Main Street Capital CORP

Previous 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.

Current 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.

Previous 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.

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 primarily 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

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.

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. In both cases, 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

We also maintain a legacy portfolio of investments in larger middle market (“Middle Market”) companies (our “Middle Market investment portfolio”). Our Middle Market investments are generally debt investments in companies owned by private equity funds that were originally issued through a syndication financing process. We have generally stopped making new Middle Market investments and expect our Middle Market investment portfolio to continue to decline in future periods as existing Middle Market investments are repaid or sold. Our Middle Market debt investments generally range in size from $3 million to $25 million, are generally secured by a first priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.

Current wording

We also maintain a legacy portfolio of investments in larger Middle Market companies. Our Middle Market investments are generally debt investments in companies owned by private equity funds that were originally issued through a syndication financing process. We have generally stopped making new Middle Market investments and expect the size of our Middle Market investment portfolio to continue to decline in future periods as existing Middle Market investments are repaid or sold. Our Middle Market debt investments generally range in size from $3 million to $25 million, are generally secured by a first priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.

Previous wording

Our other portfolio (“Other Portfolio”) investments primarily consist of investments that are not consistent with the typical profiles for our LMM, Private Loan or Middle Market portfolio investments, including investments which may be managed by third parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

Current wording

Our Other Portfolio investments primarily consist of investments that are not consistent with the typical profiles for our LMM, Private Loan or Middle Market portfolio investments, including investments which may be managed by third parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

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 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.

Current wording

Based upon our liquidity and capital structure management activities, our Investment Portfolio may also periodically include short-term portfolio investments that are atypical of our LMM and Private Loan portfolio investments in that they are intended to be a short-term deployment of capital. These assets are typically expected to be realized in one year or less and are not expected to be a significant portion of our overall Investment Portfolio.

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 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.

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 stockholders 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 described below). The ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.3% for each of the trailing twelve months ended March 31, 2025 and 2024 and for the year ended December 31, 2024. The ratio of our total operating expenses, including interest expense, as a percentage of our quarterly average total assets was 3.8% and 3.7% for the trailing twelve months ended March 31, 2025 and 2024, respectively, and 3.8% for the year ended December 31, 2024. 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

The External Investment Manager serves as the investment adviser and administrator to MSC Income Fund, Inc. (“MSC Income”) pursuant to an Investment Advisory and Administrative Services Agreement entered into in October 2020 between the External Investment Manager and MSC Income (the “Advisory Agreement”). Under the Advisory Agreement, the External Investment Manager earns a 1.75% annual base management fee on MSC Income’s average total assets, an incentive fee equal to 20% of pre-investment fee net investment income above a specified investment return hurdle rate and a 20% incentive fee on cumulative net realized capital gains in exchange for providing advisory services to MSC Income.

Current wording

The External Investment Manager serves as the investment adviser and administrator to MSC Income Fund, Inc. (“MSC Income”) pursuant to an Investment Advisory and Administrative Services Agreement entered into in October 2020 between the External Investment Manager and MSC Income (as amended and restated on January 29, 2025, the “Advisory Agreement”). Under the Advisory Agreement, prior to January 29, 2025, the External Investment Manager earned a 1.75% annual base management fee on MSC Income’s average total assets, a subordinated incentive fee on income equal to 20% of pre-incentive fee net investment income above a specified investment return hurdle rate and a 20% incentive fee on cumulative net realized capital gains in exchange for providing advisory services to MSC Income. On and after January 29, 2025, under the Advisory Agreement, the External Investment Manager earns a 1.5% annual base management fee on MSC Income’s average total assets (including cash and cash equivalents), payable quarterly in arrears (with additional future contractual reductions based upon changes to MSC Income’s investment portfolio composition), a subordinated incentive fee on income equal to 17.5% of pre-incentive fee net investment income above a specified investment return hurdle rate, subject to a 50% / 50% catch-up feature, and a 17.5% incentive fee on cumulative net realized capital gains from January 29, 2025.

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 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.

