 PennantPark Floating Rate Capital Acquisition of MCG Capital Corporation Investor Presentation April 29, 2015 Subject Company: MCG Capital Corporation and deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934 (File No. 814-00239) Filed by PennantPark Floating Rate Capital Ltd. Pursuant to Rule 425 under the Securities Act of 1933 |
 Forward-looking Statements and Risk Factors 1 1 This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that relate to future events, performance or financial condition of PennantPark Floating Rate Capital Ltd. (“PFLT”) and MCG Capital Corporation (“MCGC”). Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. Neither PFLT nor MCGC undertakes any duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this presentation. However, by their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific. The risk exists that these statements may not be fulfilled. We caution readers of this presentation not to place undue reliance on these forward-looking statements as a number of factors could cause future company results to differ materially from these statements. Forward-looking statements may be influenced in particular by factors such as the ability of the parties to consummate the transaction described in this press release on the expected timeline (or at all), the failure of PFLT or MCGC stockholders to approve the proposed merger, the ability to realize the anticipated benefits of the transaction, the effects of disruption on the companies’ business from the proposed merger, the effect that the announcement or consummation of the merger may have on the trading price of the common stock of PFLT or MCGC, the combined company’s plans, expectations, objectives and intentions, the other factors described from time to time in the companies’ filings with the Securities and Exchange Commission, fluctuations in interest rates and stock indices, the effects of competition in the areas in which we operate, and changes in economic, political and regulatory conditions. We caution that the foregoing list is not exhaustive. When relying on forward-looking statements to make decisions, investors should carefully consider the aforementioned factors as well as other uncertainties and events. The performance data quoted represents past performance and does not guarantee future results. The performance stated may have been due to extraordinary market conditions, which may not be duplicated in the future. Current performance may be lower or higher than the performance data quoted. We refer you to the list of risk factors set forth in PFLT’s most recent Annual Report on Form 10-K, a copy of which may be obtained on PFLT’s website at www.pennantpark.com or the SEC’s website at www.sec.gov. Specifically, an investment in PFLT’s common stock involves significant risks, including the risk that the secondary market price of PFLT’s common stock may decline from the offering price and may be less than PFLT’s net asset value per share, as well as the risk that the price of PFLT’s common stock in the secondary market may be highly volatile. Please see a discussion of these risks and other related risks in PFLT’s most recent Annual Report on Form 10-K under Item 1A - “Risks Relating to an Investment in Our Common Stock”. This presentation contains certain information as is set forth in PFLT’s reports on Form 10-K or 10-Q and we direct you to these reports for further information on our business. IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT This communication is being made in respect of the proposed business combination involving PFLT and MCGC. In connection with the proposed transaction, PFLT plans to file with the SEC a Registration Statement on Form N-14 that includes proxy statements of PFLT and MCGC and that also constitutes a prospectus of PFLT. The definitive Joint Proxy Statement/Prospectus will be mailed to stockholders of PFLT and MCGC. INVESTORS AND SECURITY HOLDERS OF PFLT AND MCGC ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of the Registration Statement and Joint Proxy Statement/Prospectus (when available) and other documents filed with the SEC by each of PFLT and MCGC through the web site maintained by the SEC at www.sec.gov. Free copies of the Registration Statement and Joint Proxy Statement/Prospectus (when available) and other documents filed with the SEC can also be obtained on PFLT’s website at www.pennantpark.com or on MCG’s website at www.mcgcapital.com. PFLT and MCGC and their respective directors, executive officers and certain other members of management and employees may be deemed to be participants in the solicitation of proxies from PFLT and MCGC stockholders in respect of the acquisition. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the PFLT and MCGC stockholders in connection with the proposed acquisition will be set forth in the Joint Proxy Statement/Prospectus when it is filed with the SEC. You can find information about PFLT’s executive officers and directors in its definitive proxy statement filed with the SEC on November 26, 2014. You can find information about MCGC’s executive officers and directors in its Annual Report on Form 10-K/A for the year ended December 31, 2014 filed with the SEC on April 29, 2015. You can obtain free copies of these documents from PFLT and MCGC in the manner set forth above. This presentation does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction. A registration statement relating to these securities will be filed with the Securities and Exchange Commission, and the securities may not be sold until the registration statement becomes effective. Investors are advised to carefully consider the investment objectives, risks and charges and expenses of PFLT before investing in its securities. PROXY SOLICITATION |
 Section I. Proposed Transaction & Rationale 2 |
 The Acquisition 3 PFLT was founded in 2011 to provide middle market senior secured floating rate loans to our sponsor and corporate clients and attractive and stable returns to investors PFLT has performed well since inception Since 2013 PFLT has had a total return of 33% compared to a total return of 18% for the BDC index (1) and a total return of (2%) for the senior secured floating rate BDCs (2) The acquisition of MCGC should enable PFLT to better capture the middle market opportunity for our borrowers and shareholders More relevant for borrowers due to broader platform Larger float and liquidity for shareholders Economies of scale Approximately 70% of MCGC’s assets are cash as of April 1, 2015 PFLT has valued each of MCGC’s four remaining investments and is comfortable with current marks All four investments are debt investments that have debt / EBITDA ratios below 4.0x, which is consistent with PFLT’s existing portfolio 3 (1) Represents 51 publicly traded BDCs. Market data as of 4/24/15. (2) Includes SUNS, FSFR and ACSF. Market data as of 4/24/15. |
 Transaction Summary 4 4 Estimated Consideration Mix at Closing: • $167 million in PFLT common stock ($4.521 per MCGC share) • $8 million in cash contribution from PennantPark Investment Advisers, LLC (the “Adviser”) ($0.226 per MCGC share) Aggregate Consideration: • $175 million Exchange Ratio: • Floating, based on value of $4.521 per share of MCGC common stock • PFLT common stock to be valued at the greater of NAV and the 10 day volume- weighted average price (“VWAP”) per share of PFLT common stock prior to the second trading day prior to closing Cash Consideration: • $0.226 per share of MCGC common stock (approximately $8 million in the aggregate), paid by the Adviser • The Adviser will contribute up to an additional $0.25 per PFLT share issued in this transaction to the extent PFLT’s 10 day VWAP as calculated above is less than PFLT NAV Governance: • The Adviser to remain as external manager of the combined company • Two members of the MCGC Board of Directors expected to join PFLT Board of Directors at closing Expected Closing: • Q3 2015 Required Approvals: • Approval of both MCGC and PFLT stockholders |
 Key Benefits of Combination and Synergies 5 Almost doubles market capitalization, creating more float and liquidity for shareholders Elimination of duplicative public company expenses Increases scale and competitive relevance with financial sponsors and other borrowers Larger asset base enables greater diversification within the overall portfolio as well as economies of scale Enhanced scale benefiting float and liquidity while spreading fixed costs over a larger asset base Serves as a “synthetic equity” raise without NAV dilution to PFLT shareholders (before typical deal expenses) Permits MCGC stockholders to maintain ongoing participation in the combined company and resume monthly dividend participation 5 Shareholders will continue to benefit from a proven credit manager that has had a track record of consistent and growing dividends |
