Part I [Business Overview](index=5&type=section&id=Item%201.%20Business) MSCC is an internally managed BDC and RIC, providing debt and equity financing to LMM and Middle Market companies, and managing external funds - Main Street Capital Corporation (MSCC) is an internally managed **Business Development Company (BDC)** and **Regulated Investment Company (RIC)**, focusing on customized debt and equity financing for **lower middle market (LMM)** and **middle market** companies[16](index=16&type=chunk)[17](index=17&type=chunk)[20](index=20&type=chunk) - The company's internally managed structure avoids external investment advisory fees, directly incurring operating costs for investment and portfolio management professionals, aiming for better interest alignment and optimized operating expenses[17](index=17&type=chunk)[37](index=37&type=chunk) - MSCC wholly owns Main Street Mezzanine Fund, LP (MSMF) and Main Street Capital III, LP (MSC III), both licensed as **Small Business Investment Companies (SBICs)**, enabling them to issue SBA-guaranteed debentures with favorable long-term fixed interest rates[18](index=18&type=chunk)[45](index=45&type=chunk) - MSC Adviser I, LLC (External Investment Manager), a wholly-owned subsidiary, provides investment management services to external parties, generating fee income and contributing to MSCC's net investment income[19](index=19&type=chunk)[34](index=34&type=chunk)[40](index=40&type=chunk) External Investment Manager Contribution to Net Investment Income | Year Ended December 31, | Total Contribution (in millions) | | :---------------------- | :------------------------------- | | 2023 | $33.4 | | 2022 | $22.3 | | 2021 | $16.5 | External Investment Manager Fees Earned | Year Ended December 31, | Base Management Fees (in millions) | Incentive Fees (in millions) | Administrative Service Fee Income (in millions) | | :---------------------- | :--------------------------------- | :--------------------------- | :-------------------------------------------- | | 2023 | $22.4 | $13.4 | $0.6 | | 2022 | $21.8 | $2.5 | $0.6 | | 2021 | $17.7 | $0.6 | $0 | - MSCC's investment objective is to maximize total return through current income from debt and equity investments, and capital appreciation from equity, achieved via **LMM, Private Loan, and Middle Market strategies**[26](index=26&type=chunk)[44](index=44&type=chunk) - Business strategies include delivering customized 'one-stop' financing solutions in the LMM, focusing on established companies, leveraging an experienced investment team, diversifying investments, capitalizing on a strong sourcing network, growing asset management, and benefiting from lower, fixed, long-term cost of capital through **SBIC licenses** and **investment-grade ratings**[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - As a BDC, MSCC's asset coverage ratio decreased from **200% to 150%** effective May 3, 2022, providing increased investment flexibility but also higher leverage risks[97](index=97&type=chunk) SBIC Debentures Outstanding | As of December 31, 2023 | Amount (in millions) | Weighted-Average Interest Rate | | :---------------------- | :------------------- | :----------------------------- | | SBA-guaranteed debentures | $350.0 | 3.0% | [ORGANIZATION](index=5&type=section&id=ORGANIZATION) This section details the organizational structure of Main Street Capital Corporation [CORPORATE INFORMATION](index=6&type=section&id=CORPORATE%20INFORMATION) This section provides key corporate details and contact information for the company [OVERVIEW OF OUR BUSINESS](index=6&type=section&id=OVERVIEW%20OF%20OUR%20BUSINESS) This section offers a general description of the company's business model and operations [BUSINESS STRATEGIES](index=9&type=section&id=BUSINESS%20STRATEGIES) This section outlines the core strategies employed by the company to achieve its investment objectives [INVESTMENT CRITERIA](index=10&type=section&id=INVESTMENT%20CRITERIA) This section describes the specific standards and guidelines used for evaluating potential investments [INVESTMENT PORTFOLIO](index=10&type=section&id=INVESTMENT%20PORTFOLIO) This section summarizes the composition and characteristics of the company's investment holdings [INVESTMENT PROCESS](index=12&type=section&id=INVESTMENT%20PROCESS) This section details the systematic approach and stages involved in the company's investment activities [DETERMINATION OF NET ASSET VALUE AND INVESTMENT PORTFOLIO VALUATION PROCESS](index=15&type=section&id=DETERMINATION%20OF%20NET%20ASSET%20VALUE%20AND%20INVESTMENT%20PORTFOLIO%20VALUATION%20PROCESS) This section explains the methodologies used to determine net asset value and value the investment portfolio [COMPETITION](index=17&type=section&id=COMPETITION) This section discusses the competitive landscape and factors influencing the company's market position [HUMAN CAPITAL](index=17&type=section&id=HUMAN%20CAPITAL) This section provides information on the company's workforce, talent management, and related policies [REGULATION](index=18&type=section&id=REGULATION) This section outlines the regulatory framework and compliance requirements governing the company's operations [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) This section details key investment risks: valuation uncertainty, capital management, interest rate sensitivity, competition, LMM/Middle Market company risks, leverage, regulatory constraints, and external factors - The fair value of the investment portfolio, especially for privately held **LMM** and **Private Loan** companies, is subjective and dependent on a valuation process, leading to uncertainty in reported values[143](index=143&type=chunk)[144](index=144&type=chunk) - The company's success relies heavily on its ability to effectively manage and deploy capital, identify investment opportunities, and retain key investment personnel in a competitive environment[145](index=145&type=chunk)[146](index=146&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - Changes in interest rates significantly affect net investment income, as many debt investments and borrowings have floating rates, with rising rates increasing funding costs and declining rates reducing interest income[149](index=149&type=chunk) - Investing in **LMM** and **Middle Market** companies involves significant risks, including limited financial resources, dependence on small management teams, less predictable operating results, and illiquidity of securities[165](index=165&type=chunk)[174](index=174&type=chunk) - Leverage magnifies potential gains and losses, increasing investment risk, where a default on senior securities could lead to asset foreclosure, forced sales, and business impairment[191](index=191&type=chunk)[192](index=192&type=chunk)[196](index=196&type=chunk) - Operating as a **BDC** and **RIC** imposes constraints on investment activities and capital raising, potentially hindering the achievement of investment objectives[210](index=210&type=chunk)[211](index=211&type=chunk) - External factors such as public health crises, supply chain disruptions, and inflation can negatively affect portfolio companies' performance and the company's operating results[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) [Unresolved Staff Comments](index=48&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report for the period - No unresolved staff comments[252](index=252&type=chunk) [Cybersecurity](index=48&type=section&id=Item%201C.%20Cybersecurity) The company maintains a comprehensive Cybersecurity Program, overseen by its IT Manager and Audit Committee, utilizing external advisers, and acknowledges potential material operational impacts from system failures - The Company maintains and routinely reviews its Cybersecurity Program, administered by its IT Manager, overseen by the General Counsel, Chief Compliance Officer, and an IT Steering Committee[253](index=253&type=chunk) - External IT and cybersecurity advisers, consultants, and experts are utilized for system evaluation, periodic testing, and incident response[253](index=253&type=chunk) - Cybersecurity risks are part of the annual enterprise risk management review, with oversight delegated to the Board's Audit Committee, which receives routine reports on the Cybersecurity Program[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk) - The company acknowledges that failures in its or its key service providers' cybersecurity systems could materially impact operating results[254](index=254&type=chunk) [Properties](index=49&type=section&id=Item%202.%20Properties) The company does not own any material real estate or physical properties, operating from leased office space in Houston, Texas - The company does not own any material real estate or physical properties[257](index=257&type=chunk) - Current operations are conducted from leased office space in Houston, Texas[257](index=257&type=chunk) [Legal Proceedings](index=49&type=section&id=Item%203.%20Legal%20Proceedings) The company may be involved in routine litigation, but current proceedings are not expected to materially affect financial condition or operations, though future impacts are not assured - The company may be involved in litigation in the normal course of business[258](index=258&type=chunk) - No current legal proceedings are expected to materially affect financial condition or results of operations, but future impacts cannot be assured[258](index=258&type=chunk) [Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[259](index=259&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer

[PART I FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis of Main Street Capital Corporation [Item 1. Consolidated Financial Statements](index=2&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Main Street Capital Corporation's unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed investment schedules, along with comprehensive explanatory notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%E2%80%94September%2030%2C%202023%20(unaudited)%20and%20December%2031%2C%202022) The consolidated balance sheets detail Main Street Capital Corporation's financial position, showing increased total assets and net assets, and decreased total liabilities Consolidated Balance Sheets (thousands of dollars) | Metric | September 30, 2023 (thousands of dollars) | December 31, 2022 (thousands of dollars) | | :----------------------------- | :---------------------------------------- | :---------------------------------------- | | Total Assets | $4,467,760 | $4,241,885 | | Total Investments at Fair Value | $4,294,722 | $4,102,177 | | Cash and Cash Equivalents | $77,047 | $49,121 | | Total Liabilities | $2,096,953 | $2,133,299 | | Credit Facilities | $493,000 | $607,000 | | Total Net Assets | $2,370,807 | $2,108,586 | | Net Asset Value Per Share | $28.33 | $26.86 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20(unaudited)%E2%80%94Three%20and%20nine%20months%20ended%20September%2030%2C%202023%20and%202022) The statements of operations show a significant increase in net investment income and net increase in net assets resulting from operations for both the three and nine months ended September 30, 2023, compared to the same periods in 2022 Consolidated Statements of Operations (thousands of dollars) | Metric | Three Months Ended Sept 30, 2023 (thousands of dollars) | Three Months Ended Sept 30, 2022 (thousands of dollars) | Nine Months Ended Sept 30, 2023 (thousands of dollars) | Nine Months Ended Sept 30, 2022 (thousands of dollars) | | :--------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | :----------------------------------------------------- | :----------------------------------------------------- | | Total Investment Income | $123,237 | $98,387 | $371,074 | $262,981 | | Net Investment Income | $82,179 | $62,448 | $248,872 | $169,384 | | Net Unrealized Appreciation (Depreciation) | $27,011 | $(10,081) | $167,070 | $(19,922) | | Net Increase in Net Assets from Operations | $103,261 | $55,338 | $289,366 | $135,287 | | Net Investment Income Per Share | $0.99 | $0.83 | $3.07 | $2.31 | [Consolidated Statements of Changes in Net Assets](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets%20(unaudited)%E2%80%94Nine%20months%20ended%20September%2030%2C%202023%20and%202022) The statements show a substantial increase in total net assets from December 31, 2022, to September 30, 2023, primarily driven by the net increase from operations and public offerings of common stock, partially offset by dividends to stockholders Consolidated Statements of Changes in Net Assets (thousands of dollars) | Metric | September 30, 2023 (thousands of dollars) | December 31, 2022 (thousands of dollars) | | :--------------------------------- | :---------------------------------------- | :--------------------------------------- | | Balances at Period End | $2,370,807 | $2,108,586 | | Net Increase Resulting from Operations | $289,366 | $135,287 | | Public Offering of Common Stock, net of offering costs | $165,160 | $194,504 | | Dividends to Stockholders | $(222,283) | $(161,418) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)%E2%80%94Nine%20months%20ended%20September%2030%2C%202023%20and%202022) For the nine months ended September 30, 2023, the company generated significant cash from operating activities, primarily from net increase in net assets and proceeds from investment sales/repayments, which was partially offset by cash used in financing activities Consolidated Statements of Cash Flows (thousands of dollars) | Metric | Nine Months Ended Sept 30, 2023 (thousands of dollars) | Nine Months Ended Sept 30, 2022 (thousands of dollars) | | :------------------------------------ | :----------------------------------------------------- | :----------------------------------------------------- | | Net Cash Provided by Operating Activities | $131,646 | $(257,328) | | Net Cash Provided by (Used in) Financing Activities | $(103,720) | $285,857 | | Dividends Paid | $(197,053) | $(143,075) | | Net Increase in Cash and Cash Equivalents | $27,926 | $28,529 | | Cash and Cash Equivalents at End of Period | $77,047 | $61,158 | [Consolidated Schedule of Investments (September 30, 2023)](index=11&type=section&id=Consolidated%20Schedule%20of%20Investments%20(unaudited)%E2%80%94September%2030%2C%202023) This schedule provides a detailed breakdown of the company's investment portfolio as of September 30, 2023, categorized into Control, Affiliate, and Non-Control/Non-Affiliate investments, with a total fair value of $4,294,722 thousand Investment Portfolio Fair Value (thousands of dollars) | Investment Category | Fair Value (thousands of dollars) | | :------------------------------ | :-------------------------------- | | Control Investments | $1,927,019 | | Affiliate Investments | $565,942 | | Non-Control/Non-Affiliate Investments | $1,801,761 | | Money Market Funds | $37,404 | | **Total Investments** | **$4,294,722** | [Consolidated Schedule of Investments (December 31, 2022)](index=43&type=section&id=Consolidated%20Schedule%20of%20Investments%E2%80%94December%2031%2C%202022) This schedule details the company's investment portfolio as of December 31, 2022, categorized similarly to the September 30, 2023 schedule, with a total fair value of $4,102,177 thousand Investment Portfolio Fair Value (thousands of dollars) | Investment Category | Fair Value (thousands of dollars) | | :------------------------------ | :-------------------------------- | | Control Investments | $1,703,172 | | Affiliate Investments | $618,359 | | Non-Control/Non-Affiliate Investments | $1,780,646 | | **Total Investments** | **$4,102,177** | [Notes to Consolidated Financial Statements](index=74&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations of Main Street's organization, accounting policies, fair value measurements, debt, financial highlights, and other significant financial disclosures [NOTE A — ORGANIZATION AND BASIS OF PRESENTATION](index=74&type=section&id=NOTE%20A%20%E2%80%94%20ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) Main Street Capital Corporation operates as an internally managed Business Development Company, providing debt and equity financing to lower middle market and middle market companies, and is treated as a Regulated Investment Company for tax purposes - Main Street Capital Corporation (MSCC) is an internally managed **Business Development Company (BDC)** focused on providing customized debt and equity financing to **lower middle market (LMM)** and **middle market** companies[155](index=155&type=chunk) - MSCC wholly owns several investment funds, including Main Street Mezzanine Fund, LP and Main Street Capital III, LP, which are licensed as **Small Business Investment Companies (SBICs)**[156](index=156&type=chunk) - MSC Adviser I, LLC (**External Investment Manager**), a wholly-owned subsidiary, provides investment management and other services to external parties and is accounted for as a portfolio investment[157](index=157&type=chunk) - MSCC has elected to be treated as a **Regulated Investment Company (RIC)** for U.S. federal income tax purposes, generally avoiding corporate-level taxes on distributed income[158](index=158&type=chunk) - Investment classifications under the 1940 Act are defined as: **Control Investments** (>25% voting or >50% board), **Affiliate Investments** (5-25% voting, not control), and **Non-Control/Non-Affiliate Investments** (neither control nor affiliate)[165](index=165&type=chunk) [NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=75&type=section&id=NOTE%20B%20%E2%80%94%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Main Street's key accounting policies, including fair value valuation of its investment portfolio, income recognition, and tax treatment, emphasizing the subjective nature of illiquid investment measurements - Main Street accounts for its Investment Portfolio at fair value in accordance with **ASC 820**, which defines fair value and establishes a hierarchy for its measurement[166](index=166&type=chunk) - Valuation methods include the **Waterfall methodology** for LMM equity investments, **Yield-to-Maturity** for LMM/Private Loan debt investments, and **Net Asset Value (NAV)** for Other Portfolio equity investments[171](index=171&type=chunk) - The valuation process is approved by the **Board of Directors** and involves consultation with an **independent financial advisory firm** for LMM and Private Loan portfolio companies[170](index=170&type=chunk)[180](index=180&type=chunk)[182](index=182&type=chunk) - Loans or debt securities are generally placed on **non-accrual status** when 90 days or more past due, or when collectability is not expected[197](index=197&type=chunk) - **Payment-in-Kind (PIK) interest** and **cumulative dividends** are recorded as income, but actual cash collection may be deferred until debt principal repayment or preferred equity redemption/sale[199](index=199&type=chunk) - MSCC maintains **RIC tax treatment**, requiring distribution of taxable income; Taxable Subsidiaries are taxed at corporate rates, generating deferred tax assets and liabilities[215](index=215&type=chunk)[217](index=217&type=chunk) - Main Street early adopted **ASU 2022-03**, 'Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,' as of December 31, 2022, with no material impact[227](index=227&type=chunk) [NOTE C — FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION](index=89&type=section&id=NOTE%20C%20%E2%80%94%20FAIR%20VALUE%20HIERARCHY%20FOR%20INVESTMENTS%E2%80%94PORTFOLIO%20COMPOSITION) This note details the fair value hierarchy for investments, with most portfolio assets categorized as Level 3 due to unobservable inputs, and provides a breakdown of the investment portfolio by strategy, geography, and industry - Main Street categorizes investments into a three-level fair value hierarchy: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs in non-active markets), and **Level 3** (significant unobservable inputs)[230](index=230&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - All LMM, Private Loan, Middle Market, and Other Portfolio investments are categorized as **Level 3** due to illiquidity and reliance on unobservable inputs[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk)[241](index=241&type=chunk) - Significant unobservable inputs for Level 3 valuations include **WACC** and **EBITDA multiples** for equity, and **risk-adjusted discount rates** and **expected principal recovery percentages** for debt[243](index=243&type=chunk)[245](index=245&type=chunk) Fair Value Measurements by Level (thousands of dollars) | Investment Category | September 30, 2023 (Level 3) | December 31, 2022 (Level 3) | | :------------------------------ | :--------------------------- | :-------------------------- | | LMM portfolio investments | $2,190,371 | $2,060,459 | | Private Loan portfolio investments | $1,543,958 | $1,471,466 | | Middle Market portfolio investments | $290,613 | $329,119 | | Other Portfolio investments | $123,649 | $116,299 | | External Investment Manager | $146,131 | $122,930 | | Short-term portfolio investments | — | $1,904 (Level 2) | | **Total Investments** | **$4,294,722** | **$4,102,177** | Investment Portfolio Composition (September 30, 2023 vs. December 31, 2022) | Metric | LMM (Sept 30, 2023) | LMM (Dec 31, 2022) | Private Loan (Sept 30, 2023) | Private Loan (Dec 31, 2022) | Middle Market (Sept 30, 2023) | Middle Market (Dec 31, 2022) | | :------------------------------------ | :------------------ | :----------------- | :--------------------------- | :-------------------------- | :---------------------------- | :--------------------------- | | Number of portfolio companies | 79 | 78 | 89 | 85 | 27 | 31 | | Fair value (millions of dollars) | $2,190.4 | $2,060.5 | $1,544.0 | $1,471.5 | $290.6 | $329.1 | | Cost (millions of dollars) | $1,716.9 | $1,719.9 | $1,577.5 | $1,500.3 | $343.3 | $401.7 | | Debt investments as % of portfolio (at cost) | 71.9% | 73.7% | 96.2% | 97.1% | 92.7% | 93.8% | | Equity investments as % of portfolio (at cost) | 28.1% | 26.3% | 3.8% | 2.9% | 7.3% | 6.2% | | Weighted-average annual effective yield | 12.9% | 12.3% | 12.9% | 11.6% | 12.3% | 11.0% | Total Return on Investments (Annualized) | Period | Return | | :------------------------------------ | :----- | | Three months ended September 30, 2023 | 16.0% | | Three months ended September 30, 2022 | 10.5% | | Nine months ended September 30, 2023 | 15.4% | | Nine months ended September 30, 2022 | 9.6% | | Year ended December 31, 2022 | 11.1% | Investment Portfolio by Type (at Cost) | Type of Investment | September 30, 2023 | December 31, 2022 | | :----------------- | :----------------- | :---------------- | | First lien debt | 83.9% | 85.0% | | Equity | 15.4% | 14.2% | | Second lien debt | 0.3% | 0.3% | | Equity warrants | 0.2% | 0.2% | | Other | 0.2% | 0.3% | | **Total** | **100.0%** | **100.0%** | Investment Portfolio by Type (at Fair Value) | Type of Investment | September 30, 2023 | December 31, 2022 | | :----------------- | :----------------- | :---------------- | | First lien debt | 73.2% | 75.2% | | Equity | 26.0% | 24.1% | | Second lien debt | 0.4% | 0.3% | | Equity warrants | 0.2% | 0.1% | | Other | 0.2% | 0.3% | | **Total** | **100.0%** | **100.0%** | Investment Portfolio by Geographic Region (at Cost) | Region | September 30, 2023 | December 31, 2022 | | :---------------------- | :----------------- | :---------------- | | West | 25.5% | 28.5% | | Northeast | 23.2% | 19.0% | | Southwest | 19.0% | 20.1% | | Midwest | 15.8% | 16.3% | | Southeast | 14.4% | 14.0% | | Other Non-United States | 1.7% | 1.5% | | Canada | 0.4% | 0.6% | | **Total** | **100.0%** | **100.0%** | Investment Portfolio by Geographic Region (at Fair Value) | Region | September 30, 2023 | December 31, 2022 | | :---------------------- | :----------------- | :---------------- | | West | 25.6% | 28.7% | | Northeast | 22.4% | 18.8% | | Southwest | 21.1% | 21.4% | | Midwest | 16.5% | 16.6% | | Southeast | 12.5% | 12.4% | | Other Non-United States | 1.6% | 1.5% | | Canada | 0.3% | 0.6% | | **Total** | **100.0%** | **100.0%** | Investment Portfolio by Industry (at Cost) | Industry | September 30, 2023 | December 31, 2022 | | :---------------------------- | :----------------- | :---------------- | | Internet Software & Services | 8.2% | 8.0% | | Machinery | 7.0% | 7.4% | | Commercial Services & Supplies | 6.2% | 6.7% | | Professional Services | 6.2% | 4.2% | | Construction & Engineering | 5.7% | 5.8% | | Health Care Providers & Services | 5.1% | 4.7% | | IT Services | 4.9% | 3.3% | | Diversified Consumer Services | 4.7% | 4.5% | | Distributors | 4.3% | 5.1% | | Textiles, Apparel & Luxury Goods | 3.2% | 1.9% | | Leisure Equipment & Products | 3.1% | 4.5% | | Energy Equipment & Services | 3.1% | 3.7% | | Tobacco | 3.0% | 3.1% | | Computers & Peripherals | 2.7% | 2.2% | | Media | 2.4% | 2.4% | | Specialty Retail | 2.1% | 3.2% | | Software | 2.0% | 1.9% | | Electrical Equipment | 1.9% | 1.0% | | Building Products | 1.7% | 1.9% | | Aerospace & Defense | 1.7% | 2.3% | | Containers & Packaging | 1.7% | 2.6% | | Diversified Telecommunication Services | 1.6% | 1.9% | | Auto Components | 1.6% | 1.7% | | Food Products | 1.5% | 1.6% | | Electronic Equipment, Instruments & Components | 1.5% | 1.6% | | Communications Equipment | 1.5% | 1.8% | | Diversified Financial Services | 1.4% | 1.5% | | Internet & Catalog Retail | 1.3% | 1.3% | | Health Care Equipment & Supplies | 1.3% | 1.3% | | Food & Staples Retailing | 1.2% | 1.2% | | Hotels, Restaurants & Leisure | 1.1% | 1.1% | | Chemicals | 1.0% | 1.1% | | Household Products | 1.0% | 0.4% | | Other | 3.1% | 3.1% | | **Total** | **100.0%** | **100.0%** | Investment Portfolio by Industry (at Fair Value) | Industry | September 30, 2023 | December 31, 2022 | | :---------------------------- | :----------------- | :---------------- | | Machinery | 8.1% | 8.4% | | Diversified Consumer Services | 7.0% | 6.8% | | Internet Software & Services | 6.8% | 6.8% | | Professional Services | 6.7% | 3.8% | | Construction & Engineering | 5.7% | 5.7% | | Commercial Services & Supplies | 5.1% | 6.1% | | Health Care Providers & Services | 4.8% | 4.3% | | Distributors | 4.6% | 5.5% | | IT Services | 4.5% | 3.1% | | Computers & Peripherals | 4.0% | 3.0% | | Tobacco | 3.2% | 3.4% | | Energy Equipment & Services | 2.8% | 2.7% | | Specialty Retail | 2.7% | 3.5% | | Media | 2.7% | 3.0% | | Leisure Equipment & Products | 2.7% | 4.0% | | Textiles, Apparel & Luxury Goods | 2.6% | 1.8% | | Software | 2.1% | 2.1% | | Electrical Equipment | 2.0% | 1.0% | | Containers & Packaging | 1.9% | 2.8% | | Aerospace & Defense | 1.6% | 2.2% | | Food Products | 1.6% | 1.8% | | Building Products | 1.5% | 1.9% | | Auto Components | 1.5% | 1.6% | | Diversified Telecommunication Services | 1.4% | 1.8% | | Diversified Financial Services | 1.4% | 1.7% | | Internet & Catalog Retail | 1.2% | 1.3% | | Air Freight & Logistics | 1.1% | 0.9% | | Construction Materials | 1.0% | 1.0% | | Health Care Equipment & Supplies | 1.0% | 1.0% | | Chemicals | 0.9% | 1.1% | | Food & Staples Retailing | 0.8% | 1.1% | | Other | 5.0% | 4.8% | | **Total** | **100.0%** | **100.0%** | [NOTE D — EXTERNAL INVESTMENT MANAGER](index=109&type=section&id=NOTE%20D%20%E2%80%94%20EXTERNAL%20INVESTMENT%20MANAGER) The External Investment Manager, a wholly-owned portfolio company, provides investment management and administrative services to external clients, earning management and incentive fees, significantly contributing to Main Street's net investment income - The **External Investment Manager (EIM)** provides investment management and administrative services to external parties, including MSC Income Fund, MS Private Loan Fund I, LP, and MS Private Loan Fund II, LP[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - The EIM earns **asset-based management fees** and **incentive fees** from its advised funds[293](index=293&type=chunk)[294](index=294&type=chunk) - The fair value of the EIM investment is determined using the **Waterfall valuation method** under the market approach, with changes recognized as 'Net Unrealized Appreciation (Depreciation) — Control investments'[296](index=296&type=chunk) EIM Contribution to Net Investment Income (thousands of dollars) | Period | 2023 (thousands of dollars) | 2022 (thousands of dollars) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Three months ended September 30 | $7,600 | $5,000 | | Nine months ended September 30 | $24,200 | $15,200 | EIM Total Revenues (thousands of dollars) | Revenue Type | Nine Months Ended Sept 30, 2023 (thousands of dollars) | Nine Months Ended Sept 30, 2022 (thousands of dollars) | | :------------------------ | :----------------------------------------------------- | :----------------------------------------------------- | | Management fee income | $16,667 | $16,337 | | Incentive fees | $9,594 | $45 | | Administrative services fees | $456 | $458 | | **Total Revenues** | **$26,717** | **$16,840** | [NOTE E — DEBT](index=111&type=section&id=NOTE%20E%20%E2%80%94%20DEBT) This note details Main Street's debt structure, including Credit Facilities, Notes, and SBIC Debentures, providing outstanding balances, recorded values, estimated fair values, and a summary of interest expenses and covenant compliance - The Corporate Facility has total commitments of **$995.0 million**, with **$323.0 million** outstanding as of September 30, 2023, bearing interest at **7.3%** and maturing in August 2027[309](index=309&type=chunk)[313](index=313&type=chunk) - The SPV Facility has total commitments of **$255.0 million**, with **$170.0 million** outstanding as of September 30, 2023, bearing interest at **7.9%** and maturing in November 2027[314](index=314&type=chunk)[315](index=315&type=chunk) - SBIC debentures outstanding totaled **$350.0 million** as of September 30, 2023, with a weighted-average annual interest rate of **3.0%** and the first principal maturity due in 2024[327](index=327&type=chunk) Debt Summary as of September 30, 2023 (thousands of dollars) | Debt Instrument | Outstanding Balance (thousands of dollars) | Recorded Value (thousands of dollars) | Estimated Fair Value (thousands of dollars) | | :-------------------- | :----------------------------------------- | :------------------------------------ | :------------------------------------------ | | Corporate Facility | $323,000 | $323,000 | $323,000 | | SPV Facility | $170,000 | $170,000 | $170,000 | | July 2026 Notes | $500,000 | $498,530 | $442,405 | | May 2024 Notes | $450,000 | $450,318 | $445,406 | | SBIC Debentures | $350,000 | $344,239 | $284,128 | | December 2025 Notes | $150,000 | $148,835 | $150,781 | | **Total Debt** | **$1,943,000** | **$1,934,922** | **$1,815,720** | Interest Expense for Nine Months Ended September 30 (thousands of dollars) | Debt Instrument | 2023 (thousands of dollars) | 2022 (thousands of dollars) | | :-------------------- | :-------------------------- | :-------------------------- | | Corporate Facility | $21,666 | $11,249 | | SPV Facility | $10,605 | — | | July 2026 Notes | $11,645 | $11,645 | | May 2024 Notes | $17,141 | $17,141 | | SBIC Debentures | $8,435 | $8,482 | | December 2025 Notes | $8,673 | — | | December 2022 Notes | — | $6,699 | | **Total Interest Expense** | **$78,165** | **$55,216** | [NOTE F — FINANCIAL HIGHLIGHTS](index=118&type=section&id=NOTE%20F%20%E2%80%94%20FINANCIAL%20HIGHLIGHTS) This note presents