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Forward-Looking Statements and Non-GAAP Financial Measures

Forward-Looking Statements and Non-GAAP Financial Measures.

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Forward-Looking Statements and Non-GAAP Financial Measures

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  1. Forward-Looking Statements and Non-GAAP Financial Measures This presentation contains forward-looking statements regarding the plans and objectives of management for future operations. Any such forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors, including the factors discussed under the captions “Cautionary Statement Concerning Forward Looking Statements” and “Risk Factors” included in our filings with the Securities and Exchange Commission.  Other factors that could cause actual results to differ materially include changes in the economy and future changes in laws or regulations and conditions in our operating areas.  We have based the forward-looking statements included in this presentation on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements, unless we are required to do so by applicable law. However, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. 2

  2. M A I N NYSE Business Development Companies (“BDCs”) 3

  3. Overview • Created by the Small Business Investment Incentive Act of 1980 (the “1980 Amendments”) as a result of a perceived crisis in the capital markets in the 1970s • Private equity and venture capital firms believed the “small private investment company” exemption (Section 3(c)(1) of 1940 Act) limited their capacity to provide financing to small, growing businesses • Provided Regulated Investment Company (RIC) status in 1990 • Special type of closed-end fund that: • Provides small, growing companies access to capital • Enables private equity funds to access the public capital markets • Enables retail investors to participate in the upside of pre-IPO investing with complete liquidity • Hybrid between an operating company and an investment company M A I N NYSE 4

  4. Key Market Role M A I N NYSE Retail Investors Public Equity Capital Markets Accredited Investors Business Development Companies Private Equity Firms Investment Company Act of 1940 Small and Middle-Market Businesses 5

  5. Benefits of BDCs as an Investment Vehicle • Access to public capital markets • Shares are traded on national exchanges • Flow-through tax treatment as RIC • Reduced burden under 1940 Act, as compared to closed-end funds • Restrictions on leverage • Restrictions on affiliated transactions • External model permits management fee and “carried interest” incentive fee structure • Publicly available financial information though quarterly reporting • Portfolio is typically diversified • Reduces risk typically associated with private equity investments M A I N NYSE 6

  6. BDC Industry Renaissance • Prior to 2003, the largest BDCs were primarily internally managed • Choice reflected the success of the internally managed, income producing BDC model • In 2004, Apollo Investment Corporation raised $930 million in less than three months which ignited the growth in the BDC industry • There has been a steady stream of BDC IPOs since that period • Approximately 35 internally and externally managed BDCs make up the current BDC space; 29 of which are the subject of frequent research • Current BDC space has average Market Capitalization of $565 million with the 10 largest BDCs having a combined Market Capitalization of $12.9 billion* M A I N NYSE * As of June 1, 2012. 7

  7. Non-Traded BDC Structures • The first registered, continuously-offered unlisted BDC, FS Investment Corporation, commenced fundraising in 2008; since then, these fund vehicles have grown rapidly and gained the attention of potential sponsors and the capital markets • Longer offering period with periodic closings (as opposed to IPO) • Subject to individual state registration requirements for public offerings, which can be time-consuming and expensive • Less susceptible to capital raise constraints caused by market downturns due to ability to adjust periodic offering price to remain at or above NAV • Lack of price fluctuation attractive to yield-based investors • Not fully liquid: exit through periodic repurchase offers (often at discount to NAV) M A I N NYSE 8

  8. Eligible BDC Investments • A BDC must invest 70% of its assets in “good” BDC assets • 70% basket includes securities issued by an eligible portfolio company, as defined in Section 2(a)(46), which includes: • U.S. issuers that are neither an investment company as defined in section 3 (other than a wholly-owned SBIC) nor a company which would be an investment company except for the exclusion from the definition of investment company in section 3(c) and • (i) do not have any class of securities listed on a national securities exchange; or • (ii) have a class of securities listed on a national securities exchange, but have an aggregate market value outstanding voting and non-voting common equity of less than $250 million • A BDC can generally invest with flexibility in “bad” assets that do not fall within the “70% basket” • The SEC Staff has never been called upon to consider whether utilizing a specific strategy for the entire “30% basket,” e.g., investing solely in foreign companies, might run afoul of the intent of Section 55(a) M A I N NYSE 9

