Main Street Capital CORP

Previous wording

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

Current wording

Main Street Capital Corporation (“MSCC” or, together with its consolidated subsidiaries, “Main Street” or the “Company”) is a principal investment firm primarily focused on providing customized long-term debt and equity capital solutions to lower middle market (“LMM”) companies (its “LMM investment strategy”) and debt capital to private (“Private Loan”) companies owned by or in the process of being acquired by a private equity fund (its “Private Loan investment strategy”). Main Street’s portfolio investments are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. Main Street seeks to partner with entrepreneurs, business owners and management teams and generally provides “one-stop” debt and equity financing solutions within its LMM investment strategy. Main Street invests primarily in secured debt investments, equity investments, warrants and other securities of LMM companies typically based in the United States. Main Street also seeks to partner with private equity fund sponsors in its Private Loan investment strategy and primarily invests in secured debt investments of Private Loan companies generally headquartered in the United States.

Previous wording

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

Current wording

Exchange Commission (“SEC”) to allow the External Investment Manager to register as a registered investment adviser under the Investment Advisers Act of 1940, as amended. Since the External Investment Manager conducts all of its investment management activities for External Parties, it is accounted for as a portfolio investment of Main Street and is not included as a consolidated subsidiary in Main Street’s consolidated financial statements.

Previous wording

Our principal investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and current income and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. We seek to achieve our investment objective through our LMM and Private Loan (as defined below) investment strategies. Our LMM investment strategy involves investments in companies that generally have annual revenues between $10 million and $150 million and our LMM portfolio investments generally range in size from $5 million to $100 million. Our private loan (“Private Loan”) investment strategy involves investments in companies that are generally consistent with the size of the companies in our LMM and Middle Market investment strategies, and our Private Loan investments generally range in size from $10 million to $100 million. Our Middle Market investment strategy involves investments in companies that are generally larger in size than our LMM companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $25 million.

Current wording

Our principal investment objective is to maximize our investment portfolio’s total return by generating current income from our debt investments and current income and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. We seek to achieve our investment objective through our LMM and Private Loan investment strategies. Our LMM investment strategy involves investments in companies that generally have annual revenues between $10 million and $150 million and annual earnings before interest, tax, depreciation and amortization expenses (“EBITDA”) between $3 million and $20 million. Our LMM portfolio investments generally range in size from $5 million to $125 million. Our Private Loan investment strategy involves investments in companies that generally have annual revenues between $25 million and $500 million and annual EBITDA between $7.5 million and $50 million. Our Private Loan investments generally range in size from $10 million to $100 million.

Previous wording

We seek to fill the financing gap for LMM businesses, which, historically, have had limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participation. Our ability to invest across a company’s capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a “one-stop” financing solution. Providing customized, “one-stop” financing solutions is important to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date.

Current wording

We seek to fill the financing gap for LMM businesses, which, historically, have had limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participation. Our ability to invest across a company’s capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a “one-stop” financing solution. We believe that providing customized, “one-stop” financing solutions is important and valuable to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our LMM investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date.

Previous wording

Private Loan investments primarily consist of debt securities that have primarily been originated directly by us or, to a lesser extent, through our strategic relationships with other investment funds on a collaborative basis through investments that are often referred to in the debt markets as “club deals” because of the small lender group size. Our Private Loan investments are typically made to a company owned by or in the process of being acquired by a private equity sponsor. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. We may also co-invest with the private equity sponsors in the equity securities of our Private Loan portfolio companies.

Current wording

Private Loan investments primarily consist of debt securities that have primarily been originated directly by us or, to a lesser extent, through our strategic relationships with other investment funds on a collaborative basis through investments that are often referred to in the debt markets as “club deals” because of the small lender group size. Our Private Loan investments are typically made in a company owned by or in the process of being acquired by a private equity fund. Our Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. We may also co-invest with the private equity fund in the equity securities of our Private Loan portfolio companies.

