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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DCWashington, D.C. 20549

FORMForm 10-K
(Mark One)
þ
(Mark One)
þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172023
OR
¨oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission file number:File Number: 814-00939
HMSMSC Income Fund, Inc.
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)
its charter)
Maryland
45-3999996
(State or Other Jurisdiction other jurisdiction
of Incorporationincorporation or Organization)organization)
45-3999996
(I.R.S. Employer
Identification No.)
2800
1300 Post Oak Boulevard, Suite 5000, 8th Floor
Houston, Texas
77056-6118
TX
(Address of Principal Executive Offices)principal executive offices)
77056
(Zip Code)
(888) 220-6121(713) 350-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Title of Each ClassTrading Symbol
Name of Each Exchange on Which
Registered
NoneN/AN/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001$0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” ,“smallerfiler,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer¨
o
Accelerated filer¨
o
Non-accelerated filerþ
(Do not check if a smaller
reporting company)
þ
Smaller reporting company¨
o
Emerging growth company¨o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨o No þ
There is no established public market for the Registrant’sregistrant’s common stock. The registrant closed the public offering of its shares of common stock.stock in September 2017. The Registrantlast offering price at which the registrant issued shares in its public offering was $9.30 per share. Since the registrant closed its public offering, it has filed withcontinued to issue shares pursuant to its dividend reinvestment plan. The most recent price at which the Securities and Exchange Commission (the “SEC”) a registration statement on Form N-2 (File No. 333-204659) (the “Registration Statement”), most recently declared effective on May 1, 2017, registering for sale upregistrant has issued shares pursuant to $1,500,000,000 worththe dividend reinvestment plan was $7.96 per share.
The number of shares outstanding of the issuer’s common stock.
Asstock as of March 16, 2018, there were 80,341,230 shares of the Registrant’s common stock outstanding.
1, 2024 was 80,469,732.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Portions

Table of the Registrant’s definitive Proxy Statement relating to the Registrant’s 2018 Annual Meeting of Stockholders, to be filed with the SEC pursuant to Regulation 14A within 120 days following the end of the Registrant’s fiscal year ended December 31, 2017, are incorporated by reference into Part III of this Annual Report on Form 10-K as indicated herein.contents


TABLE OF CONTENTS
PART I
Item 1.Business.
4
Risk Factors.1.
3
Unresolved Staff Comments.1A.
19
Properties.1B.
41
Item 3.Legal Proceedings.
41
Mine Safety Disclosures.2.
42
PART II
42
42
PART II
3943
Selected Financial Data.
44
4345
6757
6859
111153
111153
Other Information.
153
PART III
153
PART III
113154
Executive Compensation.
159
113160
113161
113162
PART IV
Item 15.Exhibits, Financial Statement Schedules.
114
Signatures
164
167



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PART ICAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Special Note Regarding Forward-Looking Statements
Statements in thisThis Annual Report on Form 10-K (this “Form 10-K”) that are not historical facts (including anycontains forward-looking statements concerning investment objectives, economic updates, otherregarding the plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.
The forward-looking statements in this Form 10-K are based on our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Any of the assumptions underlying forward-looking statements could be inaccurate. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide distributions to our stockholders and maintain the value of the investments in which we hold an interest, may be significantly hindered.
Our stockholders are cautioned not to place undue reliance on any forward-looking statement in this Form 10-K. All forward-looking statements are made as of the date of this Form 10-K, and the risk that actual results will differ materially from the expectations expressed in this Form 10-K may increase with the passage of time. In light of the significant uncertainties inherent in the forward-looking statements in this Form 10-K, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Form 10-K will be achieved. We expressly disclaim any responsibility to update forward-looking statements, whether a result of new information, future events or otherwise, except as required by law. The forward-looking statements and projections contained in this Form 10-K are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Please see “Item 1A. Risk Factors” for a discussion of some of the risks and uncertainties that could cause actual results to differ materially from those presented in certain forward-looking statements.

Forward-Looking Statements
Some of the statements in this Form 10-K constitute forward-looking statements because they relate to future events or our future performance or financial condition. TheAny such forward-looking statements contained in this Form 10-K may includeinvolve 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, as to:
which involve assumptions and describe our future operating results;
our business prospectsplans, strategies and the prospects of our current and prospective portfolio companies;
the impactexpectations, are generally identifiable by use of the investmentswords “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 expectcannot assure you that the projections included in these forward-looking statements will come to make;
the ability of our portfolio companies to achieve their objectives;
our expected financings and investments;
the adequacy of our cash resources and working capital;
the timing of cash flows, if any, from the operations of our portfolio companies;
changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;
the impact of increased competition;
our contractual arrangements and relationships with third parties;
the dependence of our future success on the general economy, including general economic trends, and its impact on the industries in which we invest;
the relative and absolute performance of our investment adviser, including in identifying suitable investments for us;
our ability to make distributions to our stockholders;
the effects of applicable legislation and regulations and changes thereto; and
the impact of future acquisitions and divestitures.

pass. Our actual results could differ materially from those expressed or implied or expressed inby the forward-looking statements for any reason,as a result of various factors, including, without limitation, the factors set forthdiscussed in “Item 1A. RiskItem 1A entitled “Risk Factors” in this Annual Report on Form 10-K and elsewhere in this Annual Report on Form 10-K.10-K and in other filings we may make with the Securities and Exchange Commission (“SEC”) from time to time. Other factors that could cause actual results to differ materially include:


include changes in the economiceconomy and political conditions;
risks associated with possible disruption in our operations or the economy generally; and
future changes in laws or regulations and conditions in our operating areas.

YouWe have based the forward-looking statements included in this Annual Report on Form 10-K on information available to us on the date of this Annual Report on Form 10-K, 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 consultrefer to any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including subsequent annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
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PART I
Item 1.Business
ORGANIZATION
Organization

HMSMSC Income Fund, Inc. (the(“MSIF” or, together with its consolidated subsidiaries, “MSC Income Fund” or the “Company”) is a principal investment firm primarily focused on providing debt capital to middle market (“Middle Market”) companies and customized debt and equity financing to lower middle market (“LMM”) companies. MSC Income Fund’s portfolio investments are typically made to support leveraged buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSC Income Fund invests primarily in secured debt investments of Middle Market companies generally headquartered in the United States and in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States. MSC Income Fund seeks to partner with private equity funds in its Private Loan (as defined below) and Middle Market investment strategies. MSC Income Fund seeks to partner with entrepreneurs, business owners and management teams and generally provides “one-stop” financing alternatives within its LMM investment strategy.
MSIF was formed as a Maryland corporation onin November 28, 2011 under the General Corporation Law of the State of Maryland. The Company isto operate as an externally managed non-diversified closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The CompanyMSIF has elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, MSIF generally does not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.

On October 28, 2020, MSIF’s stockholders approved the appointment of MSC Adviser I, LLC (our “Adviser”), which is wholly-owned by Main Street Capital Corporation (“Main Street”), a New York Stock Exchange listed BDC, as MSIF’s investment adviser and administrator under an Investment Advisory and Administrative Services Agreement dated October 30, 2020 (the “Investment Advisory Agreement”). In such role, our Adviser has the responsibility to manage the business of MSC Income Fund, including the responsibility to identify, evaluate, negotiate and structure prospective investments, make investment and portfolio management decisions, monitor MSC Income Fund’s Investment Portfolio (as defined below) and provide ongoing administrative services.
WeMSIF has certain direct and indirect wholly-owned subsidiaries that have elected to be taxable entities (the “Taxable Subsidiaries”). The primary purpose of the Taxable Subsidiaries is to permit MSIF to hold equity investments in portfolio companies which are “pass-through” entities for tax purposes. MSIF also has certain direct and indirect wholly-owned subsidiaries formed for financing purposes (the “Structured Subsidiaries”).
Unless otherwise noted or the context otherwise indicates, the terms “we,” “us,” “our,” the “Company” and “MSC Income Fund” refer to HMS Income Fund, Inc. asMSIF and its consolidated subsidiaries, which include the “Company,”Taxable Subsidiaries and the useStructured Subsidiaries.
CORPORATE INFORMATION
Our principal executive offices are located at 1300 Post Oak Boulevard, 8th Floor, Houston, Texas 77056. We maintain a website on the Internet at www.mscincomefund.com. We make available free of “we,” “our,” “us” or similar pronouns in thischarge on our website our annual reports on Form 10-K, refersquarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to HMS Income Fund, Inc.those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Company as requiredSEC. Information contained on our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider that information to be part of this Annual Report on Form 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports and other public filings are also available free of charge on the context in which such pronoun is used.EDGAR Database on the SEC’s website at www.sec.gov.

OVERVIEW OF OUR BUSINESS
Our primaryprincipal investment objective is to generatemaximize our portfolio’s total return by generating current income throughfrom our debt investments and equity investments. A secondary objective is to generate long-termcurrent income and capital appreciation through suchfrom our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities.securities in a portfolio company. We seek to achieve our investment objective through our Private Loan (as defined below), LMM and Middle Market investment strategies. Our portfolioprivate loan (“Private Loan”) investment strategy is to invest primarilyinvolves investments in illiquid debtcompanies that are generally consistent with the
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size of the companies in our LMM and equity securities issued by lower middle market (“LMM”)Middle Market investment strategies. Our LMM investment strategy involves investments in companies whichthat generally have annual revenues between $10 million and $150 million, and middle market (“million. Our Middle Market”)Market investment strategy involves investments in companies that are generally larger in size than theour LMM companies, and havewith annual revenues typically between $10$150 million and $3$1.5 billion. Our Private Loan, LMM and Middle Market portfolio investments generally range in size from $1 million to $15$20 million. The Company categorizes some of its investments in LMM companies and Middle Market companies as private loan (“Private Loan”) portfolio investments.
Private Loan investments primarily consist of debt securities that have primarily been originated directly by our Adviser or, to a lesser extent, through our Adviser’s strategic relationships with other investment funds on a collaborative basis through investments that are often referred to in the debt markets as “club deals,”deals” because of the small lender group size. Our Private Loan investments are investments, generallytypically made to support a company owned by or in debt instruments, that we originate onthe process of being acquired by a collaborative basis with other investment funds.private equity sponsor. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. We may also includesco-invest with Main Street and the private equity sponsors in the equity securities of our Private Loan portfolio companies.
We seek to fill the financing gap for LMM businesses, which, historically, have had limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participation. Our ability to invest across a company’s capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a “one-stop” financing solution. Providing customized, “one-stop” financing solutions is important to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date.
Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio and that were issued by the issuer through a syndicated process. Our Middle Market portfolio debt investments 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.
Our other portfolio (“Other Portfolio”) investments primarily consistingconsist of investments that are not consistent with the typical profiles for our investmentPrivate Loan, LMM 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 HMS-ORIX SLF LLC (“HMS-ORIX”) (as described below) andconnection with investments managed by third parties, such as investments in other investment companies or private funds.
Our portfolio investments are generally made through MSIF, the Taxable Subsidiaries and the Structured Subsidiaries. MSIF, the Taxable Subsidiaries and the Structured Subsidiaries share the same investment strategies and criteria. An investor’s return in MSIF will depend, in part, on the Taxable Subsidiaries’ and the Structured Subsidiaries’ investment returns as they are wholly-owned subsidiaries of MSIF.
The level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals, our ability to identify new investment opportunities that meet our investment criteria, and our ability to consummate the identified opportunities and our available liquidity. The level of new investment activity, and associated interest and fee income, will directly impact future investment income. In addition, the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long term, our growth and our operating results may be more limited during depressed economic periods. However, we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity, economic conditions and the performance of our individual portfolio companies. The changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results.
We have received an exemptive order from the SEC permitting co-investments among us, Main Street and other funds and clients advised by our Adviser 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-
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investments with Main Street and other funds and clients advised by our Adviser, in accordance with the conditions of the order. The order requires, among other things, that we and our Adviser consider whether each such investment opportunity is appropriate for us, Main Street and the other funds and clients advised by our Adviser, as applicable, and if it is appropriate, to propose an allocation of the investment opportunity between such parties. Because our Adviser is wholly-owned by Main Street and is not managing our investment activities as its sole activity, this may provide our Adviser an incentive to allocate opportunities to Main Street, other participating funds and other clients instead of us. However, our Adviser has 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.
BUSINESS STRATEGIES
Our principal investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and current income and capital appreciation from our equity and equity-related investments including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. We have adopted the following business strategies to achieve our investment objective:
•Focus on Established Companies. We generally invest in companies with established market positions, experienced management teams and proven revenue streams. Through our Private Loan and LMM investment strategies, we access proprietary investments with attractive risk-adjusted return characteristics to generate a cash yield to support our quarterly dividend. We believe that those companies generally possess better risk-adjusted return profiles than newer companies that are building their management teams or are in the early stages of building a revenue base. We also believe that established companies in our targeted size range also generally provide opportunities for capital appreciation.
•Deliver Customized Financing Solutions in the Lower Middle Market. We offer LMM portfolio companies customized debt and equity financing solutions that are tailored to the facts and circumstances of each situation. We believe our ability to provide a broad range of customized financing solutions to LMM companies sets us apart from other capital providers that focus on providing a limited number of financing solutions. Our ability to invest across a company’s capital structure, from senior secured loans to subordinated debt to equity securities, allows us to offer LMM portfolio companies a comprehensive suite of financing options, or a “one-stop” financing solution.
•Leverage the Skills and Experience of our Adviser’s Investment Team. Our Adviser’s investment team has significant experience in lending to and investing in Middle Market and LMM companies. The members of our Adviser’s investment team have broad investment backgrounds, with prior experience at private investment funds, corporate entities with active acquisition growth strategies and activities, investment banks and other financial services companies. The expertise of our Adviser’s investment team in analyzing, valuing, structuring, negotiating and closing transactions should provide us with competitive advantages by allowing us to consider customized financing solutions and non-traditional or complex structures for our portfolio companies.
•Invest Across Multiple Companies, Industries, Regions and End Markets. We seek to maintain a portfolio of investments that is appropriately balanced among various companies, industries, geographic regions and end markets. This portfolio balance is intended to mitigate the potential effects of negative economic events for particular companies, regions, industries and end markets.
•Capitalize on Strong Transaction Sourcing Network. Our Adviser’s investment team seeks to leverage its extensive network of referral sources for portfolio company investments. Main Street has developed a reputation in our marketplace as a responsive, efficient and reliable source of financing, which differhas created a growing stream of proprietary deal flow for us.
•Benefit from Lower, Fixed, Long-Term Cost of Capital. We maintain an investment grade rating from Kroll Bond Rating Agency, LLC which provides us the opportunity and flexibility to obtain additional, attractive long-term financing options to supplement our capital structure, including the unsecured notes with fixed interest rates we issue.
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INVESTMENT CRITERIA
Our Adviser’s investment team has identified the following investment criteria that it believes are important in evaluating prospective portfolio companies. Our Adviser’s investment team uses these criteria in evaluating investment opportunities. However, not all of these criteria have been, or will be, met in connection with each of our investments:
•Established Companies with Positive Cash Flow. We seek to invest in established companies with sound historical financial performance. We pursue investments in debt securities of Middle Market companies that are generally established companies with sound historical financial performance that are generally larger in size than LMM companies. We also focus on LMM companies that have historically generated earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $3 million to $20 million and commensurate levels of free cash flow. We generally do not invest in start-up companies or companies with speculative business plans.
•Defensible Competitive Advantages/Favorable Industry Position. We primarily focus on companies having competitive advantages in their respective markets and/or operating in industries with barriers to entry, which may help to protect their market position and profitability.
•Proven Management Team with Meaningful Equity Stake. We look for operationally-oriented management with direct industry experience and a successful track record. In addition, we expect the management team of each LMM portfolio company to have meaningful equity ownership in the portfolio company to better align our respective economic interests. We believe management teams with these attributes are more likely to manage the companies in a manner that both protects our debt investment and enhances the value of our equity investment.
•Exit Alternatives. We exit our debt investments primarily through the repayment of our investment from internally generated cash flow of the portfolio company and/or a refinancing. In addition, we seek to invest in companies whose business models and expected future cash flows may provide alternate methods of repaying our investment, such as through a strategic acquisition by other industry participants or a recapitalization.
INVESTMENT PORTFOLIO
The “Investment Portfolio”, as used herein, refers to our investments in Middle Market companies (including both our Private Loan and Middle Market portfolio investments), investments in LMM companies (including both our Private Loan and LMM portfolio investments) and Other Portfolio investments. Our Private Loan portfolio investments primarily consist of investments in debt securities in companies that are consistent with the size of the companies in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio investments are primarily originated directly by our Adviser, or to a lesser extent, through our Adviser’s 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 to support a company owned by or in the process of being acquired by a private equity sponsor. Our LMM portfolio investments primarily consist of secured debt, direct equity investments and equity warrants in privately held, LMM companies based in the United States. Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio and that were issued by the issuer through a syndicated process. Our Other Portfolio investments primarily consist of investments that are not consistent with the typical profiles for our other types of investments.

We co-invest in broadly-syndicated loans with ORIX Funds Corp. (“Orix”) through our investment in HMS-ORIX, which is organized as a Delaware limited liability company. HMS-ORIX was formed in April 2017. Pursuant to the terms of the limited liability company agreementPrivate Loan, LMM and through representation on the HMS-ORIX Board of Managers, we and Orix each have 50% voting control of HMS-ORIX and together will agree on all portfolio and investment decisions as well as all other significant actions for HMS-ORIX. We do not operationally control HMS-ORIX, and, accordingly, we do not consolidate the operations of HMS-ORIX within the consolidated financial statements. As of December 31, 2017, we and Orix have committed to provide, and have funded, an aggregate of $50.0 million of equity to HMS-ORIX, with us providing $30.0 million (60% of the equity) and Orix providing $20.0 million (40% of the equity). See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Portfolio Investment Composition - Investment in HMS-ORIX.”

We previously registered for sale up to 150,000,000 shares of common stock pursuant to a registration statement on Form N-2 (File No. 333-178548) which was initially declared effective by the SEC on June 4, 2012 (the “Initial Offering”). The Initial Offering terminated on December 1, 2015. We raised approximately $601.2 million under the Initial Offering, including proceeds from the distribution reinvestment plan of approximately $22.0 million. We also registered for sale up to $1,500,000,000 worth of shares of common stock (the “Offering”) pursuant to the Registration Statement, as amended, most recently declared effective on May 1, 2017. With the approval of our board of directors, we closed the Offering to new investors effective September 30, 2017. We continue to operate the distribution reinvestment plan, pursuant to which stockholders may elect to have their cash distributions reinvested in additional shares of our common stock. We raised approximately $184.1 million in the Offering including proceeds from the distribution reinvestment plan of approximately $52.4 million through December 31, 2017.

We have three wholly owned subsidiaries. HMS Funding I LLC (“HMS Funding”) and HMS Equity Holding, LLC (“HMS Equity Holding”), were both organized as Delaware limited liability companies and HMS Equity Holding II, Inc. (“HMS Equity Holding II”) was organized as a Delaware corporation. HMS Funding was created pursuant to the Deutsche Bank Credit Facility (as defined


below) in order to function as a “Structured Subsidiary,” which is permitted to incur debt outside of the EverBank Credit Facility (as defined below) since it is not a guarantor under the EverBank Credit Facility. HMS Equity Holding and HMS Equity Holding II, which have elected to be taxable entities, primarily hold equity investments in portfolio companies which are “pass through” entities for tax purposes.

The business of the Company is managed by HMS Adviser LP (the “Adviser”), a Texas limited partnership and wholly owned affiliate of Hines Interests Limited Partnership (“Hines”), under an Investment Advisory and Administrative Services Agreement dated May 31, 2012 (as amended, the “Investment Advisory Agreement”). Our Adviser oversees the management of our activities and is responsible for making investment decisions with respect to, and providing day-to-day management and administration of our investment portfolio. The Company and the Adviser have retained MSC Adviser I, LLC (the “Sub-Adviser”), a wholly owned subsidiary of Main Street Capital Corporation (“Main Street”), a New York Stock Exchange listed BDC, as the Company’s investment sub-adviser pursuant to an Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement”) to identify, evaluate, negotiate and structure prospective investments, make investment and portfolio management recommendations for approval by the Adviser, monitor the Company’s investment portfolio and provide certain ongoing administrative services to the Adviser. The Adviser and the Sub-Adviser are collectively referred to as the “Advisers,” and each is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Upon the execution of the Sub-Advisory Agreement, Main Street became an affiliate of the Company. The Company’s board of directors most recently reapproved the Investment Advisory Agreement and Sub-Advisory Agreement on May 12, 2017. The Company engaged Hines Securities, Inc. (the “Dealer Manager”), an affiliate of the Adviser, to serve as the Dealer Manager for the Offering.

Employees
We do not have any direct employees, and our day-to-day investment operations are managed by our Adviser, which is also our administrator. Our executive officers consist of a president and chief executive officer, a chief financial officer and secretary, a chief accounting officer and treasurer and a chief compliance officer, all of whom are employees of Hines.

Corporate Information
Our executive offices are located at 2800 Post Oak Boulevard, Suite 5000, Houston, Texas 77056-6118, and our telephone number is 1-888-220-6121. We make available all of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports free of charge on our internet website at www.hinessecurities.com/bdcs/hms-income-fund/ as soon as reasonably practical after such material is electronically filed with or furnished to the SEC. These reports are also available on the SEC’s internet website at www.sec.gov. The public may also read and copy paper filings that we have made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Information contained on our website is not incorporated by reference into this Form 10-K and stockholders should not consider information contained on our website to be part of this Form 10-K.
Overview of our Business

As of December 31, 2017, we had 59 debt investments in 54 Middle Market portfolio companies with an aggregate fair value of approximately $545.2 million and a total cost basis of approximately $569.3 million, and four equity investments in three Middle Market portfolio companies with an aggregate fair value of approximately $4.6 million and a total cost basis of approximately $3.3 million. As of December 31, 2017, 82.8% of our Middle Market debt investments were secured by first priority liens. Our 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.
Debt Investments
The debt investments in our Private Loan portfolio have an average investment sizerights and protections that are similar to those in our LMM debt investments, which may include affirmative and negative covenants, default penalties, lien protection, change of $8.7 millioncontrol provisions, guarantees and equity pledges. Our Private Loan portfolio debt investments are generally secured by a first priority lien and typically have a weighted average annual effective yieldterm of approximately 9.1%. The Middle Marketbetween three and seven years from the original investment date. Our Private Loan debt investments generally have floating interest rates at a London Interbank Offeredthe Secured Overnight Financing Rate (“LIBOR”SOFR”) or the Prime rate typically subject to a contractual minimum interest rate (an “interest rate floor”), plus a premium, subject to LIBOR floors, andmargin.
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Historically, we have an average term of three to seven years.
As of December 31, 2017, we had 28made LMM debt investments principally in 23the form of single tranche debt. Single tranche debt financing involves issuing one debt security that blends the risk and return profiles of both first lien secured and subordinated debt. We believe that single tranche debt is more appropriate for many LMM portfolio companies with an aggregate fair value of approximately $87.8 million,given their size in order to reduce structural complexity and a total cost basis of approximately $88.4 million, and 29 equity investments in 23 LMM portfolio companies with an aggregate fair value of approximately $47.9 million, and a total cost basis of approximately $38.2 million. potential conflicts among creditors.
Our LMM debt investments generally have termsa term of five to seven years from the original investment date, with limited required amortization prior to maturity, and provide for monthly or quarterly payment of interest at interest rates generally between 10% and 14% per annum, payable currently in cash. Interest rate terms can include either fixed or floating rate terms. The LMM debt investments with floating interest rates will generally bear interest at the SOFR or the Prime rate typically subject to an interest rate floor, plus a margin. In addition, certain LMM debt investments may have a form of interest that is not paid currently but is accrued and added to the loan balance and paid at maturity. We refer to this form of interest as payment-in-kind, or PIK, interest. We typically structure our LMM debt investments with the maximum seniority and collateral that we can reasonably obtain while seeking to achieve our total return target. In most cases, our LMM debt investment will be collateralized by a first or second priority lien on substantially all the assets of the portfolio company. AsIn addition to seeking a senior lien position in the capital structure of December 31, 2017,our LMM portfolio companies, we seek to limit the downside potential of our LMM debt investments had a weighted average annual effective yieldby negotiating covenants that are designed to protect our LMM debt investments while affording our portfolio companies as much flexibility in managing their businesses as is reasonable. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of approximately 12.2%control or change of management provisions, key-man life insurance, guarantees, equity pledges, personal guaranties, where appropriate, and put rights. In addition, we typically seek board representation or observation rights in all of our LMM portfolio companies.
While we will continue to focus our LMM debt investments primarily on single tranche debt investments, we may structure some of our debt investments as mezzanine loans. These mezzanine loans would be primarily junior secured or unsecured, subordinated loans that would provide for relatively high interest rates, payable currently in cash, and would provide us with significant interest income. These mezzanine loans would afford us the additional opportunity for income and gains through PIK interest and equity warrants and other similar equity instruments issued in conjunction with these mezzanine loans. These loans typically would have interest-only payments in the early years, with amortization of principal deferred to the later years of the mezzanine loan term. Typically, these mezzanine loans would have maturities of three to five years. We would generally target interest rates of 12% to 14%, and 100.0% of suchpayable currently in cash, for our mezzanine loan investments werewith higher targeted total returns from equity warrants or PIK interest.

Our Middle Market portfolio debt investments are generally secured by a first priority lienslien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. The debt investments in our Middle Market portfolio usually have rights and protections that are similar to those in our Private Loan and LMM portfolio companies.debt investments. The LMMMiddle Market debt investments generally have floating interest rates at SOFR or Prime rate typically subject to an interest rate floor, plus a margin.
Direct Equity Investments
We also seek to make direct equity investments consistto align our interests with key management and stockholders of equity ownership interests in theour LMM portfolio companies, and to allow for participation in the appreciation in the equity values of our LMM portfolio companies. We usually make our direct equity investments in connection with debt investments in our LMM portfolio companies. In addition, we may have both equity warrants and direct equity positions in some of our LMM portfolio companies. We, on a combined basis together with Main Street and other investment funds and accounts managed by our Adviser, seek to acquiremaintain fully diluted equity positions in our LMM portfolio companies of 5% to 50%, and may have controlling equity interests in the LMM portfolio companies.



As of December 31, 2017, we had 38 debt investments in 37 Private Loan portfolio companies with an aggregate fairsome instances. We have a value of approximately $306.8 million and a cost basis of approximately $307.7 million, and 11orientation toward our direct equity investments in eight Private Loan portfolio companies with an aggregate fair value of approximately $8.6 million and a cost basis of approximately $8.7 million. The Private Loan debthave traditionally been able to purchase our equity investments had a weighted average annual effective yield of approximately 9.1%, and 95.0% of the Private Loan debt investments were secured by first priority liens.

As of December 31, 2017, we had seven Other Portfolio investments, including our investment in HMS-ORIX, both with an aggregate fair value and cost basis of approximately $48.6 million, which comprised 4.6% of our investment portfolio at fair value.

The value of our investment portfolio will fluctuate with changes in market pricing of our underlying investments. During the fourth quarter of 2014 through the first quarter of 2016, our portfolio experienced significant unrealized losses that were largely related to the impact of broad price declines in the high yield bond and leveraged loan markets and the effect of the declining oil prices on our investments in the oil and gas sector. In 2016 and 2017, we recognized realized losses on investments in our portfolio, primarily driven by the restructuring of certain investments in the oil and gas sector. Although we have seen a recovery in the leveraged loan markets since early 2016, it has not been sufficient to reverse these unrealized and realized losses, primarily because the price of oil remains depressed relative to when we made several investments in the oil and gas sector.

reasonable valuations. We will continue investing in, and intendalso have, from time to have a significant portion of our assets invested in, customized direct secured and unsecured loans to and equity securities of LMM companies. In most cases, companies that issue customized LMM securities to us will be privately held attime, the time we invest in them. Typically, our investment in LMM companies will require usopportunity to co-invest with Main Street and/or its affiliates. These types of co-investments required us to obtain an exemptive order fromand the SEC as discussed below. Whileprivate equity sponsors in the structureequity securities of our Private Loan portfolio companies. The equity co-investment aligns our interests with those of the private equity sponsor and provides us with the opportunity to benefit from appreciation in the equity values of our Private Loan portfolio companies.
Warrants
In connection with our LMM debt investments, in customized LMM securities is likely to vary, we may invest in senior secured debt, senior unsecured debt, subordinated secured debt, subordinated unsecured debt, mezzanine debt, convertible debt, convertible preferred equity, preferred equity, commonoccasionally receive equity warrants and other instruments, many of which generate current yields. We will make other investments as allowed by the 1940 Act and consistent withto establish or increase our continued qualification as a RIC. For a discussion of the risks inherent in our portfolio investments, see “Item 1A. Risk Factors — Risks Relating to our Business and Structure.”
Our investments may include other equity investments, such as warrants, options to buy a minority interest in a portfolio company, or contractual payment rights or rights to receive a proportional interest in the operating cash flow or net income of such company. When determined by our Advisers to be in our best interest, we may acquire a controlling interest in a portfolio company. Any warrantsWarrants that we receive in connection with oura debt securities mayinvestment typically require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We intend totypically structure suchthe warrants to includeprovide provisions protecting our rights
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as a minority-interest or, if applicable, controlling-interest holder, as well as puts,secured or unsecured put rights, or rights to sell such securities back to the portfolio company, upon the occurrence of specified events. In addition,certain cases, we also may obtain demand or “piggyback” registration rights in connection with these equity interests.interests, which may include demand and “piggyback” registration rights.
INVESTMENT PROCESS
We plan to hold manyOur Adviser’s investment committee has oversight over all aspects of our investments to maturity or repayment but will sell our investments earlier if a liquidity event takes place, such as the sale or recapitalization of a portfolio company, or if we determine the sale to be in our best interest.

As a BDC, we are subject to certain regulatory restrictions in making our investments, including limitations on our ability to co-invest with certain affiliates. However, we received exemptive relief from the SEC that permits us, subject to certain conditions, to co-invest with Main Street and/or its affiliates in certain transactions originated by Main Street and/or our Advisers.investment processes. The exemptive relief permits us, and certain of our directly or indirectly wholly owned subsidiaries on one hand, and Main Street, and/or certain of its affiliates, on the other hand, to co-invest in the same investment opportunities where such investment would otherwise be prohibited under Section 57(a)(4)current members of the 1940 Act. Under the co-investment program described ininvestment committee are Dwayne L. Hyzak, our application for exemptive relief, as amended, co-investments between us and Main Street will be the norm rather than the exception, as substantially all potential co-investments that are appropriate investments for us should also be appropriate investments for Main Street, and vice versa. Limited exceptions to co-investing will be based on available capital, diversification and other relevant factors. Accordingly, our Sub-Adviser treats every potential investment in customized LMM securities evaluated by Main Street as a potential investment opportunity for us, determines the appropriateness of each potential investment for co-investment by us, provides to our Adviser, in advance, information about each potential investment that it deems appropriate for us and proposes an allocation according to an investment allocation policy that is between us and Main Street and reviewed periodically by our board of directors. If our Adviser deems such potential co-investment transaction and proposed allocation appropriate for us, our Adviser will present the transaction and the proposed allocation to the members of our board of directors who are (1) not interested persons of us or Main Street, and (2) who do not have a financial interest in the proposed transaction or the proposed portfolio company, which directors are referred to as “Eligible Directors,” and our Sub-Adviser will present the transaction and the proposed allocation for Main Street to the Eligible Directors of the Main Street board of directors. Each board of directors, including a majority of the


Eligible Directors of each board of directors, will approve each proposed co-investment transaction and the allocation associated therewith prior to the consummation of any co-investment transaction. No independent director on our board of directors or Main Street’s board of directors will have any direct or indirect financial interest in any co-investment transaction or any interest in any related portfolio company, other than through an interest (if any) in our or Main Street’s securities, as applicable. Additional information regarding the operation of the co-investment program is set forth in the order granting exemptive relief, which may be reviewed on the SEC’s website at www.sec.gov.

In addition to the co-investment program described in the Form 10-K and in the exemptive relief, we may continue to co-invest in syndicated deals and secondary loan market transactions where price is the only negotiated point.
We expect that the debt in which we invest will generally have stated terms of three to seven years. However, we are in no way limited with regard to the maturity or duration of any debt investment we may make, and we do not have a policy in place with respect to stated maturities of debt investments.

To enhance our opportunity for gain, we intend to continue to employ leverage as market conditions permit and at the discretion of our Adviser, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act.
Business Strategy
Our primary investment objective is to generate current income through debt and equity investments in LMM companies based in the United States and secured debt investments of Middle Market companies generally headquartered in the United States. A secondary objective is to generate long-term capital appreciation through equity and equity-related investments including warrants, convertible securities, and other rights to acquire equity securities. We have adopted the following business strategy to achieve our investment objective:
Utilize the experience and expertise of the principals of our Advisers. The investment professionals employed by our Sub-Adviser are also the investment professionals responsible for investing and managing Main Street’s securities portfolio. Main Street is a BDC whose shares are listed on the New York Stock Exchange. Main Street’s primary investment focus is providing customized debt and equity financing to LMM companies and debt capital to Middle Market companies that operate in diverse industry sectors. At December 31, 2017, Main Street had debt and equity investments with an aggregate fair value of approximately $2.2 billion in 186 portfolio companies. Our Adviser’s senior management team, through affiliates of Hines, has participated in the management of three publicly offered and non-traded real estate investment trusts and has extensive experience in evaluating and underwriting the credit of tenants, many of which are LMM companies, of its commercial real estate properties. The principals of our Adviser, including Sherri W. Schugart, the Chairman of our board of directors,Chief Executive Officer, David Magdol, our President and Chief ExecutiveInvestment Officer, and Ryan T. Sims,Vincent D. Foster, senior advisor to Main Street and Chairman of its board of directors.
Our Adviser’s investment processes for Private Loan, LMM and Middle Market portfolio investments are outlined below. Our Adviser’s investment strategy involves a “team” approach, whereby potential transactions are screened by several members of our Chief Financial OfficerAdviser’s investment team before being presented to the investment committee. The investment committee meets on an as-needed basis depending on transaction volume. Our Adviser generally categorizes our investment process into seven distinct stages:
Deal Generation/Origination
Deal generation and Secretary, have access to a broad network oforigination is maximized through our Adviser’s long-standing and extensive relationships with financial sponsors,industry contacts, brokers, commercial and investment banks, LMMbankers, entrepreneurs, service providers such as lawyers, financial advisors and accountants, and current and former portfolio companies and leaders within a number of industries that we believe produce significantinvestors. Our Adviser’s investment opportunities.

Focusteam has focused its deal generation and origination efforts on Private Loan, LMM and Middle Market investments, and Main Street has developed a reputation as a knowledgeable, reliable and active source of capital and assistance in these markets.
Screening
During the screening process, if a transaction initially meets our investment criteria, our Adviser will perform preliminary due diligence, taking into consideration some or all of the following information:
•a comprehensive financial model based on quantitative analysis of historical financial performance, projections and pro forma adjustments to determine the estimated internal rate of return;
•a brief industry and market analysis;
•direct industry expertise imported from other portfolio companies or investors;
•preliminary qualitative analysis of the management team’s competencies and backgrounds;
•potential investment structures and pricing terms; and
•regulatory compliance.
Upon successful screening of a proposed Private Loan transaction, the investment team makes a recommendation to the investment committee. If the investment committee concurs with moving forward on the proposed Private Loan transaction, we typically issue a non-binding term sheet to the company. Upon successful screening of a proposed LMM companiestransaction, the investment team makes a recommendation to the investment committee. If the investment committee concurs with stable cash flow. We believe that there are relatively few finance companies focusedmoving forward on transactions involvingthe proposed LMM transaction, we typically issue a non-binding term sheet or letter of intent to the company. For Middle Market portfolio investments, the initial term sheet is typically issued by the borrower, through the syndicating bank, and is screened by the investment team which makes a recommendation to the investment committee.
Term Sheet
For proposed Private Loan transactions, the non-binding term sheet will include the key economic terms based upon our analysis performed during the screening process, as well as a proposed timeline and our qualitative expectation for the transaction. Upon execution of a term sheet, our Adviser begins the formal due diligence process.
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For proposed LMM companies,transactions, the non-binding term sheet or letter of intent will include the key economic terms based upon our analysis performed during the screening process, as well as a proposed timeline and our qualitative expectation for the transaction. While the term sheet or letter of intent for LMM investments is non-binding, we typically receive an expense deposit in order to move the transaction to the due diligence phase. Upon execution of a term sheet or letter of intent, our Adviser begins the formal due diligence process.
For proposed Middle Market transactions, the initial term sheet will include key economic terms and other conditions proposed by the borrower and its representatives and the proposed timeline for the investment, which allows usare reviewed by the investment team to negotiate favorabledetermine if such terms and conditions are in agreement with our investment terms. Such favorable terms include higher debt yieldsobjectives.
Due Diligence
Due diligence on a proposed Private Loan or Middle Market investment is generally performed on materials and lower leverage levels, more significant covenant protectioninformation obtained from certain external resources and greater equity participation thanassessed internally by a minimum of three of our Adviser’s investment professionals, who work to understand the relationships among the prospective portfolio company’s business plan, operations and financial performance using the accumulated due diligence information. Our Adviser’s typical of transactions involving larger companies. We generally invest in established companies with positive cash flow. We believe that established companies possess better risk-adjusted return profiles than newer companies that are building managementPrivate Loan and Middle Market due diligence review includes some or in early stages of building a revenue base. These companies represent a significant portionall of the U.S. economyfollowing:
•detailed review of historical and often require substantial capital investment to grow their businesses.
projected financial statements;

•site visits or other discussions with management and key personnel;
Emphasize discipline in our underwriting policies•in-depth industry, market, operational and rigor in our portfolio management. We employ an underwriting process that includes astrategy analysis;
•regulatory compliance analysis; and
•detailed review of the prospects, competitive position, financial performancecompany’s management team and industry dynamicstheir capabilities.
Due diligence on a proposed LMM investment is performed by a minimum of each potential portfolio company. In addition,three of our Adviser’s investment professionals, whom we performrefer to collectively as the investment team, and certain external resources, who together conduct due diligence on potential investmentsto understand the relationships among the prospective portfolio company’s business plan, operations and seek to investfinancial performance. Our Adviser’s LMM due diligence review includes some or all of the following:
•site visits with management teams and/and key personnel;
•detailed review of historical and projected financial statements;
•operational reviews and analysis;
•interviews with customers and suppliers;
•detailed evaluation of company management, including background checks;
•review of material contracts;
•in-depth industry, market and strategy analysis;
•regulatory compliance analysis; and
•review by legal, environmental or other consultants, if applicable.
During the due diligence process, significant attention is given to sensitivity analyses and how the company might be expected to perform given downside, base-case and upside scenarios. In certain cases, we may decide not to make an investment based on the results of the diligence process.
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Document and Close
Upon completion of a satisfactory due diligence review of a proposed Private Loan or Middle Market portfolio investment, the investment team presents the findings and a recommendation to the investment committee. The presentation contains information which can include, but is not limited to, the following:
•company history and overview;
•transaction overview, history and rationale, including an analysis of transaction strengths and risks;
•overview and history of the private equity sponsors who have proven capabilities in building value. Throughsponsor as the company’s equity owner;

•analysis of key customers and suppliers;
•an analysis of the company’s business strategy;
•investment structure and expected returns;
•anticipated sources of repayment and potential exit strategies;
•pro forma capitalization and ownership;
•regulatory compliance analysis findings; and
•an analysis of historical financial results and key financial ratios.
Upon completion of a satisfactory due diligence review of a proposed LMM portfolio investment, the investment team presents the findings and a recommendation to the investment committee. The presentation contains information which can include, but is not limited to, the following:
•company history and overview;
•transaction overview, history and rationale, including an analysis of transaction strengths and risks;
•analysis of key customers and suppliers and key contracts;
•a working capital analysis;
•an analysis of the company’s business strategy;
•a management and key equity investor background check and assessment;
•third-party accounting, legal, environmental or other due diligence findings;
•investment structure and expected returns;
•anticipated sources of repayment and potential exit strategies;
•pro forma capitalization and ownership;
•an analysis of historical financial results and key financial ratios;
•sensitivities to management’s financial projections;
•regulatory compliance analysis findings; and
•detailed reconciliations of historical to pro forma results.
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If any adjustments to the transaction terms or structures are proposed by the investment committee, such changes are made and applicable analyses are updated prior to approval of the transaction. Approval for the transaction must be made by the affirmative vote from a majority of the members of the investment committee, with the committee member managing the transaction, if any, abstaining from the vote. Upon receipt of transaction approval, the investment team will re-confirm regulatory compliance, process and finalize all required legal documents, and fund the investment.
Post-Investment
Our Adviser continuously monitors the status and progress of our Advisers, we offerportfolio companies. Our Adviser generally offers managerial assistance to our portfolio companies, giving them access to our Adviser’s investment experience, direct industry expertise and contactscontacts. The same investment team that was involved in the investment process will continue its involvement in the portfolio company post-investment. This provides for continuity of knowledge and allowing usallows the investment team to continually monitor their progress. maintain a strong business relationship with key management of our portfolio companies for post-investment assistance and monitoring purposes.
As part of the monitoring process of our AdvisersPrivate Loan and Middle Market portfolio investments, the investment team will analyze monthly and quarterly financial statements versus the previous periods and year, review financial projections and review all compliance certificates and covenants. Depending upon the nature of our Private Loan portfolio investments, the investment team may also attend board meetings, and meet and discuss issues or opportunities with the portfolio company’s management team or private equity owners; however, due to the larger size and nature of our Adviser’s “lender only” relationship, with these Private Loan and Middle Market companies in comparison to our LMM portfolio companies, it is not necessary or practical to have as much direct management interface.
As part of the monitoring process of our LMM portfolio investments, the investment team will analyze monthly and quarterly financial statements versus the previous periods and year, review financial projections, meet and discuss issues or opportunities with management, attend board meetings and review all compliance certificates and covenants.
While the investment team maintains limited involvement in the ordinary course operations of our LMM portfolio companies, the investment team maintains a higher level of involvement in non-ordinary course financing or strategic activities and any non-performing scenarios.

FocusOur Adviser utilizes an internally developed investment rating system to rate the performance of each Private Loan, LMM and Middle Market portfolio company and to monitor our expected level of returns on long-term credit performanceeach of our Private Loan, LMM and principal protection. We structureMiddle Market investments in relation to our customized loan investments on a conservative basis with high cash yields, first and/or second lien security interests where possible, cash origination fees and lower relative leverage levels. We seek strong deal protectionsexpectations for the portfolio company. The investment rating system takes into consideration various factors, including, but not limited to, each investment’s expected level of returns, the collectability of our customized debt investments including default penalties,


information rights, board observation rights, and affirmative, negative and financial covenants, such as lien protection and prohibitions against change of control. We believe these protections will reduce our risk of capital loss.

Diversification. We seekthe ability to diversify our portfolio broadly among companies inreceive a multitude of different industries and end markets, thereby reducing the concentration of credit risk in any one company or sectorreturn of the economy. We cannot guarantee that we will be successfulinvested capital in this effort.

Deal Origination
Over the years, we believe the management team of Main Street, which controls our Sub-Adviser,equity investments, comparisons to competitors and the affiliates of Hines have developed and maintained a strong reputation as principal investors and an extensive network of relationships. Main Street sources investments of the type we expect to make on a day-to-day basis as part of operating a New York Stock Exchange-listed BDC. Main Street has business development professionals dedicated to sourcing investments through relationships with numerous loan syndication and trading desks, investment banks, private equity sponsors, business brokers, merger and acquisition advisors, finance companies, commercial banks, law firms and accountants. Moreover, through its over 60 years of experience in leasing commercial real estate on a global basis, Hines has developed relationships with a large number of Middle Market companies that are a potential source of Middle Market investment opportunities. Our Adviser also has continuous access to Main Street’s professional team due to its relationship with our Sub-Adviser.
We believe that ourother industry relationships are a significant source for new investment opportunities. We generally source our investments in ways other than going to auctions, which include capitalizing on long-standing relationships with companies and financial sponsors to obtain access to proprietary investment opportunities.
From time to time, we may receive referrals for new prospective investments from our portfolio companies as well as other participants, in the capital markets. We may pay referral fees to those who refer transactions to us that we consummate.
Investment Selection
Our investment philosophy and portfolio construction involves:
An assessment of the overall macroeconomic environment and financial markets;
Company-specific research and analysis;
An emphasis on capital preservation, low volatility and minimization of downside risk;
An assessment of the overall macroeconomic environment and financial markets;
Company-specific research and analysis; and
An emphasis on capital preservation, low volatility and minimization of downside risk.

The foundation of our investment philosophy is intensive credit investment analysis based on fundamental value-oriented research and diversification. Our selection process is based on:

A comprehensive analysis of issuer creditworthiness, including a quantitative and qualitative assessment of the issuer’s business;
An evaluation of the management team;
An analysis of business strategy and long-term industry trends; and
An in-depth examination of capital structure, financial results and financial projections.

We seek to identify those issuers exhibiting superior fundamental risk-return profiles with a particular focus on investments with the following characteristics:
Established companies with a history of positive and stable operating cash flows. We seek to invest in established companies with sound historical financial performance. We typically focus on companies with a history of profitability. We generally will not invest in start-up companies or companies with speculative business plans.
Ability to exert meaningful influence. We target investment opportunities in which we will be the lead investor where we can add value through active participation.
Experienced management team. We generally require that our portfolio companies have an experienced management team. We also seek to invest in companies that have a strong equity incentive program in place that properly aligns the interests of management with a company’s investors.


Strong franchises and sustainable competitive advantages. We seek to invest in companies with proven products and/or services and strong regional or national operations.
Industries with positive long-term dynamics. We seek to invest in companies in industries with positive long-term dynamics.
Companies with exit alternative/refinancing. We generally exit from most debt investments through the portfolio company’s repayment of the debtfuture outlook and other factors that are deemed to us or a successful refinancing with another debt provider. We may exit our equity positions by selling the equity backbe significant to the portfolio company or to another party if the company undergoes a transaction such as a merger or an acquisition. We typically assist our portfolio companies in developing and planning refinancing or exit opportunities, including any sale or merger of our portfolio companies. We may also assist in the structure, timing, execution and transition of the exit strategy or refinancing.

Except as restricted by the 1940 Act or the Code, we deem all of our investment policies to be non-fundamental, which means that they may be changed by our board of directors without stockholder approval.
Intensive Credit Analysis / Due Diligence
The process through which our Advisers make an investment decision with respect to a customized financing transaction in the LMM involves extensive research into the target company, its industry, its growth prospects and its ability to withstand adverse conditions. If the senior investment professional responsible for the transaction determines that an investment opportunity should be pursued, we will engage in an intensive due diligence process. Though each transaction involves a somewhat different approach, the regular due diligence steps generally to be undertaken include:
Meeting with senior management to understand the business more fully and evaluate the ability of the senior management team;
Checking management backgrounds and references;
Performing a detailed review of financial performance and earnings;
Visiting headquarters and other company locations;
Contacting customers and vendors to assess both business prospects and industry wide practices;
Conducting a competitive analysis and comparing the issuer to its main competitors;
Researching industry and financial publications to understand industry wide growth trends;
Assessing asset value and the ability of physical infrastructure and information systems to handle anticipated growth; and
Investigating legal risks and financial and accounting systems.

For Middle Market investments, a comprehensive credit analysis is conducted and continuously maintained, the results of which are available for the transaction team to review. Our due diligence process with respect to Middle Market debt securities is necessarily less intensive than that followed for customized financings. The issuers in these private debt placements tend to be rated and have placement agents who accumulate a certain level of due diligence information prior to placing the securities. Moreover, these private placements generally have much shorter timetables for making investment decisions.
Portfolio Monitoring
Our Advisers employ several methods of evaluating and monitoring the performance and value of our investments, which include the following:
Assessment of success in adhering to the portfolio company’s business plan and compliance with covenants;
Regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;
Attendance at, and participation in, board meetings of the portfolio company; and
Review of monthly and quarterly financial statements and financial projections for the portfolio company.

As a BDC, we are required to offer managerial assistance to our portfolio companies. This assistance could involve monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Our Advisers or any third-party administrator will make available such managerial assistance, on our behalf, to our portfolio companies, whether or not they request this assistance. Our Advisers’ business experience makes them qualified to provide such managerial assistance. We may receive fees for these services and will reimburse our Advisers, or any third-party administrator, for their allocated costs in providing such assistance, subject to periodic review and approval by our board of directors.


Competition
Our primary competition in providing financing to Middle Market and LMM companies includes other BDCs, specialty finance companies, investment companies, opportunity funds, institutional investors, public and private buyout and other private equity funds, commercial and investment banks, commercial financing companies, and, to the extent they provide an alternative form of financing, hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical, and marketing resources than we do. For example, some competitors may have a lower cost of funds as well as access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the source-of-income, asset diversification and distribution requirements we must satisfy to maintain our qualification as a BDC. We use the industry information of our investment professionals to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that our relationships enable us to discover, and compete effectively for, financing opportunities with attractive Middle Market and LMM companies in the industries in which we seek to invest. See “Item IA. Risk Factors — Risks Relating to Our Business and Structure — We may continue to face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses.”

Exit Strategies/Refinancing
While we generally exit most investments through the refinancing or repayment of our debt and redemption or sale of our Advisersequity positions, the refinancing or repayment of Private Loan investments and Middle Market debt investments typically assistdo not require our Adviser’s assistance due to the additional resources available to these larger Private Loan and Middle Market companies. Our Adviser typically assists our LMM portfolio companies in developing and planning exit opportunities, including any sale or merger of our portfolio companies. The AdvisersOur Adviser may also assist in the structure, timing, execution and transition of the exit strategy.
DETERMINATION OF NET ASSET VALUE AND INVESTMENT PORTFOLIO VALUATION PROCESS
We determine the net asset value (“NAV”) per share of our common stock on at least a quarterly basis. The refinancing or repaymentNAV per share is equal to our total assets minus total liabilities divided by the total number of Middleshares of common stock outstanding.
We are required to report our investments at fair value. As a result, the most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. We follow the provisions of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality
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of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market debt investments typically does not require our assistance dueparticipants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact.
We determine in good faith the additional resources available to these larger, Middle Market companies.
Determination of Net Asset Value (“NAV”)
Thefair value of our assets is determined quarterly and at such other times that an event occurs that materially affects the valuation. The valuation is madeInvestment Portfolio pursuant to Section 2(a)(41)a valuation policy in accordance with ASC 820 and a valuation process approved by our Board of Directors and in accordance with the 1940 Act. Our valuation policies and processes are intended to provide a consistent basis for determining the fair value of our Investment Portfolio. See Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a detailed discussion of our Investment Portfolio valuation process and procedures.
Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation.
The 1940 Act which requires that we value our assets as follows: (i)valuation of a portfolio security at “market value” if market quotations for the market price for thosesecurity are “readily available.” Portfolio securities for which a market quotation isquotations are not readily available and (ii) for all other securities and assets,must be valued at fair value as determined in good faith by ourthe board of directors. As a BDC, Section 2(a)(41) ofRule 2a-5 under the 1940 Act requires thepermits a BDC’s board of directors to designate its executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active oversight of the board.
Our Board of Directors has approved policies and procedures pursuant to Rule 2a-5 (the “Valuation Procedures”) and designated our Adviser, led by a group of Main Street’s and our Adviser’s executive officers, to serve as the Board’s valuation designee thereunder (the “Valuation Committee”). Pursuant to the Valuation Procedures, we undertake a multi-step process each quarter in good faithconnection with determining the fair value of our investments.
The following outlines our valuation process as established under the Valuation Procedures:
•Our quarterly process begins with an initial valuation of each portfolio securitiesinvestment performed by the Adviser’s valuation team consisting of several professionals who apply the appropriate valuation methodology depending on the type of investment.
•Each valuation model is then reviewed by the investment team responsible for which a market price is not available,monitoring the portfolio investment for accuracy, with any recommended changes reviewed by the valuation team.
•Updated valuation conclusions are then reviewed by and it does so in conjunctiondiscussed with the applicationValuation Committee at quarterly valuation meetings. Valuation meetings are generally attended by the Valuation Committee, the valuation team, members of the investment team responsible for each investment and members of the compliance team. Valuation models and valuation conclusions are adjusted as necessary following such meetings.
•A nationally recognized independent financial advisory services firm analyzes and provides observations, recommendations and an assurance certification regarding the determinations of the fair value for the majority of our portfolio companies on a rotational basis.
•After incorporating commentary by the Valuation Committee and review of recommendations provided by the independent financial advisory services firm, valuation proceduresresults are finalized and approved by our Advisers.the Valuation Committee.

There is no single standard for determining fair value•The Board of Directors oversees the process through its Audit Committee in good faith. As a result, determining fair value requires that judgment be appliedaccordance with Rule 2a-5 pursuant to the specific facts and circumstances of each asset while employing a valuation process that is consistently followed. DeterminationsValuation Procedures.
Determination of fair value involveinvolves subjective judgments and estimates. Accordingly, theThe notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, inon our consolidated financial statements. See “Item 7. Management’s Discussionresults and Analysisfinancial condition.
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COMPETITION
We compete for investments with a number of investment funds (including private equity funds, mezzanine funds, BDCs and Resultssmall business investment companies (“SBICs”)), as well as traditional financial services companies such as commercial banks and other sources of Operations — Critical Accounting Policies — Valuationfinancing. Many of Portfolio Investments.”
With the approvalentities that compete with us are larger and have more resources available to them. We believe we are able to be competitive with these entities primarily on the basis of the experience and contacts of our boardAdviser’s management team and our ability to co-invest with Main Street and funds and other accounts managed by our Adviser, our general focus on smaller companies in both the Middle Market and LMM, which we believe to be underserved in the capital markets, our Adviser’s responsive and efficient investment analysis and decision-making processes, our comprehensive suite of directors,customized financing solutions and the investment terms we closedoffer.
We believe that some of our competitors make senior secured loans, junior secured loans and subordinated debt investments with interest rates and returns that are comparable to or lower than the Offeringrates and returns that we target. Therefore, we do not seek to new investors effective September 30, 2017. Incompete primarily on the eventinterest rates and returns that we issueoffer to potential portfolio companies. For additional information concerning the competitive risks we face, see Item 1A. Risk Factors — Risks Related to Our Business and Structure — We face increasing competition for investment opportunities.
HUMAN CAPITAL
We do not currently have any employees and do not expect to have any employees in the future. Services necessary for the operation of our sharesbusiness are provided by individuals who are employees of common stock to new investors, we will sellMain Street, which wholly-owns our shares of common stock at a price necessary to ensure that shares of common stock are not sold at a price per share, after deduction of selling commissions and any dealer manager fees, that is below our NAV per share as determined within 48 hours priorAdviser, pursuant to the dateterms of each closing. In the event of a material decline in our NAV per share which we deem to be non-temporary, and that results in a 2.5% or higher decreaseInvestment Advisory Agreement. Each of our NAV per share belowexecutive officers is an employee of Main Street. Our day-to-day investment activities are managed by the Adviser. The services necessary for the origination and monitoring of our then-current net offering price,Investment Portfolio are provided by investment professionals of the Adviser, who are all employed by Main Street. As of December 31, 2023, Main Street had 100 employees, 55 of whom it categorizes as investment and subject to certain conditions, we will reduce our offering price accordingly.

The following table summarizes adjustmentsportfolio management professionals, and the others include operations professionals and administrative staff. Because we have made to our per share public offering price through September 30, 2017, the closing of our Offering to new investors, and the closing date on which such adjustments were effective.
First Effective Closing Date Per Share Public Offering Price
June 4, 2012 $10.00
January 15, 2015 $9.75
May 7, 2015 $9.90
October 8, 2015 $9.70
November 12, 2015 $9.55


First Effective Closing Date Per Share Public Offering Price
January 1, 2016 $9.00
January 21, 2016 $8.80
February 4, 2016 $8.60
February 18, 2016 $8.50
March 24, 2016 $8.60
April 21, 2016 $8.70
May 5, 2016 $8.80
July 28, 2016 $8.90
October 20, 2016 $9.00
November 25, 2016 $9.05
December 15, 2016 $9.10
January 12, 2017 $9.15
January 19, 2017 $9.30

no employees, we do not have a formal employee relations policy.
REGULATION
Regulation as a BDC
Business Development Company
We have elected to be regulated as a BDC under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters. The 1940 Act requires that a majority of ourthe members of the board of directors of a BDC be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities.
The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) more than 50% of our outstanding voting securities.
We are generally not permitted to sell our common stock at a price below NAV per share. See “Item 1A. Risk Factors — Risks Related to BDCs — Regulations governing our operation as a BDC and RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.” We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV of our common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve such sale. In addition, we may generally issue new shares of our common stock at a price below NAV in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.
Qualifying Assets
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are any of the following:
1.Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:
a.is organized under the laws of, and has its principal place of business in, the U.S.;
b.is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
c.satisfies any of the following:
i.does not have any class of securities that is traded on a national securities exchange;
ii.has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;
iii.is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or
iv.is a small and solvent company having total assets of not more than $4.0 million and capital and surplus of not less than $2.0 million.
2.Securities of any eligible portfolio company that we control.

(1)Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company (as defined below), or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC.

(2)Securities of any eligible portfolio company that we control.
3.Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
4.Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
5.
Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.
6.Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
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(3)Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
(4)Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
(5)Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.
(6)Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
In addition, a BDC must have been organized and have its principal place of business in the U.S.United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.
An eligible portfolio company is defined in the 1940 Act as any issuer which:
(a)is organized under the laws of, and has its principal place of business in, the United States;
(b)is not an investment company (other than a small business investment company wholly-owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
(c)satisfies any of the following:
(i)does not have any class of securities that is traded on a national securities exchange or has a class of securities listed on a national securities exchange but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;
(ii)is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the eligible portfolio company; or
(iii)is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million.
Managerial Assistance to Portfolio Companies
In order to count portfolio securities as qualifying assetsAs noted above, a BDC must be operated for the purpose of making investments in the 70% test, wetype of securities described in (1), (2) or (3) above under the heading entitled “— Qualifying Assets.” In addition, BDCs must either control the issuer of the securities or mustgenerally offer to make available to thesuch issuer of the securities (other than small and solvent companies described above) significant managerial assistance. However, when we purchase such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.
However, if a BDC purchases securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such significant managerial assistance on behalf of all investors in the group.
Temporary Investments
Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities orand high-quality debt securities maturing in one year or less from the time of investment which we refer to, collectively, as temporary investments,therein, so that 70% of our assets are qualifying assets.
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Senior Securities
WeUnder the provisions of the 1940 Act, we are permitted, under specified conditions,as a BDC, to issue multiple classes of debt and one class of stock senior to our common stock ifsecurities only in amounts such that our asset coverage, as defined in the 1940 Act, isequals at least equal to 200% of all debt and/or senior stock immediately after each such issuance. However, 2018 legislation modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur such that a BDC’s asset coverage ratio could be reduced from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met. We are permitted to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when quorum is met, approve a proposal to do so. If we receive such stockholder approval, we would be permitted to increase our leverage capacity on the first day after such approval. Alternatively, we may increase the maximum amount of leverage we may incur to an asset coverage ratio of 150% if the “required majority” of our independent directors as defined in Section 57(o) of the 1940 Act approve such increase with such approval becoming effective after one year. In either case, because our common stock is not listed on a national securities exchange, we would also be required to offer to repurchase 100% of the shares of our stockholders as of the date of the requisite approval over the following year (25% in each of the following four quarters). We have not requested or obtained either such approval.
In addition, while any senior securities remain outstanding (other than senior securities representing indebtedness issued in consideration of a privately arranged loan which is not intended to be publicly distributed), we must makegenerally include provisions in the documents governing new senior securities to prohibit any cash distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage.coverage with such borrowings not constituting senior securities for purposes of the asset coverage ratio requirements of the 1940 Act. A loan is presumed to be for temporary purposes if it is repaid within sixty days and not extended or renewed. For a discussion of the risks associated with leverage, see “ItemItem 1A. Risk Factors — Risks Related to BDCsLeverage, including, without limitation, — Regulations governingBecause we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.
Common Stock
We are not generally able to issue and sell our operation ascommon stock at a BDCprice below NAV per share. We may, however, sell our common stock, warrants, options or rights to acquire our common stock, at a price below the current NAV of the common stock if our Board of Directors determines that such sale is in our best interests and RIC will affectthat of our abilitystockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to raise,be issued and sold may not be less than a price which, in the way in which we raise, additional capitaldetermination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or borrow for investment purposes, which maydiscount). We have a negative effect onnever sought such stockholder authorization to sell shares of our growth.”
common stock below the then current NAV per share of our common stock.
Code of Ethics
We and our Advisers have each adopted a code of ethics underpursuant to Rule 17j-1 ofunder the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to eachthe code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. We have included these codes of ethics as exhibits to the Registration Statement. You may also read and copy, after paying a duplication fee, the codes of ethics at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549, or by making an electronic request to the following email address: publicinfo@sec.gov. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 942-8090. In addition, theThe code of ethics is available on the EDGAR Database on the SEC’s Internet sitewebsite at http://www.sec.gov.www.sec.gov.



ComplianceProxy Voting Policies and Procedures
We and our Adviser have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws, and our board of directors is required to review these compliance policies and procedures annually to assess their adequacy and the effectiveness of their implementation. Our board of directors has designated Jason Maxwell as our Chief Compliance Officer.
Proxy Policies
As an investment adviser registered under the Advisers Act, our Adviser has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients.
These policies and procedures for voting proxies for the investment advisory clients of our Adviser are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
Our Adviser will vote proxies relating to our portfolio securities in a manner in which we believe is consistent with the best interest of our stockholders. It willWe review on a case-by-case basis each proposal submitted forto a stockholder vote to determine its impact on ourthe portfolio securities.securities held by us. Although our Adviser willwe generally vote against proposals that maywe expect would have a negative impact on our portfolio securities, itwe may vote for such a proposal if there existexists compelling long-term reasons to do so.
It is unlikely that our portfolio investments will solicit proxies for stockholder votes on a regular basis. To the extent we receive proxy statements, however, we have delegated ourOur proxy voting responsibility to our Adviser. The proxy voting policies and procedures of our Adviser are set forth below. The guidelines are reviewed periodically by our Adviser and our independent directors, and, accordingly, are subject to change.
The proxy voting decisions of our Adviser are made by the senior officers who areinvestment team which is responsible for monitoring each of its clients’our investments. To ensure that itsour vote is not the product of a conflict of interest, it willwe require that: (a)that anyone involved in the decision-making process disclosediscloses to its Chief Compliance Officerour chief compliance officer any potential conflict thatregarding a proxy vote of which he or she is awareaware.
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Proxy Voting Records
YouStockholders may obtain information, without charge, regarding how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: HMS Income Fund, Inc., Attention: Ryan T. Sims, Chief FinancialCompliance Officer, and Secretary, 28001300 Post Oak Boulevard, Suite 5000,8th Floor, Houston, Texas 77056-6118, or by collect calling77056.
Other 1940 Act Regulations
We are also prohibited under the Company at (888) 220-6121. Also,1940 Act from knowingly participating in certain transactions with our affiliates without the SEC maintains a website at www.sec.gov that contains such information.
Other
As a BDC, weprior approval of our Board of Directors who are subject to periodic examinationsnot interested persons and, in some cases, prior approval by the SEC for compliance with the 1940 Act. SEC.
We are required to obtainprovide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from misconduct,willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
We and our Adviser are required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies and procedures no less frequently than annually for their adequacy and the effectiveness of their implementation, and to designate a chief compliance officer to be responsible for administering the policies and procedures.
We may be periodically examined by the SEC for compliance with the 1940 Act.
Securities Exchange Act of 1934 and Sarbanes-Oxley Act Compliance
We are subject to the reporting and disclosure requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), including the filing of quarterly, annual and current reports, proxy statements and other required items. In addition, we are subject to the Sarbanes-Oxley Act of 2002, (the “Sarbanes-Oxley Act”), which imposes a wide variety of regulatory requirements on publicly heldpublicly-held companies and their insiders. Many of these requirements will affect us. For example:
•pursuant to Rule 13a-14 underof the Exchange Act, our Chief Executive Officer and Chief Financial Officer are required to certify the accuracy of the consolidated financial statements contained in our periodic reports;
•pursuant to Item 307 of Regulation S-K, under the Exchange Act, our periodic reports are required to disclose our conclusions about the effectiveness of our disclosure controls and procedures; and


•pursuant to Rule 13a-15 underof the Exchange Act, our management is required to prepare a report regarding its assessment of our internal control over financial reporting.reporting; and

The Sarbanes-Oxley•pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the Exchange Act, requires usour periodic reports must disclose whether there were significant changes in our internal control over financial reporting or in other factors that could significantly affect these controls subsequent to review our current policiesthe date of their evaluation, including any corrective actions with regard to significant deficiencies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and have taken actions necessary to ensure that we comply with that law.material weaknesses.
Investment Adviser Regulations
Our Advisers areAdviser is subject to regulation under the Investment Advisers Act.Act of 1940, as amended (the “Advisers Act”). The Advisers Act establishes, among other things, record keepingrecordkeeping and reporting requirements, disclosure requirements, limitations on transactions between the adviser’s account and an advisory client’s account, limitations on transactions between the accounts of advisory clients, and general anti-fraud prohibitions. We and our AdvisersOur Adviser may also be examined by the SEC from time to time for compliance with the Advisers Act.
Taxation as a RICRegulated Investment Company
We haveMSIF has elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. MSIF’s taxable income includes the taxable income generated by MSIF and certain of its subsidiaries, which are treated as disregarded entities for tax purposes. As a RIC, weMSIF generally will not be subject topay corporate-level U.S. federal income taxes on any income that we distribute to our stockholders from our tax earnings and profits.as dividends. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to obtain RIC
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tax treatment, we must distribute dividends to our stockholders, in respect offor each taxable year, of an amount generally at least equal to 90% of our “investment company taxable income,” which is generally our taxable net investmentordinary taxable income plus the excess if any, of realized net short-term capital gaingains over realized net long-term capital loss, determined without regard to any deduction for dividends paidlosses, and 90% of our tax-exempt income (the “Annual Distribution Requirement”). Depending on the amountAs part of maintaining RIC status, undistributed taxable income we generate in a tax year, we may choose(subject to spill-over taxable income in excess of current year distributions into the next tax year and incur a 4% nondeductible U.Snon-deductible U.S. federal excise tax on such taxable income. Any such spill-over taxable income musttax) pertaining to a given fiscal year may be distributed through a distributionup to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the earlierlater of eight-and-one-half months after(i) filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the taxable year in which such taxable income was generated or the timely filing of the tax return related to the taxgenerated.
For any taxable year in which such taxable income was generated. Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to U.S. federal, state, local and foreign income, excise, withholding or other taxes.
Provided that we qualify as a RIC and satisfy the Annual Distribution Requirement, we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and netor capital gain (which is defined as net long-term capital gain in excess of net short-term capital loss) thatgains we timely distribute (or are deemed to distribute) to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gaingains not distributed (or deemed distributed) to our stockholders.
We will beare subject to a 4% nondeductiblenon-deductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner in respect of a calendar year dividends of an amount at least equal to the sum of (1) 98% of our net ordinary taxable income (taking into account certain deferrals and elections) for theeach calendar year, (2) 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one-year period ending OctoberDecember 31 in that calendar year (or, if we so elect, for the calendar year) and (3) any net ordinarytaxable income and capital gain net income forrecognized, but not distributed, in preceding years that was not distributed with respect to such years and on which the Company incurredwe paid no U.S. federal income tax (the “Excise Tax Avoidance Requirement”). DistributionsDividends declared and paid by us in a taxable year will generally differ from taxable income for that taxable year as such distributionsdividends may include the distribution of current taxable year’syear taxable income, exclude amounts carried over into the following taxable year, and include the distribution of prior taxable year taxable income carried over into and distributed in the current year. For amounts we carry over into the following year, we will be required to pay the 4% U.S. federal excise tax on the excess of 98% of our annual investment company taxable income and 98.2% of our capital gain net income over our distributions for the year.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:
elect•continue to be treated as a RIC;
meet the Annual Distribution Requirement;
qualify as a BDC or be registered as a management investment company under the 1940 Act at all times during each taxable year;
•derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities, loans, gains from the sale or other disposition of stock or other securities, or foreign currenciesnet income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock securities or currencies and net income derived from an interest in a “qualified publicly traded partnership” (as defined in the Code)securities (the “90% Income Test”); and
•diversify our holdings so that at the end of each quarter of the taxable year to satisfyyear:
•at least 50% of the RIC requirements:value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and


a.at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and
b.•no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one issuer, (ii) of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) of one or more “qualified publicly traded partnerships” (collectively, the “Diversification Tests”).

To the extentvalue of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one issuer, (ii) of two or more issuers that we investare controlled, as determined under applicable Code rules, by us and that are engaged in entities treated as partnerships for U.S. federal income tax purposes (other than athe same or similar or related trades or businesses or (iii) of certain “qualified publicly traded partnership”partnerships” (collectively, the “Diversification Tests”),.
In order to comply with the 90% Income Test, we generally must includeformed the itemsTaxable Subsidiaries as wholly-owned taxable subsidiaries for the primary purpose of permitting us to own equity interests in portfolio companies which are “pass-through” entities for tax purposes. Absent the taxable status of the Taxable Subsidiaries, a portion of the gross income derived by the partnershipsfrom such portfolio companies would flow directly to us for purposes of the 90% Income Test, andTest. To the extent such income that isdid not consist of income derived from securities, such as dividends and interest, it could jeopardize our ability to qualify as a partnership (other than a “qualified publicly traded partnership”) will be treated as qualifying income for purposes of the 90% Income Test onlyRIC and, therefore, cause us to the extent that such income is attributable to items of income of the partnership which would be qualifying income if realized by us directly. In addition, we generally must take into account our proportionate share of the assets held by partnerships (other than a “qualified publicly traded partnership”) in which we are a partner for purposes of the Diversification Tests.

Certain of our investment practices are subject to special and complexincur significant U.S. federal income tax provisions that may, among other things, (i) convert dividends that would otherwise constitute qualified dividend income into ordinary income, (ii) treat dividends that would otherwise be eligibletaxes. The Taxable Subsidiaries are consolidated with MSC Income Fund for deductions available to certain generally accepted accounting principles in the United States of America (“U.S. corporations underGAAP”) purposes and are included in our consolidated financial statements, and the Code as ineligibleportfolio investments held by the Taxable Subsidiaries are included in our consolidated financial statements. The Taxable Subsidiaries are not consolidated with MSIF for such treatment, (iii) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (iv) convert long-term capital gains into short-term capital gains or ordinary income, (v) convert short-term capital losses into long-term capital losses, (vi) convert an ordinary loss or deduction into a capital loss (the deductibility of which is more limited), (vii) cause us to recognize income or gain without a corresponding receipt of cash, (viii) adversely alter the characterization of certain complex financial transactions, and (ix) produce gross income that will not constitute qualifying gross income for purposes of the gross income requirement that applies to RICs. These rules also could affect the amount, timing and character of distributions to stockholders. We intend to monitor our transactions and may make certain tax elections to mitigate the effect of these provisions on our ability to be subject to tax as a RIC.

Some of the income that we might otherwise earn, such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an equity investment in an operating partnership, may not satisfy the 90% Income Test. To manage the risk that such income might disqualify us as a RIC for failure to satisfy the 90% Income Test, we may establish one or more special purpose entities treated as corporations for U.S. federal income tax purposes (any such corporation,and may generate income tax expense, or benefit, as a “Taxable Subsidiary”) to holdresult of their ownership of the portfolio investments. The income tax expense, or benefit, if any, and any related tax assets from which we do not anticipate earning qualifying income under the 90% Income Test. Any investments held through a Taxable Subsidiary generally will be subject to U.S. federal income and other taxes, and therefore we can expect to achieve a reduced after-tax yield on such investments.liabilities, are reflected in our consolidated financial statements.

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We may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt instrumentsobligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with payment-in-kind interest (“PIK”), or in certain cases, increasing interest rates or issued with warrants)warrants and debt securities invested in at a discount to par), we must include in our taxable income each tax year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxtaxable year. We may also have to include in our taxable income other amounts that we have not yet received in cash such as deferred loan origination feesPIK interest, cumulative dividends or amounts that are paid after origination of the loan or are paidreceived in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock.

Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the tax year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, or the Excise Tax Avoidance Requirement, even though we will not have received any corresponding cash amount. Furthermore, a portfolio company in which we invest may face financial difficulty that requires us to work-out, modify or otherwise restructure our investment in the portfolio company. Any such restructuring may result in unusable capital losses and future non-cash income. As a result, we may have difficulty meeting the Annual Distribution Requirement or the Excise Tax Avoidance Requirement. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.


Furthermore, any such restructuring may result in unusable capital losses as well as a substantial amount of non-qualifying income for purposes of the 90% Income Test.

Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.

Investments by us in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes, and therefore, our yield on any such securities may be reduced by such non-U.S. taxes. Stockholders will generally not be entitled to claim a credit or deduction with respect to non-U.S. taxes paid by us.

If we acquire shares in a “passive foreign investment company” (“PFIC”), we may be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend by us to our stockholders. A PFIC is generally defined as any non-U.S. entity classified as a corporation for U.S. federal income tax purposes which earns at least 75% of its annual gross income from passive sources (such as interest, dividends, rents, royalties or capital gain) or holds at least 50% of its total assets in investments producing such passive income. Additional charges in the nature of interest may be imposed on us in respect of deferred taxes arising from such distributions or gains. If we hold shares of a PFIC and elect to treat the PFIC as a “qualified electing fund” under the Code (“QEF”) in lieu of the foregoing requirements, we will be required to include in income each tax year a portion of the ordinary earnings and net capital gain of the QEF, if any, even if such income is not distributed by the PFIC to us. Alternatively, we can elect to mark-to-market our shares in a PFIC at the end of each tax year; in which case, we will recognize as ordinary income any increase in the value of such PFIC shares and as ordinary loss any decrease in such value to the extent such decrease does not exceed prior increases included in our taxable income. Under either election, we may be required to recognize taxable income from shares held in PFICs in excess of our distributions from such PFICs, and our proceeds from any dispositions of PFIC shares, and such taxable income will be taken into account for purposes of determining our compliance with the Annual Distribution Requirement and the Excise Tax Avoidance Requirement.

Our functional currency for U.S. federal income tax purposes is the U.S. dollar. Under Section 988 of the Code, gain or loss attributable to fluctuations in exchange rates between the time we accrue income, expenses, or other liabilities denominated in a foreign currency and the time we actually collect such income or pay such expenses or liabilities are generally treated as ordinary income or loss. Similarly, gain or loss on foreign currency forward contracts, futures contracts, options, notional principal contracts and similar financial instruments, and the disposition of debt denominated in a foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.

Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders in certain circumstances while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. See Regulation — Regulation as a Business Development Company — Senior Securities. Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

AsWe may distribute taxable dividends that are payable in part in our stock. Under certain applicable provisions of the Code and the U.S. Department of the Treasury (“Treasury”) regulations, distributions payable by us in cash or in shares of stock (at the stockholders’ election) would satisfy the Annual Distribution Requirement. The Internal Revenue Service has issued guidance indicating that this rule will apply even where the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. According to this guidance, if too many stockholders elect to receive their distributions in cash, each such stockholder would receive a RIC, we are not allowedpro rata share of the total cash to carry forwardbe distributed and would receive the remainder of their distribution in shares of stock. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend (whether received in cash, our stock, or carry back a net operating losscombination thereof) as (i) ordinary income (including any qualified dividend income that, in the case of a noncorporate stockholder, may be eligible for purposes of computingthe same reduced maximum tax rate applicable to long-term capital gains to the extent such distribution is properly reported by us as qualified dividend income and such stockholder satisfies certain minimum holding period requirements with respect to our investment company taxable income in other tax years. U.S. federal income tax law generally permits a RIC to carry forward (i) the excess of its net short-term capital loss over its netstock) or (ii) long-term capital gain for a given year(to the extent such distribution is properly reported as a short-term capital loss arising on the first day of the following tax year and (ii) the excess of its net long- term capital loss over its net short-term capital gain for a given year as a long-term capital loss arising on the first day of the following tax year. However, future transactions we engage in may cause our ability to use any capital loss carryforwards, and unrealized losses once realized, to be limited under Sections 382, 383 or 384 of the Code. Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert lower taxed long-term capital gain and qualified dividend income into higher taxed short-term capital gain or ordinary income, (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited)dividend), (iv) cause us to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the characterization of certain complex financial transactions, and (vii) produce income that will not be qualifying income for purposes of the 90% Income Test. We will monitor our transactions and may make certain tax elections in order to mitigate the effect of these provisions.

As described above, to the extent that we invest in equity securities of entities that are treated as partnershipsour current and accumulated earnings and profits for U.S. federal income tax purposes, the effect of such investments for purposes of the 90% Income Test and the Diversification Tests will depend


on whether or not the partnership ispurposes. As a “qualified publicly traded partnership” (as defined in the Code). If the partnership isresult, a “qualified publicly traded partnership,” the net income derived from such investments will be qualifying income for purposes of the 90% Income Test and such investments generally will be “securities” for purposes of the Diversification Tests. If the partnership, however, is not treated as a “qualified publicly traded partnership,” then the consequences of an investment in the partnership will depend upon the amount and type of income and assets of the partnership allocable to us. The income derived from such investments may not be qualifying income for purposes of the 90% Income Test and, therefore, could adversely affect our qualification as a RIC. We intend to monitor our investments in equity securities of entities that are treated as partnerships for U.S. federal income tax purposes to prevent our disqualification as a RIC.

We may invest in preferred securities or other securities the U.S. federal income tax treatment of which may not be clear orstockholder may be subjectrequired to recharacterization bypay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the expected tax treatment,stock it could affect the timing or character of income recognized, requiring us to purchase or sell securities, or otherwise change our portfolio,receives in order to complypay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax rules applicablewith respect to RICs under the Code.such dividends, including in respect of all or a portion of such dividend that is payable in stock.

Failure to Qualify as a RIC
If we fail to satisfy the 90% Income Test or the Diversification Tests for any taxtaxable year, we may nevertheless continue to qualify as a RIC for such year if certain relief provisions are applicable (which may, among other things, require us to pay certain corporate-level U.S. federal taxes or to dispose of certain assets).

We cannot assure you that we would qualify for any such relief should we fail the 90% Income Test or the Diversification Tests.
If we were unable to obtain taxqualify for treatment as a RIC and the foregoing relief provisions are not applicable, we would be subject to tax on all of our taxable income at regular corporate rates, regardless of whether we make any distributions to our stockholders.rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. DistributionsIf we were subject to tax on all of our taxable income at regular corporate rates, then distributions we make after being subject to such tax would generally be taxable to our stockholders and, provided certain holding period and other requirements were met, could qualify for treatment as “qualified dividend incomeincome” eligible for the maximum 20% rate (plus a 3.8% Medicare surtax, if applicable) applicable to qualified dividends to the extent of our current and accumulated earnings and profits (in the case of noncorporate U.S. stockholders, generally at a maximum rate applicable to qualified dividend income of 20%).profits. Subject to certain limitations under the Code, certain corporate distributees generallytaxpayers would be eligible for thea dividends-received deduction.deduction on distributions they receive. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain.

If we fail to meet the RIC requirements for more than two consecutive years and then, seek to re-qualify To requalify as a RIC in a subsequent taxtaxable year, we would be required to satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to qualify as a RIC. Subject to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code for at least one year prior to disqualification and that requalify as a RIC
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no later than the second year following the nonqualifying year, we could be subject to regular corporate-level income taxationtax on any unrealized net built-in gain recognizedgains in the assets held by us during the succeeding five-year period in which we failed to qualify as a RIC that are recognized within the subsequent five years, unless we made a special election to recognize all such built-in gain (that is, the excess of the aggregate gains, including items ofpay corporate-level U.S. federal income over aggregate losses that would have been realized with respect to such assets if we had sold our investments and other assets at fair market value (“FMV”) at the end of the tax year) upon our re-qualification as a RIC and to pay the corporate-level tax on such built-in gain.gain at the time of our requalification as a RIC.



Item 1A. Risk Factors
Investing in shares of our common stocksecurities involves a number of significant risks. You should carefully consider these risk factors, together with all ofIn addition to the other information includedcontained in this Annual Report on Form 10-K, andyou should consider carefully the other reports and documents filed by us with the SEC.following information before making an investment in our securities. The risks set out below are not the only risks we face, and additionalface. Additional risks and uncertainties not presently known to us or not presently deemed material by us maymight also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our NAV and the value of our other securities could decline, and you may lose all or part of your investment.
SUMMARY OF RISK FACTORS
The following is a summary of the principal risk factors associated with an investment in our securities. Further details regarding each risk included in the below summary list can be found further below.
Risks RelatingRelated to Ourour Business and Structure

•Because our Investment Portfolio is recorded at fair value, there is and will continue to be uncertainty as to the value of our portfolio investments.
Future disruptions or instability in capital markets could have a material adverse effect on our business,•Our financial condition and results of operations.operations depends on our Adviser’s ability to effectively manage and deploy capital.

From time•We are subject to time,risks associated with the globalinterest rate environment and changes in interest rates will affect our cost of capital, markets may experience periods of disruptionnet investment income and instability, which could materially and adversely impact the broader financial and credit markets and reduce the availability to us of debt and equity capital. For example, between 2008 and 2009, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the repricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions. In particular, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. our investments.
•We believe that such value declines were exacerbated by widespread forced liquidations as leveraged holders of financial assets, faced with declining prices, were compelled to sell to meet margin requirements and maintain compliance with applicable capital standards. Such forced liquidations also impaired or eliminated many investors and investment vehicles, leading to a decline in the supply of capitalface increasing competition for investment opportunities.
•We are dependent upon our Adviser’s key investment personnel for our future success.
•Our success depends on our Adviser’s ability to attract and depressed pricing levels for many assets. Also, the United Kingdom held a referendum in which voters approved an exit from the European Union which is expected to occur on March 29, 2019, and the implications of the United Kingdom’s pending withdrawal from the European Union are unclear at present. In addition, the implications of the current presidential administration’s policies are unclear at present. These events caused, or may in the future cause, significantly diminished overall confidence in the debt and equity markets, unprecedented declines in the values of certain assets, extreme economic uncertainty and significantly reduced availability of debt and equity capital for the market as a whole and financial services firms in particular. While market conditions have experienced relative stability in recent years, there have been continuing periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves in the future.

Future volatility and dislocation in the capital markets could create a challenging environment in which to raise or access capital. For example, the re-appearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms. Significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are soldretain qualified personnel in a principal market to market participants (even if we plan on holding an investment through its maturity) and impairments of the market values or FMV of our investments, even if unrealized, must be reflected in our financial statements for the applicable period, which could result in significant reductions to our NAV for such period. Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded then.competitive environment.

The amount of our distributions to our stockholders is uncertain. Portions of the distributions that we pay may represent a return of capital to you for U.S. federal income tax purposes which will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets. •We may not be able to pay you distributions, andreplicate the historical results achieved by Main Street or by other entities managed by our distributions may not grow over time.Adviser.

Any distributions we make to our stockholders will be paid out of assets legally available for distribution. We may fund our cash distributions from any sources of funds legally available. We cannot assure you that we will achieve investment results that will allow us to make a targeted level of distributions or year-to-year increases in distributions. •Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described in this Form 10-K. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC can limit our ability to pay distributions. All distributions will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our ability to be subject to tax as a RIC, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future.



All or a portion of our distributions may constitute a return of capital and may lower an investor’s tax basis in its shares. We have not established any limit on the extent to which we may use borrowings, if any, or stock offering proceeds to fund distributions (which may reduce the amount of capital we ultimately invest in assets). We may, for the foreseeable future, pay a portion of our distributions from sources other than net realized income from operations, which may include stock offering proceeds, borrowings, fee and expense waivers from our Advisers and support payments from the Adviser.
Price declines in the leveraged loan market may adversely affect the fair value of our syndicated loan portfolio, reducing our NAV through increased net unrealized depreciation.

Retail loan funds, collateralized loan obligations (a type of leveraged investment vehicle holding corporate loans), hedge funds and other highly leveraged investment vehicles comprise a substantial portion of the market for purchasing and holding first and second lien secured loans. As the secondary market pricing of the loans underlying these portfolios deteriorated during the second half of 2015 and into the first quarter of 2016,we believe that many investors, as a result of their generally high degrees of leverage, were forced to raise cash by selling interests in performing loans in order to satisfy margin or similar requirements imposed by their lenders. This resulted in a forced deleveraging cycle of price declines, compulsory sales and further price declines, with widespread redemption requests and other constraints generating further selling pressure. This pervasive forced selling resulted in price declines in our portfolio, negatively impacting our NAV. In addition to the deterioration of the secondary market pricing, we may experience compressed spreads between the rates at which we can borrow and the rates at which we can lend.
Conditions in the leveraged loan market may experience similar disruptions or deterioration in the future, which may cause pricing levels to continue to decline or remain volatile. As a result, we may continue to suffer unrealized depreciation and could incur realized losses in connection with the sale of our syndicated loans, which could have a material adverse impact on our NAV. As a BDC, we are generally not able to issue additional shares of our common stock at a price less than our NAV without first obtaining approval for such issuance from our stockholders and our independent directors. Additionally, a lower portfolio value may negatively impact our ability to borrow additional funds under the Credit Facilities (as defined below) because our NAV is reduced for purposes of the asset coverage ratio. All of these conditions could have a material adverse impact on our business, financial condition and results of operations.

Our ability to achieve our investment objective depends on our Advisers’ ability to manage and support our investment process. If our Adviser or our Sub-Adviser were to lose any members of their respective senior management teams, our ability to achieve our investment objective could be significantly harmed.

We are externally managed and depend upon the investment expertise, diligence, skill and network of business contacts of our Advisers. We also depend, to a significant extent, on our Advisers’ access to the investment professionals and the information and deal flow generated by these investment professionals in the course of their investment and portfolio management activities. Our Advisers evaluate, negotiate, structure, close, monitor and service our investments. Our success depends to a significant extent on the continued service and coordination of our Advisers, including their key professionals. The departure of a significant number of our Adviser’s or Sub-Adviser’s key professionals and/or the failure to replace professionals could have a material adverse effect on our ability to achieve our investment objective. In addition, we can offer no assurance that our Advisers will remain our investment adviser and sub-adviser, as applicable, or that we will continue to have access to their investment professionals or their information and deal flow.

Because our business model depends to a significant extent upon relationships with investment banks, business brokers, loan syndication and trading desks, and commercial banks, any inability on the partstrong referral relationships.
•Our Board of our Advisers to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, would adversely affect our business.

We expect that our Advisers will depend on their relationships with investment banks, business brokers, loan syndication and trading desks, commercial banks and other historical sources of deal flow, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities. If our Advisers fail to maintain their existing relationships or develop new relationships with other sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom our Advisers’ professionals have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.

We may continue to face increasing competition for investment opportunities, which could delay deployment of our capital, reduce returns and result in losses.

We compete for investments with other BDCs and investment funds, as well as traditional financial services companies such as commercial banks and other sources of funding. Moreover, alternative investment vehicles, such as hedge funds, private equity funds and mezzanine funds, also make investments in Middle Market private U.S. companies. As a result, competition for investment


opportunities in private U.S. companies may continue to intensify, particularly as these entities continue to raise large amounts of capital. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors may have greater experience operating under, or are not subject to, the regulatory restrictions under the 1940 Act that are imposed on us as a BDC.

A significant portion of our investment portfolio is and will continue to be recorded at fair value as determined in good faith by our board of directors and, as a result, there is and will be uncertainty as to the ultimate market value of our portfolio investments.

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value, as determined in good faith by our board of directors. The majority of our investments are traded on a privately negotiated over-the-counter secondary market for institutional investors. As a result, we value these securities at fair value as determined in good faith by our board of directors.

The determination of fair value, and thus the amount of unrealized gains and losses we may incur in any year, is subjective, and our Advisers may have a conflict of interest in making the determination. Our board of directors determines the fair value of these securities no less than quarterly based on input from our Advisers, including our Adviser’s valuation committee, any third-party independent valuation firm retained by our board of directors and our audit committee. Certain factors that may be considered in determining the fair value of our investments include dealer quotes for securities traded on the secondary market for institutional investors, the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly-traded companies, discounted cash flow and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations may cause our NAV per share on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments. Additionally, any volatility in the credit markets may affect the ability of our Advisers and board of directors to value our portfolio.

Our board of directorsDirectors may change our operating policies and investment strategies or use of proceeds of the sales of common stock without prior notice or stockholder approval, the effects of which may be adverse.

Our board of directors has the authority to modify or waive our current operating policies, investment criteria and investment strategies without prior notice and without stockholder approval if it determines that doing so will be in the best interests of stockholders. We cannot predict the effect any changesRisks Related to our current operating policies, investment criteriaInvestments
•The types of portfolio companies in which we invest involve significant risks and investment strategies would have on our business, NAV, operating results and value of our stock. However, the effects might be adverse, whichwe could negatively impact our ability to pay you distributions and cause you to lose all or part of yourour investment. Moreover, we have significant flexibility in investing any net stock offering proceeds
•Economic recessions or downturns could impair our portfolio companies’ performance and may use any net stock offering proceeds in ways with which investors may not agree or for purposes other than those contemplated at the time of such offering.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We anddefaults by our portfolio companies are subject to regulation at the local, state and federal level. New legislation may be enacted or new interpretations, rulings or regulationswill harm our operating results.
•Rising credit spreads could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect.

Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy to avail ourselves of new or different opportunities, or increase our leverage. Such changes could result in material differences to the strategies and plans set forth in this Form 10-K and may result in our investment focus shifting from the areas of expertise of our Advisers to other types of investments in which our Advisers may have less expertise or little or no experience. Thus, any such changes, if they occur, and uncertainty regarding the status of current laws and regulations could have a material adverse effect on our business, financial condition and results of operations andaffect the value of your investment.our investments, and rising interest rates make it more difficult for portfolio companies to make periodic payments on their loans.



The impact of financial reform legislation on us is uncertain.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended (the “Dodd-Frank Act”), instituted a wide range of reforms that are affecting all U.S. financial institutions. Many of•Inflation could adversely affect the requirements called for in the Dodd-Frank Act have been implemented over time and are subject to implementing regulations which have gradually taken effect over the course of several years. Given that the U.S. presidential administration and certain members of Congress have indicated a desire to amend or repeal certain portions of the Dodd-Frank Act, the impact such requirements or amendments to or repeals of existing requirements will have on our business, results of operations or financial condition is unclear. The changes resulting from the Dodd-Frank Act require us to invest significant management attention and resources to evaluate and make substantial changes in order to comply with new statutory and regulatory requirements. Failure to comply with any such laws, regulations or principles, or changes thereto, may negatively impact our business, results of operations and financial condition. We cannot predict the ultimate effect on us changes in the laws or regulations would have as a result of the Dodd-Frank Act or whether and to the extent to which the Dodd-Frank Act may remain in its current form.

Operating under the constraints imposed on us as a BDC and RIC may hinder the achievementcondition of our investment objectives.portfolio companies.

•We may be exposed to higher risks with respect to our investments that include original issue discount or PIK interest.
•The 1940 Act and the Code impose numerous constraints on the operationslack of BDCs and RICs that do not apply to other investment vehicles managed byliquidity in our Adviser and its affiliates. BDCs are required, for example, to invest at least 70% of their total assets in certain qualifying assets, including U.S. private or thinly-traded public companies, cash, cash equivalents, U.S. government securities and other high-quality debt instruments that mature in one year or less from the date of investment. Moreover, qualification for taxation as a RIC requires satisfaction of source-of-income, asset diversification and distribution requirements. Operating under these constraints, whichinvestments may hinderadversely affect our ability to take advantage of attractive investment opportunities and to achieve our investment objective. Any failure to do so could subject us to enforcement action by the SEC, cause us to fail to satisfy the requirements associated with RIC status and subject us to entity-level corporate income taxation, cause us to fail the 70% test described above or otherwise have a material adverse effect on our business, financial condition or results of operations.business.

•We may not replicatehave the historical results achieved by other entities managed byfunds or ability to make additional investments in our Advisers.portfolio companies.

Our primary focus in making•There may be circumstances where our debt investments may differ from that of many of the investment funds, accounts or other investment vehicles that are or have been managed by our Advisers. We cannot assure you that we will replicate the historical results achieved by other investment funds managed by our Advisers, and we caution you that our investment returns could be substantially lower than the returns achieved by them in prior periods. Additionally, allsubordinated to claims of other creditors or a portion of the prior results may have been achieved in particular market conditions which may never be repeated. Moreover, current or future market volatility and regulatory uncertainty may have an adverse impact on our future performance.

Our Advisers or their affiliates may, from time to time, possess material non-public information, limiting our investment discretion.

Principals of our Advisers and their affiliates, and members of their investment committee, may serve as directors of, or in a similar capacity with, companies in which we invest. If we obtain material non-public information with respect to such companies, or we become subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibitedsubject to lender liability claims.
•We generally will not control our portfolio companies.
•Defaults by our portfolio companies will harm our operating results.
•Any unrealized depreciation that we experience in our portfolio may be an indication of future realized losses, which could reduce our income and gains available for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us.distribution.

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion•Prepayments of our assets that may be invested in securities of a single issuer.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limiteddebt investments by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Under the 1940 Act, a “diversified” investment company is required to invest at least 75% of the value of its total assets in cash and cash items, government securities, securities of other investmentportfolio companies and other securities limited in respect of any one issuer to an amount not greater than 5% of the value of the total assets of such company and no more than 10% of the outstanding voting securities of such issuer. As a non-diversified investment company, we are not subject to this requirement. To the extent that we assume large positions in the securities of a small number of issuers,could adversely impact our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company or to a general downturn in the economy.



We are highly dependent on information systems.
We are highly dependent on the communications and information systems of our Advisers, their affiliates and certain third-party service providers, and any failure or interruption in these systems, including due to cyber-attacks, electrical or telecommunication outages or natural disasters, could cause disruptions in our activities. In addition, these systems are subject to potential attacks, including through adverse events that threaten the confidentiality, integrity or availability of our information resources. These attacks, which may include cyber incidents, may involve a third party gaining unauthorized access to our communications or information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. Any such attack could result in disruption to our business, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations and reduce our abilityreturn on equity.
•The discontinuation and replacement of LIBOR may adversely affect the value of floating-rate debt securities in our portfolio or issued by us.
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•We may be subject to pay distributionsrisks associated with “covenant-lite” loans.
•We may not realize gains from our equity investments.
Risks Related to Leverage
•Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.
•All of our stockholders.assets are subject to security interests under our senior securities and if we default on our obligations under our senior securities, we may suffer adverse consequences, including foreclosure on our assets.

•We are subject to risks associated with any revolving credit facility that utilizes a Structured Subsidiary as our interests in any Structured Subsidiary are subordinated and we could be prevented from receiving cash on our equity interests from a Structured Subsidiary.
Risks Related to our AdvisersAdviser and theirits Affiliates


•Our Advisers haveAdviser has conflicts of interest including the potential to earn base management fees or incentive fees under the Investment Advisory Agreement and the Sub-Advisory Agreement, that may create an incentive for the AdvisersAdviser to enter into investments that are riskier or more speculative than would otherwise be the case and our AdvisersAdviser may have an incentive to increase portfolio leverage in order to earn higher management fees.

Our Advisers and their respective affiliates, including our officers and certain of our directors, may have conflicts of interest as a result of compensation arrangements, time constraints and competition for investments, which they will attempt to resolve in a fair and equitable manner, but which may result in actions that are not in your best interests. Our Advisers and their affiliates receive substantial fees from us in return for their services, and these fees could influence the advice provided to us. Among other matters, the compensation arrangements could affect their judgment with respect to public offerings of equity by us, which allow our Advisers to earn increased management fees.

The incentive fee payable by us to our Advisers may create an incentive for them to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee payable to our Advisers is determined may encourage them to use leverage to increase the return on our investments. In addition, the fact that our management fee is payable based upon our gross assets, which would include any borrowings for investment purposes, may encourage our Advisers to use leverage to make additional investments. Under certain circumstances, the use of leverage (or an investment in companies that are highly leveraged) may increase the likelihood of default, which would result in higher investment losses.

•We may be obligated to pay our AdvisersAdviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.

•Our Investment Advisory Agreement and Sub-Advisory Agreement entitle our Advisers to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay our Advisers incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.

Any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. Pursuant to the Investment Advisory Agreement and Sub-Advisory Agreement, our Adviser and Sub-Adviser, respectively, will not be under any obligation to reimburse us for any part of the incentive fee they received that was based on accrued income that we never received in cash as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.

The time and resources that individuals employed by the Advisers devote to us may be diverted, and we may face additional competition due to the fact that neither our Advisers nor their affiliates is prohibited from raising money for or managing another entity that makes the same types of investments that we target.

Certain investment professionals utilized by our Sub-Adviser currently manage Main Street and other investment entities. In addition, neither our Adviser nor our Sub-Adviser is prohibited from raising money for and managing future investment entities that make the same types of investments as those we target. Additionally, the investment professionals employed by our Adviser


are employees of Hines and its affiliates, and they may hold similar positions in numerous other entities and from time to time may allocate a material amount of their time to the management of other funds or assets unrelated to our business.

As a result, the time and resources that our Advisers devote to us may be diverted, and during times of intense activity in other programs, they may devote less time and resources to our business than is necessary or appropriate. In addition, we may compete with such investment entities for the same investors and investment opportunities.

Our Sub-Adviser may face conflicts of interest in allocating investment opportunities between us, and itself and its affiliates.

The investment professionals utilized by our Sub-Adviser are also the investment professionals responsible for investing and managing Main Street’s securities portfolio. These professionals are responsible for allocating investment opportunities between us and Main Street. Our exemptive relief imposes on our Sub-Adviser the obligation to evaluate whether each investment opportunity its investment professionals review for Main Street is also appropriate for us and to propose an allocation of such opportunity to us if it deems such opportunity to be appropriate. If our Sub-Adviser determines that certain investment opportunities are appropriate for Main Street but not appropriate for us, or if our Sub-Adviser proposes an allocation of an investment opportunity to us that is disproportionately small relative to the proposed allocation to Main Street and our ability to fund the investment, our operating results could be adversely affected.

The structure of our management fees creates potential conflicts of interest that could impact our investment returns.

We pay managementother funds and incentive fees to our Advisers and reimburse our Advisers for certain expenses they incur. In addition, investors in shares of our common stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in, among other things, a lower rate of return than one might achieve through direct investments in our underlying assets.

The Sub-Advisory Agreement and the Investment Advisory Agreement contain co-termination provisions. Such provisions, if triggered, may leave us without an investment adviser or sub-adviser which could negatively impact our ability to implement our investment strategy and our ability to achieve our investment objective.

Under the terms of the Sub-Advisory and Investment Advisory Agreements, if either of the Investment Advisory Agreement or Sub-Advisory Agreement is terminated (by virtue of a voteaccounts managed by our board of directors or stockholders) or not renewed by our board of directors, then the other agreement will also terminate. In addition, under the terms of the Investment Advisory Agreement and the Sub-Advisory Agreement, in the event either the Investment Advisory Agreement or the Sub-Advisory Agreement terminates because we terminate (by virtue of a vote by our board of directors or stockholders) or our board of directors fails to renew either agreement, neither the Adviser, the Sub-Adviser nor any of their affiliates may, except in certain limited circumstances, be re-engaged as Adviser or Sub-Adviser for a period of three years following the date of such termination without the consent of the party not seeking to be re-engaged. Because our success depends to a significant extent on the deal flow and key professionals of our Advisers, the termination of the Sub-Advisory Agreement or Investment Advisory Agreement could have a materially adverse effect on our ability to achieve our investment objective.Adviser.

•Our Advisers’Adviser’s liability is limited under the Investment Advisory Agreement, and Sub-Advisory Agreement, as applicable, and we have agreed to indemnify our AdvisersAdviser against certain liabilities, which may lead our AdvisersAdviser to act in a riskier manner on our behalf than theyit would when acting for theirits own account.

Under the Investment Advisory Agreement and Sub-Advisory Agreement, as applicable, our Advisers, their respective officers, directors, managers, partners, shareholders, members, agents, employees, controlling persons and any other person or entity affiliated with them are not be liable to us for acts or omissions performed our Advisers in accordance with and pursuant to the Investment Advisory Agreement or Sub-Advisory Agreement, as applicable, except those resulting from acts constituting negligence, willful misfeasance, bad faith or misconduct. In addition, we have agreed to indemnify our Advisers and their respective officers, directors, managers, partners, shareholders, members, agents, employees, controlling persons and any other person or entity affiliated with them from and against any claims or liabilities, including reasonable legal fees, arising out of or in connection with any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement or Sub-Advisory Agreement, as applicable, except where attributable to gross negligence, willful misfeasance, bad faith or misconduct.

These protections may lead our Advisers to act in a riskier manner when acting on our behalf than they would when acting for their own account.

•Our AdvisersAdviser can resign on 120 days’ notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.



Our Adviser has the right, under the Investment Advisory Agreement, to resign at any time upon not less than 120 days’ written notice, and the Sub-Adviser has the right, under the Sub-Advisory Agreement, to resign at any time upon not less than 120 days’ written notice, whether we have found a replacement or not. If our Adviser resigns, all affiliates of the Adviser, including our Dealer Manager, may terminate their respective relationship with us and cease providing services to us. Additionally, if our Adviser or the Sub-Adviser resigns, we may not be able to find a replacement or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 120 days or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.

The Investment Advisory Agreement and the Sub-Advisory Agreement were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.

The Investment Advisory Agreement and the Sub-Advisory Agreement were not negotiated on an arm’s length basis. Consequently, their terms may not be as favorable to us as if they had been negotiated with an unaffiliated third party. In addition, we may choose not to enforce, or to enforce less vigorously, our rights and remedies under these agreements because of our desire to maintain our ongoing relationship with our Advisers. Any such decision, however, would breach our fiduciary obligations to our stockholders. Our ability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us.

Risks Related to BDCs


Our failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.

As a BDC, we may not acquire any assets other than “qualifying assets” unless, at•Operating under the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Item 1. Business — Regulation.” Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. Similarly, these rules could preventconstraints imposed on us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments in the portfolio for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments.

Regulations governing our operation as a BDC and RIC will affectmay hinder the achievement of our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.objectives.

We expect to continue to utilize leverage to fund new investments. As such, we may need to access the capital markets to refinance existing debt obligations to the extent maturing obligations are not repaid with cash flows from operations. In order to maintain RIC tax treatment we must distribute dividendsRisks Related to our stockholders each tax year on a timely basis generally of an amount at least equal to 90% of the sum of our net taxable ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, or investment company taxable income, determined without regard to any deduction for dividends paid, and the amounts of such distributions will therefore not be available to fund investment originations or to repay maturing debt. We may issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance. Our ability to issue different types of securities is also limited. Compliance with these requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend.Securities

If the value of our assets declines, we may be unable to satisfy the asset coverage test under the 1940 Act, which could prevent us from paying distributions and could prevent us from being eligible to be subject to tax as a RIC. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous.

Under the 1940 Act, we generally are prohibited from issuing or selling our common stock at a price below NAV per share, which may be a disadvantage as compared with other public companies. We may, however, sell our common stock at a price below the current NAV per share of the common stock if our board of directors and independent directors determine that such sale is•Investing in our best interests and the best interestssecurities may involve a high degree of our stockholders, and our stockholders as well as those stockholders that are not affiliatedrisk.


with us approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the fair value of such securities.

•Our ability to enter into and exit transactions with our affiliates is restricted.

We are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of a majority of the independent members of our board of directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is considered our affiliate for purposes of the 1940 Act and we are generally prohibited from buying or selling any securities from or to such affiliate, absent prior approval of our board of directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company, without prior approval of our board of directors and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we would be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates. We have, however, received an exemptive order from the SEC that permits us, notwithstanding the prohibitions contained in the 1940 Act to co-invest with Main Street under the conditions set forth in the exemptive relief in certain transactions originated by Main Street and/or our Advisers.

We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.

The net proceeds from the sale of shares of common stock will be used for our investment opportunities, operating expenses, working capital requirements, including distributions payable, and for payment of various fees and expenses such as management fees, incentive fees and other fees. Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. Accordingly, in the event that we develop a need for additional capital in the future for investments or for any other reason, these sources of funding may not be available to us. Consequently, if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to achieve portfolio diversification and our investment objective, which may negatively impact our results of operations and reduce our ability to pay distributions to our stockholders.

Failure to maintain our status as a BDC would reduce our operating flexibility.

If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.
Risks Related to Our Investments

Our investments in prospective portfolio companies, which include senior secured loans, second lien loans, and mezzanine debt, may be risky, and we could lose all or part of our investment.
We pursue a strategy focused on investing primarily in senior secured loans, second lien loans and mezzanine debt issued by Middle Market companies. Most loans in which we invest will not be rated, or would be if they were rated by a rating agency, as “below investment grade,” or “junk,” quality. Indebtedness of below investment grade quality is regarded as having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. We expect to hold 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 accrued as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. If the debt principal is not repaid in full, then PIK interest will likewise be partially or wholly uncollectible.
Senior Secured Loans and Second Lien Loans. When we make senior secured term loans and second lien loans, we will generally take a security interest in the available assets of these portfolio companies, including the equity interests of their subsidiaries. We expect this security interest to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loans may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. Also, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Finally, applicable bankruptcy laws may adversely impact the timing and methods used by us to liquidate collateral securing our loans, which could adversely


affect the collectability of such loans. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.
Mezzanine Debt. Our mezzanine debt investments will generally be subordinated to senior loans and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect our investment returns.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
We pursue a strategy focused on investing primarily in senior secured loans, second lien loans and mezzanine debt issued by Middle Market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Even though we generally structure certain of our investments as senior loans, if one of our portfolio companies were to declare bankruptcy, depending on the facts and circumstances, including the extent to which we provided managerial assistance to that portfolio company, a bankruptcy court might re-characterize our debt investment and subordinate all or a portion of our claim to that of other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower.
Second priority liens on collateral securing our loans may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
Certain loans of ours may be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before we receive anything on our loans secured by a second priority lien. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the company’s remaining assets, if any.
The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected. Additionally, the exercise of any rights may involve delay during which the value of collateral may decline.
We generally will not control our portfolio companies.
We do not expect to control our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company


in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.
We will be subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on our investments, cost of capital and/or net investment income.

We are subject to financial market risks, including changes in interest rates. While the majority of our investments are floating rate debt instruments, to the extent that we invest in fixed-rate securities or loans, general interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly have a material adverse effect on our business and our rate of return on invested capital.

In addition, since we use debt to finance investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates when we have debt outstanding, our cost of funds will increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Also, we have limited experience in entering into hedging transactions, and we will initially have to purchase or develop such expertise if we were to engage in hedging transactions.

You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates may result in a substantial increase in the amount of incentive fees payable to our Advisers. In addition, a decline in the prices of the debt due to rising market interest rates not reflected in such debt investments we own could adversely affect our NAV.

In July 2017, the head of the United Kingdom Financial Conduct Authority (the “FCA”) announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. In December 2017, following consideration of public comments, the Federal Reserve Board concluded that the public would benefit if the Federal Reserve Bank of New York published three proposed reference rates as alternatives to LIBOR. The Federal Reserve Bank of New York said that the publication of these alternative rates is targeted to commence by mid-2018. At this time, it is not possible to predict the effect of the FCA’s announcement, the Federal Reserve Board’s notice, other regulatory changes or announcements, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom, the United States or elsewhere. As such, the potential effect of any such event on our net investment income cannot yet be determined.

Our portfolio companies may experience financial distress, and our investments in such portfolio companies may be restructured.

Our portfolio companies may experience financial distress from time to time. The debt investments of these companies may not produce income, may require us to bear certain expenses to protect our investment and may subject us to uncertainty as to when, in what manner and for what value such distressed debt will eventually be satisfied, including through liquidation, reorganization or bankruptcy. If an exchange offer is made or plan of reorganization is adopted with respect to the debt securities we currently hold, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will have a value or income potential similar to what we anticipated when our original investment was made or even at the time of restructuring. In addition, we may receive equity securities in exchange for the debt investment that we currently hold, which may require significantly more of our management’s time and attention or carry restrictions on their disposition.

Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity, and rising interest rates may make it more difficult for portfolio companies to make periodic payments on their loans.

Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity. This risk and the risk of default is increased to the extent that the loan documents do not require the portfolio companies to pay down the outstanding principal of such debt prior to maturity. In addition, if general interest rates rise, there is a risk that our portfolio companies will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us.


Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. Any failure of one or more portfolio companies to repay or refinance its debt at or prior to maturity or the inability of one or more portfolio companies to make ongoing payments following an increase in contractual interest rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our portfolio companies may prepay loans, which prepayment may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.

The loans in our investment portfolio generally are prepayable at any time, sometimes at no premium to par. Whether a loan is prepaid may depend on the performance of the portfolio company and the existence of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital. In the case of some of these loans, having the loan prepaid may reduce the achievable yield for us if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations.

The disposition of our investments may result in contingent liabilities.

A significant portion of our investments are private securities. In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities. These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through our return of certain distributions previously made to us.

Defaults by our portfolio companies will harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold (and we may invest in portfolio companies that are highly leveraged themselves). We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. We may also record unrealized depreciation on any investment in a portfolio company upon default, which would reduce our NAV. Additionally, our investments with a deferred interest feature such as original issue discount could represent a higher credit risk than investments that must be paid in full in cash on a regular basis. Lastly, if a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible.
We may not realize gains from our equity investments, which may adversely affect our investment returns and stockholders’ ability to recover their entire investment in us.
Certain investments that we may make could be accompanied by or stapled to warrants or other equity securities. In addition, we may make direct equity investments, including controlling investments, in companies. Our investment objective is ultimately to realize gains upon our disposition of such equity interests. We believe that we may be unable to significantly increase our NAV per share unless we realize gains on our disposition of equity interests, thus creating risk that we will not ultimately recover our organization and offering costs. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience or to produce returns and distributions upon liquidation or sale of all our assets that provide investors with a return of all of their original purchase price for our shares of common stock. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We may acquire puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.
Our investments are primarily in debt and equity securities of Middle Market companies, including privately held companies. Investing in privately held companies presents certain challenges, including that such companies:



may have limited financial resources, reduced access to the capital markets and may be unable to meet their obligations under their debt or preferred equity securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
have investments that tend to be less liquid, making it difficult for us to exit an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule;
have shorter operating histories and therefore little public information, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns, and require us to rely on the ability of our Advisers to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies;
are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;
our officers and directors and employees of our Advisers may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and
may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.

These companies and their financial information will generally not be subject to the Sarbanes-Oxley Act and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. As a result, the relative lack of liquidity and the potential diminished capital resources of our target portfolio companies may affect our investment returns.

The lack of liquidity in our investments may adversely affect our business.
We invest in companies whose securities are typically not publicly traded and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. We expect that our investments will generally be subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.
We may not have the funds or ability to make additional investments in our portfolio companies.
We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment.
We may concentrate our investments in companies in a particular industry or industries.
In the event we concentrate our investments in companies in a particular industry or industries, any adverse conditions that disproportionately impact that industry or industries may have a magnified adverse effect on our operating results.

We are subject to risks associated with our investments in energy and power companies.

A prolonged continuation of depressed oil and natural gas prices would adversely affect the credit quality and performance of certain of our debt and equity investments in energy and power companies. A decrease in credit quality and performance would, in turn, negatively affect the fair value of these investments, which would consequently negatively affect our NAV. Should a period of depressed oil and natural gas prices continue, the ability of certain of our portfolio companies in the energy industry to satisfy financial or operating covenants imposed by us or other lenders may be adversely affected, which could, in turn, negatively impact


their financial condition and their ability to satisfy their debt service and other obligations. Likewise, should a period of depressed oil and natural gas prices occur, it is possible that the cash flow and profit generating capacity of these portfolio companies could also be adversely affected thereby negatively impacting their ability to pay us dividends or distributions on our investments, which could have a material adverse effect on our business, financial condition and results of operations. Also, energy and power companies are subject to supply and demand fluctuations in the markets in which they operate, which are impacted by numerous factors, including weather, use of renewable fuel sources, natural disasters, governmental regulation and general economic conditions, in addition to the effects of increasing regulation and general operational risks, any of which could have a material adverse effect on the performance and value of our investments in energy and power companies as well as our cash flows from such investments.

Certain of our portfolio companies are concentrated in certain geographic regions of the country. In such instance, we will be subject to the risks associated with those geographic regions of the country, including their economic conditions and growth prospects.

We may make investments in portfolio companies that are concentrated in certain geographic regions of the country. As a result, our investments in those portfolio companies will be subject to the risks of those geographic regions. These risks may include the risks associated with the economics and growth prospects of those geographic regions. An economic downturn or a negative change in growth prospects for those geographic regions could result in an inability of those portfolio companies to meet their obligations to us pursuant to our debt investments in them, or a decrease in the intrinsic value of our equity investments in them. In either instance, as a result of our exposure to the risks associated with those geographic regions, our expected earnings from these portfolio companies may be less than expected and as a result, your investment in us may be adversely affected.

Because certain of our portfolio companies are not located in the United States, we and our investments are subject to risks associated with non-U.S. investing.

As of December 31, 2017, 4.6% of our total portfolio (since the Other Portfolio investments do not represent a single geographic region, this information excludes the Other Portfolio investments) were comprised of investments in non-U.S. companies, all of which were denominated in U.S. dollars. Securities issued by non-U.S. companies are not “qualifying assets” under the 1940 Act, and we may invest in non-U.S. companies, including emerging market companies, to the limited extent we are able to do so under the 1940 Act. We intend to invest in such non-U.S. companies in accordance with our investment strategy and, accordingly, such investments would complement and broaden our portfolio. Investing in securities of emerging market companies involves many risks including economic, social, political, financial, tax and security conditions in the emerging market, potential inflationary economic environments, regulation by foreign governments, different accounting standards and political uncertainties. Economic, social, political, financial, tax and security conditions also could negatively affect the value of emerging market companies. These factors could include changes in the emerging market government’s economic and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to the emerging market companies or investments in their securities and the possibility of fluctuations in the rate of exchange between currencies.

Risks Relating to Debt Financing

We may have limited ability to fund new investments if we are unable to expand, extend or refinance our EverBank Credit Facility or the Deutsche Bank Credit Facility (combined, the “Credit Facilities”).

On March 11, 2014, we entered into a senior secured revolving credit agreement (as amended from time to time, the “Capital One Credit Facility”) with Capital One, National Association (“Capital One”), as administrative agent and lender, and the other financial institutions party thereto as lenders. On March 6, 2017, the Capital One Credit Facility was amended and restated (as amended and restated, the “EverBank Credit Facility”) to, among other things, (i) extend the maturity date to March 6, 2020 with two, one-year extension options thereafter subject to lender approval, (ii) reduce revolver commitments thereunder to $95.0 million and (iii) assign Capital One’s role as administrative agent to EverBank Commercial Finance, Inc. (“EverBank”). The EverBank Credit Facility was subsequently amended on October 19, 2017 to increase revolver commitments thereunder to $120.0 million.

On June 2, 2014, HMS Funding entered into a credit agreement (the “Deutsche Bank Credit Facility”) among HMS Funding, the Company, as equityholder and servicer, Deutsche Bank AG, New York Branch (“Deutsche Bank”), the financial institutions party thereto as lenders and U.S. Bank National Association as collateral agent and collateral custodian. The Deutsche Bank Credit Facility provided for an initial borrowing capacity of $50.0 million, subject to certain limitations, including limitations with respect to HMS Funding’s investments, as more fully described in the Deutsche Bank Credit Facility. The Deutsche Bank Credit Facility was amended and restated on May 18, 2015 and subsequently has been amended on multiple occasions, most recently on November 20, 2017, to among other things, (i) reduce the interest rate from the sum of the index plus an applicable margin of 2.50% to the


sum of the index plus an applicable margin of 2.35% (the index will be equal to the one-month LIBOR, or, in the event that LIBOR is not reasonably available, the higher of Deutsche Bank's base commercial lending rate and the interest rate equal to 0.5% above the federal funds rate), (ii) extend the maturity date to November 20, 2022, (iii) increase revolver commitments thereunder from $400.0 million to $450.0 million and (iv) establish a maximum borrowing capacity thereunder of $550.0 million.

There can be no guarantee that we will be able to expand, extend or replace the Credit Facilities on terms that are favorable to us, if at all. Our ability to expand the Credit Facilities, and to obtain replacement financing at the time of maturity, will be constrained by then-current economic conditions affecting the credit markets.

As a BDC, we are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%. Stated differently, the amount of our total borrowings and other senior securities as a percentage of our total assets cannot exceed 50%. If this ratio declines below 200%, we cannot incur additional debt and could be required to sell a portion of our investments to repay some debt when it is disadvantageous to do so.

In March of 2013, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (the “Agencies”) jointly issued final guidance on leveraged lending transactions conducted by regulated financial institutions (the “Leveraged Lending Guidance”). In November of 2014, the Agencies issued “Frequently Asked Questions (“FAQ”) for Implementing March 2013 Interagency Guidance on Leveraged Lending” that were designed to foster industry and examiner understanding of the Leveraged Lending Guidance. The Leveraged Lending Guidance outlines for Agency-supervised institutions high-level principles related to safe-and-sound leveraged lending and contains the Agencies’ minimum expectations for a risk management framework that financial institutions should have in place. With regard to BDCs, the FAQ for example states that the risk management and reporting aspects of the Leveraged Lending Guidance should be applied to underlying loans in structured transactions if an institution originates or retains credit risk in the individual loans. If the financial institution originates or participates in a loan to a BDC that holds leveraged loans, then the loan to the BDC constitutes indirect exposure that should be measured and reported as a leveraged loan. The full impact of the Leveraged Lending Guidance and the FAQ is still uncertain, but it is possible that financing may become more expensive for us and banks or other financial institutions may be less willing to engage in leveraged lending, making it more difficult for us to obtain financing.
In addition to regulatory limitations on our ability to raise capital, the Credit Facilities contain various covenants, which, if not complied with, could accelerate our repayment obligations under the Credit Facilities, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
We will have a continuing need for capital to finance our operations. The EverBank Credit Facility contains affirmative and negative covenants usual and customary for leveraged financings, including:

maintaining an interest coverage ratio of at least 2.00 to 1.00;
maintaining an asset coverage ratio of at least 2.10 to 1.00; and
maintaining a minimum consolidated tangible net worth, excluding Structured Subsidiaries, of the greater of (a) the aggregate amount of the revolver commitments or (b) $50.0 million.

Additionally, the EverBank Credit Facility requires us to obtain written approval from the administrative agent prior to entering into any material amendment, waiver or other modification of any provision of the Investment Advisory Agreement. The EverBank Credit Facility permits us to fund additional loans and investments as long as we are within the conditions set out in the agreement.

The Deutsche Bank Credit Facility contains affirmative and negative covenants usual and customary for leveraged financings, including maintaining a positive tangible net worth and limitations on industry concentration. Further, the Credit Facilities contain usual and customary default provisions including:

a default in the payment of interest and principal;
insolvency or bankruptcy of the Company;
a material adverse change in the Company’s business; or
breach of any covenant, representation or warranty in the loan agreement or other credit documents and failure to cure such breach within defined periods.

Our continued compliance with the covenants contained in the Credit Facilities depends on many factors, some of which are beyond our control. There are no assurances that we will continue to comply with these covenants. Any failure to satisfy these covenants could result in foreclosure by our lenders, which would accelerate our repayment obligations under one or both of the


Credit Facilities and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.

Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.
Borrowings, also known as leverage, magnify the potential for gain or loss on invested equity capital. As we use leverage to partially finance our investments, you will experience increased risks associated with investing in our securities. We may borrow from banks and other lenders, including under the Credit Facilities, and may issue debt securities or enter into other types of borrowing arrangements in the future. If the value of our assets decreases, leveraging would cause NAV per share to decline more sharply than it otherwise would have had we not leveraged and such a decline could affect our ability to make distributions. Similarly, any decrease in our income would cause our net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make distributions to our stockholders. Leverage is generally considered a speculative investment technique.
The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below. The calculation assumes (i) we borrow funds equal to 40% of our total assets, (ii) the resulting average total assets are approximately $1.1 billion during the twelve-month period commencing January 1, 2018 and (iii) a weighted average cost of funds of 4.33%. In order to compute the “Corresponding return to stockholders,” the “Assumed Return on Our Portfolio (net of expenses)” is multiplied by the assumed total assets to obtain an assumed return to us. From this amount, the interest expense is calculated by multiplying the assumed weighted average cost of funds times the assumed debt outstanding, and the product is subtracted from the assumed return to us in order to determine the return available to stockholders. The return available to stockholders is then divided by our stockholders’ equity to determine the “Corresponding return to stockholders.” Actual interest payments may be different.
Assumed Return on Our Portfolio (net of expenses) (10)% (5)% 0% 5% 10%
Corresponding return to stockholders (19.43)% (11.14)% (2.85)% 5.44% 13.73%

Under the same assumptions, our assets would need to yield an annual return (net of expenses) of approximately 1.72% in order to cover the annual interest payments on our outstanding debt.

We are a holding company and depend on payments from our subsidiaries in order to make payments on any debt securities that we may issue as well as to pay distributions on our common stock. Any debt securities that we issue will be structurally subordinated to the obligations of our subsidiaries.

We are a holding company and fund a majority of our investments through wholly owned subsidiaries. We depend upon the cash flow from our subsidiaries and the receipt of funds from them, any of which may be subject to restriction or limitations based on the organizational documents of the subsidiaries and the agreements governing the debt of any such subsidiary. In addition, because we are a holding company, any debt securities that we issue will be structurally subordinated to the obligations of our subsidiaries. In the event that one of our subsidiaries becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, its assets will be used first to satisfy the claims of its creditors. Consequently, any claim by us or our creditors against any subsidiary will be structurally subordinated to all of the claims of the creditors of such subsidiary. We cannot assure security holders that they will receive any payments required to be made under the terms of any debt securities that we may issue or other distributions.

Risks Relating to Our Common Stock

Because we closed our Offering to new investors, we will be limited in the number and type of investments we may make, and the value of your investment in us may be reduced in the event our assets under-perform.
With the approval of our board of directors, we closed the Offering to new investors effective September 30, 2017. Accordingly, the opportunity for diversification of our investments may be decreased and the returns achieved on those investments may be reduced as a result of allocating all of our expenses over a smaller capital base.
Our sharesof common stock are not listed on an exchange or quoted through a quotation system willand may not be listed forin the foreseeable future, if ever, and we are not obligated to effectuate a liquidity event by a specified date.ever. Therefore, youour stockholders will have limited liquidity and may not receive a full return of yourtheir invested capital if youthey sell yourtheir sharesof common stock.stock.



Our shares of common stock are illiquid assets for which there is not a secondary market nor is it expected that any will develop in the future. We intend to explore a potential liquidity event for our stockholders between four and six years following the closing of our Offering or any subsequent follow-on offerings. However, there can be no assurance that we will complete a liquidity event within such time or at all. We expect that our board of directors, in the exercise of its duties to us, will determine to pursue a liquidity event when it believes that then-current market conditions are favorable for a liquidity event, and that such an event is in our best interests. A liquidity event could include (1) the sale of all or substantially all of our assets either on a complete portfolio basis or individually followed by a liquidation, (2) a listing of our shares of common stock on a national securities exchange or (3) a merger or another transaction approved by our board of directors in which our stockholders will receive cash or shares of a publicly traded company.
In making the decision to apply for listing of our shares of common stock, our directors will try to determine whether listing our shares of common stock or liquidating our assets will result in greater value for our stockholders. In making a determination of what type of liquidity event is in our best interests, our board of directors, including our independent directors, may consider a variety of criteria, including market conditions, portfolio diversification, portfolio performance, our financial condition, potential access to capital as a listed company, market conditions for the sale of our assets or listing of our common stock, internal management requirements to become a perpetual life company and the potential for stockholder liquidity. If our shares of common stock are listed, we cannot assure you a public trading market will develop. Since a portion of the offering price from the sale of common stock will be used to pay expenses and fees, the full offering price paid by stockholders will not be invested in portfolio companies. As a result, even if we do complete a liquidity event, you may not receive a return of all of your invested capital.
You should also be aware that shares of publicly traded closed-end investment companies frequently trade at a discount to their NAV. If our shares of common stock are eventually listed on a national exchange, we would not be able to predict whether our common stock would trade above, at or below NAV per share. This risk is separate and distinct from the risk that our NAV per share may decline.
•Our share repurchase program allows us to repurchase yourour stockholders’ shares on a quarterly basis, subject to certain restrictions and limitations. As a result, youour stockholders will have limited opportunities to sell yourtheir shares and, to the extent youthey are able to sell yourtheir shares under the program, youour stockholders may not be able to recover the amount of yourtheir investment in our shares.
We have a share repurchase program allowing us to repurchase approximately 10% of our weighted average number of outstanding shares in any 12-month period. Unless our board of directors determines otherwise, we will limit the number of shares to be repurchased (i) during any calendar year to the number of shares we can repurchase with the proceeds we receive from the issuance of shares of our common stock under our distribution reinvestment plan during the trailing four quarters and (ii) in any calendar quarter to 2.5% of the weighted average number of shares of common stock outstanding during the trailing four quarters. This program allows you to sell back your shares of common stock to us on a quarterly basis at a price equal to the NAV per share, as determined within 48 hours of the repurchase date. The share repurchase program includes numerous restrictions that will limit your ability to sell your shares. At the discretion of our board of directors, we may also use cash on hand, cash available from borrowings and cash from the sale of our investments as of the end of the applicable period to repurchase shares. To the extent that the number of shares put to us for repurchase exceeds the number of shares that we are able to purchase, we will repurchase shares on a pro rata basis, not on a first-come, first-served basis. Further, we will have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under federal law or Maryland law, which prohibit distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all repurchase requests made in any year. In addition, our board of directors may suspend or terminate the share repurchase program and therefore should not be relied upon as a method to sell shares promptly and at a desired price.

•Our repurchase offers pursuant to our share repurchase program may be at prices lower than the price paid by our stockholders to purchase our common stock.
When we make quarterly repurchase offers pursuant to the share repurchase program, we offer to repurchase shares of common stock at the NAV per share, as determined within 48 hours prior to the repurchase date, which price may be lower than the price that investors paid for shares of common stock in the Company’s offering. As a result, to the extent an investor paid an offering price that included the related sales load , then the price at which such investor may sell shares of common stock pursuant to our share repurchase program may be lower than what such investor paid in connection with the purchase of shares of common stock.
•We may be unable to invest a significant portion of net stock offering proceeds on acceptable terms in an acceptable time frame.
Delays in investing net stock offering proceeds may impair our performance. We cannot assure you that we will be able to identify any investments that meet our investment objective or that any investment that we make will produce a positive return. We may


be unable to invest net stock offering proceeds on acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating results.
Before making investments, we will invest any net stock offering proceeds primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, which may produce returns that are significantly lower than the returns which we expect to achieve when our portfolio is fully invested in securities meeting our investment objective. As a result, any distributions that we pay while our portfolio is not fully invested in securities meeting our investment objective may be lower than the distributions that we may be able to pay when our portfolio is fully invested in securities meeting our investment objective.
Under the terms of our Charter, our board of directors is authorized to issue shares of preferred stock with rights and privileges superior to common stockholders without common stockholder approval.
Under the terms of our articles of amendment and restatement (our “Charter”), our board of directors is authorized to issue shares of preferred stock in one or more classes or series without stockholder approval. The board of directors has discretion to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions qualifications and terms or conditions of redemption for each class or series of preferred stock. Every issuance of preferred stock will be required to comply with the requirements of the 1940 Act. The 1940 Act requires that (1) immediately after issuance and before any distribution is made with respect to our common stockstockholders, our distributions may not grow over time, and before any purchasea portion of common stock is made, such preferred stock together with all other senior securities must not exceed an amount equaldistributions paid to 50% of our total assets after deducting the amount of such distribution or purchase price, as the casestockholders may be and (2) the holdersa return of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if distributions on such preferred stock are in arrears by two years or more. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock.capital.
Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.
Our investors do not have preemptive rights to any shares we issue in the future. Our Charter authorizes us to issue 450,000,000 shares of common stock. Pursuant to our Charter, a majority of our entire board of directors may amend our Charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series without stockholder approval. Our board of directors may elect to sell additional shares in this or future public offerings or issue equity interests in private offerings. To the extent we issue additional equity interests, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares of common stock.
Certain provisions of our Charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.
Our Charter and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from attempting to acquire us. Under the Maryland General Corporation Law (the “MGCL”), “control shares” acquired in a “control share acquisition” have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquiror, by officers or by employees who are directors of the corporation. Our bylaws contain a provision exempting from the Control Share Acquisition Act under the MGCL any and all acquisitions by any person of our shares of stock. There can be no assurance that such provision will not be amended or eliminated at some time in the future. The Control Share Acquisition Act (if we amend our bylaws to be subject to that Act) may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. However, we will amend our bylaws to be subject to the Control Share Acquisition Act only if our board of directors determines that it would be in the best interests of our stockholders and if the SEC staff expressly approves that our being subject to the Control Share Acquisition Act does not conflict with the 1940 Act. The SEC staff has issued informal guidance setting forth its position that certain provisions of the Control Share Acquisition Act, if implemented, would violate Section 18(i) of the 1940 Act. Under the MGCL, specified “business combinations,” including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between a Maryland corporation and any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock, and certain other parties (each an “interested stockholder”), or an affiliate of the interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter any of the specified business combinations must be approved by two super majority votes of the stockholders unless, among other conditions, the corporation’s common stockholders receive a minimum price for their shares.


Under the MGCL, certain statutory provisions permit a corporation that is subject to the Exchange Act and that has at least three independent directors to be subject to certain corporate governance provisions notwithstanding any contrary provision in the corporation’s charter and bylaws. Among other provisions, a board of directors may classify itself without the vote of stockholders. Further, the board of directors, by electing into certain statutory provisions and notwithstanding any contrary provision in the charter or bylaws, may (i) provide that a stockholder-requested special meeting of stockholders will be called only at the request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting, (ii) reserve for itself the right to fix the number of directors, and (iii) retain for itself the exclusive power to fill vacancies created by the death, removal or resignation of a director, which is permitted under our Charter. A corporation may be prohibited by its charter or by resolution of its board of directors from electing to be subject to any of the provisions of the statute. We are not prohibited from implementing any or all of the statute.
Additionally, our board of directors may, without stockholder action, authorize the issuance of shares of stock in one or more classes or series, including preferred stock; and our board of directors may, without stockholder action, amend our Charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the value of our common stock.
Investing in shares of our common stock may involve an above average degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk, and therefore, an investment in our shares may not be suitable for someone with lower risk tolerance.

Our stockholders could experience dilution in their ownership percentage if they do not participate in our distribution reinvestment plan.

All distributions declared to stockholders that have “opted in” to our distribution reinvestment plan are automatically reinvested in shares of our common stock. As a result, our stockholders that do not participate in our distribution reinvestment plan could experience dilution in their ownership percentage of our common stock over time if we issue additional shares of our common stock.
Federal Income Tax Risks

•We will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under Subchapter M of the Code.
•We may have difficulty paying the distributions required to maintain RIC tax treatment under the Code if we recognize income before or without receiving cash representing such income.
General Risk Factors
•Events outside of our control, including public health crises, supply chain disruptions and inflation, could negatively affect our portfolio companies and the results of our operations.
•We are currently operating in a period of capital markets disruption and economic uncertainty, and capital markets may experience periods of disruption and instability in the future.
•Failure to comply with applicable laws or regulations and changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
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•We are highly dependent on information systems and systems failures could significantly disrupt our business.
RISKS RELATED TO OUR BUSINESS AND STRUCTURE
Because our Investment Portfolio is recorded at fair value, there is and will continue to be uncertainty as to the value of our portfolio investments.
Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by us pursuant to procedures established and overseen by our Board of Directors. Typically, there is not a public market for the securities of the privately held companies in which we invest through our Private Loan and LMM investment strategies. As a result, we value these securities quarterly at fair value based on inputs from management and a nationally recognized independent financial advisory services firm (on a rotational basis) pursuant to Valuation Procedures approved by our Board of Directors. In addition, the market for investments in companies that we invest through our Middle Market investment strategy is generally not a liquid market, and therefore, we primarily use a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs, pursuant to our Valuation Procedures. See Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a detailed discussion of ourInvestment Portfolio valuation process and procedures.
The determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are to a certain degree, subjective and dependent on a valuation process approved by our Board of Directors. Certain factors that may be considered in determining the fair value of our investments include external events, such as private mergers, sales and acquisitions involving comparable companies. Because such valuations, and particularly valuations of securities in privately held companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations may cause our NAV on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our investments. As a result, investors purchasing our securities based on an overstated NAV would pay a higher price than the value of our investments might warrant. Conversely, investors selling our securities during a period in which the NAV understates the value of our investments may receive a lower price for their securities than the value of our investments might warrant.
Our financial condition and results of operations depends on our Adviser’s ability to effectively manage and deploy capital.
Our ability to achieve our investment objective of maximizing our portfolio’s total return by generating current income from our debt investments and current income and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company, depends on our Adviser’s ability to effectively manage and deploy capital, which depends, in turn, on our Adviser’s investment team’s ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria.
Accomplishing our investment objective on a cost-effective basis is largely a function of our investment team’s handling of the investment process, its ability to provide competent, attentive and efficient services and our access to investments offering acceptable terms. In addition to monitoring the performance of our existing investments, members of our investment team are also called upon, from time to time, to provide managerial assistance to some of our portfolio companies. These demands on their time may distract them or slow the rate of investment.
Even if we are able to grow and build upon our investment operations, any failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations will depend on many factors, including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial markets and economic conditions. Furthermore, if our Adviser cannot successfully operate our business or implement our investment policies and strategies as described herein, it could negatively impact our ability to pay dividends.
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We are subject to risks associated with the interest rate environment and changes in interest rates will affect our cost of capital, net investment income and the value of our investments.
To the extent we borrow money or issue debt securities or preferred stock to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities or preferred stock and the rate at which we invest these funds. In addition, many of our debt investments and borrowings have floating interest rates that reset on a periodic basis, and many of our investments are subject to interest rate floors. As a result, a change in market interest rates could have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds will increase because the interest rates on the amounts borrowed under our credit facilities are floating, and any new fixed rate debt may be issued at higher coupon rates, which could reduce our net investment income to the extent any debt investments have either fixed interest rates, or in periods when debt investments with floating interest rates are subject to an interest rate floor above then current levels. In periods of declining interest rates, our interest income and our net investment income could be reduced as the interest income earned on our floating rate debt investments declines and any new fixed rate debt may be issued at lower coupon rates. See further discussion and analysis at Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We can use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques could include various interest rate hedging activities to the extent permitted by the 1940 Act and applicable commodities laws. These activities could limit our ability to participate in the benefits of lower interest rates with respect to the hedged borrowings. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.
An increase in the market pricing of the spreads charged over index rates on floating rate investments could lead to a decline in the fair value of the debt securities we own, which would adversely affect our NAV. Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividends, which could reduce the value of our common stock.
We face increasing competition for investment opportunities.
We compete for investments with other investment funds (including private equity funds, debt funds, mezzanine funds, collateralized loan obligation funds, or CLOs, BDCs and SBICs), as well as traditional financial services companies such as commercial banks and other sources of funding. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to do. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in LMM companies is underserved by traditional commercial banks and other financing sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC.
We are dependent upon our Adviser’s key investment personnel for our future success.
We depend on the members of our Adviser’s investment team, particularly Dwayne L. Hyzak, David L. Magdol, Jesse E. Morris, Jaime Arreola, K. Colton Braud, III, Damian T. Burke, Samuel A. Cashiola, Diego Fernandez and Nicholas T. Meserve for the identification, review, final selection, structuring, closing and monitoring of our investments. These individuals have significant investment expertise and relationships that we rely on to implement our business plan. Although these executive officers and other key personnel have entered into non-compete arrangements with our Adviser or an affiliate of our Adviser, we cannot guarantee that any of these individuals will remain available to us. If we lose the services of the individuals mentioned above, we may not be able to operate our business as we expect, and our ability to compete could be harmed, which could cause our operating results to suffer.
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Our success depends on our Adviser’s ability to attract and retain qualified personnel in a competitive environment.
Our growth will require that our Adviser is able to retain new investment and administrative personnel in a competitive market. Our Adviser’s ability to attract and retain personnel with the requisite credentials, experience and skills depends on several factors including, but not limited to, our ability to offer competitive wages, benefits and professional growth opportunities. Many of the entities, including investment funds (such as private equity funds, debt funds and mezzanine funds) and traditional financial services companies, with which our Adviser competes for experienced personnel have greater resources than our Adviser has.

The competitive environment for qualified personnel may require our Adviser to take certain measures to ensure that it is able to attract and retain experienced personnel. Such measures may include increasing the attractiveness of its overall compensation packages, altering the structure of its compensation packages through the use of additional forms of compensation, or other steps. The inability of our Adviser to attract and retain experienced personnel would have a material adverse effect on our business.
We may not replicate the historical results achieved by Main Street or by other entities managed by our Adviser.
Although our primary focus in making investments is similar to that of Main Street, the parent company of our Adviser, we cannot assure stockholders that we will be able to replicate the historical results achieved by Main Street or other investment funds or accounts managed by our Adviser. Because of the differences in our business structure and portfolio composition, our investment returns could be substantially lower than the returns achieved by Main Street or other investment funds or accounts managed by our Adviser in prior periods. Additionally, all or a portion of the prior results may have been achieved in particular market conditions that may never be repeated. Moreover, current or future market volatility and regulatory uncertainty may have an adverse impact on our future performance.
Our business model depends to a significant extent upon strong referral relationships.
We expect that members of our management team will maintain their relationships with intermediaries, financial institutions, investment bankers, commercial bankers, financial advisors, attorneys, accountants, consultants and other individuals within our network, and we will rely to a significant extent upon these relationships to provide us with potential investment opportunities. If our management team fails to maintain its existing relationships or develop new relationships with sources of investment opportunities, we will not be able to grow our Investment Portfolio. In addition, individuals with whom members of our management team have relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.
Our Board of Directors may change our operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.
Our Board of Directors has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, NAV, operating results and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay interest and principal payments to holders of our debt instruments and dividends to our stockholders and cause our investors to lose all or part of their investment in us.
We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Under the 1940 Act, a “diversified” investment company is required to invest at least 75% of the value of its total assets in cash and cash items, government securities, securities of other investment companies and other securities limited in respect of any one issuer to an amount not greater than 5% of the value of the total assets of such company and no more than 10% of the outstanding voting securities of such issuer. As a non-diversified investment company, we are not subject to this requirement. To the extent that we assume large positions in the securities of a small number of issuers, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our RIC asset diversification requirements, we do not have
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fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. See Risk Factors — Federal Income Tax Risks — We will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under Subchapter M of the Code.
We and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.
Cash held by us and by our portfolio companies in non-interest-bearing and interest-bearing operating accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we or our portfolio companies could lose all or a portion of those amounts held in excess of such insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our and our portfolio companies’ business, financial condition, results of operations or prospects.
Although we assess our portfolio companies’ banking relationships as we believe necessary or appropriate, our and our portfolio companies’ access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our respective current and projected future business operations could be significantly impaired by factors that affect us or our portfolio companies, the financial institutions with which we or our portfolio companies have arrangements directly or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we or our portfolio companies have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us or our portfolio companies to acquire financing on acceptable terms or at all.
We are subject to risks related to corporate social responsibility.
Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage to our brand and reputation if we or our Adviser fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency and considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business.
RISKS RELATED TO OUR INVESTMENTS
The types of portfolio companies in which we invest involve significant risks and we could lose all or part of our investment.
Investing in the types of companies that comprise our portfolio companies exposes us to a number of significant risks. Among other things, these companies:
•may have limited financial resources and may be unable to meet their obligations under their debt instruments that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees from subsidiaries or affiliates of our portfolio companies that we may have obtained in connection with our investment, as well as a corresponding decrease in the value of the equity components of our investments;
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•may have shorter operating histories, narrower product lines, smaller market shares and/or significant customer concentrations than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;
•are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation, termination or significant under-performance of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
•generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and
•generally have less publicly available information about their businesses, operations and financial condition. We are required to rely on the ability of our Adviser’s management team and investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and may lose all or part of our investment.
In addition certain of our officers and directors or officers and directors of our Adviser may serve as directors on the boards of our portfolio companies. To the extent that litigation arises out of our investments in these companies, our officers and directors or officers and directors of our Adviser may be named as defendants in such litigation, which could result in an expenditure of funds (through our indemnification of such officers and directors) and the diversion of management time and resources.
Economic recessions or downturns could impair our portfolio companies’ performance and defaults by our portfolio companies will harm our operating results.
Many of our portfolio companies are susceptible to economic slowdowns or recessions and could be unable to repay our loans during these periods. Therefore, the number of non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions could decrease the value of collateral securing any of our loans and the value of any equity investments. A severe recession could further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing our investments and harm our operating results.
Any deterioration of general economic conditions could lead to significant declines in corporate earnings or loan performance, and the ability of corporate borrowers to service their debt, any of which could trigger a period of global economic slowdown, and have an adverse impact on our performance and financial results, and the value and the liquidity of our investments. In an economic downturn, we could have non-performing assets or an increase in non-performing assets, and we would anticipate that the value of our portfolio would decrease during these periods. Failure to satisfy financial or operating covenants imposed by lenders, including us, to a portfolio company could lead to defaults and, potentially, acceleration of payments on such loans and foreclosure on the assets representing collateral for the portfolio company’s obligations. Cross default provisions under other agreements could be triggered and thus limit the portfolio company’s ability to satisfy its obligations under any debt that we hold and affect the value of any equity securities we own. We would expect to incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a portfolio company following or in anticipation of a default.
Rising credit spreads could affect the value of our investments, and rising interest rates make it more difficult for portfolio companies to make periodic payments on their loans.
Some of our portfolio investments are debt securities that bear interest at variable rates and may be negatively affected by changes in market interest rates. Rising interest rates make it more difficult for borrowers to repay debt, which could increase the risk of payment defaults and cause the portfolio companies to defer or cancel needed investment. Any failure of one or more portfolio companies to repay or refinance its debt at or prior to maturity or the inability of one or more portfolio companies to make ongoing payments following an increase in contractual interest rates could have a
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material adverse effect on our business, financial condition, results of operations and cash flows. The value of our securities could also be reduced from an increase in market credit spreads as rates available to investors could make an investment in our securities less attractive than alternative investments.
Conversely, decreases in market interest rates could negatively impact the interest income from our variable rate debt investments while the interest we pay on our fixed rate debt securities does not change. A decrease in market interest rates may also have an adverse impact on our returns by requiring us to accept lower yields on our debt investments and by increasing the risk that our portfolio companies will prepay our debt investments, resulting in the need to redeploy capital at potentially lower rates.
Inflation could adversely affect the business, results of operations and financial condition of our portfolio companies.
Certain of our portfolio companies are in industries that could be impacted by inflation. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay dividends on our equity investments and/or interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net increase (decrease) in net assets resulting from operations.
We may be exposed to higher risks with respect to our investments that include original issue discount or PIK interest.
Our investments may include original issue discount and contractual PIK interest, which represents contractual interest added to a loan balance and due at the end of such loan’s term. To the extent original issue discount or PIK interest constitute a portion of our income, we are exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash, including the following:
•original issue discount and PIK instruments may have higher yields, which reflect the payment deferral and credit risk associated with these instruments;
•for accounting purposes, cash distributions to investors representing original issue discount income are not derived from paid in capital, although they may be effectively paid from any offering proceeds during any given period; thus, although the source for the cash used to pay a distribution of original issue discount income may come from the cash invested by investors, the 1940 Act does not require that investors be given notice of this fact;
•original issue discount and PIK instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of the collateral; and
•original issue discount and PIK instruments may represent a higher credit risk than coupon loans; even if the conditions for income accrual under U.S. GAAP are satisfied, a borrower could still default when actual payment is due upon the maturity of such loan.
The lack of liquidity in our investments may adversely affect our business.
We generally invest in companies whose securities are not publicly traded and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. Our investments are usually subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price and, as a result, we may suffer losses.
We may not have the funds or ability to make additional investments in our portfolio companies.
We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the extension of additional loans, the exercise of a warrant to
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purchase equity securities, or the funding of additional equity investments. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation, may reduce our ability to protect an existing investment or may reduce the expected yield on the investment.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
Even if our investment is structured as a senior-secured loan, principles of equitable subordination, as defined by existing case law, could lead a bankruptcy court to subordinate all or a portion of our claim to that of other creditors and transfer any lien securing such subordinated claim to the bankruptcy estate. The principles of equitable subordination defined by case law have generally indicated that a claim may be subordinated only if its holder is guilty of misconduct or where the senior loan is re-characterized as an equity investment and the senior lender has actually provided significant managerial assistance to the bankrupt debtor. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible that we could become subject to a lender liability claim, including as a result of actions taken in rendering significant managerial assistance or actions to compel and collect payments from the borrower outside the ordinary course of business.
We generally will not control our portfolio companies.
We do not, and do not expect to, control the decision making in many of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest will make business decisions with which we disagree and the management of such company will take risks or otherwise act in ways that do not serve our interests as debt investors or minority equity holders. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that would decrease the value of our portfolio holdings.
Defaults by our portfolio companies will harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to non-payment of interest and other defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.
Any unrealized depreciation that we experience in our portfolio may be an indication of future realized losses, which could reduce our income and gains available for distribution.
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at the fair value as determined in accordance with our Valuation Procedures adopted pursuant to Rule 2a-5 under the 1940 Act. Decreases in the market values or fair values of our investments will be recorded as unrealized depreciation. Any unrealized depreciation in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to affected loans or a potential impairment of the value of affected equity investments. This
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could result in realized losses in the future and ultimately in reductions of our income and gains available for distribution in future periods.
Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our securities.

The discontinuation and replacement of LIBOR may adversely affect the value of floating-rate debt securities in our portfolio or issued by us.
As of June 30, 2023, no settings of LIBOR continue to be published on a representative basis and publication of many non-U.S. dollar LIBOR settings have been entirely discontinued. On July 29, 2021, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, recommended replacing U.S. dollar LIBOR with alternative reference rates based on the Secured Overnight Financing Rate (“SOFR”). SOFR significantly differs from LIBOR, both in the actual rate and how it is calculated. Further, on March 15, 2022, the Consolidated Appropriations Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), was signed into law in the United States. This legislation established a uniform benchmark replacement process for certain financial contracts that mature after June 30, 2023 that do not contain clearly defined or practicable LIBOR fallback provisions. The legislation also created a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the U.S. Federal Reserve. In addition, the U.K. Financial Conduct Authority, which regulates the publisher of LIBOR (ICR Benchmark Administration) has announced that it required the continued publication of one, three and six month tenors of U.S. dollar LIBOR on a non-representative synthetic basis until the end of September 2024, which may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not being covered by the federal legislation remaining on synthetic U.S. dollar LIBOR until the end of this period. The transition from LIBOR as a result of certain statutory regimes (e.g., N.Y. Gen. Oblig. Law § 18-401 or the Adjustable Interest Rate (LIBOR) Act) or the use of synthetic LIBOR in floating-rate debt securities in our portfolio or issued by us and could have a material and adverse impact on the value or liquidity of those instruments.
Given the inherent difference between LIBOR and SOFR, or any other alternative benchmark rate established, there are many uncertainties regarding a transition from LIBOR, including, but not limited to, the need to amend contracts which continue to reference LIBOR and how the transition from LIBOR will impact the cost of variable rate debt and certain derivative financial instruments. In addition, SOFR or other replacement rates may fail to gain market acceptance. Any failure of SOFR or alternative reference rates to gain market acceptance could adversely affect the return on or value of the market for securities linked to such rates. The elimination of LIBOR, the replacement of LIBOR with any alternative reference rate, such as SOFR (or an alternative reference rate based on SOFR) or any other changes or reforms to floating rate benchmarks could have an adverse impact on the market value of and/or transfer ability of any floating-rate debt securities in our portfolio or issued by us.
The IRS has issued regulations regarding the tax consequences of the transition from LIBOR or another interbank offered rate (“IBOR”) to a new reference rate in debt instruments and non-debt contracts. Under the regulations, alteration or modification of the terms of a debt instrument to replace an operative rate that uses a discontinued IBOR with a qualified rate (as defined in the regulations) including true up payments equalizing the fair market value of contracts before and after such IBOR transition, to add a qualified rate as a fallback rate to a contract whose operative rate uses a discontinued IBOR or to replace a fallback rate that uses a discontinued IBOR with a qualified rate would not be taxable. The IRS may provide additional guidance, with potential retroactive effect.
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We may be subject to risks associated with “covenant-lite” loans.
Some of the loans in which we invest may be “covenant-lite” loans, which means the loans contain fewer maintenance covenants than other loans (in some cases, none) and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain criteria are breached. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. To the extent we invest in covenant-lite loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in loans with finance maintenance covenants.
We may not realize gains from our equity investments.
Certain investments that we have made in the past and may make in the future include warrants or other equity securities. Investments in equity securities involve a number of significant risks, including the risk of further dilution as a result of additional issuances, inability to access additional capital and failure to pay current distributions. Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited voting rights. In addition, we may from time to time make non-control, equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We often seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer; however, we may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our investment strategy contemplates potential investments in debt securities of foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in securities of U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
Although most of our investments will be U.S. dollar denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments.
RISKS RELATED TO LEVERAGE
Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.
Borrowings, also known as leverage, magnify the potential for loss on investments in our indebtedness and gain or loss on investments in our equity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. Accordingly, any event that adversely affects the value of an investment would be magnified to the extent we use leverage. Such events could result in a substantial loss to us, which would be greater than if leverage had not been used. In addition, our investment objectives are dependent on the continued availability of leverage at attractive relative interest rates.
We may also borrow from banks and other lenders and may issue debt securities or enter into other types of borrowing arrangements in the future. Lenders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. We have the ability to pledge up to 100% of our assets and can grant a security interest in all of
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our assets under the terms of any debt instruments we could enter into with lenders. The terms of our existing indebtedness require us to comply with certain financial and operational covenants, and we expect similar covenants in future debt instruments. Failure to comply with such covenants could result in a default under the applicable credit facility or debt instrument if we are unable to obtain a waiver from the applicable lender or holder, and such lender or holder could accelerate repayment under such indebtedness and negatively affect our business, financial condition, results of operations and cash flows. In addition, under the terms of any credit facility or other debt instrument we enter into, in the event of a default, we are likely to be required by its terms to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital Resources for a discussion regarding our outstanding indebtedness.
If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any decrease in our income would cause net investment income to decline more sharply than it would have had we not leveraged our business. Such a decline could negatively affect our ability to pay common stock dividends, scheduled debt payments or other payments related to our securities.
Illustration: The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below.

