MSC Income Fund Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE HIERARCHY FOR INVESTMENTS???PORTFOLIO COMPOSITION (Tables)

FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION (Tables)

6 Months Ended

Jun. 30, 2024

Schedule of Fair Value Measurement Inputs and Valuation Techniques

The following tables provide a summary of the significant unobservable inputs used to fair value MSC Income Fund’s Level 3 portfolio investments as of June 30, 2024 and December 31, 2023:


Type of Investment	Fair Value as of June 30, 2024 (in thousands)		Valuation Technique	Significant Unobservable Inputs	Range(3)	Weighted Average(3)		Median(3)
Equity investments	$	262,251	Discounted cash flow	WACC	10.7% - 22.9%	14.2	%	15.1	%
			Market comparable / Enterprise value	EBITDA multiple (1)	4.5x - 9.4x (2)	7.3x		6.5x
Debt investments	$	843,221	Discounted cash flow	Risk adjusted discount factor (4)	9.8% - 17.3% (2)	13.5	%	12.6	%
				Expected principal recovery percentage	0.6% - 100.0%	99.3	%	100.0	%
Debt investments	$	42,836	Market approach	Third-party quote	40.8 - 101.0	86.4		91.5
Total Level 3 investments	$	1,148,308

_____________________

(1)EBITDA may include proforma adjustments and/or other add-backs based on specific circumstances related to each investment.

(2)Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 2.0x - 15.7x and the range for risk adjusted discount factor is 8.0% - 31.7%.

(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

(4)Discount rate includes the effect of the standard SOFR base rate, as applicable.


Type of Investment	Fair Value as of December 31, 2023 (in thousands)		Valuation Technique	Significant Unobservable Inputs	Range(3)	Weighted Average(3)		Median(3)
Equity investments	$	254,770	Discounted cash flow	WACC	10.9% - 22.5%	14.4	%	15.5	%
			Market comparable / Enterprise value	EBITDA multiple (1)	4.9x - 9.2x (2)	7.3x		6.5x
Debt investments	$	777,003	Discounted cash flow	Risk adjusted discount factor (4)	9.8% - 16.8% (2)	13.1	%	12.8	%
				Expected principal recovery percentage	0.6% - 100.0%	99.6	%	100.0	%
Debt investments	$	61,122	Market approach	Third-party quote	4.5 - 99.2	85.0		89.5
Total Level 3 investments	$	1,092,895

_____________________

(1)EBITDA may include proforma adjustments and/or other add-backs based on specific circumstances related to each investment.

(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

(4)Discount rate includes the effect of the standard SOFR base rate, as applicable.

Schedule of MSC Income Fund’s Level 3 Portfolio Investments

The following tables provide a summary of changes in fair value of MSC Income Fund’s Level 3 portfolio investments for the six months ended June 30, 2024 and 2023 (amounts in thousands):


Type of Investment	Fair Value as of December 31, 2023		Transfers Into Level 3 Hierarchy		Redemptions/ Repayments		New Investments		Net Changes from Unrealized to Realized		Net Unrealized Appreciation (Depreciation)		Other(1)		Fair Value as of June 30, 2024
Debt	$	838,125	$	—	$	(132,534)	$	179,870	$	2,652	$	(1,890)	$	(166)	$	886,057
Equity	254,029		—		(6,832)		8,835		(1,969)		6,292		166		260,521
Equity Warrant	741		—		—		980		—		9		—		1,730
	$	1,092,895	$	—	$	(139,366)	$	189,685	$	683	$	4,411	$	—	$	1,148,308

______________________

(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information in the Consolidated Statements of Cash Flows.


Type of Investment	Fair Value as of December 31, 2022		Transfers Into Level 3 Hierarchy		Redemptions/ Repayments		New Investments		Net Changes from Unrealized to Realized		Net Unrealized Appreciation (Depreciation)		Other(1)		Fair Value as of June 30, 2023
Debt	$	852,282	$	—	$	(119,365)	$	108,857	$	25,167	$	(6,254)	$	(11,446)	$	849,241
Equity	214,687		—		(11,419)		8,061		1,167		11,061		12,551		236,108
Equity Warrant	1,174		—		—		523		—		477		(1,105)		1,069
	$	1,068,143	$	—	$	(130,784)	$	117,441	$	26,334	$	5,284	$	—	$	1,086,418

_____________________

(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information in the Consolidated Statements of Cash Flows.