Previous wording

Subject to changes in our cash and overall liquidity, our Investment Portfolio (as defined below) may also include short-term portfolio investments that are atypical of our LMM, Private Loan and Middle Market portfolio investments in that they are intended to be a short-term deployment of capital. These assets are typically expected to be liquidated in one year or less and are not expected to be a significant portion of the overall Investment Portfolio. The “Investment Portfolio,” as used herein, refers to all of our investments in LMM companies (including both our LMM and Private Loan portfolio investments) and investments in Middle Market companies (including both our Private Loan and Middle Market portfolio investments), Other Portfolio investments, short-term portfolio investments and our investment in the External Investment Manager.

Current wording

Subject to changes in our cash and overall liquidity, our Investment Portfolio (as defined below) may also include short-term portfolio investments that are atypical of our LMM, Private Loan and Middle Market portfolio investments in that they are intended to be a short-term deployment of capital. These assets are typically expected to be liquidated in one year or less and are not expected to be a significant portion of our overall Investment Portfolio. The “Investment Portfolio,” as used herein, refers to all of our LMM portfolio investments, Private Loan portfolio investments, Middle Market portfolio investments, Other Portfolio investments, short-term portfolio investments and our investment in the External Investment Manager.

Previous wording

Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a better alignment of interests between our management team and our employees and our shareholders and a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio and our External Investment Manager’s asset management business (as defined below). The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.3% and 1.4% for the trailing twelve months ended June 30, 2024 and 2023, respectively, and 1.3% for the year ended December 31, 2023. The ratio of our total operating expenses, including interest expense, as a percentage of our quarterly average total assets was 3.6% and 3.7% for the trailing twelve months ended June 30, 2024 and 2023, respectively, and 3.7% for the year ended December 31, 2023. Our ratio of expenses as a percentage of our average net asset value is described in greater detail in Note F – Financial Highlights to the consolidated financial statements included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Current wording

Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a better alignment of interests between our management team and our employees and our shareholders and a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio and our External Investment Manager’s asset management business (as defined below). The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.3% and 1.4% for the trailing twelve months ended September 30, 2024 and 2023, respectively, and 1.3% for the year ended December 31, 2023. The ratio of our total operating expenses, including interest expense, as a percentage of our quarterly average total assets was 3.7% for each of the trailing twelve months ended September 30, 2024 and 2023 and for the year ended December 31, 2023. Our ratio of expenses as a percentage of our average net asset value is described in greater detail in Note F – Financial Highlights to the consolidated financial statements included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Previous wording

Additionally, the External Investment Manager has entered into investment management agreements with MS Private Loan Fund I, LP (the “Private Loan Fund”) and MS Private Loan Fund II, LP (the “Private Loan Fund II”), each a private investment fund with a strategy to co-invest with Main Street in Private Loan portfolio investments, pursuant to which the External Investment Manager provides investment advisory and management services to each fund in exchange for an asset-based fee and certain incentive fees. The External Investment Manager may also advise other clients, including funds and separately managed accounts, pursuant to advisory and services agreements with such clients in exchange for asset-based and incentive fees.

Current wording

Additionally, the External Investment Manager has entered into investment management agreements with MS Private Loan Fund I, LP (the “Private Loan Fund”) and MS Private Loan Fund II, LP (the “Private Loan Fund II”), each a private investment fund with a strategy to co-invest with Main Street in Private Loan portfolio investments, pursuant to which the External Investment Manager provides investment advisory and management services to each fund in exchange for an asset-based base management fee and certain incentive fees. The External Investment Manager may also advise other clients, including funds and separately managed accounts, pursuant to advisory and services agreements with such clients in exchange for asset-based and incentive fees.

Previous wording

The External Investment Manager earns management fees based on the assets of the funds and accounts under management and may earn incentive fees, or a carried interest, based on the performance of the funds and accounts managed. For the three months ended June 30, 2024 and 2023, the External Investment Manager earned $5.9 million and $5.5 million in base management fees, respectively, $4.1 million and $3.7 million in incentive fees, respectively, and $0.2 million of administrative service fee income for each of the three months ended June 30, 2024 and 2023. For the six months ended June 30, 2024 and 2023, the External Investment Manager earned $11.6 million and $11.0 million in base management fees, respectively, $8.0 million and $7.0 million in incentive fees, respectively, and $0.3 million of administrative service fee income for each of the six months ended June 30, 2024 and 2023.