Assumed Return on Our Portfolio(1) (net of expenses)
(10.0)%(5.0)%0.0%5.0%10.0%
Corresponding Net Return to Common Stock Holder(2)
(23.8)%(14.7)%(5.5)%3.6%12.8%
_____________________________
(1)Assumes, as of December 31, 2023, $1,139.9 million in total assets, $485.7 million in debt outstanding, $622.3 million in net assets and a weighted-average interest rate of 7.1%. Actual interest payments may be different.
(2)In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2023 total assets of at least 3.0%.
Our ability to achieve our investment objective may depend in part on our ability to access additional leverage on favorable terms and there can be no assurance that such additional leverage can in fact be achieved. If we are unable to obtain leverage or if the interest rates of such leverage are not attractive, we could experience diminished returns. The number of leverage providers and the total amount of financing available could decrease or remain static.
All of our assets are subject to security interests under our senior securities and if we default on our obligations under our senior securities, we may suffer adverse consequences, including foreclosure on our assets.
Substantially all of our assets are currently pledged as collateral under our senior securities, including any credit facilities or notes. If we default on our obligations under our senior securities, our lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claim. In such event, we may be forced to sell our investments to raise funds to repay our outstanding borrowings in order to avoid foreclosure and these forced sales may be at times and at prices we would not consider advantageous. Moreover, such deleveraging of our company could significantly impair our ability to effectively operate our business in the manner in which we have historically operated. As a result, we could be forced to curtail or cease new investment activities and lower or eliminate the dividends that we have historically paid to our stockholders. In addition, if the lenders exercise their right to sell the assets pledged under our senior securities, such sales may be completed at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repayment of the amounts outstanding under the senior securities.
If our operating performance declines and we are not able to generate sufficient cash flow to service our debt obligations, we may in the future need to refinance or restructure our debt, sell assets, reduce or delay capital investments, seek to raise additional capital or seek to obtain waivers from the required lenders under our senior securities to avoid being in default. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under our senior securities. If we breach our covenants under our senior securities and seek a waiver, we may not be able to obtain a waiver from the required lenders or debt holders. If this occurs, we would be in default under our
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senior securities, the lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt. Because certain of our senior securities have customary cross-default provisions, if the indebtedness under our senior securities is accelerated, we may be unable to repay or finance the amounts due.
We are subject to risks associated with any revolving credit facility that utilizes a Structured Subsidiary as our interests in any Structured Subsidiary are subordinated and we could be prevented from receiving cash on our equity interests from a Structured Subsidiary.
We own directly or indirectly 100% of the equity interests in MSIF Funding, LLC (“MSIF Funding”), a special purpose Structured Subsidiary utilized in our senior secured special purpose vehicle revolving credit facility (the “SPV Facility”). We consolidate the financial statements of the MSIF Funding in our consolidated financial statements and treat the indebtedness under the SPV Facility as our leverage. Our interest in MSIF Funding is subordinated in priority of payment to every other obligation of MSIF Funding and is subject to certain payment restrictions set forth in the SPV Facility.
We receive cash from MSIF Funding only to the extent that we receive distributions on our equity interests therein. MSIF Funding could make distributions on its equity interests only to the extent permitted by the payment priority provisions of the SPV Facility. The SPV Facility generally provides that payments on the respective interests could not be made on any payment date unless all amounts owing to the lenders and other secured parties are paid in full. In addition, if MSIF Funding does not meet the leverage and borrowing base requirements set forth in the agreement governing the SPV Facility, a default could occur. In the event of a default under the SPV Facility credit agreement, cash would be diverted from us to pay the applicable lenders and other secured parties in amounts sufficient to cause such tests to be satisfied. In the event that we fail to receive cash from MSIF Funding, we could be unable to make distributions to our stockholders in amounts sufficient to maintain our status as a RIC, or at all. We also could be forced to sell investments in portfolio companies at less than their fair value in order to continue making such distributions. We cannot assure you that distributions on the assets held by MSIF Funding will be sufficient to make any distributions to us or that such distributions will meet our expectations.
Our equity interest in MSIF Funding ranks behind all of the secured and unsecured creditors, known or unknown, including the lenders in the SPV Facility. Consequently, to the extent that the value of MSIF Funding’s portfolio of loan investments has been reduced as a result of conditions in the credit markets, defaulted loans, capital gains and losses on the underlying assets, prepayment or changes in interest rates, the returns on our investments in MSIF Funding could be reduced. Accordingly, our investments in MSIF Funding could be subject to up to 100% loss.
The ability to sell investments held by a Structured Subsidiary is limited.
The credit agreement governing the SPV Facility places significant restrictions on our ability, as servicer, to sell investments. As a result, there could be times or circumstances during which we are unable to sell investments or take other actions that might be in our best interests.
We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
We may invest in derivatives and other assets that are subject to many of the same types of risks related to the use of leverage. Derivative transactions, if any, will generally create leverage for us and involve significant risks. The primary risks related to derivative transactions include counterparty, correlation, liquidity, leverage, volatility, over-the-counter trading, operational and legal risks. In addition, a small investment in derivatives could have a large potential impact on our performance, effecting a form of investment leverage on our portfolio. In certain types of derivative transactions, we could lose the entire amount of our investment; in other types of derivative transactions the potential loss is theoretically unlimited.
Under SEC Rule 18f-4 under the 1940 Act (“Rule 18f-4”), related to use of derivatives, short sales, reverse repurchase agreements and certain other transactions by registered investment companies, we are permitted to enter into derivatives and other transactions that create future payment or delivery obligations, including short sales, notwithstanding the senior security provision of the 1940 Act if we comply with certain value-at-risk leverage limits, a derivatives risk management program and board oversight and reporting requirements or comply with a “limited derivatives users” exception. Rule 18f-4 also permits us to enter into reverse repurchase agreements or similar financing transactions
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notwithstanding the senior security provision of the 1940 Act if we aggregate the amount of indebtedness associated with our reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the asset coverage ratios as discussed herein. In addition, we are permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security under the 1940 Act, provided that (i) we intend to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”). We may otherwise engage in such transaction as a “derivatives transaction” for purposes of compliance with the rule. Furthermore, we are permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act if we reasonably believe, at the time we enter into such agreement, that we will have sufficient cash and cash equivalents to meet our obligations with respect to all such agreements as they come due. We cannot predict the effects of these requirements.
We have adopted updated policies and procedures in compliance with Rule 18f-4. We expect to qualify as a “limited derivatives user.” Future legislation or rules may modify how we treat derivatives and other financial arrangements for purposes of our compliance with the leverage limitations of the 1940 Act. Future legislation or rules may modify how leverage is calculated under the 1940 Act and, therefore, may increase or decrease the amount of leverage currently available to us under the 1940 Act, which may be materially adverse to us and our investors.
RISKS RELATED TO OUR ADVISER AND ITS AFFILIATES
Our Adviser has conflicts of interest that may create an incentive for the Adviser to enter into investments that are riskier or more speculative than would otherwise be the case and our Adviser may have an incentive to increase portfolio leverage in order to earn higher management fees.
Our Adviser and its affiliates, including our officers, may have conflicts of interest as a result of compensation arrangements, time constraints and competition for investments, which they will attempt to resolve in a fair and equitable manner, but which may result in actions that are not in the best interests of our stockholders. Our Adviser receives substantial fees from us in return for its services and these fees could influence the investment and other decisions they make on our behalf. Among other matters, the compensation arrangements could affect its judgment with respect to public offerings of equity by us, which may allow our Adviser to earn increased management fees.
The incentive fee payable by us to our Adviser may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee payable to our Adviser is determined may encourage it to use leverage to increase the return on our investments. In addition, the fact that our management fee is payable based upon our gross assets, which includes any borrowings for investment purposes, may encourage our Adviser to use leverage to make additional investments. Under certain circumstances, the use of leverage (or an investment in companies that are highly leveraged) may increase the likelihood of default, which would result in higher investment losses.
We may be obligated to pay our Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
The Investment Advisory Agreement entitles our Adviser to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay our Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
Any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible. Pursuant to the Investment Advisory Agreement, our Adviser will not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received in cash as a result of a default by an entity on the obligation that resulted in the accrual of such income and such circumstances would result in our paying an incentive fee on income we never received.
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Our Adviser may face conflicts of interest in allocating investment opportunities between us, Main Street and the other funds and accounts managed by our Adviser.
The investment professionals utilized by our Adviser are also the investment professionals responsible for investing and managing Main Street’s investment portfolio as well as the investment portfolios of other funds and accounts managed by our Adviser. These professionals are responsible for allocating investment opportunities between us, Main Street and other funds and accounts managed by it. We have made and, in the future, intend to make co-investments with Main Street and other funds or clients advised by the Adviser in accordance with the conditions of an exemptive relief order from the SEC permitting such co-investment transactions. The order requires, among other things, that Main Street and the Adviser consider whether each such investment opportunity is appropriate for us, Main Street and the Adviser’s advised clients and, if it is appropriate, to propose an allocation of the investment opportunity between such other parties. As a consequence, it may be more difficult for us to maintain or increase the size of our Investment Portfolio in the future. Although the Adviser and Main Street will endeavor to allocate investment opportunities in a fair and equitable manner, including in accordance with the conditions set forth in the order issued by the SEC when relying on such order, we may face conflicts in allocating investment opportunities between us, Main Street and other funds and accounts managed by the Adviser. Because our Adviser may receive performance-based fee compensation from the other funds and accounts it manages, this may provide our Adviser an incentive to allocate opportunities to other funds and accounts our Adviser manages, instead of us. Our Adviser and Main Street have implemented an allocation policy to ensure the equitable distribution of investment opportunities and, as a result, we may be unable to participate in certain investments based upon such allocation policy.
Our Adviser’s liability is limited under the Investment Advisory Agreement, and we have agreed to indemnify our Adviser against certain liabilities, which may lead our Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
Under the Investment Advisory Agreement, our Adviser and officers, directors, employees, agents and certain other affiliates are not liable to us for acts or omissions performed by our Adviser in accordance with and pursuant to the Investment Advisory Agreement, except those resulting from acts constituting negligence, willful misfeasance, bad faith or misconduct. In addition, we have agreed to indemnify our Adviser and officers, directors, employees, agents and certain other affiliates from and against any claims or liabilities, including reasonable legal fees, arising out of or in connection with any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement, except where attributable to gross negligence, willful misfeasance, bad faith or misconduct. These protections may lead our Adviser to act in a riskier manner when acting on our behalf than they would when acting for their own account.
Our Adviser can resign on 120 days’ notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
Our Adviser has the right, under the Investment Advisory Agreement, to resign at any time upon not less than 120 days’ written notice, whether we have found a replacement or not. If our Adviser resigns, we may not be able to find a replacement or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 120 days or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the value of our shares may decline. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.
RISKS RELATED TO BDCs
Failure to maintain our status as a BDC would reduce our operating flexibility.
If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.
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Operating under the constraints imposed on us as a BDC and RIC may hinder the achievement of our investment objectives.
The 1940 Act and the Code impose numerous constraints on the operations of BDCs and RICs that do not apply to certain of the other investment vehicles that we may compete with. BDCs are required, for example, to invest at least 70% of their total assets in certain qualifying assets, including U.S. private or thinly traded public companies, cash, cash equivalents, U.S. government securities and other high-quality debt instruments that mature in one year or less from the date of investment. Moreover, qualification for taxation as a RIC requires satisfaction of source-of-income, asset diversification and distribution requirements. Operating under these constraints may hinder our ability to take advantage of attractive investment opportunities and to achieve our investment objective. Any failure to do so could subject us to enforcement action by the SEC, cause us to fail to satisfy the variousrequirements associated with RIC qualification requirements.status and subject us to entity-level corporate income taxation, cause us to fail the 70% test described above or otherwise have a material adverse effect on our business, financial condition or results of operations.
Regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital.
Our business will require capital to operate and grow. We may acquire such additional capital from the following sources:
Senior Securities

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as senior securities. As a result of issuing senior securities, we will be exposed to additional risks, including the following:
•Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements are met) immediately after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we will be prohibited from issuing debt securities or preferred stock and/or borrowing money from banks or other financial institutions and may not be permitted to declare a dividend or make any distribution to stockholders or repurchase shares until such time as we satisfy this test.
•Any amounts that we use to service our debt or make payments on preferred stock will not be available for dividends to our common stockholders.
•It is likely that any senior securities or other indebtedness we issue will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, some of these securities or other indebtedness may be rated by rating agencies, and in obtaining a rating for such securities and other indebtedness, we may be required to abide by operating and investment guidelines that further restrict operating and financial flexibility.
•We and, indirectly, our stockholders will bear the cost of issuing and servicing such securities and other indebtedness.
•Preferred stock or any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock, including separate voting rights and could delay or prevent a transaction or a change in control to the detriment of the holders of our common stock.
•Any unsecured debt issued by us would generally rank (i) pari passu with our current and future unsecured indebtedness and effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and (ii) structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries.
Additional Common Stock
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We are not generally able to issue and sell our common stock at a price below NAV per share. We may, however, sell our common stock, warrants, options or rights to acquire our common stock, at a price below the current NAV of the common stock if our Board of Directors determines that such sale is in the best interests of our stockholders, and our stockholders approve such sale. Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all.

Previously enacted legislation may allow us to incur additional leverage.
The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However, legislation passed in March 2018 modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur by lowering the required asset coverage ratio of 200% to an asset coverage ratio of 150% (i.e., the amount of debt may not exceed 662/3% of the value of our assets), if certain requirements are met. Under the legislation, we are allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when a quorum is met, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the legislation allows a “required majority” (as defined in Section 57(o) of the 1940 Act) of the members of our Board of Directors to approve an increase in our leverage capacity, and such approval would become effective after one year from the date of approval. In either case, because our common stock is not listed on a national securities exchange, we would be required to offer to repurchase 100% of the shares of our stockholders as of the date of the requisite approval over the following year (25% in each of the following four quarters). In addition, we would be required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. As a result of this legislation, we may be able to increase our leverage up to an amount that reduces our asset coverage ratio from 200% to 150%. See Risk Factors — Risks Related to Leverage — Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us for a discussion of the risks associated with leverage.
RISKS RELATED TO OUR SECURITIES
Investing in our securities may involve a high degree of risk.
The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk, and therefore, an investment in our securities may not be suitable for someone with lower risk tolerance.
Our shares of common stock are not listed on an exchange or quoted through a quotation system and may not be listed in the foreseeable future, if ever. Therefore, our stockholders will have limited liquidity and may not receive a full return of their invested capital if they sell their shares of common stock.
Our shares of common stock are illiquid assets for which there is not a secondary market, nor is it expected that any secondary market will develop in the future. We intend to explore potential liquidity event for our stockholders from time to time. However, there can be no assurance that we will complete a liquidity event.
If our shares of common stock are listed, stockholders cannot be assured a public trading market will develop. Since a portion of the offering price from any sale of common stock will be used to pay expenses and fees, the full offering price paid by stockholders will not be invested in portfolio companies. As a result, even if we do complete a liquidity event, stockholders may not receive a return of all of their invested capital.
Stockholders should also be aware that shares of publicly traded closed-end investment companies, including BDCs, may trade at a discount to their NAV. If our shares of common stock are eventually listed on a national securities exchange, we would not be able to predict whether our common stock would trade above, at or below NAV per share. This risk is separate and distinct from the risk that our NAV per share may decline.
Our share repurchase program allows us to repurchase our stockholders’ shares on a quarterly basis, subject to certain restrictions and limitations. As a result, our stockholders will have limited opportunities to sell their shares and, to the
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extent they are able to sell their shares under the program, our stockholders may not be able to recover the amount of their investment in our shares.
We have a share repurchase program that currently allows us to repurchase during any calendar quarter shares of common stock in an amount equal to the number of shares we can repurchase with 90% of the proceeds we receive from the issuance of shares of our common stock under our dividend reinvestment plan. Our Board of Directors may amend, suspend or terminate the share repurchase program at any time.
Our share repurchase program allows stockholders to sell back their shares of common stock to us on a quarterly basis at a price equal to the NAV per share, as determined within 48 hours of the repurchase date. The share repurchase program includes numerous restrictions that limit stockholders’ the ability to sell shares back to us. At the discretion of our Board of Directors, we may make changes to the share repurchase program without prior stockholder approval. To the extent that the number of shares put to us for repurchase exceeds the number of shares that we offered to purchase, we will repurchase shares on a pro-rata basis, subject to limited exceptions, not on a first-come, first-served basis. Further, we will have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under federal law or Maryland law, which prohibit distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all repurchase requests made in any quarter. In addition, our Board of Directors may suspend or terminate the share repurchase program and therefore should not be relied upon as a method to sell shares promptly and at a desired price.
Our repurchase offers pursuant to our share repurchase program may be at prices lower than the price paid by our stockholders to purchase our common stock.
When we make quarterly repurchase offers pursuant to the share repurchase program, we offer to repurchase shares of common stock at the NAV per share, as determined within 48 hours prior to the repurchase date. As a result, to the extent an investor paid an offering price that included the related sales load, then the price at which such investor may sell shares of common stock pursuant to our share repurchase program may be lower than what such investor paid in connection with the purchase of shares of common stock.
We may not be able to pay distributions to our stockholders, our distributions may not grow over time, and a portion of distributions paid to our stockholders may be a return of capital.
We intend to pay distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to pay a specified level of cash distributions, previously projected distributions for future periods, or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described herein. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC could limit our ability to pay distributions. All distributions will be paid at the discretion of our Board of Directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations, compliance with our debt covenants and such other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future.
When we make distributions, we will be required to determine the extent to which such distributions are paid out of current or accumulated taxable earnings, recognized capital gains or capital. To the extent there is a return of capital, investors will be required to reduce their basis in our stock for U.S. federal income tax purposes, which may result in higher tax liability when the shares are sold, even if they have not increased in value or have lost value. In addition, any return of capital will be net of any sales load and offering expenses associated with sales of shares of our common stock. In the future, our distributions may include a return of capital.

Our common stockholders’ interest in us will be diluted if we issue additional shares, which could reduce the overall value of their investment.
Our investors do not have preemptive rights to any shares we issue in the future. Our Articles of Incorporation authorize us to issue 450,000,000 shares of common stock. Pursuant to our Articles of Incorporation, a majority of our entire Board of Directors may amend our Articles of Incorporation from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series without stockholder approval. Our Board of Directors may elect to sell additional shares in future public offerings or issue equity interests in private offerings. To the extent we issue additional equity interests, our stockholders’ percentage ownership interest in us
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will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, stockholders may also experience dilution in the book value and fair value of their shares of common stock.
Our stockholders could experience dilution in their ownership percentage if they do not participate in our dividend reinvestment plan.
All dividends declared to stockholders that have “opted in” to our dividend reinvestment plan are automatically reinvested in shares of our common stock. As a result, our stockholders that do not participate in our dividend reinvestment plan could experience dilution in their ownership percentage of our common stock over time if we issue additional shares of our common stock.
Provisions of the Maryland General Corporation Law and our articles of incorporation and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
The Maryland General Corporation Law and our articles of incorporation and bylaws contain provisions that may have the effect of discouraging, delaying or making difficult a change in control of our company or the removal of our incumbent directors. The existence of these provisions, among others, may have a negative impact on the price of our common stock and may discourage third-party bids for ownership of our company. These provisions may prevent any premiums being offered to you for our common stock.
We may in the future determine to issue preferred stock, which could adversely affect the value of our common stock.
The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the value for our common stock by making an investment in the common stock less attractive. In addition, the dividends on any preferred stock we issue must be cumulative. Payment of dividends and repayment of the liquidation preference of preferred stock must take preference over any dividends or other payments to our common stockholders, and holders of preferred stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into common stock). In addition, under the 1940 Act, preferred stock constitutes a “senior security” for purposes of the asset coverage test.
FEDERAL INCOME TAX RISKS
We will be subject to corporate-level U.S. federal income tax if we are unable to qualify for andas a RIC under Subchapter M of the Code.

To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements:
•The Annual Distribution Requirement thefor a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% Income Test and the Diversification Tests in each of our net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Depending on the level of taxable income earned in a tax years. Additionally,year, we may choose to carry forward taxable income in order to avoidexcess of current year distributions into the imposition ofnext tax year and pay a 4% nondeductible U.S. federal excise tax on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year which generated such taxable income. For more information regarding tax treatment, see Business — Regulation — Taxation as a Regulated Investment Company. Because we needuse debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and are (and may in the future become) subject to certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Excise Tax Avoidance Requirement. See “Item 1. Business — Regulation — Taxationdistribution requirement. In addition, because we receive non-cash sources of income such as a RIC.”
We must satisfy these tests on an ongoing basis in orderPIK interest which involves us recognizing taxable income without receiving the cash representing such income, we may have difficulty meeting the distribution requirement. If we are unable to maintainobtain cash from other sources, we could fail to qualify for RIC tax treatment and maythus become subject to corporate-level U.S. federal income tax.
•The source-of-income requirement will be required to makesatisfied if we obtain at least 90% of our gross income for each year from distributions, to stockholdersinterest, gains from the sale of stock or securities or similar sources.
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•The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at times when it would be more advantageous to reinvest cash in existing or other investments, or when we do not have funds readily available for distribution. Compliance with the RIC tax requirements may hinderend of each quarter of our ability to operate solely on the basistaxable year. To satisfy this requirement, at least 50% of maximizing profits and the value of our stockholders’ investments. Ifassets must consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one issuer, (ii) of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) of certain “qualified publicly traded partnerships.”
Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments are in privately held companies, and therefore illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses. Moreover, if we fail to qualify for or maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

If we fail to satisfyWe may have difficulty paying the 90% Income Test or any of the Diversification Tests in any tax year, we may nevertheless continue to qualify as a RIC for such tax year if certain relief provisions are applicable (which may subject us to certain corporate-level U.S. federal, state and local income taxes, as well as dispose of certain assets).

If we fail to qualify for, ordistributions required to maintain RIC tax treatment for any reason or do not qualify to cureunder the disqualification, the resulting corporate-level U.S. federal, state and local income taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. See “Item 1. Business — Regulation — Taxation as a RIC.”
Some of our equity investments may be subject to corporate level tax.

We may invest in certain debt and equity investments through our wholly owned subsidiaries, HMS Equity Holding and HMS Equity Holding II, as well as other taxable subsidiaries and the net taxable income of HMS Equity Holding and HMS Equity


Holding II as well as those other taxable subsidiaries will be subject to federal and state corporate income taxes. In addition, we may invest in certain foreign debt and equity investments which could be subject to foreign taxes (such as income tax, withholding, and value added taxes).

We may have difficulty paying our required distributionsCode if we recognize taxable income before or without receiving a corresponding cash payment.
For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt instruments that are treatedunder applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include a portion of the original issue discount that accrues over the life of the obligation in determining our investment company taxable income for any tax year, regardless of whether cash representing such income is received by us in the same tax year. income.
We may also have towill include in income othercertain amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may be comprisedas: (i) amortization of original issue discount, or other income requiredwhich may arise if we receive warrants in connection with the origination of a loan such that ascribing a value to be included in our investment company taxable income prior to receipt of cash. Further, we have elected to amortize market discount on all debt instruments with market discount acquired by us, and have included the amount of such market discount currently in our investment company taxable income over the remaining term of all such instruments acquired with market discount, instead of upon disposition or receipt of other principal payments on such debt instruments, as failing to make such an election could limit our ability to deduct interest expense for tax purposes.
Because anywarrants creates original issue discount in the debt instrument, if we invest in a debt investment at a discount to the par value of the debt security or possibly in other amounts accruedcircumstances; (ii) contractual payment-in-kind, or PIK, interest, which represents contractual interest added to the loan balance and due at the end of the loan term; (iii) contractual preferred dividends, which represents contractual dividends added to the preferred stock and due at the end of the preferred stock term, subject to adequate profitability at the portfolio company; or (iv) amortization of market discount, which is associated with loans purchased in the secondary market at a discount to par value. Such amortization of original issue discounts increases in loan balances as a result of contractual PIK arrangements, cumulative preferred dividends, or amortization of market discount will be included in our investment company taxable income forbefore we receive the tax year of the accrual, wecorresponding cash payments. We also may be required to makeinclude in income certain other amounts before we receive such amounts in cash. Investments structured with these features may represent a distributionhigher level of credit risk compared to our stockholdersinvestments generating income which must be paid in order to satisfy the Annual Distribution Requirementcash on a current basis.
Since, in certain cases, we may recognize taxable income before or the Excise Tax Avoidance Requirement, even though we will not have received any correspondingwithout receiving cash amount. As a result,representing such income, we may have difficulty meeting the Annual Distribution Requirement ornecessary to maintain RIC tax treatment under the Excise Tax Avoidance Requirement. WeCode. Accordingly, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax. For additional discussion regarding the tax implications of a RIC, please see “ItemItem 1. Business — Regulation — Taxation as a RIC.”Regulated Investment Company.
Furthermore, weWe may invest in the equity securitiesfuture choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of non-U.S. corporations (or other non-U.S. entities classified as corporations for U.S. federal income tax purposes)the cash you receive.
We may distribute taxable dividends that could be treated underare payable in part in our stock. Under certain applicable provisions of the Code and U.S.the Treasury regulations, as PFICs and/distributions payable by us in cash or controlled foreign corporations. The rules relating to investment in these types of non-U.S. entities are designed to ensure that U.S. taxpayers are either, in effect, taxed currently (or on an accelerated basis with respect to corporate level events) or taxed at increased tax rates at distribution or disposition. In certain circumstances, these rules also could require us to recognize taxable income or gains where we do not receive a corresponding payment in cash.

Our stockholders may receive shares of our common stock as distributions, which could result in adverse tax consequences to them.

In order to(at the stockholders’ election) would satisfy the Annual Distribution Requirement, we may declareRequirement. The Internal Revenue Service has issued guidance providing that a large portion of a distributiondividend payable in shares of our common stock instead of in cash. As long as at least 20% of such distribution is paidor in cash and certain requirements are met,at the entire distributionelection of the stockholders will be treated as a taxable dividend eligible for the dividends paid deduction provided at least 20% of the total distribution is payable in cash and certain other requirements are satisfied. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income (or as long-term capital gain to the extent such dividend is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder generally wouldmay be subjectrequired to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on 100%the market price of our stock at the time of the fair market valuesale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of the distribution on the date the distributionall or a portion of such dividend that is received by the stockholderpayable in the same manner asstock. In addition, if a cash distribution, even though mostsignificant number of the distribution was paid inour stockholders determine to sell shares of our commonstock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our stock.

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YouStockholders may have current tax liability on distributions youdividends they elect to reinvest in our common stock but would not receive cash from such distributionsdividends to pay such tax liability.
If youstockholders participate in our distributiondividend reinvestment plan, youthey will be deemed to have received, and for federal income tax purposes will be taxed on, the amount reinvested in our common stock to the extent the amount reinvested was not a tax-free return of capital. As a result, unless you area stockholder is a tax-exempt entity, youit may have to use funds from other sources to pay yourits tax liability on the value of the dividend that they have elected to have reinvested in our common stock received from the distribution.
If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you will be taxed as though you received a distribution of some of our expenses.

A “publicly offered regulated investment company” is a RIC whose shares are either (i) continuously offered pursuant to a public offering, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the tax


year. If we are not a publicly offered RIC for any period, a noncorporate stockholder’s allocable portion of our affected expenses, including our management fees, will be treated as an additional distribution to the stockholder and will be deductible by such stockholder only to the extent permitted under the limitations described below. For noncorporate stockholders, including individuals, trusts, and estates, significant limitations generally apply to the deductibility of certain expenses of a non-publicly offered RIC, including management fees. In particular, for tax years beginning after 2025 these expenses, referred to as miscellaneous itemized deductions, are deductible to an individual only to the extent they exceed 2% of such a stockholder’s adjusted gross income, are not deductible for alternative minimum tax purposes and are subject to the overall limitation on itemized deductions imposed by the Code. For tax years beginning after 2017 and prior to 2026, miscellaneous itemized deductions are disallowed in their entirety. Because shares of our common stock currently are continuously offered pursuant to a public offering, we believe that we are currently considered a publicly offered regulated investment company. There can be no assurance, however, that we will otherwise be considered a publicly offered regulated investment company in the future.

Our portfolio investments may present special tax issues.

Investments in below-investment grade debt instruments, commonly known as “junk” securities, and certain equity securities may present special tax issues for us. U.S. federal income tax rules are not entirely clear about issues such as when we may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless debt in equity securities, how payments received on obligations in default should be allocated between principal and interest income, as well as whether exchanges of debt instruments in a bankruptcy or workout context are taxable. Such matters could cause us to recognize taxable income for U.S. federal income tax purposes, even in the absence of cash or economic gain, and require us to make taxable distributions to our stockholders to maintain our RIC status or preclude the imposition of either U.S. federal corporate income or excise taxation. Additionally, because such taxable income may not be matched by corresponding cash received by us, we may be required to borrow money or dispose of other investments to be able to make distributions to our stockholders. These and other issues will be considered by us, to the extent determined necessary, in order that we minimize the level of any U.S. federal income or excise tax that we would otherwise incur.

stock.
Legislative or regulatory tax changes could adversely affect you.

our stockholders.
At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or of you as a stockholder.our stockholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments. In that regard, significant tax reform legislation (commonly referred to as the “Tax Cuts and Jobs Act”) was signed into law on December 22, 2017. The Tax Cuts and Jobs Act, among other things, permanently reduces the maximum federal corporate income tax rate, reduces the maximum individual income tax rate (effective for taxable years 2018 through 2025), restricts the deductibility of business interest expense, changes the rules regarding the calculation of net operating loss deductions that may be used to offset taxable income, expands the circumstances in which a foreign corporation will be treated as a “controlled foreign corporation” and, under certain circumstances, requires accrual method taxpayers to recognize income for U.S. federal income tax purposes no later than the income is taken into account as revenue in an applicable financial statement. The impact of this new legislation on us, our stockholders and our portfolio companies is uncertain. Prospective investors are urged to consult their tax advisors regarding the effects of the new legislation on an investment in us. If we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.

GENERAL RISK FACTORS
Events outside of our control, including public health crises, supply chain disruptions and inflation, could negatively affect our portfolio companies and the results of our operations.
Periods of market volatility could occur in response to pandemics or other events outside of our control. We and the portfolio companies in which we invest in could be affected by force majeure events (i.e., events beyond the control of the party claiming that the event has occurred, such as acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism, labor strikes, major plant breakdowns, pipeline or electricity line ruptures, failure of technology, defective design and construction, accidents, demographic changes, government macroeconomic policies, social instability, etc.). Some force majeure events could adversely affect the ability of a party (including us, a portfolio company or a counterparty to us) to perform its obligations until it is able to remedy the force majeure event. In addition, force majeure events, such as the cessation of the operation of equipment for repair or upgrade, could similarly lead to the unavailability of essential equipment and technologies. These risks could, among other effects, adversely impact the cash flows available from a portfolio company, cause personal injury or loss of life, including to an officer, director or a member of our investment team, damage property, or instigate disruptions of service. In addition, the cost to a portfolio company or us of repairing or replacing damaged assets resulting from such force majeure event could be considerable.
It will not be possible to insure against all such events, and insurance proceeds received, if any, could be inadequate to completely or even partially cover any loss of revenues or investments, any increases in operating and maintenance expenses, or any replacements or rehabilitation of property. Certain events causing catastrophic loss could be either uninsurable, or insurable at such high rates as to adversely impact us or portfolio companies, as applicable. Force majeure events that are incapable of or are too costly to cure could have permanent adverse effects. Certain force majeure events (such as war or an outbreak of an infectious disease) could have a broader negative impact on the world economy and international business activity generally, or in any of the countries in which we invest or our portfolio companies operate specifically. Such force majeure events could result in or coincide with: increased volatility in the global securities, derivatives and currency markets; a decrease in the reliability of market prices and difficulty in valuing assets; greater fluctuations in currency exchange rates; increased risk of default (by both government and private issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; less governmental regulation and supervision of the securities markets and market participants and decreased monitoring of the markets by governments or self-regulatory organizations and reduced enforcement of regulations; limited, or limitations on, the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; inability to purchase and sell investments or otherwise settle security or derivative transactions (i.e., a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation, which can last many years and have
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substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.
We are currently operating in a period of capital markets disruption and economic uncertainty, and capital markets may experience periods of disruption and instability in the future. These market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations.
The success of our activities is affected by general economic and market conditions, including, among others, interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, and trade barriers. These factors could affect the level and volatility of securities prices and the liquidity of our investments. Volatility or illiquidity could impair our profitability or result in losses. These factors also could adversely affect the availability or cost of our leverage, which would result in lower returns.
These disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. Such disruptions could adversely affect our business, financial condition, results of operations and cash flows, and future market disruptions and/or illiquidity could negatively impact us. These unfavorable economic conditions could increase our funding costs and limit our access to the capital markets, and could result in a decision by lenders not to extend credit to us in the future. These events could limit our investments, our ability to grow and could negatively impact our operating results and the fair values of our debt and equity investments.
Failure to comply with applicable laws or regulations and changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
We, our Adviser and our portfolio companies are subject to applicable local, state and federal laws and regulations. Failure to comply with any applicable local, state or federal law or regulation could negatively impact our reputation and our business results. New legislation may also be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. Such changes could result in material differences to the strategies and plans set forth herein and may result in our investment focus shifting from the areas of expertise of our Adviser’s investment team to other types of investments in which our Adviser’s investment team may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.
We may experience fluctuations in our operating results.
We could experience fluctuations in our operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of portfolio dividend and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, operating results for any period should not be relied upon as being indicative of performance in future periods.
Technological innovations and industry disruptions may negatively impact us.
Technological innovations have disrupted traditional approaches in multiple industries and can permit younger companies to achieve success and in the process disrupt markets and market practices. We can provide no assurance that new businesses and approaches will not be created that would compete with us and/or our portfolio companies or alter the market practices in which we have been designed to function within and on which we depend on for our investment return. New approaches could damage our investments, disrupt the market in which we operate and subject us to increased competition, which could materially and adversely affect our business, financial condition and results of investments.
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We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.
Our business is highly dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our and our Adviser’s financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:
•sudden electrical or telecommunications outages;
•natural disasters such as earthquakes, tornadoes and hurricanes;
•disease pandemics;
•events arising from local or larger scale political or social matters, including terrorist acts; and
•cyber-attacks, including software viruses, ransomware, malware and phishing and vishing schemes.
The failure in cybersecurity systems, as well as the occurrence of events unanticipated in our and our Adviser’s disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.
The occurrence of a disaster such as a cyber-attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in our and our Adviser’s disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of our managers were unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised.
We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our and our Adviser’s computer systems could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we may experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.
Third parties with which we do business (including, but not limited to, service providers, such as accountants, custodians, transfer agents and administrators, and the issuers of securities in which we invest) may also be sources or targets of cybersecurity or other technological risks. While we engage in actions to reduce our exposure resulting from outsourcing, we cannot control the cybersecurity plans and systems put in place by these third parties and ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other cybersecurity incidents, with increased costs and other consequences, including those described above. Privacy and information security laws and regulation changes, and compliance with those changes, may also result in cost increases due to system changes and the development of new administrative processes.
Item 1B. Unresolved Staff Comments
None.

Not applicable.Item 1C. Cybersecurity
Main Street and our Adviser maintain, and routinely review and evaluate their and the Company’s information technology (“IT”) and cybersecurity policies, practices and procedures (the “Cybersecurity Program”). The Cybersecurity Program has various policies and procedures including a Cyber Incident Response Plan as part of Main Street’s Crisis Management Plan. The Cybersecurity Program is administered by Main Street’s IT Manager, who is managed on a day to
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day basis by Main Street’s General Counsel and Chief Compliance Officer and overseen by Main Street’s IT Steering Committee consisting of Main Street’s Chief Executive Officer, Main Street’s Chief Financial Officer and Chief Operating Officer and Main Street’s General Counsel and Chief Compliance Officer. Main Street’s General Counsel and Chief Compliance Officer also serves as the crisis response team leader in connection with any material cybersecurity incident under the Cyber Incident Response Plan. Main Street and our Adviser also utilize the services of IT and cybersecurity advisers, consultants and experts in the evaluation and periodic testing of IT and cybersecurity systems, to recommend improvements to the Cybersecurity Program and in connection with any cybersecurity incident. We believe that the individuals involved in the Cybersecurity Program possess the necessary skills, experience and backgrounds that, when combined with the resources of the external IT and cybersecurity advisers, consultants and experts, are sufficient to manage the Cybersecurity Program.
As part of our overall risk management process, our management engages at least annually in an enterprise risk management review and evaluation, during which management reviews the principal risks relating to our business and operations. Included in this process is a review and evaluation of our risks relating to the Cybersecurity Program. Additionally, as part of our Rule 38a-1 compliance program, we review at least annually the compliance policies and procedures of our key service providers, including our Adviser and Main Street, including documentation discussing each service providers’ information security and privacy controls. Any failure in our or our key service providers’ cybersecurity systems could have a material impact on our operating results. See Item 1A. Risk Factors — General Risk Factors — The failure in cybersecurity systems, as well as the occurrence of events unanticipated in our and our Adviser’s disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.
Our Board as a whole has responsibility for the Company’s risk oversight, with reviews of certain areas being conducted by the relevant Board committees that report on their deliberations to the full Board. The oversight responsibility of the Board and its committees is enabled by management reporting processes that are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. Areas of focus include competitive, economic, operational, financial (accounting, credit, liquidity and tax), legal, regulatory, compliance and other risks.
Oversight of risks relating to IT and cybersecurity has been delegated by our Board to its Audit Committee. The Audit Committee includes members of the Board who, in addition to each being designated as an “audit committee financial expert,” possess backgrounds and experience which we believe enable them to provide effective oversight of our IT and cybersecurity risks. Our management routinely reports to the Audit Committee on the status of the Cybersecurity Program at the Audit Committee’s quarterly meetings. Routine reports generally detail any testing, observations or developments concerning the Cybersecurity Program that occurred during the prior quarter. The results of periodic testing related to the Cybersecurity Program are also described in the Chief Compliance Officer’s annual report to the Board, provided pursuant to Rule 38a-1 under the 1940 Act. The crisis response team leader also collaborates with the Audit Committee chair to ensure that the Board is apprised of any material cybersecurity incident and consults with the Audit Committee chair in connection with any material decisions or actions related thereto.
Item 2. Properties

We do not own any real estate or other physical properties materially important to our operation.operations. Currently, the AdviserMain Street leases office space in Houston, Texas for its and its affiliates’ corporate headquarters.headquarters, including ours. We believe that theour current office facilities ofare adequate to meet our needs.
Item 3. Legal Proceedings
We, the Adviser are suitable and adequate for our business as it is contemplated to be conducted.


Item 3.  Legal Proceedings


We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. Fromand/or Main Street may, from time to time, we may be a party to certain legal proceedings, including proceedings relating to the enforcementinvolved in litigation arising out of our rights under contractsoperations in the normal course of business or otherwise. Furthermore, third parties may seek to impose liability on us, the Adviser and/or Main Street in connection with the activities of our portfolio companies. While the outcome of theseany current legal proceedings cannot at this time be predicted with certainty, we do not expect that theseany current matters will materially affect our, the Adviser’s or Main Street’s financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect uponon our, the Adviser’s or Main Street’s financial condition or results of operations.operations in any future reporting period.
Item 4. Mine Safety Disclosures

Not applicable.


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Table of contents
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
COMMON STOCK AND HOLDERS
Market Information
Our shares are not listed on an exchange or quoted through a quotation system. There is currently no market for our common stock, and we do not expect one to develop.that a market for our shares will develop in the future. Therefore, there is a risk that a stockholder may not be able to sell our stock at a time or price acceptable to the stockholder, or at all. None of our common stock has been authorized for issuance under any equity compensation plans. With the approval of our boardBoard of directors,Directors, we closed the Offeringour continuous follow-on public offering of shares to new investors effective September 30, 2017.
Set forth below is a chart describing the classes of our securities outstanding as of March 16, 2018:1, 2024:
(1) (2) (3) (4)
Title of Class Amount Authorized Amount Held by Us or for Our Account Amount Outstanding Exclusive of Amount Under Column (3)Title of ClassAmount AuthorizedAmount Held by Us or for Our AccountAmount Outstanding Exclusive of Amount Under Column
Common Stock, par value $0.001 per share 450,000,000
 —
 80,341,230
As of March 16, 2018,1, 2024, we had 14,82814,292 record holders of our common stock.
DIVIDEND/DISTRIBUTION POLICY
Distributions and Taxable Income
SubjectWe currently intend to distribute dividends or make distributions to our boardstockholders out of directors’ discretionassets legally available for distribution. Our dividends and applicable legal restrictions, we intendother distributions, if any, will be determined by our Board of Directors from time to time. Our ability to declare ordinary cashdividends depends on our earnings, our overall financial condition (including our liquidity position), maintenance of our RIC status and such other factors as our Board of Directors may deem relevant from time to time. When we make distributions, on a quarterly basis and paywe are required to determine the extent to which such distributions are paid out of current or accumulated earnings, recognized capital gains or capital. To the extent there is a return of capital (a distribution of the stockholders’ invested capital), investors will be required to reduce their basis in our stock for federal tax purposes. In the future, our distributions may include a return of capital.
We have adopted a dividend reinvestment plan (the “DRIP”) that provides for the reinvestment of dividends on a monthly basis. With the authorizationbehalf of our boardstockholders. As a result, if we declare a cash dividend, our stockholders who have “opted in” to the DRIP will have their cash dividend automatically reinvested into additional shares of directors, we declared distributions during each quarterMSIF common stock. The number of shares of common stock to be issued to a stockholder under the DRIP shall be determined by dividing the total dollar amount of the years ended December 31, 2017 and 2016. These distributions were paid monthly and were calculated based on stockholders of record each day in an amount equaldistribution payable to $0.00191781such stockholder by a price per share per day (which represents an annualized distribution rate of 7.00% based oncommon stock determined by our initial offering priceBoard of $10.00Directors or a committee thereof, in its sole discretion, that is (i) not less than the NAV per share of common stock determined in good faith by the Board of Directors or a committee thereof, in its sole discretion, within 48 hours prior to the payment of the distribution (NAV per share) and 7.53% based on our offering price of $9.30(ii) not more than 2.5% greater than the NAV per share as of September 30, 2017, if such ratedate.
SALES OF UNREGISTERED SECURITIES
During the year ended December 31, 2023, we issued 2,345,246 shares of our common stock under the DRIP. These issuances were maintained every day fornot subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).
In addition, during the year ended December 31, 2023, on certain dividend payment dates we sold shares of our common stock to Main Street at the price at which we issued new shares in connection with reinvestments of dividends pursuant to the DRIP. In each of these transactions, the issuance and sale of shares were exempt from registration under Section 4(a)(2) of the Securities Act and were unanimously approved by our Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company or our Adviser.

43
Table of contents
The following table describes the terms of these exempt sales of common stock:
Date of TransactionTotal number of shares soldSale price per shareProceeds to the Company
May 1, 2023255,754 $7.82 $2,000,000 
August 1, 2023348,542 $7.89 $2,750,000 
November 1, 2023475,888 $7.88 $3,750,000 
The aggregate value of the shares of our common stock issued during 2023 under the DRIP and pursuant to the exempt sale transactions was $26.9 million.

PURCHASES OF EQUITY SECURITIES
We maintain a twelve-month period). Distributions are paid onshare repurchase program whereby we make quarterly offers to purchase shares at the first business day followingestimated NAV per share, as determined within 48 hours prior to the completion of each month to which they relate. For additional information regarding our distributions, see “Item 1A. Risk Factors — Risks Relating to our Business and Structure — repurchase date. The amount of shares of our distributionscommon stock to be repurchased during any calendar quarter may be equal to the lesser of (i) the number of shares of common stock we could repurchase with the proceeds we received from the issuance of common stock under the DRIP or (ii) 2.5% of the weighted-average number of shares of common stock outstanding in the prior four calendar quarters. Repurchase offers are currently limited to the number of shares of common stock that we can repurchase with 90% of the cash retained as a result of issuances of common stock under the DRIP.
At the discretion of our Board of Directors, we may also use cash on hand, cash available from borrowings and cash from the sale of investments as of the end of the applicable period to repurchase shares. Our Board of Directors may amend, suspend or terminate the share repurchase program upon 30 days’ notice. Since inception of the share repurchase program, we have funded the repurchase of $153.5 million in shares of common stock.
In addition to our stockholders is uncertain. Portions ofshare repurchase program, during the distributions thatfiscal year ended December 31, 2023, we pay may represent a return of capital to you for U.S. federal income tax purposes which will lower your tax basis in your shares and reduce the amount of funds we have for investment in targeted assets. We may not be able to pay you distributions, and our distributions may not grow over time.” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, Liquidity and Capital Resources.”
We may fund our cash distributions from any sources of funds legally available, including stock offering proceeds, borrowings, net investment income from operations, capital gainsused proceeds from the sale of assets, non-capital gains proceeds fromour shares during 2023 discussed above to complete three modified “Dutch auction” tender offers, pursuant to which we offered to purchase up to a specified amount of shares of our common stock at the salelowest clearing purchase price elected by participating stockholders within a specified range that allowed us to purchase the maximum amount offered. All shares purchased in a “Dutch auction” tender offer were purchased at the clearing purchase price. SEC rules permitted us to increase the number of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Advisers.
We have elected to be treatedshares accepted for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. We intend to annually qualify as a RIC. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any ordinary income or capital gain that we distribute to our stockholders from our taxable earnings and profits. To qualify as a RICpurchase in any taxable year, we must, among other things, satisfy certain source-of-income and asset diversification requirements. In addition, we must satisfy the Annual Distribution Requirement to qualify and to maintain our ability to be subject to tax as a RIC. As a part of maintaining RIC status, undistributed taxable income (subject to a 4% nondeductible U.S. federal excise tax) pertaining to a given taxable year may be distributedoffer by up to 12 months subsequent to the end of that taxable year, provided such distributions are declared prior to the earlier of eight-and-one-half months after the close of such taxable year in which such taxable income was generated or the filing of the federal income tax return for the taxable year in which such taxable income was generated. In order to avoid the imposition of the 4% nondeductible U.S. federal excise tax, we need to satisfy the Excise Tax Avoidance Requirement. In 2015, we distributed $3.8 million, or $0.0615 per share,2% of our taxable income in 2016, prior tooutstanding shares without amending the filingoffer. For the year ended December 31, 2023, we purchased 1,267,667 shares of our federal income tax returncommon stock for our 2015 taxable year. As a result, we were subject to a 4% nondeductible federal excise tax liability of approximately $119,000. In 2016, we distributed $7.1 million, or $0.096753 per share, of our taxable income in 2017, prior to the filing of our federal income tax return for our 2016 taxable year. As a result, we were subject to a 4% nondeductible federal excise tax liability of approximately $239,000. In 2017, we distributed $14.9 million, or $0.187394 per share, of our taxable income in 2018, prior to the filing of our federal income tax return for our 2017 taxable year. As a result, we were subject to a 4% nondeductible federal excise tax liability of approximately $392,000.



Ordinary distributions from a RIC qualify for the 20% maximum federal income tax rate on dividend income from domestic corporations and qualified foreign corporations only to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes of our distributions will generally include both ordinary income and capital gains but may also include qualified dividends or return of capital.
The determination of the tax attributes of our distributions is made annually at the end of our taxable year based upon our taxable income for the full taxable year and distributions paid for the full taxable year. The actual tax characteristics of distributions to stockholders will be reported to stockholders subject to tax reporting annually on a Form 1099-DIV. Promptly following the payment of distributions to all stockholders of record, we will send information to stockholders residing in Maryland and Oklahoma regarding the estimated source of such distributions.
Our distributions may exceed our earnings and profits, especially during the period before we have substantially invested the proceeds from the sales of common stock. As a result, a portion of the distributions we make may represent a return of capital for U.S. federal income tax purposes. Notices to stockholders will be provided in accordance with Section 19(a) of the 1940 Act with respect to any portion of our distributions not derived from our net investment income.
Use of Proceeds from Registered Securities
The Registration Statement under which we registered the Offering was most recently declared effective by the SEC on May 1, 2017. With the approval of our board of directors, we closed the Offering to new investors effective September 30, 2017. We raised gross proceeds of approximately $184.1 million in the Offering including proceeds from the distribution reinvestment plan of approximately $52.4$7.8 million through December 31, 2017.

Issuer Purchases of Equity Securities

our modified Dutch auction tender offers.
The following table lists shares we repurchased under our share repurchase program and Dutch auction tender offers during the period covered by this Form 10-K.fourth quarter of 2023:
PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced plans or programsApproximate dollar value of shares that may yet be purchased under the plans or programs
October 1 through October 31, 2023———— 
November 1 through November 30, 2023531,085$7.73 531,085N/A
December 1 through December 31, 2023(1)
427,8436.50 427,843N/A
_____________________________
(1)Includes 427,843 shares repurchased under the Dutch auction tender offer pursuant to the tender offer statement and Offer to Purchase filed with the SEC on November 15, 2023 at a price of $6.50 per share for an aggregate cost of $2.8 million.
Period (1)
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (2)
October 1 through October 31, 2017—
—
—
—
November 1 through November 30, 2017—
—
—
—
December 1 through December 31, 20171,105,578
$8.10
1,105,578
—
Total1,105,578

1,105,578

(1)In September 2013, we commenced a share repurchase program pursuant to which we intend to offer to repurchase on a quarterly basis approximately 2.5% per quarter of our weighted average number of shares of common stock outstanding for the trailing four quarters on such terms as may be determined by our board of directors in its complete and absolute discretion unless, in the judgment of the independent directors of our board of directors, such repurchases would not be in the best interests of our stockholders or would violate applicable law.
(2)Unless our board of directors determines otherwise, we will limit the number of shares we repurchase (i) in any calendar year to the proceeds we receive from the sale of our common stock under our distribution reinvestment plan during the trailing four quarters and (ii) in any calendar quarter to 2.5% of the weighted average number of shares of common stock outstanding during the trailing four quarters.


Item 6. Selected Financial Data
The selected financial and other data below as of December 31, 2017, 2016, 2015, 2014 and 2013 and for the years then ended have been derived from financial statements that have been audited by Grant Thornton LLP, an independent registered public accounting firm. The data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this Form 10-K.

[Reserved.]
44
 Year Ended December 31,
 2017 2016 2015 2014 2013
 (dollars in thousands)
Statement of operations data: 
  
      
Investment income: 
  
      
Non-Control/Non-Affiliate investments$94,963
 $84,503
 $63,253
 $19,013
 $2,758
Affiliate investments6,934
 3,968
 1,204
 170
 —
Control investments1,763
 928
 932
 30
 —
Total investment income103,660
 89,399
 65,389
 19,213
 2,758
Expenses: 
  
      
Interest expense18,317
 15,055
 11,159
 3,325
 419
Base management and incentive fees24,814
 20,840
 18,142
 6,029
 784
Internal administrative services expenses3,014
 2,315
 2,037
 1,497
 1,018
Offering costs1,861
 901
 —
 —
 —
Professional fees645
 1,056
 606
 478
 361
Insurance191
 191
 192
 191
 186
Other general and administrative1,518
 1,440
 1,280
 598
 235
Expenses before fee and expense waivers50,360
 41,798
 33,416
 12,118
 3,003
Waiver of management and incentive fees(3,029) (1,689) (2,601) (2,274) (784)
Waiver of internal administrative services expenses(3,014) (2,315) (2,037) (1,497) (1,018)
Expense support payment from Adviser—
 —
 —
 (328) (153)
Total expenses, net of fee and expense waivers44,317
 37,794
 28,778
 8,019
 1,048
Net investment income before taxes59,343
 51,605
 36,611
 11,194
 1,710
Income tax expense (benefit), including excise tax624
 336
 127
 (3) 5
Net investment income58,719
 51,269
 36,484
 11,197
 1,705
Total realized gain (loss) on investments(4,363) (22,891) (5,508) 20
 27
Net realized income54,356
 28,378
 30,976
 11,217
 1,732
Total net change in unrealized appreciation (depreciation) on investments(1,730) 38,206
 (37,956) (14,214) 421
Net increase (decrease) in net assets resulting from operations$52,626
 $66,584
 $(6,980) $(2,997) $2,153
Net investment income per share/unit – basic and diluted$0.76
 $0.75
 $0.75
 $0.70
 $0.64
Net realized income per share/unit – basic and diluted$0.70
 $0.41
 $0.63
 $0.70
 $0.65
Net increase (decrease) in net assets from operations per share/unit – basic and diluted$0.68
 $0.97
 $(0.14) $(0.19) $0.81
Stockholder distributions declared per share/unit – basic and diluted$0.70
 $0.70
 $0.70
 $0.70
 $0.70
Weighted average shares/units outstanding – basic and diluted77,718,813
 68,029,977
 48,838,114
 16,022,853
 2,648,689



Table of contents
 As of December 31,
 2017 2016 2015 2014 2013
 (dollars in thousands)
Balance sheet data: 
  
      
Assets: 
  
      
Total portfolio investments at fair value$1,049,439
 $989,247
 $852,988
 $473,862
 $66,882
Cash and cash equivalents45,791
 23,719
 24,001
 19,868
 6,356
Interest receivable8,638
 7,204
 7,927
 4,328
 399
Receivable for securities sold4,959
 7,610
 1,995
 3,014
 —
Prepaid and other assets4,072
 1,268
 511
 338
 109
Due from Main Street—
 —
 —
 —
 19
Deferred offering costs (net of accumulated amortization)—
 680
 1,107
 2,388
 3,688
Deferred financing costs (net of accumulated amortization)6,163
 3,840
 4,883
 2,426
 168
Total assets$1,119,062
 $1,033,568
 $893,412
 $506,224
 $77,621
Liabilities and net assets:         
Accounts payable and other liabilities$1,459
 $1,164
 $610
 $238
 $66
Payable for unsettled trades—
 932
 —
 6,249
 2,608
Stockholders distributions payable4,772
 4,354
 3,717
 1,760
 295
Base management fees payable5,682
 5,054
 4,521
 2,080
 —
Due to affiliates59
 184
 1,202
 2,450
 3,771
Directors’ fees payable17
 12
 14
 8
 5
Payable for securities purchased29,284
 11,035
 11,696
 50,512
 8,799
Credit facilities payable430,000
 413,000
 380,000
 182,864
 14,000
Total liabilities471,273
 435,735
 401,760
 246,161
 29,544
Total net assets647,789
 597,833
 491,652
 260,063
 48,077
Total liabilities and net assets$1,119,062
 $1,033,568
 $893,412
 $506,224
 $77,621
Other data: 
  
      
Weighted average effective yield on LMM debt (1)
12.2% 12.4% 11.0% 11.3% 15.0%
Number of LMM debt portfolio investments28
 29
 19
 11
 2
Weighted average effective yield on Middle Market debt (1)
9.1% 8.8% 8.3% 8.0% 7.3%
Number of Middle Market debt portfolio investments59
 75
 83
 77
 62
Weighted average effective yield on Private Loan debt (1)
9.1% 9.2% 8.5% 9.7% 9.5%
Number of Private Loan debt portfolio investments38
 29
 20
 11
 2
Weighted average effective yield on total portfolio (1)
8.9% 8.9% 8.3% 8.1% 7.5%
Number of LMM equity portfolio investments29
 28
 17
 9
 —
Number of Middle Market equity portfolio investments4
 5
 —
 —
 —
Number of Private Loan equity portfolio investments (2)
11
 9
 5
 —
 —
Number of Other Portfolio investments7
 3
 3
 1
 —
Expense ratios (as percentage of average net assets):         
Total expenses7.14% 7.12% 7.23% 5.62% 4.24%
Operating expenses excluding interest expense4.23% 4.25% 4.44% 3.29% 2.55%

(1)Weighted-average effective yield is calculated based on our investments at the end of each period and includes accretion of original issue discounts and amortization of premiums, and the amortization of fees received in connection with transactions. Investments on non-accrual status are assumed to have a zero yield in the calculation of weighted-average effective yield.
(2)Investments were non-income producing during the years ended December 31, 2017, 2016 and 2015.



Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.
Statements we make in the following discussion which express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including the risks and uncertainties we have referred to under the headings “Special Note Regarding“Cautionary Statement Concerning Forward-Looking Statements” and “Item 1A. Risk“Risk Factors” in Part I of this Form 10-K.report.

INVESTMENT PORTFOLIO SUMMARY
OVERVIEW
We areThe following tables provide a specialty finance company sponsored by Hines that makes debt and equity investments in Middle Market and LMM companies. We are an externally managed, non-diversified closed-end management investment company that has elected to be treated as a BDC under the 1940 Act. We are, therefore, required to comply with certain regulatory requirements. We have elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code.

Our primary investment objective is to generate current income through debt and equity investments. A secondary objective is to generate long-term capital appreciation through equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities. Our portfolio strategy is to invest primarily in illiquid debt and equity securities issued by LMM companies and Middle Market companies in private placements and negotiated transactions, which are traded in private over-the-counter markets for institutional investors. We will also invest in, and a significant portion of our assets are invested in, customized direct secured and unsecured loans to and equity securities of LMM companies, referred to as LMM securities. Typically, our investments in LMM companies require us to co-invest with Main Street and/or its affiliates. We categorize somesummary of our investments in the Private Loan, LMM companies and Middle Market companiesportfolios as Private Loan portfolio investments. Private Loanof December 31, 2023 and 2022 (this information excludes Other Portfolio investments, often referred towhich are discussed further below):
As of December 31, 2023
Private LoanLMM (a)Middle Market
(dollars in millions)
Number of portfolio companies78 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 lien100.0 %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, we had equity ownership in the debt markets as “club deals,” are investments, generally in debt instruments, that we originate on a collaborative basis with other investment funds. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold inall of our LMM portfolio companies, and Middle Market portfolio. Ourthe average fully diluted equity ownership in those portfolio also includes Other Portfolio investments, primarily consisting of our investment in HMS-ORIX and investments managed by third parties, which differ from the typical profiles for our other types of investments.companies was 9%.

As a BDC, we are subject to certain regulatory restrictions in making our investments, including limitations on our ability to co-invest with certain affiliates, including Main Street. However, we received exemptive relief from the SEC that permits us, subject to certain conditions, to co-invest with Main Street and/or its affiliates in certain transactions originated by Main Street and/or our Advisers. (b)The exemptive relief permits us, and certain of our directly or indirectly wholly owned subsidiaries on one hand, and Main Street, and/or certain of its affiliates, on the other hand, to co-invest in the same investment opportunities where such investment may otherwise be prohibited under Section 57(a)(4) of the 1940 Act. In addition, we may continue to co-invest with Main Street and/or its affiliates in syndicated deals and secondary loan market purchases in accordance with applicable regulatory guidance or interpretations where price is the only negotiated point.

As of December 31, 2017, we had investments in 59 Middle Market debt investments, 38 Private Loan debt investments, 28 LMM debt investments, 29 LMM equity investments, 11 Private Loan equity investments, four Middle Market equity investments and seven Other Portfolio investments with an aggregate fair value of approximately $1,049.4 million, a cost basis of approximately $1,064.3 million, and a weighted averageweighted-average annual effective annual yield of approximately 8.9%. The weighted average annual yield was calculatedyields were computed using the effective interest rates for all debt investments at cost as of December 31, 2017,2023, including amortization of deferred debt origination fees and accretion of original issue discount and amortizationbut excluding fees payable upon repayment of the premium to par value, the amortization of fees received in connection with transactions,debt instruments and assumes zero yield forany 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 12.6% for our Private Loan portfolio, 13.0% for our LMM portfolio and 9.9% 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 our utilization of debt capital in our capital structure, our 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 our investment in this portfolio company, and those portfolio companies whose primary purpose is to own real estate.
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Table of contents
As of December 31, 2022
Private LoanLMM (a)Middle Market
(dollars in millions)
Number of portfolio companies70 48 21 
Fair value$559.8 $352.7 $126.7 
Cost$563.0 $312.5 $159.7 
Debt investments as a % of portfolio (at cost)96.2 %73.2 %95.0 %
Equity investments as a % of portfolio (at cost)3.8 %26.8 %5.0 %
% of debt investments at cost secured by first priority lien99.4 %99.9 %98.5 %
Weighted-average annual effective yield (b)11.8 %12.1 %11.3 %
Average EBITDA (c)$36.8 $8.6 $79.2 
_____________________________
(a)At December 31, 2022, we had equity ownership in all of our 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, 2022, 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, 2022 including debt investments on non-accrual status was 11.4% for our Private Loan portfolio, 11.7% for our LMM portfolio and 9.7% 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 our utilization of debt capital in our capital structure, our 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 our investment in this portfolio company, and those portfolio companies whose primary purpose is to own real estate.
For the years ended December 31, 2023 and 2022, we achieved a total return on investments of 13.6% and 9.1%, respectively. 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 our utilization of debt capital in our capital structure, our expenses or any sales load paid by an investor.
As of December 31, 2017, approximately 79.1%2023, we had Other Portfolio investments in four entities, collectively totaling $24.6 million in fair value and 9.3%$21.5 million in cost basis and which comprised 2.3% and 2.1% of our total portfolioInvestment Portfolio at fair value and cost, respectively. As of December 31, 2022, we had Other Portfolio investments (atin four entities, collectively totaling $29.0 million in fair value) were secured by first priority liensvalue and second priority liens on portfolio company assets, respectively, with the remainder$24.7 million in unsecured debt investmentscost basis and equity investments.which comprised 2.7% and 2.3% of our Investment Portfolio at fair value and cost, respectively.
CRITICAL ACCOUNTING POLICIES
The levelpreparation of new portfolio investment activity will fluctuate from periodfinancial statements and related disclosures in conformity with generally accepted accounting principles (“U.S. GAAP”) requires management to period based upon our viewmake estimates and assumptions that affect the reported amounts of assets and liabilities, and contingent assets and liabilities at the date of the current economic fundamentals, our abilityfinancial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. Critical accounting policies are those that require management to identify new investment opportunitiesmake subjective or complex judgments about the effect of matters that meet our investment criteriaare inherently uncertain and our ability to close on the identified transactions. The level of new investment activity and associated interest and fee income will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long-term, our growth and our operating resultsmay change in subsequent periods. Changes that may be more limited during depressed economic periods. However, we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gainsrequired in the underlying assumptions or losses and unrealized appreciation or depreciation will also fluctuate depending upon portfolio activity and the performance of


our individual portfolio companies. The changesestimates in realized gains and losses and unrealized appreciation or depreciationthese areas could have a material impact on our current and future financial condition and results of operations.
Management has discussed the development and selection of each critical accounting policy and estimate with the Audit Committee of the Board of Directors. Our critical accounting policies and estimates include the Investment Portfolio Valuation and Revenue Recognition policies described below. Our significant accounting policies are described in greater detail in Note B — Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
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Investment Portfolio Valuation
The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. We consider this determination to be a critical accounting estimate, given the significant judgments and subjective measurements required. As of both December 31, 2023 and 2022, our Investment Portfolio valued at fair value represented 96% of our total assets. We are required to report our investments at fair value. We follow the provisions of FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact. See Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a detailed discussion of our Investment Portfolio valuation process and procedures.
Due to the inherent uncertainty in the valuation process, our determination of fair value for our Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation.
Rule 2a-5 under the 1940 Act permits a BDC’s board of directors to designate its executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active oversight of the board. Our Board of Directors has approved policies and procedures pursuant to Rule 2a-5 (the “Valuation Procedures”) and has designated our Adviser, led by a group of Main Street’s and our Adviser’s executive officers, to serve as the Board of Directors’ valuation designee. We believe our Investment Portfolio as of December 31, 2023 and 2022 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.
Revenue Recognition
Interest and Dividend Income
We record interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. We evaluate accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service its debt obligation, we will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security’s status significantly improves regarding the debtor’s ability to service the debt obligation, or if a loan or debt security is sold or written off, we remove it from non-accrual status.
Fee Income
We may periodically provide services, including structuring and advisory services to our portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are generally deferred and accreted into income over the life of the financing.
Payment-in-Kind (“PIK”) Interest and Cumulative Dividends
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
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treatment (as discussed in Note B.7. — Summary of Significant Accounting Policies — Income Taxes included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K), 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 years ended December 31, 2023, 2022 and 2021 (i) 3.8%, 2.5% and 2.3%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) 0.1%, 0.6% and 0.3%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.
INVESTMENT PORTFOLIO COMPOSITION
The following tables summarize the composition of our 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 December 31, 2023 and 2022 (this information excludes Other Portfolio investments).
Cost:December 31, 2023December 31, 2022
First lien debt86.5 %88.5 %
Equity13.3 10.8 
Second lien debt— 0.3 
Equity warrants0.2 0.2 
Other— 0.2 
100.0 %100.0 %
Fair Value:December 31, 2023December 31, 2022
First lien debt78.4 %81.4 %
Equity21.5 17.9 
Second lien debt— 0.3 
Equity warrants0.1 0.1 
Other— 0.3 
100.0 %100.0 %
Our Private Loan, LMM and Middle Market portfolio investments carry a number of risks including: (1) investing in companies which may have limited operating histories and financial resources; (2) holding investments that generally are not publicly traded and which may be subject to legal and other restrictions on resale; and (3) other risks common to investing in below investment-grade debt and equity investments in our Investment Portfolio. Please see Item 1A. Risk Factors — Risks Related to our Investments contained in this Annual Report on Form 10-K for a more complete discussion of the risks involved with investing in our Investment Portfolio.
PORTFOLIO ASSET QUALITY
Our Adviser utilizes an internally developed investment rating system to rate the performance of each Private Loan, LMM and Middle Market portfolio company and to monitor our expected level of returns on each of our Private Loan, LMM and Middle Market investments in relation to our expectations for the portfolio company. The investment rating system takes into consideration various factors, including, but not limited to, each investment’s expected level of returns, the collectability of our debt investments and the ability to receive a return of the invested capital in our equity investments, comparisons to competitors and other industry participants, the portfolio company’s future outlook and other factors that are deemed to be significant to the portfolio company.
As of December 31, 2023, investments on non-accrual status comprised 1.1% of our total Investment Portfolio at fair value and 4.0% at cost. As of December 31, 2022, investments on non-accrual status comprised 0.8% of our total Investment Portfolio at fair value and 4.8% at cost.
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The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In periods during which the United States economy contracts, it is likely that the financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements, to an increase in defaults on our debt investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized appreciation on our equity investments. Consequently, we can provide no assurance that the performance of certain portfolio companies will not be negatively impacted by future economic cycles or other conditions, which could also have a negative impact on our future results.
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Set forth below is a comparison of the results of operations and changes in financial condition for the years ended December 31, 2023 and 2022. The comparison of, and changes between, the fiscal years ended December 31, 2022 and 2021 can be found within Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is incorporated herein by reference.
Comparison of the years ended December 31, 2023 and 2022
Year Ended
December 31,		Net Change
20232022Amount%
(dollars in thousands)
Total investment income$131,386 $103,765 $27,621 27 %
Total expenses, net of expense waivers(73,717)(50,896)(22,821)45 %
Net investment income57,669 52,869 4,800 9 %
Net realized loss from investments(34,010)(3,936)(30,074)NM
Net unrealized appreciation (depreciation) from investments46,319 (1,702)48,021 NM
Income tax provision(3,769)(1,643)(2,126)NM
Net increase in net assets resulting from operations$66,209 $45,588 $20,621 45 %
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NM — Net Change % not meaningful
Investment Income
We have generated, and plan to continue to generate,Total investment income primarily in the form of interest on the debt securities that we hold, dividends and other distributions with respect to any equity interests that we hold and capital gains, if any, on our investments. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees, and possibly consulting fees and performance-based fees. All such fees will be generated in connection with our investments and recognized as earned or as additional yield over the life of the debt investment. To date our investment income has been interest income on debt investments, accretion of original issue discounts, dividend income, amortization of premiums and fees received from transactions, net realized appreciation (depreciation) and net change in unrealized appreciation (depreciation).
Expenses
On both a short-term and long-term basis, our primary use of funds will be investments in portfolio companies and cash distributions to our stockholders. Our primary operating expenses will be debt service payments, general and administrative expenses and payment of advisory fees under the Investment Advisory Agreement. The investment advisory fees paid to our Adviser (and the fees paid by our Adviser to our Sub-Adviser pursuant to the Sub-Advisory Agreement) will compensate our Advisers for their work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.
We bear all other expenses of our operations and transactions, including fees and expenses relating to:

corporate and organizational expenses relating to offerings of our common stock, subject to certain limitations;
the cost of calculating our NAV, including the cost of any third-party valuation services;
the cost of effecting sales and repurchase of shares of our common stock and other securities;
fees payable to third parties relating to, or associated with, monitoring our financial and legal affairs, making investments, and valuing investments, including fees and expenses associated with performing due diligence reviews of prospective investments;
interest payable on debt, if any, including any hedging costs;
investment advisory fees;
transfer agent and custodial fees;
fees and expenses associated with marketing efforts;
federal and state registration fees;
federal, state and local taxes;
independent directors’ fees and expenses, including travel expenses;
costs of director and stockholder meetings, proxy statements, stockholders’ reports and notices;
cost of fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums;
direct costs such as printing of stockholder reports and advertising or sales materials, mailing, long distance telephone, and staff;
fees and expenses associated with independent audits and outside legal costs, including compliance with the Sarbanes-Oxley Act, the 1940 Act, and other applicable federal and state securities laws;
costs associated with our reporting and compliance obligations under the 1940 Act and other applicable federal and state securities laws and regulations;
brokerage commissions for our investments;
all other expenses incurred by our Advisers in performing their obligations, subject to the limitations included in the Investment Advisory Agreement and Sub-Advisory Agreement; and
all other expenses incurred by us or any administrator in connection with administering our business, including payments under any administration agreement that will be based upon our allocable portion of overhead and other expenses incurred by any administrator in performing its obligations under any proposed administration agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer and Chief Financial Officer and their respective staffs.



During periods of asset growth, we expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets and increase during periods of asset declines.

Base Management Fee and Incentive Fee Waiver Agreements and Administrative Services Expense Reimbursement Waiver Agreements

From time to time, our Advisers may waive certain fees and expense reimbursements accrued under the Investment Advisory Agreement and the Sub-Advisory Agreement, as applicable. We may reimburse such waived fees and expenses within three years from the date of each respective fee or expense reimbursement waiver. See Note 11 - Related Party Transactions and Arrangements - Advisory Agreements and Conditional Fee Waiver and - Administration to our consolidated financial statements included elsewhere in this Form 10-K for additional information on our fee and expense reimbursement waivers.

CRITICAL ACCOUNTING POLICIES
Basis of Presentation and Consolidation
Our consolidated financial statements have been prepared in accordance with the instructions to Form 10-K and accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of our wholly owned consolidated subsidiaries: HMS Funding, HMS Equity Holding and HMS Equity Holding II. All intercompany accounts and transactions have been eliminated in consolidation. Under the 1940 Act rules, regulations pursuant to Articles 6, 10 and 12 of Regulation S-X and Topic 946, Financial Services - Investment Companies, of the Accounting Standards Codification, as amended (the “ASC”), of the Financial Accounting Standards Board (“FASB”), we are precluded from consolidating portfolio company investments, including those in which we have a controlling interest, unless the portfolio company is a wholly owned investment company. An exception to this general principle occurs if we own a controlled operating company whose purpose is to provide services to us such as an investment adviser or transfer agent. None of our investments qualify for this exception. Therefore, our portfolio company investments, including those in which we have a controlling interest, are carried on the Consolidated Balance Sheet at fair value with changes to fair value recognized as “Net Change in Unrealized Appreciation (Depreciation)” on the Consolidated Statements of Operations until the investment is realized, usually upon exit, resulting in any gain or loss on exit being recognized as a realized gain or loss. However, in the event that any controlled subsidiary exceeds the tests of significance set forth in Rules 3-09 or 4-08(g) of Regulation S-X, we will include required financial information for such subsidiary in the notes or as an attachment to our consolidated financial statements.

Investment Classification
We classify our investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, (a) “Control” investments are defined as investments in companies in which the Company owns more than 25% of the voting securities or has rights to nominate greater than 50% of the directors or managers of the entity, (b) “Affiliate” investments are defined as investments in which between 5% and 25% of the voting securities are owned, or an investment in an investment company’s investment adviser, and the investments are not classified as Control investments and (c) “Non-Control/Non-Affiliate” investments are defined as investments that are neither Control investments nor Affiliated investments.

Valuation of Portfolio Investments
We account for our portfolio investments at fair value under the provisions of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable, and willing and able to transact.

Our portfolio strategy calls for us to invest primarily in illiquid debt and equity securities issued by private, LMM companies and debt securities issued by Middle Market companies that are generally larger in size than the LMM companies. We categorize some of our investments in LMM companies and Middle Market companies as Private Loan portfolio investments. Private Loan investments, often referred to in the debt markets as “club deals,” are investments, generally in debt instruments, that we originate on a collaborative basis with other investment funds or lenders. Private Loan investments are typically similar in size, structure, terms and conditions to the investments we hold in our LMM portfolio and Middle Market portfolio. Our portfolio also includes Other Portfolio investments, primarily consisting of our investment in HMS-ORIX and investments managed by third parties, which differ from the typical profiles for our LMM portfolio investments, Middle Market portfolio investments or Private Loan


portfolio investments. Our portfolio investments may be subject to restrictions on resale. See “Item 1A. Risk Factors — Risks Related to Our Investments — The lack of liquidity in our investments may adversely affect our business.”

LMM investments and Other Portfolio investments generally have no established trading market while Middle Market securities generally have established markets that are not active. Private Loan investments may include investments which have no established trading market or have established markets that are not active. We determine in good faith the fair value of our investment portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved by our board of directors and in accordance with the 1940 Act. Our valuation policies and processes are intended to provide a consistent basis for determining the fair value of the portfolio.