Current wording

Additionally, the External Investment Manager has entered into investment management agreements with MS Private Loan Fund I, LP (“Private Loan Fund I”) and MS Private Loan Fund II, LP (“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 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 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.

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 March 31, 2025 and 2024, the External Investment Manager earned $5.8 million and $5.7 million in base management fees, respectively, $2.7 million and $3.9 million in incentive fees, respectively, and $0.2 million of administrative service fee income for each of the three months ended March 31, 2025 and 2024.

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 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.

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 March 31, 2025 and 2024 are net of expenses allocated to the External Investment Manager of $5.3 million and $5.6 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 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.

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 March 31, 2025 and 2024, dividends accrued by us from the External Investment Manager were $2.5 million and $3.0 million, respectively. For the three months ended March 31, 2025 and 2024, the total contribution of the External Investment Manager to our net investment income was $7.8 million and $8.6 million, respectively.

Previous wording

We have received an exemptive order from the SEC permitting co-investments among us, MSC Income and other funds and clients advised by the External Investment Manager in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. We have made co-investments with, and in the future intend to continue to make co-investments with MSC Income, the Private Loan Fund, the Private Loan Fund II and other funds and clients advised by the External Investment Manager, in accordance with the conditions of the order. The order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is appropriate for us and the External Investment Manager’s advised clients, as applicable, and if it is appropriate, to propose an allocation of the investment opportunity between such parties. Because the External Investment Manager may receive performance-based fee compensation from funds and clients advised by the External Investment Manager, this may provide the Company and the External Investment Manager an incentive to allocate opportunities to other participating funds and clients instead of us. However, both we and the External Investment Manager have policies and procedures in place to manage this conflict, including oversight by the independent members of our Board of Directors. In addition to the co-investment program described above, we also co-invest in syndicated deals and other transactions where price is the only negotiated point by us and our affiliates.

Current wording

We have received an exemptive order from the SEC permitting co-investments among us, MSC Income and other advisory clients of the External Investment Manager in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. We have made co-investments with, and in the future intend to continue to make co-investments with MSC Income, Private Loan Fund I, Private Loan Fund II and other advisory clients of the External Investment Manager, in accordance with the conditions of the order. The order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is appropriate for us and the External Investment Manager’s advised clients, as applicable, and if it is appropriate, to propose an allocation of the investment opportunity between such parties. Because the External Investment Manager may receive performance-based fee compensation from its advisory clients, this may provide the Company and the External Investment Manager an incentive to allocate opportunities to advisory clients instead of us. However, both we and the External Investment Manager have policies and procedures in place to manage this conflict, including approval of investment allocations and oversight of co-investments by the independent members of our Board of Directors. In addition to the co-investment program described above, we also co-invest in syndicated deals and other transactions where price is the only negotiated point by us and our affiliates.

Previous wording

The following tables provide a summary of our investments in the LMM, Private Loan and Middle Market portfolios as of September 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments and the External Investment Manager which are discussed further below).

Current wording

The following tables provide a summary of our investments in the LMM and Private Loan portfolios as of March 31, 2025 and December 31, 2024 (this information excludes Middle Market, Other Portfolio investments and the External Investment Manager, which are discussed further below).

Previous wording

(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2023, 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 December 31, 2023 including debt investments on non-accrual status was 12.9% for our LMM portfolio, 12.5% for our Private Loan portfolio and 10.8% 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 as of March 31, 2025, 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, and are weighted based upon the principal amount of each applicable debt investment as of March 31, 2025. The weighted-average annual effective yield on our debt portfolio as of March 31, 2025, including debt investments on non-accrual status, was 12.1% for our LMM portfolio and 10.8% for our Private Loan 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 two LMM portfolio companies and two Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

Current wording

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

Previous 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%.

Current wording

(a)As of December 31, 2024, we had equity ownership in all of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 38%.

Previous 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.

