67,451. This represented 5.3% of net assets as of June 30, 2017.

(6)
Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2017 for control investments located in this region was $28,471. This represented 2.2% of net assets as of June 30, 2017. The fair value as of June 30, 2017 for affiliate investments located in this region was $62,090. This represented 4.8% of net assets as of June 30, 2017.

(7)
Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2017 for control investments located in this region was $33,418. This represented 2.6% of net assets as of June 30, 2017. The fair value as of June 30, 2017 for affiliate investments located in this region was $53,475. This represented 4.2% of net assets as of June 30, 2017.

(8)
Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of June 30, 2017 for control investments located in this region was $289,380. This represented 22.6% of net assets as of June 30, 2017. The fair value as of June 30, 2017 for affiliate investments located in this region was $138,111. This represented 10.8% of net assets as of June 30, 2017.

(9)
Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of June 30, 2017 for control investments located in this region was $137,954. This represented 10.8% of net assets as of June 30, 2017. The fair value as of June 30, 2017 for affiliate investments located in this region was $47,361. This represented 3.7% of net assets as of June 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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Table of Contents

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 June 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 June 30, 2018  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    70     57     54  

Fair value

  $ 1,084.9   $ 591.6   $ 516.8  

Cost

  $ 909.6   $ 608.0   $ 543.2  

% of portfolio at cost—debt

    68.6%     97.3%     93.6%  

% of portfolio at cost—equity

    31.4%     2.7%     6.4%  

% of debt investments at cost secured by first priority lien

    98.4%     89.4%     94.4%  

Weighted-average annual effective yield(b)

    12.2%     9.4%     9.8%  

Average EBITDA(c)

  $ 5.0   $ 91.1   $ 42.0  

(a)
At June 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 38%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of June 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 four LMM portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for

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    our 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, 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 June 30, 2018, we had Other Portfolio investments in eleven companies, collectively totaling approximately $108.1 million in fair value and approximately $113.7 million in cost basis and which comprised approximately 4.6% 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 June 30, 2018, there was no cost basis in this investment and the investment had a fair value of approximately $62.7 million, which comprised approximately 2.7% 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 the three months ended June 30, 2018 and 2017, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.6% and 1.7%, respectively, on an annualized basis. For the six months ended June 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 June 30, 2018 and 2017, the External Investment Manager earned $2.9 million and $2.7 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the six months ended June 30, 2018 and 2017, the External Investment Manager earned $5.7 million and $5.3 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 receive performance-based fee compensation from HMS Income, this may provide it an incentive to

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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

    Basis of Presentation

        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 six months ended June 30, 2018 and 2017, cash flows for the six months ended June 30, 2018 and 2017, and financial position as of June 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 six months ended June 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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    Investment Portfolio Valuation

        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 June 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 June 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.

    Revenue Recognition

    Interest and Dividend Income

        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.

    Fee Income

        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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    Payment-in-Kind ("PIK") Interest and Cumulative Dividends

        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 June 30, 2018 and 2017, (i) approximately 0.6% and 3.0%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 0.8% and 1.8%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the six months ended June 30, 2018 and 2017, (i) approximately 0.8% and 3.2%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 0.9% and 1.8%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.

    Share-Based Compensation

        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.

    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) 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 the portfolio company and typically have a term of between three and seven years from the original investment date.

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        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 June 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $1.7 million and $1.6 million, respectively. Our total expenses for the six months ended June 30, 2018 and 2017 are net of expenses allocated to the External Investment Manager of $3.7 million and $3.2 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 June 30, 2018 and 2017, the total contribution to our net investment income was $2.7 million and $2.4 million, respectively. For the six months ended June 30, 2018 and 2017, the total contribution to our net investment income was $5.3 million and $4.6 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 June 30, 2018 and December 31, 2017 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  June 30,
2018
  December 31,
2017
 

First lien debt

    78.8%     79.0%  

Equity

    15.6%     15.3%  

Second lien debt

    4.4%     4.5%  

Equity warrants

    0.7%     0.7%  

Other

    0.5%     0.5%  

    100.0%     100.0%  

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Fair Value:
  June 30,
2018
  December 31,
2017
 