Current wording

The External Investment Manager earns management fees based on the assets of the funds and accounts under management and may earn incentive fees, or a carried interest, based on the performance of the funds and accounts managed. For the three months ended September 30, 2024 and 2023, the External Investment Manager earned $6.1 million and $5.7 million in base management fees, respectively, $2.4 million and $2.6 million in incentive fees, respectively, and $0.2 million of administrative service fee income for each of the three months ended September 30, 2024 and 2023. For the nine months ended September 30, 2024 and 2023, the External Investment Manager earned $17.7 million and $16.7 million in base management fees, respectively, $10.4 million and $9.6 million in incentive fees, respectively, and $0.5 million of administrative service fee income for each of the nine months ended September 30, 2024 and 2023.

Previous wording

We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with MSC Income and its other clients. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended June 30, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $5.9 million and $5.7 million, respectively. Our total expenses for the six months ended June 30, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $11.4 million and $10.7 million, respectively.

Current wording

We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with MSC Income and its other clients. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended September 30, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $5.3 million and $5.4 million, respectively. Our total expenses for the nine months ended September 30, 2024 and 2023 are net of expenses allocated to the External Investment Manager of $16.8 million and $16.1 million, respectively.

Previous wording

The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income earned from the External Investment Manager. For the three months ended June 30, 2024 and 2023, dividends accrued by us from the External Investment Manager were $3.3 million and $2.9 million, respectively. For the three months ended June 30, 2024 and 2023, the total contribution of the External Investment Manager to our net investment income was $9.2 million and $8.5 million, respectively. For the six months ended June 30, 2024 and 2023, dividends accrued by us from the External Investment Manager were $6.3 million and $5.9 million, respectively. For the six months ended June 30, 2024 and 2023, the total contribution of the External Investment Manager to our net investment income was $17.8 million and $16.6 million, respectively.

Current wording

The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and the dividend income earned from the External Investment Manager. For the three months ended September 30, 2024 and 2023, dividends accrued by us from the External Investment Manager were $2.6 million and $2.2 million, respectively. For the three months ended September 30, 2024 and 2023, the total contribution of the External Investment Manager to our net investment income was $7.9 million and $7.6 million, respectively. For the nine months ended September 30, 2024 and 2023, dividends accrued by us from the External Investment Manager were $8.9 million and $8.1 million, respectively. For the nine months ended September 30, 2024 and 2023, the total contribution of the External Investment Manager to our net investment income was $25.6 million and $24.2 million, respectively.

Previous wording

(a)At June 30, 2024, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 39%.

Current wording

(a)As of September 30, 2024, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 39%.

Previous wording

(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of June 30, 2024, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on our debt portfolio as of June 30, 2024 including debt investments on non-accrual status was 12.5% for our LMM portfolio, 12.4% for our Private Loan portfolio and 11.0% for our Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.

Current wording

(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2024, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on our debt portfolio as of September 30, 2024 including debt investments on non-accrual status was 12.3% for our LMM portfolio, 12.0% for our Private Loan portfolio and 10.6% for our Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.

Previous wording

(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and Middle Market portfolios. These calculations exclude certain portfolio companies, including four LMM portfolio companies, four Private Loan portfolio companies and three Middle Market portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

Current wording

(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Private Loan and Middle Market portfolios. These calculations exclude certain portfolio companies, including four LMM portfolio companies, five Private Loan portfolio companies and two Middle Market portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate and those portfolio companies whose primary operations have ceased and only residual value remains.

Previous wording

(a)At December 31, 2023, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 40%.

Current wording

(a)As of December 31, 2023, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 40%.