Current wording

(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments as of December 31, 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, and are weighted based upon the principal amount of each applicable debt investment as of December 31, 2024. The weighted-average annual effective yield on our debt portfolio as of December 31, 2024, including debt investments on non-accrual status, was 12.3% for our LMM portfolio and 11.5% for our Private Loan 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, 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.

Current wording

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

Previous 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.

Current wording

For the three months ended March 31, 2025 and 2024, we achieved an annualized total return on investments of 16.0% and 16.7%, respectively. For the year ended December 31, 2024, we achieved a total return on investments of 17.9%. 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 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.

Current wording

As previously discussed in Note A.1. — Organization and Basis of Presentation — Organization, we hold an investment in the External Investment Manager, a wholly-owned subsidiary that is treated as a portfolio investment. As of March 31, 2025, this investment had a fair value of $238.2 million and a cost basis of $29.5 million, which comprised 4.7% and 0.7% of our Investment Portfolio at fair value and cost, respectively. As of December 31, 2024, this investment had a fair value of $246.0 million and a cost basis of $29.5 million, which comprised 5.0% and 0.7% 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 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.

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 March 31, 2025 and 2024, (i) 2.9% and 3.2%, 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.

Previous 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.

Current wording

As of March 31, 2025, investments on non-accrual status comprised 1.7% of our total Investment Portfolio at fair value and 4.5% at cost. As of December 31, 2024, investments on non-accrual status comprised 0.9% of our total Investment Portfolio at fair value and 3.5% at cost.

Previous 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.

Current wording

(a)The decrease in interest income was primarily due to (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, partially offset by higher average levels of income producing Investment Portfolio debt investments.

Previous 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.

Current wording

(b)The increase in dividend income from Investment Portfolio equity investments was primarily a result of (i) an increase of $13.1 million in dividend income from our LMM portfolio companies and (ii) an increase of $1.2 million in dividend income from our Private Loan portfolio companies, partially offset by (i) a decrease of $0.6 million in dividend income from our Other Portfolio investments and (ii) a decrease of $0.5 million in dividend income from our External Investment Manager.

Previous 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.

Current wording

(c)The decrease in fee income was primarily related to (i) a $3.6 million decrease from lower exit, prepayment and amendment activity and (ii) a $2.1 million decrease in fees related to decreased investment activity.

Previous wording

(d)The increase in total investment income includes a net reduction of $1.7 million in certain income considered less consistent or non-recurring, including a $6.5 million decrease in such dividend income, partially offset by (i) a $3.5 million increase in such fee income and (ii) a $1.3 million increase in accelerated interest income from accelerated prepayment, repricing and other activity related to certain Investment Portfolio debt investments.

Current wording

(d)The increase in total investment income includes a net reduction of $5.2 million in certain income considered less consistent or non-recurring, including (i) a $3.5 million decrease in such fee income, (ii) a $1.2 million decrease in such dividend income and (iii) a $0.5 million decrease in such interest income from accelerated prepayment, repricing and other activity related to certain Investment Portfolio debt investments.

Previous wording

Total expenses for the three months ended September 30, 2024 were $49.2 million, a 20% increase from the $41.1 million in the corresponding period of 2023. The following table provides a summary of the changes in the comparable period activity.

Current wording

Total expenses for the three months ended March 31, 2025 were $47.2 million, a 13% increase from the $41.8 million in the corresponding period of 2024. The following table provides a summary of the changes in the comparable period activity.

Previous 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.

Current wording

(a)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, partially offset by a decrease in the weighted-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”), resulting from decreases in the benchmark index interest rates.

Previous 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.

Current wording

Net investment income for the three months ended March 31, 2025 was $89.8 million, or $1.01 per share, compared to net investment income of $89.8 million, or $1.05 per share, in the corresponding period of 2024. The decrease in net investment income per share reflects the impact of the increase in weighted-average shares outstanding for the three months ended March 31, 2025, 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 decrease in net investment income on a per share basis also includes a $0.06 per share decrease in investment income considered less consistent or non-recurring in nature.