For LMM portfolio investments, we generally review external events, including private mergers, sales and acquisitions involving comparable companies, and include these events in the valuation process by using an enterprise value waterfall (“Waterfall”) for our LMM equity investments and an income approach using a yield-to-maturity model (“Yield-to-Maturity”) for our LMM debt investments. For Middle Market portfolio investments, we use observable inputs such as quoted prices in the valuation process. We determine the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. We often cannot observe the inputs considered by the third party in determining their quotes. For Middle Market and Private Loan portfolio investments in debt securities for which it has determined that third-party quotes or other independent pricing are not available or appropriate, we generally estimate the fair value based on the assumptions that we believe hypothetical market participants would use to value the investment in a current hypothetical sale using the Yield-to-Maturity valuation method. For our Other Portfolio equity investments, we generally calculate the fair value of the investment primarily based on the NAV of the fund. All of the valuation approaches for our portfolio investments estimate the value of the investment as if we were to sell, or exit, the investment as of the measurement date.

Under the Waterfall valuation method, we estimate the enterprise value of a portfolio company using a combination of market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the portfolio company or third-party valuations of the portfolio company, and then perform a Waterfall calculation by using the enterprise value over the portfolio company’s securities in order of their preference relative to one another. The enterprise value is the fair value at which an enterprise could be sold in a transaction between two willing parties, rather than through a forced or liquidation sale. Typically, private companies are bought and sold based on multiples of earnings before interest, taxes, depreciation and amortization, cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise value is derived. In estimating the enterprise value of a portfolio company, we analyze various factors including the portfolio company’s historical and projected financial results. The operating results of a portfolio company may include unaudited, projected, budgeted or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in its determination. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, we also analyze the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, we allocate the enterprise value to investments in order of the legal priority of the various components of the portfolio company’s capital structure. In applying the Waterfall valuation method, we assume the loans are paid off at the principal amount in a change in control transaction and are not assumed by the buyer, which we believe is consistent with our past transaction history and standard industry practices.

Under the Yield-to-Maturity valuation method, we also use the income approach to determine the fair value of debt securities based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of the portfolio investments. We estimate the expected repayment date of our debt securities is generally the legal maturity date of the instrument, as we generally intend to hold our loans and debt securities to maturity. The Yield-to-Maturity analysis also considers changes in leverage levels, credit quality, portfolio company performance and other factors. We will generally use the value determined by the Yield-to-Maturity analysis as the fair value for that security. However, it is our position that assuming a borrower is outperforming underwriting expectations and because these respective investments do not generally contain pre-payment penalties, the borrower would most likely prepay or refinance the borrowing if the market interest rate, given the borrower’s credit quality, is lower than the stated loan interest rate. Therefore, we do not believe that a market participant would pay a premium for the investment, and because of our general intent to hold its loans to maturity, we generally do not believe that the fair value of the investment should be adjusted in excess of the face amount. A change in the assumptions that we use to estimate the fair value of our debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair value. If there is deterioration in credit quality or if a debt security is in workout status, we may consider other factors in determining the fair value of the debt security, including the value attributable


to the debt security from the enterprise value of the portfolio company or the proceeds that would most likely be received in a liquidation analysis.

Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, we measure the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date. However, in determining the fair value of the investment, we may consider whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of our investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding our ability to realize the full NAV of our interests in the investment fund.

With respect to investments for which market quotations are not readily available or an indicator exists that the available market prices are not reliable for a particular security, a multi-step valuation process is undertaken, as described below:

��Our valuation process will begin with our Sub-Adviser preparing draft valuations of each investment based upon the methodology contained in our Sub-Adviser’s valuation policy and submitting such draft valuations to our Adviser.
Our Adviser then prepares its own initial draft valuation for each investment based upon our Adviser’s valuation policy.
The Advisers obtain and potentially take into account information received from a third-party valuation firm retained by our board of directors, if applicable, and then individually set the initial draft value of each investment.
Team members from our Advisers then confer regarding their respective draft valuations, and our Adviser’s team members issue such clarifying questions regarding discrepancies in value estimates to our Sub-Adviser for mutual resolution. After receiving responses to such inquiries from our Sub-Adviser, our Adviser then prepares and presents its recommended fair value for each of the investments for consideration by our Adviser’s valuation committee.
Our Adviser’s valuation committee meets to review our Adviser’s initial draft values, to analyze and discuss the proposed valuations and to document its conclusions. Our Adviser’s valuation committee approves the fair values that are recommended to our audit committee and our board of directors.
Team members from our Adviser prepare written valuation materials for distribution to our audit committee and our board of directors containing final recommended valuations, as approved by our Adviser’s valuation committee.
Our audit committee reviews our Adviser’s preliminary recommended valuations with representatives of our Advisers, and our audit committee recommends the fair value of our portfolio for approval by our board of directors.
At this point, our board of directors then approves the fair value of our investment portfolio in good faith based on several factors, including the input and recommendation of our Advisers, our Adviser’s valuation committee, our audit committee, and any third-party valuation firm, if applicable, and further determines that the valuation of investments held by us and presented in our financial statements was approved in accordance with our valuation policy.

Pursuant to our internal valuation process and the requirements under the 1940 Act, we perform valuation procedures on our unquoted investments in LMM portfolio companies and certain Private Loan portfolio companies (the “Internally Valued Investments”) at least once a quarter. Among other things, we generally consult with a nationally recognized independent valuation firm on the Internally Valued Investments at least once in every calendar year, and for new Internally Valued Investments, at least once in the twelve-month period subsequent to the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to consult with the nationally recognized independent valuation firm on our investments in one or more of these Internally Valued Investments. Such instances include situations where the fair value of our investment is determined to be insignificant relative to the total investment portfolio. For the year ended December 31, 2017, we consulted with our independent valuation firm in arriving at our determination of fair value on our investments in 22 of the 25 LMM portfolio companies and in 19 of the 38 Private Loan portfolio companies. For the year ended December 31, 2016, we consulted with our independent valuation firm in arriving at our determination of fair value on our investments in 21 of the 23 LMM portfolio companies and in 15 of the 29 Private Loan portfolio companies.

Due to the inherent uncertainty in the valuation process, our estimate of fair value may differ materially from the values that would have been used had an active market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We estimate the fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation in the Consolidated Statements of Operations.

Interest, Fee and Dividend Income
Interest and dividend income are recorded on the accrual basis to the extent amounts are expected to be collected. Prepayment penalties received by us are recorded as income upon receipt. Dividend income is recorded when dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. Accrued interest and


dividend income are evaluated quarterly for collectability. When a debt security becomes 90 days or more past due and we do not expect the debtor to be able to service all of its debt or other obligations, it will generally be placed on non-accrual status, and we will cease recognizing interest income on that debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If there is reasonable doubt that we will receive any previously accrued interest, then the interest income will be written off. Additionally, if a debt security has deferred interest payment terms and we become aware of a deterioration in the credit quality, we will evaluate the collectability of the deferred interest payment. If it is determined that the deferred interest is unlikely to be collected, we will place the security on non-accrual status and cease recognizing interest income on that debt security until the borrower has demonstrated the ability and intent to pay the contractual amounts due. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. If a debt security’s status significantly improves with respect to the debtor’s ability to service the debt or other obligations, or if a debt security is fully impaired, sold or written off, it will be removed from non-accrual status.

As of December 31, 2017, we had four debt investments in three portfolio companies that were more than 90 days past due, all of which were on non-accrual status. One of the three portfolio companies on non-accrual status was in default due to failure to pay its outstanding principal balance of $2.9 million due upon the maturity of its two loans, while the other two portfolio companies on non-accrual status were in default due to failure to pay required interest payments. Our Advisers are currently working with the borrowers to maximize recovery of the amounts borrowed. As of December 31, 2017, these four investments on non-accrual status comprised approximately 0.2% of the total investment portfolio at fair value and 0.9% of the total investment portfolio at cost. Each of these portfolio companies experienced a significant decline in credit quality raising doubt regarding our ability to collect the principal and interest contractually due. Given the credit deterioration, we ceased accruing interest income on the non-accrual debt investments and wrote off any previously accrued interest deemed uncollectable. There was no allowance recorded for the year ended December 31, 2017. As2023 was $131.4 million, a 27% increase from the $103.8 million of December 31, 2017, we are not aware of any other material changes to the creditworthiness of the borrowers underlying its debt investments. For those investments in which S&P credit ratings are available, approximately 32.4% of the portfolio, the portfolio had a weighted average effective credit rating of B as of December 31, 2017.

As of December 31, 2016, we had five debt investments in four portfolio companies that were more than 90 days past due (two of which were in the oil and gas industry), including three debt investments in two portfolio companies that were on non-accrual status. As of December 31, 2016, we had three investments in two portfolio companies that were on non-accrual status. These three investments on non-accrual status comprised approximately 0.2% of the total investment portfolio at fair value and 0.8% of the total investment portfolio at cost. Each of these portfolio companies experienced a significant decline in credit quality raising doubt regarding our ability to collect the principal and interest contractually due. Given the credit deterioration, we ceased accruing interest income on the non-accrual debt investments and wrote off any previously accrued interest deemed uncollectable. There was no allowance recorded for the year ended December 31, 2016.

From time to time, we may hold debt instruments in our investment portfolio that contain a PIK interest provision. If these borrowers elect to pay or are obligated to pay interest under the optional PIK provision, and, if deemed collectible, then the interest would be computed at the contractual rate specified in the investment’s credit agreement, recorded as interest income and periodically added to the principal balance of the investment. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. We stop accruing PIK interest and write off any accrued and uncollected interest in arrears when we determine that such PIK interest in arrears is no longer collectible.

At both December 31, 2017 and 2016, we held 19 investments, which contained a PIK provision. As discussed above, three of the 19 investments with PIK provisions as of December 31, 2017 and two of the 19 investments with PIK provisions as of December 31, 2016 were on non-accrual status. No PIK interest was recorded on these investments during the years ended December 31, 2017 and December 31, 2016. For the years ended December 31, 2017, 2016 and 2015, we capitalized approximately $1.3 million, $469,000 and $1.2 million, respectively, of PIK interest. We stop accruing PIK interest and write off any accrued and uncollected interest in arrears when we determine that such PIK interest in arrears is no longer collectible.

We may periodically provide services, including structuring and advisory services, to our portfolio companies or other third parties. The income from such services is non-recurring. For services that are separately identifiable and evidence exists to substantiate fair value, income is recognized as earned, which is generally when the investment or other applicable transaction closes. For the years ended December 31, 2017, 2016 and 2015, the Company recognized $2.4 million, $1.3 million and $1.1 million, respectively, of non-recurring fee income received from its portfolio companies or other third parties, which accounted for approximately 2.3%, 1.4% and 1.6%, respectively, of the Company’s total investment income during such periods. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into interest income over the life of the financing.



A presentation of the investment income we received from our investment portfolio in each of the periods presented (dollars in thousands) is as follows:

 Year Ended December 31,
 2017 2016 2015
      
Interest, Fee and Dividend Income:     
Interest Income$97,672
 $86,006
 $63,864
Fee Income2,374
 1,260
 1,073
Dividend Income3,614
 2,133
 452
Total Interest, Fee and Dividend Income$103,660
 $89,399
 $65,389


Unearned Income – Original Issue Discount / Premium to Par Value
We generally purchase our debt investments for an amount different than their respective principal values. For purchases at less than par value a discount is recorded at acquisition, which is accreted into interest income based on the effective interest method over the life of the debt investment. For purchases at greater than par value, a premium is recorded at acquisition, which is amortized as a reduction to interest income based on the effective interest method over the life of the investment. Upon repayment or sale, any unamortized discount or premium is also recognized into interest income. For the years ended December 31, 2017, 2016 and 2015, we accreted approximately a net of $15.1 million, $11.9 million and $4.4 million, respectively, into interest income.

Offering Costs
In accordance with the Investment Advisory Agreement and the Sub-Advisory Agreement, we reimburse our Advisers for any offering costs that are paid on our behalf, which consist of, among other things, actual legal, accounting, bona fide out-of-pocket itemized and detailed due diligence costs, printing, filing fees, transfer agent costs, postage, escrow fees, data processing fees, advertising and sales literature and other offering costs. We expect to reimburse the Advisers for such costs incurred on our behalf on a monthly basis, up to a maximum aggregate amount of 1.5% of the gross stock offering proceeds. The Advisers are responsible for the payment of offering costs to the extent they exceed 1.5% of the aggregate gross stock offering proceeds.

Prior to January 1, 2016, offering costs were capitalized as incurred by our Advisers, and such costs, up to 1.5% of the gross proceeds, were recorded as a charge to additional paid in capital and a reduction of deferred offering costs. Effective January 1, 2016 through the closing of the Offering to new investors, offering costs were capitalized as incurred by us as we became obligated to reimburse our Advisers for such costs and subsequently amortized to expense over a 12-month period to more closely track applicable guidance. Deferred offering costs were fully amortized to expense upon the closing of the Offering to new investors as previously discussed, and are currently expensed as incurred by us as we become obligated to reimburse our Advisers for such costs.

Income Taxes

Certain of our investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) convert dividends that would otherwise constitute qualified dividend income into ordinary income, (ii) treat dividends that would otherwise be eligible for deductions available to certain U.S. corporations under the Code as ineligible for such treatment, (iii) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (iv) convert long-term capital gains into short-term capital gains or ordinary income, (v) convert short-term capital losses into long-term capital losses, (vi) convert an ordinary loss or deduction into a capital loss (the deductibility of which is more limited), (vii) cause us to recognize income or gain without a corresponding receipt of cash, (viii) adversely alter the characterization of certain complex financial transactions, and (ix) produce gross income that will not constitute qualifying gross income for purposes of the gross income requirement that applies to RICs. These rules also could affect the amount, timing and character of distributions to stockholders. We intend to monitor our transactions and may make certain tax elections to mitigate the effect of these provisions on our ability to be subject to tax as a RIC.

Some of the income that we might otherwise earn, such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an equity investment in an operating partnership, may not satisfy the 90% Income Test. To manage the risk that such income might disqualify us as a RIC for failure to satisfy the 90% Income Test, we may establish one or more Taxable Subsidiaries to hold assets


from which we do not anticipate earning qualifying income under the 90% Income Test. Any investments held through a Taxable Subsidiary generally will be subject to U.S. federal income and other taxes, and therefore we can expect to achieve a reduced after-tax yield on such investments).

In December 2017, the “Tax Cuts and Jobs Act” legislation was enacted. The Tax Cuts and Jobs Act includes significant changes to the U.S. corporate tax system, including a U.S. federal corporate income tax rate reduction from 35% to 21% and other changes. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. As such, we have accounted for the tax effects as a result of the enactment of the Tax Cuts and Jobs Act as of December 31, 2017.

Uncertainty in Income Taxes

We evaluate our tax positions in accordance with ASC Topic 740, Income Taxes, to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in the consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our Consolidated Statements of Operations. 

PORTFOLIO INVESTMENT COMPOSITION
Our Middle Market portfolio investments primarily consist of direct or secondary purchases of interest-bearing debt securities in companies that are generally larger in size than the LMM companies included in our LMM portfolio. While our Middle Market debt investments are generally secured by a first priority lien, 17.0% of the fair value of our Middle Market portfolio is secured by second priority liens.
Our LMM portfolio consists of debt investments secured by a first priority lien (64.7% of the total fair value of the LMM portfolio) on the assets of the portfolio companies and equity investments (35.3% of the total fair value of the LMM portfolio) in privately held LMM companies as of December 31, 2017. The LMM debt investments generally mature between five and seven years from the original investment date. The LMM equity investments represent an equity position or the right to acquire an equity position through warrants.

Our Private Loan portfolio primarily consists of debt investments secured by first and second priority liens (92.4% and 1.5% of the total fair value of the Private Loan portfolio, respectively) on the assets of the portfolio companies, unsecured debt investments (3.4% of the total fair value of the Private Loan portfolio) and equity investments (2.7% of the total fair value of the Private Loan portfolio) in eight Private Loan companies as of December 31, 2017. The Private Loan debt investments typically have stated terms between three and seven years from the original investment date. The Private Loan equity investments represent an equity position or the right to acquire an equity position through warrants.

Our Other Portfolio investments primarily consist of our investment in HMS-ORIX (discussed in more detail below) and investments managed by third parties, which differ from the typical profiles for LMM, Middle Market and Private Loan portfolio investments. In the Other Portfolio investments, 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.

During the year ended December 31, 2017, we funded investment purchases of approximately $551.8 million and had three investments under contract to purchase as of December 31, 2017, for approximately $29.3 million, which settled or we scheduled to settle after December 31, 2017. We also received proceeds from sales and repayments of existing portfolio investments of approximately $525.0 million including $97.4 million in sales. Additionally, we had two investments under contract to sell as of December 31, 2017, for approximately $5.0 million, which represented the contract sales price. The combined result of these transactions increased our portfolio, on a cost basis, by approximately $61.9 million, or 6.2%, and the number of portfolio investments decreased by two, or 1.1%, compared to the portfolio as of December 31, 2016. As of December 31, 2017, the largest investment in an individual portfolio company represented approximately 2.9% of our portfolio’s fair value with the remaining investments in an individual portfolio company ranging from 0.0% to 1.8%. The average single investment in our portfolio is approximately $6.0 million or 0.6% of the total portfolio. As a result of these transactions, our portfolio has become increasingly broadened across individual portfolio investments, geographic regions, and industries. Further, our total portfolio’s investment composition (excluding our Other Portfolio investments) at fair value is comprised of 83.0% first lien debt securities and 9.8% second lien debt securities, with the remainder in unsecured debt investments and equity investments. First lien debt securities have priority over subordinated debt owed by the issuer with respect to the collateral pledged as security for the loan. Due to the relative priority of payment of first lien investments, these generally have lower yields than lower priority, less secured investments.



During the year ended December 31, 2016, we funded investment purchases of approximately $464.9 million and had three investments under contract to purchase as of December 31, 2016 for approximately $11.0 million, which settled or we scheduled to settle after December 31, 2016. We also received proceeds from sales and repayments of existing portfolio investments of approximately $349.6 million including $106.6 million in sales. Additionally, we had two investments under contract to sell as of December 31, 2016, for approximately $7.6 million, which represented the contract sales price. The combined result of which increased our portfolio, on a cost basis, by approximately $97.7 million, or 10.8%, and the number of portfolio investments by 31, or 21.1%, compared to the portfolio as of December 31, 2015. As of December 31, 2016, the largest investment in an individual portfolio company represented approximately 1.8% of our portfolio’s fair value with the remaining investments in an individual portfolio company ranging from 0.01% to 1.6%. The average single investment in our portfolio as of December 31, 2016 was approximately $5.6 million or 0.6% of the total portfolio. Further, our total portfolio’s investment composition (excluding our Other Portfolio investments) at fair value as of December 31, 2016 was comprised of 81.5% first lien debt securities, 11.8% second lien debt securities, with the remainder in unsecured debt investments and equity investments.

During the year ended December 31, 2015, we funded investment purchases of approximately $631.1 million and had five investments under contract to purchase as of December 31, 2015 for approximately $11.7 million, which settled or we scheduled to settle after December 31, 2015. We also received proceeds from sales and repayments of existing portfolio investments of approximately $176.1 million including $45.7 million in sales. Additionally, we had one investment under contract to sell as of December 31, 2015, for approximately $2.0 million, which represented the contract sales price. The combined result of which increased our portfolio, on a cost basis, by approximately $417.1 million, or 85.5%, and the number of portfolio investments by 38, or 34.9%, compared to the portfolio as of December 31, 2014. As of December 31, 2015, the largest investment in an individual portfolio company represented approximately 2.3% of our portfolio’s fair value with the remaining investments in an individual portfolio company ranging from 0.03% to 1.8%. The average single investment in our portfolio as of December 31, 2015 was approximately $5.8 million or 0.7% of the total portfolio. Further, our total portfolio’s investment composition (excluding our Other Portfolio investments) at fair value as of December 31, 2015 was comprised of 80.3% first lien debt securities, 16.7% second lien debt securities, with the remainder in unsecured debt investments and equity investments.

As of December 31, 2017 and 2016, the weighted average rating of our LMM investments was approximately 2.7 and 2.6, respectively. Lastly, from December 31, 2016 to December 31, 2017, the overall weighted average effective yield on our investment portfolio has remained unchanged at 8.9%.

Summaries of the composition of our total investment portfolio at cost and fair value are shown in the following tables (this information excludes Other Portfolio investments):
 December 31, 2017 December 31, 2016
Cost:LMM Private
Loan		 Middle Market Total LMM Private
Loan		 Middle Market Total
First Lien Secured Debt69.8% 92.5% 83.1% 84.3% 67.9% 92.0% 81.5% 82.3%
Second Lien Secured Debt—
 1.5
 16.2
 9.6
 3.5
 0.7
 16.9
 11.9
Unsecured Debt—
 3.3
 0.1
 1.1
 —
 4.9
 0.9
 1.6
Equity (1)
29.2
 2.5
 0.6
 4.8
 26.9
 2.0
 0.7
 3.9
Equity Warrants1.0
 0.2
 —
 0.2
 1.7
 0.4
 —
 0.3
 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Includes our investment in HMS-ORIX.

 December 31, 2017 December 31, 2016
Fair Value:LMM Private
Loan		 Middle Market Total LMM Private
Loan		 Middle Market Total
First Lien Secured Debt64.7% 92.4% 82.1% 83.0% 64.3% 91.5% 81.3% 81.5%
Second Lien Secured Debt—
 1.5
 17.0
 9.8
 3.3
 0.7
 17.0
 11.8
Unsecured Debt—
 3.4
 0.1
 1.1
 —
 4.9
 0.9
 1.7
Equity (1)
34.3
 2.5
 0.8
 5.9
 30.7
 2.1
 0.8
 4.6
Equity Warrants1.0
 0.2
 —
 0.2
 1.7
 0.8
 —
 0.4
 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Includes our investment in HMS-ORIX.



See Note 3 — Fair Value Hierarchy for Investments — Portfolio Investment Composition to the financial statements included elsewhere in this Form 10-K for summaries of the composition of our investments by geographic region and by industry.

Investment in HMS-ORIX

We co-invest in broadly-syndicated loans with Orix through our investment in HMS-ORIX, which is organized as a Delaware limited liability company. Pursuant to the terms of the limited liability company agreement and through representation on the HMS-ORIX Board of Managers, we and Orix each have 50% voting control of HMS-ORIX and together will agree on all portfolio and investment decisions as well as all other significant actions for HMS-ORIX. We do not operationally control HMS-ORIX, and, accordingly, we do not consolidate the operations of HMS-ORIX within the consolidated financial statements. As of December 31, 2017, we and Orix have committed to provide, and have funded, an aggregate of $50.0 million of equity to HMS-ORIX, with us providing $30.0 million (60% of the equity) and Orix providing $20.0 million (40% of the equity).

As of December 31, 2017, HMS-ORIX had total assets of $142.9 million and HMS-ORIX’s portfolio consisted of 74 broadly-syndicated loans, generally in industries similar to those in which we may directly invest. As of December 31, 2017, there were no loans in HMS-ORIX’s portfolio that were on non-accrual status.

On April 5, 2017, HMS-ORIX closed on a $100.0 million credit facility with Bank of America, N.A. The facility has a maturity date of April 5, 2020 and borrowings under the facility bear interest at a rate equal to LIBOR plus 1.65% per annum. As of December 31, 2017, $86.5 million was outstanding under this facility. Borrowings under the facility are secured by substantially all of the assets of HMS-ORIX. If we were to include our pro-rata share of the borrowings under the HMS-ORIX credit facility as leverage on our balance sheet as of December 31, 2017, our asset coverage ratio as of such date would have been 223.0%, assuming unfunded commitments are treated as senior securities.

prior year. The following table presentsprovides a summary of HMS-ORIX’s portfolio as of December 31, 2017 (dollarsthe changes in thousands):the comparable period activity.
Year Ended
December 31,		Net Change
20232022Amount%
(dollars in thousands)
Interest income$116,976 $90,811 $26,165 29 %(a)
Dividend income11,255 9,442 1,813 19 %(b)
Fee income3,155 3,512 (357)(10)%
Total investment income$131,386 $103,765 $27,621 27 %(c)
 As of December 31, 2017
  
Total debt investments (1)
$138,908
Weighted average effective yield on loans(2)
4.95%
Largest loan to a single borrower(1)
$3,496
Total of 10 largest loans to borrowers(1)
$30,790
_____________________________
(1) At principal amount.
(2) Weighted average effective annual yield is calculated based on the investments at the end of each period and includes accretion of original issue discounts and amortization of premiums, and the amortization of fees received in connection with transactions.

The following table presents a listing of HMS-ORIX’s individual loans as of December 31, 2017:
HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Acosta, Inc.Commercial Services and SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - September 26, 2021)$2,000
$1,881
$1,766
Acrisure, LLCInsuranceLIBOR (2 months) + 4.25%, Current Coupon 5.65%, Secured Debt (Maturity - November 22, 2023)2,115
2,122
2,139
Advantage Sales & Marketing Inc.Commercial Services and SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.63%, Secured Debt (Maturity - July 23, 2021)1,990
1,938
1,945
Air Medical Group Holdings IncHealth Care Providers & ServicesLIBOR (6 months) + 4.00%, Current Coupon 5.67%, Secured Debt (Maturity - April 28, 2022)1,990
1,981
1,993


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Albany Molecular Research, Inc.Life Sciences Tools & ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - August 28, 2024)$100
$100
$99
Alphabet Holding Company, Inc.Food ProductsLIBOR (1 month) + 3.50%, Current Coupon 5.07%, Secured Debt (Maturity - September 26, 2024)1,995
1,985
1,935
American Seafoods Group LLCFood ProductsPrime + 2.25%, Current Coupon 6.75%, Secured Debt (Maturity - August 21, 2023)1,500
1,493
1,513
Ancestry.com Operations Inc.Internet Software & ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.66%, Secured Debt (Maturity - October 19, 2023)1,995
2,013
2,007
Arch Coal, Inc.Metals & MiningLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - March 7, 2024)1,985
1,992
2,004
AshCo, Inc.Specialty RetailLIBOR (3 months) + 5.00%, Current Coupon 6.57%, Secured Debt (Maturity - September 25, 2024)1,995
1,951
1,993
Asurion, LLCInsuranceLIBOR (1 month) + 3.00%, Current Coupon 4.57%, Secured Debt (Maturity - November 3, 2023)1,312
1,312
1,320
Atkore International, Inc.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 3.00%, Current Coupon 4.70%, Secured Debt (Maturity - December 22, 2023)2,977
3,005
2,999
BCP Renaissance Parent L.L.C.Oil, Gas & Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.38%, Secured Debt (Maturity - October 31, 2024)600
602
608
BMC Software Finance, Inc.SoftwareLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - September 12, 2022)3,156
3,181
3,163
Builders FirstSource, Inc.Building ProductsLIBOR (1 month) + 3.00%, Current Coupon 4.69%, Secured Debt (Maturity - February 29, 2024)2,977
2,974
2,993
Calpine CorporationIndependent Power and Renewable Electricity ProducersLIBOR (3 months) + 2.50%, Current Coupon 4.20%, Secured Debt (Maturity - January 15, 2023)1,990
1,997
1,991
CHS/Community Health Systems, Inc.Health Care Providers & ServicesLIBOR (3 months) + 3.00%, Current Coupon 4.48%, Secured Debt (Maturity - January 27, 2021)1,613
1,608
1,543
ClubCorp Holdings, Inc.Real Estate Management & DevelopmentLIBOR (3 months) + 3.25%, Current Coupon 4.94%, Secured Debt (Maturity - September 18, 2024)1,959
1,949
1,969
Colorado Buyer IncTechnology Hardware, Storage & PeripheralsLIBOR (3 months) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - May 1, 2024)2,985
2,995
3,008
Confie Seguros Holding II Co.InsuranceLIBOR (1 month) + 5.25%, Current Coupon 6.73%, Secured Debt (Maturity - April 19, 2022)1,985
1,992
1,987
CPI International, Inc.Aerospace & DefenseLIBOR (1 month) + 3.50%, Current Coupon 5.07%, Secured Debt (Maturity - July 26, 2024)1,995
1,995
2,011
Diamond Resorts International, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 4.50%, Current Coupon 6.07%, Secured Debt (Maturity - September 1, 2023)2,152
2,179
2,173
      


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Duff & Phelps CorporationDiversified Financial ServicesLIBOR (3 months) + 3.25%, Current Coupon 4.94%, Secured Debt (Maturity - October 15, 2024)$491
$494
$493
  LIBOR (3 months) + 3.25%, Current Coupon 4.63%, Secured Debt (Maturity - December 4, 2024)2,728
2,724
2,737
   3,219
3,218
3,230
EFS Cogen Holdings I LLCElectric UtilitiesLIBOR (3 months) + 3.25%, Current Coupon 4.95%, Secured Debt (Maturity - June 28, 2023)1,904
1,917
1,925
Encapsys LLCChemicalsLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - November 7, 2024)1,000
1,001
1,006
Endo Luxembourg Finance Company I S.a.r.l.PharmaceuticalsLIBOR (1 month) + 4.25%, Current Coupon 5.88%, Secured Debt (Maturity - April 29, 2024)1,990
2,009
2,005
Envision Healthcare CorporationHealth Care Providers & ServicesLIBOR (1 month) + 3.00%, Current Coupon 4.57%, Secured Debt (Maturity - December 1, 2023)2,481
2,481
2,491
Everi Payments Inc.Leisure ProductsLIBOR (3 months) + 3.50%, Current Coupon 4.98%, Secured Debt (Maturity - May 9, 2024)1,990
1,983
2,013
Exgen Renewables IV, LLCElectrical ProductionLIBOR (3 months) + 3.00%, Current Coupon 4.47%, Secured Debt (Maturity - November 29, 2024)300
299
304
First American Payment Systems, L.P.Diversified Financial ServicesLIBOR (1 month) + 5.75%, Current Coupon 7.14%, Secured Debt (Maturity - January 5, 2024)952
963
958
Fitness International, LLCHotels, Restaurants & LeisureLIBOR (1 month) + 3.50%, Current Coupon 5.19%, Secured Debt (Maturity - July 1, 2020)1,735
1,757
1,760
Flex Acquisition Company IncContainers & PackagingLIBOR (3 months) + 3.00%, Current Coupon 4.34%, Secured Debt (Maturity - December 29, 2023)1,995
2,004
2,008
Flexera Software LLCSoftwareLIBOR (1 month) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - April 2, 2020)1,995
2,013
2,008
Gardner Denver, Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 4.44%, Secured Debt (Maturity - July 30, 2024)1,995
2,005
2,004
Golden Nugget, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 3.25%, Current Coupon 4.66%, Secured Debt (Maturity - October 4, 2023)1,990
1,990
2,008
Greatbatch Ltd.Health Care Equipment & SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.66%, Secured Debt (Maturity - October 27, 2022)2,763
2,780
2,788
GYP Holdings III Corp.Trading Companies & DistributorsLIBOR (1 month) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - March 31, 2023)3,483
3,506
3,502
Harbor Freight Tools USA, Inc.Specialty RetailLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - August 18, 2023)1,980
1,987
1,996
HD Supply Waterworks, Ltd.Trading Companies & DistributorsLIBOR (6 months) + 3.00%, Current Coupon 4.46%, Secured Debt (Maturity - August 1, 2024)140
140
141
Horizon Pharma, Inc.PharmaceuticalsLIBOR (1 month) + 3.25%, Current Coupon 4.75%, Secured Debt (Maturity - March 29, 2024)1,990
2,009
2,001


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
IG Investments Holdings, LLCProfessional ServicesLIBOR (1 month) + 3.50%, Current Coupon 5.19%, Secured Debt (Maturity - October 29, 2021)$1,990
$2,002
$1,992
Jackson Hewitt Tax Service Inc.Diversified Financial ServicesLIBOR (1 month) + 7.00%, Current Coupon 8.38%, Secured Debt (Maturity - July 30, 2020)1,939
1,868
1,922
KMG Chemicals, Inc.ChemicalsLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 17, 2024)863
859
868
KUEHG Corp.Educational ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.44%, Secured Debt (Maturity - August 12, 2022)2,482
2,489
2,493
LANDesk Group, Inc.SoftwareLIBOR (1 month) + 4.25%, Current Coupon 5.82%, Secured Debt (Maturity - January 22, 2024)993
999
947
Learfield Communications LLCMediaLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - December 1, 2023)1,990
2,009
2,007
MA FinanceCo., LLCElectric Equipment, Instruments & ComponentsLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 21, 2024)387
387
388
Mohegan Tribal Gaming AuthorityHotels, Restaurants & LeisureLIBOR (1 month) + 4.00%, Current Coupon 5.57%, Secured Debt (Maturity - October 13, 2023)1,985
2,003
2,006
MPH Acquisition Holdings LLCHealth Care TechnologyLIBOR (3 months) + 3.00%, Current Coupon 4.69%, Secured Debt (Maturity - June 7, 2023)2,896
2,935
2,905
NAB Holdings, LLCIT ServicesLIBOR (3 months) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - July 1, 2024)1,990
1,981
2,000
Ortho-Clinical Diagnostics, IncLife Sciences Tools & ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.44%, Secured Debt (Maturity - June 30, 2021)1,985
1,980
1,992
PODS, LLCTransportation & LogisticsLIBOR (1 month) + 3.00%, Current Coupon 4.40%, Secured Debt (Maturity - December 6, 2024)1,995
1,994
2,010
Rackspace Hosting, Inc.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - November 3, 2023)3,284
3,309
3,286
Radiate Holdco, LLCMediaLIBOR (3 months) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - February 1, 2024)2,570
2,544
2,547
Red Ventures, LLCDirect Marketing ServicesLIBOR (1 month) + 4.00%, Current Coupon 5.57%, Secured Debt (Maturity - November 8, 2024)1,995
1,981
1,996
Scientific Games International, Inc.Leisure ProductsLIBOR (1 month) + 3.25%, Current Coupon 4.67%, Secured Debt (Maturity - August 14, 2024)399
401
403
Seattle Spin Co.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 21, 2024)2,613
2,616
2,618
SeaWorld Parks & Entertainment, Inc.Hotels, Restaurants & LeisureLIBOR (3 months) + 3.00%, Current Coupon 4.69%, Secured Debt (Maturity - April 1, 2024)1,985
1,987
1,966
Signode Industrial Group US Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - April 30, 2021)2,773
2,792
2,785


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Staples, Inc.DistributorsLIBOR (3 months) + 4.00%, Current Coupon 5.49%, Secured Debt (Maturity - September 12, 2024)$2,000
$1,995
$1,965
Telenet Financing USD LLCDiversified Telecommunications ServicesLIBOR (1 month) + 2.50%, Current Coupon 3.92%, Secured Debt (Maturity - March 2, 2026)1,655
1,655
1,663
Transdigm, Inc.Aerospace & DefenseLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 9, 2023)1,985
1,992
1,990
  LIBOR (1 month) + 3.00%, Current Coupon 4.57%, Secured Debt (Maturity - August 22, 2024)1,000
998
1,006
   2,985
2,990
2,996
Travelport Finance (Luxembourg) S.A.R.L.Internet Software & ServicesLIBOR (3 months) + 2.75%, Current Coupon 4.17%, Secured Debt (Maturity - September 2, 2021)1,901
1,901
1,903
Traverse Midstream Partners LLCOil, Gas & Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.85%, Secured Debt (Maturity - September 27, 2024)781
784
793
UFC Holdings, LLCMediaLIBOR (3 months) + 3.25%, Current Coupon 4.81%, Secured Debt (Maturity - August 18, 2023)1,990
2,002
2,003
Ultra Resources, Inc.Oil, Gas & Consumable FuelsLIBOR (1 month) + 3.00%, Current Coupon 4.41%, Secured Debt (Maturity - April 12, 2024)2,000
2,002
2,002
Utz Quality Foods, LLCCommercial Services and SuppliesLIBOR (1 month) + 3.50%, Current Coupon 5.01%, Secured Debt (Maturity - November 21, 2024)1,600
1,599
1,616
Valeant Pharmaceuticals International, Inc.PharmaceuticalsLIBOR (1 month) + 3.50%, Current Coupon 4.94%, Secured Debt (Maturity - April 1, 2022)1,546
1,553
1,570
Vertiv Group CorporationElectrical EquipmentLIBOR (3 months) + 4.00%, Current Coupon 5.35%, Secured Debt (Maturity - November 30, 2023)1,555
1,569
1,556
Vistra Operations Company LLCElectric UtilitiesLIBOR (2 months) + 2.75%, Current Coupon 4.08%, Secured Debt (Maturity - December 14, 2023)1,985
1,996
2,001
West CorporationDiversified Telecommunications ServicesLIBOR (1 month) + 4.00%, Current Coupon 5.35%, Secured Debt (Maturity - October 10, 2024)1,032
1,022
1,036
WideOpenWest Finance, LLCDiversified Telecommunications ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.75%, Secured Debt (Maturity - August 18, 2023)3,496
3,506
3,470
Total Loan Portfolio   $139,017
$139,012

For the period from inception (April 4, 2017) to December 31, 2017, we received $450,000 of dividend income from our investment in HMS-ORIX.



The following tables show the financial information for HMS-ORIX:

HMS-ORIX SLF LLC
Balance Sheet (Unaudited)
(dollars in thousands)
 As of December 31, 2017
Assets 
Portfolio investments at fair value (amortized cost: $139,017)$139,012
Cash and cash equivalents2,681
Interest receivable306
Deferred financing costs, net890
Other assets15
Total assets$142,904
  
Liabilities 
Credit facilities payable$86,500
Payable for securities purchased5,268
Accounts payable and accrued expenses64
Total liabilities91,832
  
Net assets 
Members’ equity51,072
Total net assets51,072
Total liabilities and net assets$142,904


HMS-ORIX SLF LLC
Statement of Operations (Unaudited)
(dollars in thousands)
 Period from inception (April 4, 2017) to December 31, 2017
 
Investment income 
Interest income$3,730
Dividend income—
Fee income—
Other income—
Total investment income3,730
Expenses 
Interest expense1,720
Other expenses34
General and administrative expenses64
Total expenses1,818
Net investment income1,912
Net realized (loss) from investments(85)
Net realized income1,827
Net change in unrealized (depreciation) on investments(5)
Net increase in net assets resulting from operations$1,822



PORTFOLIO ASSET QUALITY
As of December 31, 2017, we owned a broad portfolio of 176 investments in 123 companies representing a wide range of industries. We believe that this broad portfolio adds to the structural protection of the portfolio, revenue sources, income, cash flows and dividends. The portfolio included the following:

▪59 debt investments in 54 Middle Market portfolio companies with an aggregate fair value of approximately $545.2 million and a cost basis of approximately $569.3 million. The Middle Market debt investments had a weighted average annual effective yield of approximately 9.1%, which is calculated assuming the investments on non-accrual status are non-yielding, and 82.8% of the Middle Market debt investments were secured by first priority liens. Further, 89.6% of the Middle Market debt investments contain variable rates, though a majority of the investments with variable rates are subject to contractual minimum base interest rates between 100 and 150 basis points.

▪38 debt investments in 37 Private Loan portfolio companies with an aggregate fair value of approximately $306.8 million and a cost basis of approximately $307.7 million. The Private Loan debt investments had a weighted average annual effective yield of approximately 9.1%, which is calculated assuming the investments on non-accrual status are non-yielding, and 95.0% of the Private Loan debt investments were secured by first priority liens. Further, 94.6% of the Private Loan debt investments contain variable rates, though a majority of the investments with variable rates are subject to contractual minimum base interest rates between 100 and 150 basis points.

▪28 debt investments in 23 LMM portfolio companies with an aggregate fair value of approximately $87.8 million and a cost basis of approximately $88.4 million. The LMM debt investments had a weighted average annual effective yield of approximately 12.2% and 100.0% of the debt investments were secured by first priority liens. Also, 43.4% of the LMM debt investments are fixed rate investments with fixed interest rates between 7.3% and 15.0%. Further, 22 LMM debt investments, representing approximately 56.6% of the LMM debt investments, have variable rates subject to a contractual minimum base interest rate of 100 basis points.

▪44 equity investments and seven equity warrant investments in 23 LMM portfolio companies, eight Private Loan portfolio companies, three Middle Market portfolio companies and five Other Portfolio companies with an aggregate fair value of approximately $109.7 million and a cost basis of approximately $98.9 million.

Overall, as of December 31, 2017, our investment portfolio had a weighted average effective yield of approximately 8.9%, and 79.1% of our total portfolio’s investment composition (including our Other Portfolio investments) was secured by first priority liens.

We utilize a rating system developed by our Sub-Adviser to rate the performance of each LMM portfolio company. The investment rating system takes into consideration various factors, including each investment’s expected level of returns, collectability, comparisons to competitors and other industry participants, and the portfolio company’s future outlook.

Investment Rating 1 represents a LMM portfolio company that is performing in a manner which significantly exceeds expectations.
Investment Rating 2 represents a LMM portfolio company that, in general, is performing above expectations.
Investment Rating 3 represents a LMM portfolio company that is generally performing in accordance with expectations. All new LMM portfolio investments receive an initial Investment Rating 3.
Investment Rating 4 represents a LMM portfolio company that is underperforming expectations, requiring increased monitoring and scrutiny by us.
Investment Rating 5 represents a LMM portfolio company that is significantly underperforming, requiring heightened levels of monitoring and scrutiny by us and involves the recognition of significant unrealized depreciation on such investment.

The following table shows the distribution of our LMM portfolio investments on the 1 to 5 investment rating scale at fair value as of December 31, 2017 and December 31, 2016 (dollars in thousands):
 December 31, 2017 December 31, 2016
Investment RatingInvestments at Fair Value Percentage of Total Portfolio Investments at Fair Value Percentage of Total Portfolio
1$2,940
 2.2% $1,541
 1.3%
247,155
 34.8
 56,244
 48.5
379,655
 58.7
 50,764
 43.7
45,439
 4.0
 7,511
 6.5
5468
 0.3
 —
 —
Totals$135,657
 100.0% $116,060
 100.0%


Based upon the investment rating system, the weighted average rating of our LMM portfolio at fair value was approximately 2.7 and 2.6 as of December 31, 2017 and December 31, 2016, respectively. Lastly, from December 31, 2016 to December 31, 2017, the overall weighted average effective yield on our investment portfolio has remained unchanged, which is currently 8.9%.
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
RESULTS COMPARISONS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

Total Investment Income, Operating Expenses, Net Assets
For the years ended December 31, 2017 and 2016, our total investment income was approximately $103.7 million and $89.4 million, respectively, consisting predominately of interest income. (a)The increase in interest income was primarily due to (i) thean increase in interest rates on floating rate Investment Portfolio debt investments primarily resulting from increases in benchmark index rates, partially offset by lower average levels of income producing Investment Portfolio debt investments.

(b)The increase in dividend income was primarily a result of growth in our totaldividend income from certain LMM portfolio companies resulting from the continued strong operating results, financial condition and liquidity positions of those
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portfolio companies. The increase includes a $0.7 million increase in dividend income considered to be less consistent or non-recurring.
(c)The increase in total investment income includes a net increase of additional equity capital raised$1.9 million due to the impact of certain income considered less consistent or non-recurring, including (i) a $1.8 million increase in accelerated prepayments, repricing and borrowings under the Credit Facilitiesother activity related to certain Investment Portfolio debt investments and (ii) ana $0.7 million increase in the amountdividend income, partially offset by a $0.6 million decrease in fee income.
Expenses
Total expenses, net of accretion of unearned income into interest income. Forexpense waivers, for the year ended December 31, 2017,2023 were $73.7 million, a 45% increase from $50.9 million in the prior year. The following table provides a summary of the changes in the comparable period activity.
Year Ended
December 31,		Net Change
20232022Amount%
(dollars in thousands)
Interest expense$36,458 $24,423 $12,035 49 %(a)
Base management fees19,828 19,831 (3)— %
Incentive fees12,569 2,130 10,439 490%(b)
Internal administrative services fees8,916 5,147 3,769 73 %(c)
General and administrative4,254 3,905 349 9 %
Total expenses before expense waivers82,025 55,436 26,589 48 %
Waiver of internal administrative services expenses(8,308)(4,540)(3,768)83 %
Total expenses$73,717 $50,896 $22,821 45 %
_____________________________
(a)The increase in interest expense was primarily related to increased average interest rates on our averagefloating 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 for these floating rate obligations, partially offset by lower weighted-average outstanding borrowings.
(b)The increase in incentive fees was due to the increased Pre-Incentive Fee Net Investment Income resulting from MSC Income Fund’s more favorable operating results for the year ended December 31, 2023.
(c)The increase in internal administrative service fees related primarily to increased expenses incurred by the Adviser associated with its activities and services under the Investment Advisory Agreement. Consistent with prior practice, the vast majority of such internal administrative service fees, or all fees other than $0.6 million, were waived by the Adviser. The only fees not waived are the cost of services previously provided by a sub-administrator prior to January 1, 2022 and assumed by the Adviser thereafter (see Note K.1. — Related Party Transactions — Advisory Agreements and Conditional Expense Reimbursement Waivers included in Item 8. Consolidated Financial Statements).
Net Investment Income
Net investment portfolio was $1,026.7income for the year ended December 31, 2023 increased 9% to $57.7 million, or $0.72 per share, compared to $912.6net investment income of $52.9 million, or $0.66 per share, in 2022. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by the increase in total expenses, both as discussed above. The increase in net investment income and net investment income on a per share basis includes a $1.9 million, or $0.02 per share, increase in investment income considered less consistent or non-recurring, as discussed above.
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Net Realized Gain (Loss) from Investments
The following table provides a summary of the primary components of the total net realized loss on investments of $34.0 million for the year ended December 31, 2016. Additionally, during2023.

Year Ended December 31, 2023
Full ExitsPartial ExitsRestructuresOther (a)Total
Net Gain/(Loss)# of InvestmentsNet Gain/(Loss)# of InvestmentsNet Gain/(Loss)# of InvestmentsNet Gain/(Loss)Net Gain/(Loss)
(dollars in thousands)
Private Loan portfolio$554 2$— —$(18,505)2$(90)$(18,041)
LMM portfolio(9,414)3— —(1,541)1— (10,955)
Middle Market portfolio3,127 3— —(10,606)2242 (7,237)
Other Portfolio— —2,223 1— —— 2,223 
Total net realized gain (loss)$(5,733)8$2,223 1$(30,652)5$152 $(34,010)
_________________
(a)Other activity includes realized gains and losses from transactions involving 15 portfolio companies which are not considered to be significant individually or in the years ended December 31, 2017 and 2016, we accreted approximately $15.1 million and $11.9 million, respectively,aggregate.
The following table provides a summary of unearned income into interest income. We believe further increases in investment income in future periods may arise due to (i) a growing basethe primary components of portfolio companythe total net realized loss on investments and (ii) investments being held for the entire period relative to incremental net investment activity during each quarter.
For the year ended December 31, 2017, expenses, net of any fee and expense waivers, were approximately $44.3 million as compared to expenses of approximately $37.8$3.9 million for the year ended December 31, 2016. The increase in expenses was primarily due2022.
Year Ended December 31, 2022
Full ExitsPartial ExitsRestructuresOther (a)Total
Net Gain/(Loss)# of InvestmentsNet Gain/(Loss)# of InvestmentsNet Gain/(Loss)# of InvestmentsNet Gain/(Loss)Net Gain/(Loss)
(dollars in thousands)
Private Loan portfolio$5,849 2$— —$(9,014)2$(27)$(3,192)
LMM portfolio— —— —(1,456)1198 (1,258)
Middle Market portfolio(145)3— —— —(42)(187)
Other Portfolio— —779 1— —(78)701 
Total net realized gain (loss)$5,704 5$779 1$(10,470)3$51 $(3,936)
_____________________________
(a)Other activity includes realized gains and losses from transactions involving 15 portfolio companies which are not considered to an increase in (i) interest expense of $3.3 million, (ii) base management and incentive fees (net of fee waivers) of $2.6 million due primarily to an increase in average gross assets and (iii) amortization of deferred offering costs of $1.0 million. Interest expense increased primarily due to an increasebe significant individually or in the average borrowings duringaggregate.
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Net Unrealized Appreciation (Depreciation)
The following table provides a summary of the period and an increase in our costtotal net unrealized appreciation of borrowing on the Credit Facilities. Average borrowings were $427.2$46.3 million for the year ended December 31, 2017 compared to $396.02023.
Year Ended December 31, 2023
Private
Loan		LMM(a)Middle
Market		OtherTotal
(dollars in thousands)
Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period$18,295 $10,428 $7,785 $(2,225)$34,283 
Net unrealized appreciation (depreciation) relating to portfolio investments(6,144)20,729 (3,574)1,025 12,036 
Total net unrealized appreciation (depreciation) relating to portfolio investments$12,151 $31,157 $4,211 $(1,200)$46,319 
_________________
(a)Includes unrealized appreciation on 25 LMM portfolio investments and unrealized depreciation on 19 LMM portfolio investments.
The following table provides a summary of the total net unrealized depreciation of $1.7 million for the year ended December 31, 2016. As of December 31, 20172022.
Year Ended December 31, 2022
Private
Loan		LMM(a)Middle
Market		OtherTotal
(dollars in thousands)
Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period$3,212 $1,462 $(978)$(392)$3,304 
Net unrealized appreciation (depreciation) relating to portfolio investments(5,997)4,289 (6,769)3,471 (5,006)
Total net unrealized appreciation (depreciation) relating to portfolio investments$(2,785)$5,751 $(7,747)$3,079 $(1,702)
_____________________________
(a)Includes unrealized appreciation on 24 LMM portfolio investments and 2016, the annualized interest rateunrealized depreciation on borrowings was approximately 4.1% and 3.5%, respectively.18 LMM portfolio investments.

Income Tax Provision
For the year ended December 31, 2017, base management and incentive fees, net of fee waivers, were approximately $21.8 million compared to a net fee of $19.2 millionThe income tax provision for the year ended December 31, 2016. There were no waivers2023 of base management fees$3.8 million principally consisted of (i) a deferred tax provision of $2.9 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 $0.9 million related to a $0.5 million provision for the years ended December 31, 2017excise tax on our estimated undistributed taxable income and 2016, respectively; however, our Advisers waived the subordinated incentive fees on$0.4 million provision for current U.S. federal and state income for the years ended December 31, 2017 and 2016, totaling approximately $3.0 million and $1.7 million, respectively.taxes.


ForThe income tax provision for the year ended December 31, 2017,2022 of $1.6 million principally consisted of (i) a current tax provision of $1.3 million related to a $0.8 million provision for excise tax on our estimated undistributed taxable income and $0.5 million provision for current U.S. federal and state income taxes and (ii) a deferred tax provision of $0.4 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, changes in valuation allowance and other temporary book-tax differences.
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Net Increase in Net Assets Resulting from Operations
The net increase in net assets resulting from operations was approximately $52.6 million. The increase was attributable to net investment income of approximately $58.7 million, offset by net realized losses of approximately $4.4 million and net change in unrealized depreciation on investments of approximately $1.7 million. The net realized losses were primarily the result of realized losses of $6.5 million relating to the exit or restructure of Middle Market investments in two companies in the oil and gas sector, offset by a realized gain of $3.5 million relating to the exit of one Private Loan equity investment and one Other Portfolio investment.

RESULTS COMPARISONS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Total Investment Income, Operating Expenses, Net Assets
For the years ended December 31, 2016 and 2015, our total investment income was approximately $89.4 million and $65.4 million, respectively, consisting predominately of interest income. The increase in interest income was primarily due to (i) the growth in our total portfolio resulting from the investment of additional equity capital raised and borrowings under the Credit Facilities, (ii) an increase in the amount of accretion of unearned income into interest income and (iii) an increase in our investment portfolio’s weighted average annual effective yield. For the year ended December 31, 2016, our average investment portfolio was $912.6 million, compared to $723.5 million for the year ended December 31, 2015. Additionally,2023 was $66.2 million, or $0.82 per share, compared with $45.6 million, or $0.57 per share, during the years ended December 31, 2016 and 2015, we accreted approximately $11.9 million and $4.4 million, respectively, of unearned income into interest income. Finally, as of December 31, 2016, the portfolio had a weighted average annual effective yield on investments of approximately 8.9% compared to 8.3% as of December 31, 2015. The increase in the weighted average annual effective yield is largely due to the additional investments in LMM and Private Loan companies during the year, which are higher yielding than the Middle Market investments. We believe further increases in investment income in future periods may arise due to (i) a growing base of portfolio company investments and (ii) investments being held for the entire period relative to incremental net investment activity during each quarter.

For the year ended December 31, 2016, expenses, net2022. The tables above provide a summary of any fee and expense waivers, were approximately $37.8 million as compared to expenses of approximately $28.8 millionthe reasons for the year ended December 31, 2015. The increasechange in expenses was primarily due to (i) an increase in interest expense of approximately $3.9 million, (ii) an increase in base management and incentive


fees (net of fee waivers) of $3.6 million and (iii) commencing amortization of deferred offering costs to expense effective January 1, 2016 (see - Critical Accounting Policies - Offering Costs). Interest expense increased primarily due to an increase in the average borrowings during the period and an increase in our cost of borrowing on the Credit Facilities. Average borrowings were $396.0 million for the year ended December 31, 2016 compared to $305.0 million for the year ended December 31, 2015. As of December 31, 2016 and 2015, the annualized interest rate on borrowings was approximately 3.5% and 3.0%, respectively. Base management and incentive fees (net of fee waivers) increased primarily due to an increase in our average gross assets.

For the year ended December 31, 2016, the base management and incentive fees, net of fee waivers, were approximately $19.2 million compared to a net fee of $15.5 million for the year ended December 31, 2015. There were no waivers of base management fees for the years ended December 31, 2016 and 2015, respectively; however, our Advisers waived the subordinated incentive fees on income for the years ended December 31, 2016 and 2015, totaling approximately $1.7 million and $2.6 million, respectively.

For the year ended December 31, 2016, the net increase in net assets resulting from operations was approximately $66.6 million. The increase was attributable to unrealized appreciation on investments of approximately $38.2 million and net investment income of approximately $51.3 million, offset by net realized losses of approximately $22.9 million. The unrealized appreciation on investments in our portfolio was primarily driven by a recovery in the leveraged loan markets and the appreciation of our LMM and Private Loan equity investments. The net realized losses were primarily the result of (i) the realized loss of $20.3 million relating to the restructure of Middle Market investments in four companies in the oil and gas sector and (ii) the realized loss of $2.4 million relating to the exit of one Middle Market investment.

Forfor the year ended December 31, 2015,2023 as compared to the net decrease in net assets resulting from operations was approximately $7.0 million. The decrease was primarily attributable to unrealized depreciation on investments of approximately $38.0 million and realized losses of approximately $5.5 million, offset by net investment income of approximately $36.5 million. The unrealized depreciation on investments in our portfolio was primarily driven by the impact of broad price declines in the high yield bond and leveraged loan markets and the effect of declining oil prices on our investments in companies in the oil and gas sector. The realized losses were primarily driven by the Private Loan debt investment in Relativity Media, LLC that was converted into equity and warrants following a declaration of bankruptcy by the company. In conjunction with the conversion, we recognized a $5.5 million realized loss on the debt investment.year ended December 31, 2022.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Overview

As of December 31, 2017, we had $45.8 million in cash and cash equivalents, which we held in various custodial accounts, and our NAV totaled approximately $647.8 million equating to approximately $8.15 per share. In addition, as of December 31, 2017, we had $140.0 million in capacity available under the Credit Facilities. To seek to enhance our returns, we intend to continue to employ leverage as market conditions permit and at the discretion of our Adviser, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See “— Financing Arrangements.”

As of December 31, 2017, we had 28 senior secured loan investments and four equity investments with aggregate unfunded commitments of $45.4 million. We believe that we maintain sufficient cash and cash equivalents on hand and available borrowings to fund such unfunded commitments should the need arise.

We currently generate cash primarily from interest and fees earned on our investments, principal repayments and proceeds from sales of our investments, and the net proceeds of the issuance of shares under our distribution reinvestment plan.

Prior to investing in securities of portfolio companies, we invest the net proceeds from the issuance of shares of common stock under our distribution reinvestment plan and from sales and pay-downs of existing investments primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.
Cash and Cash Equivalents

As of December 31, 2017, we had approximately $45.8 million in cash and cash equivalents and our NAV totaled approximately $647.8 million equating to approximately $8.15 per share.

As of December 31, 2016, we had approximately $23.7 million in cash and cash equivalents and our NAV totaled approximately $597.8 million equating to approximately $8.15 per share. The change from the December 31, 2015 NAV per share of $7.88 was largely due to the unrealized appreciation on investments in the portfolio. The unrealized appreciation on investments in our portfolio was primarily driven by a recovery in the high yield bond and leveraged loan markets in the last three quarters of the year.



Cash Flows

For the year ended December 31, 2017,2023, we experiencedrealized a net increase in cash and cash equivalents of approximately $22.1 million. During that period, approximately $12.2$9.4 million, which is the net result of $50.2 million of cash was generated fromprovided by our operating activities and $40.8 million of cash used in our financing activities.
The $50.2 million of cash provided by our operating activities resulted primarily from (i) cash proceeds totaling $238.7 million from the sales and repayments of debt investments and sales of and return of capital from equity investments, (ii) cash flows that we generated from the operating profits earned totaling $46.7 million, which is our 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) cash proceeds of $1.9 million related to changes in other assets and liabilities, partially offset by the funding of new and follow-on portfolio investments of $236.4 million.

The $40.8 million of cash used in our financing activities principally consisted of (i) $36.4 million in cash dividends paid to stockholders, (ii) $24.4 million for the repaymentrepurchase of portfolio investments of $525.0common stock and (iii) $2.3 million and a net increase in net assets resulting from operations of approximately $52.6 million,for deferred financing costs, partially offset by the purchase of new portfolio investments of $551.8 million. During the year ended December 31, 2017, approximately $9.9 million was generated from financing activities, which principally consisted of $45.8(i) $14.0 million in net offering proceeds received and a net $17.0 million increase in borrowings under thefrom our Credit Facilities offset by $26.4and (ii) $8.5 million innet cash distributions paid to stockholders, $23.0 million in redemptions paid to stockholders and $3.6 million in deferred financing costsproceeds related to the credit facility amendments.

our common stock issuances.
For the year ended December 31, 2016,2022, we experiencedrealized a net decrease in cash and cash equivalents of approximately $0.3 million. During that period, approximately $71.6$4.5 million, which is the net result of $76.7 million of cash wasprovided by our operating activities and $81.2 million of cash used in our financing activities.
The $76.7 million of cash provided by our operating activities resulted primarily from (i) cash proceeds totaling $247.5 million from the sales and repayments of debt investments and sales of and return of capital from equity investments, (ii) cash flows that we generated from the operating profits earned totaling $43.5 million, which is our 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) cash proceeds of $2.9 million related to changes in other assets and liabilities, partially offset by the funding of new and follow-on portfolio investments of $217.2 million.
The $81.2 million of cash used in our financing activities principally consisted of (i) $105.0 million in net repayments on our Credit Facilities, (ii) $33.0 million in cash dividends paid to stockholders, (iii) $16.0 million for the purchaserepurchase of new portfolio investments of $464.9common stock and (iv) $0.1 million for deferred financing costs, partially offset by (i) $72.5 million of cash proceeds from our Series A Notes (defined below) issued in January 2022 and (ii) $0.8 million net cash proceeds related to our common stock issuance.
Share Repurchases
We maintain a share repurchase program whereby we make quarterly offers to purchase shares at the repaymentestimated NAV per share, as determined within 48 hours prior to the repurchase date. The amount of portfolio investmentsshares of $349.6 million andour common stock to be repurchased during any calendar quarter may be equal to the lesser of (i) the number of shares of common stock we could repurchase with the proceeds we received from the issuance of common stock under the DRIP or (ii) 2.5% of the weighted-average number of shares of common stock outstanding in the prior four calendar quarters. Repurchase offers are currently limited to the number of shares of common stock we can repurchase with 90% of the cash retained as a net increase in net assets resulting from operationsresult of approximately $66.6 million. Duringissuances of common stock under the DRIP.
In addition to our share repurchase program, during the fiscal year ended December 31, 2016, approximately $71.3 million was generated2023, we used proceeds from financing activities,the sale of our shares during 2023 discussed above to complete three modified “Dutch auction” tender offers,
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pursuant to which principally consistedwe offered to purchase up to a specified amount of $72.0 millionshares of our common stock at the lowest clearing purchase price elected by participating stockholders within a specified range that allowed us to purchase the maximum amount offered. All shares purchased in net offering proceeds received and a net $33.0 million“Dutch auction” tender offer were purchased at the clearing purchase price. SEC rules permitted us to increase the number of shares accepted for purchase in borrowings underany offer by up to 2% of our outstanding shares without amending the Credit Facilities, offset by $22.4 million in cash distributions paid to stockholders and $10.9 million in redemptions paid to stockholders.

offer. For the year ended December 31, 2015,2023, we experienced a net increase in cashpurchased 1,267,667 shares of our common stock for $7.8 million through our modified Dutch auction tender offers.
See Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and cash equivalentsIssuer Purchases of approximately $4.1 million. During that period, approximately $425.4 millionEquity Securities of cash was used inthis Annual Report on Form 10-K and Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of our operating activities, which principally consistedquarterly reports on Form 10-Q for more information regarding repurchases of the purchase of new portfolio investments of $631.1 million and a net decrease in net assets resulting from operations of approximately $7.0 million, offset by the repayment of portfolio debt investments of $176.1 million. During the year ended December 31, 2015, approximately $429.5 million was generated from financing activities, which principally consisted of $254.2 million in net offering proceeds received and a net $197.1 million increase in borrowings under the Credit Facilities, offset by $15.3 million in cash distributions paid to stockholders and $3.5 million paid for financing costs related to the Credit Facilities entered intoour common stock during the year ended December 31, 2015.2023.

Capital Resources
Continuous Public Offering and Distribution Reinvestment Plan
With the approval of our board of directors, we closed the Offering to new investors effective September 30, 2017. During the Offering period, we accepted subscriptions on a continuous basis and issued shares at weekly closings at prices that, after deducting selling commissions and Dealer Manager fees, were above our NAV per share. Since commencing our Initial Offering through September 30, 2017, we issued 84.1 million shares of common stock for gross proceeds of $785.3 million.  

During the year ended December 31, 2017, we issued 8.9 million shares of common stock for gross proceeds of $78.7 million at an average price per share of $8.81. The gross proceeds received during the year ended December 31, 2017 include reinvested distributions of $27.6 million for which we issued 3.3 million shares of common stock. The selling commissions and Dealer Manager fees related to the sale of our common stock were $4.0 million for the year ended December 31, 2017. During the year ended December 31, 2017, we also incurred offering costs of $1.2 million, which consisted primarily of marketing expenses and legal, due diligence and printing fees.

During the year ended December 31, 2016, we raised proceeds of $105.4 million from the Initial Offering and the Offering, including proceeds from the distribution reinvestment plan, and made payments of $7.0 million for selling commissions and Dealer Manager fees. We also incurred an obligation for $1.6 million of offering costs.

During the year ended December 31, 2015, we raised proceeds of $306.0 million from the Initial Offering, including proceeds from the distribution reinvestment plan, and made payments of $25.7 million for selling commissions and Dealer Manager fees. We also incurred an obligation for $4.6 million of offering costs.



Distributions

The following table reflects the cash distributions per share that we declared on our common stock during the years ended December 31, 2017, 2016 and 2015 (dollars in thousands except per share amounts).
 Distributions
For the Period EndedPer Share Amount
2017   
Three months ended December 31, 2017$0.18
 $14,144
Three months ended September 30, 20170.17
 13,910
Three months ended June 30, 20170.18
 13,438
Three months ended March 31, 20170.17
 12,922
2016   
Three months ended December 31, 20160.18
 12,767
Three months ended September 30, 20160.17
 12,307
Three months ended June 30, 20160.18
 11,650
Three months ended March 31, 20160.17
 11,037
2015   
Three months ended December 31, 20150.18
 10,564
Three months ended September 30, 20150.17
 9,373
Three months ended June 30, 20150.18
 7,998
Three months ended March 31, 20150.17
 6,260
On December 14, 2017, with the authorization of our board of directors, we declared distributions to our stockholders for the period of January 2018 through March 2018. These distributions have been, or will be, calculated based on stockholders of record each day from January 1, 2018 through March 31, 2018 in an amount equal to $0.00191781 per share, per day. Distributions are paid on the first business day following the completion of each month to which they relate and will be paid in cash or reinvested in common stock for those stockholders participating in our distribution reinvestment plan.
Specific tax characteristics of all distributions are reported to stockholders shortly after the close of each calendar year on Form 1099-DIV. For the years ended December 31, 2017, 2016 and 2015, respectively, approximately 96.4%, 93.9% and 99.7% of the distributions paid were taxable to the investor as ordinary income and approximately 3.6%, 6.1% and 0.3% were treated as capital gain distributions for federal income tax purposes. No portion of the distributions paid during the years ended December 31, 2017, 2016 and 2015 represented a return of capital.
We have adopted an “opt in” distribution reinvestment plan for our stockholders. As a result, if we make a distribution, our stockholders will receive distributions in cash unless they specifically “opt in” to the distribution reinvestment plan so as to have their cash distributions reinvested in additional shares of our common stock. We may, for the foreseeable future, pay a portion of our distributions from sources other than net realized income from operations, which may include stock offering proceeds, borrowings, fee and expense waivers from our Advisers and support payments from the Adviser.
We may fund our cash distributions from any sources of funds legally available, including stock offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Advisers. We have not established any limit on the extent to which we may use borrowings or stock offering proceeds to fund distributions. Our distributions may exceed our earnings, especially during the period before we have substantially invested the stock offering proceeds. As a result, a portion of the distributions we make may represent a return of capital for U.S. federal income tax purposes.
The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.
In order to satisfy the Code’s requirements applicable to entities subject to tax as a RIC, we must distribute to our stockholders substantially all of our taxable income on an annual basis. However, we may elect to spill over certain excess undistributed taxable income from one tax year into the next tax year, which may require us to pay a 4% nondeductible U.S. federal excise tax on such excess undistributed taxable income. For the taxable year ended December 31, 2015, we distributed $3.8 million, or $0.0615 per share, of our taxable income in 2016, prior to the filing of our U.S. federal income tax return for our 2015 taxable year. As a result, we were subject to a 4% nondeductible excise tax of $119,000. In 2016, we distributed $7.1 million, or $0.096753 per share, of our taxable income in 2017, prior to the filing of our federal income tax return for our 2016 taxable year. As a result, we were


subject to a 4% nondeductible excise tax liability of approximately $239,000. In 2017, we distributed $14.9 million, or $0.187394 per share, of our taxable income in 2018, prior to the filing of our federal income tax return for our 2017 taxable year. As a result, we were subject to a 4% nondeductible excise tax liability of approximately $392,000.

Financing Arrangements
On March 11, 2014, the Company entered into the Capital One Credit Facility. On March 6, 2017, the Company entered into the EverBank Credit Facility, which amended and restated the Capital One Credit Facility. The EverBank Credit Facility was subsequently amended on October 19, 2017, increasing revolver commitments to $120.0 million, with an accordion provision allowing borrowing capacity to increase up to $150.0 million, subject to satisfaction of certain conditions.

On June 2, 2014, HMS Funding, entered into the Deutsche Bank Credit Facility, which was most recently amended on November 20, 2017, increasing the revolver commitments to $450.0 million. The Company contributes certain assets to HMS Funding from time to time, as permitted under the EverBank Credit Facility, as collateral to secure the Deutsche Bank Credit Facility.

As of December 31, 2017,2023, we had $82.0$30.8 million in cash and cash equivalents and $129.3 million of unused capacity under the Credit Facilities, which we maintain to support our investment and operating activities. As of December 31, 2023, our NAV totaled $622.3 million, or $7.77 per share.
As of December 31, 2023, we had $132.0 million outstanding and $38.0$33.0 million availableof undrawn commitments under our EverBank CreditCorporate Facility and $348.0$203.7 million outstanding and $102.0$96.3 million availableof undrawn commitments under the Deutsche Bank Creditour SPV Facility, both of which we estimated approximated fair value andvalue. Availability under our Credit Facilities is subject to certain leverage and borrowing base limitations, various covenants, reporting requirements and other customary requirements for similar credit facilities. In August 2023, the SPV facility was amended to extend the revolving period expiration date from February 3, 2024 to February 3, 2027 and the asset coverage restrictions under the 1940 Act. Asmaturity date from February 3, 2025 to February 3, 2028. Additionally, total commitments were reduced from $325.0 million to $300.0 million. For further information on our Credit Facilities, including key terms and financial covenants, refer to Note E — Debt included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
In October 2021, we issued $77.5 million in aggregate principal amount of our 4.04% Series A Senior Notes due 2026 (the “Series A Notes”), and we issued an additional $72.5 million of Series A Notes in January 2022, all of which remained outstanding as of December 31, 2016,2023. For more information on our Series A Notes, including key terms and financial covenants, refer to Note E — Debt included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
During the years ended December 31, 2023 and 2022, on certain dividend payment dates we had $80.0 million outstanding and $45.0 million available undersold shares of our Capital One Credit Facility and $333.0 million outstanding and $52.0 million available undercommon stock to Main Street at the Deutsche Bank Credit Facility, both ofprice at which we estimated approximated fair valueissued new shares in connection with reinvestments of dividends pursuant to the DRIP. In each of these transactions, the issuance and subject to certain limitationssale of shares were exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and the asset coverage restrictions underwere unanimously approved by our Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act. See Note 6 - BorrowingsAct, of the Company or our Adviser. During the year ended December 31, 2023, we sold 1,080,185 shares to Main Street at a weighted-average price of $7.87 for total proceeds, prior to payment of expenses, of $8.5 million. During the financial statements included elsewhere in this Form 10-Kyear ended December 31, 2022, we sold 94,697 shares to Main Street at a price of $7.92 for total proceeds, prior to payment of expenses, of $0.8 million.
We closed our continuous follow-on public offering of shares to new investors effective September 2017. As such, our ability to raise additional information regarding the Credit Facilities.
equity is limited.
As a BDC, we generally are required to meetmaintain a coverage ratio, or BDC asset coverage ratio, of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if certain requirements are met in the future). This requirement limits the amount that we may borrow. As of December 31, 2017,2023, our BDC asset coverage ratio under BDC regulations was 236% when assuming unfunded commitments are treated as senior securities. As228%. The combination of December 31, 2016,these factors limits our asset coverage ratio under BDC regulations was 245% when assuming unfunded commitments are treated as senior securities. As of December 31, 2017, considering these limitations, we had theaccess to capital to fund future investment activities or operating requirements, including our ability to draw upongrow the entire $140.0 million of remaining capacity in the Credit Facilities.

Investment Portfolio. We anticipate that we will continue to fund our investment activities and operating requirements through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, including cash proceeds from the repayments and from the sales of investments in our portfolio companies, and utilization of available borrowings on theunder our Credit Facilities. Our primary uses of funds in both the short-term and long-term will be investments in portfolio companies, operating expenses, and cash distributions to holders of our common stock.stock and share repurchases under our share repurchase programs.

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Related Party TransactionsWe periodically invest excess cash balances into marketable securities and Agreementsidle funds investments. The primary investment objective of marketable securities and idle funds investments is to generate incremental cash returns on excess cash balances prior to utilizing those funds for investment in our Private Loan, LMM and Middle Market portfolio investments. Marketable securities and idle funds investments generally consist of debt investments, independently rated debt investments, certificates of deposit with financial institutions, diversified bond funds and publicly traded debt and equity investments.
We have entered into agreements with our Adviser, our Sub-Adviser and our Dealer Manager, wherebyIn order to satisfy the Code requirements applicable to a RIC, we pay certain fees and reimbursementsintend to these entities. These included paymentsdistribute to our Dealer Manager for selling commissionsstockholders, after consideration and application of our ability under the Code to carry forward certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income.
Although we have been able to secure access to additional liquidity, including through the Credit Facilities and the Dealer Manager fee and include payments to our Adviser for reimbursement of offering costs. In addition, we make payments for certain servicesNote Purchase Agreement, there is no assurance that include the identification, execution, and management of our investments and also the management of our day-to-day operations provideddebt or equity capital will be available to us by our Adviser and Sub-Adviser, pursuant to various agreements that we have entered into. See Note 11 — Related Party Transactions and Arrangements toin the financial statements included elsewhere in this Form 10-K for additional information regarding related party transactions.
Contractual Obligations
As of December 31, 2017, we had $430.0 million in borrowings outstanding under the Credit Facilities. The Everbank Credit Facility will maturefuture on March 6, 2020 and the Deutsche Bank Credit Facility will mature on November 20, 2022. See above for a description of the Credit Facilities.


A summary of our significant contractual payment obligations for the repayment of outstanding borrowingsfavorable terms, or at December 31, 2017 is as follows:
 Payments Due By Period (dollars in thousands)
 Total Less than 1 year 1-3 years 3-5 years After 5 years
EverBank Credit Facility (1)
$82,000
 $—
 $82,000
 $—
 $—
Deutsche Bank Credit Facility (2)
348,000
 —
 —
 348,000
 —
Total$430,000
 $—
 $82,000
 $348,000
 $—
(1)At December 31, 2017, $38.0 million remained available under our EverBank Credit Facility; however, our borrowing ability is limited to the asset coverage ratio restrictions imposed by the 1940 Act, as discussed above.
(2)At December 31, 2017, $102.0 million remained available under the Deutsche Bank Credit Facility; however, our borrowing ability is limited to the asset coverage ratio restrictions imposed by the 1940 Act, as discussed above.

all.
Recently Issued or Adopted Accounting Standards
In May 2014, the FASB issued ASU 2014‑09, Revenue from Contracts with Customers (Topic 606). ASU 2014‑09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry‑specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016‑12, Revenue from Contracts with Customers (Topic 606)-Narrow‑Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring non-cash consideration, and certain transition matters. The new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. We expect to identify similar performance obligations under ASC 606 as compared with deliverables and separate units of account previously identified. As a result, we expect the timing of our revenue recognition to remain the same.

In January 2016, the FASB issued ASU 2016-01,Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities which amends the guidance related to the classification and measurement of investments in equity securities. The guidance requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The ASU will also amend the guidance related to the presentation of certain fair value changes for financial liabilities measured at fair value and certain disclosure requirements associated with the fair value of financial instruments. For public companies, this ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The impact of the adoption of this new accounting standard on our consolidated financial statements is not expected to be material.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues including, among other things, the classification of debt prepayment or debt extinguishment costs. ASU No. 2016-15 is effective for annual reporting periods, and the interim periods within those periods, beginning after December 15, 2017. Early adoption is permitted. The impact of the adoption of this new accounting standard on our consolidated financial statements is not expected to be material.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230),”which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The amendment should be adopted retrospectively. The impact of the adoption of this new accounting standard on our consolidated financial statements is not expected to be material.