First lien debt

    71.1%     70.5%  

Equity

    23.9%     24.4%  

Second lien debt

    4.1%     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 June 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

    Comparison of the three months ended June 30, 2018 and June 30, 2017

 
  Three Months Ended
June 30,
  Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 59,869   $ 50,271   $ 9,598     19%  

Total expenses

    (20,357 )   (17,578 )   (2,779 )   16%  

Net investment income

    39,512     32,693     6,819     21%  

Net realized gain (loss) from investments

    (13,944 )   10,981     (24,925 )      

Net realized loss on extinguishment of debt

    (1,522 )       (1,522 )      

Net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    32,711     1,365     31,346        

SBIC debentures

    (10 )   (36 )   26        

Total net unrealized appreciation

    32,701     1,329     31,372        

Income tax provision

    (1,296 )   (2,174 )   878        

Net increase in net assets resulting from operations

  $ 55,451   $ 42,829   $ 12,622     29%  

 

 
  Three Months Ended
June 30,
  Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands, except
per share amounts)

 

Net investment income

  $ 39,512   $ 32,693   $ 6,819     21%  

Share-based compensation expense

    2,432     2,798     (366 )   –13%  

Distributable net investment income(a)

  $ 41,944   $ 35,491   $ 6,453     18%  

Net investment income per share—Basic and diluted

  $ 0.66   $ 0.58   $ 0.08     14%  

Distributable net investment income per share—Basic and diluted(a)

  $ 0.70   $ 0.63   $ 0.07     11%  

(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.

    Investment Income

        For the three months ended June 30, 2018, total investment income was $59.9 million, a 19% increase over the $50.3 million of total investment income for the corresponding period of 2017. This comparable period increase was principally attributable to a $5.6 million increase in dividend income from Investment Portfolio equity investments and a $5.2 million net increase in interest income

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primarily related to 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, with these increases partially offset by a $1.2 million decrease in fee income. The $9.6 million increase in total investment income in the three months ended June 30, 2018 includes $3.5 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 $1.2 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.

    Expenses

        For the three months ended June 30, 2018, total expenses increased to $20.4 million from $17.6 million for the corresponding period of 2017. This comparable period increase in operating expenses was principally attributable to (i) a $2.0 million increase in interest expense, primarily due to (a) a $2.3 million increase as a result of the issuance of our 4.50% Notes due 2022 in November 2017, (b) a $0.7 million increase from the SBIC debentures due to the higher average balance outstanding and (c) a $0.5 million increase from the Credit Facility due to an increase in the market-based interest rate, which was partially offset by a lower 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 $1.1 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 $0.4 million decrease in share-based compensation expense during the three months ended June 30, 2018. The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets for the three months ended June 30, 2018 was 1.6% on an annualized basis compared to 1.7% for the three months ended June 30, 2017 and 1.6% for the year ended December 31, 2017.

    Net Investment Income

        Net investment income for the three months ended June 30, 2018 was $39.5 million, or a 21% increase, compared to net investment income of $32.7 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.

    Distributable Net Investment Income

        For the three months ended June 30, 2018, distributable net investment income increased 18% to $41.9 million, or $0.70 per share, compared with $35.5 million, or $0.63 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 June 30, 2018 reflects (i) a net increase of approximately $0.04 per share from the comparable period in 2017 attributable to the net effect of the elevated dividend income activity, partially offset by the decrease in the comparable levels of accelerated prepayment, repricing and other activity as 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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    Net Increase in Net Assets Resulting from Operations