Previous wording

For the three months ended June 30, 2024 and 2023, we achieved an annualized total return on investments of 15.7% and 16.7%, respectively. For the six months ended June 30, 2024 and 2023, we achieved an annualized total return on investments of 16.2% and 15.1%, respectively. For the year ended December 31, 2023, we achieved a total return on investments of 16.3%. Total return on investments is calculated using the interest, dividend and fee income, as well as the realized and unrealized change in fair value of the Investment Portfolio for the specified period. Our total return on investments is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.

Current wording

For the three months ended September 30, 2024 and 2023, we achieved an annualized total return on investments of 17.7% and 16.0%, respectively. For the nine months ended September 30, 2024 and 2023, we achieved an annualized total return on investments of 16.7% and 15.4%, respectively. For the year ended December 31, 2023, we achieved a total return on investments of 16.3%. Total return on investments is calculated using the interest, dividend and fee income, as well as the realized and unrealized change in fair value of the Investment Portfolio for the specified period. Our total return on investments is not reflective of what an investor in shares of our common stock will realize on its investment because it does not reflect changes in the market value of our stock, our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.

Previous wording

As of June 30, 2024, we had Other Portfolio investments in 14 entities, collectively totaling $179.5 million in fair value and $175.0 million in cost basis and which comprised 3.8% and 4.3% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, we had Other Portfolio investments in 15 entities, collectively totaling $142.0 million in fair value and $149.1 million in cost basis and which comprised 3.3% and 4.0% of our Investment Portfolio at fair value and cost, respectively.

Current wording

As of September 30, 2024, we had Other Portfolio investments in 14 entities, collectively totaling $162.4 million in fair value and $155.8 million in cost basis and which comprised 3.3% and 3.7% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, we had Other Portfolio investments in 15 entities, collectively totaling $142.0 million in fair value and $149.1 million in cost basis and which comprised 3.3% and 4.0% of our Investment Portfolio at fair value and cost, respectively.

Previous wording

As previously discussed, the External Investment Manager is a wholly-owned subsidiary that is treated as a portfolio investment. As of June 30, 2024, this investment had a fair value of $186.6 million and a cost basis of $29.5 million, which comprised 3.9% and 0.7% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, this investment had a fair value of $174.1 million and a cost basis of $29.5 million, which comprised 4.1% and 0.8% of our Investment Portfolio at fair value and cost, respectively.

Current wording

As previously discussed, the External Investment Manager is a wholly-owned subsidiary that is treated as a portfolio investment. As of September 30, 2024, this investment had a fair value of $218.4 million and a cost basis of $29.5 million, which comprised 4.4% and 0.7% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2023, this investment had a fair value of $174.1 million and a cost basis of $29.5 million, which comprised 4.1% and 0.8% of our Investment Portfolio at fair value and cost, respectively.

Previous wording

We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.10. — Summary of Significant Accounting Policies — Income Taxes included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended June 30, 2024 and 2023, 3.7% and 1.8%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash. For the three months ended June 30, 2024 and 2023, 0.5% and 0.2%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the six months ended June 30, 2024 and 2023, 3.5% and 2.1%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash. For the six months ended June 30, 2024 and 2023, 0.4% and 0.3% of our total investment income was attributable to cumulative dividend income not paid currently in cash.

Current wording

We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.10. — Summary of Significant Accounting Policies — Income Taxes included in Item 1. Consolidated Financial Statements of this Quarterly Report on Form 10-Q), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2024 and 2023, (i) 4.4% and 1.9%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) 0.5% and 0.3%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2024 and 2023, (i) 3.8% and 2.0%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) 0.4% and 0.3%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.

Previous wording

As of June 30, 2024, investments on non-accrual status comprised 1.2% of our total Investment Portfolio at fair value and 3.6% at cost. As of December 31, 2023, investments on non-accrual status comprised 0.6% of our total Investment Portfolio at fair value and 2.3% at cost.