From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of recently issued standards and any that are not yet effective will not have a material impact on our consolidated financial statements upon adoption. For a description of recently issued or adopted accounting standards, see Note B.11. — Summary of Significant Accounting Policies — Recently Issued or Adopted Accounting Standards included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Inflation
Inflation has not historically had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, specifically including over the last few years, as a result of recent geopolitical events, supply chain and labor issues, and may continue to experience, the increasing impacts of inflation on their operating results, including periodic escalations in their costs for labor, raw materials and third-party services and required energy consumption. These issues and challenges related to inflation are receiving significant attention from our investment teams and the management teams of our portfolio companies as we work to manage these growing challenges. Prolonged or more severe impacts of inflation to our portfolio companies could continue to affect their operating profits and, thereby, increase their borrowing costs, and as a result negatively impact their ability to service their debt obligations and/or reduce their available cash for distributions. In addition, these factors could have a negative effect on the fair value of our investments in these portfolio companies. The combined impacts therefrom in turn could negatively affect our results of operations.
Off-Balance Sheet Arrangements
We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments include commitments to extend credit and fund equity capital and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the Consolidated Balance Sheets. At December 31, 2017,2023, we had a total of approximately $45.4$70.8 million in outstanding commitments comprised of (i) 2866 investments with commitments to fund revolving loans that had not been fully drawn or term loans that hadwith additional commitments not beenyet funded and (ii) fourthree investments with equity capital commitments that had not been fully called. We recognized unrealized appreciation of approximately $14,000 on the outstanding unfunded loan commitments and no unrealized appreciation or depreciation on the outstanding unfunded capital commitments during the year ended December 31, 2017. We had equity commitments of up to $30.0 million to HMS-ORIX, which were fully funded as
Contractual Obligations
As of December 31, 2017. At2023, we had $485.7 million in total borrowings outstanding under our Credit Facilities and Series A Notes. The Corporate Facility will mature on March 1, 2026. The SPV Facility will mature on February 3, 2028. The Series A Notes will mature on October 30, 2026. See further discussion of the terms of our Credit Facilities, Series A Notes and other debt in Note E — Debt included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
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A summary of our significant contractual payment obligations for the repayment of outstanding borrowings at December 31, 2016, we had a total2023 is as follows.
20242025202620272028ThereafterTotal
(dollars in thousands)
SPV Facility(1)
$— $— $— $— $203,688 $— $203,688 
Series A Notes— — 150,000 — — — 150,000 
Interest due on Series A Notes6,060 6,060 6,060 — — — 18,180 
Corporate Facility(2)
— — 132,000 — — — 132,000 
Total$6,060 $6,060 $288,060 $— $203,688 $— $503,868 
_____________________________
(1)As of approximately $42.7 million in outstanding commitments comprised of (i) 22 commitments to fund revolving loans that had not been fully drawn or term loans that had not been funded and (ii) three capital commitments that had not been fully called. We recognized unrealized depreciation of approximately $266,000 on our outstanding unfunded loan commitments and unrealized appreciation of approximately $14,000 on our outstanding unfunded capital commitments during the year ended December 31, 2016.2023, $96.3 million remained available to borrow under the SPV Facility; however, our borrowing ability is limited to leverage and borrowing base restrictions imposed by the SPV Facility and the 1940 Act, as discussed above.

(2)As of December 31, 2023, $33.0 million remained available to borrow under the Corporate Facility; however, our borrowing ability is limited to leverage and borrowing base restrictions imposed by the Corporate Facility and the 1940 Act, as discussed above.
Related Party Transactions and Agreements
 Commitments and Contingencies
 (dollars in thousands)
 December 31, 2017 December 31, 2016
    
Unfunded Loan Commitments   
Apex Linen Services, Inc.$403
 $397
Arcus Hunting, LLC976
 2,136
BarFly Ventures, LLC613
 881
BigName Holdings, LLC101
 —
Boccella Precast Products, LLC500
 —
Buca C, LLC—
 1,548
CapFusion Holding, LLC—
 394
CDHA Management, LLC2,343
 3,259
Charps, LLC1,000
 —
Clad-Rex Steel, LLC100
 —
CTVSH, PLLC200
 —
Datacom, LLC25
 1,302
Felix Investments Holdings II LLC1,667
 —
Gamber-Johnson Holdings, LLC300
 300
GST Autoleather Inc.1,281
 —
Guerdon Modular Holdings, Inc.400
 400
Hawk Ridge Systems, LLC400
 400
Hojeij Branded Foods, Inc.1,923
 2,000
Hostway Corporation7
 —
HW Temps LLC200
 50
Jackmont Hospitality, Inc.—
 1,200
LaMi Products, LLC294
 1,729
Market Force Information, Inc.400
 —
Meisler Operating, LLC400
 —
Minute Key, Inc.—
 197
Mystic Logistics, Inc.200
 194
NNE Issuer, LLC5,542
 —
NuStep, LLC300
 —
Pardus Oil & Gas, LLC—
 357
Permian Holdco 2, Inc.97
 290
PPC/Shift, LLC500
 500
Resolute Industrial LLC5,750
 —
Strike, LLC—
 2,475
Unirush, LLC—
 980
Volusion, LLC—
 2,955


 Commitments and Contingencies
 (dollars in thousands)
 December 31, 2017 December 31, 2016
    
Wireless Vision Holdings, LLC$2,084
 $—
Unfunded Capital Commitments   
Brightwood Capital Fund III, LP1,000
 1,000
Brightwood Capital Fund IV, LP9,000
 10,000
Copper Trail Energy Fund I LP2,500
 —
Freeport First Lien Loan Fund III, LP4,941
 7,737
Total$45,447
 $42,681

We have entered into agreements with our Adviser and/or certain of its affiliates and other parties whereby we pay certain fees and reimbursements to these entities. These included payments for selling commissions and fees and for reimbursement of offering costs. In addition, we make payments for certain services that include the identification, execution and management of our investments and also the management of our day-to-day operations provided to us by our Adviser, pursuant to various agreements that we have entered into. See Note K — Related Party Transactions included in Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K for additional information regarding these related party transactions and agreements.
Recent Developments

On January 31, 2024, we sold 314,070 shares of our common stock to Main Street at $7.96 per share, the price at which we issued new shares in connection with reinvestments of the January 31, 2024 dividend pursuant to the DRIP, for total proceeds to us of $2.5 million. The issuance and sale were made pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and were unanimously approved by the Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, of us or our Adviser.

On February 2, 2018,January 31, 2024, we filed arepurchased 518,173 shares of our common stock validly tendered and not withdrawn on the terms set forth in our tender offer statement on Schedule TO and Offer to Purchase filed with the SEC to commence an offer by us to purchase, as approved by our board of directors, 1,942,970.33on December 21, 2023. The shares of our issued and outstanding common stock. The offer is for cashwere repurchased at a purchase price equal to theof $7.81 per share, which was our NAV per share as of January 31, 2024, for an aggregate purchase price of $4.0 million (an amount equal to be determined within 48 hours90% of the proceeds we received from the issuance of shares under the DRIP from our January 31, 2024 dividend payment).

On February 5, 2024, we commenced a modified “Dutch Auction” tender offer (the “February Dutch Auction Tender Offer”) pursuant to the Offer to Purchase, dated February 5, 2024, which expired on March 4, 2024. Pursuant to the February Dutch Auction Tender Offer, we repurchased 357,143 shares on March 8, 2024, at a price of $7.00 per share for an aggregate cost of $2.5 million, excluding fees and expenses related to the February Dutch Auction Tender Offer.
In March 2024, our Board of Directors declared a quarterly cash dividend of $0.185 per share payable May 1, 2024 to stockholders of record as of March 29, 2024. Additionally, our Board of Directors approved a repurchase date.offer pursuant to our share repurchase program in an amount equal to 90% of the proceeds resulting from shares issued in lieu of cash distributions from the May 1, 2024 dividend payment.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, in particularincluding changes in interest rates. Changesrates, and changes in interest rates may affect both our interest expense on the debt outstanding under our Credit Facilities and our interest income from portfolio investments, the fair value ofinvestments. Our risk management systems and procedures are designed to identify and analyze our fixed income investments,risk, to set appropriate policies and our cost of funding.
limits and to continually monitor these risks. Our interestinvestment income will be affected by changes in various interest rates,rate indices, including LIBORSOFR and primePrime rates, to the extent that any of our debt investments include floating interest rates. See Risk Factors — Risks Related to our Investments — The discontinuation and replacement of LIBOR may adversely affect the value of floating-rate debt securities in our portfolio or issued by us., Risk Factors — Risks Related to our Business and Structure — We generally invest in floating rate debt instruments, meaning thatare subject to risks associated with the interest rate payable on such instrument resets periodically based uponenvironment and changes in interest rates will affect our cost of capital, net investment income and the value of our investments. and Risk Factors — Risks Related to Leverage — Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us. included in Item 1A. Risk Factors of this Annual Report on Form 10-K for more information regarding risks associated with our debt investments and borrowings that utilize SOFR or Prime as a specifiedreference rate.
The majority of our debt investments are made with either fixed interest rate index, typicallyrates or floating rates that are subject to contractual minimum interest rates for the one-month or three-month LIBOR.term of the investment. As of December 31, 2017, approximately 87.2%2023, 78% of our LMM, Private Loan, and Middle Market portfolio debt investments (based onInvestment Portfolio (at cost) containedbore interest at floating rates, 95% of which were subject to contractual minimum interest rates. As of December 31, 2017, the one-month and three-month LIBOR was approximately 1.57% and 1.69% respectively. However, many2023, 31% of our investments provide that the specifieddebt obligations bore interest rate index on such instruments will never fall below a level, or floor, generally between 100 and 150 basis points, equal to 1.0% to 1.5%, regardless of the level of the specified index rate. Given that most floating rate debt investments have index floors at or above 100 basis points, a decline in index rates is not expected to result in a significant change to interest income.
In addition, any fluctuations in prevailing interest rates may affect the fair value of our fixed rate debt instruments and result in changes in unrealized gains and losses, and may also affect a net increase or decrease in net assets resulting from operations. Such changes in unrealized appreciation and depreciation will materialize into realized gains and losses if we sell our investments before their respective debt maturity dates.

Further, because we borrow money to make investments, our net investment income is partially dependent upon the difference between the interest rate at which we invest borrowed funds and the interest rate at which we borrow funds. In periods of rising interest rates and when we have borrowed capital with floating interest rates, ourrates. Our interest expense will increase, which will increasebe affected by changes in the published SOFR rate in connection with our financing costs and reduce our net investment income, especially toCredit Facilities; however, the extent we hold fixed-rate debt investments. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.outstanding Series A Notes are fixed for the life of such debt. As of December 31, 2023, we had not entered into any interest rate hedging arrangements. Due to our limited use of derivatives, we have claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, are not subject to registration or regulation as a pool operator under such Act. The Company expects to operate as a “limited derivatives user” under Rule 18f-4 under the 1940 Act.


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The following table shows the approximate annualized increase or decrease (dollars in thousands) in the components of net investment income due to hypothetical base rate changes in interest rate index changes,rates, assuming no changes in our investments and borrowings as of December 31, 2017.2023.
Basis Point ChangeIncrease
(Decrease)
in Interest
Income		(Increase)
Decrease
in Interest
Expense		Increase
(Decrease) in Pre Incentive Fee Net
Investment
Income		(Increase) Decrease in Incentive Fee ExpenseIncrease (Decrease) in Net Investment IncomeIncrease
(Decrease) in Net
Investment
Income per Share
(dollars in thousands, except per share amounts)
(200)$(13,142)$6,714 $(6,428)$3,678 $(2,750)$(0.03)
(175)(11,499)5,875 (5,624)3,678 (1,946)(0.02)
(150)(9,857)5,035 (4,822)3,678 (1,144)(0.01)
(125)(8,214)4,196 (4,018)3,171 (847)(0.01)
(100)(6,571)3,357 (3,214)2,367 (847)(0.01)
(75)(4,928)2,518 (2,410)1,563 (847)(0.01)
(50)(3,286)1,678 (1,608)761 (847)(0.01)
(25)(1,643)839 (804)161 (643)(0.01)
251,643 (839)804 (161)643 0.01 
503,286 (1,678)1,608 (322)1,286 0.02 
754,928 (2,518)2,410 (482)1,928 0.02 
1006,571 (3,357)3,214 (643)2,571 0.03 
1258,214 (4,196)4,018 (804)3,214 0.04 
1509,857 (5,035)4,822 (964)3,858 0.05 
17511,499 (5,875)5,624 (1,125)4,499 0.06 
20013,142 (6,714)6,428 (1,286)5,142 0.06 
Change in interest rates 
Increase
(Decrease) in
Interest Income
 
Increase
(Decrease) in
Interest Expense
 
Net Increase
(Decrease) in Net
Investment Income
Down 100 basis points $(5,713) $(4,300) $(1,413)
Down 50 basis points (4,239) (2,150) (2,089)
Up 50 basis points 4,277
 2,150
 2,127
Up 100 basis points 8,568
 4,300
 4,268
Up 200 basis points 17,152
 8,600
 8,552
Up 300 basis points 25,736
 12,900
 12,836


Although we believe that this analysis is indicative of our existing sensitivity tothe impact of interest rate changes itto our Net Investment Income as of December 31, 2023, the analysis does not adjust fortake into consideration future changes in the credit market, credit quality the size and composition of the assets in our portfolio andor other business developments, including borrowing under the Credit Facilities or other borrowings,economic developments that could affect net increase in net assets resulting from operations, or net income.our Net Investment Income. Accordingly, we can offer no assurances that actual results would not differ materially from the analysis above.

If deemed prudent, we may use interest The hypothetical results assume that all SOFR and Prime rate risk management techniqueschanges would be effective on the first day of the period. However, the contractual SOFR and Prime rate reset dates would vary throughout the period. The majority of our investments are based on contracts which reset quarterly while our Corporate Facility and our SPV Facility reset on a monthly and quarterly basis, respectively. The hypothetical results would also be impacted by the changes in the amount of debt outstanding under our Credit Facilities (with an increase (decrease) in the debt outstanding under the Credit Facilities resulting in an effort to minimize our exposure to(increase) decrease in the hypothetical interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and resultsexpense).
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Table of operations. As of December 31, 2017, we had not entered into any interest rate hedging arrangements.contents


Item 8. Consolidated Financial Statements and Supplementary Data
Index to AuditedConsolidated Financial Statements
6960
7062
7163
7264
7365
66
86
104
74142
Notes to the Consolidated Financial Statements
76
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm


Board of Directors and Stockholders
HMSMSC Income Fund, Inc.


Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of HMSMSC Income Fund, Inc. (a Maryland corporation) and subsidiaries (the “Company”), including the consolidated scheduleschedules of investments, as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2017,2023, and the related notes and the financial highlights (see Note 7) for each of the five years in the period ended December 31, 2017statement schedule included under Item 15(b) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017,2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities as of December 31, 2023, by correspondence with the portfolio companies and custodians; when replies were not received, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included verification by confirmation of securities as of December 31, 2017 and 2016, by correspondence with the portfolio companies and custodians, or by other appropriate auditing procedures where replies were not received. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair Value of Investments
As described further in Note C to the financial statements, the Company’s investments recorded at fair value, categorized as Level 3 investments within the fair value hierarchy, totaled $1,092,895 thousand at December 31, 2023. Approximately 95% of these investments have no readily available market values and are measured using significant unobservable inputs and assumptions, and generally use valuation techniques such as the income and market approach. The significant unobservable inputs disclosed by management include, among others, weighted-average cost of capital (“WACC”) inputs and market multiples for equity investments, and risk adjusted discount rates and percentage of expected principal recovery for debt investments. Changes in these assumptions could have a significant impact on the determination of fair value. As such, we identified fair value of Level 3 investments measured using significant unobservable inputs and assumptions as a critical audit matter.
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The principal considerations for our determination that fair value of Level 3 investments measured using significant unobservable inputs is a critical audit matter are the significant management judgements used in developing complex valuation techniques and inherent estimation uncertainty. Auditing these investments requires a high degree of subjective auditor judgement, including use of valuation professionals with specialized skills and knowledge, to evaluate the reasonableness of unobservable inputs and assumptions.
Our audit procedures related to the critical audit matter included the following, among others:
•Testing the design and operating effectiveness of controls over management’s process to determine investment fair value. Specifically, we identified and tested key attributes of management’s fair value determination review. These attributes addressed the relevance, adequacy and appropriateness of the data, assumptions, valuation methods, and mathematical accuracy used to determine investment fair value as of the reporting date.

•Evaluated the ability to estimate fair value by comparing prior period fair values to transaction prices of transactions occurring subsequent to the prior period valuation date.
•With the assistance of internal valuation specialists to evaluate and test management’s process to develop the valuation estimates, we performed substantive audit procedures to determine mathematical accuracy and to determine that the data, valuation methods, and significant unobservable inputs and assumptions used to determine investment fair value as of the Company’s reporting date were reasonable. We tested certain key inputs/assumptions for a selection of investments, including the following, as applicable:
•enterprise values,
•weighted average cost of capital (“WACC”),
•discount rates,
•forecasted cash flows and long-term growth rates,
•discount for lack of marketability,
•market multiples,
•weighting between valuation techniques,
•risk adjusted discount factor, and
•percentage of expected principal recovery.
In testing the above, we considered available third-party market information and published studies, current economic conditions and subsequent events, and other information that could be corroborated to source information.
/s/ GRANT THORNTON LLP


We have served as the Company’s auditor since 2012.


Houston, Texas
March 21, 20188, 2024

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Table of contents


MSC INCOME FUND, INC.
PART I — FINANCIAL INFORMATION
HMS Income Fund, Inc.
Consolidated Balance Sheets
(dollars in thousands, except share and per share amounts)
 December 31, 2017 December 31, 2016
ASSETS 
  
Portfolio investments at fair value: 
  
Non-Control/Non-Affiliate investments (amortized cost: $948,029 and $935,741 as of December 31, 2017 and December 31, 2016, respectively)$922,898
 $916,393
Affiliate investments (amortized cost: $71,708 and $53,771 as of December 31, 2017 and December 31, 2016, respectively)76,862
 56,312
Control investments (amortized cost: $44,592 and $12,883 as of December 31, 2017 and December 31, 2016, respectively)49,679
 16,542
Total portfolio investments1,049,439
 989,247
    
Cash and cash equivalents45,791
 23,719
Interest receivable8,638
 7,204
Receivable for securities sold4,959
 7,610
Prepaid and other assets4,072
 1,268
Deferred offering costs (net of accumulated amortization of $0 and $9,919 as of December 31, 2017 and December 31, 2016, respectively)—
 680
Deferred financing costs (net of accumulated amortization of $309 and $2,862 as of December 31, 2017 and December 31, 2016, respectively)6,163
 3,840
Total assets$1,119,062
 $1,033,568
    
LIABILITIES 
  
Accounts payable and other liabilities$1,459
 $1,164
Payable for unsettled trades—
 932
Stockholder distributions payable4,772
 4,354
Base management fees payable5,682
 5,054
Due to affiliates59
 184
Directors’ fees payable17
 12
Payable for securities purchased29,284
 11,035
Credit facilities payable430,000
 413,000
Total liabilities471,273
 435,735
    
Commitments and Contingencies (Note 13)   
    
NET ASSETS 
  
Common stock, $.001 par value; 150,000,000 shares authorized, 79,511,731 and 73,382,971 issued and outstanding as of December 31, 2017 and December 31, 2016, respectively80
 73
Additional paid in capital685,593
 633,855
Accumulated distributions in excess of net investment income(22,660) (22,602)
Net change in unrealized appreciation (depreciation) on investments(15,224) (13,493)
Total net assets647,789
 597,833
    
Total liabilities and net assets$1,119,062
 $1,033,568
    
Net asset value per share$8.15
 $8.15

 See notes to the consolidated financial statements.


HMS Income Fund, Inc.
Consolidated Statements of Operations
(dollars in thousands, except shares and per share amounts)
 For The Year Ended December 31,
 2017 2016 2015
INVESTMENT INCOME: 
  
  
From non-control/non-affiliate investments:     
Interest income$92,159
 $83,037
 $61,956
Fee income2,121
 903
 944
Dividend income683
 563
 353
From affiliate investments:     
Interest income4,850
 2,229
 1,060
Fee income180
 276
 45
Dividend income1,904
 1,463
 99
From control investments:     
Interest income663
 740
 848
Fee income73
 81
 84
Dividend income1,027
 107
 —
Total interest, fee and dividend income103,660
 89,399
 65,389
EXPENSES: 
  
  
Interest expense18,317
 15,055
 11,159
Base management and incentive fees24,814
 20,840
 18,142
Internal administrative services expenses3,014
 2,315
 2,037
Offering costs1,861
 901
 —
Professional fees645
 1,056
 606
Insurance191
 191
 192
Other general and administrative1,518
 1,440
 1,280
Expenses before fee and expense waivers50,360
 41,798
 33,416
Waiver of incentive fees(3,029) (1,689) (2,601)
Waiver of internal administrative services expenses(3,014) (2,315) (2,037)
Total expenses, net of fee and expense waivers44,317
 37,794
 28,778
Net investment income before taxes59,343
 51,605
 36,611
Income tax expense (benefit), including excise tax624
 336
 127
NET INVESTMENT INCOME58,719
 51,269
 36,484
NET REALIZED GAIN (LOSS) ON INVESTMENTS 
  
  
Non-Control/Non-Affiliate investments(5,314) (22,891) (5,508)
Affiliate investments951
 —
 —
Control investments—
 —
 —
Total realized gain (loss) on investments(4,363) (22,891) (5,508)
NET REALIZED INCOME54,356
 28,378
 30,976
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 
  
  
Non-Control/Non-Affiliate investments(5,767) 34,185
 (40,543)
Affiliate investments2,608
 1,601
 1,348
Control investments1,429
 2,420
 1,239
Total net change in unrealized appreciation (depreciation) on investments(1,730) 38,206
 (37,956)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS$52,626
 $66,584
 $(6,980)
PER SHARE INFORMATION – BASIC AND DILUTED     
NET INVESTMENT INCOME PER SHARE$0.76
 $0.75
 $0.75
NET REALIZED INCOME PER SHARE$0.70
 $0.41
 $0.63
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE (EARNINGS PER SHARE)$0.68
 $0.97
 $(0.14)
DISTRIBUTIONS DECLARED PER SHARE$0.70
 $0.70
 $0.70
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED77,718,813
 68,029,977
 48,838,114
December 31, 2023December 31, 2022
ASSETS
Investments at fair value:
Control investments (cost: $43,159 and $31,120 as of December 31, 2023 and December 31, 2022, respectively)$53,644 $50,303 
Affiliate investments (cost: $231,378 and $241,565 as of December 31, 2023 and December 31, 2022, respectively)291,279 277,000 
Non‑Control/Non‑Affiliate investments (cost: $763,781 and $787,201 as of December 31, 2023 and December 31, 2022, respectively)747,972 740,840 
Total investments (cost: $1,038,318 and $1,059,886 as of December 31, 2023 and December 31, 2022, respectively)1,092,895 1,068,143 
Cash and cash equivalents30,786 21,312 
Interest and dividend receivable10,541 11,917 
Receivable for securities sold171 464 
Deferred financing costs (net of accumulated amortization of $4,168 and $2,413 as of December 31, 2023 and December 31, 2022, respectively)3,416 2,908 
Prepaids and other assets2,091 2,420 
Total assets$1,139,900 $1,107,164 
LIABILITIES
Credit Facilities$335,688 $321,688 
Series A Notes due 2026 (par: $150,000 as of both December 31, 2023 and December 31, 2022)149,155 148,856 
Accounts payable and other liabilities255 1,292 
Payable for securities purchased206 — 
Interest payable6,266 5,443 
Dividend payable14,019 12,816 
Management and incentive fees payable8,745 7,042 
Deferred tax liability, net3,259 362 
Total liabilities517,593 497,499 
Commitments and contingencies (Note J)
NET ASSETS
Common stock, $0.001 par value per share (450,000,000 shares authorized; 80,108,865 and 80,105,999 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively)80 80 
Additional paid‑in capital686,136 684,165 
Total overdistributed earnings(63,909)(74,580)
Total net assets622,307 609,665 
Total liabilities and net assets$1,139,900 $1,107,164 
NET ASSET VALUE PER SHARE$7.77 $7.61 
SeeThe accompanying notes to theare an integral part of these consolidated financial statements.

statements

62
HMS Income Fund, Inc.
MSC INCOME FUND, INC.

Consolidated Statements of Operations

(dollars in thousands, except shares and per share amounts)
Year Ended December 31,
202320222021
INVESTMENT INCOME:
Interest, fee and dividend income:
Control investments$3,101 $3,223 $2,810 
Affiliate investments29,805 24,057 18,244 
Non‑Control/Non‑Affiliate investments98,480 76,485 69,074 
Total investment income131,386 103,765 90,128 
EXPENSES:
Interest(36,458)(24,423)(14,469)
Base management fees(19,828)(19,831)(17,316)
Incentive fees(12,569)(2,130)(557)
Internal administrative services expenses(8,916)(5,147)(4,317)
General and administrative(4,254)(3,905)(4,427)
Total expenses before expense waivers(82,025)(55,436)(41,086)
Waiver of internal administrative services expenses8,308 4,540 4,317 
Total expenses, net of expense waivers(73,717)(50,896)(36,769)
NET INVESTMENT INCOME57,669 52,869 53,359 
NET REALIZED GAIN (LOSS):
Control investments2,223 — — 
Affiliate investments(7,188)(7,327)(2,673)
Non‑Control/Non‑Affiliate investments(29,045)3,391 2,175 
Realized loss on extinguishment of debt— — (2,430)
Total net realized loss(34,010)(3,936)(2,928)
NET UNREALIZED APPRECIATION (DEPRECIATION):
Control investments(1,289)1,503 2,001 
Affiliate investments25,116 15,689 10,237 
Non‑Control/Non‑Affiliate investments22,492 (18,894)12,857 
Total net unrealized appreciation (depreciation)46,319 (1,702)25,095 
INCOME TAXES:
Federal and state income, excise and other taxes(872)(1,281)(1,890)
Deferred taxes(2,897)(362)— 
Income tax provision(3,769)(1,643)(1,890)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS$66,209 $45,588 $73,636 
NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED$0.72 $0.66 $0.67 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE—BASIC AND DILUTED$0.82 $0.57 $0.92 
WEIGHTED-AVERAGE SHARES
OUTSTANDING—BASIC AND DILUTED		80,269,002 79,993,040 79,873,537 
The accompanying notes are an integral part of these consolidated financial statements
63
MSC INCOME FUND, INC.

Consolidated Statements of Changes in Net Assets

(dollars in thousands, except share and per share amounts) 

shares)
  For The Year Ended December 31,
  2017 2016 2015
Change in Net Assets from Operations:      
Net investment income $58,719
 $51,269
 $36,484
Net realized loss on investments (4,363) (22,891) (5,508)
Net change in unrealized appreciation (depreciation) on investments (1,730) 38,206
 (37,956)
Net increase (decrease) in net assets resulting from operations 52,626
 66,584
 (6,980)
Change in Net Assets from Stockholders’ Distributions:      
Distributions from net investment income (54,414) (47,761) (34,195)
Distributions from net realized gain on investments —
 —
 —
Net decrease in net assets resulting from stockholders’ distributions (54,414) (47,761) (34,195)
Change in Net Assets from Capital Share Transactions:      
Issuance of common stock, net of issuance costs 47,077
 73,491
 263,372
Reinvestment of stockholder distributions 27,641
 24,766
 16,937
Repurchase of common stock (22,974) (10,899) (2,955)
Offering costs —
 —
 (4,590)
Net increase in net assets resulting from capital share transactions 51,744
 87,358
 272,764
       
Total Increase in Net Assets 49,956
 106,181
 231,589
Net Assets at beginning of period 597,833
 491,652
 260,063
Net Assets at end of the period $647,789
 $597,833
 $491,652
       
NAV per share at end of the period $8.15
 $8.15
 $7.88
       
Common shares outstanding, beginning of period 73,382,971
 62,382,044
 30,967,120
Issuance of common shares 5,625,617
 9,271,585
 29,856,266
Issuance of common shares pursuant to distribution reinvestment plan 3,316,991
 3,115,762
 1,918,998
Repurchase of common shares (2,813,848) (1,386,420) (360,340)
Common shares outstanding, end of period 79,511,731
 73,382,971
 62,382,044
Common StockAdditional
Paid-In
Capital		Total
Overdistributed
Earnings		Total Net
Asset Value
Number of
Shares		Par
Value
Balances at December 31, 202079,608,304 $80 $682,028 $(102,484)$579,624 
Issuance of common stock89,705 — 674 — 674 
Dividend reinvestment1,461,714 1 11,159 — 11,160 
Common stock repurchased(1,333,118)(1)(10,064)— (10,065)
Net increase resulting from operations— — — 73,636 73,636 
Dividends to stockholders— — — (41,859)(41,859)
Reclassification for certain permanent book-to-tax differences— — (1,371)1,371 — 
Balances at December 31, 202179,826,605 $80 $682,426 $(69,336)$613,170 
Issuance of common stock94,697 — 750 — 750 
Dividend reinvestment2,259,611 2 17,748 — 17,750 
Common stock repurchased(2,074,914)(2)(15,984)— (15,986)
Net increase resulting from operations— — — 45,588 45,588 
Dividends to stockholders— — — (51,607)(51,607)
Reclassification for certain permanent book-to-tax differences— — (775)775 — 
Balances at December 31, 202280,105,999 $80 $684,165 $(74,580)$609,665 
Issuance of common stock1,080,185 1 8,499 — 8,500 
Dividend reinvestment2,345,246 2 18,415 — 18,417 
Common stock repurchased(3,422,565)(3)(24,424)— (24,427)
Net increase resulting from operations— — — 66,209 66,209 
Dividends to stockholders— — — (56,057)(56,057)
Reclassification for certain permanent book-to-tax differences— — (519)519 — 
Balances at December 31, 202380,108,865 $80 $686,136 $(63,909)$622,307 

SeeThe accompanying notes to theare an integral part of these consolidated financial statements.statements

64


Table of contents
HMS Income Fund, Inc.MSC INCOME FUND, INC.

Consolidated Statements of Cash Flows

(dollars in thousands)
 For The Year Ended December 31,
 2017 2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES 
  
  
Net increase (decrease) in net assets resulting from operations$52,626
 $66,584
 $(6,980)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash generated from (used in) operating activities: 
  
  
Principal repayments received, proceeds from sales of investments in portfolio companies525,018
 349,564
 176,066
Investments in portfolio companies(551,797) (464,882) (631,126)
Net change in unrealized depreciation (appreciation) on investments1,730
 (38,206) 37,956
Net realized loss on sale of portfolio investments4,363
 22,891
 5,508
Amortization of deferred financing costs1,327
 1,492
 1,161
Amortization of deferred offering costs1,861
 901
 —
Accretion of unearned income(15,127) (11,946) (4,378)
Net payment-in-kind interest accrual(1,255) (469) (1,223)
Changes in other assets and liabilities: 
  
  
Interest receivable(1,434) 723
 (3,599)
Prepaid and other assets(5,040) 103
 101
Due to affiliates(60) 24
 4,623
Base management fees payable628
 533
 2,441
Accounts payable and other liabilities295
 204
 302
Directors’ fees payable5
 (2) 6
Payable for unsettled trades(932) 932
 (6,249)
Net cash generated from (used in) operating activities12,208
 (71,554) (425,391)
      
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
Proceeds from issuance of common stock51,109
 80,611
 284,481
Redemption of common stock(22,974) (10,899) (2,955)
Payment of selling commissions and dealer manager fees(4,118) (7,033) (25,699)
Payment of offering costs(1,160) (1,603) (4,590)
Payment of stockholder distributions(26,356) (22,359) (15,301)
Repayments on credit facilities payable(480,276) (388,000) (176,664)
Proceeds from credit facilities payable497,276
 421,000
 373,800
Payment of deferred financing costs(3,637) (445) (3,548)
Net cash generated from financing activities9,864
 71,272
 429,524
      
Net increase (decrease) in cash and cash equivalents22,072
 (282) 4,133
      
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD23,719
 24,001
 19,868
      
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$45,791
 $23,719
 $24,001
Year Ended
December 31,
202320222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations$66,209 $45,588 $73,636 
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Investments in portfolio companies(236,404)(217,226)(546,882)
Proceeds from sales and repayments of debt investments in portfolio companies223,154 247,455 312,806 
Proceeds from sales and return of capital of equity investments in portfolio companies15,595 — — 
Net unrealized (appreciation) depreciation(46,319)1,702 (25,095)
Net realized loss on portfolio investments34,010 3,936 498 
Realized loss on extinguishment of debt— — 2,430 
Amortization of deferred financing costs2,053 1,463 1,277 
Amortization of deferred offering costs129 276 230 
Accretion of unearned income(7,833)(5,054)(5,139)
Payment-in-kind interest(5,023)(4,057)(5,361)
Cumulative dividends(172)(669)— 
Deferred tax provision2,897 362 — 
Changes in other assets and liabilities:
Interest and dividend receivable116 1,074 (4,688)
Prepaid and other assets329 (361)380 
Management and incentive fees payable1,703 1,853 1,137 
Interest payable823 2,350 2,807 
Accounts payable and other liabilities(1,037)(2,016)816 
Net cash provided by (used in) operating activities50,230 76,676 (191,148)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock8,500 750 674 
Redemption of common stock(24,427)(15,984)(10,065)
Payment of offering costs(129)(276)(230)
Dividends paid(36,438)(33,018)(18,725)
Proceeds from Credit Facilities150,000 115,000 489,688 
Repayments on Credit Facilities(136,000)(220,000)(364,816)
Proceeds from Series A Notes due 2026— 72,500 77,500 
Proceeds from Main Street Term Loan— — 60,000 
Repayments of Main Street Term Loan— — (60,000)
Payment of deferred financing costs(2,262)(149)(6,131)
Net cash provided by (used in) financing activities(40,756)(81,177)167,895 
Net increase (decrease) in cash and cash equivalents9,474 (4,501)(23,253)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD21,312 25,813 49,066 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$30,786 $21,312 $25,813 
Supplemental cash flow disclosures:
Interest paid$33,594 $20,610 $10,385 
Taxes paid$2,003 $2,469 $1,324 
Non-cash financing activities:
Dividends declared and unpaid$14,019 $12,816 $11,974 
Value of shares issued pursuant to the DRIP$18,417 $17,750 $11,160 
SeeThe accompanying notes to theare an integral part of these consolidated financial statements.


statements
65
HMS Income Fund, Inc.
Consolidated Schedule of Investments
As of December 31, 2017
(dollars in thousands)
Portfolio Company (1) (3)Business DescriptionType of Investment (2) (3)Index Rate (22)Principal (7)Cost (7)Fair Value (26)
       
Control Investments (6)
Copper Trail Energy Fund I, LP (9)(15)(16)Investment PartnershipLP Interests (Copper Trail Energy Fund I, LP) (Fully diluted 30.1%)—$—
$2,500
$2,500
GRT Rubber Technologies, LLC (8) (10) (13)Engineered Rubber Product ManufacturerLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity - December 19, 2019)1 month LIBOR5,715
5,657
5,715
  Member Units (2,896 shares) (16)——6,435
10,821
     12,092
16,536
HMS-ORIX SLF LLC (9) (15)Investment PartnershipMembership Interests (Fully diluted 60.00%) (16)——30,000
30,643
       
Subtotal Control Investments (6) (5% of total investments at fair value)  $44,592
$49,679
Affiliate Investments (4)
AFG Capital Group, LLC (10) (13)Provider of Rent-to-Own Financing Solutions and ServicesMember Units (46 shares) (16)—$—
$300
$897


Warrants (10 equivalent shares, Expiration - November 7, 2024)——
65
215
  
  365
1,112
Charps, LLC (10) (13)Pipeline Maintenance and Construction12.00% Secured Debt (Maturity - January 31, 2022)None4,600
4,497
4,500
  Preferred Member Units (400 units)——100
163
     4,597
4,663
Clad-Rex Steel, LLC (10) (13)Specialty Manufacturer of Vinyl-Clad MetalLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.86%, Secured Debt (Maturity - December 20, 2021) (8)1 month LIBOR3,320
3,264
3,320
  Member Units (179 units) (16)——
1,820
2,375
  10.00% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity - December 19, 2036)None296
293
293
  Member Units (Clad-Rex Steel RE Investor, LLC) (200 units)——
53
70
     5,430
6,058
Freeport First Lien Loan Fund III, LP (9) (15)Investment PartnershipLP Interests (Freeport First Lien Loan Fund III, LP) (Fully diluted 5.60%) (16)——
8,558
8,506
Gamber-Johnson Holdings, LLC (8) (10) (13)Manufacturer of Ruggedized Computer Mounting SystemsLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.36%, Secured Debt (Maturity - June 24, 2021)1 month LIBOR5,850
5,750
5,850
  Member Units (2,155 units) (16)——
3,711
5,843
     9,461
11,693
Guerdon Modular Holdings, Inc. (10) (13)Multi-Family and Commercial Modular Construction Company13.00% Secured Debt (Maturity - August 13, 2019)None2,677
2,644
2,660
  Common Stock (53,008 shares)——
746
—
  Class B Preferred Stock (101,250 shares)——
285
—
     3,675
2,660
Gulf Publishing Investor, LLC (10) (13)Energy Focused Media and Publishing12.50% Secured Debt (Maturity - April 29, 2021)None3,200
3,151
3,151
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.86%, Secured Debt (Maturity - September 30, 2020) (8)1 month LIBOR20
20
20
  Member Units (781 shares)——
920
1,210
     4,091
4,381
Harris Preston Fund Investments (15) (16)Investment PartnershipLP Interests (HPEP 3, LP) (Fully diluted 9.60%) (9)——
943
943
  LP Interests (2717 MH, LP) (Fully diluted 7.00%)——
536
536
     1,479
1,479
       
       
Hawk Ridge Systems, LLC (9) (10) (13)Value-Added Reseller of Engineering Design and Manufacturing Solutions11.00% Secured Debt (Maturity - December 2, 2021)None$3,575
$3,513
$3,574
  Preferred Member Units (56 units) (16)——
713
950
  Preferred Member Units (HRS Services, ULC) (56 units) (16)——
38
50
     4,264
4,574
HW Temps LLC (8) (10) (13)Temporary Staffing SolutionsLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.36%, Secured Debt (Maturity - July 2, 2020)1 month LIBOR2,494
2,454
2,454
  Preferred Member Units (800 shares) (16)——
986
985



 

3,440
3,439
Market Force Information, Inc. (8)(10)(13)Provider of Customer Experience Management ServicesLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.48%, Secured Debt (Maturity - July 28, 2022)3 month LIBOR5,840
5,732
5,732
  Member Units (170,000 units)——
3,675
3,675

    9,407
9,407
M.H. Corbin, Inc. (10) (13)Manufacturer and Distributor of Traffic Safety Products13.00% Secured Debt (Maturity - August 31, 2020)None3,150
3,130
3,130

 Preferred Member Units (1,000 units)——1,500
1,500



 

4,630
4,630
Mystic Logistics, Inc. (10) (13)Logistics and Distribution Services Provider for Large Volume Mailers12.00% Secured Debt (Maturity - August 15, 2019)None1,942
1,914
1,916
  Common Stock (1,468 shares) (16)——680
1,705



 

2,594
3,621
NuStep, LLC (10) (13)Designer, Manufacturer and Distributor of Fitness Equipment12.00% Secured Debt (Maturity - January 31, 2022)None5,150
5,047
5,048
  Preferred Member Units (102 units)——2,550
2,550
     7,597
7,598
SoftTouch Medical Holdings LLC (8) (10) (13)Home Provider of Pediatric Durable Medical EquipmentLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity - October 31, 2019)1 month LIBOR1,260
1,250
1,260


Member Units (785 units) (16)——
870
1,781



 

2,120
3,041
       
Subtotal Affiliate Investments (4) (7% of total investments at fair value)  $71,708
$76,862



 





Non-Control/Non-Affiliate Investments (5)
AAC Holding Corp. (8)Substance Abuse Treatment Service ProviderLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.13%, Secured Debt (Maturity - June 30, 2023)3 month LIBOR$11,751
$11,475
$11,810
Adams Publishing Group, LLC (8) (11)Local Newspaper OperatorLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity - November 3, 2020)3 month LIBOR10,341
10,123
10,147
ADS Tactical, Inc. (8) (11)Value-Added Logistics and Supply Chain Solutions ProviderLIBOR Plus 7.50% (Floor 0.75%), Current Coupon 9.19%, Secured Debt (Maturity - December 31, 2022)3 month LIBOR12,981
12,671
12,801
Aethon United BR, LP (8)(11)Oil & Gas Exploration & ProductionLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.16%, Secured Debt (Maturity - September 8, 2023) (14)1 month LIBOR3,438
3,388
3,388
Ahead, LLC (8) (11)IT Infrastructure Value Added ResellerLIBOR Plus 6.50%, Current Coupon 8.20%, Secured Debt (Maturity - November 2, 2020)3 month LIBOR7,374
7,233
7,420
Allflex Holdings III Inc. (8)Manufacturer of Livestock Identification ProductsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.36%, Secured Debt (Maturity - July 19, 2021) (14)3 month LIBOR13,964
14,054
14,075
American Scaffold Holdings, Inc. (8) (11)Marine Scaffolding Service ProviderLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.19%, Secured Debt (Maturity - March 31, 2022)3 month LIBOR7,031
6,948
6,996
       
       
American Teleconferencing Services, Ltd. (8)Provider of Audio Conferencing and Video Collaboration SolutionsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.90%, Secured Debt (Maturity - December 8, 2021)2 month LIBOR$9,532
$8,684
$9,407
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.85%, Secured Debt (Maturity - June 6, 2022) (14)3 month LIBOR5,571
5,335
5,260
     14,019
14,667
Apex Linen Service, Inc. (10) (13)Industrial Launderers16.00% Secured Debt (Maturity - October 30, 2022)None3,604
3,552
3,552
  LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.36%, Secured Debt (Maturity - October 30, 2022) (8)1 month LIBOR600
600
600



 

4,152
4,152
Arcus Hunting, LLC (8) (11)Manufacturer of Bowhunting and Archery Products and AccessoriesLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.34%, Secured Debt (Maturity - November 13, 2019)1 month LIBOR7,696
7,618
7,690
ATI Investment Sub, Inc. (8)Manufacturer of Solar Tracking SystemsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.82%, Secured Debt (Maturity - June 22, 2021)1 month LIBOR7,364
7,221
7,346
ATX Networks Corp. (8) (9)Provider of Radio Frequency Management EquipmentLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33%, Current Coupon plus PIK 8.33%, Secured Debt (Maturity - June 11, 2021)3 month LIBOR14,474
14,253
14,384
BarFly Ventures, LLC (11)Casual Restaurant Group12.00% Secured Debt (Maturity - August 31, 2020)None2,905
2,863
2,905
  Warrants (.410 equivalent units, Expiration - August 31, 2025)——
158
175
  Options (.731 equivalent units)——
133
309



 

3,154
3,389
BBB Tank Services, LLC (10) (13)Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market15.00% Secured Debt (Maturity - April 8, 2021)None1,000
987
969
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity - April 9, 2018) (8)1 month LIBOR200
200
200


Member Units (200,000 units)——
200
125



 

1,387
1,294
Berry Aviation, Inc. (11)Airline Charter Service OperatorCurrent Coupon 13.75%, Secured Debt (Maturity - January 30, 2020) (14)None1,407
1,395
1,407
  Common Stock (138 shares)——100
252
     1,495
1,659
BigName Commerce, LLC (8) (11)Provider of Envelopes and Complimentary Stationery ProductsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.59%, Secured Debt (Maturity - May 11, 2022)1 month LIBOR2,488
2,460
2,460
Binswanger Enterprises, LLC (8) (11)Glass Repair and Installation Service ProviderLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.49%, Secured Debt (Maturity - March 9, 2022)3 month LIBOR15,267
15,002
15,135


Member Units (1,050,000 Class A units)——1,050
1,000



 

16,052
16,135
Bluestem Brands, Inc. (8)Multi-Channel Retailer of General MerchandiseLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.07%, Secured Debt (Maturity - November 6, 2020)3 month LIBOR13,005
12,836
9,158
Boccella Precast Products, LLC (8) (10) (13)Manufacturer of Precast Hollow Core ConcreteLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.34%, Secured Debt (Maturity - June 30, 2022)1 month LIBOR4,100
4,005
4,100
  Member Units (540,000 units)——540
860
     4,545
4,960
Brightwood Capital Fund Investments (9) (15)Investment PartnershipLP Interests (Brightwood Capital Fund III, LP) (Fully diluted 0.52%) (16)——4,075
3,443
  LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 1.58%) (16)——2,037
2,037
     6,112
5,480
Brundage-Bone Concrete Pumping, Inc.Construction Services Provider10.38% Secured Debt (Maturity - September 1, 2023) (14)None12,000
12,074
12,720
Buca C, LLC (8) (10) (13)Casual Restaurant GroupLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.63%, Secured Debt (Maturity - June 30, 2020)1 month LIBOR$13,536
$13,386
$13,386
  Preferred Member Units (4 units, 6.00% cumulative) (16)——2,702
2,781
     16,088
16,167
Cadence Aerospace, LLC (8) (11)Aerospace and DefenseLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.91%, Secured Debt (Maturity - November 14, 2023)3 month LIBOR15,000
14,853
14,853
CAI Software, LLC (10) (13)Provider of Specialized Enterprise Resource Planning Software12.00% Secured Debt (Maturity - October 10, 2019)None1,021
1,005
1,021
  Member Units (16,339 units) (16)——163
807
     1,168
1,828
CapFusion Holding, LLC (9) (10) (13)Business Lender13.00% Secured Debt (Maturity - March 25, 2021) (18)None1,669
1,394
468
CDHA Management, LLC (8) (11)Dental ServicesLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.78%, Secured Debt (Maturity - December 5, 2021)3 month LIBOR5,365
5,270
5,365
Central Security Group, Inc. (8)Security Alarm Monitoring Service ProviderLIBOR Plus 5.63% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity - October 6, 2021)1 month LIBOR7,481
7,462
7,518
Cenveo CorporationProvider of Commercial Printing, Envelopes, Labels, Printed Office Products6.00% Secured Debt (Maturity - August 1, 2019)None15,000
13,706
10,650
Charlotte Russe, Inc. (8)Fast-Fashion Retailer to Young WomenLIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.89%, Secured Debt (Maturity - May 22, 2019)3 month LIBOR14,972
14,863
6,045
Clarius BIGS, LLC (11) (18)Prints & Advertising Film Financing15.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None2,140
1,882
62
  20.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None773
680
22
     2,562
84
Clickbooth.com, LLC (8) (11)Provider of Digital Advertising Performance Marketing SolutionsLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.01%, Secured Debt (Maturity - December 5, 2022)1 month LIBOR3,000
2,941
2,941
Construction Supply Investments, LLC (11)Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry ContractorsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity - June 30, 2023) (8)1 month LIBOR7,125
7,090
7,090


Member units (20,000 units)——
3,723
3,723
     10,813
10,813
ContextMedia Health, LLC (8)Provider of Healthcare Media ContentLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.13%, Secured Debt (Maturity - December 23, 2021)1 month LIBOR9,500
8,685
6,413
CTVSH, PLLC (8) (11) (13)Emergency Care and Specialty Service Animal HospitalLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.48%, Secured Debt (Maturity - August 3, 2022)1 month LIBOR2,963
2,907
2,907
Datacom, LLC (10) (13)Technology and Telecommunications Provider5.25% Current / 5.25% PIK, Current Coupon 10.50% Secured Debt (Maturity - May 30, 2019)None1,366
1,357
1,229
  8.00% Secured Debt (Maturity - May 30, 2018)None175
175
175


Class A Preferred Member Units (1,530 units, 15.00% cumulative) (16)——
131
81


Class B Preferred Member Units (717 units)——
670
—



 

2,333
1,485
Digital River, Inc. (8)Provider of Outsourced e-Commerce Solutions and ServicesLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.08%, Secured Debt (Maturity - February 12, 2021)3 month LIBOR8,946
8,898
8,969
Evergreen Skills Lux S.á r.l.
(d/b/a Skillsoft) (8) (9)
Technology-Based Performance Support SolutionsLIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.82%, Secured Debt (Maturity - April 28, 2022) (14)1 month LIBOR10,901
10,510
9,725
Extreme Reach, Inc. (8)Integrated TV and Video Advertising PlatformLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.59%, Secured Debt (Maturity - February 7, 2020)3 month LIBOR10,411
10,397
10,398
Felix Investments Holdings II, LLC (8) (11)Oil and Gas Exploration and ProductionLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.90%, Secured Debt (Maturity - August 9, 2022)3 month LIBOR$3,333
$3,267
$3,267
Flavors Holdings, Inc. (8)Global Provider of Flavoring and Sweetening Products and SolutionsLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.44%, Secured Debt (Maturity - April 3, 2020)3 month LIBOR12,407
11,853
11,507
GoWireless Holdings, Inc. (8) (12)Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.16%, Secured Debt (Maturity - December 22, 2024)3 month LIBOR15,000
14,850
14,888
GST Autoleather, Inc. (8)Automotive Leather ManufacturerPrime Plus 6.50% (Floor 2.00%), Current Coupon 11.00%, Secured Debt (Maturity - July 10, 2020)PRIME17,384
16,898
13,994
  Prime Plus 6.50% (Floor 2.25%), Current Coupon 11.00%, Secured Debt (Maturity - April 5, 2018)PRIME3,377
3,299
3,326
     20,197
17,320
Guitar Center, Inc.Musical Instruments Retailer6.50% Secured Debt (Maturity - April 15, 2019)None15,015
14,490
13,889
Hojeij Branded Foods, LLC (8) (11)Multi-Airport, Multi-Concept Restaurant OperatorLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.57%, Secured Debt (Maturity - July 20, 2022)1 month LIBOR12,107
12,000
12,107
Hoover Group, Inc. (8) (9) (11)Provider of Storage Tanks and Related Products to the Energy and Petrochemical MarketsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.70%, Secured Debt (Maturity - January 28, 2021)3 month LIBOR14,848
14,030
13,656
Hunter Defense Technologies, Inc. (8)Provider of Military and Commercial Shelters and SystemsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.35%, Secured Debt (Maturity - August 5, 2019)3 month LIBOR14,552
14,161
14,389
Hydrofarm Holdings, LLC (8) (11)Wholesaler of Horticultural ProductsLIBOR Plus 7.00%, Current Coupon 8.49%, Secured Debt (Maturity - May 12, 2022)1 month LIBOR6,666
6,546
6,657
iEnergizer Limited (8) (9)Provider of Business Outsourcing SolutionsLIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.57%, Secured Debt (Maturity - May 1, 2019)1 month LIBOR10,644
10,408
10,618
Implus Footcare, LLC (8) (11)Provider of Footwear and Other AccessoriesLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.44%, Secured Debt (Maturity - April 30, 2021)3 month LIBOR14,491
14,299
14,394
Industrial Services Acquisitions, LLC (11)Industrial Cleaning Services11.25% Current / 0.75% PIK, Current Coupon 12.00%, Unsecured Debt (Maturity - December 17, 2022) (17)None10,603
10,429
10,603
  Member Units (Industrial Services Investments, LLC) (2,100,000 units)——2,100
1,890
     12,529
12,493
Inn of the Mountain Gods Resort and CasinoHotel & Casino Owner & Operator9.25% Secured Debt (Maturity - November 30, 2020)None10,749
10,620
9,782
iPayment, Inc. (8)Provider of Merchant AcquisitionLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.62%, Secured Debt (Maturity - April 11, 2023)3 month LIBOR11,970
11,970
12,090
iQor US Inc. (8)Business Process Outsourcing Services ProviderLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.34%, Secured Debt (Maturity - April 1, 2021)3 month LIBOR7,678
7,338
7,649
IronGate Energy Services, LLC (18)Oil and Gas Services11.00% Secured Debt (Maturity - July 1, 2018) (18)None5,825
5,827
2,039
Jackmont Hospitality, Inc. (8) (11)Franchisee of Casual Dining RestaurantsLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.32%, Secured Debt (Maturity - May 26, 2021)1 month LIBOR8,665
8,642
8,665
Jacuzzi Brands Corp. (8)Manufacturer of Bath and Spa ProductsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity - June 28, 2023)3 month LIBOR5,925
5,812
5,969
Joerns Healthcare, LLC (8)Manufacturer and Distributor of Health Care Equipment & SuppliesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.48%, Secured Debt (Maturity - May 9, 2020)3 month LIBOR11,119
10,948
10,359
Kellermeyer Bergensons Services, LLC (8)Outsourced Janitorial Services to Retail/Grocery CustomersLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.88%, Secured Debt (Maturity - April 29, 2022) (14)3 month LIBOR14,700
14,618
14,241
Keypoint Government Solutions, Inc. (8) (11)Provider of Pre-Employment Screening ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.35%, Secured Debt (Maturity - April 18, 2024)3 month LIBOR12,031
11,921
12,031
LaMi Products, LLC (8) (11)General Merchandise DistributionLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.05%, Secured Debt (Maturity -September 16, 2020)3 month LIBOR11,110
10,988
11,085
Larchmont Resources, LLC (8)Oil & Gas Exploration & ProductionLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.53%, Secured Debt (Maturity - August 7, 2020)3 month LIBOR$4,118
$4,118
$4,076


Member units (Larchmont Intermediate Holdco, LLC) (4,806 units)——
601
1,658



 

4,719
5,734
LJ Host Merger Sub, Inc. (8)Managed Services and Hosting ProviderLIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.44%, Secured Debt (Maturity - December 13, 2019)3 month LIBOR16,137
15,744
15,714


LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.44%, Secured Debt (Maturity - December 13, 2018)3 month LIBOR2,433
2,358
2,293
     18,102
18,007
Logix Acquisition Company, LLC (8) (11)Competitive Local Exchange CarrierLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.28%, Secured Debt (Maturity - August 9, 2024) (23)1 month LIBOR9,730
9,632
9,839
LSF9 Atlantis Holdings, LLC (8)Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.36%, Secured Debt (Maturity - May 1, 2023)1 month LIBOR13,825
13,722
13,897
Lulu’s Fashion Lounge, LLC (8)(11)Fast Fashion E-Commerce RetailerLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.57%, Secured Debt (Maturity - August 28, 2022)1 month LIBOR6,690
6,496
6,766
Meisler Operating, LLC (10) (13)Provider of Short Term Trailer and Container RentalLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.84%, Secured Debt (Maturity - June 7, 2022) (8)3 month LIBOR4,200
4,095
4,104
  Member Units (Milton Meisler Holdings, LLC) (8,000 units)——
800
848
     4,895
4,952
MHVC Acquisition Corp. (8)Provider of Differentiated Information Solutions, Systems Engineering and AnalyticsLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.95%, Secured Debt (Maturity - April 29, 2024)1 month LIBOR10,448
10,399
10,578
Minute Key, Inc. (10) (13)Operator of Automated Key Duplication KioskWarrants (359,352 equivalent units, Expiration - May 20, 2025)——
70
293
NBG Acquisition, Inc. (8)Wholesaler of Home Decor ProductsLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity - April 26, 2024)1 month LIBOR4,402
4,336
4,452
New Media Holdings II LLC (8) (9)Local Newspaper OperatorLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity - July 14, 2022)1 month LIBOR17,033
16,762
17,176
NNE Issuer, LLC (8) (11)Oil & Gas Exploration & ProductionLIBOR Plus 8.00%, Current Coupon 9.49%, Secured Debt (Maturity - March 2, 2022)3 month LIBOR11,958
11,851
11,854
North American Lifting Holdings, Inc. (8)Crane Service ProviderLIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.19%, Secured Debt (Maturity - November 27, 2020)3 month LIBOR6,310
5,666
5,912
Novetta Solutions, LLC (8)Provider of Advanced Analytics Solutions for Defense AgenciesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.70%, Secured Debt (Maturity - October 17, 2022)3 month LIBOR9,625
9,382
9,364
NTM Acquisition Corp. (8)Provider of B2B Travel Information ContentLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.94%, Secured Debt (Maturity - June 7, 2022)3 month LIBOR10,908
10,797
10,853
Paris Presents, Inc. (8)Branded Cosmetic and Bath AccessoriesLIBOR Plus 8.75% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity - December 31, 2021) (14)1 month LIBOR10,000
9,899
9,950
Parq Holdings, LP (8) (9)Hotel and Casino OperatorLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.19%, Secured Debt (Maturity - December 17, 2020)3 month LIBOR12,469
12,317
12,547
Permian Holdco 2, Inc.Storage Tank Manufacturer14.00% PIK Unsecured Debt (Maturity - October 15, 2021) (17)None765
765
765


Series A Preferred Shares (Permian Holdco 1, Inc.) (386,255 units) (12.00% Cumulative) (16)——
1,997
2,449
  Common Shares (Permian Holdco 1, Inc.) (386,255 units)——
—
350
     2,762
3,564
Permian Holdings, Inc.Storage Tank Manufacturer10.50% Secured Debt (Maturity - January 15, 2018)None1,000
968
290
Pernix Therapeutics Holdings, Inc. (11)Pharmaceutical Royalty - Anti-Migraine12.00% Secured Debt (Maturity - August 1, 2020)None2,737
2,717
1,725
PPC/Shift, LLC (8) (11)Provider of Digital Solutions to Automotive IndustryLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.69%, Secured Debt (Maturity - December 22, 2021)3 month LIBOR$6,825
$6,704
$6,825
Prowler Acquisition Corporation (8)Specialty Distributor to the Energy SectorLIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.34%, Secured Debt (Maturity - January 28, 2020)3 month LIBOR12,412
11,199
11,854
Renaissance Learning, Inc. (8)Technology-based K-12 Learning SolutionsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.69%, Secured Debt (Maturity - April 11, 2022) (14)3 month LIBOR12,695
12,359
12,767
Resolute Industrial, LLC (8) (11)HVAC Equipment Rental and RemanufacturingLIBOR Plus 7.62% (Floor 1.00%), Current Coupon 8.95%, Secured Debt (Maturity - July 26, 2022) (24)3 month LIBOR17,086
16,679
16,774
  Common Stock (601 units)——750
750
     17,429
17,524
RGL Reservoir Operations, Inc. (9) (11)Oil & Gas Equipment & Services1.00% Current / 9.00% PIK Secured Debt (Maturity - December 23, 2024)None721
407
407
RM Bidder, LLC (11)Full-scale Film and Television Production and DistributionCommon Stock (1,854 units)——31
13
  Series A Warrants (124,915 equivalent units, Expiration - October 20, 2025)——284
—
  Series B Warrants (93,686 equivalent units, Expiration - October 20, 2025)———
—
     315
13
Salient Partners, LP (8)Provider of Asset Management ServicesLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.85%, Secured Debt (Maturity - June 9, 2021)3 month LIBOR11,042
10,748
10,711
Smart Modular Technologies, Inc. (8) (9) (11)Provider of Specialty Memory SolutionsLIBOR Plus 6.25%, (Floor 1.00%), Current Coupon 7.66%, Secured Debt (Maturity - August 9, 2022)3 month LIBOR14,625
14,351
14,552
Sorenson Communications, Inc.Manufacturer of Communication Products for Hearing Impaired9.00% Secured Debt (Maturity - October 31, 2020) (14)None6,616
6,457
6,599
  LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.00%, Secured Debt (Maturity - April 30, 2020) (8)3 month LIBOR2,947
2,932
2,971
     9,389
9,570
Strike, LLC (8)Pipeline Construction and Maintenance ServicesLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - November 30, 2022)3 month LIBOR9,500
9,251
9,643
  LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.45%, Secured Debt (Maturity - May 30, 2019)3 month LIBOR2,500
2,480
2,513
     11,731
12,156
Synagro Infrastructure Company, Inc. (8)Waste Management ServicesLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.19%, Secured Debt (Maturity - August 22, 2020)3 month LIBOR6,411
6,235
6,023
TE Holdings, LLCOil & Gas Exploration & ProductionCommon Units (72,785 units)——728
118
Teleguam Holdings, LLC (8)Cable and Telecom Services ProviderLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.07%, Secured Debt (Maturity - April 12, 2024) (14)1 month LIBOR7,750
7,602
7,808
TMC Merger Sub Corp (8)Refractory & Maintenance Services ProviderLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.88%, Secured Debt (Maturity - October 31, 2022) (25)1 month LIBOR19,140
18,993
19,237
TOMS Shoes, LLC (8)Global Designer, Distributor, and Retailer of Casual FootwearLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.98%, Secured Debt (Maturity - October 30, 2020)3 month LIBOR4,863
4,604
2,893
Turning Point Brands, Inc. (8) (9) (11)Marketer/Distributor of Tobacco ProductsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.61%, Secured Debt (Maturity - May 17, 2022) (24)3 month LIBOR8,436
8,364
8,605
TVG-I-E CMN Acquisition, LLC (8) (11)Organic Lead Generation for Online Postsecondary SchoolsLIBOR Plus 6.00%, (Floor 1.00%), Current Coupon 7.56%, Secured Debt (Maturity - November 3, 2021)1 month LIBOR8,170
8,031
8,170
U.S. Telepacific Corp. (8)Provider of Communications and Managed ServicesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.69%, Secured Debt (Maturity - May 2, 2023)3 month LIBOR16,421
16,027
15,754
USJ-IMECO Holding Company, LLC (8)Marine Interior Design and InstallationLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity - April 16, 2020)3 month LIBOR8,243
8,224
8,202
Valley Healthcare Group, LLC (8) (10) (13)Provider of Durable Medical EquipmentLIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.86%, Secured Debt (Maturity - December 29, 2020)1 month LIBOR$2,942
$2,901
$2,901
  Preferred Member Units (Valley Healthcare Holding, LLC) (400 units)——
400
400
     3,301
3,301
VIP Cinema Holdings, Inc. (8)Supplier of Luxury Seating to the Cinema IndustryLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity - March 1, 2023)3 month LIBOR9,625
9,582
9,721
Vistar Media, Inc. (8) (11)Operator of Digital Out-of-Home Advertising PlatformLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.69%, Secured Debt (Maturity - February 16, 2022)3 month LIBOR3,319
3,046
3,102
  Warrants (70,207 equivalent units, Expiration - February 17, 2027)——331
500
     3,377
3,602
Volusion, LLC (10) (13)Provider of Online Software-as-a-Service eCommerce Solutions11.50% Secured Debt (Maturity - January 24, 2020)None7,172
6,453
6,453
  Preferred Member Units (2,090,001 units)——6,000
6,000
  Warrants (784,866.80 equivalent units, Expiration - January 26, 2025)——1,104
891
     13,557
13,344
Wellnext, LLC (8) (11)Manufacturer of Supplements and VitaminsLIBOR Plus 10.10% (Floor 1.00%), Current Coupon 11.67%, Secured Debt (Maturity - July 21, 2022) (23)1 month LIBOR9,930
9,856
9,930
Wireless Vision Holdings, LLC (8) (11)Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 8.91% (Floor 1.00%), Current Coupon 10.27%, Secured Debt (Maturity - September 29, 2022) (23)1 month LIBOR12,899
12,574
12,574
Wirepath, LLC (8)E-Commerce Provider Into Connected Home MarketLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.87%, Secured Debt (Maturity - August 5, 2024)2 month LIBOR11,471
11,416
11,629
       
Subtotal Non-Control/Non-Affiliate Investments (5) (88% of total portfolio investments at fair value)  $948,029
$922,898
       
Total Portfolio Investments    $1,064,329
$1,049,439
       
Short Term Investments (20)      
Fidelity Institutional Money Market Funds (21)—Prime Money Market Portfolio, Class III Shares——$11,335
$11,335
US Bank Money Market Account (21)————18,613
18,613
       
Total Short Term Investments    $29,948
$29,948
MSC INCOME FUND, INC.
Consolidated Schedule of Investments
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Control Investments (5)
Copper Trail Fund Investments(12) (13)Investment Partnership
LP Interests (CTMH, LP) (8) (24)7/17/201738.8%$693 $568 
GRT Rubber Technologies LLCManufacturer of Engineered Rubber Products
Secured Debt12/21/201811.48%SF+6.00%10/29/20261,182 1,173 1,182 
Secured Debt12/19/201413.48%SF+8.00%10/29/202619,944 19,803 19,944 
Member Units 12/19/20142,8966,435 21,890 
27,411 43,016 
Harris Preston Fund Investments(12) (13)Investment Partnership
LP Interests (2717 MH, L.P.) (8) (24)10/1/201749.3%3,345 6,050 
Volusion, LLCProvider of Online Software-as-a-Service eCommerce Solutions
Secured Debt3/31/202310.00%3/31/2025900 900 900 
Preferred Member Units3/31/20232,184,6833,706 3,110 
Preferred Member Units3/31/202361,077— — 
Preferred Member Units1/26/20152,090,0016,000 — 
Common Stock3/31/2023772,6201,104 — 
11,710 4,010 
Subtotal Control Investments (8.6% of net assets at fair value)$43,159 $53,644 
Affiliate Investments (6)
Analytical Systems Keco Holdings, LLCManufacturer of Liquid and Gas Analyzers
Secured Debt(9)8/16/201915.38%SF+10.00%8/16/2024$55 $54 $54 
Secured Debt(9)8/16/201915.38%SF+10.00%8/16/20241,031 1,020 1,020 
Preferred Member Units5/20/2021607607 1,210 
Preferred Member Units8/16/201980014.13%800 — 
Warrants(27)8/16/20191058/16/202979 — 
2,560 2,284 
Barfly Ventures, LLC(10)Casual Restaurant Group
Member Units10/26/202012528 1,380 
Batjer TopCo, LLCHVAC Mechanical Contractor
Secured Debt(37)3/7/20223/7/2027— (1)— 
Secured Debt3/7/202210.00%3/7/202730 30 30 
Secured Debt3/7/202210.00%3/7/20271,175 1,160 1,175 
Preferred Stock(8)3/7/2022453455 680 
1,644 1,885 
Brewer Crane Holdings, LLCProvider of Crane Rental and Operating Services
Secured Debt(9)1/9/201815.46%L+10.00%1/9/20251,375 1,375 1,374 
Preferred Member Units(8)1/9/20187371,070 1,400 
2,445 2,774 
66
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Centre Technologies Holdings, LLCProvider of IT Hardware Services and Software Solutions
Secured Debt (9) (37)1/4/2019SF+9.00%1/4/2026— — — 
Secured Debt(9)1/4/201914.48%SF+9.00%1/4/20264,394 4,364 4,394 
Preferred Member Units1/4/20193,3271,531 2,760 
5,895 7,154 
Chamberlin Holding LLCRoofing and Waterproofing Specialty Contractor
Secured Debt (9) (37)2/26/2018SF+6.00%2/26/2026— (49)— 
Secured Debt(9)2/26/201813.49%SF+8.00%2/26/20263,905 3,903 3,905 
Member Units(8)2/26/20181,0872,860 7,330 
Member Units (8) (23)11/2/2018261,786443 715 
7,157 11,950 
Charps, LLCPipeline Maintenance and Construction
Preferred Member Units(8)2/3/2017457491 3,920 
Clad-Rex Steel, LLCSpecialty Manufacturer of Vinyl-Clad Metal
Secured Debt 12/20/201611.50%  1/15/20242,140 2,140 2,103 
Secured Debt12/20/201610.00%12/20/2036253 251 251 
Member Units(8)12/20/20161791,820 1,300 
Member Units(23)12/20/2016200127 282 
4,338 3,936 
Cody Pools, Inc.Designer of Residential and Commercial Pools
Secured Debt(37)3/6/2020   12/17/2026— (2)— 
Secured Debt 3/6/202012.50%  12/17/20267,111 7,089 7,111 
Preferred Member Units (8) (23)3/6/20201472,079 18,120 
9,166 25,231 
Colonial Electric Company LLCProvider of Electrical Contracting Services
Secured Debt(37)3/31/20213/31/2026— — — 
Secured Debt3/31/202112.00%3/31/20265,513 5,448 5,407 
Preferred Member Units6/27/2023240240 600 
Preferred Member Units 3/31/20214,3201,920 1,920 
7,608 7,927 
Compass Systems & Sales, LLCDesigner of End-to-End Material Handling Solutions
Secured Debt(37)11/22/202311/22/2028— — — 
Secured Debt11/22/202313.50%11/22/20284,300 4,175 4,175 
Preferred Equity11/22/20231,8631,863 1,863 
6,038 6,038 
Datacom, LLCTechnology and Telecommunications Provider
Secured Debt3/1/20227.50%12/31/202550 49 49 
Secured Debt3/31/202110.00%12/31/2025928 887 844 
Preferred Member Units 3/31/20211,000290 10 
1,226 903 
67
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Digital Products Holdings LLCDesigner and Distributor of Consumer Electronics
Secured Debt(9)4/1/201815.38%SF+10.00%4/27/20263,718 3,689 3,673 
Preferred Member Units(8)4/1/20189642,375 2,459 
6,064 6,132 
Direct Marketing Solutions, Inc.Provider of Omni-Channel Direct Marketing Services
Secured Debt 2/13/201814.00%  2/13/2026217 213 217 
Secured Debt 12/27/202214.00%  2/13/20265,002 4,974 5,002 
Preferred Stock(8)2/13/20182,1002,100 5,180 
7,287 10,399 
Flame King Holdings, LLCPropane Tank and Accessories Distributor
Preferred Equity(8)10/29/20212,3402,600 6,970 
Freeport Financial Funds(12) (13)Investment Partnership
LP Interests (Freeport First Lien Loan Fund III LP) (8) (24)7/31/20156.0%4,160 3,705 
Gamber-Johnson Holdings, LLCManufacturer of Ruggedized Computer Mounting Systems
Secured Debt (9) (36) (37)6/24/2016SF+7.50%1/1/2028— — — 
Secured Debt (9) (36)12/15/202210.50%SF+7.50%1/1/202813,520 13,336 13,520 
Member Units(8)6/24/20162,2614,423 24,180 
17,759 37,700 
GFG Group, LLCGrower and Distributor of a Variety of Plants and Products to Other Wholesalers, Retailers and Garden Centers
Secured Debt3/31/20218.00%3/31/20262,336 2,304 2,336 
Preferred Member Units(8)3/31/2021561,225 2,870 
3,529 5,206 
Gulf Publishing Holdings, LLCEnergy Industry Focused Media and Publishing
Secured Debt (9) (37)9/29/2017SF+9.50%7/1/2027— — — 
Secured Debt7/1/202212.50%7/1/2027600 600 571 
Preferred Equity7/1/202215,9301,400 620 
Member Units4/29/2016920920 — 
2,920 1,191 
Harris Preston Fund Investments(12) (13)Investment Partnership
LP Interests (HPEP 3, L.P.)(24)8/9/20178.2%2,296 4,225 
IG Investor, LLCMilitary and Other Tactical Gear
Secured Debt(37)6/21/20236/21/2028— (27)(27)
Secured Debt6/21/202313.00%6/21/20289,316 9,069 9,069 
Common Equity6/21/20233,6003,600 3,600 
12,642 12,642 
68
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Independent Pet Partners Intermediate Holdings, LLC(10)Omnichannel Retailer of Specialty Pet Products
Common Equity 4/7/20236,436,566   6,540 6,320 
        