        The net increase in net assets resulting from operations during the three months ended June 30, 2018 was $55.5 million, or $0.93 per share, compared with $42.8 million, or $0.76 per share, during the three months ended June 30, 2017. This $12.6 million improvement from the prior year was primarily the result of (i) a $31.3 million improvement in net unrealized appreciation from portfolio investments, including the impact of accounting reversals relating to realized gains/income (losses), (ii) a $6.8 million increase in net investment income as discussed above and (iii) a $0.9 million decrease in the income tax provision, with these improvements partially offset by (i) a $24.9 million decrease in the net realized gain (loss) from investments to a net realized loss of $13.9 million for the three months ended June 30, 2018 and (ii) a $1.5 million net realized loss on extinguishment of debt related to the redemption of the 6.125% Notes in the three months ended June 30, 2018. The net realized loss from investments of $13.9 million for the three months ended June 30, 2018 was primarily the result of (i) the net realized loss of $14.4 million resulting primarily from losses on the exits of two LMM investments and other activity in the LMM portfolio, partially offset by the realized gain on the exit of one LMM investment and (ii) the realized loss of $1.1 million on the exit of a Middle Market investment, with these losses partially offset by the realized gain of $1.4 million on the exit of a Private Loan investment.

        The following table provides a summary of the total net unrealized appreciation of $32.7 million for the three months ended June 30, 2018:

 
  Three Months Ended June 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

  $ 10.4   $   $ (1.7 ) $ (0.1 ) $ 8.6  

Net unrealized appreciation (depreciation) relating to portfolio investments

    13.3     (4.4 )   0.8     14.4 (b)   24.1  

Total net unrealized appreciation (depreciation) relating to portfolio investments

  $ 23.7   $ (4.4 ) $ (0.9 ) $ 14.3   $ 32.7  

Unrealized depreciation relating to SBIC debentures(c)

                             

Total net unrealized appreciation

                          $ 32.7  

(a)
LMM includes unrealized appreciation on 19 LMM portfolio investments and unrealized depreciation on 16 LMM portfolio investments.

(b)
Other includes $13.9 million of unrealized appreciation relating to the External Investment Manager and $0.5 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 June 30, 2018 of $1.3 million principally consisted of a deferred tax provision of $2.2 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, offset by a current U.S. federal and state income tax benefit of $0.9 million.

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    Comparison of the six months ended June 30, 2018 and June 30, 2017

 
  Six Months Ended
June 30,
  Net Change  
 
  2018   2017   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 115,812   $ 98,160   $ 17,652     18%  

Total expenses

    (39,324 )   (34,300 )   (5,024 )   15%  

Net investment income

    76,488     63,860     12,628     20%  

Net realized gain (loss) from investments

    (6,484 )   38,549     (45,033 )      

Net realized loss on extinguishment of debt

    (2,896 )   (5,217 )   2,321        

Net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    21,829     (20,726 )   42,555        

SBIC debentures

    1,348     5,629     (4,281 )      

Total net unrealized appreciation (depreciation)

    23,177     (15,097 )   38,274        

Income tax provision

    (316 )   (7,812 )   7,496        

Net increase in net assets resulting from operations

  $ 89,969   $ 74,283   $ 15,686     21%  

 

 
  Six Months Ended
June 30,
  Net Change
 
  2018   2017   Amount   %
 
  (dollars in thousands, except
per share amounts)

Net investment income

  $ 76,488   $ 63,860   $ 12,628     20%

Share-based compensation expense

    4,735     5,067     (332 )   (7)%

Distributable net investment income(a)

  $ 81,223   $ 68,927   $ 12,296     18%

Net investment income per share—Basic and diluted

  $ 1.29   $ 1.15   $ 0.14     12%

Distributable net investment income per share—Basic and diluted(a)

  $ 1.37   $ 1.24   $ 0.13     10%

(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.

    Investment Income

        For the six months ended June 30, 2018, total investment income was $115.8 million, an 18% increase over the $98.2 million of total investment income for the corresponding period of 2017. This comparable period increase was principally attributable to a $12.4 million increase in dividend income from Investment Portfolio equity investments and a $6.3 million net increase in interest income primarily related to 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

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Investment Portfolio debt investments, with these increases partially offset by a $1.1 million decrease in fee income. The $17.7 million increase in total investment income in the six months ended June 30, 2018 includes $8.0 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 $2.9 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.