Current wording

As of September 30, 2024, investments on non-accrual status comprised 1.4% of our total Investment Portfolio at fair value and 3.9% at cost. As of December 31, 2023, investments on non-accrual status comprised 0.6% of our total Investment Portfolio at fair value and 2.3% at cost.

Previous wording

(a)The increase in interest income was primarily due to (i) higher average levels of income producing Investment Portfolio debt investments and (ii) an increase in interest rates on floating rate Investment Portfolio debt investments primarily resulting from increases in benchmark index rates, partially offset by an increase in non-accrual investments.

Current wording

(a)The increase in interest income was primarily due to higher average levels of income producing Investment Portfolio debt investments, partially offset by (i) an increase in investments on non-accrual status and (ii) a decrease in interest rates on floating rate Investment Portfolio debt investments primarily resulting from decreases in benchmark index rates.

Previous wording

(c)The increase in total investment income includes a net reduction of $3.4 million in the impact of certain income considered less consistent or non-recurring, including a $6.8 million decrease in such dividend income, partially offset by a $3.4 million increase in accelerated prepayment, repricing and other activity related to certain Investment Portfolio debt investments.

Current wording

(c)The increase in total investment income includes a net increase of $1.6 million in certain income considered less consistent or non-recurring, including (i) a $1.7 million increase in such interest income from accelerated prepayment, repricing and other activity related to certain Investment Portfolio debt investments and (ii) a $0.3 million increase in such dividend income, partially offset by a $0.4 million decrease in such fee income.

Previous wording

(a)The decrease in cash compensation expense was primarily related to decreased incentive compensation accruals, partially offset by (i) increased headcount to support our growing Investment Portfolio and asset management activities and (ii) increased base compensation rates.

Current wording

(a)The decrease in cash compensation expenses was primarily related to decreased incentive compensation accruals, partially offset by (i) increased base compensation rates and (ii) increased headcount to support our growing Investment Portfolio and asset management activities.

Previous wording

(c)The increase in interest expense is primarily related to (i) an increased weighted average interest rate on our debt obligations resulting from the issuance of the March 2029 Notes and the June 2027 Notes, combined with the repayment of the May 2024 Notes (each as defined in the Liquidity and Capital Resources section below) and (ii) an increased average interest rate on our Credit Facilities due to increases in benchmark index rates.

Current wording

(b)The increase in interest expense was primarily related to (i) an increased weighted-average interest rate on our debt obligations resulting from the issuance of the March 2029 Notes and the June 2027 Notes and the repayment at maturity of the May 2024 Notes (each as defined in the Liquidity and Capital Resources section below) and (ii) an increase in average borrowings outstanding used to fund a portion of the growth of our Investment Portfolio.

Previous wording

(d)Share-based compensation increased $0.8 million in the second quarter of 2024 from the comparable period of the prior year, principally attributable to an increase in incentive based grants related to incentive compensation awards issued in April 2024.

Current wording

(c)The increase in share-based compensation expense was primarily attributable to an increase in incentive based grants related to incentive compensation awards issued in April 2024.

Previous wording

Net investment income for the three months ended June 30, 2024 increased 2% to $87.3 million, or $1.01 per share, compared to net investment income of $85.7 million, or $1.06 per share, in the corresponding period of 2023. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses, both as discussed above. The decrease in net investment income per share also reflects the impact of the increase in weighted average shares outstanding for the three months ended June 30, 2024, primarily due to shares issued since the beginning of the prior year through our (i) at-the-market program (“ATM Program”), (ii) dividend reinvestment plan and (iii) equity incentive plans. The decrease in net investment income on a per share basis includes a $0.02 per share decrease in investment income considered less consistent or non-recurring in nature.

Current wording

Net investment income for the three months ended September 30, 2024 increased 7% to $87.6 million, or $1.00 per share, compared to net investment income of $82.2 million, or $0.99 per share, in the corresponding period of 2023. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses, both as discussed above. The increase in net investment income per share also reflects the impact of the increase in weighted-average shares outstanding for the three months ended September 30, 2024, primarily due to shares issued since the beginning of the comparable period of the prior year through our (i) at-the-market program (“ATM Program”), (ii) dividend reinvestment plan and (iii) equity incentive plans. The increase in net investment income on a per share basis includes a $0.02 per share increase in investment income and a $0.01 per share increase in non-cash deferred compensation expenses, in both cases considered less consistent or non-recurring in nature.