Integral Energy Services(10)Nuclear Power Staffing Services
Secured Debt(9)8/20/202113.16%SF+7.50%8/20/202616,925 16,737 16,232 
Preferred Equity12/7/20233,72510.00%10.00%265 350 
Common Stock8/20/202111,6471,584 190 
18,586 16,772 
Kickhaefer Manufacturing Company, LLCPrecision Metal Parts Manufacturing
Secured Debt10/31/201812.00%10/31/20264,950 4,933 4,933 
Secured Debt10/31/20189.00%10/31/2048960 951 951 
Preferred Equity10/31/20181453,060 2,420 
Member Units(23)10/31/2018200248 683 
9,192 8,987 
MH Corbin Holding LLCManufacturer and Distributor of Traffic Safety Products
Secured Debt(17)8/31/201513.00%12/31/20221,350 1,350 1,256 
Preferred Member Units3/15/201916,5001,100 80 
Preferred Member Units9/1/20151,0001,500 — 
3,950 1,336 
Mystic Logistics Holdings, LLCLogistics and Distribution Services Provider for Large Volume Mailers
Secured Debt(37)8/18/20141/31/2024— — — 
Secured Debt8/18/201410.00%1/31/20241,436 1,436 1,436 
Common Stock(8)8/18/20141,468680 6,598 
2,116 8,034 
NexRev LLCProvider of Energy Efficiency Products & Services
Secured Debt(37)2/28/2018 2/28/2025— — — 
Secured Debt2/28/201810.00%2/28/20252,453 2,435 2,435 
Preferred Member Units(8)2/28/201825,786,0462,053 1,590 
4,488 4,025 
NuStep, LLCDesigner, Manufacturer and Distributor of Fitness Equipment
Secured Debt(9)1/31/201711.98%SF+6.50%1/31/2025900 899 899 
Secured Debt1/31/201712.00%1/31/20254,610 4,606 4,606 
Preferred Member Units11/2/2022515515 1,290 
Preferred Member Units1/31/20171022,550 2,310 
8,570 9,105 
Oneliance, LLCConstruction Cleaning Company
Secured Debt(9)8/6/202116.48%SF+11.00%8/6/20261,360 1,346 1,339 
Preferred Stock8/6/2021282282 282 
1,628 1,621 
Orttech Holdings, LLCDistributor of Industrial Clutches, Brakes and Other Components
Secured Debt (9) (37)7/30/2021SF+11.00%7/31/2026— (2)— 
69
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt(9)7/30/202116.48%SF+11.00%7/31/20265,510 5,452 5,510 
Preferred Stock (8) (23)7/30/20212,5002,500 4,260 
7,950 9,770 
Pinnacle TopCo, LLCManufacturer and Distributor of Garbage Can Liners, Poly Bags, Produce Bags, and Other Similar Products
Secured Debt12/21/20238.00%12/31/2028115 105 105 
Secured Debt12/21/202313.00%12/31/20287,660 7,472 7,472 
Preferred Equity12/21/20231103,135 3,135 
10,712 10,712 
Robbins Bros. Jewelry, Inc.Bridal Jewelry Retailer
Secured Debt(37)12/15/202112/15/2026— (6)(6)
Secured Debt 12/15/202112.50%12/15/20263,790 3,745 3,421 
Preferred Equity12/15/20211,2301,230 — 
4,969 3,415 
SI East, LLCRigid Industrial Packaging Manufacturing
Secured Debt8/31/201811.25%6/16/2028375 370 375 
Secured Debt6/16/202312.47%6/16/202818,179 18,019 18,179 
Preferred Member Units(8)8/31/201855508 6,390 
18,897 24,944 
Student Resource Center, LLC(10)Higher Education Services
Secured Debt(14)12/31/20228.50%  8.50%12/31/20275,918 5,426 3,543 
Preferred Equity12/31/20226,564,055— — 
5,426 3,543 
Tedder Industries, LLCManufacturer of Firearm Holsters and Accessories
Secured Debt(17)8/31/201812.00%8/31/2023460 460 432 
Secured Debt(17)8/31/201812.00%8/31/20233,800 3,800 3,565 
Preferred Member Units8/28/20231,651165 — 
Preferred Member Units2/1/20231,411141 — 
Preferred Member Units8/31/20181362,311 — 
6,877 3,997 
Trantech Radiator Topco, LLCTransformer Cooling Products and Services
Secured Debt(37)5/31/20195/31/2024— (1)— 
Secured Debt5/31/201912.00%5/31/20241,980 1,975 1,980 
Common Stock(8)5/31/20191541,164 3,180 
3,138 5,160 
VVS Holdco LLCOmnichannel Retailer of Animal Health Products
Secured Debt (9) (17) (37)12/1/2021 SF+6.00%12/1/2023— — — 
Secured Debt 12/1/202111.50%12/1/20267,050 6,926 6,926 
Preferred Equity (8) (23)12/1/20213,0603,060 3,060 
9,986 9,986 
Subtotal Affiliate Investments (46.8% of net assets at fair value)$231,378 $291,279 
Non-Control Investments (7)
AAC Holdings, Inc.(11)Substance Abuse Treatment Service Provider
70
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt1/31/202318.00%18.00%6/25/2025$151 $149 $149 
Secured Debt12/11/202018.00%18.00%6/25/20255,014 4,888 4,958 
Common Stock12/11/2020593,9273,148 — 
Warrants(27)12/11/2020197,71712/11/2025— — 
8,185 5,107 
AB Centers Acquisition Corporation(10)Applied Behavior Analysis Therapy Provider
Secured Debt (9) (37)9/6/2022P+5.00%9/6/2028— (20)— 
Secured Debt(9)9/6/202211.43%SF+6.00%9/6/20281,081 1,066 1,081 
Secured Debt(9)9/6/202211.43%SF+6.00%9/6/20282,304 2,219 2,304 
Secured Debt(9)6/21/202311.43%SF+6.00%9/6/2028772 743 772 
4,008 4,157 
Acumera, Inc.(10)Managed Security Service Provider
Secured Debt (9) (37)6/7/2023 SF+7.50%6/7/2028— (8)(8)
Secured Debt(9)6/7/202312.98%SF+7.50%6/7/202811,922 11,825 11,922 
Warrants(40)6/7/202314,9535/19/2028— 90 
11,817 12,004 
Adams Publishing Group, LLC(10)Local Newspaper Operator
Secured Debt (9) (36)3/11/202211.00%SF+7.00%1.00%3/11/2027936 936 917 
Secured Debt (9) (36)3/11/202211.00%SF+7.00%1.00%3/11/20272,531 2,527 2,481 
3,463 3,398 
ADS Tactical, Inc.(11)Value-Added Logistics and Supply Chain Provider to the Defense Industry
Secured Debt(9)3/29/202111.22%SF+5.75%3/19/20264,250 4,210 4,214 
AMEREQUIP LLC.(10)Full Services Provider Including Design, Engineering and Manufacturing of Commercial and Agricultural Equipment
Secured Debt (9) (37)8/31/2022SF+7.40%8/31/2027— — — 
Secured Debt(9)8/31/202212.76%SF+7.40%8/31/20271,538 1,538 1,538 
Common Stock(8)8/31/20221183 100 
1,621 1,638 
American Health Staffing Group, Inc.(10)Healthcare Temporary Staffing
Secured Debt (9) (37)11/19/2021P+5.00%11/19/2026— (10)(10)
Secured Debt(9)11/19/202113.50%P+5.00%11/19/20268,188 8,140 8,188 
8,130 8,178 
American Nuts, LLC(10)Roaster, Mixer and Packager of Bulk Nuts and Seeds
Secured Debt(9)3/11/202215.29%SF+9.75%15.29%4/10/20264,833 4,812 4,102 
Secured Debt(9)3/11/202215.29%SF+9.75%15.29%4/10/2026— — — 
Secured Debt (9) (14)3/11/202217.29%SF+11.75%17.29%4/10/20264,270 4,244 2,522 
Secured Debt (9) (14)3/11/202217.29%SF+11.75%17.29%4/10/2026— — — 
9,056 6,624 
American Teleconferencing Services, Ltd.(11)Provider of Audio Conferencing and Video Collaboration Solutions
Secured Debt (14) (17)9/17/2021   4/7/20232,425 2,375 109 
71
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt (14) (17)5/19/2016   6/8/202311,693 11,451 526 
13,826 635 
ArborWorks, LLC(10)Vegetation Management Services
Secured Debt11/6/202315.00%15.00%11/6/20281,007 1,007 1,007 
Secured Debt(9)11/6/202312.04%SF+6.50%12.04%11/6/20283,765 3,765 3,765 
Preferred Equity11/6/202317,2657,468 7,468 
Preferred Equity11/6/202317,265— — 
Common Equity11/9/20212,070124 — 
12,364 12,240 
Archer Systems, LLC(10)Mass Tort Settlement Administration Solutions Provider
Common Stock8/11/202262,40262 100 
ATS Operating, LLC(10)For-Profit Thrift Retailer
Secured Debt(9)1/18/202212.16%SF+6.50%1/18/202750 50 50 
Secured Debt(9)1/18/202211.16%SF+5.50%1/18/2027925 911 925 
Secured Debt(9)1/18/202213.16%SF+7.50%1/18/2027925 911 925 
Common Stock1/18/2022100,000100 90 
1,972 1,990 
AVEX Aviation Holdings, LLC(10)Specialty Aircraft Dealer & MRO Provider
Secured Debt (9) (37)12/23/2022 SF+7.25%12/23/2027— (17)(5)
Secured Debt(9)12/23/202212.76%SF+7.25%12/23/20273,417 3,321 3,344 
Common Equity(8)12/15/2021137134 124 
3,438 3,463 
Berry Aviation, Inc.(10)Charter Airline Services
Preferred Member Units(23)11/12/2019122,416  — 200 
Preferred Member Units (8) (23)7/6/20181,548,387  — 2,560 
— 2,760 
Bettercloud, Inc.(10)SaaS Provider of Workflow Management and Business Application Solutions
Secured Debt (9) (37)6/30/2022SF+7.25% 6/30/2028— (18)(18)
Secured Debt(9)6/30/202212.64%SF+7.25%6.25%6/30/20288,535 8,419 7,998 
8,401 7,980 
Binswanger Enterprises, LLC(10)Glass Repair and Installation Service Provider
Member Units3/10/20171,050,0001,050 120 
Bluestem Brands, Inc.(11)Multi-Channel Retailer of General Merchandise
Secured Debt(9)10/19/202216.00%P+7.50%15.00%8/28/20252,035 2,035 1,907 
Secured Debt(9)8/28/202013.96%SF+8.50%12.96%8/28/20253,941 3,305 3,695 
Common Stock 10/1/2020700,446— 533 
Warrants(27)10/19/2022175,11010/19/20321,111 129 
6,451 6,264 
Boccella Precast Products LLCManufacturer of Precast Hollow Core Concrete
Secured Debt9/23/202110.00%2/28/202780 80 80 
72
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Member Units 6/30/2017540,000564 498 
644 578 
Bond Brand Loyalty ULC(10) (13) (21)Provider of Loyalty Marketing Services
Secured Debt (9) (37)5/1/2023SF+7.00%5/1/2028— (16)(16)
Secured Debt(9)5/1/202311.54%SF+6.00%5/1/20284,040 3,970 4,040 
Secured Debt(9)5/1/202313.54%SF+8.00%5/1/20284,040 3,970 4,040 
Preferred Equity5/1/2023360360 310 
Common Equity5/1/2023360— — 
8,284 8,374 
Brightwood Capital Fund Investments(12) (13)Investment Partnership
LP Interests (Brightwood Capital Fund III, LP)(24)7/21/20140.5%2,270 1,360 
LP Interests (Brightwood Capital Fund IV, LP) (8) (24)10/26/20161.2%8,737 8,716 
11,007 10,076 
Buca C, LLCCasual Restaurant Group
Secured Debt(17)6/30/201512.00%8/31/202311,490 11,490 8,218 
Preferred Member Units 6/30/201546.00%6.00%3,040 — 
14,530 8,218 
Burning Glass Intermediate Holding Company, Inc.(10)Provider of Skills-Based Labor Market Analytics
Secured Debt(9)6/14/202110.46%SF+5.00%6/10/2026310 296 310 
Secured Debt(9)6/14/202110.46%SF+5.00%6/10/202813,121 12,970 13,121 
13,266 13,431 
CAI Software LLCProvider of Specialized Enterprise Resource Planning Software
Preferred Equity 12/13/2021379,338379 379 
Preferred Equity12/13/2021126,446— — 
379 379 
Career Team Holdings, LLCProvider of Workforce Training and Career Development Services
Secured Debt(9)12/17/202111.38%SF+6.00%12/17/2026100 96 96 
Secured Debt12/17/202113.00%12/17/20262,225 2,185 2,185 
Common Stock12/17/202150,000500 500 
2,781 2,781 
CaseWorthy, Inc.(10)SaaS Provider of Case Management Solutions
Secured Debt (9) (37)5/18/2022SF+6.00%5/18/2027— (3)(3)
Secured Debt(9)5/18/202211.61%SF+6.00%5/18/20272,581 2,561 2,581 
Secured Debt(9)5/18/202211.61%SF+6.00%5/18/20271,985 1,971 1,985 
Common Equity12/30/202280,00080 80 
4,609 4,643 
Channel Partners Intermediateco, LLC(10)Outsourced Consumer Services Provider
Secured Debt (9) (44)2/7/202212.60%SF+7.00%2/7/2027190 175 183 
Secured Debt(9)2/7/202212.66%SF+7.00%2/7/20273,360 3,317 3,224 
Secured Debt(9)6/24/202212.66%SF+7.00%2/7/2027186 184 179 
Secured Debt(9)3/27/202312.66%SF+7.00%2/7/2027450 440 432 
73
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
4,116 4,018 
Clarius BIGS, LLC(10)Prints & Advertising Film Financing
Secured Debt (14) (17)9/23/2014  1/5/20152,694 2,350 16 
Classic H&G Holdings, LLCProvider of Engineered Packaging Solutions
Secured Debt(9)3/12/202011.69%SF+6.00%3/12/20251,140 1,133 1,140 
Secured Debt3/12/20208.00%3/12/20254,819 4,781 4,819 
Preferred Member Units(8)3/12/2020391,440 4,000 
7,354 9,959 
Computer Data Source, LLC(10)Third Party Maintenance Provider to the Data Center Ecosystem
Secured Debt (9) (30)8/6/202113.52%SF+8.00%8/6/20264,167 4,123 4,040 
Secured Debt(9)8/6/202113.52%SF+8.00%8/6/202615,260 15,098 14,797 
19,221 18,837 
Construction Supply Investments, LLC(10)Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors
Member Units 12/29/2016861,6183,335 23,135 
CQ Fluency, LLC(10)Global Language Services Provider
Secured Debt (9) (37)12/27/2023SF+7.00%6/27/2027— (44)(44)
Secured Debt (9) (37)12/27/2023SF+7.00%6/27/2027— (44)(44)
Secured Debt(9)12/27/202312.45%SF+7.00%6/27/20277,500 7,280 7,280 
7,192 7,192 
Dalton US Inc.(10)Provider of Supplemental Labor Services
Common Stock 8/16/2022    52 60 
DMA Industries, LLCDistributor of aftermarket ride control products
Secured Debt11/19/202112.00%11/19/20264,700 4,642 4,700 
Preferred Equity11/19/20211,4861,486 1,920 
6,128 6,620 
DTE Enterprises, LLC(10)Industrial Powertrain Repair and Services
Class AA Preferred Member Units (non-voting)(8)4/13/201810.00%10.00%1,284 1,283 
Class A Preferred Member Units 4/13/2018776,3168.00%8.00%776 260 
2,060 1,543 
Dynamic Communities, LLC(10)Developer of Business Events and Online Community Groups
Secured Debt(9)12/20/202210.45%SF+5.00%10.45%12/31/20262,070 1,912 1,912 
Secured Debt(9)12/20/202212.45%SF+7.00%12.45%12/31/20262,113 1,879 1,859 
Preferred Equity12/20/2022125,000128 60 
Preferred Equity12/20/20222,376,241— — 
Common Equity12/20/20221,250,000— — 
3,919 3,831 
74
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Elgin AcquireCo, LLCManufacturer and Distributor of Engine and Chassis Components
Secured Debt (9) (37)10/3/2022SF+6.00%10/3/2027— — — 
Secured Debt10/3/202212.00%10/3/20271,227 1,200 1,200 
Secured Debt10/3/20229.00%10/3/2052412 409 409 
Common Stock10/3/202219374 390 
Common Stock(23)10/3/202261102 109 
2,085 2,108 
Emerald Technologies Acquisition Co, Inc.(11)Design & Manufacturing
Secured Debt(9)2/10/202211.79%SF+6.25%12/29/20272,391 2,357 2,175 
Engineering Research & Consulting, LLC(10)Provider of Engineering & Consulting Services to US Department of Defense
Secured Debt (9) (37)5/23/2022 P+5.50%5/23/2027— (11)— 
Secured Debt(9)5/23/202211.98%SF+6.50%5/23/20285,095 5,023 5,095 
5,012 5,095 
Escalent, Inc.(10)Market Research and Consulting Firm
Secured Debt (9) (37)4/7/2023SF+8.00%4/7/2029— (9)(9)
Secured Debt(9)4/7/202313.45%SF+8.00%4/7/20296,924 6,742 6,924 
Common Equity4/7/2023170,998174 190 
6,907 7,105 
Event Holdco, LLC(10)Event and Learning Management Software for Healthcare Organizations and Systems
Secured Debt(9)12/22/202112.61%SF+7.00%12/22/2026308 306 302 
Secured Debt(9)12/22/202112.61%SF+7.00%12/22/20263,681 3,659 3,614 
3,965 3,916 
Garyline, LLC(10)Manufacturer of Consumer Plastic Products
Secured Debt (9) (37)11/10/2023 SF+6.75%11/10/2028— (76)(76)
Secured Debt(9)11/10/202312.22%SF+6.75%11/10/20289,664 9,384 9,384 
Common Equity 11/10/2023    210 210 
9,518 9,518 
Hawk Ridge Systems, LLCValue-Added Reseller of Engineering Design and Manufacturing Solutions
Secured Debt(9)12/2/201611.65%SF+6.00%1/15/2026494 492 494 
Secured Debt12/2/201612.50%1/15/20269,744 9,697 9,744 
Preferred Member Units 12/2/201656713 4,370 
Preferred Member Units(23)12/2/20165638 230 
10,940 14,838 
HDC/HW Intermediate Holdings(10)Managed Services and Hosting Provider
Secured Debt (9) (17)12/21/201814.34%SF+9.50%14.34%12/21/2023205 205 186 
Secured Debt (9) (17)12/21/201814.34%SF+9.50%14.34%12/21/20232,036 2,036 1,849 
2,241 2,035 
HEADLANDS OP-CO LLC(10)Clinical Trial Sites Operator
Secured Debt (9) (37)8/1/2022SF+6.50%8/1/2027— (14)(14)
Secured Debt(9)8/1/202211.86%SF+6.50%8/1/20271,995 1,962 1,995 
Secured Debt(9)8/1/202211.86%SF+6.50%8/1/20274,925 4,854 4,925 
75
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
6,802 6,906 
Hybrid Promotions, LLC(10)Wholesaler of Licensed, Branded and Private Label Apparel
Secured Debt(9)6/30/202115.91%SF+8.25%2.00%6/30/20267,964 7,813 7,313 
IG Parent Corporation(11)Software Engineering
Secured Debt (9) (37)7/30/2021SF+5.75%7/30/2026— (13)— 
Secured Debt(9)7/30/202110.96%SF+5.50%7/30/20286,266 6,200 6,266 
Secured Debt(9)7/30/202110.96%SF+5.50%7/30/20281,942 1,921 1,942 
8,108 8,208 
Imaging Business Machines, L.L.C.(10)Technology Hardware & Equipment
Secured Debt (9) (29)6/8/202312.41%SF+7.00%6/30/2028791 791 786 
Secured Debt(9)6/8/202312.45%SF+7.00%6/30/202810,384 10,068 10,318 
Common Equity6/8/2023422580 550 
11,439 11,654 
Implus Footcare, LLC(10)Provider of Footwear and Related Accessories
Secured Debt(9)6/1/201714.25%SF+7.75%1.00%7/31/202417,012 17,010 15,816 
Industrial Services Acquisition, LLC(10)Industrial Cleaning Services
Secured Debt (9) (32)8/13/202112.22%SF+6.75%8/13/2026752 734 752 
Secured Debt(9)8/13/202112.22%SF+6.75%8/13/202611,436 11,330 11,436 
Preferred Member Units (8) (23)1/31/201833610.00%10.00%321 415 
Preferred Member Units (8) (23)5/17/201918720.00%20.00%240 279 
Member Units(23)6/17/20162,1002,100 1,610 
14,725 14,492 
Infinity X1 Holdings, LLCManufacturer and Supplier of Personal Lighting Products
Secured Debt3/31/202313.00%3/31/20284,388 4,314 4,314 
Preferred Equity3/31/202320,0001,000 1,000 
5,314 5,314 
Infolinks Media Buyco, LLC(10)Exclusive Placement Provider to the Advertising Ecosystem
Secured Debt(9)11/1/202111.21%SF+5.75%11/1/20261,881 1,829 1,881 
Secured Debt(9)11/1/202111.21%SF+5.75%11/1/20269,690 9,579 9,690 
11,408 11,571 
Insight Borrower Corporation(10)Test, Inspection, and Certification Instrument Provider
Secured Debt (9) (37)7/19/2023SF+6.25%7/19/2028— (40)(40)
Secured Debt (9) (37)7/19/2023SF+6.25%7/19/2029— (33)(33)
Secured Debt(9)7/19/202311.65%SF+6.25%7/19/20298,373 8,143 8,287 
Common Equity7/19/202347,847239 239 
8,309 8,453 
Inspire Aesthetics Management, LLC(10)Surgical and Non-Surgical Plastic Surgery and Aesthetics Provider
Secured Debt (9) (31)4/3/202313.53%SF+8.00%4/3/2028676 659 664 
Secured Debt(9)4/3/202313.55%SF+8.00%4/3/20286,256 6,115 6,144 
76
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt(9)6/14/202313.55%SF+8.00%4/3/20281,260 1,231 1,237 
Common Equity4/3/2023101,719322 190 
8,327 8,235 
Interface Security Systems, L.L.C(10)Commercial Security & Alarm Services
Secured Debt (17) (28)12/9/202115.48%SF+10.00%8/7/20231,835 1,835 1,781 
Secured Debt (9) (14) (17)8/7/201912.46%SF+7.00%12.46%8/7/20237,334 7,254 433 
Common Stock12/7/20212,143— — 
9,089 2,214 
Intermedia Holdings, Inc.(11)Unified Communications as a Service
Secured Debt(9)8/3/201811.47%SF+6.00%7/19/20255,544 5,539 5,370 
Invincible Boat Company, LLC.(10)Manufacturer of Sport Fishing Boats
Secured Debt(9)8/28/201912.00%SF+6.50%8/28/2025519 516 509 
Secured Debt(9)8/28/201912.00%SF+6.50%8/28/202516,812 16,751 16,515 
17,267 17,024 
INW Manufacturing, LLC(11)Manufacturer of Nutrition and Wellness Products
Secured Debt(9)5/19/202111.36%SF+5.75%3/25/20276,656 6,537 5,325 
Iron-Main Investments, LLCConsumer Reporting Agency Providing Employment Background Checks and Drug Testing
Secured Debt8/2/202113.50%1/31/20281,128 1,108 1,108 
Secured Debt9/1/202113.50%1/31/2028735 722 722 
Secured Debt11/15/202113.50%1/31/20282,236 2,236 2,236 
Secured Debt11/15/202113.50%1/31/20284,906 4,815 4,815 
Secured Debt1/31/202313.50%1/31/20282,641 2,525 2,525 
Common Stock8/3/202150,753689 670 
12,095 12,076 
Isagenix International, LLC(11)Direct Marketer of Health & Wellness Products
Secured Debt(9)4/13/202311.04%SF+5.50%8.54%4/14/20282,615 2,374 2,301 
Common Equity4/13/2023186,322— — 
2,374 2,301 
ITA Holdings Group, LLCAir Ambulance Services
Secured Debt(9)6/21/202316.59%SF+9.00%2.00%6/21/2027207 201 201 
Secured Debt(9)6/21/202316.59%SF+9.00%2.00%6/21/2027178 174 174 
Secured Debt(9)6/21/202315.59%SF+8.00%2.00%6/21/20271,084 842 842 
Secured Debt(9)6/21/202317.59%SF+10.00%2.00%6/21/20271,091 848 848 
Warrants(27)6/21/202348,3276/21/2033523 523 
2,588 2,588 
Jackmont Hospitality, Inc.(10)Franchisee of Casual Dining Restaurants
Secured Debt (9) (26)10/26/202212.46%SF+7.00%11/4/20241,675 1,649 1,675 
Secured Debt(9)11/8/202112.46%SF+7.00%11/4/20243,948 3,948 3,948 
Preferred Equity 11/8/20215,653,333  216 2,190 
77
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
5,813 7,813 
Joerns Healthcare, LLC(11)Manufacturer and Distributor of Health Care Equipment & Supplies
Secured Debt (9) (14)11/15/202123.63%SF+18.00%23.63%1/31/20242,048 2,048 1,747 
Secured Debt (9) (14)8/21/201921.63%SF+16.00%21.63%8/21/20241,708 1,701 121 
Secured Debt (9) (14)8/21/201921.63%SF+16.00%21.63%8/21/20241,643 1,635 117 
Common Stock8/21/2019392,5143,678 — 
9,062 1,985 
Johnson Downie Opco, LLCExecutive Search Services
Secured Debt(37)12/10/2021  12/10/2026— (4)— 
Secured Debt 12/10/202115.00%  12/10/20262,690 2,645 2,690 
Preferred Equity 12/10/2021368404 1,070 
3,045 3,760 
JorVet Holdings, LLCSupplier and Distributor of Veterinary Equipment and Supplies
Secured Debt3/28/202212.00%3/28/20272,850 2,814 2,814 
Preferred Equity(8)3/28/202211,9341,193 1,193 
4,007 4,007 
JTI Electrical & Mechanical, LLC(10)Electrical, Mechanical and Automation Services
Secured Debt (9) (41)12/22/202111.64%SF+6.00%12/22/2026261 253 261 
Secured Debt(9)12/22/202111.61%SF+6.00%12/22/20263,000 2,963 3,000 
Common Equity12/22/2021140,351140 140 
3,356 3,401 
KMS, LLC(10)Wholesaler of Closeout and Value-priced Products
Secured Debt(9)10/4/202114.75%SF+9.25%10/4/20261,292 1,235 1,180 
Secured Debt(9)10/4/202114.75%SF+9.25%10/4/20269,310 9,205 8,475 
10,440 9,655 
Lightbox Holdings, L.P.(11)Provider of Commercial Real Estate Software
Secured Debt5/9/201910.62%SF+5.00%5/9/20265,765 5,736 5,592 
LL Management, Inc.(10)Medical Transportation Service Provider
Secured Debt(9)5/2/201912.71%SF+7.25%9/25/20247,960 7,933 7,960 
Secured Debt(9)5/2/201912.71%SF+7.25%9/25/20245,246 5,228 5,246 
Secured Debt(9)11/20/202012.71%SF+7.25%9/25/2024— — — 
Secured Debt(9)2/26/202112.71%SF+7.25%9/25/2024871 868 871 
Secured Debt(9)5/12/202212.71%SF+7.25%9/25/20248,822 8,781 8,822 
22,810 22,899 
LLFlex, LLC(10)Provider of Metal-Based Laminates
Secured Debt(9)8/16/202115.54%SF+9.00%1.00%8/16/20264,920 4,861 4,417 
Logix Acquisition Company, LLC(10)Competitive Local Exchange Carrier
Secured Debt(9)1/8/201813.25%P+4.75%12/22/202411,552 11,285 9,069 
78
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Mako Steel, LP(10)Self-Storage Design & Construction
Secured Debt (9) (37)3/15/2021 SF+6.75%3/15/2026— (36)— 
Secured Debt(9)3/15/202112.28%SF+6.75%3/15/202616,721 16,568 16,721 
16,532 16,721 
MB2 Dental Solutions, LLC(11)Dental Partnership Organization
Secured Debt(9)1/28/202111.46%SF+6.00%1/29/20272,803 2,771 2,803 
Secured Debt(9)1/28/202111.46%SF+6.00%1/29/20273,925 3,880 3,925 
Secured Debt(9)1/28/202111.46%SF+6.00%1/29/20273,464 3,424 3,464 
Secured Debt(9)1/28/202111.46%SF+6.00%1/29/20277,796 7,725 7,796 
17,800 17,988 
Metalforming Holdings, LLCDistributor of Sheet Metal Folding and Metal Forming Equipment
Secured Debt(37)10/19/202210/19/2024— — — 
Secured Debt10/19/202212.75%10/19/20271,748 1,707 1,707 
Preferred Equity(8)10/19/2022434,3318.00%8.00%443 443 
Common Stock10/19/2022112,865113 110 
2,263 2,260 
Microbe Formulas, LLC(10)Nutritional Supplements Provider
Secured Debt (9) (37)4/4/2022SF+6.25%4/3/2028— (6)(6)
Secured Debt(9)4/4/202211.46%SF+6.00%4/3/20282,671 2,632 2,671 
2,626 2,665 
Mills Fleet Farm Group, LLC(10)Omnichannel Retailer of Work, Farm and Lifestyle Merchandise
Secured Debt(9)10/24/201812.52%SF+7.00%12/31/202618,152 17,863 17,524 
Mini Melts of America, LLC(10)Manufacturer and Distributor of Branded Premium Beaded Ice Cream
Secured Debt (9) (37)11/30/2023SF+6.25%11/30/2028— (28)(28)
Secured Debt (9) (37)11/30/2023SF+6.25%11/30/2028— (10)(10)
Secured Debt(9)11/30/202310.64%SF+5.25%11/30/20283,225 3,149 3,149 
Secured Debt(9)11/30/202312.64%SF+7.25%11/30/20283,225 3,146 3,146 
Common Equity11/30/2023300,000300 300 
6,557 6,557 
MonitorUS Holding, LLC(10) (13) (21)SaaS Provider of Media Intelligence Services
Secured Debt 5/24/202214.00%4.00%5/24/20271,120 1,106 1,133 
Secured Debt 5/24/202214.00%4.00%5/24/20272,912 2,870 3,184 
Secured Debt 5/24/202214.00%4.00%5/24/20274,957 4,890 4,957 
Common Stock8/30/202212,798,820256 197 
9,122 9,471 
NinjaTrader, LLC(10)Operator of Futures Trading Platform
Secured Debt (9) (37)12/18/2019SF+7.00%12/18/2026— (4)(3)
Secured Debt (9) (37)12/18/2019SF+7.00%12/18/2026— (12)(12)
Secured Debt(9)12/18/201912.54%SF+7.00%12/18/202610,991 10,888 10,991 
Secured Debt(9)12/18/202312.52%SF+7.00%12/18/20263,878 3,807 3,878 
14,679 14,854 
79
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Obra Capital, Inc. (f/k/a Vida Capital, Inc.)(11)Alternative Asset Manager
Secured Debt 10/10/201911.47%SF+6.00%10/1/20267,043 6,711 6,039 
Paragon Healthcare, Inc.(10)Infusion Therapy Treatment Provider
Secured Debt (9) (37)1/19/2022 SF+5.75%1/19/2027— (11)— 
Secured Debt (9) (43)1/19/202211.24%SF+5.75%1/19/2027423 414 421 
Secured Debt(9)1/19/202211.25%SF+5.75%1/19/20272,456 2,412 2,442 
2,815 2,863 
Power System Solutions(10)Backup Power Generation
Secured Debt (9) (37)6/7/2023SF+6.75%6/7/2028— (35)(35)
Secured Debt (9) (37)6/7/2023SF+6.75%6/7/2028— (35)(35)
Secured Debt(9)6/7/202312.12%SF+6.75%6/7/20287,939 7,729 7,939 
Common Equity6/7/2023532532 500 
8,191 8,369 
PrimeFlight Aviation Services(10)Air Freight & Logistics
Secured Debt(9)5/1/202312.28%SF+6.85%5/1/20295,970 5,813 5,970 
Secured Debt(9)9/7/202312.20%SF+6.85%5/1/2029570 553 570 
6,366 6,540 
PTL US Bidco, Inc(10) (13) (21)Manufacturers of Equipment, Including Drilling Rigs and Equipment, and Providers of Supplies and Services to Companies Involved In the Drilling, Evaluation and Completion of Oil and Gas Wells
Secured Debt (9) (45)8/19/202212.80%SF+7.25%8/19/2027198 189 196 
Secured Debt(9)8/19/202212.88%SF+7.25%8/19/20271,734 1,707 1,720 
1,896 1,916 
Purge Rite, LLC(10)HVAC Flushing and Filtration Services
Secured Debt (9) (37)10/2/2023SF+8.00%10/2/2028— (19)(19)
Secured Debt(9)10/2/202313.70%SF+8.00%10/2/20283,906 3,813 3,813 
Preferred Equity10/2/20231,302,0831,302 1,302 
5,096 5,096 
RA Outdoors LLC(10)Software Solutions Provider for Outdoor Activity Management
Secured Debt (9) (32)4/8/202112.22%SF+6.75%4/8/2026796 789 745 
Secured Debt(9)4/8/202112.21%SF+6.75%4/8/202612,917 12,829 12,089 
13,618 12,834 
Research Now Group, Inc. and Survey Sampling International, LLC(11)Provider of Outsourced Online Surveying
Secured Debt(9)12/29/201711.14%SF+5.50%12/20/20249,691 9,691 7,237 
Richardson Sales Solutions(10)Business Services
Secured Debt (9) (34)8/24/202318.47%SF+6.50%8/24/2028833 781 818 
Secured Debt(9)8/24/202311.88%SF+6.50%8/24/202810,553 10,261 10,362 
11,042 11,180 
Roof Opco, LLC(10)Residential Re-Roofing/Repair
Secured Debt (9) (37)8/27/2021 SF+6.50%8/27/2026— (10)— 
Secured Debt(9)8/27/202112.16%SF+6.50%8/27/20264,219 4,150 4,142 
80
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt(9)8/27/202114.16%SF+8.50%8/27/20264,219 4,150 4,082 
8,290 8,224 
Rug Doctor, LLC.(10)Carpet Cleaning Products and Machinery
Secured Debt(9)7/16/202113.54%SF+6.00%2.00%11/16/20256,410 6,389 6,383 
Secured Debt(9)7/16/202113.54%SF+6.00%2.00%11/16/20259,022 8,991 8,984 
15,380 15,367 
Slick Innovations, LLCText Message Marketing Platform
Secured Debt9/13/201814.00%12/22/20272,860 2,777 2,860 
Common Stock 9/13/201817,500114 600 
2,891 3,460 
South Coast Terminals Holdings, LLC(10)Specialty Toll Chemical Manufacturer
Secured Debt(9)12/10/202111.46%SF+6.00%12/13/202638 34 34 
Secured Debt(9)12/10/202111.70%SF+6.00%12/13/20262,979 2,943 2,979 
Common Equity12/10/202160,60661 59 
3,038 3,072 
SPAU Holdings, LLC(10)Digital Photo Product Provider
Secured Debt (9) (37)7/1/2022SF+8.00%7/1/2027— (14)— 
Secured Debt(9)7/1/202213.72%SF+8.00%7/1/20274,925 4,857 4,925 
Common Stock7/1/2022200,000200 160 
5,043 5,085 
Tex Tech Tennis, LLC(10)Sporting Goods & Textiles
Preferred Equity(23)7/7/20211,000,0001,000 2,840 
The Affiliati Network, LLCPerformance Marketing Solutions
Secured Debt 8/9/202113.00%8/9/202640 37 37 
Secured Debt8/9/202113.00%8/9/20261,880 1,858 1,841 
Preferred Stock9/1/202343,02743 43 
Preferred Stock(8)8/9/2021320,0001,600 1,600 
3,538 3,521 
U.S. TelePacific Corp.(11)Provider of Communications and Managed Services
Secured Debt (9) (14)6/1/202312.53%SF+7.15%6.00%5/2/20276,802 2,623 2,438 
Secured Debt(14)6/1/2023    5/2/2027692 15 — 
2,638 2,438 
USA DeBusk LLC(10)Provider of Industrial Cleaning Services
Secured Debt(9)10/22/201911.46%SF+6.00%9/8/202612,405 12,308 12,405 
Secured Debt(9)7/19/202311.96%SF+6.50%9/8/20264,825 4,742 4,825 
Secured Debt(9)11/21/202311.96%SF+6.50%9/8/20262,515 2,468 2,515 
19,518 19,745 
UserZoom Technologies, Inc.(10)Provider of User Experience Research Automation Software
Secured Debt(9)1/11/202312.99%SF+7.50%4/5/20293,000 2,923 3,000 
Vistar Media, Inc.(10)Operator of Digital Out-of-Home Advertising Platform
Preferred Stock4/3/201970,207767 2,180 
81
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Vitesse Systems(10)Component Manufacturing and Machining Platform
Secured Debt(9)12/22/202312.63%SF+7.00%12/22/202812,500 12,193 12,193 
VORTEQ Coil Finishers, LLC(10)Specialty Coating of Aluminum and Light-Gauge Steel
Common Equity(8)11/30/2021769,231769 1,911 
Wall Street Prep, Inc.(10)Financial Training Services
Secured Debt (9) (37)7/19/2021SF+7.00%7/19/2026— (5)(5)
Secured Debt(9)7/19/202112.54%SF+7.00%7/19/20264,654 4,600 4,654 
Common Stock7/19/2021500,000500 910 
5,095 5,559 
Watterson Brands, LLC(10)Facility Management Services
Secured Debt (9) (41)12/17/202111.50%SF+6.00%12/17/2026253 249 253 
Secured Debt(9)12/17/202111.50%SF+6.00%12/17/202653 47 53 
Secured Debt(9)12/17/202111.50%SF+6.00%12/17/20262,166 2,146 2,166 
Secured Debt(9)12/17/202111.50%SF+6.00%12/17/20261,955 1,936 1,955 
4,378 4,427 
West Star Aviation Acquisition, LLC(10)Aircraft, Aircraft Engine and Engine Parts
Secured Debt (9) (42)3/1/202211.34%SF+6.00%3/1/2028665 654 665 
Secured Debt(9)3/1/202211.35%SF+6.00%3/1/20282,948 2,907 2,947 
Secured Debt(9)11/3/202311.35%SF+6.00%3/1/20281,467 1,438 1,467 
Common Stock3/1/2022200,000200 390 
5,199 5,469 
Winter Services LLC(10)Provider of Snow Removal and Ice Management Services
Secured Debt (9) (35)11/19/202112.64%SF+7.00%11/19/20262,778 2,745 2,778 
Secured Debt(9)11/19/202112.66%SF+7.00%11/19/20262,583 2,528 2,583 
Secured Debt(9)11/19/202112.66%SF+7.00%11/19/202611,625 11,479 11,625 
16,752 16,986 
World Micro Holdings, LLCSupply Chain Management
Secured Debt12/12/202213.00%12/12/20271,627 1,601 1,601 
Preferred Equity(8)12/12/2022530530 530 
2,131 2,131 
Xenon Arc, Inc.(10)Tech-enabled Distribution Services to Chemicals and Food Ingredients Primary Producers
Secured Debt (9) (37)12/17/2021SF+5.25%12/17/2026— (5)— 
Secured Debt(9)12/17/202111.22%SF+5.75%12/17/20271,188 1,163 1,188 
Secured Debt(9)12/17/202111.25%SF+5.75%12/17/20272,352 2,321 2,352 
3,479 3,540 
YS Garments, LLC(11)Designer and Provider of Branded Activewear
Secured Debt(9)8/22/201813.00%SF+7.50%8/9/20265,584 5,485 5,110 
82
MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Zips Car Wash, LLC(10)Express Car Wash Operator
Secured Debt (9) (33)2/11/202212.71%SF+7.25%3/1/20242,356 2,352 2,234 
Secured Debt (9) (33)2/11/202212.71%SF+7.25%3/1/2024591 589 555 
2,941 2,789 
Subtotal Non-Control/Non-Affiliate Investments (120.2% of net assets at fair value)$763,781 $747,972 
Total Portfolio Investments, December 31, 2023 (175.6% of net assets at fair value)$1,038,318 $1,092,895 
Money market funds (included in cash and cash equivalents) (16)
Fidelity Government Portfolio Class III Fund (38) $3,188 $3,188 
First American Treasury Obligations Fund Class Z (39)17,656 17,656 
Total money market funds$20,844 $20,844 
_____________________________
(1)All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note C — Fair Value Hierarchy for Investments — Portfolio Composition for a description of Lower Middle Market portfolio investments. All of the assets of HMS Income Fund, Inc. (the “Company”)Company’s investments, unless otherwise noted, are encumbered as security for one of the Company’s credit agreements. See Note 6 - Borrowings.Credit Facilities.
(2)Debt investments are income producing, unless otherwise noted.noted by footnote (14), as described below. Equity investments and warrants are non-income producing, unless otherwise noted.noted by footnote (8), as described below.
(3)See Note 3 - C — Fair Value Hierarchy for Investments — Portfolio Composition and Schedule 12-14 for a summary of geographic location of portfolio companies.
(4) Affiliate investments are defined byPrincipal is net of repayments. Cost is net of repayments and accumulated unearned income. Negative cost is the Investment Company Act of 1940, as amended (the “1940 Act”), as investments in which between 5% and 25%result of the voting securities are owned, or an investment in an investment company’s investment adviser, andcapitalized discount being greater than the investments are not classified as Control investments. Fair value as of December 31, 2016 and December 31, 2017 along with transactions duringprincipal amount outstanding on the year ended December 31, 2017 in these affiliated investments were as follows (in thousands):loan.
    Twelve Months Ended December 31, 2017   Twelve Months Ended December 31, 2017
Affiliate Investments Fair Value at December 31, 2016 
Gross Additions (Cost)*
 
Gross Reductions (Cost)**
 Net Unrealized Gain (Loss) Fair Value at December 31, 2017 Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
AFG Capital Group, LLC         
     
Member units $687
 $—
 $—
 $210
 $897
 $—
$—
$—
$18
Warrants 167
 —
 —
 48
 215
 —
—
—
—
Charps, LLC               
Term loan —
 4,817
 (320) 3
 4,500
 —
533
1
—
Preferred member units —
 101
 —
 62
 163
 —
—
—
—
                
                
                
                
Clad-Rex Steel, LLC         
     
Term loan $3,449
 $16
 $(201) $56
 $3,320
 $—
$392
$—
$—
Term loan 99
 —
 (99) —
 —
 —
—
—
—
Member units 1,820
 —
 —
 555
 2,375
 —
—
—
103
Term loan (Clad-Rex Steel RE Investor, LLC) 298
 —
 (5) —
 293
 —
30
—
—
Member units (Clad-Rex Steel RE Investor, LLC) 53
 —
 —
 17
 70
 —
—
—
—
EIG Traverse Co-Investment, LP               
LP interests 9,905
 951
 (10,756) (100) —
 951
—
—
871
Freeport First Lien Loan Fund III, LP               
LP interests 4,763
 3,795
 —
 (52) 8,506
 —
—
—
617
Gamber-Johnson Holdings, LLC         
     
Term loan 5,964
 19
 (170) 37
 5,850
 —
755
—
—
Common stock 4,730
 —
 —
 1,113
 5,843
 —
—
54
105
Guerdon Modular Holdings, Inc.         
     
Term loan 2,642
 22
 (1) (3) 2,660
 —
366
—
—
Common stock 20
 —
 —
 (20) —
 —
—
—
—
Class B preferred units 285
 —
 —
 (285) —
 —
—
—
—
Gulf Publishing Holdings, LLC         
     
Term loan 2,455
 710
 (14) —
 3,151
 —
387
1
—
Term loan —
 20
 —
 —
 20
 —
—
—
—
Member units 781
 142
 —
 287
 1,210
 —
—
10
—
Harris Preston Fund Investments         
     
LP interests (HPEP 3, LP) —
 943
 —
 —
 943
 —
—
—
—
LP interests (2717 HM, LP) —
 536
 —
 —
 536
 —
—
—
—
Hawk Ridge Systems, LLC         
     
Term loan 2,451
 1,212
 (149) 60
 3,574
 —
301
—
—
Preferred member units 713
 —
 —
 237
 950
 —
—
—
65
Preferred member units (HRS Services, ULC) 38
 —
 —
 12
 50
 —
—
—
1
HWT, LLC         
     
Term loan 2,591
 13
 (150) —
 2,454
 —
370
—
—
Member units 985
 —
 —
 —
 985
 —
—
35
—
Market Force Information, Inc.         
     
Term loan —
 6,018
 (286) —
 5,732
 —
324
—
—
Member units —
 3,675
 —
 —
 3,675
 —
—
—
—
M.H. Corbin, LLC         
     
Term loan 3,299
 8
 (177) —
 3,130
 —
382
—
—
Member units 1,500
 —
 —
 —
 1,500
 —
—
35
—
Mystic Logistics, Inc.         
     
Term loan 2,294
 21
 (352) (47) 1,916
 —
272
2
—
Common stock 1,445
 —
 —
 260
 1,705
 —
—
—
—
NuStep, LLC         
     
Term loan —
 5,179
 (131) —
 5,048
 —
603
—
—
Preferred member units —
 2,550
 —
 —
 2,550
 —
—
—
—
SoftTouch Medical Holdings, LLC         
     
Term loan 1,260
 5
 —
 (5) 1,260
 —
135
—
124
Member units 1,618
 —
 —
 163
 1,781
 —
—
42
—
  $56,312
 $30,753
 $(12,811) $2,608
 $76,862
 $951
$4,850
$180
$1,904
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.

(5) Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.
(6) Control investments are defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained. Fair value as of December 31, 2016 and December 31, 2017 along with transactions during the year ended December 31, 2017 in these controlled investments were as follows (in thousands):
    Twelve Months Ended December 31, 2017   Twelve Months Ended December 31, 2017
Controlled Investments Fair Value at December 31, 2016 
Gross Additions (Cost)**
 
Gross Reductions (Cost)***
 Net Unrealized Gain (Loss) Fair Value at December 31, 2017 Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
Copper Trail Energy Fund I, LP               
LP interests $—
 $2,500
 $—
 $—
 $2,500
 $—
$—
$—
$—
GRT Rubber Technologies, LLC         
     
Term loan 6,538
 32
 (824) (31) 5,715
 —
663
—
—
Member units 10,004
 —
 —
 817
 10,821
 —
—
73
577
HMS-ORIX SLF LLC*
               
Membership interests —
 30,000
 —
 643
 30,643
 —
—
—
450
  $16,542
 $32,532
 $(824) $1,429
 $49,679
 $—
$663
$73
$1,027
* Together with ORIX Funds Corp. (“Orix”), the Company co-invests through HMS-ORIX SLF LLC (“HMS-ORIX”), which is organized as a Delaware limited liability company. Pursuant to the terms of the limited liability company agreement and through representation on the HMS-ORIX Board of Managers, the Company and Orix each have 50% voting control of HMS-ORIX and together will agree on all portfolio and investment decisions as well as all other significant actions for HMS-ORIX. Therefore, although the Company owns more than 25% of the voting securities of HMS-ORIX, the Company does not have control over HMS-ORIX for purposes of the 1940 Act or otherwise.
** Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
*** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(7) Principal is net of repayments. Cost represents amortized cost which is net of repayments and adjusted for the amortization of premiums and/or accretion of discounts, as applicable.
(8) Index based floating interest rate is subject to contractual minimum interest rates.
(9) The investment is not a qualifying asset under the 1940 Act. A business development company (“BDC”) may not acquire any asset other than qualifying assets unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. As of December 31, 2017, approximately 13.9% of the Company’s investments were considered non-qualifying.
(10) Investment is classified as a Lower Middle Market investment.
(11) Investment is classified as a Private Loan portfolio investment.
(12) Investment or portion of investment is under contract to purchase and met trade date accounting criteria as of December 31, 2017. Settlement occurred or is scheduled to occur after December 31, 2017. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies for Summary of Security Transactions.
(13) Investment serviced by Main Street pursuant to servicing arrangements with the Company.
(14) Second lien secured debt investment.
(15) Investment is classified as an Other Portfolio investment.
(16) Income producing through dividends or distributions.
(17) Unsecured debt investment.
(18) Investment is on non-accrual status as of December 31, 2017.
(19) Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.
(20) Short term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less.
(21) Effective yield as of December 31, 2017 was approximately 0.01%.
(22) The 1, 2, 3 and 6 month LIBOR rates were 1.57%, 1.62%, 1.69% and 1.84%, respectively, as of December 31, 2017. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2017, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2017. The prime rate was 4.50% as of December 31, 2017.
(23) The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the credit agreement and the Condensed Consolidated Schedule of Investments above reflects such higher rate.
(24) As part of the credit agreement with the portfolio company, the Company is entitled to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest and any other amounts due thereunder. The rate the Company receives per the credit agreement is the same as the rate reflected in the Condensed Consolidated Schedule of Investments above.
(25) The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the credit agreement and the Condensed Consolidated Schedule of Investments above reflects such lower rate.
(26) The fair value of the investment was determined using significant unobservable inputs. See Note 3 - Fair Value Hierarchy for Investments.


See notes to the consolidated financial statements.


HMS Income Fund, Inc.
Consolidated Schedule of Investments
As of December 31, 2016
(dollars in thousands)
Portfolio Company (1) (3)Business DescriptionType of Investment (2) (3)Index Rate (22)Principal (7)Cost (7)Fair Value
       
Control Investments (6)
GRT Rubber Technologies, LLC (8) (10) (13)Engineered Rubber Product ManufacturerLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity - December 19, 2019)1 month LIBOR$6,538
$6,448
$6,538
  Member Units (2,896 shares)——
6,435
10,004
     12,883
16,542
       
Subtotal Control Investments (6) (2% of total investments at fair value)  $12,883
$16,542
 
Affiliate Investments (4)
AFG Capital Group, LLC (10) (13)Provider of Rent-to-Own Financing Solutions and ServicesMember Units (46 shares)——
$300
$687
  Warrants (10 equivalent shares, Expiration - November 7, 2024)——
65
167
     365
854
Clad-Rex Steel, LLC (10) (13)Specialty Manufacturer of Vinyl-Clad MetalLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity - December 20, 2021) (8)1 month LIBOR3,520
3,449
3,449
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity - December 20, 2018) (8)1 month LIBOR100
99
99
  Member Units (179 units)——
1,820
1,820
  10.00% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity - December 20, 2036)None301
298
298
  Member Units (Clad-Rex Steel RE Investor, LLC) (200 units)——
53
53
     5,719
5,719
EIG Traverse Co-Investment, LP (9) (15)Investment PartnershipLP Interests (EIG Traverse Co-Investment, LP) (Fully diluted 22.20%) (16)——
9,805
9,905
Freeport First Lien Loan Fund III, LP (9) (15)Investment PartnershipLP Interests (Freeport First Lien Loan Fund III, LP) (Fully diluted 5.60%) (16)——
4,763
4,763
Gamber-Johnson Holdings, LLC (8) (10) (13)Manufacturer of Ruggedized Computer Mounting SystemsLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity - June 24, 2021)1 month LIBOR6,020
5,902
5,964
  Member Units (2,155 units) —
3,711
4,730
     9,613
10,694
Guerdon Modular Holdings, Inc. (10) (13)Multi-Family and Commercial Modular Construction Company9.00% Current / 4.00% PIK Secured Debt (Maturity - August 13, 2019)None2,668
2,621
2,642
  Common Stock (53,008 shares)——
746
20
  Class B Preferred Stock (101,250 shares)——
285
285
     3,652
2,947
Gulf Publishing Holdings, LLC (10) (13)Energy Focused Media and Publishing12.50% Secured Debt (Maturity - April 29, 2021)None2,500
2,455
2,455
  Member Units (781 shares) —
781
781
     3,236
3,236
Hawk Ridge Systems, LLC (9) (10) (13)Value-Added Reseller of Engineering Design and Manufacturing Solutions10.00% Secured Debt (Maturity - December 2, 2021)None2,500
2,451
2,451
  Preferred Member Units (56 units)——
713
713
  Preferred Member Units (HRS Services, ULC) (56 units)——
38
38
     3,202
3,202
HW Temps LLC (8) (10) (13)Temporary Staffing SolutionsLIBOR Plus 13.00% (Floor 1.00%), Current Coupon 14.00%, Secured Debt (Maturity - July 2, 2020)1 month LIBOR2,644
2,591
2,591
  Preferred Member Units (800 shares) (16)——
986
985
     3,577
3,576
M.H. Corbin Holding, LLC (10) (13)Manufacturer and Distributor of Traffic Safety Products10.00% Secured Debt (Maturity - August 31, 2021)None3,325
3,299
3,299
  Preferred Member Units (1,000 shares) —
1,500
1,500
     4,799
4,799
Mystic Logistics, Inc. (10) (13)Logistics and Distribution Services Provider for Large Volume Mailers12.00% Secured Debt (Maturity - August 15, 2019)None$2,294
$2,246
$2,294
  Common Stock (1,468 shares) (16)——
680
1,445
     2,926
3,739
SoftTouch Medical Holdings LLC (8) (10) (13)Home Provider of Pediatric Durable Medical EquipmentLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity - October 31, 2019)1 month LIBOR1,260
1,244
1,260
  Member Units (785 units) (16)——
870
1,618
     2,114
2,878
       
Subtotal Affiliate Investments (4) (6% of total investments at fair value)  $53,771
$56,312
       
Non-Control/Non-Affiliate Investments (5)
Adams Publishing Group, LLC (8) (11)Local Newspaper OperatorLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity - November 3, 2020)3 month LIBOR$7,589
$7,459
$7,589
ADS Tactical, Inc. (8) (11)Value-Added Logistics and Supply Chain Solutions ProviderLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - December 31, 2022)3 month LIBOR10,000
9,750
9,750
Ahead, LLC (8) (11)IT Infrastructure Value Added ResellerLIBOR Plus 6.50%, Current Coupon 7.50%, Secured Debt (Maturity - November 2, 2020)3 month LIBOR9,500
9,267
9,536
Allflex Holdings III Inc. (8)Manufacturer of Livestock Identification ProductsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity - July 19, 2021) (14)6 month LIBOR14,922
15,012
14,936
American Scaffold Holdings, Inc. (8) (11)Marine Scaffolding Service ProviderLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - March 31, 2022)1 month LIBOR7,359
7,257
7,323
American Teleconferencing Services, Ltd. (8)Provider of Audio Conferencing and Video Collaboration SolutionsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - December 8, 2021)3 month LIBOR10,056
9,122
9,848
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity - June 6, 2022) (14)3 month LIBOR5,571
5,353
5,353
     14,475
15,201
AmeriTech College Operations, LLC (10) (13)For-Profit Nursing and Healthcare College13.00% Secured Debt (Maturity - January 31, 2020)None375
375
375
  10.00% Secured Debt (Maturity - November 30, 2019)None61
61
61
  13.00% Secured Debt (Maturity - November 30, 2019)None64
64
64
  Preferred Member Units (364 units, 5.00% cumulative) (16)——
284
284
     784
784
AP Gaming I, LLC (8) (11)Developer, Manufacturer and Operator of Gaming MachinesLIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity - December 21, 2020)3 month LIBOR11,291
11,194
11,267
Apex Linen Service, Inc. (10) (13)Industrial Launderers13.00% Secured Debt (Maturity - October 30, 2022)None3,604
3,545
3,545
  LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - October 30, 2022)1 month LIBOR600
600
600
     4,145
4,145
Arcus Hunting, LLC (8) (11)Manufacturer of Bowhunting and Archery Products and AccessoriesLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity - November 13, 2019)1 month LIBOR6,973
6,850
6,973
Artel, LLC (8) (12)Provider of Secure Satellite Network and IT SolutionsLIBOR Plus 7.00% (Floor 1.25%), 7.25% Current/1.00% PIK, Current Coupon 8.25%, Secured Debt (Maturity - November 27, 2017)3 month LIBOR5,173
5,000
4,837
ATI Investment Sub, Inc. (8)Manufacturer of Solar Tracking SystemsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity - June 22, 2021)1 month LIBOR9,500
9,322
9,476
ATX Networks Corp. (8) (9)Provider of Radio Frequency Management EquipmentLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - June 11, 2021)3 month LIBOR14,775
14,541
14,516
       
BarFly Ventures, LLC (11)Casual Restaurant Group12.00% Secured Debt (Maturity - August 30, 2020)None$1,986
$1,953
$1,942
  Warrants (.410 equivalent units, Expiration - August 31, 2025)——
158
94
  Options (.731 equivalent units)——
133
164
     2,244
2,200
BBB Tank Services, LLC (10) (13)Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market15% Current Secured Debt (Maturity - April 8, 2021)None1,007
989
989
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity - April 8, 2021)1 month LIBOR200
200
200
  Member Units (200,000 units)——
200
200
     1,389
1,389
Berry Aviation, Inc. (11)Airline Charter Service Operator12.00% Current / 1.75% PIK, Current Coupon 13.75%, Secured Debt (Maturity - January 30, 2020) (14)None1,407
1,390
1,407
  Common Stock (138 shares)——100
205
     1,490
1,612
Bluestem Brands, Inc. (8)Multi-Channel Retailer of General MerchandiseLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - November 6, 2020)3 month LIBOR13,812
13,582
12,039
Brightwood Capital Fund III, LP (9) (15)Investment PartnershipLP Interests (Brightwood Capital Fund III, LP) (Fully diluted .52%) (16)——4,075
3,698
Brundage-Bone Concrete Pumping, Inc.Construction Services Provider10.38% Secured Debt (Maturity - September 1, 2021) (14)None12,000
12,088
12,960
Buca C, LLC (8) (10) (13)Casual Restaurant GroupLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity - June 30, 2020)1 month LIBOR15,114
14,889
15,114
  Preferred Member Units (4 units, 6.00% cumulative) (16)——
2,547
3,110
     17,436
18,224
CAI Software, LLC (10) (13)Provider of Specialized Enterprise Resource Planning Software12.00% Secured Debt (Maturity - October 10, 2019)None921
904
921
  Member Units (16,339 units)——
163
620
     1,067
1,541
CapFusion Holding, LLC (9) (10) (13)Business Lender13.00% Secured Debt (Maturity - March 25, 2021)None3,600
3,289
3,289
  Warrants (400 equivalent units, Expiration - March 24, 2026)——
300
300
     3,589
3,589
CDHA Management, LLC (8) (11)Dental ServicesPrime Plus 6.25% (Floor 3.75%), Current Coupon 10.00%, Secured Debt (Maturity - December 5, 2021)PRIME4,491
4,376
4,376
  Prime Plus 6.25% (Floor 3.75%), Current Coupon 10.00%, Secured Debt (Maturity - December 5, 2021)PRIME—
—
—
     4,376
4,376
Cenveo CorporationProvider of Commercial Printing, Envelopes, Labels, Printed Office Products6.00% Secured Debt (Maturity - August 1, 2019)None15,000
13,013
13,388
Charlotte Russe, Inc. (8)Fast-Fashion Retailer to Young WomenLIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.75%, Secured Debt (Maturity - May 22, 2019)3 month LIBOR15,101
14,918
9,184
CJ Holding Company (8)Oil and Gas Equipment and ServicesLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity - March 31, 2017)3 month LIBOR83
85
83
Clarius BIGS, LLC (11) (18)Prints & Advertising Film Financing15.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None2,144
1,886
64
  20.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None774
681
23
     2,567
87
Compuware Corporation (8)Provider of Software and Supporting ServicesLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity - December 15, 2019)3 month LIBOR$12,265
$12,004
$12,341
Construction Supply Investments, LLC (8) (11)Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry ContractorsLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity - June 30, 2023)3 month LIBOR8,500
8,305
8,330
  Member units (20,000 units)——
2,000
2,000
     10,305
10,330
ContextMedia Health, LLC (8) (12)Provider of Healthcare Media ContentLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - December 21, 2021)1 month LIBOR10,000
9,000
9,150
Covenant Surgical Partners, Inc.Ambulatory Surgical Centers8.75% Secured Debt (Maturity - August 1, 2019)None9,500
9,500
9,168
CRGT, Inc. (8)Provider of Custom Software DevelopmentLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - December 18, 2020)1 month LIBOR9,642
9,492
9,666
CST Industries, Inc. (8)Storage Tank ManufacturerLIBOR Plus 6.25% (Floor 1.50%), Current Coupon 7.75%, Secured Debt (Maturity - May 22, 2017)3 month LIBOR2,759
2,766
2,759
Datacom, LLC (10) (13)Technology and Telecommunications Provider5.25% Current / 5.25% PIK, Current Coupon 10.50% Secured Debt (Maturity - May 30, 2019)None1,296
1,282
1,222
  8.00% Secured Debt (Maturity - May 30, 2017)—100
100
100
  Class A Preferred Member Units (1,530 units, 15.00% cumulative) (16)——
131
152
  Class B Preferred Member Units (717 units)——
670
170
     2,183
1,644
Digital River, Inc. (8)Provider of Outsourced e-Commerce Solutions and ServicesLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - February 12, 2021)3 month LIBOR14,586
14,477
14,713
Digital Room, LLC (8)Organic Lead Generation for Online Postsecondary SchoolsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - November 21, 2022)3 month LIBOR7,625
7,475
7,549
East West Copolymer & Rubber, LLC (10) (13)Manufacturer of Synthetic Rubbers12.00% Current / 2.00% PIK, Current Coupon 14.00%, Secured Debt (Maturity - October 17, 2019)None2,400
2,351
2,136
  Warrants (627,697 equivalent shares, Expiration - October 15, 2024)——
13
—
     2,364
2,136
ECP-PF Holdings Groups, Inc. (11)Fitness Club OperatorLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity - November 26, 2019)3 month LIBOR1,875
1,863
1,875
Evergreen Skills Lux S.á r.l. (d/b/a Skillsoft) (8) (9)Technology-Based Performance Support SolutionsLIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.34%, Secured Debt (Maturity - April 28, 2022) (14)6 month LIBOR10,902
10,443
8,214
Flavors Holdings, Inc. (8)Global Provider of Flavoring and Sweetening Products and SolutionsLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity - April 3, 2020)3 month LIBOR11,774
11,236
9,596
GST Autoleather, Inc. (8)Automotive Leather ManufacturerLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity - July 10, 2020)3 month LIBOR12,204
12,073
11,929
Guitar Center, Inc.Musical Instruments Retailer6.50% Secured Debt (Maturity - April 15, 2019)None15,015
14,128
13,626
Hojeij Branded Foods, LLC (8) (11)Multi-Airport, Multi-Concept Restaurant OperatorLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - July 28, 2021)3 month LIBOR5,419
5,376
5,419
Hoover Group, Inc. (8) (9) (11)Provider of Storage Tanks and Related Products to the Energy and Petrochemical MarketsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity - January 28, 2021)3 month LIBOR15,000
13,961
13,961
Horizon Global Corporation (8) (9)Auto Parts ManufacturerLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - June 30, 2021)1 month LIBOR12,098
11,893
12,325
Hunter Defense Technologies, Inc. (8)Provider of Military and Commercial Shelters and SystemsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - August 5, 2019)3 Month LIBOR13,847
13,255
12,878
Hygea Holdings Corp. (8) (11)Provider of Physician ServicesLIBOR Plus 9.25%, Current Coupon 10.17%, Secured Debt (Maturity - February 24, 2019)3 Month LIBOR7,875
7,378
7,615
  Warrants (5,910,453 equivalent shares, Expiration - February 24, 2023)——
369
1,531
     7,747
9,146
iEnergizer Limited (8) (9)Provider of Business Outsourcing SolutionsLIBOR 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity - May 1, 2019)1 month LIBOR$8,569
$8,110
$8,312
Indivior Finance, LLC (8) (9)Specialty Pharmaceutical Company Treating Opioid DependenceLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - December 19, 2019)3 month LIBOR9,000
8,644
9,079
Industrial Container Services, LLC (8) (11)Steel Drum ReconditionerLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity - December 31, 2018)3 month LIBOR8,927
8,871
8,927
Industrial Services Acquisitions, LLC (11)Industrial Cleaning Services11.25% Current / 0.75% PIK, Current Coupon 12.00%, Unsecured Debt (Maturity - December 17, 2022) (17)None10,523
10,325
10,325
  Member units (Industrial Services Investments, LLC) (2,100,000 units)——
2,100
2,100
     12,425
12,425
Inn of the Mountain Gods Resort and CasinoHotel & Casino Owner & Operator9.25% Secured Debt (Maturity - November 30, 2020)None10,749
10,583
9,782
Intertain Group Limited (8) (9)Business-to-Consumer Online Gaming OperatorLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - April 8, 2022)3 month LIBOR8,799
8,633
8,876
iPayment, Inc. (8)Provider of Merchant AcquisitionLIBOR Plus 5.25% (Floor 1.50%), Current Coupon 6.75%, Secured Debt (Maturity - May 8, 2017)3 month LIBOR15,007
14,986
14,481
Ipreo Holdings, LLCApplication Software for Capital Markets7.25% Unsecured Debt (Maturity - August 1, 2022) (17)None6,250
5,318
5,266
iQor US Inc. (8)Business Process Outsourcing Services ProviderLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity - April 1, 2021)1 month LIBOR7,757
7,331
7,442
IronGate Energy Services, LLC (18)Oil and Gas Services11.00% Secured Debt (Maturity - July 1, 2018) (18)None5,825
5,827
1,631
Jackmont Hospitality, Inc. (8) (11)Franchisee of Casual Dining RestaurantsLIBOR Plus 4.25% (Floor 1.00%)/ 2.50% PIK , Current Coupon 7.75%, Secured Debt (Maturity - May 26, 2021)1 month LIBOR8,891
8,861
8,891
Joerns Healthcare, LLC (8)Manufacturer and Distributor of Health Care Equipment & SuppliesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity - May 9, 2020)3 month LIBOR12,172
11,947
11,442
JSS Holdings, Inc. (8)Aircraft Maintenance Program ProviderLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - August 31, 2021)3 month LIBOR13,828
13,550
13,759
Kellermeyer Bergensons Services, LLC (8)Outsourced Janitorial Services to Retail/Grocery CustomersLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - April 29, 2022) (14)3 month LIBOR14,700
14,603
13,964
Kendra Scott, LLC (8)Jewelry Retail StoresLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - July 17, 2020)3 month LIBOR9,375
9,305
9,328
Keypoint Government Solutions, Inc. (8)Provider of Pre-Employment Screening ServicesLIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (Maturity - November 13, 2017)3 month LIBOR1,761
1,757
1,752
LaMi Products, LLC (8) (11)General Merchandise DistributionLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - September 16, 2020)3 month LIBOR10,735
10,564
10,730
  LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - September 16, 2020)3 month LIBOR   
     10,564
10,730
Larchmont Resources, LLC (8)Oil & Gas Exploration & ProductionLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00% PIK, Secured Debt (Maturity - August 7, 2020)3 month LIBOR3,816
3,816
3,731
  Member units (Larchmont Intermediate Holdo, LLC) (4,806 units)——
601
2,027
     4,417
5,758
Legendary Pictures Funding, LLC (8) (11)Producer of TV, Film, and Comic ContentLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - April 22, 2020)3 month LIBOR8,020
7,905
8,030
LJ Host Merger Sub, Inc. (8)Managed Services and Hosting ProviderLIBOR Plus 4.75% (Floor 1.25%), Current Coupon 6.00%, Secured Debt (Maturity - December 13, 2019)3 month LIBOR4,846
4,837
4,595
Logix Acquisition Company, LLC (8) (11)Competitive Local Exchange CarrierLIBOR Plus 8.28% (Floor 1.00%), Current Coupon 9.28%, Secured Debt (Maturity - June 24, 2021)3 month LIBOR8,593
8,455
8,593
Minute Key, Inc. (10) (13)Operator of Automated Key Duplication Kiosk10.00% Current / 2.00% PIK Secured Debt (Maturity - September 19, 2019) (14)None$3,905
$3,821
$3,821
  Warrants (359,352 equivalent units, Expiration - May 20, 2025)——
70
117
     3,891
3,938
Mood Media Corporation (8) (9)Provider of Electronic EquipmentLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - May 1, 2019)3 month LIBOR14,822
14,741
14,328
New Media Holdings II LLC (8) (9)Local Newspaper OperatorLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - June 4, 2020)3 month LIBOR14,706
14,578
14,633
North American Lifting Holdings, Inc. (8)Crane Service ProviderLIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity - November 27, 2020)3 month LIBOR2,405
2,016
2,101
North Atlantic Trading Company, Inc. (8)Marketer/Distributor of TobaccoPrime Plus 5.50% (Floor 3.75%), Current Coupon 9.25%, Secured Debt (Maturity - January 13, 2020)PRIME10,897
10,913
10,829
Novitex Acquisition, LLC (8)Provider of Document Management ServicesLIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (Maturity - July 7, 2020)3 month LIBOR13,322
13,004
12,823
NTM Acquisition Corp. (8)Provider of B2B Travel Information ContentLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - June 7, 2022)3 month LIBOR4,144
4,085
4,128
Pardus Oil & Gas, LLCOil & Gas Exploration and Production13.00% PIK, Secured Debt (Maturity - November 12, 2021)None989
989
989
  5.00% PIK, Secured Debt (Maturity - May 13, 2022) (14)None517
517
293
  Class A units (1,331 units)——
1,331
523
     2,837
1,805
Paris Presents, Inc. (8)Branded Cosmetic and Bath AccessoriesLIBOR Plus 8.75% (Floor 1.00%), Current Coupon 9.75%, Secured Debt (Maturity - December 31, 2021) (14)1 month LIBOR7,500
7,382
7,350
Parq Holdings, LP (8) (9)Hotel and Casino OperatorLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - December 17, 2020)1 month LIBOR12,500
12,378
12,313
Permian Holdco 2, Inc.Storage Tank Manufacturer14.00% PIK Unsecured Debt (Maturity - October 15, 2021)None483
483
483
  Series A Preferred Shares (Permian Holdco 1, Inc.) (386,255 units) (12.00% Cumulative) (16)——
997
997
  Common Shares (Permian Holdco 1, Inc.) (386,255 units)——
997
997
     2,477
2,477
Permian Holdings, Inc.Storage Tank Manufacturer10.50% Secured Debt (Maturity - January 15, 2018)None1,000
338
338
Pernix Therapeutics Holdings, Inc. (11)Pharmaceutical Royalty - Anti-Migraine12.00% Secured Debt (Maturity - August 1, 2020)None3,016
2,990
2,910
Pike Corporation (8)Construction and Maintenance Services for Electric Transmission and Distribution InfrastructureLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - June 22, 2022) (14)1 month LIBOR13,334
13,070
13,411
Polycom, Inc. (8)Provider of Audio and Video Communication SolutionsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - September 27, 2023)3 month LIBOR12,089
11,617
12,194
PPC/Shift, LLC (8) (11)Provider of Digital Solutions to Automotive IndustryLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - December 22, 2021)3 month LIBOR7,000
6,851
6,851
Premier Dental Services, Inc. (8)Dental Care ServicesLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - November 1, 2018)3 month LIBOR4,511
4,497
4,494
Prowler Acquisition Corporation (8)Specialty Distributor to the Energy SectorLIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity - January 28, 2020)3 month LIBOR11,329
9,896
8,383
Raley’s, Inc. (8)Family-Owned Supermarket Chain in CaliforniaLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - May 18, 2022)3 month LIBOR4,195
4,125
4,242
Redbox Automated Retail, LLC (8)Operator of Home Media Entertainment KiosksLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - September 27, 2021)3 month LIBOR14,344
13,925
13,989
Renaissance Learning, Inc. (8)Technology-based K-12 Learning SolutionsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity - April 11, 2022) (14)3 month LIBOR$12,950
$12,548
$12,896
RGL Reservoir Operations, Inc. (8) (9)Oil & Gas Equipment & ServicesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity - August 13, 2021)3 month LIBOR3,910
3,826
880
RM Bidder, LLC (11)Full-scale Film and Television Production and DistributionCommon Stock (1,854 units)——
31
29
  Series A Warrants (124,915 equivalent units, Expiration - October 20, 2025)——
284
200
  Series B Warrants (93,686 equivalent units, Expiration - October 20, 2025)——
—
—
     315
229
Salient Partners, LP (8)Provider of Asset Management ServicesLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - June 9, 2021)3 month LIBOR11,842
11,527
11,338
School Specialty, Inc. (8)Distributor of Education Supplies and FurnitureLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - June 11, 2019)1 month LIBOR5,467
5,396
5,536
Sigma Electric Manufacturing Corp. (8) (11)Manufacturer and Distributor of Electrical Fittings and PartsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity - May 13, 2019)3 Month LIBOR12,500
12,199
12,199
Sorenson Communications, Inc.Manufacturer of Communication Products for Hearing Impaired9.00% Secured Debt (Maturity - October 31, 2020) (14)None11,710
11,308
10,305
  LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.00%, Secured Debt (Maturity - April 30, 2020)3 month LIBOR2,977
2,957
2,955
     14,265
13,260
Strike, LLC (8)Pipeline Construction and Maintenance ServicesLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.29%, Secured Debt (Maturity - November 30, 2022)6 month LIBOR10,000
9,667
9,900
Synagro Infrastructure Company, Inc. (8)Waste Management ServicesLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity - August 22, 2020)3 month LIBOR2,704
2,687
2,372
TaxAct, Inc. (8)Provider of Tax Preparation SolutionsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - January 3, 2023)1 month LIBOR6,500
6,369
6,549
TE Holdings, LLCOil & Gas Exploration & ProductionCommon Units (72,785 units)——728
546
Teleguam Holdings, LLC (8)Cable and Telecom Services ProviderLIBOR Plus 7.50% (Floor 1.25%), Current Coupon 8.75%, Secured Debt (Maturity - June 10, 2019) (14)1 month LIBOR6,397
6,387
6,268
  LIBOR Plus 4.00% (Floor 1.25%), Current Coupon 5.25%, Secured Debt (Maturity - December 10, 2018)1 month LIBOR7,481
7,335
7,406
     13,722
13,674
TMC Merger Sub Corp (8)Refractory & Maintenance Services ProviderLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - October 31, 2022)1 week LIBOR12,500
12,376
12,438
The Topps Company, Inc. (8)Trading Cards & ConfectionaryLIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity - October 2, 2018)3 month LIBOR1,109
1,104
1,113
TOMS Shoes, LLC (8)Global Designer, Distributor, and Retailer of Casual FootwearLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity - October 30, 2020)3 month LIBOR4,913
4,573
3,635
Travel Leaders Group, LLC (8)Travel Agency Network ProviderLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - December 7, 2020)1 month LIBOR15,988
15,900
15,960
TVG-I-E CMN Acquisition, LLC (8) (11)Organic Lead Generation for Online Postsecondary SchoolsLIBOR Plus 6.00%, Current Coupon 7.00%, Secured Debt (Maturity - November 3, 2021)1 month LIBOR6,459
6,333
6,333
Unirush LLC (10) (13)Provider of Prepaid Debit Card Solutions12.00% Secured Debt (Maturity Date - February 1, 2019)None3,000
2,745
3,000
  Warrants (111,181 equivalent units, Expiration - February 2, 2026)——
313
313
     3,058
3,313
U.S. Telepacific Corp. (8) (11)Provider of Communications and Managed ServicesLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - February 24, 2021)3 month LIBOR7,500
7,367
7,367
USJ-IMECO Holding Company, LLC (8)Marine Interior Design and InstallationLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - April 16, 2020)3 month LIBOR$8,857
$8,829
$8,813
Valley Healthcare Group, LLC (8) (10) (13)Provider of Durable Medical EquipmentLIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.12%, Secured Debt (Maturity - December 29, 2020)1 month LIBOR3,239
3,183
3,183
  Preferred Member Units (Valley Healthcare Holding, LLC) (400 units)——
400
400
     3,583
3,583
VCVH Holding Corp. (8)Healthcare Technology Services Focused on Revenue MaximizationLIBOR Plus 9.25% (Floor 1.00%), Current Coupon 10.25%, Secured Debt (Maturity - June 1, 2024) (14)3 month LIBOR3,500
3,417
3,474
Volusion, LLC (10) (13)Provider of Online Software-as-a-Service eCommerce Solutions11.50% Secured Debt (Maturity - January 24, 2020)None7,500
6,484
6,484
  Preferred Member Units (2,090,001 units)——
6,000
6,000
  Warrants (784,866.80 equivalent units, Expiration - January 26, 2025)——
1,104
1,104
     13,588
13,588
Wellnext, LLC (8) (11)Manufacturer of Supplements and VitaminsLIBOR Plus 9.00% (Floor 0.50%), Current Coupon 9.85%, Secured Debt (Maturity - May 23, 2021)3 month LIBOR10,058
9,966
10,058
Worley Claims Services, LLC (8) (11)Insurance Adjustment Management and Services ProviderLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity - October 31, 2020)1 month LIBOR6,370
6,326
6,370
YP Holdings LLC (8)Online and Offline Advertising OperatorLIBOR Plus 11.00% (Floor 1.25%), Current Coupon 12.25%, Secured Debt (Maturity - June 4, 2018)1 month LIBOR15,280
15,016
15,241
       
Subtotal Non-Control/Non-Affiliate Investments (5) (91% of total portfolio investments at fair value)  $935,741
$916,393
       
Total Portfolio Investments    $1,002,395
$989,247
       
Short Term Investments (20)      
Fidelity Institutional Money Market Funds—Prime Money Market Portfolio, Class III Shares (21)——$9,775
$9,775
UMB Bank Money Market Account (21)——  642
642
US Bank Money Market Account (21)————10,672
10,672
       
Total Short Term Investments    $21,089
$21,089
(1) All investments are Middle Market portfolio investments, unless otherwise noted. All of the Company’s assets are encumbered as security for the Company’s credit agreements. See Note 6 - Borrowings.
(2) Debt investments are income producing, unless otherwise noted. Equity investments and warrants are non-income producing, unless otherwise noted.
(3) See Note 3 - Fair Value Hierarchy for Investments for summary geographic location of portfolio companies.
(4) (6)Affiliate investments are defined by the1940the 1940 Act as investments in which between 5% and 25% (inclusive) of the voting securities are owned or an investment in an investment company’s investment adviser, and the investments are not classified as Control investments. Fair value as of December 31, 2015 and December 31, 2016 along with transactions during the year ended December 31, 2016 in these affiliated investments were as follows (in thousands):
    Twelve Months Ended December 31, 2016   Twelve Months Ended December 31, 2016
Affiliate Investments Fair Value at December 31, 2015 
Gross Additions (Cost)*
 
Gross Reductions (Cost)**
 Net Unrealized Gain (Loss) Fair Value at December 31, 2016 Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
AFG Capital Group, LLC               
Term loan $3,197
 $120
 $(3,238) $(79) $—
 $—
$256
$—
$—
Member units 505
 1
 (1) 182
 687
 —
—
—
—
Warrants 123
 —
 —
 44
 167
 —
—
—
—
Clad-Rex Steel, LLC               
Term loan —
 3,449
 —
 —
 3,449
 —
14
—
—
Term loan —
 99
 —
 —
 99
 —
—
1
—
Member units —
 1,820
 —
 —
 1,820
 —
—
—
—
Term loan (Clad-Rex Steel RE Investor, LLC) —
 298
 —
 —
 298
 —
—
—
—
Member units (Clad-Rex Steel RE Investor, LLC) —
 53
 —
 —
 53
 —
—
—
—
                
EIG Traverse Co-Investment, LP               
LP interests $4,755
 $5,051
 $(1) $100
 $9,905
 $—
$—
$56
$888
Freeport First Lien Loan Fund III, LP               
LP interests 2,077
 2,686
 —
 —
 4,763
 —
—
—
402
Gamber-Johnson Holdings, LLC               
Term loan —
 5,902
 —
 62
 5,964
 —
328
—
—
Common stock —
 3,711
 —
 1,019
 4,730
 —
—
101
—
Guerdon Modular Holdings, Inc.               
Term loan —
 2,651
 (4) (5) 2,642
 —
311
—
—
Common stock —
 303
 —
 (283) 20
 —
—
13
—
Class B preferred units —
 285
 —
 —
 285
 —
—
—
—
Gulf Publishing Holdings, LLC               
Term loan —
 2,455
 —
 —
 2,455
 —
219
—
—
Member units —
 781
 —
 —
 781
 —
—
—
—
Hawk Ridge Systems, LLC               
Term loan —
 2,451
 —
 —
 2,451
 —
22
—
—
Preferred member units —
 713
 —
 —
 713
 —
—
—
—
Preferred member units (HRS Services, ULC) —
 38
 —
 —
 38
 —
—
—
—
HWT, LLC               
Term loan 2,430
 211
 (50) —
 2,591
 —
283
—
—
Member units 986
 1
 (1) (1) 985
 —
—
32
108
M.H. Corbin, LLC               
Term loan 3,467
 4
 (172) —
 3,299
 —
351
—
—
Member units 1,500
 —
 —
 —
 1,500
 —
—
46
—
Mystic Logistics, Inc.               
Term loan 2,361
 8
 (59) (16) 2,294
 —
301
—
—
Common stock 1,492
 1
 —
 (48) 1,445
 —
—
—
—
Soft Touch Medical Holdings, LLC               
Term loan 1,402
 3
 (161) 16
 1,260
 —
144
—
—
Member units 1,008
 1
 (1) 610
 1,618
 —
—
27
65
  $25,303
 $33,096
 $(3,688) $1,601
 $56,312
 $—
$2,229
$276
$1,463
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(5) (7)Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.
(6) (8)Income producing through dividends or distributions.
(9)Index based floating interest rate is subject to contractual minimum interest rate. As noted in this schedule, 95% of these floating rate loans (based on the par amount) contain LIBOR or Term SOFR ("SOFR") floors which range between 0.75% and 2.00%, with a weighted-average floor of 1.17%.
(10)Private Loan portfolio investment. See Note C — Fair Value Hierarchy for Investments — Portfolio Composition for a description of Private Loan portfolio investments.
(11)Middle Market portfolio investment. See Note C — Fair Value Hierarchy for Investments — Portfolio Composition for a description of Middle Market portfolio investments.
(12)Other Portfolio investment. See Note C — Fair Value Hierarchy for Investments — Portfolio Composition for a description of Other Portfolio investments.
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
(13)Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets.
(14)Non-accrual and non-income producing debt investment.
(15)All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities.”
(16)Money market fund interests included in cash and cash equivalents.
(17)Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.
(18)Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C — Fair Value Hierarchy for Investments—Portfolio Composition for further discussion. Negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.
(19)Investments may have a portion, or all, of their income received from Paid-in-Kind (“PIK”) interest or dividends. PIK interest income and cumulative dividend income represent income not paid currently in cash. The difference between the Total Rate and PIK Rate represents the cash rate as of December 31, 2023.
(20)All portfolio company headquarters are based in the United States, unless otherwise noted.
(21)Portfolio company headquarters are located outside of the United States.
(22)Investment date represents the date of initial investment in the security position.
(23)Shares/Units represent ownership in a related Real Estate or HoldCo entity.
(24)Investment is not unitized. Presentation is made in percent of fully diluted ownership unless otherwise indicated.
(25)A majority of the variable rate loans in the Company’s Investment Portfolio bear interest at a rate that may be determined by reference to either LIBOR (“L”), SOFR (“SF”) or an alternate base rate (commonly based on the Federal Funds Rate or the Prime rate (“P”)), which typically resets every one, three, or six months at the borrower’s option. SOFR based contracts may include a credit spread adjustment (the “Adjustment”) that is charged in addition to the stated spread. The Adjustment is applied when the SOFR rate, plus the Adjustment, exceeds the stated floor rate, as applicable. As of December 31, 2023, SOFR based contracts in the portfolio had Adjustments ranging from 0.10% to 0.43%.
(26)As of December 31, 2023, borrowings under the loan facility bear interest at SOFR+7.00% (Floor 1.00%). Each new draw or funding on the facility has a different floating rate reset date. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(27)Warrants are presented in equivalent shares/units with a strike price of $0.01 per share/unit.
(28)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+10.00%. RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(29)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+7.00% (Floor 1.50%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(30)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+8.00% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(31)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+8.00% (Floor 2.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(32)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+6.75% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2023
(dollars in thousands)
(33)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+7.25% (Floor 1.00%). Each new draw or funding on the facility has a different floating rate reset date. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(34)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+6.50% (Floor 2.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(35)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+7.00% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(36)Index based floating interest rate is subject to contractual maximum base rate of 3.00%.
(37)The position is unfunded and no interest income is being earned as of December 31, 2023. The position may earn a nominal unused facility fee on committed amounts.
(38)Effective yield as of December 31, 2023 was approximately 5.25% on the Fidelity Government Portfolio Class III Fund.
(39)Effective yield as of December 31, 2023 was approximately 5.23% on the First American Treasury Obligations Fund Class Z.
(40)Warrants are presented in equivalent shares/units with a strike price of $1.00 per share/unit.
(41)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+6.00% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(42)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+6.00% (Floor 0.75%). Each new draw or funding on the facility has a different floating rate reset date. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(43)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+5.75% (Floor 1.00%). Each new draw or funding on the facility has a different floating rate reset date. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(44)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+7.00% (Floor 2.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.
(45)As of December 31, 2023, borrowings under the loan facility bore interest at SOFR+7.25% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2023.