key financial highlights, including Net Asset Value per share, net investment income per share, and various financial ratios, showing improved total return metrics for the nine months ended September 30, 2023 Per Share Data for Nine Months Ended September 30 | Metric | 2023 | 2022 | | :-------------------------------------- | :---- | :---- | | NAV at the beginning of the period | $26.86 | $25.29 | | Net investment income | $3.07 | $2.31 | | Net increase in net assets from operations | $3.57 | $1.84 | | NAV at the end of the period | $28.33 | $25.94 | | Market value at the end of the period | $40.63 | $33.64 | Key Financial Ratios for Nine Months Ended September 30 | Metric | 2023 | 2022 | | :-------------------------------------- | :------ | :------ | | Ratio of net investment income to average NAV | 11.18% | 9.03% | | Total investment return | 17.72% | (20.81)% | | Total return based on change in NAV | 13.72% | 7.56% | [NOTE G — DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME](index=119&type=section&id=NOTE%20G%20%E2%80%94%20DIVIDENDS%2C%20DISTRIBUTIONS%20AND%20TAXABLE%20INCOME) Main Street pays regular monthly and supplemental dividends, distributing at least 90% of its taxable income as a RIC to avoid corporate-level taxes, with this note reconciling net assets to taxable income and distributions Dividends Paid (Nine Months Ended September 30) | Dividend Type | 2023 (thousands of dollars) | 2023 (per share) | 2022 (thousands of dollars) | 2022 (per share) | | :------------------ | :-------------------------- | :--------------- | :-------------------------- | :--------------- | | Regular monthly dividends | $164,900 | $2.04 | $141,200 | $1.935 | | Supplemental dividends | $55,300 | $0.675 | $18,500 | $0.25 | Reconciliation of Net Increase in Net Assets to Taxable Income and Distributions (Nine Months Ended September 30, thousands of dollars) | Metric | 2023 (thousands of dollars) | 2022 (thousands of dollars) | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Net increase in net assets from operations | $289,366 | $135,287 | | Estimated taxable income | $221,743 | $164,923 | | Total distributions accrued or paid to common stockholders | $222,283 | $161,418 | Income Tax Provision (Nine Months Ended September 30, thousands of dollars) | Tax Type | 2023 (thousands of dollars) | 2022 (thousands of dollars) | | :-------------------- | :-------------------------- | :-------------------------- | | Total current tax expense | $4,663 | $3,658 | | Total deferred tax expense | $18,690 | $13,819 | | **Total income tax provision** | **$23,353** | **$17,477** | [NOTE H — COMMON STOCK](index=123&type=section&id=NOTE%20H%20%E2%80%94%20COMMON%20STOCK) Main Street utilizes an At-The-Market (ATM) Program for selling common stock, having sold 4,186,856 shares for $166.8 million in gross proceeds during the nine months ended September 30, 2023 - During the nine months ended September 30, 2023, Main Street sold **4,186,856 shares** of common stock under its **ATM Program** at a weighted-average price of **$39.84 per share**, generating **$166.8 million** in gross proceeds and **$165.1 million** in net proceeds[350](index=350&type=chunk) - As of September 30, 2023, **6,275,828 shares** remained available for sale under the ATM Program[350](index=350&type=chunk) [NOTE I — DIVIDEND REINVESTMENT PLAN](index=125&type=section&id=NOTE%20I%20%E2%80%94%20DIVIDEND%20REINVESTMENT%20PLAN) The Dividend Reinvestment Plan allows stockholders to reinvest cash dividends into additional shares of common stock, with $22.8 million in participation and 574,323 shares issued for DRIP during the nine months ended September 30, 2023 DRIP Information (Nine Months Ended September 30) | Metric | 2023 (thousands of dollars) | 2022 (thousands of dollars) | | :---------------- | :-------------------------- | :-------------------------- | | DRIP participation | $22,791 | $16,370 | | Shares issued for DRIP | 574,323 | 410,415 | [NOTE J — SHARE-BASED COMPENSATION](index=125&type=section&id=NOTE%20J%20%E2%80%94%20SHARE-BASED%20COMPENSATION) Main Street accounts for share-based compensation using the fair value method for restricted stock awards granted to employees and non-employee directors, with compensation expense amortized over the vesting period - As of September 30, 2023, total unrecognized compensation expense related to non-vested restricted shares was **$34.4 million**, expected to be recognized over a remaining weighted-average period of **2.7 years**[364](index=364&type=chunk) Share-Based Compensation Expense (thousands of dollars) | Period | 2023 (thousands of dollars) | 2022 (thousands of dollars) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Three months ended September 30 | $4,200 | $3,600 | | Nine months ended September 30 | $12,400 | $10,000 | Restricted Stock Awards (RSAs) Activity (Nine Months Ended September 30, 2023) | Metric | Number of Shares | Weighted-Average Grant-Date Fair Value ($ per share) | | :-------------------------------------- | :--------------- | :--------------------------------------------------- | | Non-vested, December 31, 2022 | 817,401 | $38.78 | | Granted | 551,730 | $39.43 | | Vested | (398,914) | $39.20 | | Forfeited | (11,992) | $40.47 | | Non-vested, September 30, 2023 | 958,225 | $40.48 | | Aggregate intrinsic value (Sept 30, 2023) | — | $38,933 (thousands of dollars) | [NOTE K — COMMITMENTS AND CONTINGENCIES](index=127&type=section&id=NOTE%20K%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) Main Street has outstanding commitments for equity capital and revolving/term loans to portfolio companies, totaling $325.3 million as of September 30, 2023, which it expects to fund through existing liquidity and future capital raises - Main Street expects to fund its unfunded commitments using existing cash, cash equivalents, and borrowings under its **Credit Facilities**[375](index=375&type=chunk) Outstanding Commitments as of September 30, 2023 (thousands of dollars) | Commitment Type | Amount (thousands of dollars) | | :------------------ | :---------------------------- | | Total Equity Commitments | $41,325 | | Total Loan Commitments | $284,020 | | **Total Commitments** | **$325,345** | [NOTE L — RELATED PARTY TRANSACTIONS](index=135&type=section&id=NOTE%20L%20%E2%80%94%20RELATED%20PARTY%20TRANSACTIONS) Main Street engages in various related party transactions, including investments in clients of its External Investment Manager, co-investments with advised funds, and a deferred compensation plan for directors and employees - As of September 30, 2023, Main Street had a **$9.4 million** receivable from the External Investment Manager, including operating expenses and declared but unpaid dividends[380](index=380&type=chunk) - Main Street owned **814,379 shares** of MSC Income Fund as of September 30, 2023, following several purchases[382](index=382&type=chunk) - Main Street committed up to **$15.0 million** to MS Private Loan Fund I, LP, having funded **$14.3 million** with **$0.7 million** unfunded as of September 30, 2023[383](index=383&type=chunk) - Main Street committed up to **$15.0 million** to MS Private Loan Fund II, LP, having funded **$1.2 million** with **$6.5 million** unfunded as of September 30, 2023[387](index=387&type=chunk) - Main Street provided MS Private Loan Fund II, LP with a **$50.0 million** revolving line of credit, with **$11.0 million** outstanding as of September 30, 2023[388](index=388&type=chunk) - As of September 30, 2023, **$18.9 million** of compensation was deferred under the **2015 Deferred Compensation Plan**, including **$7.1 million** in phantom Main Street stock units and **$11.8 million** in funded investments within a rabbi trust[390](index=390&type=chunk)[391](index=391&type=chunk) [NOTE M — SUBSEQUENT EVENTS](index=137&type=section&id=NOTE%20M%20%E2%80%94%20SUBSEQUENT%20EVENTS) Subsequent to September 30, 2023, Main Street expanded its SPV Facility commitments, declared a supplemental cash dividend for December 2023, and increased regular monthly dividends for Q1 2024 - In October 2023, Main Street expanded its total commitments under the **SPV Facility** from **$255.0 million** to **$430.0 million**[392](index=392&type=chunk) - A supplemental cash dividend of **$0.275 per share** was declared in October 2023, payable in December 2023[393](index=393&type=chunk) - Regular monthly dividends of **$0.24 per share** were declared for January, February, and March 2024, totaling **$0.72 per share** for Q1 2024, representing a **6.7% increase** from Q1 2023[394](index=394&type=chunk)[541](index=541&type=chunk)[542](index=542&type=chunk) [Consolidated Schedules of Investments in and Advances to Affiliates](index=138&type=section&id=Consolidated%20Schedules%20of%20Investments%20in%20and%20Advances%20to%20Affiliates%20(unaudited)%E2%80%94September%2030%2C%202023%20and%202022) These schedules provide detailed breakdowns of investments in and advances to affiliates, categorized by Control and Affiliate investments, showing realized and unrealized gains/losses, income credited, and fair value for September 30, 2023, and 2022 Total Control Investments (thousands of dollars) | Metric | September 30, 2023 (thousands of dollars) | September 30, 2022 (thousands of dollars) | | :------------------ | :---------------------------------------- | :---------------------------------------- | | Realized Gain/(Loss) | $(50,532) | $(5,822) | | Unrealized Gain/(Loss) | $122,779 | $20,618 | | Income Credited | $145,485 | $110,751 | | Fair Value | $1,927,019 | $1,599,429 | Total Affiliate Investments (thousands of dollars) | Metric | September 30, 2023 (thousands of dollars) | September 30, 2022 (thousands of dollars) | | :------------------ | :---------------------------------------- | :---------------------------------------- | | Realized Gain/(Loss) | $(16,495) | $1,340 | | Unrealized Gain/(Loss) | $26,859 | $3,703 | | Income Credited | $53,722 | $38,300 | | Fair Value | $565,942 | $552,581 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=155&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Main Street's financial condition, operating results, investment portfolio, asset quality, and liquidity for the periods ended September 30, 2023 and 2022 - Main Street's principal investment objective is to maximize total return by generating **current income** from debt investments and **capital appreciation** from equity and equity-related investments in LMM and Middle Market