Schedule of MSC Income Fund's Investments at Fair Value Hierarchy

At June 30, 2024 and December 31, 2023, MSC Income Fund's investments at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:


			Fair Value Measurements
			(in thousands)
At June 30, 2024	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Private Loan portfolio investments	$	665,860	$	—	$	—	$	665,860
LMM portfolio investments	406,252		—		—		406,252
Middle Market portfolio investments	49,898		—		—		49,898
Other Portfolio investments	26,298		—		—		26,298
Total investments	$	1,148,308	$	—	$	—	$	1,148,308


			Fair Value Measurements
			(in thousands)
At December 31, 2023	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Private Loan portfolio investments	$	595,326	$	—	$	—	$	595,326
LMM portfolio investments	386,956		—		—		386,956
Middle Market portfolio investments	85,990		—		—		85,990
Other Portfolio investments	24,623		—		—		24,623
Total investments	$	1,092,895	$	—	$	—	$	1,092,895

Schedule of Investment Holdings

The following tables provide a summary of MSC Income Fund’s investments in the Private Loan, LMM and Middle Market portfolios as of June 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments, which are discussed further below).


	As of June 30, 2024
	Private Loan			LMM (a)			Middle Market
	(dollars in millions)
Number of portfolio companies	84			54			13
Fair value	$	665.9		$	406.3		$	49.9
Cost	$	659.0		$	335.1		$	74.5
Debt investments as a % of portfolio (at cost)	94.9		%	70.4		%	89.1		%
Equity investments as a % of portfolio (at cost)	5.1		%	29.6		%	10.9		%
% of debt investments at cost secured by first priority lien	99.9		%	99.9		%	99.9		%
Weighted-average annual effective yield (b)	13.1		%	13.3		%	14.5		%
Average EBITDA (c)	$	33.7		$	9.9		$	56.5

___________________

(a)At June 30, 2024, MSC Income Fund had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 9%.

(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 MSC Income Fund’s debt portfolio as of June 30, 2024 including debt investments on non-accrual status was 12.7% for its Private Loan portfolio, 12.2% for its LMM portfolio and 9.8% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of MSC Income Fund’s common stock will realize on its investment because it does not reflect MSC Income Fund’s utilization of debt capital in its capital structure, MSC Income Fund’s expenses or any sales load paid by an investor.

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


	As of December 31, 2023
	Private Loan			LMM (a)			Middle Market
	(dollars in millions)
Number of portfolio companies	78			50			16
Fair value	$	595.3		$	387.0		$	86.0
Cost	$	586.4		$	315.7		$	114.7
Debt investments as a % of portfolio (at cost)	94.1		%	70.2		%	93.1		%
Equity investments as a % of portfolio (at cost)	5.9		%	29.8		%	6.9		%
% of debt investments at cost secured by first priority lien	100.0		%	99.9		%	100.0		%
Weighted-average annual effective yield (b)	13.1		%	13.0		%	13.0		%
Average EBITDA (c)	$	30.5		$	8.8		$	74.2

___________________

(a)At December 31, 2023, MSC Income Fund had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 9%.

(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 MSC Income Fund’s debt portfolio as of December 31, 2023 including debt investments on non-accrual status was 12.6% for its Private Loan portfolio, 13.0% for its LMM portfolio and 9.9% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of MSC Income Fund’s common stock will realize on its investment because it does not reflect MSC Income Fund’s utilization of debt capital in its capital structure, MSC Income Fund’s expenses or any sales load paid by an investor.

(c)The average EBITDA is calculated using a weighted-average for the Private Loan and Middle Market portfolios and a simple average for the LMM portfolio. These calculations exclude certain portfolio companies, including one Private Loan portfolio company, as EBITDA is not a meaningful valuation metric for MSC Income Fund’s investment in this portfolio company, and those portfolio companies whose primary purpose is to own real estate.

The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total combined Private Loan, LMM and Middle Market portfolio investments, as of June 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments, which are discussed above).