  9. BDC Borrowing Limitations • BDCs must have 200% asset coverage (Total Assets/Total Debt) • For example, a BDC with $50 in equity can borrow up to $50 • A BDC would be able to invest $100 in growing businesses M A I N NYSE $50 Debt $50 Equity $50 Equity • Other investment companies are restricted to a 300% asset coverage requirement with respect to issuing debt $25 Debt $50 Equity $50 Equity • BDCs may exclude leverage at the SBIC level if the SEC grants exemptive relief 10

  10. How do BDCs Value Their Assets? • Investments are reported at fair value • FASB ASC 820 – Fair Value Measurements and Disclosures • Fair Value – Price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date • Regulated investment companies also governed by definition of “value” in Investment Company Act of 1940 further interpreted in SEC Codification of Financial Reporting section 404.03 – “fair value as determined in good faith by the board of directors” M A I N NYSE 11

  11. Tax Considerations for BDCs • A BDC may elect to be taxed as a RIC under the Internal Revenue Code • Taxation as a RIC • Allows “pass through” tax treatment for income and capital gains that are distributable to shareholders • A BDC must distribute at least 90% of its investment income to shareholders annually • The BDC may retain, distribute or “deem distribute” capital gains • BDC must meet minimum source of income requirements annually and meet requirements on a quarterly basis with respect to portfolio diversification • Conversion to RIC status • Formation considerations – Built-in gains M A I N NYSE 12

  12. M A I N NYSE BDC Market Statistics 13

  13. BDC Market Statistics Source: Raymond James – BDC Weekly Update, June 01, 2012. 14

  14. BDC Market Statistics Source: Raymond James – BDC Weekly Update, June 01, 2012. (1) Dividend Yield uses the current dividend annualized. 15

  15. BDC Market Statistics Source: Raymond James – BDC Weekly Update, June 01, 2012. 16

  16. BDC Market Statistics Source: Raymond James – BDC Weekly Update, June 01, 2012. 17

  17. M A I N NYSE Main Street Capital Corporation Corporate Overview 18

  18. MAIN is a Principal Investor in Private Debt and Equity • Publicly-traded on the New York Stock Exchange (NYSE: “MAIN”) • Internally-managed Business Development Company (BDC) • IPO in October 2007 • Over $900 million in assets under management • Seeks to invest in the under-served Lower Middle Market (LMM) • Generally companies with revenue between $10 million - $150 million; EBITDA between $3 million - $20 million • Self-sponsored/self-originated orientation – partner with business owners and entrepreneurs • Invest in complimentary interest bearing debt investments in Middle Market companies • Generally issuances of secured and/or rated debt securities • Generally larger companies than LMM strategy • Recapitalizations, buyouts, growth and acquisition capital • High level of management ownership/investment in MAIN • Headquartered in Houston, Texas M A I N NYSE 19

  19. MAIN is a Principal Investor in Private Debt and Equity • High cash dividend yield – dividends paid monthly • Long-term focus on delivering shareholders sustainable growth in both the value of portfolio assets and recurring dividends • Owns two Small Business Investment Company (SBIC) Funds • Main Street Mezzanine Fund (2002 vintage) and Main Street Capital II (2006 vintage) • Provides access to 10-year, low cost, fixed rate government-backed leverage • Strong capitalization and liquidity position – stable, long-term debt and significant available liquidity • Internally managed cost structure provides significant operating leverage • Favorable ratio of total operating expenses, excluding interest expense, to average total assets of 2.2% • Greater portion of gross portfolio returns are delivered to our shareholders M A I N NYSE 20