companies[437](index=437&type=chunk) - The company operates with an **internally managed structure**, which is believed to provide better alignment of interests with shareholders and a beneficial operating expense structure compared to externally managed firms[447](index=447&type=chunk) Operating Expenses as a Percentage of Average Total Assets | Metric | Trailing 12 months ended Sept 30, 2023 | Trailing 12 months ended Sept 30, 2022 | Year ended Dec 31, 2022 | | :-------------------------------------- | :------------------------------------- | :------------------------------------- | :---------------------- | | Total operating expenses (excluding interest) | 1.4% | 1.4% | 1.4% | | Total operating expenses (including interest) | 3.7% | 3.3% | 3.3% | External Investment Manager Contribution to Net Investment Income (thousands of dollars) | Period | 2023 (thousands of dollars) | 2022 (thousands of dollars) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Three months ended September 30 | $7,600 | $5,000 | | Nine months ended September 30 | $24,200 | $15,200 | - The valuation of the Investment Portfolio is considered a **critical accounting estimate** due to the significant judgments and subjective measurements required for illiquid investments[464](index=464&type=chunk) Comparison of Results of Operations (Three Months Ended September 30, thousands of dollars) | Metric | 2023 (thousands of dollars) | 2022 (thousands of dollars) | Net Change (Amount, thousands of dollars) | Net Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :---------------------------------------- | :------------- | | Total investment income | $123,237 | $98,387 | $24,850 | 25% | | Total expenses | $(41,058) | $(35,939) | $(5,119) | 14% | | Net investment income | $82,179 | $62,448 | $19,731 | 32% | | Net realized gain from investments | $664 | $5,031 | $(4,367) | NM | | Net unrealized appreciation (depreciation) from investments | $27,011 | $(10,081) | $37,092 | NM | | Income tax provision | $(6,593) | $(2,060) | $(4,533) | NM | | Net increase in net assets from operations | $103,261 | $55,338 | $47,923 | 87% | Comparison of Results of Operations (Nine Months Ended September 30, thousands of dollars) | Metric | 2023 (thousands of dollars) | 2022 (thousands of dollars) | Net Change (Amount, thousands of dollars) | Net Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :---------------------------------------- | :------------- | | Total investment income | $371,074 | $262,981 | $108,093 | 41% | | Total expenses | $(122,202) | $(93,597) | $(28,605) | 31% | | Net investment income | $248,872 | $169,384 | $79,488 | 47% | | Net realized gain (loss) from investments | $(103,223) | $3,302 | $(106,525) | NM | | Net unrealized appreciation (depreciation) from investments | $167,070 | $(19,922) | $186,992 | NM | | Income tax provision | $(23,353) | $(17,477) | $(5,876) | NM | | Net increase in net assets from operations | $289,366 | $135,287 | $154,079 | 114% | - As of September 30, 2023, cash and cash equivalents totaled **$77.0 million**, with **$757.0 million** of unused capacity under Credit Facilities[517](index=517&type=chunk) - The BDC asset coverage ratio was **248%** as of September 30, 2023, exceeding the required minimum of **150%**[529](index=529&type=chunk) - Portfolio companies have experienced increasing impacts of **inflation** on operating results, potentially affecting debt service, defaults, and fair value of investments[532](index=532&type=chunk) Contractual Obligations as of September 30, 2023 (thousands of dollars) | Obligation | Total (thousands of dollars) | | :------------------------- | :--------------------------- | | July 2026 Notes | $500,000 | | Interest due on July 2026 Notes | $45,000 | | May 2024 Notes | $450,000 | | Interest due on May 2024 Notes | $23,400 | | SBIC debentures | $350,000 | | Interest due on SBIC debentures | $47,484 | | December 2025 Notes | $150,000 | | Interest due on December 2025 Notes | $29,045 | | Operating Lease Obligation | $12,293 | | **Total** | **$1,607,222** | - Subsequent to September 30, 2023, Main Street expanded its **SPV Facility** commitments from **$255.0 million** to **$430.0 million**, declared a supplemental cash dividend of **$0.275 per share** for December 2023, and increased regular monthly dividends for Q1 2024 to **$0.24 per share** (total **$0.72/share**)[539](index=539&type=chunk)[540](index=540&type=chunk)[541](index=541&type=chunk)[542](index=542&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=178&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Main Street is exposed to market risks, primarily interest rate risk, affecting both interest income from investments and interest expense on debt, with most debt investments having floating rates and most debt obligations being fixed rate - Main Street is subject to financial market risks, including changes in **interest rates**, which affect both interest expense on debt and interest income from portfolio investments[543](index=543&type=chunk) - As of September 30, 2023, **70%** of the debt Investment Portfolio (at cost) bore **floating rates**, with **91%** of these subject to contractual minimum interest rates[544](index=544&type=chunk) - As of September 30, 2023, **75%** of Main Street's debt obligations bore **fixed rates**[544](index=544&type=chunk) - Main Street had not entered into any **interest rate hedging arrangements** as of September 30, 2023[544](index=544&type=chunk) Annualized Net Investment Income Sensitivity to Hypothetical Base Rate Changes (as of September 30, 2023, thousands of dollars, except per share amounts) | Basis Point Change | Net Investment Income (thousands of dollars) | Net Investment Income per Share | | :----------------- | :----------------------------------------- | :------------------------------ | | (200) | $(32,003) | $(0.38) | | (100) | $(16,001) | $(0.19) | | 100 | $16,001 | $0.19 | | 200 | $32,003 | $0.38 | [Item 4. Controls and Procedures](index=178&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures as of September 30, 2023, concluding they are effective, with no material changes to internal control over financial reporting during the quarter - An evaluation of the effectiveness of **disclosure controls and procedures** was carried out as of September 30, 2023, and management concluded they are effective[548](index=548&type=chunk) - There have been **no material changes** in internal control over financial reporting during the quarter ended September 30, 2023[548](index=548&type=chunk) [PART II OTHER INFORMATION](index=180&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, other disclosures, and exhibits [Item 1. Legal Proceedings](index=180&type=section&id=Item%201.%20Legal%20Proceedings) Main Street may be involved in litigation in the normal course of business but does not expect any current matters to materially affect its financial condition or results of operations - Main Street does not expect any current legal proceedings to materially affect its financial condition or results of operations[550](index=550&type=chunk) [Item 1A. Risk Factors](index=180&type=section&id=Item%201A.%20Risk%20Factors) There are no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year ended December 31, 2022, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 - There are **no material changes** to the risk factors as previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023[553](index=553&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=180&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended September 30, 2023, Main Street issued 200,150 shares of common stock under its dividend reinvestment plan, totaling $8.1 million, which were not subject to registration requirements - During the three months ended September 30, 2023, **200,150 shares** of common stock were issued under the **dividend reinvestment plan**, with an aggregate value of **$8.1 million**, not subject to registration requirements[554](index=554&type=chunk) - Shares were withheld to meet applicable tax withholding requirements upon vesting of restricted stock awarded under the employee equity compensation plan[555](index=555&type=chunk) [Item 5. Other Information](index=180&type=section&id=Item%205.%20Other%20Information) Main Street terminated its equity distribution agreement with Comerica Securities, Inc. for the ATM Program, with other sales agents continuing, and no insider trading arrangements were adopted or terminated during the quarter - The equity distribution agreement with Comerica Securities, Inc. for the **ATM Program** was terminated effective November 3, 2023[556](index=556&type=chunk) - No contract, instruction, or written plan for the purchase or sale of securities under **Exchange Act Rule 10b5-1(c)** or any 'non-Rule 10b5-1 trading arrangement' was adopted or terminated during the fiscal quarter ended September 30, 2023[557](index=557&type=chunk) [Item 6. Exhibits](index=181&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the report, including lender joinder agreements, certifications from executive officers, and financial information formatted in iXBRL - Exhibits filed include **Lender Joinder Agreements** (10.1, 10.2), **Certifications of Chief Executive Officer and Chief Financial Officer** (31.1, 31.2, 32.1, 32.2), and financial information formatted in **Inline Extensible Business Reporting Language (iXBRL)** (101, 104)[558](index=558&type=chunk) [Signatures](index=182&type=section&id=Signatures) The report is duly signed on behalf of Main Street Capital Corporation by its Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, and Chief Accounting Officer on November 3, 2023 - The report was signed by **Dwayne L. Hyzak** (Chief Executive Officer), **Jesse E. Morris** (Chief Financial Officer and Chief Operating Officer), and **Ryan R. Nelson** (Chief Accounting Officer)[561](index=561&type=chunk) - The report was signed on **November 3, 2023**[561](index=561&type=chunk)

(2) As of June 30, 2023, MAIN's Credit Facilities had $1.2 billion in total commitments; MAIN's Credit Facilities include accordion features which could increase total commitments up to $1.8 billion; in August 2023, MAIN expanded its total commitments under the Corporate Facility (as defined on page 42) by $15.0 million from $980.0 million to $995.0 million (3) Includes $500.0 million of July 2026 Notes, $450.0 million of May 2024 Notes, and $150.0 million of December 2025 Notes MAIN Executive Management Te ...