    Expenses

        For the six months ended June 30, 2018, total expenses increased to $39.3 million from $34.3 million for the corresponding period of 2017. This comparable period increase in operating expenses was principally attributable to (i) a $3.7 million increase in interest expense, primarily due to (a) a $4.5 million increase as a result of the issuance of our 4.50% Notes due 2022 in November 2017 and (b) a $1.2 million increase from the SBIC debentures due to the higher average balance outstanding, with these increases partially offset by (a) a $1.5 million decrease from the redemption of the 6.125% Notes effective April 1, 2018 and (b) a $0.5 million decrease related to the Credit Facility due primarily to the lower average balance outstanding and (ii) a $2.2 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 a (i) $0.6 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 and (ii) a $0.3 million decrease in share-based compensation expense during the six months ended June 30, 2018. The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets for the six months ended June 30, 2018 was 1.5% on an annualized basis compared to 1.6% for the six months ended June 30, 2017 and 1.6% for the year ended December 31, 2017.

    Net Investment Income

        Net investment income for the six months ended June 30, 2018 was $76.5 million, or a 20% increase, compared to net investment income of $63.9 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.

    Distributable Net Investment Income

        For the six months ended June 30, 2018, distributable net investment income increased 18% to $81.2 million, or $1.37 per share, compared with $68.9 million, or $1.24 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 six months ended June 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.

    Net Increase in Net Assets Resulting from Operations

        The net increase in net assets resulting from operations during the six months ended June 30, 2018 was $90.0 million, or $1.52 per share, compared with $74.3 million, or $1.33 per share, during the

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six months ended June 30, 2017. This $15.7 million improvement from the prior year was primarily the result of (i) a $38.3 million improvement 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 $12.6 million increase in net investment income as discussed above, (iii) a $7.5 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 $45.0 million decrease in the net realized gain (loss) from investments to a total net realized loss from investments of $6.5 million for the six months ended June 30, 2018. The net realized loss from investments of $6.5 million for the six months ended June 30, 2018 was primarily the result of (i) net realized losses of $9.7 million in our Middle Market portfolio, which is primarily the result of (a) the realized loss of $4.4 million on the exits of two Middle Market investments and (b) the realized loss of $5.3 million on the restructure of a Middle Market investment and (ii) the realized loss of $1.3 million resulting from the net effect of losses on the exits of two LMM investments and other activity in the LMM portfolio, partially offset by gains on the exits of three LMM investments, with these net realized losses partially offset by (i) the realized gains of $3.2 million due to activity in our Other Portfolio and (ii) the realized gain of $1.4 million on the exit of a Private Loan investment.

        The following table provides a summary of the total net unrealized appreciation of $23.2 million for the six months ended June 30, 2018:

 
  Six Months Ended June 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

  $ (8.5 ) $ 8.8   $ (2.1 ) $ (0.4 ) $ (2.2 )

Net unrealized appreciation (depreciation) relating to portfolio investments

    10.0     (4.8 )   (1.7 )   20.5 (b)   24.0  

Total net unrealized appreciation (depreciation) relating to portfolio investments

  $ 1.5   $ 4.0   $ (3.8 ) $ 20.1   $ 21.8  

Unrealized appreciation relating to SBIC debentures(c)

                            1.4  

Total net unrealized appreciation

                          $ 23.2  

(a)
LMM includes unrealized appreciation on 28 LMM portfolio investments and unrealized depreciation on 19 LMM portfolio investments.

(b)
Other includes $20.9 million of unrealized appreciation relating to the External Investment Manager, partially offset by $0.4 million of net unrealized depreciation relating to the Other Portfolio.

(c)
The $1.4 million of unrealized appreciation on the SBIC debentures held by MSC II which are accounted for on a fair value basis is due to the accounting reversals of previously recognized unrealized depreciation recorded due to fair value adjustments since the date of acquisition of MSC II on the debentures repaid.

        The income tax provision for the six months ended June 30, 2018 of $0.3 million principally consisted of a deferred tax provision of $0.3 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. A $0.5 million accrual for excise tax on our estimated undistributed taxable income was

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offset by a $0.5 million benefit for U.S. federal and state income taxes, resulting in no current tax expense for the period.