  20. MAIN Regulatory Framework • Operates as Business Development Company • Regulated by SEC - 1940 Act • Publicly-traded, private investment company • Regulated Investment Company (RIC) tax structure • Eliminates corporate level income tax • Efficient tax structure providing high yield to investors • Passes through capital gains to investors • Small Business Investment Company subsidiaries • Regulated by SBA • Access to low cost, fixed rate, long-term leverage • Total leverage capacity of $225 million • MAIN received 2011 SBIC of the Year Award M A I N NYSE 21

  21. MAIN Corporate Structure – Internally Managed “Internally managed” means no external management fees or expenses and provides operating leverage to MAIN’s business. MAIN targets cash operating and administrative costs at or less than 2% of total assets. Main Street Capital Corporation (BDC/RIC)Assets: ~$332 millionLine of Credit: $107 million($235 million facility) Main Street Capital II, LP(2006 vintage SBIC)Assets: ~$159 millionSBIC Debt: $95 million Main Street Mezzanine Fund, LP(2002 vintage SBIC)Assets: ~$247 millionSBIC Debt: $125 million 22

  22. Flexible Capital for the Lower Middle Market M A I N NYSE 23

  23. Market Segment Opportunity for LMM Investment Strategy MAIN targets LMM investments in established, profitable companies • Large and critical portion of U.S. economy • 175,000+ domestic LMM businesses(1) • LMM is under-served from a capital perspective and less competitive • Inefficient asset class generates pricing inefficiencies • Enterprise values average 4X – 5X EBITDA and leverage multiples average 2X – 3X EBITDA to MAIN • Ability to become a partner vs. a “commoditized vendor of capital” M A I N NYSE • Source: U.S. Small Business Administration, Office of Advocacy 24

  24. LMM Investment Portfolio M A I N NYSE 25

  25. Privately Placed Debt Investment Strategy MAIN also maintains a portfolio of privately placed, interest-bearing debt investments • Favorable market environment has generated attractive investment opportunities • Generally larger issuances of secured and/or rated debt securities • 69% of current privately-placed debt portfolio is first lien term debt and 31% is second lien term debt • Most have a B or BB S&P rating • Generally larger companies than LMM investment strategy • Current privately-placed portfolio has weighted average revenues of approximately $367 million • 7% - 12% targeted gross yields • 27 investments representing 27% of total portfolio at cost • Weighted average yield of 10.6% M A I N NYSE 26

  26. Total Investment Portfolio • Includes complimentary LMM debt and equity investments and privately placed debt investments • Total portfolio consists of 73% LMM / 27% privately placed investments (as a percentage of cost) • 81 portfolio companies • Average investment size of $6.2 million • Largest individual portfolio company represents 3.2% of total investment income and 4.3% of total portfolio fair value • Significant diversification • Issuer • Industry • Transaction type • Geography • End markets M A I N NYSE 27

  27. Total Portfolio by Industry (as a Percentage of Cost) 28

  28. 28% 9% 12% 9% 42% Diversified Total Portfolio (as a Percentage of Cost) Invested Capital by Transaction Type Invested Capital by Geography Recapitalization/Refinancing33% LBO/MBO 26% Growth Capital 22% Acquisition19% 29

  29. MAIN Total Return Performance Since IPO • Notes: • Assumes dividends reinvested on ex-dividend date • BDC Index includes: ACAS, AINV, ARCC, BKCC, FDUS, FSC, GAIN, GBDC, GLAD, HRZN, HTGC, KCAP, MAIN, MCC, MCGC, MVC, NGPC, NMFC, PNNT, PSEC, SAR, SLRC, SUNS, TCAP, TCRD, TICC and TINY • BDC Index is equal weighted • First trading date is October 4, 2007 and last trading date is December 30, 2011 30

  30. M A I N NYSE Q&A 31

  31. Contact Information • Main Street Capital Corporation • 1300 Post Oak Blvd., Suite 800 • Houston, TX 77056 • 713-350-6000 (main) • 713-350-6042 (fax) • www.mainstcapital.com • Vincent D. Foster • Chairman of the Board and Chief Executive Officer • 713-350-6039 • vdfoster@mainstcapital.com • Alejandro Palomo • Sr. Associate • 713-350-6019 • apalomo@mainstcapital.com 32

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