Financial Data and Key Metrics Changes - The company reported a return on equity of 19.2% for the second quarter, with new quarterly records for net investment income (NII) per share, distributable net investment income (DNII) per share, and net asset value (NAV) per share for the fourth consecutive quarter [18][21][79] - Total investment income increased by $42.4 million or 50% year-over-year, reaching $127.6 million, with strong performance across all income components [27] - DNII per share for the quarter was a record $1.12, an increase of $0.34 or 30% year-over-year, exceeding total dividends paid by 24% [79][155] Business Line Data and Key Metrics Changes - The lower middle market portfolio represented 52% of total assets at fair value, exceeding the company's target, while the middle market portfolio was reduced to 7% [143] - The company completed $168 million in total private loan investments, resulting in a net decrease of $11 million in the private loan portfolio due to repayments and realized losses [26][156] - The lower middle market investment pipeline was characterized as average, with a mix of follow-on investments in existing portfolio companies and new platform opportunities [42][64] Market Data and Key Metrics Changes - Interest income increased by $33.3 million or 52% year-over-year, driven by rising benchmark interest rates and growth in debt investments [75] - Interest expense rose by $9.5 million over the prior year, primarily due to higher benchmark rates and new debt obligations [76] - The company maintained a conservative leverage ratio of 0.75, slightly below its target range, indicating a cautious approach in the current economic environment [149] Company Strategy and Development Direction - The company aims to grow its lower middle market portfolio to over 50% of total assets, with a long-term goal of reaching 55-60% [3][119] - The strategic shift towards private loans is driven by the belief in a favorable direct lending environment and the potential for better risk-adjusted returns compared to middle market investments [47][142] - The company plans to continue focusing on the lower middle market and private loan strategies, with expectations for continued strong performance in these areas [138][142] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate current economic uncertainties and maintain strong performance in the third quarter [30][80] - The company anticipates continued strong performance from its lower middle market portfolio, with expectations for fair value appreciation and dividend income contributions [138][124] - Management highlighted the importance of maintaining a conservative capital structure and strong liquidity to capitalize on future investment opportunities [32][53] Other Important Information - The board declared a supplemental dividend of $0.275 per share for September 2023, marking the eighth consecutive quarterly supplemental dividend [157] - The company recorded net fair value appreciation of $29.4 million in its investment portfolio, with significant contributions from lower middle market investments [77][148] - The company expects to propose additional supplemental dividends in the future, contingent on continued favorable performance [158] Q&A Session Summary Question: Can you provide insights on the lower middle market pipeline? - Management indicated that the pipeline is characterized as average, with a consistent amount of follow-on investment opportunities in existing portfolio companies [63][64] Question: Why is the company maintaining a conservative leverage ratio? - Management explained that the conservative approach is intentional, reflecting a cautious stance in the current economic environment despite strong performance [66][68] Question: What are the trends in EBITDA growth among portfolio companies? - Management noted that performance is more company-specific than industry-specific, with some companies performing exceptionally well [122][124] Question: How does the company view future supplemental dividends? - Management expressed confidence in continuing to declare supplemental dividends as long as DNII significantly exceeds regular dividends and NAV remains stable or positive [158]

Table of contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 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) (State or other ...

Main Street Capital (NYSE:MAIN) Q1 2023 Earnings Conference Call May 5, 2023 10:00 AM ET Company Participants Zach Vaughan - Vice President, Dennard Lascar Investor Relations Dwayne Hyzak - Chief Executive Officer David Magdol - President, Chief Investment Officer Jesse Morris - Chief Financial Officer, Chief Operating Officer Nick Meserve - Managing Director, Head of Private Credit Investment Group Conference Call Participants Robert Dodd - Raymond James Bryce Rowe - B. Riley Kenneth Lee - RBC Mark Hughes ...

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) For the quarterly period ended March 31, 2023 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) (State or other ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Main Street Capital Corporation is an internally managed BDC providing debt and equity financing to LMM and Middle Market companies, focused on maximizing total portfolio return - MSCC is a principal investment firm focused on providing customized debt and equity financing to **Lower Middle Market (LMM)** companies and debt capital to **Middle Market** companies[16](index=16&type=chunk) - As an **internally managed BDC**, MSCC avoids external advisory fees, resulting in a beneficial operating expense structure, with a **1.4%** ratio of total operating expenses (excluding interest) to quarterly average total assets in 2022[17](index=17&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - MSCC's wholly-owned subsidiary, MSC Adviser I, LLC (the "**External Investment Manager**"), contributed **$22.3 million** to MSCC's net investment income in 2022 by providing investment management services to third parties[19](index=19&type=chunk)[42](index=42&type=chunk) - The company has elected to be treated as a **Regulated Investment Company (RIC)** for tax purposes, generally avoiding corporate-level federal income taxes on distributed income[20](index=20&type=chunk) - Through its licensed **Small Business Investment Company (SBIC)** subsidiaries, MSCC accesses low-cost, long-term leverage from SBA-guaranteed debentures, with **$350.0 million** outstanding at a weighted-average interest rate of **2.9%** as of year-end 2022[18](index=18&type=chunk)[117](index=117&type=chunk) [Organization](index=5&type=section&id=ORGANIZATION) MSCC operates as an internally managed BDC, owning SBIC funds and an external investment manager, and is taxed as a RIC - MSCC operates as an **internally managed BDC**, directly employing its executive officers and staff, thus avoiding external advisory fees[17](index=17&type=chunk) - The company wholly owns two funds licensed as **SBICs** by the SBA: Main Street Mezzanine Fund, LP (MSMF) and Main Street Capital III, LP (MSC III)[18](index=18&type=chunk) - MSC Adviser I, LLC is a wholly-owned subsidiary acting as an **External Investment Manager** for third parties, accounted for as a portfolio investment rather than a consolidated subsidiary[19](index=19&type=chunk)[26](index=26&type=chunk) - MSCC utilizes wholly-owned **Taxable Subsidiaries** to hold equity investments in pass-through entities and **Structured Subsidiaries** for financing purposes, all consolidated in its financial statements[21](index=21&type=chunk)[22](index=22&type=chunk) [Overview of Our Business](index=6&type=section&id=OVERVIEW%20OF%20OUR%20BUSINESS) The company maximizes total portfolio return through LMM, Private Loan, and Middle Market strategies, benefiting from an internally managed structure and external asset management fee income Investment Strategy Focus | Strategy | Target Company Annual Revenue | Typical Investment Size | | :--- | :--- | :--- | | Lower Middle Market (LMM) | $10 million - $150 million | $5 million - $75 million | | Private Loan | Consistent with LMM/Middle Market | $10 million - $75 million | | Middle Market | $150 million - $1.5 billion | $3 million - $25 million | Operating Expense Ratios | Expense Ratio (as a % of quarterly average total assets) | 2022 | 2021 | | :--- | :--- | :--- | | Total operating expenses (excluding interest) | 1.4% | 1.5% | | Total operating expenses (including interest) | 3.3% | 3.4% | External Investment Manager Contribution to Net Investment Income | Year | Contribution (in millions) | | :--- | :--- | | 2022 | $22.3 | | 2021 | $16.5 | | 2020 | $9.9 | - The company has an SEC exemptive order permitting co-investments with funds advised by its **External Investment Manager**, such as MSC Income and the Private Loan Fund[44](index=44&type=chunk) [Business Strategies](index=9&type=section&id=BUSINESS%20STRATEGIES) Main Street's strategy focuses on maximizing total portfolio return by offering customized financing to LMM companies, growing asset management, and leveraging low-cost capital - Offer customized "**one-stop**" debt and equity financing solutions to LMM portfolio companies[46](index=46&type=chunk) - Focus on established companies with proven management teams, positive cash flow, and defensible market positions[46](index=46&type=chunk) - Leverage an extensive network for proprietary deal flow and grow the external asset management business to diversify income[46](index=46&type=chunk) - Utilize low-cost, long-term capital from SBIC licenses (SBA-guaranteed debentures) and investment-grade ratings to maintain a competitive cost of capital[46](index=46&type=chunk) [Investment Criteria](index=10&type=section&id=INVESTMENT%20CRITERIA) The company evaluates prospective portfolio companies based on management quality, financial performance, competitive advantages, and clear exit strategies - Management teams should be operationally-oriented, have direct industry experience, and hold a meaningful equity stake in the company[49](index=49&type=chunk) - Targets established companies with sound historical financial performance, typically with **EBITDA of $3 million to $20 million** for LMM investments[49](index=49&type=chunk) - Focuses on companies with competitive advantages and/or operating in industries with barriers to entry[49](index=49&type=chunk) - Seeks clear exit alternatives, primarily through repayment from cash flow, refinancing, strategic acquisition, or recapitalization[49](index=49&type=chunk) [Investment Portfolio](index=10&type=section&id=INVESTMENT%20PORTFOLIO) The investment portfolio primarily consists of first-lien secured debt in LMM, Private Loan, and Middle Market companies, complemented by equity investments for capital appreciation - LMM debt investments are generally first-lien, single tranche loans with **5-7 year terms** and interest rates between **10% and 14%**[48](index=48&type=chunk)[50](index=50&type=chunk) - Private Loan and Middle Market debt investments are also typically first-lien secured loans with **3-7 year terms** and floating interest rates[52](index=52&type=chunk)[53](index=53&type=chunk) - In connection with LMM debt, the company often receives equity warrants or makes direct equity investments, targeting a **5% to 50%** fully diluted equity