    Liquidity and Capital Resources

    Cash Flows

        For the six months ended June 30, 2018, we experienced a net decrease in cash and cash equivalents in the amount of approximately $11.0 million, which is the net result of approximately $133.7 million of cash used in our operating activities and approximately $122.6 million of cash provided by our financing activities.

        During the period, $133.7 million of cash was used in our operating activities, which resulted primarily from (i) cash flows we generated from the operating profits earned through our operating activities totaling $73.9 million, which is our $81.2 million of distributable net investment income, excluding the non-cash effects of the accretion of unearned income of $6.9 million, payment-in-kind interest income of $1.0 million, cumulative dividends of $1.1 million and the amortization expense for deferred financing costs of $1.7 million, (ii) cash uses totaling $532.3 million consisting of (a) $528.0 million for the funding of new portfolio company investments and settlement of accruals for portfolio investments existing as of December 31, 2017, (b) $2.9 million related to decreases in payables and accruals and (c) $1.4 million related to increases in other assets and (iii) cash proceeds totaling $324.8 million which resulted from the sales and repayments of debt investments and sales of and return on capital of equity investments.

        During the six months ended June 30, 2018, $122.6 million in cash was provided by our financing activities, which principally consisted of (i) $53.8 million in net cash proceeds from the ATM Program (described below), (ii) $225.0 million in net cash proceeds from the Credit Facility and (iii) $22.0 million in cash proceeds from issuance of SBIC debentures, partially offset by (i) $90.7 million for repurchase of the 6.125% Notes, (ii) $77.5 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) $1.9 million for payment of deferred debt issuance costs, SBIC debenture fees and other costs.

    Capital Resources

        As of June 30, 2018, we had $40.5 million in cash and cash equivalents and $366.0 million of unused capacity under the Credit Facility, which we maintain to support our investment and operating activities. As of June 30, 2018, our net asset value totaled $1,447.4 million, or $23.96 per share.

        The Credit Facility, which provides additional liquidity to support our investment and operational activities, was amended and restated during June 2018 to provide for an increase in total commitments from $585.0 million to $655.0 million and to increase the diversified group of lenders to sixteen 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 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 (2.1% as of June 30, 2018) plus (i) 1.875% (or the applicable base rate (Prime Rate of 5.00% as of June 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

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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 June 30, 2018, we had $289.0 million in borrowings outstanding under the Credit Facility, the interest rate on the Credit Facility was 3.9% 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 six months ended June 30, 2018, we issued $22.0 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, leaving $32.2 million of remaining capacity under our SBIC licenses. 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 June 30, 2018, through our three wholly owned SBICs, we had $313.8 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 5.7 years as of June 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 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

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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 June 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 June 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 six months ended June 30, 2018, we sold 1,428,596 shares of our common stock at a weighted-average price of $38.08 per share and raised $54.4 million of gross proceeds under the ATM Program. Net proceeds were $53.6 million after commissions to the selling agents on shares sold and offering costs. As of June 30, 2018, there were 3,625,892 shares available for sale under the ATM Program.

        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.

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        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.

    Recently Issued or Adopted Accounting Standards

        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 new 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 new 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,

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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 new 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 new accounting standard on our consolidated financial statements was not material.

        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 recently issued standards and any that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

    Inflation

        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.

    Off-Balance Sheet Arrangements

        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 June 30, 2018, we had a total of $127.9 million in outstanding commitments comprised of (i) 39 investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional

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commitments not yet funded and (ii) 11 investments with equity capital commitments that had not been fully called.

    Contractual Obligations

        As of June 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   $ 197,800   $ 313,800  

Interest due on SBIC debentures

    5,862     11,798     10,610     8,054     7,042     23,939     67,305  

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)

    346     749     763     777     791     4,239     7,665  

Total

  $ 14,309   $ 219,747   $ 74,698   $ 57,156   $ 206,158   $ 225,978   $ 798,046  

(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 June 30, 2018, we had $289.0 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."