Previous wording

Distributable net investment income for the three months ended June 30, 2024 increased 2% to $92.3 million, or $1.07 per share, compared with $90.3 million, or $1.12 per share, in the corresponding period of 2023. The increase in distributable net investment income was primarily due to the increased level of total investment income, partially offset by higher operating expenses, excluding the impact of share-based compensation expense and deferred compensation expense, both as discussed above. The decrease in distributable net investment income per share reflects the impact of the increase in weighted average shares outstanding for the three months ended June 30, 2024, as discussed above. The decrease in distributable net investment income on a per share basis includes a $0.02 per share decrease in investment income considered less consistent or non-recurring in nature.

Current wording

Distributable net investment income for the three months ended September 30, 2024 increased 8% to $93.0 million, or $1.06 per share, compared with $86.2 million, or $1.04 per share, in the corresponding period of 2023. The increase in distributable net investment income was primarily due to the increased level of total investment income, partially offset by higher operating expenses, excluding the impact of share-based compensation expense and deferred compensation expense, both as discussed above. The increase in distributable net investment income per share reflects the impact of the increase in weighted-average shares outstanding for the three months ended September 30, 2024, as discussed above. The increase in distributable net investment income on a per share basis includes a $0.02 per share increase in investment income considered less consistent or non-recurring in nature.

Previous wording

The following table provides a summary of the primary components of the total net realized gain on investments of $3.4 million for the three months ended June 30, 2024.

Current wording

The following table provides a summary of the primary components of the total net realized gain on investments of $26.4 million for the three months ended September 30, 2024.

Previous wording

(a)Other activity includes realized gains and losses from transactions involving 16 portfolio companies which are not considered to be significant individually or in the aggregate.

Current wording

(a)Other activity includes realized gains and losses from transactions involving 18 portfolio companies which are not considered to be significant individually or in the aggregate.

Previous wording

The following table provides a summary of the total net unrealized appreciation of $23.0 million for the three months ended June 30, 2024.

Current wording

The following table provides a summary of the total net unrealized appreciation of $21.7 million for the three months ended September 30, 2024.

Previous wording

(a)Includes unrealized appreciation on 33 LMM portfolio investments and unrealized depreciation on 26 LMM portfolio investments.

Current wording

(a)Includes unrealized appreciation on 39 LMM portfolio investments and unrealized depreciation on 20 LMM portfolio investments.

Previous wording

(b)Includes (i) $6.1 million of net unrealized appreciation related to the Other Portfolio, (ii) $1.3 million of unrealized appreciation related to the External Investment Manager and (iii) $0.1 million of net unrealized appreciation related to the assets of the deferred compensation plan.

Current wording

(b)Includes (i) $31.8 million of unrealized appreciation related to the External Investment Manager, (ii) $2.3 million of net unrealized appreciation related to the Other Portfolio and (iii) $0.5 million of net unrealized appreciation related to the assets of the deferred compensation plan.

Previous wording

The income tax provision for the three months ended June 30, 2024 of $11.1 million principally consisted of (i) a deferred tax provision of $9.5 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences and (ii) a current tax provision of $1.6 million, related to a $1.3 million provision for current U.S. federal and state income taxes and a $0.3 million provision for excise tax on our estimated undistributed taxable income.

Current wording

The income tax provision for the three months ended September 30, 2024 of $11.7 million principally consisted of (i) a deferred tax provision of $9.3 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences and (ii) a current tax provision of $2.5 million, related to a $2.0 million provision for current U.S. federal and state income taxes and a $0.5 million provision for excise tax on our estimated undistributed taxable income.