85
Table of contents
MSC INCOME FUND, INC.
Consolidated Schedule of Investments
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Control Investments (5)
Copper Trail Fund Investments(12) (13)Investment Partnership
LP Interests (CTMH, LP)(24)07/17/201739.0%$713 $588 
GRT Rubber Technologies LLCManufacturer of Engineered Rubber Products
Secured Debt12/21/201810.12%L+6.00%12/21/2023330 324 330 
Secured Debt12/19/201412.12%L+8.00%10/29/202619,944 19,753 19,943 
Member Units(8)12/19/20142,8966,435 21,890 
26,512 42,163 
Harris Preston Fund Investments(12) (13)Investment Partnership
LP Interests (2717 MH, L.P.)(24)10/01/201749.3%3,895 7,552 
Subtotal Control Investments (8.3% of net assets at fair value)$31,120 $50,303 
Affiliate Investments (6)
AFG Capital Group, LLCProvider of Rent-to-Own Financing Solutions and Services
Preferred Member Units(8)11/07/201446$300 $2,350 
Analytical Systems Keco Holdings, LLCManufacturer of Liquid and Gas Analyzers
Secured Debt(9)08/16/2019L+10.00%8/16/2024— (2)(2)
Secured Debt(9)08/16/201914.13%L+10.00%8/16/20241,166 1,135 1,135 
Preferred Member Units05/20/2021607607 880 
Preferred Member Units08/16/201980014.13%800 — 
Warrants(27)08/16/20191058/16/202979 — 
2,619 2,013 
ATX Networks Corp.(11)Provider of Radio Frequency Management Equipment
Secured Debt(9)09/01/202112.23%L+7.50%9/1/20266,811 6,266 6,368 
Unsecured Debt09/01/202110.00%10.00%9/1/20283,417 2,337 2,614 
Common Stock09/01/2021585— 3,290 
8,603 12,272 
Barfly Ventures, LLC(10)Casual Restaurant Group
Member Units10/26/202012528 1,107 
Batjer TopCo, LLCHVAC Mechanical Contractor
Secured Debt03/07/20223/31/2027— (1)(1)
Secured Debt03/07/202211.00%3/31/20271,225 1,205 1,205 
Preferred Stock(8)03/07/2022453455 455 
1,659 1,659 
Brewer Crane Holdings, LLCProvider of Crane Rental and Operating Services
Secured Debt(9)01/09/201814.12%L+10.00%1/9/20231,491 1,491 1,491 
Preferred Member Units(8)01/09/20187371,070 1,770 
2,561 3,261 
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Centre Technologies Holdings, LLCProvider of IT Hardware Services and Software Solutions
Secured Debt(9)01/04/2019L+9.00%1/4/2026— — — 
Secured Debt(9)01/04/201913.13%L+9.00%1/4/20263,758 3,731 3,731 
Preferred Member Units01/04/20193,3271,531 2,170 
5,262 5,901 
Chamberlin Holding LLCRoofing and Waterproofing Specialty Contractor
Secured Debt(9)02/26/2018L+6.00%2/26/2023— — — 
Secured Debt(9)02/26/201812.13%L+8.00%2/26/20234,236 4,228 4,236 
Member Units(8)02/26/20181,0872,860 5,728 
Member Units(8) (23)11/02/2018261,786443 678 
7,531 10,642 
Charps, LLCPipeline Maintenance and Construction
Preferred Member Units(8)02/03/2017457491 3,330 
Clad-Rex Steel, LLCSpecialty Manufacturer of Vinyl-Clad Metal
Secured Debt(9)12/20/201613.23%SF+9.00%1/15/20242,620 2,620 2,620 
Secured Debt12/20/201610.00%12/20/2036262 260 260 
Member Units(8)12/20/20161791,820 2,060 
Member Units(23)12/20/201620053 152 
4,753 5,092 
Cody Pools, Inc.Designer of Residential and Commercial Pools
Secured Debt(9)03/06/202015.38%L+10.50%12/17/2026273 261 273 
Secured Debt(9)03/06/202015.38%L+10.50%12/17/20266,882 6,786 6,882 
Preferred Member Units(8) (23)03/06/20201472,079 14,550 
9,126 21,705 
Colonial Electric Company LLCProvider of Electrical Contracting Services
Secured Debt03/31/20213/31/2026— — — 
Secured Debt03/31/202112.00%3/31/20265,828 5,729 5,729 
Preferred Member Units(8)03/31/20214,3201,920 2,290 
7,649 8,019 
Datacom, LLCTechnology and Telecommunications Provider
Secured Debt03/01/20227.50%12/31/202525 25 25 
Secured Debt03/31/20217.50%12/31/2025958 895 865 
Preferred Member Units(8)03/31/20211,000290 300 
1,210 1,190 
Digital Products Holdings LLCDesigner and Distributor of Consumer Electronics
Secured Debt(9)04/01/201814.13%L+10.00%4/1/20233,883 3,878 3,878 
Preferred Member Units(8)04/01/20189642,375 2,459 
6,253 6,337 
Direct Marketing Solutions, Inc.Provider of Omni-Channel Direct Marketing Services
Secured Debt(9)02/13/2018L+11.00%2/13/2026— (5)— 
Secured Debt(9)12/27/202215.13%L+11.00%2/13/20265,352 5,306 5,352 
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Preferred Stock(8)02/13/20182,1002,100 5,558 
7,401 10,910 
Flame King Holdings, LLCPropane Tank and Accessories Distributor
Secured Debt(9)10/29/202110.75%L+6.50%10/31/20261,900 1,885 1,900 
Secured Debt(9)10/29/202113.25%L+9.00%10/31/20265,300 5,175 5,300 
Preferred Equity(8)10/29/20212,3402,600 4,400 
9,660 11,600 
Freeport Financial Funds(12) (13)Investment Partnership
LP Interests (Freeport First Lien Loan Fund III LP)(8) (24)07/31/20156.0%6,303 5,848 
Gamber-Johnson Holdings, LLCManufacturer of Ruggedized Computer Mounting Systems
Secured Debt(9)06/24/2016SF+8.50%1/1/2028— — — 
Secured Debt(9)12/15/202211.50%SF+8.50%1/1/202816,020 15,747 16,020 
Member Units(8)06/24/20162,2614,423 12,720 
20,170 28,740 
GFG Group, LLCGrower and Distributor of a Variety of Plants and Products to Other Wholesalers, Retailers and Garden Centers
Secured Debt03/31/20219.00%3/31/20262,836 2,779 2,836 
Preferred Member Units(8)03/31/2021561,225 1,790 
4,004 4,626 
Gulf Publishing Holdings, LLCEnergy Industry Focused Media and Publishing
Secured Debt(9)09/29/2017L+9.50%7/1/2027— — — 
Secured Debt07/01/202212.50%7/1/2027600 600 571 
Preferred Equity07/01/202215,9301,400 950 
Member Units04/29/2016920920 — 
2,920 1,521 
Harris Preston Fund Investments(12) (13)Investment Partnership
LP Interests (HPEP 3, L.P.)(24)08/09/20178.2%2,558 4,331 
Kickhaefer Manufacturing Company, LLCPrecision Metal Parts Manufacturing
Secured Debt10/31/201811.50%10/31/20235,104 5,075 5,093 
Secured Debt10/31/20189.00%10/31/2048970 961 961 
Preferred Equity10/31/20181453,060 1,800 
Member Units(8) (23)10/31/2018200248 713 
9,344 8,567 
Market Force Information, LLCProvider of Customer Experience Management Services
Secured Debt(14)07/28/201712.00%12.00%7/28/20236,520 6,463 403 
Member Units07/28/2017185,9804,160 — 
10,623 403 
MH Corbin Holding LLCManufacturer and Distributor of Traffic Safety Products
88
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt08/31/201513.00%12/31/20221,539 1,539 1,137 
Preferred Member Units03/15/201916,5001,100 — 
Preferred Member Units09/01/20151,0001,500 — 
4,139 1,137 
Mystic Logistics Holdings, LLCLogistics and Distribution Services Provider for Large Volume Mailers
Secured Debt08/18/20141/31/2024— — — 
Secured Debt08/18/201410.00%1/31/20241,436 1,436 1,436 
Common Stock(8)08/18/20141,468680 5,708 
2,116 7,144 
NexRev LLCProvider of Energy Efficiency Products & Services
Secured Debt02/28/20182/28/2025— — — 
Secured Debt02/28/201811.00%2/28/20252,866 2,828 2,119 
Preferred Member Units(8)02/28/201825,786,0462,053 280 
4,881 2,399 
NuStep, LLCDesigner, Manufacturer and Distributor of Fitness Equipment
Secured Debt(9)01/31/201710.63%L+6.50%1/31/20251,100 1,097 1,100 
Secured Debt01/31/201712.00%1/31/20254,610 4,603 4,603 
Preferred Member Units11/02/2022515515 1,290 
Preferred Member Units01/31/20171022,550 2,010 
8,765 9,003 
Oneliance, LLCConstruction Cleaning Company
Secured Debt(9)08/06/202115.13%L+11.00%8/6/20261,400 1,380 1,380 
Preferred Stock08/06/2021264264 264 
1,644 1,644 
Orttech Holdings, LLCDistributor of Industrial Clutches, Brakes and Other Components
Secured Debt(9)07/30/2021L+11.00%7/31/2026— (2)(2)
Secured Debt(9)07/30/202115.13%L+11.00%7/31/20265,900 5,814 5,814 
Preferred Stock(8) (23)07/30/20212,5002,500 2,940 
8,312 8,752 
Robbins Bros. Jewelry, Inc.Bridal Jewelry Retailer
Secured Debt(9)12/15/202112/15/2026— (8)(8)
Secured Debt(9)12/15/202112.50%12/15/20263,965 3,902 3,902 
Preferred Equity12/15/20211,2301,230 1,650 
5,124 5,544 
SI East, LLCRigid Industrial Packaging Manufacturing
Secured Debt08/31/20188/31/2023— — — 
Secured Debt08/31/20189.50%8/31/202329,929 29,795 29,929 
Preferred Member Units(8)08/31/201852406 4,550 
30,201 34,479 
Sonic Systems International, LLC(10)Nuclear Power Staffing Services
Secured Debt(9)08/20/202111.24%L+7.50%8/20/202618,425 18,143 18,425 
Common Stock08/20/202111,6471,584 1,490 
19,727 19,915 
Student Resource Center, LLC(10)Higher Education Services
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt12/31/202213.27%L+8.50%12/31/20275,556 5,063 5,063 
Preferred Equity12/31/20226,564,055— — 
5,063 5,063 
Tedder Industries, LLCManufacturer of Firearm Holsters and Accessories
Secured Debt08/31/201812.00%8/31/2023460 460 460 
Secured Debt08/31/201812.00%8/31/20233,800 3,797 3,780 
Preferred Member Units08/31/20181362,311 1,920 
6,568 6,160 
Trantech Radiator Topco, LLCTransformer Cooling Products and Services
Secured Debt05/31/20195/31/2024— (3)— 
Secured Debt05/31/201912.00%5/31/20241,980 1,960 1,980 
Common Stock(8)05/31/20191541,164 1,950 
3,121 3,930 
VVS Holdco LLCOmnichannel Retailer of Animal Health Products
Secured Debt(9) (23)12/01/2021L+6.00%12/1/2023— (5)(5)
Secured Debt(23)12/01/202111.50%12/1/20267,600 7,421 7,421 
Preferred Equity(8) (23)12/01/20212,9602,960 2,990 
10,376 10,406 
Subtotal Affiliate Investments (45.4% of net assets at fair value)$241,565 $277,000 
Non-Control Investments (7)
AAC Holdings, Inc.(11)Substance Abuse Treatment Service Provider
Secured Debt12/11/202018.00%18.00%6/25/2025$4,173 $3,963 $4,110 
Common Stock12/11/2020593,9273,148 — 
Warrants(27)12/11/2020197,71712/11/2025— — 
7,111 4,110 
AB Centers Acquisition Corporation(10)Applied Behavior Analysis Therapy Provider
Secured Debt(9)09/06/2022SF+6.00%9/6/2028— (5)(5)
Secured Debt(9)09/06/202210.20%SF+6.00%9/6/202886 77 86 
Secured Debt(9)09/06/202210.58%SF+6.00%9/6/20281,983 1,930 1,983 
2,002 2,064 
Acumera, Inc.(10)Managed Security Service Provider
Secured Debt(9)06/28/202213.88%L+9.50%10/26/20274,616 4,511 4,616 
Secured Debt(9)06/28/202213.57%L+9.00%10/26/20271,379 1,348 1,379 
5,859 5,995 
Adams Publishing Group, LLC(10)Local Newspaper Operator
Secured Debt(9) (28)03/11/202210.00%L+6.00%3/11/2027565 565 565 
Secured Debt(9) (28)03/11/202210.00%L+7.50%3/11/20272,826 2,819 2,826 
3,384 3,391 
ADS Tactical, Inc.(11)Value-Added Logistics and Supply Chain Provider to the Defense Industry
Secured Debt(9)03/29/202110.14%L+5.75%3/19/20269,125 8,996 8,213 
AMEREQUIP LLC.(10)Full Service Provider of Comprehensive Commercial Production Services, Including the Design, Engineering, and Manufacturing of Products It
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt(9)08/31/2022SF+7.40%8/31/2027— — — 
Secured Debt(9)08/31/202211.72%SF+7.40%8/31/20272,026 2,026 2,025 
Common Stock08/31/20221180 80 
2,106 2,105 
American Health Staffing Group, Inc.(10)Healthcare Temporary Staffing
Secured Debt(9)11/19/2021L+6.00%11/19/2026— (13)(13)
Secured Debt(9)11/19/202111.12%L+6.00%11/19/20268,271 8,206 8,271 
8,193 8,258 
American Nuts, LLC(10)Roaster, Mixer and Packager of Bulk Nuts and Seeds
Secured Debt(9)03/11/202210.46%SF+6.75%4/10/20264,438 4,416 4,148 
Secured Debt(9)03/11/202212.46%SF+8.75%4/10/20264,438 4,417 4,161 
8,833 8,309 
American Teleconferencing Services, Ltd.(11)Provider of Audio Conferencing and Video Collaboration Solutions
Secured Debt(14)09/17/20217.50%L+6.50%1/31/20232,425 2,375 136 
Secured Debt(9) (14)05/19/20167.50%L+6.50%6/8/202311,693 11,451 658 
13,826 794 
ArborWorks, LLC(10)Vegetation Management Services
Secured Debt(9)11/09/202113.41%L+9.00%11/9/20262,484 2,427 2,095 
Secured Debt(9)11/09/202113.56%L+9.00%11/9/202615,786 15,540 13,313 
Common Equity11/09/2021124124 — 
18,091 15,408 
Archer Systems, LLC(10)Mass Tort Settlement Administration Solutions Provider
Secured Debt(9)08/11/2022SF+6.50%8/11/2027— (4)(4)
Secured Debt(9)08/11/202210.92%SF+6.50%8/11/20272,205 2,165 2,170 
Common Stock08/11/202262,40262 62 
2,223 2,228 
ATS Operating, LLC(10)For-Profit Thrift Retailer
Secured Debt(9)01/18/2022SF+5.50%1/18/2027— — — 
Secured Debt(9)01/18/20229.32%SF+5.50%1/18/2027925 907 914 
Secured Debt(9)01/18/202211.32%SF+7.50%1/18/2027925 907 916 
Common Stock01/18/2022100,000100 90 
1,914 1,920 
AVEX Aviation Holdings, LLC(10)Specialty Aircraft Dealer
Secured Debt(9)12/23/2022SF+7.25%12/23/2027— (8)(8)
Secured Debt(9)12/23/202212.17%SF+7.25%12/23/20274,038 3,876 3,876 
Common Equity12/15/20215050 56 
3,918 3,924 
BBB Tank Services, LLCMaintenance, Repair and Construction Services to the Above-Ground Storage Tank Market
Unsecured Debt(9) (17)04/08/201615.12%L+11.00%4/8/2021200 200 200 
Unsecured Debt(9) (17)04/08/201615.12%L+11.00%4/8/20211,000 1,000 522 
Preferred Stock (non-voting)12/17/201815.00%41 — 
Member Units04/08/2016200,000200 — 
1,441 722 
Berry Aviation, Inc.(10)Charter Airline Services
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt07/06/201812.00%1.50%1/6/2024190 189 190 
Preferred Member Units(8) (23)11/12/2019122,41616.00%— 270 
Preferred Member Units(8) (23)07/06/20181,548,3878.00%8.00%1,161 4,561 
1,350 5,021 
Bettercloud, Inc.(10)SaaS Provider of Workflow Management and Business Application Solutions
Secured Debt(9)06/30/2022SF+1.00%6.00%6/30/2028— (22)(22)
Secured Debt(9)06/30/202211.40%SF+1.00%6.00%6/30/20287,991 7,848 7,991 
7,826 7,969 
Binswanger Enterprises, LLC(10)Glass Repair and Installation Service Provider
Member Units03/10/20171,050,0001,050 420 
Bluestem Brands, Inc.(11)Multi-Channel Retailer of General Merchandise
Secured Debt(9)10/19/2022L+8.50%8/28/2025— — — 
Secured Debt(9)08/28/202012.94%L+8.50%8/28/20253,473 2,455 3,366 
Common Stock(8)10/01/2020700,446— 4,708 
Warrants(27)10/19/2022175,11010/19/20321,111 1,173 
3,566 9,247 
Boccella Precast Products LLCManufacturer of Precast Hollow Core Concrete
Secured Debt09/23/202110.00%2/28/202780 80 80 
Member Units(8)06/30/2017540,000564 741 
644 821 
Brightwood Capital Fund Investments(12) (13)Investment Partnership
LP Interests (Brightwood Capital Fund III, LP)(8) (24)07/21/20140.5%2,449 1,576 
LP Interests (Brightwood Capital Fund IV, LP)(8) (24)10/26/20161.2%8,737 9,082 
11,186 10,658 
Buca C, LLCCasual Restaurant Group
Secured Debt06/30/20159.00%6/30/202311,740 11,740 8,345 
Preferred Member Units06/30/201546.00%6.00%3,040 — 
14,780 8,345 
Burning Glass Intermediate Holding Company, Inc.(10)Provider of Skills-Based Labor Market Analytics
Secured Debt(9)06/14/2021L+5.00%6/10/2026— (19)— 
Secured Debt(9)06/14/20218.91%L+5.00%6/10/202813,255 13,070 13,255 
13,051 13,255 
Cadence Aerospace LLC(10)Aerostructure Manufacturing
Secured Debt(9) (30)11/14/201711.99%L+8.50%0.01%11/14/202320,112 20,066 20,112 
CAI Software LLCProvider of Specialized Enterprise Resource Planning Software
Preferred Equity(8)12/13/2021379,338379 379 
Preferred Equity12/13/2021126,446— — 
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
379 379 
Camin Cargo Control, Inc.(11)Provider of Mission Critical Inspection, Testing and Fuel Treatment Services
Secured Debt(9)06/14/202110.88%L+6.50%6/4/20267,609 7,553 7,342 
Career Team Holdings, LLCProvider of Workforce Training and Career Development Services
Secured Debt(9)12/17/2021L+6.00%12/17/2026— (3)(3)
Secured Debt12/17/202112.50%12/17/20262,250 2,196 2,196 
Common Stock12/17/202150,000500 500 
2,693 2,693 
CaseWorthy, Inc.(10)SaaS Provider of Case Management Solutions
Secured Debt(9)05/18/2022L+6.00%5/18/2027— (4)(4)
Secured Debt(9)05/18/202210.73%L+6.00%5/18/20272,600 2,574 2,574 
Secured Debt(9)05/18/202210.48%L+5.75%5/18/20271,995 1,977 1,995 
Common Equity12/30/202280,00080 80 
4,627 4,645 
Channel Partners Intermediateco, LLC(10)Outsourced Consumer Services Provider
Secured Debt(9) (34)02/07/202210.72%SF+6.25%2/7/2027172 162 169 
Secured Debt(9) (35)02/07/202210.71%SF+6.25%2/7/20273,591 3,530 3,539 
3,692 3,708 
Clarius BIGS, LLC(10)Prints & Advertising Film Financing
Secured Debt(14) (17)09/23/201415.00%15.00%1/5/20152,747 2,403 19 
Classic H&G Holdings, LLCProvider of Engineered Packaging Solutions
Secured Debt(9)03/12/20209.75%L+6.00%3/12/20251,140 1,127 1,140 
Secured Debt03/12/20208.00%3/12/20254,819 4,754 4,819 
Preferred Member Units(8)03/12/2020391,440 6,160 
7,321 12,119 
Computer Data Source, LLC(10)Third Party Maintenance Provider to the Data Center Ecosystem
Secured Debt(9) (36)08/06/202112.56%L+8.00%8/6/20264,167 4,106 3,851 
Secured Debt(9)08/06/202112.56%L+8.00%8/6/202615,604 15,374 14,421 
19,480 18,272 
Construction Supply Investments, LLC(10)Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors
Member Units(8)12/29/2016861,6183,335 21,165 
Dalton US Inc.(10)Provider of Supplemental Labor Services
Secured Debt(9)08/16/202211.90%SF+8.00%8/16/202779 63 78 
Secured Debt(9)08/16/2022SF+8.00%8/16/2027— (5)(5)
Secured Debt(9)08/16/202212.56%SF+8.00%8/16/20271,035 1,016 1,020 
Common Stock08/16/20221414 14 
1,088 1,107 
DMA Industries, LLCDistributor of aftermarket ride control products
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt11/19/202112.00%11/19/20265,300 5,217 5,300 
Preferred Equity11/19/20211,4861,486 1,820 
6,703 7,120 
DTE Enterprises, LLC(10)Industrial Powertrain Repair and Services
Secured Debt(9)04/13/2018L+7.50%4/13/2023— (1)(1)
Secured Debt(9)04/13/201812.24%L+7.50%4/13/20236,119 6,110 5,978 
Class AA Preferred Member Units (non-voting)(8)04/13/201810.00%10.00%1,161 1,161 
Class A Preferred Member Units04/13/2018776,3168.00%8.00%776 380 
8,046 7,518 
Dynamic Communities, LLC(10)Developer of Business Events and Online Community Groups
Secured Debt(9)12/20/20229.18%SF+4.50%9.18%12/31/20261,875 1,717 1,717 
Secured Debt(9)12/20/202211.18%SF+6.50%11.18%12/31/20261,875 1,642 1,642 
Preferred Equity12/20/2022125,000128 128 
Preferred Equity12/20/20222,376,241— — 
Common Equity12/20/20221,250,000— — 
3,487 3,487 
Elgin AcquireCo, LLCManufacturer and Distributor of Engine and Chassis Components
Secured Debt(9)10/03/2022SF+6.00%10/3/2027— (1)(1)
Secured Debt10/03/202212.00%10/3/20271,227 1,192 1,192 
Secured Debt10/03/20229.00%10/3/2052415 411 411 
Common Stock10/03/202225497 497 
Common Stock(23)10/03/202261102 102 
2,201 2,201 
Emerald Technologies Acquisition Co, Inc.(11)Design & Manufacturing
Secured Debt(9)02/10/202210.67%SF+6.25%2/10/20282,453 2,411 2,328 
Engineering Research & Consulting, LLC(10)Provider of Engineering & Consulting Services to US Department of Defense
Secured Debt(9)05/23/202211.68%SF+6.50%5/23/202741 27 41 
Secured Debt(9)05/23/202210.92%SF+6.50%5/23/20285,159 5,070 5,159 
5,097 5,200 
EPIC Y-Grade Services, LP(11)NGL Transportation & Storage
Secured Debt(9)06/22/201810.70%L+6.00%6/30/20276,840 6,777 6,156 
Event Holdco, LLC(10)Event and Learning Management Software for Healthcare Organizations and Systems
Secured Debt(9) (23)12/22/202110.67%L+7.00%12/22/2026308 305 292 
Secured Debt(9) (23)12/22/202110.67%L+7.00%12/22/20263,692 3,663 3,507 
3,968 3,799 
Flip Electronics LLC(10)Distributor of Hard-to-Find and Obsolete Electronic Components
Secured Debt(9)03/24/202211.21%SF+7.50%1/2/2026818 818 818 
Secured Debt(9)01/04/202112.19%SF+7.50%1/2/202612,327 12,055 12,327 
12,873 13,145 
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Hawk Ridge Systems, LLCValue-Added Reseller of Engineering Design and Manufacturing Solutions
Secured Debt(9)12/02/201610.13%L+6.00%1/15/2026796 796 796 
Secured Debt12/02/20169.00%1/15/20268,200 8,147 8,200 
Preferred Member Units(8)12/02/201656713 4,370 
Preferred Member Units(23)12/02/20165638 230 
9,694 13,596 
HDC/HW Intermediate Holdings(10)Managed Services and Hosting Provider
Secured Debt(9)12/21/201814.34%SF+9.50%2.00%12/21/2023180 179 175 
Secured Debt(9)12/21/201814.34%SF+9.50%2.00%12/21/20231,780 1,772 1,731 
1,951 1,906 
HEADLANDS OP-CO LLC(10)Clinical Trial Sites Operator
Secured Debt(9)08/01/2022SF+6.50%8/1/2027— (18)(18)
Secured Debt(9)08/01/2022SF+6.50%8/1/2027— (18)(18)
Secured Debt(9)08/01/202210.62%SF+6.50%8/1/20274,975 4,884 4,975 
4,848 4,939 
Hybrid Promotions, LLC(10)Wholesaler of Licensed, Branded and Private Label Apparel
Secured Debt06/30/202112.07%SF+8.25%6/30/20267,875 7,762 6,826 
IG Parent Corporation(11)Software Engineering
Secured Debt(9) (37)07/30/202110.17%SF+5.75%7/30/2026465 447 465 
Secured Debt(9)07/30/202110.17%SF+5.75%7/30/20288,291 8,186 8,291 
8,633 8,756 
Implus Footcare, LLC(10)Provider of Footwear and Related Accessories
Secured Debt(9)06/01/201713.98%L+7.75%1.50%4/30/202416,921 16,914 15,961 
Independent Pet Partners Intermediate Holdings, LLC(10)Omnichannel Retailer of Specialty Pet Products
Secured Debt11/28/202214.42%SF+10.00%14.42%2/27/2023481 459 459 
Secured Debt(14)12/10/20206.00%6.00%11/20/202310,902 10,443 4,515 
Preferred Stock (non-voting)12/10/20206.00%6.00%2,470 — 
Preferred Stock (non-voting)12/10/2020— — 
Member Units11/20/20181,191,6671,192 — 
Warrants11/20/2018185,75711/19/2028— — 
14,564 4,974 
Industrial Services Acquisition, LLC(10)Industrial Cleaning Services
Secured Debt(9)08/13/202111.50%L+6.75%8/13/2026387 359 387 
Secured Debt(9)08/13/202111.50%L+6.75%8/13/202610,871 10,738 10,871 
Preferred Member Units(8) (23)01/31/201833610.00%10.00%301 338 
Preferred Member Units(8) (23)05/17/201918720.00%20.00%215 217 
Member Units(23)06/17/20162,1002,100 1,400 
13,713 13,213 
Infolinks Media Buyco, LLC(10)Exclusive Placement Provider to the Advertising Ecosystem
Secured Debt(9)11/01/2021L+5.50%11/1/2026— (48)(48)
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt(9)11/01/202110.23%L+5.50%11/1/202610,742 10,576 10,742 
10,528 10,694 
Interface Security Systems, L.L.C(10)Commercial Security & Alarm Services
Secured Debt(38)12/09/202114.22%L+10.00%8/7/20231,682 1,682 1,682 
Secured Debt(9) (14)08/07/201912.07%L+7.00%1.00%8/7/20237,334 7,254 1,085 
Common Stock12/07/20212,143— — 
8,936 2,767 
Intermedia Holdings, Inc.(11)Unified Communications as a Service
Secured Debt(9)08/03/201810.38%L+6.00%7/19/20255,621 5,613 4,342 
Invincible Boat Company, LLC.(10)Manufacturer of Sport Fishing Boats
Secured Debt(9)08/28/201910.14%L+6.50%8/28/2025622 618 622 
Secured Debt(9)08/28/201910.17%L+6.50%8/28/202517,148 17,050 17,148 
17,668 17,770 
INW Manufacturing, LLC(11)Manufacturer of Nutrition and Wellness Products
Secured Debt(9)05/19/202110.48%L+5.75%3/25/20276,984 6,825 5,972 
Iron-Main Investments, LLCConsumer Reporting Agency Providing Employment Background Checks and Drug Testing
Secured Debt08/02/202112.50%11/15/20261,133 1,108 1,108 
Secured Debt09/01/202112.50%11/15/2026788 771 771 
Secured Debt11/15/202112.50%11/15/20262,236 2,236 2,236 
Secured Debt11/15/202112.50%11/15/20264,928 4,813 4,813 
Common Stock08/03/202144,944449 449 
9,377 9,377 
Isagenix International, LLC(11)Direct Marketer of Health & Wellness Products
Secured Debt(9) (14)06/21/20189.93%L+7.75%6/14/20255,053 5,034 1,537 
Jackmont Hospitality, Inc.(10)Franchisee of Casual Dining Restaurants
Secured Debt(9)10/26/202212.23%L+7.50%11/4/20241,000 965 1,000 
Secured Debt(9)11/08/202112.23%L+7.50%11/4/20244,126 4,126 4,126 
Preferred Equity(8)11/08/20215,653,33312.00%12.00%242 1,247 
5,333 6,373 
Joerns Healthcare, LLC(11)Manufacturer and Distributor of Health Care Equipment & Supplies
Secured Debt11/15/202118.00%1/31/20241,935 1,935 1,935 
Secured Debt(14)08/21/201919.75%19.75%8/21/20243,351 3,325 418 
Common Stock08/21/2019392,5143,678 — 
8,938 2,353 
Johnson Downie Opco, LLCExecutive Search Services
Secured Debt(9)12/10/2021L+11.50%12/10/2026— (3)— 
Secured Debt(9)12/10/202115.63%L+11.50%12/10/20261,111 1,093 1,111 
Preferred Equity(8)12/10/2021350350 620 
1,440 1,731 
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
JorVet Holdings, LLCSupplier and Distributor of Veterinary Equipment and Supplies
Secured Debt03/28/202212.00%3/28/20272,850 2,802 2,802 
Preferred Equity(8)03/28/202211,9341,193 1,193 
3,995 3,995 
JTI Electrical & Mechanical, LLC(10)Electrical, Mechanical and Automation Services
Secured Debt(9)12/22/2021L+6.00%12/22/2026— (11)(11)
Secured Debt(9)12/22/202110.73%L+6.00%12/22/20263,059 3,010 3,059 
Common Equity12/22/2021140,351140 240 
3,139 3,288 
KMS, LLC(10)Wholesaler of Closeout and Value-priced Products
Secured Debt(9)10/04/202112.00%L+7.25%10/4/20261,330 1,250 1,244 
Secured Debt(9)10/04/202112.00%L+7.25%10/4/20269,381 9,238 8,778 
10,488 10,022 
Lightbox Holdings, L.P.(11)Provider of Commercial Real Estate Software
Secured Debt05/09/20199.73%L+5.00%5/9/20265,826 5,783 5,622 
LL Management, Inc.(10)Medical Transportation Service Provider
Secured Debt(9)05/02/201911.21%SF+7.25%9/25/20238,003 7,987 7,945 
Secured Debt(9)05/02/201911.67%SF+7.25%9/25/20236,164 6,148 6,119 
Secured Debt(9)05/12/202211.67%SF+7.25%9/25/20238,884 8,809 8,820 
22,944 22,884 
LLFlex, LLC(10)Provider of Metal-Based Laminates
Secured Debt(9)08/16/202112.74%L+9.00%8/16/20264,938 4,856 4,833 
Logix Acquisition Company, LLC(10)Competitive Local Exchange Carrier
Secured Debt(9)01/08/201810.13%L+5.75%12/22/20249,506 9,476 7,843 
Mako Steel, LP(10)Self-Storage Design & Construction
Secured Debt(9) (31)03/15/202111.79%L+7.25%3/15/20263,448 3,395 3,426 
Secured Debt(9)03/15/202111.09%L+7.25%3/15/202617,070 16,845 16,959 
20,240 20,385 
MB2 Dental Solutions, LLC(11)Dental Partnership Organization
Secured Debt(9)01/28/202110.42%SF+6.00%1/29/20278,359 8,223 8,359 
Secured Debt(9)01/28/202110.42%SF+6.00%1/29/20277,876 7,783 7,876 
16,006 16,235 
MetalForming AcquireCo, LLCDistributor of Sheet Metal Folding and Metal Forming Equipment
Secured Debt10/19/202210/19/2024— (1)(1)
Secured Debt10/19/202212.75%10/19/20271,748 1,697 1,697 
Preferred Equity(8)10/19/2022434,3318.00%8.00%441 441 
Common Stock10/19/2022112,865113 113 
2,250 2,250 
Microbe Formulas, LLC(10)Nutritional Supplements Provider
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt(9)04/04/2022SF+6.25%4/3/2028— (7)(7)
Secured Debt(9)04/04/20229.86%SF+6.25%4/3/20283,142 3,085 3,034 
3,078 3,027 
Mills Fleet Farm Group, LLC(10)Omnichannel Retailer of Work, Farm and Lifestyle Merchandise
Secured Debt(9)10/24/201810.66%L+6.25%10/24/202418,769 18,559 18,338 
MonitorUS Holding, LLC(10) (13) (21)SaaS Provider of Media Intelligence Services
Secured Debt(9)05/24/2022L+7.00%5/24/2027— (19)(19)
Secured Debt(9)05/24/202211.73%L+7.00%5/24/20272,882 2,828 3,139 
Secured Debt(9)05/24/202211.73%L+7.00%5/24/20274,906 4,820 4,906 
Common Stock08/30/202212,798,820256 256 
7,885 8,282 
NinjaTrader, LLC(10)Operator of Futures Trading Platform
Secured Debt(9)12/18/2019L+6.25%12/18/2024— (1)— 
Secured Debt(9)12/18/2019L+6.25%12/18/2024— (23)(23)
Secured Debt(9)12/18/20199.99%L+6.25%12/18/202411,634 11,524 11,634 
11,500 11,611 
NTM Acquisition Corp.(11)Provider of B2B Travel Information Content
Secured Debt(9)07/12/20169.50%L+6.25%1.00%6/7/20244,036 4,034 3,915 
NWN Corporation(10)Value Added Reseller and Provider of Managed Services to a Diverse Set of Industries
Secured Debt(9) (39)05/07/202110.85%SF+8.00%5/7/20261,570 1,519 1,482 
Secured Debt(9)05/07/202112.56%SF+8.00%5/7/202620,786 20,476 19,620 
Secured Debt12/16/202220.00%20.00%8/6/20263,226 3,065 3,065 
25,060 24,167 
OVG Business Services, LLC(10)Venue Management Services
Secured Debt(9)11/29/202110.64%L+6.25%11/19/202817,413 17,265 16,368 
Paragon Healthcare, Inc.(10)Infusion Therapy Treatment Provider
Secured Debt(9)01/19/202210.26%SF+5.75%1/19/202771 57 70 
Secured Debt(9) (29)01/19/20229.96%SF+5.75%1/19/2027356 343 349 
Secured Debt(9)01/19/20229.81%SF+5.75%1/19/20272,363 2,304 2,317 
2,704 2,736 
PTL US Bidco, Inc(13) (40)Manufacturers of Equipment, Including Drilling Rigs and Equipment, and Providers of Supplies and Services to Companies Involved In the Drilling, Evaluation and Completion of Oil and Gas Wells.
Secured Debt(9)08/19/2022SF+7.25%8/19/2027— (12)(12)
Secured Debt(9)08/19/202211.80%SF+7.25%8/19/20271,852 1,817 1,828 
1,805 1,816 
RA Outdoors LLC(10)Software Solutions Provider for Outdoor Activity Management
Secured Debt(9)04/08/2021SF+6.75%4/8/2026— (11)(11)
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Secured Debt(9)04/08/202110.56%SF+6.75%4/8/202612,917 12,789 11,685 
12,778 11,674 
Research Now Group, Inc. and Survey Sampling International, LLC(11)Provider of Outsourced Online Surveying
Secured Debt(9)12/29/20178.84%L+5.50%12/20/20249,820 9,820 7,434 
RM Bidder, LLC(10)Scripted and Unscripted TV and Digital Programming Provider
Member Units11/12/20151,85431 13 
Warrants(26)11/12/2015218,60110/20/2025284 — 
315 13 
Roof Opco, LLC(10)Residential Re-Roofing/Repair
Secured Debt(9)08/27/202110.97%SF+6.50%8/27/2026389 375 389 
Secured Debt(9)08/27/202110.32%SF+6.50%8/27/20262,917 2,835 2,917 
Secured Debt(9)08/27/202110.32%SF+6.50%8/27/20263,967 3,906 3,967 
7,116 7,273 
Rug Doctor, LLC.(10)Carpet Cleaning Products and Machinery
Secured Debt(9)07/16/202113.02%SF+6.25%2.00%11/16/20246,250 6,212 5,597 
Secured Debt(9)07/16/202113.02%SF+6.25%2.00%11/16/20249,250 9,190 8,293 
15,402 13,890 
Savers, Inc.(11)For-Profit Thrift Retailer
Secured Debt(9)05/14/202110.34%SF+5.50%4/26/20284,281 4,270 4,149 
SIB Holdings, LLC(10)Provider of Cost Reduction Services
Secured Debt(9)10/29/202111.01%L+6.25%10/29/2026522 511 491 
Secured Debt(9)10/29/202111.01%L+6.25%10/29/20261,954 1,908 1,803 
Secured Debt(9)10/29/202111.01%L+6.25%10/29/20269,726 9,576 8,974 
Common Equity10/29/2021119,048250 183 
12,245 11,451 
Slick Innovations, LLCText Message Marketing Platform
Secured Debt09/13/201814.00%12/22/20273,460 3,334 3,460 
Common Stock(8)09/13/201817,500114 400 
3,448 3,860 
South Coast Terminals Holdings, LLC(10)Specialty Toll Chemical Manufacturer
Secured Debt(9)12/10/2021L+5.75%12/13/2026— (6)(6)
Secured Debt(9)12/10/20219.69%L+5.75%12/13/20263,523 3,467 3,523 
Common Equity12/10/202160,60661 92 
3,522 3,609 
SPAU Holdings, LLC(10)Digital Photo Product Provider
Secured Debt(9)07/01/2022SF+7.50%7/1/2027— (18)(18)
Secured Debt(9)07/01/202211.06%SF+7.50%7/1/20274,975 4,887 4,975 
Common Stock07/01/2022200,000200 200 
5,069 5,157 
Tex Tech Tennis, LLC(10)Sporting Goods & Textiles
Preferred Equity(23)07/07/20211,000,0001,000 1,830 
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
The Affiliati Network, LLCPerformance Marketing Solutions
Secured Debt08/09/202113.00%8/9/202630 26 26 
Secured Debt08/09/202113.00%8/9/20262,380 2,341 2,341 
Preferred Stock(8)08/09/2021320,0001,600 1,600 
3,967 3,967 
U.S. TelePacific Corp.(11)Provider of Communications and Managed Services
Secured Debt(9)05/17/201711.57%SF+1.25%7.25%5/2/202613,425 13,358 5,018 
USA DeBusk LLC(10)Provider of Industrial Cleaning Services
Secured Debt(9)10/22/20199.82%L+5.75%9/8/202618,013 17,828 18,013 
Vida Capital, Inc(11)Alternative Asset Manager
Secured Debt10/10/201910.38%L+6.00%10/1/20266,263 6,208 4,885 
Vistar Media, Inc.(10)Operator of Digital Out-of-Home Advertising Platform
Preferred Stock04/03/201970,207767 2,250 
Volusion, LLCProvider of Online Software-as-a-Service eCommerce Solutions
Secured Debt(17)01/26/201511.50%1/26/20207,172 7,172 6,392 
Unsecured Convertible Debt05/16/20188.00%11/16/2023175 175 — 
Preferred Member Units01/26/20152,090,0016,000 — 
Warrants(27)01/26/2015784,8671/26/20251,104 — 
14,451 6,392 
VORTEQ Coil Finishers, LLC(10)Specialty Coating of Aluminum and Light-Gauge Steel
Common Equity(8)11/30/2021769,231769 2,910 
Wall Street Prep, Inc.(10)Financial Training Services
Secured Debt(9)07/19/2021L+7.00%7/19/2026— (7)(7)
Secured Debt(9)07/19/202110.74%L+7.00%7/19/20265,328 5,252 5,216 
Common Stock07/19/2021500,000500 530 
5,745 5,739 
Watterson Brands, LLC(10)Facility Management Services
Secured Debt(9)12/17/202110.73%L+6.00%12/17/202651 46 51 
Secured Debt(9)12/17/202110.73%L+6.00%12/17/202653 45 53 
Secured Debt(9)12/17/202110.73%L+6.00%12/17/20264,142 4,089 4,141 
4,180 4,245 
West Star Aviation Acquisition, LLC(10)Aircraft, Aircraft Engine and Engine Parts
Secured Debt(9)03/01/2022SF+6.00%3/1/2028— (6)(6)
Secured Debt(9)03/01/20228.59%SF+6.00%3/1/20282,978 2,926 2,948 
Common Stock03/01/2022200,000200 250 
3,120 3,192 
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
Portfolio Company (1) (20)Business DescriptionType of Investment (2) (3) (15)Investment Date (22)Shares/UnitsTotal RateReference Rate and Spread (25)PIK Rate (19)Maturity DatePrincipal (4)Cost (4)Fair Value (18)
Winter Services LLC(10)Provider of Snow Removal and Ice Management Services
Secured Debt(9)11/19/2021L+7.00%11/19/2026— (43)— 
Secured Debt(9)11/19/2021L+7.00%11/19/2026— (43)(43)
Secured Debt(9)11/19/202110.74%L+7.00%11/19/202612,500 12,305 12,487 
12,219 12,444 
World Micro Holdings, LLCSupply Chain Management
Secured Debt12/12/202213.00%12/12/20271,970 1,930 1,930 
Preferred Equity12/12/2022530530 530 
2,460 2,460 
Xenon Arc, Inc.(10)Tech-enabled Distribution Services to Chemicals and Food Ingredients Primary Producers
Secured Debt12/17/2021L+5.25%12/17/2026— (6)(6)
Secured Debt12/17/202110.84%L+5.25%12/17/20271,200 1,169 1,192 
Secured Debt12/17/20218.63%L+5.25%12/17/20272,370 2,332 2,354 
3,495 3,540 
YS Garments, LLC(11)Designer and Provider of Branded Activewear
Secured Debt(9)08/22/20189.51%L+5.50%8/9/20246,329 6,310 6,064 
Zips Car Wash, LLC(10)Express Car Wash Operator
Secured Debt(9)02/11/202211.67%SF+7.25%3/1/20242,388 2,357 2,388 
Secured Debt(9) (32)02/11/202211.67%SF+7.25%3/1/2024599 594 597 
2,951 2,985 
Subtotal Non-Control/Non-Affiliate Investments (121.5% of net assets at fair value)$787,201 $740,840 
Total Portfolio Investments, December 31, 2022 (175.2% of net assets at fair value)$1,059,886 $1,068,143 
Short-Term Investments (16)
US Bank Money Market Account (21)$8,347 $8,347 
Total Short-Term Investments$8,347 $8,347 

(1)All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note C—Fair Value Hierarchy for Investments—Portfolio Composition for a description of Lower Middle Market portfolio investments. All of the Company’s investments, unless otherwise noted, are encumbered as security for one of the Company’s Credit Facilities.
(2)Debt investments are income producing, unless otherwise noted by footnote (14), as described below. Equity and warrants are non-income producing, unless otherwise noted by footnote (8), as described below.
(3)See Note C — Fair Value Hierarchy for Investments — Portfolio Composition and Schedule 12-14 for a summary of geographic location of portfolio companies.
(4)Principal is net of repayments. Cost is net of repayments and accumulated unearned income.
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
(5)Control investments are defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained. Fair value
(6)Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% (inclusive) of December 31, 2016 and December 31, 2017 along with transactions during the year ended December 31, 2017 in these controlled investments were as follows (in thousands):
    Twelve Months Ended December 31, 2016   Twelve Months Ended December 31, 2016
Controlled Investments Fair Value at December 31, 2015 
Gross Additions (Cost)*
 
Gross Reductions (Cost)**
 Net Unrealized Gain (Loss) Fair Value at December 31, 2016 Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
GRT Rubber Technologies, LLC               
Term loan $7,806
 $37
 $(1,395) $90
 $6,538
 $—
$740
$—
$—
Member units 7,674
 —
 —
 2,330
 10,004
 —
—
81
107
  $15,480
 $37
 $(1,395) $2,420
 $16,542
 $—
$740
$81
$107
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existingvoting securities for one or more new securitiesare owned and the movement of an existing portfolio company into this category from a different category.investments are not classified as Control investments.
** Gross reductions include decreases in(7)Non-Control/Non-Affiliate investments are defined by the cost basis of1940 Act as investments resulting from principal collections related to investment repaymentsthat are neither Control investments nor Affiliate investments.
(8)Income producing through dividends or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.distributions.
(7) Principal is net of repayments. Cost represents amortized cost which is net of repayments and adjusted for the amortization of premiums and/or accretion of discounts, as applicable.
(8) (9)Index based floating interest rate is subject to contractual minimum interest rates.rate. As noted in this schedule, 93% of the loans (based on the par amount) contain LIBOR floors which range between 0.50% and 2.00%, with a weighted-average LIBOR floor of 1.04%.
(9) The investment(10)Private Loan portfolio investment. See Note C—Fair Value Hierarchy for Investments—Portfolio Composition for a description of Private Loan portfolio investments.
(11)Middle Market portfolio investment. See Note C—Fair Value Hierarchy for Investments—Portfolio Composition for a description of Middle Market portfolio investments.
(12)Other Portfolio investment. See Note C—Fair Value Hierarchy for Investments—Portfolio Composition for a description of Other Portfolio investments.
(13)Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. A BDC may not acquire any asset other than qualifyingQualifying assets unless, at the time the acquisition is made, qualifying assetsmust represent at least 70% of total assets at the BDC’s totaltime of acquisition of any additional non-qualifying assets. As of December 31, 2016, approximately 13.8%
(14)Non-accrual and non-income producing debt investment.
(15)All of the Company’s portfolio investments were considered non-qualifying.are generally subject to restrictions on resale as “restricted securities.”
(10) Investment is classified as a Lower Middle Market investment.
(11) Investment is classified as a Private Loan portfolio investment.
(12) Investment or portion of investment is under contract to purchase and met trade date accounting criteria as of December 31, 2016. Settlement occurred or is scheduled to occur after December 31, 2016.
(13) Investment serviced by Main Street pursuant to servicing arrangements with the Company.
(14) Second lien secured debt investment.
(15) Investment is classified as an Other Portfolio investment.
(16) Income producing through dividends or distributions.
(17) Unsecured debt investment.
(18) Investment is on non-accrual status as of December 31, 2016.
(19) Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.
(20) Short termShort-term investments represent an investment in a fund that invests in highly liquid investments with average original maturity dates of three months or less. These short-term investments are included as Cash and cash equivalents on the Consolidated Balance Sheets.
(17)Maturity date is under on-going negotiations with the portfolio company and other lenders, if applicable.
(18)Investment fair value was determined using significant unobservable inputs, unless otherwise noted. See Note C — Fair Value Hierarchy for Investments—Portfolio Composition for further discussion. Negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.
(19)Investments may have a portion, or all, of their income received from Paid-in-Kind (“PIK”) interest or dividends. PIK interest income and cumulative dividend income represent income not paid currently in cash. The difference between the Total Rate and PIK Rate represents the cash rate as of December 31, 2022.
(20)All portfolio company headquarters are based in the United States, unless otherwise noted.
(21)Effective yield as of December 31, 20162022 was approximately 0.01%.0.005% on the US Bank Money Market Account.
(22)Investment date represents the date of initial investment in the security position.
(23)Shares/Units represent ownership in a related Real Estate or HoldCo entity.
(24)Investment is not unitized. Presentation is made in percent of fully diluted ownership unless otherwise indicated.
(25)A majority of the variable rate loans in the Company’s Investment Portfolio bear interest at a rate that may be determined by reference to either LIBOR (“L”), SOFR (“SF”) or an alternate Base rate (commonly based on the Federal Funds Rate or the Prime rate (“P”)), which typically resets every one, three, or six months at the borrower’s option. SOFR based contracts may include a credit spread adjustment (the “Adjustment”) that is charged in addition to the stated spread. The 1 week and 1, 2, 3 and 6 month LIBOR rates were 0.72%Adjustment is applied when the SOFR rate, plus the Adjustment, exceeds the stated floor rate, as applicable. As of December 31, 2022, 0.77%, 0.82%,SOFR based contracts in the portfolio had Adjustments ranging from 0.10% to 0.26%.
(26)Warrants are presented in equivalent units with a strike price of $14.28 per unit.
(27)Warrants are presented in equivalent shares/units with a strike price of $0.01 per share/unit.
(28)Index based floating interest rate is subject to contractual maximum base rate of 2.50%.
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MSC INCOME FUND, INC.
Consolidated Schedule of Investments (Continued)
December 31, 2022
(dollars in thousands)
(29)As of December 31, 2022, borrowings under the loan facility bore interest at SOFR+5.75% (Floor 1.00% and 1.32%, respectively,). Delayed draw term loan facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2016. 2022.
(30)The security has an effective contractual interest rate of 2.00% PIK + LIBOR+6.50%, Floor 1.00%,but the issuer may, in its discretion, elect to pay the PIK interest in cash. The rate presented represents the effective current yield based on actual LIBORpayments received during the period.
(31)As of December 31, 2022, borrowings under the loan facility bore interest at LIBOR+7.25% (Floor 0.75%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for each loan listed may not beborrowings under the applicable LIBOR ratefacility, as of December 31, 2016, as2022.
(32)As of December 31, 2022, borrowings under the loan may have been priced or repriced basedfacility bore interest at SOFR+7.25% (Floor 1.00%). Each new draw on the delayed draw term loan facility has a LIBORdifferent floating rate prior to or subsequent to December 31, 2016.reset date. The prime rate was 3.75%presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2016.2022.

(33)The position is unfunded and no interest income is being earned as of December 31, 2022. The position may earn a nominal unused facility fee on committed amounts.

(34)As of December 31, 2022, borrowings under the loan facility bore interest at SOFR+6.25% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2022.
See notes(35)As of December 31, 2022, borrowings under the loan facility bore interest at SOFR+6.25% (Floor 1.00%). Due to an amendment and subsequent funding during the consolidated financial statements.quarter, the term loan facility has different floating rate reset dates. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2022.


(36)As of December 31, 2022, borrowings under the loan facility bore interest at LIBOR+8.00% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2022.

(37)As of December 31, 2022, borrowings under the loan facility bore interest at SOFR+5.75% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2022.
HMS Income Fund, Inc.(38)As of December 31, 2022, borrowings under the loan facility bore interest at LIBOR+10.00%. RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2022.
(39)As of December 31, 2022, borrowings under the loan facility bore interest at SOFR+ 8.00% (Floor 1.00%). RLOC facility permits the borrower to make an interest rate election regarding the base rate on each draw under the facility. The rate presented represents a weighted-average rate for borrowings under the facility, as of December 31, 2022.
(40)Portfolio company headquarters are located outside of the United States.

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MSC INCOME FUND, INC.

Notes to the Consolidated Financial Statements


NOTE A—ORGANIZATION AND BASIS OF PRESENTATION
Note 1. Principal Business and Organization

HMSMSC Income Fund, Inc. (the(“MSIF” or, together with its consolidated subsidiaries, “MSC Income Fund” or the “Company”) is a principal investment firm primarily focused on providing debt capital to middle market (“Middle Market”) companies and customized debt and equity financing to lower middle market (“LMM”) companies. MSC Income Fund’s portfolio investments are typically made to support leveraged buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSC Income Fund seeks to partner with private equity funds in its Private Loan (as defined below) and Middle Market investment strategies. MSC Income Fund invests primarily in secured debt investments of Middle Market companies generally headquartered in the United States and in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States. MSC Income Fund seeks to partner with entrepreneurs, business owners and management teams and generally provides “one-stop” financing alternatives within its LMM investment strategy.
MSIF was formed as a Maryland corporation onin November 28, 2011 under the General Corporation Law of the State of Maryland. The Company isto operate as an externally managed non-diversified closed-end management investmentbusiness development company that has elected to be treated as a BDC(“BDC”) under the Investment Company Act of 1940, Act. The Companyas amended (the “1940 Act”). MSIF has elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, MSIF generally does not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders.

The Company’s primary investment objective is to generate current income through debt and equity investments. A secondary objectiveOn October 28, 2020, MSIF’s stockholders approved the appointment of the Company is to generate long-term capital appreciation through equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities. The Company’s portfolio strategy is to invest primarily in illiquid debt and equity securities issued by lower middle market (“LMM”) companies, which generally have annual revenues between $10 million and $150 million, and middle market (“Middle Market”) companies that are generally larger in size than the LMM companies. The Company categorizes some of its investments in LMM companies and Middle Market companies as private loan (“Private Loan”) portfolio investments. Private Loan investments, often referred to in the debt markets as “club deals,” are investments, generally in debt instruments, that the Company originates on a collaborative basis with other investment funds. Private Loan investments are typically similar in size, structure, terms and conditions to investments the Company holds in its LMM portfolio and Middle Market portfolio. The Company’s portfolio also includes other portfolio (“Other Portfolio”) investments primarily consisting of the Company’s investment in HMS-ORIX (see Note 4 - Investment in HMS-ORIX SLF LLC) and investments managed by third parties, which differ from the typical profiles for the Company’s other types of investments.

The Company previously registered for sale up to 150,000,000 shares of common stock pursuant to a registration statement on Form N-2 (File No. 333-178548) which was initially declared effective by the Securities and Exchange Commission (the “SEC”) on June 4, 2012 (the “Initial Offering”). The Initial Offering terminated on December 1, 2015. The Company had raised approximately $601.2 million under the Initial Offering, including proceeds from the dividend reinvestment plan of approximately $22.0 million. The Company also registered for sale up to $1,500,000,000 worth of shares of common stock (the “Offering”) pursuant to a new registration statement on Form N-2 (File No. 333-204659), as amended, most recently declared effective on May 1, 2017. With the approval of the Company’s board of directors, the Company closed the Offering to new investors effective September 30, 2017. Through December 31, 2017, the Company raised approximately $184.1 million in the Offering, including proceeds from the distribution reinvestment plan of approximately $52.4 million.

The Company has three wholly owned subsidiaries. HMS Funding I LLC (“HMS Funding”) and HMS Equity Holding, LLC (“HMS Equity Holding”) were both organized as Delaware limited liability companies and HMS Equity Holding II, Inc. (“HMS Equity Holding II”) was organized as a Delaware corporation. HMS Funding was created pursuant to the Deutsche Bank Credit Facility (as defined below in Note 6 - Borrowings) in order to function as a “Structured Subsidiary,” which is permitted to incur debt outside of the EverBank Credit Facility (as defined below in Note 6 - Borrowings).

The business of the Company is managed by HMS Adviser LP (the “Adviser”), a Texas limited partnership and affiliate of Hines Interests Limited Partnership (“Hines”), under an Investment Advisory and Administrative Services Agreement dated May 31, 2012 (as amended, the “Investment Advisory Agreement”). The Company and the Adviser have retained MSC Adviser I, LLC (the “Sub-Adviser”“Adviser”), awhich is wholly-owned subsidiary ofby Main Street Capital Corporation (“Main Street”), a New York Stock Exchange listed BDC, as the Company’sMSIF’s investment sub-adviser, pursuant toadviser and administrator under an Investment Sub-AdvisoryAdvisory and Administrative Services Agreement dated October 30, 2020 (the “Sub-Advisory“Investment Advisory Agreement”). In such role, the Adviser has the responsibility to manage the business of MSC Income Fund, including the responsibility to identify, evaluate, negotiate and structure prospective investments, make investment and portfolio management recommendations for approval by the Adviser,decisions, monitor the Company’sMSC Income Fund’s investment portfolio and provide certain ongoing administrative servicesservices.
MSIF has certain direct and indirect wholly-owned subsidiaries that have elected to be taxable entities (the “Taxable Subsidiaries”). The primary purpose of the Adviser. The AdviserTaxable Subsidiaries is to permit MSIF to hold equity investments in portfolio companies which are “pass-through” entities for tax purposes. MSIF also has certain direct and indirect wholly-owned subsidiaries formed for financing purposes (the “Structured Subsidiaries”).
Unless otherwise noted or the context otherwise indicates, the terms “we,” “us,” “our,” the “Company” and “MSC Income Fund” refer to MSIF and its consolidated subsidiaries, which include the Taxable Subsidiaries and the Sub-Adviser are collectively referred to as the “Advisers”, and each is registered as an investment adviser under the Investment Advisers Act of 1940, as amended . Upon the execution of the Sub-Advisory Agreement, Main Street became an affiliate of the Company. The Company’s board of directors most recently reapproved the Investment Advisory Agreement and Sub-Advisory Agreement on May 12, 2017. The Company engaged Hines Securities, Inc. (the “Dealer Manager”), an affiliate of the Adviser, to serve as the Dealer Manager for the Offering.Structured Subsidiaries.

Note 2.Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The Company is an investment company, as defined in the accounting and reporting guidance under Topic 946, Financial Services-Investment Companies, of the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification, as amended


(the “ASC”). The accompanyingMSC Income Fund’s consolidated financial statements have beenare prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies (“ASC 946”). For each of the periods presented herein, MSC Income Fund’s consolidated financial statements include the accounts of the CompanyMSIF and its wholly owned consolidated subsidiaries: HMS Funding, HMS Equity Holdingsubsidiaries. The Investment Portfolio, as used herein, refers to all of MSC Income Fund’s investments in Private Loan portfolio companies, investments in LMM portfolio companies, investments in Middle Market portfolio companies and HMS Equity Holding II. AllOther Portfolio investments (see Note C — Fair Value Hierarchy for Investments — Portfolio Composition — Investment Portfolio Composition for additional discussion of MSC Income Fund’s Investment Portfolio and definitions for the defined terms Private Loan and Other Portfolio). MSC Income Fund’s results of operations and cash flows for the years ended December 31, 2023, 2022 and 2021 and financial position as of December 31, 2023 and 2022, are presented on a consolidated basis. The effects of all intercompany accountstransactions between MSIF and transactionsits consolidated subsidiaries have been eliminated in consolidation.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Principles of Consolidation
Under the 1940 Act rules, regulations pursuant to Articles 6, 10 and 12 of Regulation S-X and ASC Topic 946, the CompanyMSC Income Fund is precluded from consolidating portfolio companyother entities in which MSC Income Fund has equity investments, including those in which it has a controlling interest, unless the portfolio companyother entity is a wholly ownedanother investment company. An exception to this general principle in ASC 946 occurs if the Company ownsMSC Income Fund holds a controlledcontrolling interest in an operating company whose purpose isthat provides all or substantially all of its services directly to provide services toMSC Income Fund. Accordingly, as noted above, MSC Income Fund’s consolidated financial statements include the Company such as an investment adviser or transfer agent. Nonefinancial position and operating results for the Taxable Subsidiaries and the Structured Subsidiaries. MSC Income Fund has determined that none of theits portfolio investments made by the Company qualifiesqualify for this exception. Therefore, the Company’s portfolio company investments, including those in which the Company has a controlling interest, areMSC Income Fund’s Investment Portfolio is carried on the Consolidated Balance SheetSheets at fair value, as discussed below,further in Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio, with changesany adjustments to fair value recognized as “Net Change in Unrealized Appreciation (Depreciation) on Investments” on the Consolidated Statements of Operations” until the investment is realized, usually upon exit, resulting in any gain or loss on exit being recognized as a realized gain or loss. However,“Net Realized Gain (Loss),” in the event that any controlled subsidiary exceeds the tests of significance set forth in Rules 3-09 or 4-08(g) of Regulation S-X, the Company will include required financial information for such subsidiary in the notes or as an attachment to its consolidated financial statements.

Reclassifications

The presentation of investment income has been changed to separately state interest income, fee income and dividend income inboth cases on the Consolidated Statements of Operations. The prior periods have been reclassified to conform to this presentation as of December 31, 2017.

Use of Estimates

The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amounts and disclosures of assets, liabilities and contingencies as of the date of the financial statements and accompanying notes. The Company evaluates its assumptions and estimates on an ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Additionally, application of the Company’s accounting policies involves exercising judgments regarding assumptions as to future uncertainties. Actual results may differ from these estimates under different assumptions or conditions. Significant estimates are used in the determination of fair value of investments. See Note 3 — Fair Value Hierarchy for Investments for a description of these estimates.

Portfolio Investment Classification

The CompanyMSC Income Fund classifies its investmentsInvestment Portfolio in accordance with the requirements of the 1940 Act. Under the 1940 Act, (a) “Control” investments“Control Investments” are defined as investments in companies in which the CompanyMSC Income Fund owns more than 25% of the voting securities or has rights to nominatemaintain greater than 50% of the directors or managers of the entity,board representation, (b) “Affiliate” investments“Affiliate Investments” are defined as investments in which MSC Income Fund owns between 5% and 25% (inclusive) of the voting securities are owned, or an investment in an investment company’s investment adviser, and does not have rights to maintain greater than 50% of the investments are not classified as Control investmentsboard representation and (c) “Non-Control/Non-Affiliate” investmentsNon-Affiliate Investments” are defined as investments that are neither Control investmentsInvestments nor Affiliated investments.Affiliate Investments. For purposes of determining the classification of its Investment Portfolio, MSC Income Fund has excluded consideration of any voting securities or board appointment rights held by Main Street and third-party investment funds advised by the Adviser.
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.Valuation of the Investment Portfolio Investments
The CompanyMSC Income Fund accounts for its portfolio investmentsInvestment Portfolio at fair value undervalue. As a result, MSC Income Fund follows the provisions of ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 requires the CompanyMSC Income Fund to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact.

MSC Income Fund’s portfolio strategy calls for it to invest primarily in debt securities issued by Middle Market companies and illiquid debt and equity securities issued by privately held, LMM companies. The Middle Market companies in which MSC Income Fund invests are generally larger in size than the LMM companies and their debt securities can be more liquid than the debt securities issued by LMM companies. MSC Income Fund categorizes some of its investments in Middle Market companies and LMM companies as Private Loan portfolio investments, which are primarily debt securities in privately held companies that have primarily been originated directly by our Adviser or, to a lesser extent, through our Adviser’s 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, MSC Income Fund’s Private Loan investments are typically made to support a company owned by or in the process of being acquired by a private equity sponsor. Private Loan investments are made in companies that are generally consistent with the size of companies MSC Income Fund invests in through its Middle Market portfolio and LMM portfolio. MSC Income Fund’s portfolio also includes Other Portfolio investments which primarily consist of investments that are not consistent with the typical profiles for its Private Loan, LMM or Middle Market portfolio investments, including investments which may be managed by third parties. MSC Income Fund’s portfolio investments may be subject to restrictions on resale.
Private Loan investments may include investments which have no established market or have established markets that are not active, while LMM investments and Other Portfolio investments generally have no established trading market, whilemarket. Middle Market securitiesportfolio investments generally have established markets that are not active. Private Loan investments may include investments which have no established trading market or have established markets that are not active. The CompanyMSC Income Fund determines
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Notes to the Consolidated Financial Statements (Continued)
in good faith the fair value of its investment portfolioInvestment Portfolio pursuant to a valuation policy in accordance with ASC 820, and awith such valuation process approved by its boardBoard of directorsDirectors and in accordance with the 1940 Act. The Company’sMSC Income Fund’s valuation policies and processes are intended to provide a consistent basis for determining the fair value of MSC Income Fund’s Investment Portfolio.
For Private Loan and Middle Market portfolio investments in debt securities for which it has determined that third-party quotes or other independent pricing are not available or appropriate, MSC Income Fund generally estimates the portfolio.

fair value based on the assumptions that it believes hypothetical market participants would use to value the investment in a current hypothetical sale using the yield-to-maturity model (“Yield-to-Maturity”) valuation method. For LMM portfolio investments, the CompanyMSC Income Fund generally reviews external events, including private mergers, sales and acquisitions involving comparable companies, and includes these events in the valuation process by using an enterprise value waterfall


methodology (“Waterfall”) for its LMM equity investments and an income approach using a yield-to-maturity model (“Yield-to-Maturity”)Yield-to-Maturity valuation method for its LMM debt investments. For Middle Market portfolio investments the Companyin debt securities for which it has determined that third-party quotes or other independent prices are available, MSC Income Fund primarily uses observable inputs such as quoted prices in the valuation process. The CompanyMSC Income Fund determines the appropriateness of the use of third-party broker quotes, if any, in determining fair value based on its understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. The Company often cannot observe the inputs considered by the third party in determining their quotes. For Middle Market and Private Loan portfolio investments in debt securities for which it has determined that third-party quotes or other independent pricing are not available or appropriate, the Company generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value the investment in a current hypothetical sale using the Yield-to-Maturity valuation method. For its Other Portfolio equity investments, the CompanyMSC Income Fund generally calculates the fair value of the investment primarily based on the net asset value (“NAV”) of the fund.fund and adjusts the fair value for other factors deemed relevant that would affect the fair value of the investment. All of the valuation approaches for the Company’sMSC Income Fund’s portfolio investments estimate the value of the investment as if the CompanyMSC Income Fund was to sell, or exit, the investment as of the measurement date.

These valuation approaches consider the value associated with MSC Income Fund’s ability to control the capital structure of the portfolio company, as well as the timing of a potential exit. For valuation purposes, “control” portfolio investments are composed of debt and equity securities in companies for which MSC Income Fund has a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company’s board of directors. For valuation purposes, “non-control” portfolio investments are generally composed of debt and equity securities in companies for which MSC Income Fund does not have a controlling interest in the equity ownership of the portfolio company or the ability to nominate a majority of the portfolio company’s board of directors.
Under the Waterfall valuation method, the CompanyMSC Income Fund estimates the enterprise value of a portfolio company using a combination of market and income approaches or other appropriate valuation methods, such as considering recent transactions in the equity securities of the portfolio company or third-party valuations of the portfolio company, and then performs a Waterfall calculation by usingallocating the enterprise value over the portfolio company’s securities in order of their preference relative to one another. The enterprise value is the fair value at which an enterprise could be sold in a transaction between two willing parties, ratherother than through a forced or liquidation sale. Typically, privateprivately held companies are bought and sold based on multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”), cash flows, net income, revenues, or in limited cases, book value. There is no single methodology for estimating enterprise value. For any one portfolio company, enterprise value is generally described as a range of values from which a single estimate of enterprise value is derived. In estimating the enterprise value of a portfolio company, the CompanyMSC Income Fund analyzes various factors including the portfolio company’s historical and projected financial results. TheDue to SEC deadlines for MSC Income Fund’s quarterly and annual financial reporting, the operating results of a portfolio company used in the current period valuation are generally the results from the period ended three months prior to such valuation date and may include unaudited, projected, budgeted or pro forma financial information and may require adjustments for non-recurring items or to normalize the operating results that may require significant judgment in its determination.determining. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, the CompanyMSC Income Fund also analyzes the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, the CompanyMSC Income Fund allocates the enterprise value to investments in order of the legal priority of the various components of the portfolio company’s capital structure. In applying the Waterfall valuation method, the CompanyMSC Income Fund assumes the loans are paid offpaid-off at the principal amount in a change in control transaction and are not assumed by the buyer, which the CompanyMSC Income Fund believes is consistent with its past transaction history and standard industry practices.