    Related Party Transactions

        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 June 30, 2018, we had a receivable of approximately $2.9 million due from the External Investment Manager which included approximately $1.9 million primarily related to operating expenses incurred by us 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 above in "—Critical Accounting Policies—Income Taxes") and approximately $1.0 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 June 30, 2018, $5.8 million of compensation and directors' fees

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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, the phantom stock units outstanding as of June 30, 2018 represented 115,536 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.

    Recent Developments

        During July 2018, we expanded our total commitments under the Credit Facility from $655.0 million to $680.0 million. The $25.0 million increase in total commitments was the result of the addition of a new lender relationship, which further diversifies our lending group under the Credit Facility to a total of seventeen participants. The recent increase in total commitments was executed under the accordion feature of the Credit Facility which allows for an increase up to $800.0 million in total commitments under the facility from new and existing lenders on the same terms and conditions as the existing commitments.

        In July 2018, we fully exited our remaining investment in Drilling Info Holdings, Inc. ("Drilling Info"), the leading software, data, and analytics platform for the energy value chain. We made debt and equity investments in Drilling Info beginning in 2009 to support its acquisition growth strategy. Our debt investment in Drilling Info was fully repaid and a majority portion of our equity interests in Drilling Info were redeemed during the first quarter of 2012, with us recognizing a realized gain of $9.2 million. As part of this transaction, we maintained a minority equity stake in Drilling Info. In July 2018, we realized a gain of $15.5 million on the exit of our remaining equity investment in Drilling Info.

        During July 2018, we declared regular monthly dividends of $0.195 per share for each month of October, November and December of 2018. These regular monthly dividends equal a total of $0.585 per share for the fourth quarter of 2018 and represent a 2.6% increase from the regular monthly dividends declared for the fourth quarter of 2017. Including the regular monthly dividends declared for the third and fourth quarters of 2018, we will have paid $23.960 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 June 30, 2018, approximately 74% of our debt investment portfolio (at cost) bore interest at floating rates, 94% 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 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 June 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

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investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of June 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)

  $ (6,435 ) $ 1,445   $ (4,990 ) $ (0.08 )

(25)

    (3,242 )   722     (2,520 )   (0.04 )

25

    3,264     (722 )   2,542     0.04  

50

    6,527     (1,445 )   5,082     0.08  

100

    13,054     (2,890 )   10,164     0.17  

200

    26,109     (5,780 )   20,329     0.34  

300

    39,163     (8,670 )   30,493     0.50  

400

    52,218     (11,560 )   40,658     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 June 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 June 30, 2018, we issued 126,003 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 June 30, 2018 under the dividend reinvestment plan was approximately $4.8 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
  10.1 * Form of Equity Distribution Agreement dated May 10, 2018 (previously filed as Exhibit (h)(3) to Main Street Capital Corporation's Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 filed on May 10, 2018 (Reg. No. 333-223483)).

 

10.2

*

Third Amended and Restated Credit Agreement dated June 5, 2018 (previously filed as Exhibit 10.1 to Main Street Capital Corporation's Current Report on Form 8-K filed on June 6, 2018 (File No. 1-33723)).

 

10.3

*

Third Amended and Restated General Security Agreement dated June 5, 2018 (previously filed as Exhibit 10.2 to Main Street Capital Corporation's Current Report on Form 8-K filed on June 6, 2018 (File No. 1-33723)).

 

10.4

*

Third Amended and Restated Equity Pledge Agreement dated June 5, 2018 (previously filed as Exhibit 10.3 to Main Street Capital Corporation's Current Report on Form 8-K filed on June 6, 2018 (File No. 1-33723)).

 

10.5

*

Supplement Agreement dated July 19, 2018 (previously filed as Exhibit 10.1 to Main Street Capital Corporation's Current report on Form 8-K filed on July 20, 2018 (File No. 1-33723)).

 

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.

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*
Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by reference.

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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: August 3, 2018

 

/s/ VINCENT D. FOSTER

Vincent D. Foster
Chairman and Chief Executive Officer
(principal executive officer)

Date: August 3, 2018

 

/s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
(principal financial officer)

Date: August 3, 2018

 

/s/ SHANNON D. MARTIN

Shannon D. Martin
Vice President and Chief Accounting Officer
(principal accounting officer)

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