position[54](index=54&type=chunk)[56](index=56&type=chunk) [Investment Process](index=12&type=section&id=INVESTMENT%20PROCESS) The company employs a seven-stage investment process, from deal generation and due diligence to post-investment monitoring and exit, managed by its investment committee - The investment process is managed by an internal investment committee and follows seven stages: Deal Generation, Screening, Term Sheet, Due Diligence, Document and Close, Post-Investment, and Exit/Refinancing[58](index=58&type=chunk) - Due diligence for LMM investments is comprehensive, including site visits, financial reviews, and interviews with customers and suppliers; Private Loan and Middle Market due diligence relies more on external resources and internal assessment[63](index=63&type=chunk) - Post-investment, the company actively monitors its portfolio companies, offering managerial assistance and often taking board representation or observation rights in its LMM investments[69](index=69&type=chunk)[70](index=70&type=chunk) - An internally developed rating system is used to monitor the performance and expected returns of each portfolio company[72](index=72&type=chunk) [Determination of Net Asset Value and Investment Portfolio Valuation Process](index=15&type=section&id=DETERMINATION%20OF%20NET%20ASSET%20VALUE%20AND%20INVESTMENT%20PORTFOLIO%20VALUATION%20PROCESS) The company determines its NAV quarterly, with the illiquid investment portfolio valuation being the most significant estimate, following ASC 820 and SEC Rule 2a-5 - NAV is determined quarterly, and the valuation of the investment portfolio is the most significant estimate in the financial statements[74](index=74&type=chunk)[75](index=75&type=chunk) - The valuation process adheres to **ASC 820** and **SEC Rule 2a-5**, with the Board designating an executive group as the Valuation Committee[75](index=75&type=chunk)[80](index=80&type=chunk) - The quarterly valuation process is a multi-step procedure involving an internal valuation team, the investment team, the Valuation Committee, and rotational review by an independent financial advisory firm[81](index=81&type=chunk) [Human Capital](index=17&type=section&id=HUMAN%20CAPITAL) Main Street's success relies on attracting and retaining talent through competitive compensation, development opportunities, and a diverse, inclusive culture - The company emphasizes attracting, developing, and retaining employees through competitive compensation, benefits, and a strong corporate culture[84](index=84&type=chunk)[87](index=87&type=chunk) - As of December 31, 2022, Main Street had **91 employees**, including **53 investment and portfolio management professionals**[91](index=91&type=chunk) - Maintains initiatives to promote a diverse and inclusive work environment, including a **Women's Initiative** and a **Community Building Committee**[87](index=87&type=chunk)[88](index=88&type=chunk) [Regulation](index=18&type=section&id=REGULATION) Main Street is subject to comprehensive regulation as a BDC, including asset composition and leverage limits, and as a RIC, requiring specific income and distribution tests - As a BDC, the company must maintain at least **70%** of its assets in "**qualifying assets**," primarily securities of private or thinly traded U.S. companies[94](index=94&type=chunk) - Effective May 3, 2022, the company's required asset coverage ratio was reduced from **200% to 150%**, allowing for increased leverage[98](index=98&type=chunk) - Its SBIC funds are regulated by the SBA, which provides access to up to **$350 million** in SBA-guaranteed debentures but imposes specific investment and operational restrictions[110](index=110&type=chunk)[112](index=112&type=chunk)[117](index=117&type=chunk) - To maintain its RIC status, the company must meet a **90% income test**, asset diversification tests, and distribute at least **90%** of its investment company taxable income annually[123](index=123&type=chunk)[126](index=126&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) Investing in the company involves significant risks related to business operations, investment performance, leverage, regulatory compliance, and general market conditions - **Business and Structure Risks**: The portfolio is recorded at fair value, which involves subjective estimates; the company's success depends on its ability to manage and deploy capital, attract and retain key personnel, and navigate increasing competition[137](index=137&type=chunk)[143](index=143&type=chunk)[154](index=154&type=chunk) - **Investment Risks**: Investments in LMM companies carry significant risks, including limited financial resources and lack of liquidity; economic downturns, rising interest rates, and inflation could impair portfolio companies' performance and lead to defaults[139](index=139&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk) - **Leverage Risks**: The use of borrowed money magnifies the potential for both gains and losses; a decline in asset value would cause NAV to decline more sharply, and default on debt obligations could lead to foreclosure on assets[140](index=140&type=chunk)[189](index=189&type=chunk)[196](index=196&type=chunk) - **Regulatory and Tax Risks**: Failure to comply with BDC regulations could reduce operating flexibility; failure to meet RIC qualification requirements would subject the company to corporate-level income tax, substantially reducing net assets and income available for distribution[140](index=140&type=chunk)[209](index=209&type=chunk)[234](index=234&type=chunk) - **General Risks**: Events outside of the company's control, such as public health crises, supply chain disruptions, inflation, and capital market instability, could negatively affect portfolio companies and overall operations[145](index=145&type=chunk)[242](index=242&type=chunk)[244](index=244&type=chunk) [Unresolved Staff Comments](index=47&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - None[256](index=256&type=chunk) [Properties](index=47&type=section&id=Item%202.%20Properties) The company does not own any real estate or other material physical properties, leasing its corporate headquarters in Houston, Texas - The company leases its corporate headquarters in Houston, Texas and does not own any material real estate[257](index=257&type=chunk) [Legal Proceedings](index=47&type=section&id=Item%203.%20Legal%20Proceedings) The company may be involved in litigation in the normal course of business but does not expect any current legal matters to materially affect its financial condition or results of operations - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition or results of operations[258](index=258&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[259](index=259&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=48&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Main Street's common stock trades on the NYSE, consistently at a premium to NAV, with a dividend reinvestment plan, and has significantly outperformed market indices since its IPO Common Stock Price Range and Premium to NAV (2022) | Quarter | NAV per Share | High Price | Low Price | Premium of High to NAV | Premium of Low to NAV | | :--- | :--- | :--- | :--- | :--- | :--- | | Q1 2022 | $25.89 | $44.88 | $39.94 | 73% | 54% | | Q2 2022 | $25.37 | $43.65 | $34.59 | 72% | 36% | | Q3 2022 | $25.94 | $45.28 | $33.23 | 75% | 28% | | Q4 2022 | $26.86 | $39.50 | $32.57 | 47% | 21% | - The company has a dividend reinvestment plan (DRIP) where stockholder dividends are automatically reinvested into additional shares unless they opt out[269](index=269&type=chunk) - During 2022, **625,196 shares** of common stock were issued under the DRIP, with an aggregate value of **$24.1 million**[270](index=270&type=chunk) - The stock performance graph indicates that Main Street's total return since its IPO has substantially exceeded that of major market indices, including the **S&P 500** and the **S&P BDC Index**[273](index=273&type=chunk)[274](index=274&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, Main Street experienced significant growth in investment income and NII, despite a net realized loss and lower unrealized appreciation, maintaining strong liquidity Key Financial Results Comparison (2022 vs. 2021) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Investment Income | $376.9M | $289.0M | 30% | | Net Investment Income (NII) | $245.3M | $182.7M | 34% | | Distributable NII | $257.5M | $194.7M | 32% | | NII per Share | $3.29 | $2.65 | 24% | | Distributable NII per Share | $3.46 | $2.82 | 23% | | Net Realized Gain (Loss) | ($5.2M) | $45.3M | NM | | Net Unrealized Appreciation | $24.8M | $135.6M | NM | - The increase in interest income was primarily due to higher average levels of debt investments and higher floating interest rates[307](index=307&type=chunk) - Total expenses increased by **24%** to **$131.5 million**, mainly due to higher interest expense from increased borrowings and higher compensation costs[309](index=309&type=chunk)[310](index=310&type=chunk) - As of December 31, 2022, the company had **$49.1 million** in cash and **$568.0 million** of unused capacity under its credit facilities[330](index=330&type=chunk) [Investment Portfolio Summary](index=52&type=section&id=INVESTMENT%20PORTFOLIO%20SUMMARY) As of December 31, 2022, the company's investment portfolio grew across LMM, Private Loan, and Middle Market segments, with increased weighted-average effective yields reflecting rising interest rates Portfolio Summary as of December 31, 2022 | Portfolio | of Companies | Fair Value (M) | Cost (M) | Wtd-Avg Yield | | :--- | :--- | :--- | :--- | :--- | | LMM | 78 | $2,060.5 | $1,719.9 | 12.3% | | Private Loan | 85 | $1,471.5 | $1,500.3 | 11.6% | | Middle Market | 31 | $329.1 | $401.7 | 11.0% | Portfolio Summary as of December 31, 2021 | Portfolio | of Companies | Fair Value (M) | Cost (M) | Wtd-Avg Yield | | :--- | :--- | :--- | :--- | :--- | | LMM | 73 | $1,716.4 | $1,455.7 | 11.2% | | Private Loan | 75 | $1,141.8 | $1,157.5 | 8.2% | | Middle Market | 36 | $395.2 | $440.9 | 7.5% | - The investment in the External Investment Manager had a fair value of **$122.9 million** as of December 31, 2022, down from **$140.4 million** at year-end 2021[285](index=285&type=chunk) [Critical Accounting Policies](index=53&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) The company's critical accounting policies involve significant judgment, particularly in the valuation of its investment portfolio at fair value and the recognition of interest and dividend income - The valuation of the Investment Portfolio is the most significant accounting estimate, representing **97%** of total assets, determined at fair value following **ASC 820** and **SEC Rule 2a-5**[289](index=289&type=chunk)[291](index=291&type=chunk) - Interest and dividend income are recorded on an accrual basis; loans are generally placed on non-accrual status when **90 days or more past due** and collectability is doubtful[292](index=292&type=chunk) - The company recognizes non-cash income from Payment-in-Kind (PIK) interest and cumulative dividends, which comprised **1.4%** and **0.5%** of total investment income in 2022, respectively[295](index=295&type=chunk) [Investment Portfolio Composition](index=55&type=section&id=INVESTMENT%20PORTFOLIO%20COMPOSITION) The combined LMM, Private Loan, and Middle