Previous wording

The net increase in net assets resulting from operations for the three months ended June 30, 2024 was $102.7 million, or $1.19 per share, compared with $106.5 million, or $1.32 per share, during the three months ended June 30, 2023. The tables above provide a summary of the reasons for the change in net increase in net assets resulting from operations for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Current wording

The net increase in net assets resulting from operations for the three months ended September 30, 2024 was $124.0 million, or $1.42 per share, compared with $103.3 million, or $1.25 per share, during the three months ended September 30, 2023. The tables above provide a summary of the reasons for the change in net increase in net assets resulting from operations for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Previous wording

Set forth below is a comparison of the results of operations, and a reconciliation of net investment income to distributable net investment income, for the six months ended June 30, 2024 and 2023.

Current wording

Set forth below is a comparison of the results of operations, and a reconciliation of net investment income to distributable net investment income, for the nine months ended September 30, 2024 and 2023.

Previous wording

(a)The increase in interest income was primarily due to (i) higher average levels of income producing Investment Portfolio debt investments and (ii) an increase in interest rates on floating rate Investment Portfolio debt investments primarily resulting from increases in benchmark index rates, partially offset by an increase in non-accrual investments.

Current wording

(a)The increase in interest income was primarily due to (i) higher average levels of income producing Investment Portfolio debt investments and (ii) an increase in interest rates on floating rate Investment Portfolio debt investments primarily resulting from increases in benchmark index rates, partially offset by an increase in investments on non-accrual status.

Previous wording

(b)The increase in dividend income from Investment Portfolio equity investments was primarily a result of (i) an increase of $1.0 million in dividend income from certain of our LMM portfolio companies and (ii) an increase of $0.5 million in dividend income from the External Investment Manager, partially offset by a decrease of $0.5 million in dividend income from certain of our Private Loan portfolio companies. The increase includes a $1.6 million decrease in dividend income considered less consistent or non-recurring.

Current wording

(b)The increase in dividend income from Investment Portfolio equity investments was primarily a result of (i) an increase of $1.3 million in dividend income from certain of our LMM portfolio companies and (ii) an increase of $0.8 million in dividend income from the External Investment Manager, partially offset by a decrease $0.6 million in dividend income from certain of our Private Loan portfolio companies.

Previous wording

(b)The increase in fee income was primarily related to (i) a $3.7 million increase from refinancing and prepayment of debt investments and (ii) a $2.9 million increase in fees related to increased investment activity.

Current wording

(c)The increase in fee income was primarily related to (i) a $4.0 million increase in fees related to increased investment activity and (ii) a $3.1 million increase from refinancing and prepayment of debt investments.

Previous wording

(b)The increase in general and administrative expense was primarily attributable to an increase in business development activities, professional fees and technology costs.

Current wording

(a)The increase in general and administrative expense was primarily attributable to an increase in business development activities, professional fees and technology costs.

Previous wording

(c)The increase in interest expense was primarily related to (i) an increased weighted average interest rate on our debt obligations resulting from the issuance of the March 2029 Notes and the June 2027 Notes, combined with the repayment of the May 2024 Notes (each as defined in the Liquidity and Capital Resources section below) and (ii) an increased average interest rate on our floating rate multi-year revolving credit facility (the “Corporate Facility”) and special purpose vehicle revolving credit facility (the “SPV Facility” and, together with the Corporate Facility, the “Credit Facilities”) due to increases in benchmark index rates.

Current wording

(b)The increase in interest expense was primarily related to (i) an increased weighted-average interest rate on our debt obligations resulting from the issuance of the March 2029 Notes and the June 2027 Notes and the repayment at maturity of the May 2024 Notes (each as defined in the Liquidity and Capital Resources section below), (ii) an increase in average borrowings outstanding used to fund a portion of the growth of our Investment Portfolio and (iii) an increased average interest rate on our floating rate multi-year revolving credit facility (the “Corporate Facility”) and special purpose vehicle revolving credit facility (the “SPV Facility” and, together with the Corporate Facility, the “Credit Facilities”) due to increases in benchmark index rates.