 6 PFLT and MCGC Combined Externally managed by PennantPark $343 million investment portfolio at value on balance sheet (1) 72 portfolio companies across 21 different industries on balance sheet (1) Average investment size of $4.8 million (1) 95% floating rate investments (1) PennantPark Investment Advisers, LLC has deployed over $4.3 billion across nearly 350 companies since 2007 (1) $200 million five-year credit facility at L+200 (1) Monthly dividends of $0.095 per share Leader in the externally managed BDC space as measured by expense ratio and efficiency ratio (1) PFLT MCGC Internally managed $50 million investment portfolio on balance sheet (2) Cash position of $116 million (2) Portfolio of 4 debt securities with debt / EBITDA ratios under 4.0x (2) Has been in the process of liquidating its portfolio and buying back stock via a December 2014 tender offer Announced that it is exploring strategic alternatives on February 9, 2015 Founded in 1998, went public in 2001 and is headquartered in Arlington, VA PFLT and MCGC Larger market capitalization and greater trading liquidity for investors Continued focus on middle market senior loans Elimination of MCGC’s cost burden associated with being a standalone public entity Externally managed by PennantPark 1) As of 12/31/14. 2) As of 3/31/15. |
 Value to MCGC Shareholders 7 7 Receiving PFLT shares represents attractive currency as the company provides investors with capital preservation and current income MCGC shareholders can benefit from appreciation of stock price and PFLT has increased dividends since inception 15.8% premium to MCGC’s stock price on April 28, 2015 Partnership with Best In-Class Manager PFLT has a shareholder friendly expense structure – One of the lowest cost BDCs relative to asset base (1) PFLT has the highest annual and total returns among the floating rate-focused BDCs (2) – Since 2013, PFLT has had a total return of 33% compared to a total return of 18% for the BDC index (3) and a total return of (2%) for the senior secured floating rate BDCs (4) – Was the only floating rate BDC in 2014 to have positive returns at 8% PFLT’s external manager has experience with public vehicles since 2007 (PNNT’s IPO) – Funded $4.3 billion in 350 companies since inception across PennantPark entities (5) – 145 different sponsor clients since inception across PennantPark entities (5) Attractive Entry Point into PFLT from Valuation Perspective Strategic Reorientation into Attractive Floating Rate Market Floating rate loans help protect against inflation and rising interest rates PFLT has a diversified and defensive portfolio with a weighted average cash interest coverage of 3.2x (5) Senior secured loans have strong capital preservation attributes PFLT has a solid dividend track record, paying monthly dividends of $0.095 per share 1) SNL Financial as of most recent quarterly financials. 2) SNL Financial as of 4/24/15. 3) Represents 51 publicly traded BDCs. 4) Includes SUNS, FSFR and ACSF. 5) As of 12/31/14. |
 Demonstrated Ability to Deploy Capital 8 8 PFLT has demonstrated an ability to quickly ramp assets, while maintaining strong credit quality, after equity offerings PFLT Portfolio Size and Debt Yield ($ in millions) Ramp after $100mm IPO Ramp after two follow-on offerings 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Jun -11 Sep-11 Dec-11 Mar-12 Jun -12 Sep-12 Dec-12 Mar-13 Jun -13 Sep-13 Dec-13 Mar-14 Jun -14 Sep-14 Dec-14 Total Portfolio Size Yield on Portfolio |
 Increased Relevance in Senior Secured Middle Market 9 Through the proposed acquisition of MCGC, PFLT will be able to become more relevant with financial sponsors and borrowers and have a greater opportunity to identify high quality assets in a large market 9 Middle Market Origination Volume by Quarter vs. PFLT Portfolio Size Note: Mid-market defined as issuers with EBITDA of $50 million or less. Source: S&P, represents senior secured loans. $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Mid-Market Volume PFLT Portfolio Size |