Previous wording

Distributable net investment income for the nine months ended September 30, 2024 increased 7% to $279.6 million, or $3.24 per share, compared with $261.9 million, or $3.23 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 (benefit), 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 nine months ended September 30, 2024, as discussed above. The increase in distributable net investment income on a per share basis includes a $0.03 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 March 31, 2025 increased 0.5% to $94.8 million, or $1.07 per share, compared to $94.4 million, or $1.11 per share, in the corresponding period of 2024. The increase in distributable net investment income was primarily due to an increase in share-based compensation expense, partially offset by a decrease in deferred compensation expense. 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 March 31, 2025, as discussed above. The decrease in distributable net investment income on a per share basis also includes a $0.06 per share decrease 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 $26.4 million for the three months ended September 30, 2024.

Current wording

The following table provides a summary of the primary components of the total net realized loss on investments of $29.5 million for the three months ended March 31, 2025.

Previous 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.

Current wording

(a)Other activity includes realized gains and losses from transactions involving 11 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 $21.7 million for the three months ended September 30, 2024.

Current wording

The following table provides a summary of the total net unrealized appreciation of $63.2 million for the three months ended March 31, 2025.

Previous wording

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

Current wording

(a)Includes unrealized appreciation on 35 LMM portfolio investments and unrealized depreciation on 20 LMM portfolio investments.

Previous 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.

Current wording

The income tax provision for the three months ended March 31, 2025 of $7.4 million principally consisted of (i) a deferred tax provision of $4.9 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 $1.3 million provision for excise tax on our estimated undistributed taxable income and a $1.1 million provision for current U.S. federal and state income taxes.

Previous wording

The income tax provision for the nine months ended September 30, 2024 of $33.7 million principally consisted of (i) a deferred tax provision of $27.5 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 $6.2 million related to a $4.5 million provision for current U.S. federal and state income taxes and a $1.7 million provision for excise tax on our estimated undistributed taxable income.

Current wording

The income tax provision for the three months ended March 31, 2024 of $10.9 million principally consisted of (i) a deferred tax provision of $8.8 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 $2.1 million, related to a $1.2 million provision for current U.S. federal and state income taxes and a $0.9 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 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.

Current wording

The net increase in net assets resulting from operations for the three months ended March 31, 2025 was $116.1 million, or $1.31 per share, compared to $107.1 million, or $1.26 per share, during the three months ended March 31, 2024. 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 March 31, 2025 as compared to the three months ended March 31, 2024.

Previous wording

For the nine months ended September 30, 2024, we realized a net increase in cash and cash equivalents of $24.3 million, which is the net result of $232.2 million of cash used in our operating activities and $256.5 million of cash provided by our financing activities.

Current wording

For the three months ended March 31, 2025, we realized a net increase in cash and cash equivalents of $30.9 million, which is the net result of $20.4 million of cash used in our operating activities and $51.3 million of cash provided by our financing activities.

Previous wording

The $232.2 million of cash used in our operating activities resulted primarily from cash uses totaling $1.297 billion for the funding of new and follow-on portfolio investments, partially offset by (i) cash proceeds totaling $808.2 million from the sales and repayments of debt investments and sales and return of capital from equity investments, (ii) cash flows that we generated from the operating profits earned totaling $250.2 million, which is our distributable net investment income, excluding the non-cash effects of the accretion of unearned income, payment-in-kind interest income, cumulative dividends and the amortization expense for deferred financing costs and (iii) $13.7 million in cash proceeds related to other assets and liabilities.

Current wording

The $20.4 million of cash used in our operating activities resulted primarily from (i) cash uses totaling $242.7 million for the funding of new and follow-on portfolio investments and (ii) $26.7 million in cash uses related to other assets and liabilities, partially offset by (i) cash proceeds totaling $164.5 million from the sales and repayments of debt investments and sales and return of capital from equity investments and (ii) cash flows that we generated from the operating profits earned totaling $87.2 million, which is our distributable net investment income, excluding the non-cash effects of the accretion of unearned income, payment-in-kind interest income, cumulative dividends and the amortization expense for deferred financing costs.