Market portfolios are predominantly composed of first-lien debt, with equity investments making up a significant portion at fair value due to unrealized appreciation Portfolio Composition by Investment Type (at Cost) | Investment Type | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | First lien debt | 85.0% | 82.5% | | Equity | 14.2% | 16.2% | | Second lien debt | 0.3% | 0.6% | | Other | 0.5% | 0.7% | Portfolio Composition by Investment Type (at Fair Value) | Investment Type | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | First lien debt | 75.2% | 74.3% | | Equity | 24.1% | 24.6% | | Second lien debt | 0.3% | 0.5% | | Other | 0.4% | 0.6% | [Portfolio Asset Quality](index=56&type=section&id=PORTFOLIO%20ASSET%20QUALITY) The company monitors portfolio asset quality using an internal rating system, with a slight increase in non-accrual investments by number, though a decrease as a percentage of fair value Non-Accrual Investments | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Number of Investments | 12 | 9 | | % of Portfolio (at Fair Value) | 0.6% | 0.7% | | % of Portfolio (at Cost) | 3.7% | 3.3% | [Discussion and Analysis of Results of Operations](index=57&type=section&id=DISCUSSION%20AND%20ANALYSIS%20OF%20RESULTS%20OF%20OPERATIONS) For 2022, total investment income and net investment income significantly increased due to higher interest income, while net realized and unrealized gains decreased, leading to a lower net increase in net assets Results of Operations (Year Ended Dec 31) | (in thousands) | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Total investment income | $376,860 | $289,047 | $87,813 | | Total expenses | ($131,533) | ($106,382) | ($25,151) | | Net investment income | $245,327 | $182,665 | $62,662 | | Net realized gain (loss) | ($5,212) | $45,336 | ($50,548) | | Net unrealized appreciation | $24,816 | $135,624 | ($110,808) | | Net increase in net assets | $241,606 | $330,762 | ($89,156) | - The **30%** increase in total investment income was driven by a **47%** rise in interest income, partially offset by a **6%** decrease in dividend income[306](index=306&type=chunk)[307](index=307&type=chunk) - The **24%** increase in total expenses was primarily due to a **33%** increase in interest expense and a **15%** increase in cash compensation[309](index=309&type=chunk)[310](index=310&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) In 2022, financing activities provided significant cash, primarily from credit facilities and equity offerings, while operating activities used cash for investments, maintaining strong liquidity and a healthy asset coverage ratio - Net cash provided by financing activities was **$263.4 million** in 2022, while net cash used in operating activities was **$246.9 million**[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) - As of December 31, 2022, liquidity consisted of **$49.1 million** in cash and **$568.0 million** of unused capacity under its Credit Facilities[330](index=330&type=chunk) - In 2022, the company raised **$212.4 million** in gross proceeds from its at-the-market (ATM) equity program and **$55.1 million** from a public equity offering[338](index=338&type=chunk)[339](index=339&type=chunk) - The company's BDC asset coverage ratio was **227%** as of December 31, 2022, well above the required **150%**[345](index=345&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risk primarily from interest rate changes, with a majority of its debt investments at floating rates and debt obligations at fixed rates, leading to a positive sensitivity to rising rates - As of December 31, 2022, **73%** of the debt investment portfolio (at cost) had floating interest rates, while **70%** of the company's debt obligations had fixed interest rates[361](index=361&type=chunk) Interest Rate Sensitivity Analysis (as of Dec 31, 2022) | Basis Point Change | Change in Net Investment Income (in thousands) | Change in NII per Share | | :--- | :--- | :--- | | +200 | $33,681 | $0.43 | | +100 | $16,755 | $0.21 | | -100 | ($17,098) | ($0.22) | | -200 | ($34,024) | ($0.43) | [Consolidated Financial Statements and Supplementary Data](index=68&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2022, including balance sheets, statements of operations, cash flows, and detailed notes, with an unqualified audit opinion - The independent auditor, Grant Thornton LLP, issued an **unqualified opinion** on the financial statements and on the effectiveness of the company's internal control over financial reporting[369](index=369&type=chunk)[370](index=370&type=chunk)[380](index=380&type=chunk) - The critical audit matter identified was the fair value of **Level 3 investments**, due to the significant management judgments and estimation uncertainty involved in their valuation[374](index=374&type=chunk) [Consolidated Financial Statements](index=69&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $4.24 billion and net assets of $2.11 billion as of December 31, 2022, with total investment income of $376.9 million and a net increase in net assets of $241.6 million for the year Consolidated Balance Sheet Highlights (as of Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Total Investments (Fair Value) | $4,102,177 | $3,561,831 | | Total Assets | $4,241,885 | $3,694,802 | | Total Liabilities | $2,133,299 | $1,905,956 | | Total Net Assets | $2,108,586 | $1,788,846 | | NAV per Share | $26.86 | $25.29 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Investment Income | $376,860 | $289,047 | $222,614 | | Net Investment Income | $245,327 | $182,665 | $137,945 | | Net Increase in Net Assets | $241,606 | $330,762 | $29,383 | [Notes to Consolidated Financial Statements](index=131&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail critical accounting policies, particularly the valuation of Level 3 investments, portfolio composition, debt structure, dividend policy, unfunded commitments, and related party transactions - As of December 31, 2022, **$4.10 billion** of the **$4.102 billion** investment portfolio was categorized as **Level 3** in the fair value hierarchy, indicating reliance on unobservable inputs[615](index=615&type=chunk) - The External Investment Manager contributed **$22.3 million** to Main Street's net investment income in 2022 through a combination of allocated expenses and dividend income[654](index=654&type=chunk) - Total debt outstanding as of December 31, 2022, was **$2.007 billion**, consisting of SBIC debentures, credit facilities, and three series of unsecured notes[658](index=658&type=chunk) - As of December 31, 2022, the company had **$274.4 million** in outstanding unfunded commitments, primarily for revolving loans and equity capital[742](index=742&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=198&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[798](index=798&type=chunk) [Controls and Procedures](index=198&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes reported - Management concluded that disclosure controls and procedures were effective as of the end of the period[799](index=799&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, which was attested to by the independent auditor[800](index=800&type=chunk)[801](index=801&type=chunk) [Other Information](index=198&type=section&id=Item%209B.%20Other%20Information) This section provides updated annual expense estimates, totaling 8.92% of net assets, and announces a new Vice President, Chief Accounting Officer, and Assistant Treasurer appointment Annual Expenses (as a % of net assets) | Expense Category | Percentage | | :--- | :--- | | Operating expenses | 3.14% | | Interest payments on borrowed funds | 4.41% | | Income tax expense | 1.11% | | Acquired fund fees and expenses | 0.26% | | **Total annual expenses** | **8.92%** | - On February 21, 2023, the Board appointed Ryan R. Nelson as Vice President, Chief Accounting Officer, and Assistant Treasurer, effective March 13, 2023[810](index=810&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=200&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[814](index=814&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=200&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the 2023 Proxy Statement[816](index=816&type=chunk) [Executive Compensation](index=201&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive and director compensation, including the Compensation Discussion and Analysis, is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the 2023 Proxy Statement[818](index=818&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=201&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of December 31, 2022, over 5.2 million securities were available for future issuance under approved equity compensation plans, with additional securities under unapproved plans Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be Issued Upon Exercise | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | | Approved by security holders | — | 5,281,165 | | Not approved by security holders | 165,248 | — | | **Total** | **165,248** | **5,281,165** | [Certain Relationships and Related Transactions, and Director Independence](index=201&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning related party transactions and director independence is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the 2023 Proxy Statement[820](index=820&type=chunk) [Principal Accountant Fees and Services](index=201&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 Proxy Statement - Information is incorporated by reference from the 2023 Proxy Statement[821](index=821&type=chunk) Part IV [Exhibits and Consolidated Financial Statement Schedules](index=202&type=section&id=Item%2015.%20Exhibits%20and%20Consolidated%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Annual Report, including financial statements, schedules, and a comprehensive index of exhibits - This section contains the index to the Consolidated Financial Statements and the Schedule of Investments in and Advances to Affiliates[823](index=823&type=chunk)[824](index=824&type=chunk) - A comprehensive list of exhibits is provided, including corporate governance documents, debt indentures, credit agreements, equity incentive plans, and required certifications[824](index=824&type=chunk)[825](index=825&type=chunk)[826](index=826&type=chunk)

Main Street Capital (NYSE:MAIN) Q4 2022 Earnings Conference Call February 24, 2023 10:00 AM ET Company Participants Zach Vaughan - Dennard Lascar-Investor Relations Dwayne Hyzak - Chief Executive Officer David Magdol - President & Chief Investment Officer Jesse Morris - EVP, Chief Financial Officer & Chief Operating Officer Nick Meserve - Managing Director & Head-Private Credit Investment Group Conference Call Participants Robert Dodd - Raymond James Bryce Rowe - B. Riley Kenneth Lee - RBC Capital Markets M ...

CAPITAL CORPORATION Investor Presentation Third Quarter – 2022 Main Street Capital Corporation NYSE: MAIN mainstcapital.com Main Street Capital Corporation NYSE: MAIN mainstcapital.com www.mainstcapital.com Page 1 Disclaimers Main Street Capital Corporation (MAIN) cautions that statements in this presentation that are forward-looking, and provide other than historical information, involve risks and uncertainties that may impact our future results of operations. The forward-looking statements in this present ...