 Efficiency Ratio Expense Ratio Expense Ratio Comparisons 10 PFLT offers current MCGC shareholders a friendly expense structure In terms of non-interest expense efficiencies, PFLT is a leader in the externally managed BDC space as measured by expense ratio and efficiency ratio 10 Non-Interest Expenses Average Assets Expense Ratio = Non-Interest Expenses Non-Interest Income + = Efficiency Ratio Net Interest Income Note: Includes all externally-managed BDCs that are paying a regular cash dividend. Excludes BDCs that have not filed quarterly financials since Q3'14. Source: SNL Financial as of most recent quarterly financials. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mkt. Cap. Between $500M and $1B Mkt. Cap. Between $200M and $500M Mkt. Cap. Less Than $200M Floating Rate Snr. Secured Vehicles 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Mkt. Cap. Between $500M and $1B Mkt. Cap. Between $200M and $500M Mkt. Cap. Less Than $200M Floating Rate Snr. Secured Vehicles Higher Cost Structures Higher Cost Structures |
 Section II. PFLT’s Value Proposition 11 |
 Value Oriented Investment Philosophy PennantPark Investment Advisers, LLC Established Credit Platform 12 As of 12/31/14 The Adviser founded in 2007 Deep expertise in the middle market Longer investment horizon with attractive publicly traded model Value oriented with a focus on capital preservation Disciplined investment approach with strong credit performance Proprietary origination, research and evaluation Team approach – institutionalized investment process and relationships Established long-term trust with clients and investors NASDAQ: “PNNT” IPO Date: April 2007 NASDAQ: “PFLT” IPO Date: April 2011 12 Established Investment Platform 2nd Lien Secured Debt 13% 1st Lien Senior Secured Debt 84% Subordinated Debt, Common and Perferred Equity 3% Common and Preferred Equity 8% 1st Lien Senior Secured Debt 32% Subordinated Debt 16% 2nd Lien Secured Debt 44% |
 PFLT has a Compelling Track Record 13 Shareholders will continue to benefit from a proven credit manager that has had consistent and growing dividends 13 Portfolio Size ($ in millions) and Debt Yield Total Portfolio Size Yield on Portfolio 5.00 6.00 7.00 7.50 8.00 8.25 8.50 8.75 9.00 9.50 0 1 2 3 4 5 6 7 8 9 10 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Monthly Dividends (cents per share) |
 The PFLT Advantage 14 14 Conservative Risk Management Weighed Average cash interest coverage of 3.2x (1) Weighted Average debt / EBITDA through PFLT security of 3.8x (1) 84% of PFLT portfolio is 1st Lien Senior Secured Debt (1) Since inception four years ago, PFLT has had only one non-accrual at a cost of $2.2 million. So far, PFLT has recovered 97 cents on the dollar on this investment PennantPark entities have had only 9 non-accruals out of 350 investments since inception eight years ago despite the recession and credit crisis (1) As of 12/31/14. |
 Pro-Forma Overall Portfolio as of 12/31/2014 Highly Diversified Industry Mix (1) Portfolio Overview 94% Floating rate investments (including 88% with a floor) Annualized Dividend Yield of 8.1% (2) Total Portfolio: $393 million Source: Company Financial Statements. Note: Portfolio companies from MCGC include: C7 Data Centers, GMC Television Broadcasting, RadioPharmacy Investors, South Bay Mental Health and Broadview Networks Holdings at 3/31/15 fair value marks. (1) Total of 21 industries. “Other” includes: Beverage, Foodand Tobacco /MetalsandMining / Telecommunications. (2) Based on a $0.095 monthly dividend and closing price on 3/31/15. Average Investment Size: $5.1 million 77 Different Companies Portfolio Mix Yield at Cost on Debt Portfolio: 8.9% 15 MEDIA: DIVERSIFIED AND PRODUCTION 1% CHEMICALS, PLASTICS AND RUBBER 1% OTHER 2% ENERGY: OIL AND GAS 2% WHOLESALE 3% AUTOMOTIVE 3% CONSTRUCTION AND BUILDING 3% AEROSPACE AND DEFENSE 3% CONSUMER GOODS: NON - 3% MEDIA: BROADCASTING AND SUBSCRIPTION 4% BANKING, FINANCE, INSURANCE & REAL ESTATE 4% CONSUMER GOODS: DURABLE 5% RETAIL 5% MEDIA: ADVERTISING, PRINTING AND PUBLISHING 6% HOTEL, GAMING AND LEISURE 7% CONSUMER SERVICES 7% BUSINESS SERVICES 13% HIGH TECH INDUSTRIES 13% PHARMACEUTICALS 15% 0 SUBORDINATED DEBT, PREFERRED AND COMMON EQUITY 5% 2ND LIEN SECURED DEBT 11% 1ST LIEN SENIOR SECURED DEBT 84% DURABLE HEALTHCARE AND |
 PFLT Post Acquisition 16 16 A leader in middle market senior secured loans An ability to leverage a proven track record of capital preservation and current income for shareholders Ability to capture more share and become more relevant to our clients Ramp up in a prudent manner consistent with historical performance and market opportunity Combined business will have low fees and eliminate duplicative public company costs Greater liquidity and float for shareholders |