Cost:	June 30, 2024		December 31, 2023
First lien debt	86.7	%	86.5	%
Equity	12.9		13.3
Second lien debt	—		—
Equity warrants	0.3		0.2
Other	0.1		—
	100.0	%	100.0	%


Fair Value:	June 30, 2024		December 31, 2023
First lien debt	78.8	%	78.4	%
Equity	20.9		21.5
Second lien debt	—		—
Equity warrants	0.2		0.1
Other	0.1		—
	100.0	%	100.0	%

The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined Private Loan, LMM and Middle Market portfolio investments, as of June 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.


Cost:	June 30, 2024		December 31, 2023
Northeast	22.8	%	21.9	%
Midwest	19.7		17.6
Southeast	19.7		17.8
Southwest	18.4		23.8
West	17.6		17.0
Canada	0.8		0.8
Other Non-United States	1.0		1.1
	100.0	%	100.0	%


Fair Value:	June 30, 2024		December 31, 2023
Northeast	22.5	%	21.6	%
Southwest	21.8		26.8
Midwest	20.3		18.3
West	16.9		16.4
Southeast	16.8		15.0
Canada	0.7		0.8
Other Non-United States	1.0		1.1
	100.0	%	100.0	%

MSC Income Fund’s Private Loan, LMM and Middle Market portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments by industry at cost and fair value as of June 30, 2024 and December 31, 2023 (this information excludes Other Portfolio investments).


Cost:	June 30, 2024		December 31, 2023
Commercial Services & Supplies	7.6	%	8.5	%
Internet Software & Services	7.0		8.8
Electrical Equipment	6.3		2.2
Professional Services	6.1		5.7
Diversified Consumer Services	5.7		5.4
Machinery	5.4		5.8
Health Care Providers & Services	4.7		6.5
Containers & Packaging	4.6		4.3
IT Services	4.5		5.2
Distributors	4.4		4.4
Leisure Equipment & Products	3.5		3.7
Textiles, Apparel & Luxury Goods	2.9		3.1
Specialty Retail	2.8		2.9
Communications Equipment	2.6		2.7
Computers & Peripherals	2.6		2.9
Aerospace & Defense	2.5		2.6
Building Products	2.4		2.1
Construction & Engineering	2.4		2.5
Diversified Financial Services	2.4		2.1
Hotels, Restaurants & Leisure	2.0		2.1
Household Products	1.9		2.0
Auto Components	1.8		0.8
Energy Equipment & Services	1.7		0.5
Internet & Catalog Retail	1.7		1.6
Food & Staples Retailing	1.6		1.5
Software	1.5		1.4
Media	1.3		2.5
Health Care Equipment & Supplies	1.1		1.3
Other (1)	5.0		4.9
	100.0	%	100.0	%

___________________

(1)Includes various industries with each industry individually less than 1.0% of the total combined Private Loan, LMM and Middle Market portfolio investments at each date.


Fair Value:	June 30, 2024		December 31, 2023
Machinery	6.7	%	7.2	%
Diversified Consumer Services	6.6		6.5
Commercial Services & Supplies	6.5		7.3
Electrical Equipment	6.1		2.3
Internet Software & Services	6.0		7.3
Professional Services	6.0		5.5
Containers & Packaging	4.9		4.6
Distributors	4.7		4.6
Computers & Peripherals	4.5		4.6
IT Services	4.4		5.0
Health Care Providers & Services	4.2		6.0
Construction & Engineering	3.1		3.1
Leisure Equipment & Products	2.9		3.3
Specialty Retail	2.8		2.9
Textiles, Apparel & Luxury Goods	2.7		2.9
Aerospace & Defense	2.4		2.5
Building Products	2.3		1.9
Diversified Financial Services	2.3		2.0
Construction Materials	2.0		2.2
Household Products	1.8		1.9
Software	1.8		1.7
Auto Components	1.7		0.8
Hotels, Restaurants & Leisure	1.6		1.6
Air Freight & Logistics	1.5		1.6
Internet & Catalog Retail	1.5		1.5
Energy Equipment & Services	1.4		0.3
Food & Staples Retailing	1.4		1.2
Media	1.4		2.6
Communications Equipment	1.1		1.1
Other (1)	3.7		4.0
	100.0	%	100.0	%

___________________

(1)Includes various industries with each industry individually less than 1.0% of the total combined Private Loan, LMM and Middle Market portfolio investments at each date.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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