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Notes to the Consolidated Financial Statements (Continued)
Under the Yield-to-Maturity valuation method, the CompanyMSC Income Fund also uses the income approach to determine the fair value of debt securities based on projections of the discounted future free cash flows that the debt security will likely generate, including analyzing the discounted cash flows of interest and principal amounts for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of the portfolio investments. The Company’scompany. MSC Income Fund’s estimate of the expected repayment date of its debt securities is generally the legal maturity date of the instrument, as the CompanyMSC Income Fund generally intends to hold its loans and debt securities to maturity. The Yield-to-Maturity analysis also considers changes in leverage levels, credit quality, portfolio company performance, changes in market-based interest rates and other factors. The CompanyMSC Income Fund will generally use the value determined by the Yield-to-Maturity analysis as the fair value for that security. However, it is the Company’s position that assuming a borrower is outperforming underwriting expectations and because these respective investments do not generally contain pre-payment penalties, the borrower would most likely prepay or refinance the borrowing if the market interest rate, given the borrower’s credit quality, is lower than the stated loan interest rate. Therefore, the Company does not believe that a market participant would pay a premium for the investment, andsecurity; however, because of the Company’sMSC Income Fund’s general intent to hold its loans to maturity, the Company generally does not believe that the fair value will not exceed the principal amount of the investment should be adjusted in excess ofdebt security valued using the face amount.Yield-to-Maturity valuation method. A change in the assumptions that the CompanyMSC Income Fund uses to estimate the fair value of its debt securities using the Yield-to-Maturity valuation method could have a material impact on the determination of fair value. If there is deterioration in credit quality or if a debt security is in workout status, the CompanyMSC Income Fund may consider other factors in determining the fair value of the debt security, including the value attributable to the debt security from the enterprise value of the portfolio company or the proceeds that would most likely be received in a liquidation analysis.

Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, the CompanyMSC Income Fund measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date. However,date and adjusts the investment’s fair value for factors known to MSC Income Fund that would affect that fund’s NAV, including, but not limited to, fair values for individual investments held by the fund if MSC Income Fund holds the same investment or for a publicly traded investment. In addition, in determining the fair value of the investment, the Company may considerMSC Income Fund considers whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of the Company’sMSC Income Fund’s investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, and expected future cash flows available to equity holders, including the rate of return on those cash flows compared to an implied market return on equity required by market participants, or other uncertainties surrounding the Company’sMSC Income Fund’s ability to realize the full NAV of its interests in the investment fund.



With respect to investments for which market quotations are not readily available, or an indicator exists that the available market prices are not reliable for a particular security, a multi-step valuation process is undertaken, as described below:

The Company’s valuation process will begin with the Sub-Adviser preparing draft valuations of each investment based upon the methodology contained in the Sub-Adviser’s valuation policy and submitting such draft valuations to the Adviser.
The Adviser then prepares its own initial draft valuation for each investment based upon the Adviser’s valuation policy.
The Advisers obtain and potentially take into account information received from a third-party valuation firm retained by the Company’s board of directors, if applicable, and then individually set the initial draft value of each investment.
Team members from the Advisers then confer regarding their respective draft valuations, and the Adviser’s team members issue such clarifying questions regarding discrepancies in value estimates to the Sub-Adviser for mutual resolution. After receiving responses to such inquiries from the Sub-Adviser, the Adviser then prepares and presents its recommended fair value for each of the investments for consideration by the Adviser’s valuation committee.
The Adviser’s valuation committee meets to review the Adviser’s initial draft values, to analyze and discuss the proposed valuations and to document its conclusions. The Adviser’s valuation committee approves the fair values that are recommended to the Company’s audit committee and board of directors.
Team members from the Adviser prepare written valuation materials for distribution to the Company’s audit committee and board of directors containing final recommended valuations, as approved by the Adviser’s valuation committee.
The Company’s audit committee reviews the Adviser’s preliminary recommended valuations with representatives of the Advisers, and the Company’s audit committee recommends the fair value of the Company’s portfolio for approval by its board of directors.
At this point, the Company’s board of directors then approves the fair value of the Company’s investment portfolio in good faith based on several factors, including the input and recommendation of the Advisers, the Adviser’s valuation committee, the audit committee, and any third-party valuation firm, if applicable, and further determines that the valuation of investments held by us and presented in our financial statements was approved in accordance with the Company’s valuation policy.

Pursuant to its internal valuation process and the requirements under the 1940 Act, the CompanyMSC Income Fund performs valuation procedures on each of its portfolio investments quarterly. In addition to its internal valuation process, in arriving at estimates of fair value for its investments in each LMM portfolio company and certainits Private Loan portfolio companies, (the “Internally Valued Investments”) once a quarter. AmongMSC Income Fund, among other things, the Company generally consults with a nationally recognized independent valuationfinancial advisory services firm on(the “Financial Advisory Firm”). The Financial Advisory Firm analyzes and provides observations and recommendations and an assurance certification regarding MSC Income Fund’s determinations of the Internally Valued Investmentsfair value of its Private Loan portfolio company investments. The Financial Advisory Firm is generally consulted relative to MSC Income Fund’s investments in each Private Loan portfolio company at least once in every calendar year, and for MSC Income Fund’s investments in new Internally Valued Investments,Private Loan portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, the CompanyMSC Income Fund may determine that it is not cost-effective, and as a result is not in its stockholders’ best interest, to consult with the nationally recognized independent valuation firmFinancial Advisory Firm on its investments in one or more of these Internally Valued Investments.Private Loan portfolio companies. Such instances include, but are not limited to, situations where the fair value of the Company’sMSC Income Fund’s investment in a Private Loan portfolio company is determined to be insignificant relative to the total investment portfolio. During the year ended December 31, 2017, the CompanyInvestment Portfolio. MSC Income Fund consulted with its independent valuation firmand received an assurance certification from the Financial Advisory Firm in arriving at the Company’sits determination of fair value for its investments in a total of 55 and 51 Private Loan portfolio companies during the years ended December 31, 2023 and 2022, respectively, representing 79% and 83% of the total Private Loan portfolio at fair value as of December 31, 2023 and 2022, respectively. Excluding its investments in Private Loan portfolio companies that, as of December 31, 2023 and 2022, as applicable, had not been in the Investment Portfolio for at least twelve months subsequent to the initial investment and its investments in Private Loan portfolio companies that were not reviewed because the investment is valued based upon third-party quotes or other independent pricing, 90% and 94% of the Private Loan portfolio at fair value was reviewed and certified by the Financial Advisory Firm for the years ended December 31, 2023 and 2022, respectively.
For valuation purposes, all of MSC Income Fund’s Private Loan portfolio investments are either non-control or affiliate investments. For Private Loan portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, MSC Income Fund generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Private Loan debt investments in a
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Notes to the Consolidated Financial Statements (Continued)
current hypothetical sale using the Yield-to-Maturity valuation method and such Private Loan equity investments in a current hypothetical sale using the Waterfall valuation method.
In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its LMM portfolio companies, MSC Income Fund, among other things, consults with the Financial Advisory Firm. The Financial Advisory Firm analyzes and provides observations, recommendations and an assurance certification regarding MSC Income Fund’s determinations of the fair value of its LMM portfolio company investments. The Financial Advisory Firm is generally consulted relative to MSC Income Fund’s investments in each LMM portfolio company at least once every calendar year, and for MSC Income Fund’s investments in new LMM portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, MSC Income Fund may determine that it is not cost-effective, and as a result is not in its stockholders’ best interest, to consult with the Financial Advisory Firm on its investments in 22 of the 25one or more LMM portfolio companies andcompanies. Such instances include, but are not limited to, situations where the fair value of MSC Income Fund’s investment in 19 ofa LMM portfolio company is determined to be insignificant relative to the 38 Private Loan portfolio companies. During the year ended December 31, 2016, the Companytotal Investment Portfolio. MSC Income Fund consulted with its independent valuation firmand received an assurance certification from the Financial Advisory Firm in arriving at the Company’sMSC Income Fund’s determination of fair value onfor its investments in 21a total of the 2346 and 44 LMM portfolio companies during the years ended December 31, 2023 and in 152022, respectively, representing 95% and 97% of the 29 Private Loantotal LMM portfolio companies.at fair value as of December 31, 2023 and 2022, respectively. Excluding its investments in LMM portfolio companies that, as of December 31, 2023 and 2022, as applicable, had not been in the Investment Portfolio for at least twelve months subsequent to the initial investment or whose primary purpose is to own real estate for which a third-party appraisal is obtained on at least an annual basis, over 99% of the LMM portfolio at fair value was reviewed and certified by the Financial Advisory Firm for both of the years ended December 31, 2023 and December 31, 2022.

For valuation purposes, all of MSC Income Fund’s Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, MSC Income Fund uses observable inputs to determine the fair value of these investments through obtaining third-party quotes or other independent pricing. For Middle Market portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, MSC Income Fund generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Middle Market debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current hypothetical sale using the Waterfall valuation method. MSC Income Fund generally consults on a limited basis with the Financial Advisory Firm in connection with determining the fair value of its Middle Market portfolio investments due to the nature of these investments. The vast majority (97% and 91% as of December 31, 2023 and 2022, respectively) of the Middle Market portfolio investments (i) are valued using third-party quotes or other independent pricing services or (ii) MSC Income Fund has consulted with and received an assurance certification from the Financial Advisory Firm within the last twelve months.
For valuation purposes, all of MSC Income Fund’s Other Portfolio investments are non-control, affiliate or control investments. MSC Income Fund’s Other Portfolio investments comprised 2.3% and 2.7% of MSC Income Fund’s Investment Portfolio at fair value as of December 31, 2023 and 2022, respectively. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily available. For its Other Portfolio equity investments, MSC Income Fund generally determines the fair value of these investments using the NAV valuation method.
Due to the inherent uncertainty in the valuation process, the Company’s estimateMSC Income Fund’s determination of fair value for its Investment Portfolio may differ materially from the values that would have been useddetermined had an activea ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. The Company estimatesMSC Income Fund determines the fair value of each individual investment and recordrecords changes in fair value as unrealized appreciation or depreciationdepreciation.
MSC Income Fund uses an internally developed portfolio investment rating system in connection with its investment oversight, portfolio management and analysis and investment valuation procedures for its Private Loan, LMM and Middle Market portfolio companies. This system takes into account both quantitative and qualitative factors of each Private Loan, LMM and Middle Market portfolio company.
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Notes to the Consolidated Financial Statements (Continued)
Rule 2a-5 under the 1940 Act permits a BDC’s board of directors to designate its executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active oversight of the board. MSC Income Fund’s Board of Directors has approved policies and procedures pursuant to Rule 2a-5 (the “Valuation Procedures”) and has designated the Adviser, led by a group of Main Street’s and the Adviser’s executive officers, to serve as the Board of Directors’ valuation designee. MSC Income Fund believes its Investment Portfolio as of December 31, 2023 and 2022 approximates fair value as of those dates based on the markets in which it operates and other conditions in existence on those reporting dates.
2.Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates under different conditions or assumptions. Additionally, as explained in Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio, the consolidated financial statements include investments in the Consolidated StatementsInvestment Portfolio whose values have been estimated by MSC Income Fund pursuant to valuation policies and procedures approved and overseen by MSC Income Fund’s Board of Operations.Directors, in the absence of readily ascertainable market values. Because of the inherent uncertainty of the Investment Portfolio valuations, those estimated values may differ materially from the values that would have been determined had a ready market for the securities existed.
Macroeconomic factors, including pandemics, risk of recession, inflation, supply chain constraints or disruptions, geopolitical disruptions and changing market index interest rates, and the related effect on the U.S. and global economies, have impacted, and may continue to impact, the businesses and operating results of certain of MSC Income Fund’s portfolio companies. As a result of these and other current effects of macroeconomic factors, as well as the uncertainty regarding the extent and duration of their impact, the valuation of MSC Income Fund’s Investment Portfolio has and may continue to experience increased volatility.
3.Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase. These highly liquid, short term investments are included in the Consolidated Schedule of Investments. Cash and cash equivalents are carried at cost, which approximates fair value.

Security Transactions

Security transactions are accounted for on the trade date. As of the trade date, the investment is derecognized for security sales and recognized for security purchases. As of both At December 31, 2017 and 2016,2023, the Company had three$20.8 million of cash equivalents invested in AAA-rated money market funds. These highly liquid, short-term investments at contract prices of $29.3 million and $11.0 million, respectively, under contract to purchase which had not yet settled. These investments


have been recognized by the Company and are included in the Consolidated Schedule of Investments. The settlement obligations are presented in the line item “Payable for securities purchased” at the contract price. As of both
At December 31, 20172023 and 2016,December 31, 2022, cash balances totaling $9.0 million and $11.7 million, respectively, exceeded Federal Deposit Insurance Corporation insurance protection levels, subjecting the Company had two investments at contract prices of $5.0 millionto risk related to the uninsured balance.
4.Interest, Dividend and $7.6 million, respectively, under contract to sell which had not yet settled. These investments were derecognized by the Company and are not included in the Consolidated Schedule of Investments. The sale trades are presented in the line item “Receivable for securities sold” at the contract price.Fee Income

Interest, Fee and DividendMSC Income
Interest Fund records interest and dividend income are recorded on the accrual basis to the extent amounts are expected to be collected. Prepayment penalties received by the Company are recorded as income upon receipt. Dividend income is recorded when dividends are declared by the portfolio company or at the pointsuch other time that an obligation exists for the portfolio company to make a distribution. AccruedMSC Income Fund evaluates accrued interest and dividend income are evaluated quarterlyperiodically for collectability. When a loan or debt security becomes 90 days or more past due, and the Companyif MSC Income Fund otherwise does not expect the debtor to be able to service all of its debt or other obligations, itobligation, MSC Income Fund will generally be placedplace the loan or debt security on non-accrual status and the Company will cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If there is reasonable doubt that we will receive any previously accrued interest, then the interest income will be written off. Additionally, if a debt security has deferred interest payment terms and the Company becomes aware of a deterioration in credit quality, the Company will evaluate the collectability of the deferred interest payment. If it is determined that the deferred interest is unlikely to be collected, the Company will place the security on non-accrual status and cease recognizing interest income on that debt security until the borrower has demonstrated the ability and intent to pay the contractual amounts due. Payments received on non-accrual investments may be recognized as incomeloan or applied to principal depending upon the collectability of the remaining principal and interest. If a debt security’s status significantly improves with respect toregarding the debtor’s ability to service the debt or other obligations,obligation, or if a loan or debt security is fully impaired, sold or written off, MSC Income Fund removes it will be removed from non-accrual status.

As of December 31, 2017, the Company had four debt2023, investments in three portfolio companies that were more than 90 days past due, all of which were on non-accrual status. Eachstatus comprised 1.1% of these portfolio companies experienced a significant decline in credit quality raising doubt regarding the Company’s ability to collect the principalMSC Income Fund’s total Investment Portfolio at fair value and interest contractually due. Given the credit deterioration, the Company ceased accruing interest income on the non-accrual debt investments and wrote off any previously accrued interest deemed uncollectible.4.0% at cost. As of December 31, 2017, the Company is not aware2022, investments on non-accrual status comprised 0.8% of any other material changesMSC Income Fund’s total Investment Portfolio at fair value and 4.8% at cost.
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Notes to the creditworthiness of the borrowers underlying its debt investments.Consolidated Financial Statements (Continued)

As of December 31, 2016, the Company had five debtInterest income from investments in four portfolio companies that were more than 90 days past due (twothe “equity” class of which weresecurity of collateralized loan obligation (“CLO”) funds (typically subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing estimated projected cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets. MSC Income Fund monitors the oilexpected cash inflows from its investment in a CLO, including the expected residual payments, and gas industry), including threethe effective yield is determined and updated periodically.
MSC Income Fund holds certain debt investments in two portfolio companies that were on non-accrual status. Each of these portfolio companies experienced a significant decline in credit quality raising doubt regarding the Company’s ability to collect the principal and interest contractually due. Given the credit deterioration, the Company ceased accruing interest income on the non-accrual debt investments and wrote off any previously accrued interest deemed uncollectible. There was no allowance recorded for the year ended December 31, 2016.

From time to time, the Company may hold debtpreferred equity instruments in its investment portfolioInvestment Portfolio that contain a payment-in-kind (“PIK”) interest provision. If these borrowers elect to pay or are obligated to payand cumulative dividend provisions. The PIK interest, under the optional PIK provision, and if deemed collectible in management’s judgment, then the interest would be computed at the contractual rate specified in the investment’s crediteach debt agreement, recorded as interest income andis periodically added to the principal balance of the investment.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 Companyactual 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.7. — Summary of Significant Accounting Policies — Income Taxes below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though MSC Income Fund may not have collected the PIK interest and cumulative dividends in cash. MSC Income Fund stops accruing PIK interest and cumulative dividends and writes off any accrued and uncollected interest and dividends in arrears when it determines that such PIK interest and dividends in arrears isare no longer collectible.

At both December 31, 2017 and 2016, the Company held 19 investments, which contained a PIK provision. As discussed above, three of the 19 investments with PIK provisions as of December 31, 2017 and two of the 19 investments with PIK provisions as of December 31, 2016 were on non-accrual status and no PIK interest was recorded on these investments during the years ended December 31, 2017 and 2016. For the years ended December 31, 2017, 20162023, 2022 and 2015, the Company recognized approximately $1.3 million, $469,0002021, (i) 3.8%, 2.5% and $1.2 million,2.3%, respectively, of PIK interest. The Company stops accruingMSC Income Fund’s total investment income was attributable to PIK interest income not paid currently in cash and writes off any accrued(ii) 0.1%, 0.6% and uncollected interest0.3%, respectively, of MSC Income Fund’s total investment income was attributable to cumulative dividend income not paid currently in arrears when it determines that such PIK interest in arrears is no longer collectible.cash.

The CompanyMSC Income Fund may periodically provide services, including structuring and advisory services, to its portfolio companies or other third parties. The income from such services is non-recurring. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or other applicable transaction closes. For the years ended December 31, 2017, 2016 and 2015, the Company recognized approximately $2.4 million, $1.3 million and $1.1 million, respectively, of non-recurring fee income received from its portfolio companies or other third parties, which accounted for approximately 2.3%, 1.4% and 1.6%, respectively, of the Company’s total investment income during such periods.


earned. Fees received in connection with debt financing transactions for services that do not meet these criteria are treatedgenerally deferred and accreted into income over the life of the financing.
A presentation of total investment income MSC Income Fund received from its Investment Portfolio in each of the periods presented is as follows:
Year Ended
December 31,
202320222021
(dollars in thousands)
Interest, fee and dividend income:
Interest income$116,976 $90,811 $72,536 
Dividend income11,255 9,442 15,880 
Fee income3,155 3,512 1,712 
Total interest, fee and dividend income$131,386 $103,765 $90,128 
5.Deferred Financing Costs
Deferred financing costs include commitment fees and other direct costs incurred in connection with arranging MSC Income Fund’s borrowings. These costs were incurred in connection with MSC Income Fund’s multi-year revolving Credit Facilities (as defined below in Note E — Debt) and have been capitalized as an asset and reflected in the Consolidated Balance Sheets as Deferred financing costs. Deferred financing costs incurred in connection with the Series A Notes (as defined below in Note E — Debt) are a direct deduction from the principal amount outstanding.
6.Unearned Income — Debt Origination Fees and Original Issue Discount and Discounts / Premiums to Par Value
MSC Income Fund capitalizes debt origination fees received in connection with financings and reflects such fees as unearned income netted against the applicable debt investments. The unearned income from the fees is accreted into income over the life of the financing.
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Notes to the Consolidated Financial Statements (Continued)
In connection with its portfolio debt investments, MSC Income Fund sometimes receives nominal cost warrants or warrants with an exercise price below the fair value of the underlying equity (together, “nominal cost equity”) that are deferredvalued as part of the negotiation process with the particular portfolio company. When MSC Income Fund receives nominal cost equity, it allocates its cost basis in its investment between its debt security and its nominal cost equity at the time of origination based on amounts negotiated with the particular portfolio company. The allocated amounts are based upon the fair value of the nominal cost equity, which is then used to determine the allocation of cost to the debt security. Any discount recorded on a debt investment resulting from this allocation is reflected as unearned income, which is netted against the applicable debt investment, and accreted into interest income over the life of the financing.debt investment. The actual collection of this interest is deferred until the time of debt principal repayment.

UnearnedMSC Income – Original Issue Discount / PremiumFund may also purchase debt securities at a discount or at a premium to Par Value

The Company generally purchases its debt investments for an amount different than their respective principal values. For purchases at less thanthe par value of the debt security. In the case of a purchase at a discount, is recordedMSC Income Fund records the investment at acquisition, whichthe par value of the debt security net of the discount, and the discount is accreted into interest income based on the effective interest method over the life of the debt investment. For purchasesIn the case of a purchase at greater thana premium, MSC Income Fund records the investment at the par value aof the debt security plus the premium, is recorded at acquisition, whichand the premium is amortized as a reduction to interest income based on the effective interest method over the life of the debt investment. Upon repayment or sale, any unamortized discount or premium is also recognized into
To maintain RIC tax treatment (as discussed in Note B.7. — Summary of Significant Accounting Policies — Income Taxes below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though MSC Income Fund may not have collected the interest income. For the years ended December 31, 2017, 20162023, 2022 and 20152021, 2.5%, 2.5%, and 5.7%, respectively, of MSC Income Fund’s total investment income was attributable to interest income from the Company accreted approximately aaccretion of discounts associated with debt investments, net of $15.1 million, $11.9 million and $4.4 million, respectively, into interest income.any premium amortization.
Net Realized Gains or Losses on Investments andNet Change in Unrealized Appreciation (Depreciation) on Investments

Generally, net realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment and the principal amount, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net change in unrealized appreciation or depreciation on investments reflects the net change in the fair value of the investment portfolio and the reclassification of any prior period unrealized appreciation (depreciation) on exited investments to realized gains or losses.

Deferred Financing Costs
Deferred financing costs represent fees and other direct costs incurred in connection with arranging the Company’s borrowings. These costs were incurred in connection with the Company’s revolving credit facilities (see Note 6 — Borrowings) and have been capitalized. The deferred financing costs are being amortized to interest expense using the straight-line method over the life of the related credit facility, which the Company believes is materially consistent with the effective interest method. For the years ended December 31, 2017, 2016 and 2015, the Company amortized approximately $1.3 million, $1.5 million, and $1.2 million, respectively, into interest expense related to deferred financing costs.
Offering Costs
In accordance with the Investment Advisory Agreement and the Sub-Advisory Agreement, the Company reimburses the Advisers for any offering costs that are paid on the Company’s behalf, which consist of, among other costs, actual legal, accounting, bona fide out-of-pocket itemized and detailed due diligence costs, printing, filing fees, transfer agent costs, postage, escrow fees, data processing fees, advertising and sales literature and other offering costs. The Company expects to reimburse the Advisers for such costs incurred on its behalf on a monthly basis, up to a maximum aggregate amount of 1.5% of the gross stock offering proceeds. The Advisers are responsible for the payment of offering costs to the extent they exceed 1.5% of the aggregate gross stock offering proceeds.

Prior to January 1, 2016, offering costs were capitalized as incurred by the Advisers and such costs, up to 1.5% of the gross proceeds, were recorded as a charge to additional paid in capital and a reduction of deferred offering costs. Effective January 1, 2016 through the closing of the Offering to new investors, offering costs were capitalized as incurred by the Company as it became obligated to reimburse its Advisers for such costs and subsequently amortized to expense over a 12-month period to more closely track applicable guidance. Deferred offering costs were fully amortized to expense upon the closing of the Offering to new investors and are currently expensed as incurred by the Company as it becomes obligated to reimburse its Advisers for such costs .

Payable for Unsettled Trades
The Company accepted stockholders’ subscriptions on a weekly basis during the Offering, which was closed to new investors effective September 30, 2017. There was no payable for unsettled trades as of December 31, 2017. For subscriptions received, for which shares of common stock were not issued by December 31, 2016, the amounts of such subscriptions were presented as cash and as a payable for unsettled trades. The shares issued in exchange for these subscriptions were issued and outstanding on January 4, 2017.


Per Share Information
Net increase (decrease) in net assets resulting from operations per share, net investment income per share, and net realized income per share are calculated based upon the weighted average number of shares of common stock outstanding during the reporting period. 

Concentration of Credit Risk
The Company has cash deposited in a financial institution in excess of federally insured levels. Management regularly monitors the financial stability of these financial institutions in an effort to manage the Company’s exposure to any significant credit risk in cash. The Federal Deposit Insurance Corporation generally only insures limited amounts per depositor per insured bank.
Fair Value of Financial Instruments
Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The Company believes that the carrying amounts of its financial instruments, consisting of cash, accounts receivable from affiliates, interest payable to affiliates, other accrued expenses and liabilities, and credit facilities payable approximate the fair values of such items due to the short term nature of these instruments.
7.Income Taxes

The CompanyMSIF has elected to be treated for U.S. federal income tax purposes as a RIC. MSIF’s taxable income includes the taxable income generated by MSIF and certain of its subsidiaries, including the Structured Subsidiaries, which are treated as disregarded entities for tax purposes. As a RIC, the CompanyMSIF generally will not incurpay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that the Company timelyMSIF distributes each taxable year as dividends to its stockholders. To qualify as a RIC in any taxable year, the CompanyMSIF must among other things, satisfy certain source-of-income and asset diversification requirements. In addition, the Company mustgenerally distribute in respect of each taxable year dividends of an amount generally at least equal to 90% of its investment“investment company taxable income” (which is generally its net ordinary taxable income determined without regard to any deduction for dividends paid,and realized net short-term capital gains in orderexcess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its ability to be subject toRIC status (pass-through tax as a RIC (the “Annual Distribution Requirement”)treatment for amounts distributed). As a part of maintaining our RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given taxablefiscal year may be distributed up to 12twelve months subsequent to the end of that taxablefiscal year, provided such distributionsdividends are declared on or prior to the earlierlater of eight-and-one-half months after the close of that taxable year or(i) the filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the year in which such prior taxable year. In order to avoid the imposition of this excise tax, the Company needs to distribute in respect of each calendar year dividends of an amount at least equal to the sum of: (1) 98.0% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of its capital gain in excess of capital loss, or capital gain net income, (adjusted for certain ordinary losses) for the one-year period generally ending on October 31 of that calendar year (or, if we so elect, for that calendar year) and (3) any net ordinary income and capital gain net income for preceding years that was not distributed with respect to such years and on which the Company incurred no U.S. federal income tax (the “Excise Tax Avoidance Requirement”).

generated.
The Company has formed wholly owned subsidiaries, HMS Equity Holding and HMS Equity Holding II, which have electedTaxable Subsidiaries primarily hold certain equity investments for MSC Income Fund. The Taxable Subsidiaries permit MSC Income Fund to be taxable entities. HMS Equity Holding and HMS Equity Holding II primarily hold equity investments in portfolio companies which are treated as “pass through”“pass-through” entities for tax purposes. HMS Equity Holdingpurposes and HMS Equity Holding IIto continue to comply with the “source-of-income” requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with MSC Income Fund for U.S. GAAP financial reporting purposes, and the portfolio investments held by each entitythe Taxable Subsidiaries are included in theMSC Income Fund’s consolidated financial statements as portfolio investments and recorded at fair value. HMS Equity Holding and HMS Equity Holding IIThe Taxable Subsidiaries are not consolidated with the CompanyMSIF for income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of itstheir ownership of certain portfolio investments. ThisThe taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at corporate income tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in the Company’sMSC Income Fund’s consolidated financial statements.

HMS Equity Holding and HMS Equity Holding IIThe Taxable Subsidiaries use the liability method in accounting for income taxes in accordance with ASC Topic 740, Income Taxes.taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is provided, if necessary, against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. MSC Income Fund’s net assets as included on the
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Notes to the Consolidated Financial Statements (Continued)
Consolidated Balance Sheets and Consolidated Statements of Changes in Net Assets include an adjustment to classification as a result of permanent book-to-tax differences, which include differences in the book and tax treatment of income and expenses.
Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Taxable income generally excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

8.Net Realized Gains or Losses and Net Unrealized Appreciation or Depreciation

Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net unrealized appreciation or depreciation reflects the net change in the fair value of the Investment Portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.

9.Fair Value of Financial Instruments
UncertaintyFair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. MSC Income TaxesFund believes that the carrying amounts of its financial instruments, consisting of cash and cash equivalents, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments.

To estimate the fair value of MSC Income Fund’s Series A Notes as disclosed in Note E — Debt, MSC Income Fund uses the Yield-to-Maturity valuation method based on projections of the discounted future free cash flows that the debt security will likely generate, including both the discounted cash flows of the associated interest and principal amounts for the debt security. The Company evaluates its tax positionsinputs used to determine if the tax positions taken in accordance with ASC Topic 740, value MSC Income Taxes meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expectedFund’s debt instrument are considered to be takenLevel 2 according to the ASC 820 fair value hierarchy.
10.Earnings per Share
Net increase in net assets resulting from operations per share and net investment income per share are computed utilizing the weighted-average number of shares of common stock outstanding for the purposes of measuring and recognizing tax benefitsperiod.
11.Recently Issued or liabilities in the consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in the consolidated statements of operations. 

Recent Accounting Pronouncements

In May 2014, the FASB issuedAdopted Accounting Standards Update (“ASU”) 2014‑09, Revenue from Contracts with Customers (Topic 606). ASU 2014‑09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry‑specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized.
In March 2016,2020, the FASB issued ASU 2016-08, Revenue from Contracts2020-04, Reference rate reform (Topic 848) — Facilitation of the effects of reference rate reform on financial reporting. The amendments in this update provide optional expedients and exceptions for applying U.S. GAAP to certain contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform and became effective upon issuance for all entities. The Company has agreements that have LIBOR as a reference rate with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifiedcertain portfolio companies and also with certain lenders. Many of these agreements include language for choosing an alternative successor rate if LIBOR reference is no longer considered to be appropriate. Contract modifications are required to be evaluated in determining whether the implementation guidance on principal versus agent considerations. modifications result in the establishment of new contracts or the continuation of existing contracts. The Company adopted this amendment in March 2020 and plans to apply the amendments in this update to account for contract modifications due to changes in reference rates when LIBOR reference is no longer used.
In April 2016,November 2022, the FASB issued ASU 2016-10, Revenue2022-06, Reference rate reform (Topic 848) — Deferral of the Sunset Date of Topic 848, which deferred the sunset date of Topic 848 from Contracts with Customers (Topic 606): Identifying Performance ObligationsDecember 31, 2022 to December 31, 2024 after which entities will no longer be permitted to apply the relief in Topic 848. The Company utilized the optional expedients and Licensing, exceptions provided by ASU 2020-04 and extended by ASU 2022-06 during the years ended December 31, 2023 and 2022, the effect of which clarifiedwas not material to the implementation guidance regarding performance obligationsconsolidated financial statements and licensing arrangements. the notes thereto. The Company will continue to utilize the optional expedients provided by ASU 2020-04 and extended by ASU 2022-06 through December 31,
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Notes to the Consolidated Financial Statements (Continued)
2024. The Company does not expect ASU 2022-06 to have a material impact to the consolidated financial statements and the notes thereto.
In May 2016,June 2022, the FASB issued ASU No. 2016‑12, Revenue from Contracts with Customers (Topic 606)-Narrow‑Scope Improvements and Practical Expedients, which clarified guidance2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this update provide that a contractual restriction on assessing collectability, presenting sales tax, measuring non-cash consideration, and certain transition matters. The new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. The Company expects to identify similar performance obligations under ASC 606 as compared with deliverables and separate unitssale of an equity security is not considered part of the unit of account previously identified. As a result, the Company expects the timing of its revenue recognition to remain the same.

In January 2016, the FASB issued ASU 2016-01,Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities which amends the guidance related to the classification and measurement of investments in equity securities. The guidance requires equity investments (except those accounted for under the equity method of accounting or those that resultsecurity and, therefore, is not considered in consolidation of the investee)measuring fair value. The amendments in this update also require additional disclosures for equity securities subject to be measured at fair value with changes in fair value recognized in net income. Thecontractual sales restrictions. ASU will also amend the guidance related to the presentation of certain fair value changes for financial liabilities measured at fair value and certain disclosure requirements associated with the fair value of financial instruments. For public companies, this ASU2022-03 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The impact of the adoption of this new accounting standard on the Company’s consolidated financial statements is not expected to be material.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which addresses eight specific cash flow issues including, among other things, the classification of debt prepayment or debt extinguishment costs. ASU No. 2016-15 is effective for annual reporting periods, and the interim periods within those periods, beginning after December 15, 2017. Early adoption is permitted. The impact of the adoption of this new accounting standard on the Company’s consolidated financial statements is not expected to be material.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230),”which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for interim and annual periods beginning after December 15, 2017 and2023, though early adoption is permitted. The amendment should be adopted retrospectively.Company elected to early adopt ASU 2022-03 as of December 31, 2022 and it did not have a material impact on the consolidated financial statements and the notes thereto.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The amendments in this update require more disaggregated information on income taxes paid. ASU 2023-09 is effective for years beginning after December 15, 2024. Early adoption is permitted; however, the Company has not elected to adopt this provision as of the date of the financial statements contained in this report. The Company is still assessing the impact of the adoption of this new accounting standardguidance. However, it does not expect ASU 2023-09 to have a material impact on the Company’s consolidated financial statements is not expected to be material.

and the notes thereto.
From time to time, new accounting pronouncements are issued by the FASB or other standards settingstandards-setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.



Note 3NOTE C — Fair Value HierarchyFAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION
ASC 820 defines fair value, establishes a framework for Investmentsmeasuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. MSC Income Fund accounts for its investments at fair value.
Fair Value Hierarchy
In accordance with ASC Topic 820, establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuringMSC Income Fund has categorized its investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Basedbased on the observabilitypriority of the inputs used into the valuation techniques, the Company is required to provide disclosures on fair value measurements according to thetechnique into a three-level fair value hierarchy. The fair value hierarchy ranksgives the observability of the inputs usedhighest priority to determine fair values. Investments carried at fair value are classified and disclosed in one of the following three categories:
Level 1—Valuations based on quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).
Investments recorded on MSC Income Fund’s Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 — Investments whose values are based on unadjusted quoted prices for identical assets or liabilitiesin an active market that the CompanyMSC Income Fund has the ability to access.access (examples include investments in active exchange-traded equity securities and investments in most U.S. government and agency securities).
Level 2—Valuations2 — Investments whose values are based on inputs other than quoted prices in markets that are not active markets, whichor model inputs that are observable either directly or indirectly observable for essentiallysubstantially the full term of the investment. Level 2 inputs include quotedthe following:
•Quoted prices for similar assets in active markets quoted(for example, investments in restricted stock);
•Quoted prices for identical or similar assets in non-active markets (for example, investments in thinly traded public companies), pricing;
•Pricing models whose inputs are observable for substantially the full term of the investment (for example, market interest rate indices); and pricing
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Notes to the Consolidated Financial Statements (Continued)
•Pricing models whose inputs are derived principally from, or corroborated by, observable market data through correlation or other means for substantially the full term of the investment.
Level 3—Valuations3 — Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Such information may bemeasurement (for example, investments in illiquid securities issued by privately held companies). These inputs reflect management’s own assumptions about the result of consensusassumptions a market participant would use in pricing information or broker quotes for which sufficient observable inputs were not available.

the investment.
As required by ASC Topic 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, gainsunrealized appreciation and losses fordepreciation related to such investments categorized within the Level 3 tabletables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). The Company conducts reviews of fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain investments.

As of December 31, 20172023 and December 31, 2016, the Company’s investment portfolio was comprised of debt securities, equity investments, and Other Portfolio investments. The fair value determination for these investments primarily consisted of unobservable (Level 3) inputs.

As of December 31, 2017 and December 31, 2016, all of the Company’s LMM portfolio investments consisted of illiquid securities issued by private companies. The fair value determination for the LMM2022, MSC Income Fund’s Private Loan portfolio investments primarily consisted of unobservable inputs. As a result, all of the Company’s LMM portfolio investments were categorized as Level 3 as of December 31, 2017 and December 31, 2016.

As of December 31, 2017 and December 31, 2016, the Company’s Middle Market portfolio investments consisted primarily of Middle Market investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of (1) observable inputs in non-active markets for which sufficient observable inputs were available to determine the fair value of these investments, (2) observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and (3) unobservable inputs. As a result, all of the Company’s Middle Market portfolio investments were categorized as Level 3 as of December 31, 2017 and December 31, 2016.

As of December 31, 2017 and December 31, 2016, the Company’s Private Loan portfolio investments primarily consisted of debt investments. The fair value determination for Private Loan investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of the Company’sMSC Income Fund’s Private Loan portfolio investments were categorized as Level 3 as of December 31, 20172023 and December 31, 2016.

2022.
As of December 31, 2017, the Company’s Other Portfolio2023 and 2022, all of MSC Income Fund’s LMM portfolio investments consisted of illiquid securities issued by private companies. The Company relies primarily on information provided by managers of private investment funds in valuing these investmentsprivately held companies and


considers whether it is appropriate, in light of all relevant circumstances, to value the Other Portfolio investments, at the NAV reported by the private investment fund at the time of valuation or to adjust the value to reflect a premium or discount. The fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of the Company’s Other Portfolio equityMSC Income Fund’s LMM portfolio investments were categorized as Level 3 as of December 31, 20172023 and 2022.
As of December 31, 2016.2023 and 2022, MSC Income Fund’s Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of MSC Income Fund’s Middle Market portfolio investments were categorized as Level 3 as of December 31, 2023 and 2022.

As of December 31, 2023 and 2022, MSC Income Fund’s Other Portfolio investments consisted of illiquid securities issued by privately held entities and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of MSC Income Fund’s Other Portfolio investments were categorized as Level 3 as of December 31, 2023 and 2022.

As of December 31, 2023, all money market funds included in cash and cash equivalents were valued using Level 1 inputs.
The fair value determination of theeach portfolio investment categorized as Level 3 securities required one or more of the following unobservable inputs:
•Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;
•Current and projected financial condition of the portfolio company;
•Current and projected ability of the portfolio company to service its debt obligations;
•Type and amount of collateral, if any, underlying the investment;
•Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/EBITDA ratio) applicable to the investment;
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Notes to the Consolidated Financial Statements (Continued)
•Current liquidity of the investment and related financial ratios (e.g., current ratio and quick ratio);
•Pending debt or capital restructuring of the portfolio company;
•Projected operating results of the portfolio company;
•Current information regarding any offers to purchase the investment;
•Current ability of the portfolio company to raise any additional financing as needed;
•Changes in the economic environment which may have a material impact on the operating results of the portfolio company;
•Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company;
•Qualitative assessment of key management;
•Contractual rights, obligations or restrictions associated with the investment; and
Third party pricing for securities with limited observability of inputs determining the pricing; and
•Other factors deemed relevant.

The following table presentsuse of significant unobservable inputs creates uncertainty in the measurement of fair value measurementsas of the Company’s investments, by major class, as of December 31, 2017 according to the fair value hierarchy (dollars in thousands):
 Fair Value Measurements
 Level 1 Level 2 Level 3 Total
First lien secured debt investments$—
 $—
 $830,460
 $830,460
Second lien secured debt investments—
 —
 97,940
 97,940
Unsecured debt investments—
 —
 11,368
 11,368
Equity investments (1)
—
 —
 109,671
 109,671
Total$—
 $—
 $1,049,439
 $1,049,439
(1) Includes the Company’s investment in HMS-ORIX. (See Note 4 - Investment in HMS-ORIX SLF LLC)

The following table presents fair value measurements of the Company’s investments, by major class, as of December 31, 2016 according to the fair value hierarchy (dollars in thousands):
 Fair Value Measurements
 Level 1 Level 2 Level 3 Total
First lien secured debt investments$—
 $—
 $791,126
 $791,126
Second lien secured debt investments—
 —
 114,652
 114,652
Unsecured debt investments—
 —
 16,074
 16,074
Equity investments—
 —
 67,395
 67,395
Total$—
 $—
 $989,247
 $989,247


The following table presents fair value measurements of the Company’s investments, by investment classification, segregated by the level within the fair value hierarchy as of December 31, 2017 (dollars in thousands):
 Fair Value Measurements
 Level 1 Level 2 Level 3 Total
LMM portfolio investments$—
 $—
 $135,657
 $135,657
Private Loan investments—
 —
 315,382
 315,382
Middle Market investments—
 —
 549,792
 549,792
Other Portfolio investments (1)
—
 —
 48,608
 48,608
Total$—
 $—
 $1,049,439
 $1,049,439
(1) Includes the Company’s investment in HMS-ORIX. (See Note 4 - Investment in HMS-ORIX SLF LLC)

The following table presents fair value measurements of the Company’s investments, by investment classification, segregated by the level within the fair value hierarchy as of December 31, 2016 (dollars in thousands):
 Fair Value Measurements
 Level 1 Level 2 Level 3 Total
LMM portfolio investments$—
 $—
 $116,060
 $116,060
Private Loan investments—
 —
 211,357
 211,357
Middle Market investments—
 —
 643,464
 643,464
Other Portfolio investments—
 —
 18,366
 18,366
Total$—
 $—
 $989,247
 $989,247

reporting date. The significant unobservable inputs used in the fair value measurement of the Company’sMSC Income Fund’s LMM Middle Market and Private Loan debt investments are (i) risk adjusted discount rates used in the yield-to-maturity valuation technique (described in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies - Valuation of Portfolio Investments) and (ii) the percentage of expected principal recovery. Increases (decreases) in any of these discount rates in isolation could result in a significantly lower (higher) fair value measurement. Increases (decreases) in any of these expected principal recovery percentages in isolation could result in a significantly higher (lower) fair value measurement.  The significant unobservable inputs used in the fair value measurement of the Company’s LMM equity securities and Private Loan equity securities, which are generally valued through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these approaches is determined to not applicable)be appropriate), are (i) EBITDA multiples and (ii) the weighted averageweighted-average cost of capital (“WACC”). IncreasesSignificant increases (decreases) in EBITDA multiple inputs in isolation couldwould result in a significantly higher (lower) fair value measurement. Conversely,On the contrary, significant increases (decreases) in WACC inputs in isolation couldwould result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of MSC Income Fund’s Private Loan, LMM and Middle Market securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (see Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio) and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tabletables below.

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MSC INCOME FUND, INC.

Notes to the Consolidated Financial Statements (Continued)
The following table, which is not intended to be all inclusive, presentstables provide a summary of the significant unobservable inputs of the Company’sused to fair value MSC Income Fund’s Level 3 portfolio investments as of December 31, 2017 (dollars in thousands):2023 and 2022:
Type of
Investment
Fair Value as of
December 31, 2023
(in thousands)
Valuation TechniqueSignificant
Unobservable Inputs		Range(3)Weighted Average(3)Median(3)
Equity investments$254,770 Discounted cash flowWACC10.9% - 22.5%14.4 %15.5 %
Market comparable / Enterprise valueEBITDA multiple (1)4.9x - 9.2x (2)7.3x6.5x
Debt investments$777,003 Discounted cash flowRisk adjusted discount factor (4)9.8% - 16.8% (2)13.1 %12.8 %
Expected principal recovery percentage0.6% - 100.0%99.6 %100.0 %
Debt investments$61,122 Market approachThird-party quote4.5 - 99.285.089.5
Total Level 3 investments$1,092,895 
 Fair Value
Valuation
Technique
Significant Unobservable InputsRange 
Weighted
Average (2)
LMM equity investments$47,876
Discounted Cash FlowsWACC12.6% - 17.4% 13.9%
  Market Approach/Enterprise Value
EBITDA Multiples (1)
4.0x - 10.0x 7.1x
LMM debt portfolio investments87,781
Discounted Cash FlowsExpected Principal Recovery28.0% - 100.0% 98.9%
  
 Risk Adjusted Discount Factor10.6% - 20.5% 12.3%
Private Loan debt investments228,789
Discounted Cash FlowsExpected Principal Recovery2.9% - 100.0% 99.7%
   Risk Adjusted Discount Factor4.5% - 28.3% 7.9%
 77,981
Market ApproachThird Party Quotes92.0% - 102.0% 98.8%
Private Loan equity investments8,612
Market Approach/Enterprise Value
EBITDA Multiples (1)
5.0x - 9.5x 8.0x
  Discounted Cash FlowsWACC9.9% - 14.0% 11.8%
Middle Market debt investments545,217
Market ApproachThird Party Quotes29.0% - 106.0% 96.1%
Middle Market equity investments4,575
Market ApproachThird Party Quotes$1.6 - $345.0 $322.2
  Discounted Cash FlowWACC15.3% - 15.3% 15.3%
  
Market Approach/
Enterprise Value
EBITDA Multiples (1)
5.5x - 5.5x 5.5x
Other Portfolio investments (3)
48,608
Market Approach
NAV (1)
86.1% - 102.1% 100.3%
 $1,049,439
     
_____________________________
(1) MayEBITDA may include pro formaproforma adjustments and/or other add-backsaddbacks based on specific circumstances related to each investment.
(2) Weighted averageRange 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% - 27.3%.
(3)Does not include investments for which the significant unobservable input wasvaluation technique does not utilized ininclude the use of the applicable fair value determination.input.
(3) Includes(4)Discount rate includes the Company’s investment in HMS-ORIX. (See Note 4 - Investment in HMS-ORIX SLF LLC)

The following table, which is not intended to be all inclusive, presents the significant unobservable inputseffect of the Company’s Level 3 investmentsstandard SOFR base rate, as of December 31, 2016 (dollars in thousands):applicable.
Type of
Investment
Fair Value as of
December 31, 2022
(in thousands)
Valuation TechniqueSignificant
Unobservable Inputs		Range(3)Weighted
Average(3)		Median(3)
Equity investments$215,861 Discounted cash flowWACC10.4% - 22.5%14.3 %15.7 %
Market comparable / Enterprise valueEBITDA multiple (1)4.3x - 8.5x (2)7.2x6.4x
Debt investments$743,887 Discounted cash flowRisk adjusted discount factor (4)8.5% - 18.2% (2)13.0 %12.4 %
Expected principal recovery percentage0.7% - 100.0%99.1 %100.0 %
Debt investments$108,395 Market approachThird-party quote5.6 - 98.585.790.0
Total Level 3 investments$1,068,143 
 Fair ValueValuation
Technique		Significant Unobservable InputsRange 
Weighted
Average (2)
LMM equity investments$37,616
Discounted Cash FlowsWACC10.7% - 16.6% 12.7%
  Market Approach/Enterprise Value
EBITDA Multiples (1)
3.3x - 11.5x 6.9x
LMM debt portfolio investments78,444
Discounted Cash FlowsExpected Principal Recovery100.0% - 100.0% 100.0%
  
 Risk Adjusted Discount Factor8.5% - 21.0% 11.3%
Private Loan debt investments165,968
Discounted Cash FlowsExpected Principal Recovery3.0% - 100.0% 99.9%
   Risk Adjusted Discount Factor4.8% - 14.2% 8.3%
 39,066
Market ApproachThird Party Quotes96.5% - 100.4% 99.7%
Private Loan equity investments6,323
Market Approach/Enterprise Value
EBITDA Multiples (1)
5.0x - 9.5x 8.3x
  Discounted Cash FlowsWACC10.6% - 13.2% 11.8%
Middle Market debt investments638,374
Market ApproachThird Party Quotes22.5% - 108.0% 95.7%
Middle Market equity investments5,090
Market ApproachThird Party Quotes75.0% - 337.5% 281.8%
Other Portfolio investments18,366
Market Approach
NAV (1)
92.5% - 101.0% 99.0%
 $989,247
     
_____________________________
(1) MayEBITDA may include pro formaproforma adjustments and/or other add-backsaddbacks based on specific circumstances related to each investment.
(2) Weighted averageRange 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 6.5% - 43.3%.
(3)Does not include investments for which the significant unobservable input wasvaluation technique does not utilized ininclude the use of the applicable fair value determination.input.

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

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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
The following table providestables provide a summary of changes in fair value of the Company’sMSC Income Fund’s Level 3 portfolio investments for the yearyears ended December 31, 2017 (dollars2023 and 2022 (amounts in thousands):
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
December 31, 2023
Debt$852,282 $— $(253,517)$230,663 $33,078 $(5,467)$(18,914)$838,125 
Equity214,687 — (15,329)16,377 923 17,352 20,019 254,029 
Equity Warrant1,174 — (284)523 284 149 (1,105)741 
$1,068,143 $— $(269,130)$247,563 $34,285 $12,034 $— $1,092,895 
_____________________________
(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, 2021
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
December 31,
2022
Debt$879,970 $— $(205,481)$211,631 $10,645 $(42,747)$(1,736)$852,282 
Equity196,374 — (22,234)7,728 (7,037)38,120 1,736 214,687 
Equity Warrant792 — (45)1,111 (305)(379)— 1,174 
$1,077,136 $— $(227,760)$220,470 $3,303 $(5,006)$— $1,068,143 
_____________________________
(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.
At December 31, 2023 and 2022, 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 December 31, 2023Fair ValueQuoted 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 investments386,956 — — 386,956 
Middle Market portfolio investments85,990 — — 85,990 
Other Portfolio investments24,623 — — 24,623 
Total investments$1,092,895 $— $— $1,092,895 
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Type of InvestmentJanuary 1, 2017 Fair ValuePIK Interest Accrual
New
Investments (1)
Sales/ Repayments
Net Change in Unrealized
Appreciation
(Depreciation) (2)
Net Realized Gain (Loss)December 31, 2017 Fair Value
LMM Equity$37,616
$154
$8,276
$(622)$3,210
$(758)$47,876
LMM Debt78,444
120
26,985
(15,854)(1,104)(810)87,781
Private Loan Equity6,323
—
3,855
(2,917)(1,197)2,548
8,612
Private Loan Debt205,034
201
210,474
(108,750)(143)(46)306,770
Middle Market Debt638,374
697
294,857
(380,250)(3,536)(4,925)545,217
Middle Market Equity5,090
83
914
(1,004)813
(1,321)4,575
Other Portfolio (3)
18,366
—
39,812
(10,756)237
949
48,608
Total$989,247
$1,255
$585,173
$(520,153)$(1,720)$(4,363)$1,049,439
Fair Value Measurements
(in thousands)
At December 31, 2022Fair ValueQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Private Loan portfolio investments$559,763 $— $— $559,763 
LMM portfolio investments352,661 — — 352,661 
Middle Market portfolio investments126,744 — — 126,744 
Other Portfolio investments28,975 — — 28,975 
Total investments$1,068,143 $— $— $1,068,143 
(1) Column includes changesInvestment Portfolio Composition
MSC Income Fund’s principal investment objective is to maximize its portfolio’s total return by generating current income from its debt investments and current income and capital appreciation from its equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. MSC Income Fund seeks to achieve its investment objective through its Private Loan, LMM and Middle Market investment strategies.
MSC Income Fund’s private loan (“Private Loan”) investment strategy is focused on investments in privately held companies that are generally consistent with the size of its LMM portfolio companies or Middle Market portfolio companies, and its Private Loan investments generally range in size from $1 million to $20 million. MSC Income Fund’s Private Loan investments primarily consist of debt securities that have primarily been originated directly by the Adviser or, to a lesser extent, through the Adviser’s 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 to support a company owned by or in the process of being acquired by a private equity sponsor. MSC Income Fund’s 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. MSC Income Fund may have the option to co-invest with Main Street and the private equity sponsor in the equity securities of its Private Loan portfolio companies.
MSC Income Fund’s LMM investment strategy is focused on investments in secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. MSC Income Fund’s LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $1 million to $20 million. The LMM debt investments are typically secured by a first priority lien on the assets of the portfolio company, can include either fixed or floating rate terms and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, MSC Income Fund receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.
MSC Income Fund’s Middle Market investment strategy is focused on investments in syndicated loans to or debt securities in Middle Market companies, which MSC Income Fund defines as companies with annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $1 million to $20 million. MSC Income Fund’s Middle Market portfolio debt investments 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.
MSC Income Fund’s other portfolio (“Other Portfolio”) investments primarily consist of investments that are not consistent with the typical profiles for its Private Loan, LMM or Middle Market portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, MSC Income Fund may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds. For Other Portfolio investments, MSC Income Fund generally receives distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten-year period.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the net accretionlevel of discounts/premiumsnew investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be highly concentrated among several portfolio companies. For the years ended December 31, 2023, 2022 and amortization2021, MSC Income Fund did not record investment income from any single portfolio company in excess of fees.
(2) Column does not include unrealized appreciation (depreciation) on unfunded commitments.
(3) Includes the Company’s10% of total investment in HMS-ORIX. (See Note 4 - Investment in HMS-ORIX SLF LLC)

income.
The following table providestables provide a summary of changesMSC Income Fund’s investments in the Private Loan, LMM and Middle Market portfolios as of December 31, 2023 and 2022 (this information excludes Other Portfolio investments, which are discussed further below):
As of December 31, 2023
Private LoanLMM (a)Middle Market
(dollars in millions)
Number of portfolio companies785016
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 lien100.0 %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 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.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
As of December 31, 2022
Private LoanLMM (a)Middle Market
(dollars in millions)
Number of portfolio companies704821
Fair value$559.8 $352.7 $126.7 
Cost$563.0 $312.5 $159.7 
Debt investments as a % of portfolio (at cost)96.2 %73.2 %95.0 %
Equity investments as a % of portfolio (at cost)3.8 %26.8 %5.0 %
% of debt investments at cost secured by first priority lien99.4 %99.9 %98.5 %
Weighted-average annual effective yield (b)11.8 %12.1 %11.3 %
Average EBITDA (c)$36.8 $8.6 $79.2 
_____________________________
(a)At December 31, 2022, 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, 2022, 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, 2022 including debt investments on non-accrual status was 11.4% for its Private Loan portfolio, 11.7% for its LMM portfolio and 9.7% 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.
For the years ended December 31, 2023 and 2022, MSC Income Fund achieved a total return on investments of 13.6% and 9.1%, respectively. 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 Company’s Level 3Investment Portfolio for the specified period. MSC Income Fund’s total return on investments 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.
As of December 31, 2023, MSC Income Fund had Other Portfolio investments in four entities, collectively totaling $24.6 million in fair value and $21.5 million in cost basis and which comprised 2.3% and 2.1% of MSC Income Fund’s Investment Portfolio at fair value and cost, respectively. As of December 31, 2022, MSC Income Fund had Other Portfolio investments in four entities, collectively totaling $29.0 million in fair value and $24.7 million in cost basis and which comprised 2.7% and 2.3% of MSC Income Fund’s Investment Portfolio at fair value and cost, respectively.
The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments forat cost and fair value by type of investment as a percentage of the year ended December 31, 2016 (dollars in thousands):total combined
120
Type of InvestmentJanuary 1, 2016 Fair Value
PIK Interest
Accrual
New
Investments (1)
Sales/ Repayments
Net Change in Unrealized
Appreciation
(Depreciation)(2)
Net Realized Gain (Loss)December 31, 2016 Fair Value
LMM Equity$24,165
$(72)$9,264
$—
$4,259
$—
$37,616
LMM Debt61,295
200
24,343
(7,715)321
—
78,444
Private Loan Equity530
—
4,602
—
1,191
—
6,323
Private Loan Debt110,558
248
164,902
(72,533)2,156
(297)205,034
Middle Market Debt645,913
93
260,416
(275,787)30,333
(22,594)638,374
Middle Market Equity—
—
4,653
—
437
—
5,090
Other Portfolio10,527
—
7,985
—
(146)—
18,366
Total$852,988
$469
$476,165
$(356,035)$38,551
$(22,891)$989,247
Table of contents
(1) Column includes changes to investments dueMSC INCOME FUND, INC.
Notes to the net accretion of discounts/premiumsConsolidated Financial Statements (Continued)
Private Loan, LMM and amortization of fees.
(2) Column does not include unrealized appreciation (depreciation) on unfunded commitments.
The net change in unrealized appreciation (depreciation) for the years ended December 31, 2017, 2016 and 2015 included in the Consolidated Statement of Operations that related to Level 3 assets still held as of December 31, 2017, 2016 and 2015 was approximately $0.4 million, $17.1 million and $(41.4) million, respectively. For the years ended December 31, 2017 and 2016, there were no transfers between Level 2 and Level 3Middle Market portfolio investments.

Portfolio Investment Composition

The composition of the Company’s investments, as of December 31, 2017,2023 and 2022 (this information excludes Other Portfolio investments).
Cost:December 31, 2023December 31, 2022
First lien debt86.5 %88.5 %
Equity13.3 10.8 
Second lien debt— 0.3 
Equity warrants0.2 0.2 
Other— 0.2 
100.0 %100.0 %
Fair Value:December 31, 2023December 31, 2022
First lien debt78.4 %81.4 %
Equity21.5 17.9 
Second lien debt— 0.3 
Equity warrants0.1 0.1 
Other— 0.3 
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 was as follows (dollars in thousands):
 
Investments
at Cost
 
Cost Percentage
of Total Portfolio
 
Investments
at Fair Value
 
Fair Value Percentage 
of Total Portfolio
First lien secured debt investments$856,582
 80.5% $830,460
 79.1%
Second lien secured debt investments97,691
 9.2
 97,940
 9.3
Unsecured debt investments11,194
 1.0
 11,368
 1.1
Equity investments (1)
96,850
 9.1
 107,597
 10.3
Equity warrants2,012
 0.2
 2,074
 0.2
Total$1,064,329
 100.0% $1,049,439
 100.0%
(1) Includes the Company’s investment in HMS-ORIX. (See Note 4 - Investment in HMS-ORIX SLF LLC)



The compositiona percentage of the Company’stotal combined Private Loan, LMM and Middle Market portfolio investments, as of December 31, 2016,2023 and 2022 (this information excludes Other Portfolio investments). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
Cost:December 31, 2023December 31, 2022
Southwest23.8 %22.2 %
Northeast21.9 20.3 
Southeast17.8 17.8 
Midwest17.6 15.1 
West17.0 22.9 
Canada0.8 0.8 
Other Non-United States1.1 0.9 
100.0 %100.0 %
Fair Value:December 31, 2023December 31, 2022
Southwest26.8 %25.3 %
Northeast21.6 20.3 
Midwest18.3 15.9 
West16.4 21.1 
Southeast15.0 15.2 
Canada0.8 1.2 
Other Non-United States1.1 1.0 
100.0 %100.0 %
121
Table of contents
MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
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 was as follows (dollars in thousands):
 
Investments
at Cost
 
Cost Percentage
of Total Portfolio
 
Investments 
at Fair Value
 
Fair Value Percentage 
of Total Portfolio
First lien secured debt investments$809,280
 80.7% $791,126
 80.0%
Second lien secured debt investments117,339
 11.7
 114,652
 11.6
Unsecured debt investments16,126
 1.6
 16,074
 1.6
Equity investments56,974
 5.7
 63,569
 6.4
Equity warrants2,676
 0.3
 3,826
 0.4
Total$1,002,395
 100.0% $989,247
 100.0%

The composition of the Company’s investments by geographic region as of December 31, 2017, at cost2023 and fair value, was as follows (dollars in thousands) (since the Other Portfolio investments do not represent a single geographic region, this2022 (this information excludes Other Portfolio investments):.
Cost:December 31, 2023December 31, 2022
Internet Software & Services8.8 %7.8 %
Commercial Services & Supplies8.5 11.3 
Health Care Providers & Services6.5 4.9 
Machinery6.0 5.9 
Professional Services5.7 3.7 
Diversified Consumer Services5.4 4.7 
IT Services5.2 4.9 
Distributors4.4 5.0 
Containers & Packaging4.3 3.4 
Leisure Equipment & Products3.7 3.7 
Textiles, Apparel & Luxury Goods3.1 2.0 
Computers & Peripherals2.9 1.9 
Specialty Retail2.7 4.0 
Communications Equipment2.7 3.5 
Aerospace & Defense2.6 3.6 
Media2.5 2.4 
Construction & Engineering2.5 2.5 
Electrical Equipment2.2 1.8 
Building Products2.1 2.4 
Hotels, Restaurants & Leisure2.1 2.0 
Diversified Financial Services2.1 1.7 
Household Products2.0 1.5 
Internet & Catalog Retail1.6 1.3 
Food & Staples Retailing1.5 0.9 
Software1.4 1.3 
Health Care Equipment & Supplies1.3 1.2 
Food Products0.9 1.1 
Energy Equipment & Services0.5 1.2 
Diversified Telecommunication Services0.1 3.4 
Other (1)4.7 5.0 
100.0 %100.0 %
 Investments
at Cost		 Cost Percentage
of Total Portfolio		 Investments
at Fair Value		 Fair Value Percentage 
of Total Portfolio
Northeast$155,908
 15.4% $154,098
 15.4%
Southeast180,946
 17.8
 188,290
 18.8
West190,615
 18.8
 177,422
 17.7
Southwest193,219
 19.0
 190,926
 19.1
Midwest250,005
 24.6
 244,331
 24.4
Non-United States44,987
 4.4
 45,764
 4.6
Total$1,015,680
 100.0% $1,000,831
 100.0%
_____________________________
The composition(1)Includes various industries with each industry individually less than 1.0% of the Company’stotal combined Private Loan, LMM and Middle Market portfolio investments by geographic region asat each date.
122
Table of contents
MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Fair Value:December 31, 2023December 31, 2022
Machinery7.4 %7.5 %
Commercial Services & Supplies7.3 10.3 
Internet Software & Services7.3 6.7 
Diversified Consumer Services6.5 5.9 
Health Care Providers & Services6.0 4.6 
Professional Services5.5 2.8 
IT Services5.0 4.7 
Distributors4.6 5.5 
Computers & Peripherals4.6 2.8 
Containers & Packaging4.6 3.8 
Leisure Equipment & Products3.3 3.7 
Construction & Engineering3.1 2.9 
Textiles, Apparel & Luxury Goods2.9 2.0 
Specialty Retail2.7 3.1 
Media2.6 2.6 
Aerospace & Defense2.5 3.5 
Electrical Equipment2.3 1.9 
Construction Materials2.2 2.1 
Diversified Financial Services2.0 1.8 
Building Products1.9 2.5 
Household Products1.9 1.3 
Software1.7 1.7 
Air Freight & Logistics1.6 1.2 
Hotels, Restaurants & Leisure1.6 1.5 
Internet & Catalog Retail1.5 1.9 
Food & Staples Retailing1.2 0.8 
Communications Equipment1.1 1.3 
Energy Equipment & Services0.3 1.0 
Diversified Telecommunication Services0.1 3.6 
Other (1)4.7 5.0 
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.
At December 31, 2016, at cost2023 and fair value,2022, MSC Income Fund had no portfolio investment that was as follows (dollars in thousands) (since the Other Portfolio investments do not represent a single geographic region, this information excludes the Other Portfolio investments):
 Investments
at Cost		 Cost Percentage
of Total Portfolio		 Investments
at Fair Value		 Fair Value Percentage 
of Total Portfolio
Northeast$144,465
 14.6% $141,637
 14.6%
Southeast185,803
 18.9
 193,616
 19.9
West177,572
 18.1
 167,544
 17.3
Southwest188,455
 19.2
 181,894
 18.7
Midwest217,603
 22.1
 218,540
 22.5
Non-United States69,854
 7.1
 67,650
 7.0
Total$983,752
 100.0% $970,881
 100.0%


The compositiongreater than 10% of the Company’s total investments by industry as of December 31, 2017 and December 31, 2016,Investment Portfolio at cost and fair value was as follows (since the Other Portfolio investments do not represent a single industry, this information excludes Other Portfolio investments):
value.
 Cost Fair Value
 December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Commercial Services and Supplies7.9% 9.1% 7.7% 9.2%
Hotels, Restaurants, and Leisure6.2
 8.0
 6.3
 8.1
Construction and Engineering5.4
 4.6
 5.5
 4.8
Diversified Telecommunication Services5.3
 3.1
 5.3
 3.0
Aerospace and Defense4.8
 1.9
 4.9
 1.8
IT Services4.6
 4.6
 4.6
 4.7
Communications Equipment4.3
 4.7
 4.5
 4.9
Media4.0
 7.7
 3.9
 7.6
Diversified Consumer Services3.6
 2.8
 3.7
 2.7
Energy Equipment and Services3.5
 3.7
 3.2
 2.8
Professional Services3.5
 1.0
 3.6
 1.0
Machinery3.5
 1.5
 4.0
 1.9
Internet Software and Services3.3
 5.1
 3.3
 5.2
Distributors3.1
 1.6
 3.2
 1.7
Leisure Equipment and Products3.0
 0.8
 3.1
 0.8
Specialty Retail2.9
 3.9
 2.0
 3.3
Auto Components2.7
 3.1
 2.4
 3.2
Food Products2.6
 2.7
 2.6
 2.5
Oil, Gas, and Consumable Fuels2.4
 0.9
 2.5
 0.9
Computers and Peripherals2.3
 1.0
 2.6
 1.1
Health Care Equipment and Supplies2.0
 2.2
 2.1
 2.3
Internet and Catalog Retail1.9
 1.4
 1.6
 1.2
Household Durables1.6
 —
 1.6
 —
Health Care Providers and Services1.5
 2.2
 1.6
 2.4
Construction Materials1.5
 1.0
 1.6
 1.1
Diversified Financial Services1.3
 1.9
 1.2
 1.9
Trading Companies and Distributors1.2
 1.0
 1.3
 1.0
Capital Markets1.1
 1.2
 1.1
 1.2
Food & Staples Retailing1.0
 1.4
 1.0
 1.5
Personal Products1.0
 0.8
 1.0
 0.8
Healthcare Technology0.9
 1.3
 0.6
 1.3
Marine0.8
 0.9
 0.8
 0.9
Tobacco0.8
 1.1
 0.9
 1.1
Electronic Equipment, Instruments & Components0.7
 3.7
 0.7
 3.7
Electrical Equipment0.7
 0.9
 0.7
 1.0
Building Products0.5
 0.6
 0.6
 0.6
Road & Rail0.5
 —
 0.5
 —
Software0.5
 2.6
 0.6
 2.7
Textiles, Apparel & Luxury Goods0.4
 0.5
 0.3
 0.4
Publishing0.4
 0.3
 0.4
 0.3
Pharmaceuticals0.3
 1.2
 0.2
 1.2
Air Freight & Logistics0.3
 0.3
 0.4
 0.4
Airlines0.2
 0.2
 0.2
 0.2
Consumer Finance—
 0.3
 0.1
 0.4
Containers and Packaging—
 0.3
 —
 0.3
Chemicals—
 0.2
 —
 0.2
Oil and Gas Exploration and Production—
 0.1
 —
 0.1
Insurance—
 0.6
 —
 0.6
Total100.0% 100.0% 100.0% 100.0%



Note 4 — Investment in HMS-ORIX SLF LLC

On April 4, 2017, the Company and ORIX Funds Corp. (“Orix”) entered into a limited liability company agreement to co-manage HMS-ORIX SLF LLC (“HMS-ORIX”), which invests primarily in broadly-syndicated loans. Pursuant to the terms of the limited liability agreement and through representation on the HMS-ORIX Board of Managers, the Company and Orix each have 50% voting control of HMS-ORIX and together will agree on all portfolio and investment decisions as well as all other significant actions for HMS-ORIX. The Company does not operationally control HMS-ORIX and, accordingly, does not consolidate the operations of HMS-ORIX within the consolidated financial statements. As of December 31, 2017, the Company and Orix have committed to provide, and have funded, an aggregate of $50.0 million of equity to HMS-ORIX, with the Company providing $30.0 million (60% of the equity) and Orix providing $20.0 million (40% of the equity).

As of December 31, 2017, HMS-ORIX had total assets of $142.9 million and HMS-ORIX’s portfolio consisted of 74 broadly-syndicated loans, all of which were secured by first-priority liens, generally in industries similar to those in which the Company may directly invest. As of December 31, 2017, there were no loans in HMS-ORIX’s portfolio that were on non-accrual status.

On April 5, 2017, HMS-ORIX closed on a $100.0 million credit facility with Bank of America, N.A. The facility has a maturity date of April 5, 2020 and borrowings under the facility bear interest at a rate equal to LIBOR plus 1.65% per annum. As of December 31, 2017, $86.5 million was outstanding under this facility. Borrowings under the facility are secured by substantially all of the assets of HMS-ORIX.

The following table presents a summary of HMS-ORIX’s portfolio as of December 31, 2017 (dollars in thousands):
 As of December 31, 2017
  
Total debt investments (1)
$138,908
Weighted average effective yield on loans(2)
4.95%
Largest loan to a single borrower(1)
$3,496
Total of 10 largest loans to borrowers(1)
$30,790
(1) At principal amount.
(2) Weighted average effective annual yield is calculated based on the investments at the end of each period and includes accretion of original issue discounts and amortization of premiums, and the amortization of fees received in connection with transactions.

The following table presents a listing of HMS-ORIX’s individual loans as of December 31, 2017:
HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Acosta, Inc.Commercial Services and SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - September 26, 2021)$2,000
$1,881
$1,766
Acrisure, LLCInsuranceLIBOR (2 months) + 4.25%, Current Coupon 5.65%, Secured Debt (Maturity - November 22, 2023)2,115
2,122
2,139
Advantage Sales & Marketing Inc.Commercial Services and SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.63%, Secured Debt (Maturity - July 23, 2021)1,990
1,938
1,945
Air Medical Group Holdings IncHealth Care Providers & ServicesLIBOR (6 months) + 4.00%, Current Coupon 5.67%, Secured Debt (Maturity - April 28, 2022)1,990
1,981
1,993
Albany Molecular Research, Inc.Life Sciences Tools & ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - August 28, 2024)100
100
99
Alphabet Holding Company, Inc.Food ProductsLIBOR (1 month) + 3.50%, Current Coupon 5.07%, Secured Debt (Maturity - September 26, 2024)1,995
1,985
1,935


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
American Seafoods Group LLCFood ProductsPrime + 2.25%, Current Coupon 6.75%, Secured Debt (Maturity - August 21, 2023)$1,500
$1,493
$1,513
Ancestry.com Operations Inc.Internet Software & ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.66%, Secured Debt (Maturity - October 19, 2023)1,995
2,013
2,007
Arch Coal, Inc.Metals & MiningLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - March 7, 2024)1,985
1,992
2,004
AshCo, Inc.Specialty RetailLIBOR (3 months) + 5.00%, Current Coupon 6.57%, Secured Debt (Maturity - September 25, 2024)1,995
1,951
1,993
Asurion, LLCInsuranceLIBOR (1 month) + 3.00%, Current Coupon 4.57%, Secured Debt (Maturity - November 3, 2023)1,312
1,312
1,320
Atkore International, Inc.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 3.00%, Current Coupon 4.70%, Secured Debt (Maturity - December 22, 2023)2,977
3,005
2,999
BCP Renaissance Parent L.L.C.Oil, Gas & Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.38%, Secured Debt (Maturity - October 31, 2024)600
602
608
BMC Software Finance, Inc.SoftwareLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - September 12, 2022)3,156
3,181
3,163
Builders FirstSource, Inc.Building ProductsLIBOR (1 month) + 3.00%, Current Coupon 4.69%, Secured Debt (Maturity - February 29, 2024)2,977
2,974
2,993
Calpine CorporationIndependent Power and Renewable Electricity ProducersLIBOR (3 months) + 2.50%, Current Coupon 4.20%, Secured Debt (Maturity - January 15, 2023)1,990
1,997
1,991
CHS/Community Health Systems, Inc.Health Care Providers & ServicesLIBOR (3 months) + 3.00%, Current Coupon 4.48%, Secured Debt (Maturity - January 27, 2021)1,613
1,608
1,543
ClubCorp Holdings, Inc.Real Estate Management & DevelopmentLIBOR (3 months) + 3.25%, Current Coupon 4.94%, Secured Debt (Maturity - September 18, 2024)1,959
1,949
1,969
Colorado Buyer IncTechnology Hardware, Storage & PeripheralsLIBOR (3 months) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - May 1, 2024)2,985
2,995
3,008
Confie Seguros Holding II Co.InsuranceLIBOR (1 month) + 5.25%, Current Coupon 6.73%, Secured Debt (Maturity - April 19, 2022)1,985
1,992
1,987
CPI International, Inc.Aerospace & DefenseLIBOR (1 month) + 3.50%, Current Coupon 5.07%, Secured Debt (Maturity - July 26, 2024)1,995
1,995
2,011
Diamond Resorts International, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 4.50%, Current Coupon 6.07%, Secured Debt (Maturity - September 1, 2023)2,152
2,179
2,173
Duff & Phelps CorporationDiversified Financial ServicesLIBOR (3 months) + 3.25%, Current Coupon 4.94%, Secured Debt (Maturity - October 15, 2024)491
494
493
  LIBOR (3 months) + 3.25%, Current Coupon 4.63%, Secured Debt (Maturity - December 4, 2024)2,728
2,724
2,737
   3,219
3,218
3,230
EFS Cogen Holdings I LLCElectric UtilitiesLIBOR (3 months) + 3.25%, Current Coupon 4.95%, Secured Debt (Maturity - June 28, 2023)1,904
1,917
1,925
Encapsys LLCChemicalsLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - November 7, 2024)1,000
1,001
1,006


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Endo Luxembourg Finance Company I S.a.r.l.PharmaceuticalsLIBOR (1 month) + 4.25%, Current Coupon 5.88%, Secured Debt (Maturity - April 29, 2024)$1,990
$2,009
$2,005
Envision Healthcare CorporationHealth Care Providers & ServicesLIBOR (1 month) + 3.00%, Current Coupon 4.57%, Secured Debt (Maturity - December 1, 2023)2,481
2,481
2,491
Everi Payments Inc.Leisure ProductsLIBOR (3 months) + 3.50%, Current Coupon 4.98%, Secured Debt (Maturity - May 9, 2024)1,990
1,983
2,013
Exgen Renewables IV, LLCElectrical ProductionLIBOR (3 months) + 3.00%, Current Coupon 4.47%, Secured Debt (Maturity - November 29, 2024)300
299
304
First American Payment Systems, L.P.Diversified Financial ServicesLIBOR (1 month) + 5.75%, Current Coupon 7.14%, Secured Debt (Maturity - January 5, 2024)952
963
958
Fitness International, LLCHotels, Restaurants & LeisureLIBOR (1 month) + 3.50%, Current Coupon 5.19%, Secured Debt (Maturity - July 1, 2020)1,735
1,757
1,760
Flex Acquisition Company IncContainers & PackagingLIBOR (3 months) + 3.00%, Current Coupon 4.34%, Secured Debt (Maturity - December 29, 2023)1,995
2,004
2,008
Flexera Software LLCSoftwareLIBOR (1 month) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - April 2, 2020)1,995
2,013
2,008
Gardner Denver, Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 4.44%, Secured Debt (Maturity - July 30, 2024)1,995
2,005
2,004
Golden Nugget, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 3.25%, Current Coupon 4.66%, Secured Debt (Maturity - October 4, 2023)1,990
1,990
2,008
Greatbatch Ltd.Health Care Equipment & SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.66%, Secured Debt (Maturity - October 27, 2022)2,763
2,780
2,788
GYP Holdings III Corp.Trading Companies & DistributorsLIBOR (1 month) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - March 31, 2023)3,483
3,506
3,502
Harbor Freight Tools USA, Inc.Specialty RetailLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - August 18, 2023)1,980
1,987
1,996
HD Supply Waterworks, Ltd.Trading Companies & DistributorsLIBOR (6 months) + 3.00%, Current Coupon 4.46%, Secured Debt (Maturity - August 1, 2024)140
140
141
Horizon Pharma, Inc.PharmaceuticalsLIBOR (1 month) + 3.25%, Current Coupon 4.75%, Secured Debt (Maturity - March 29, 2024)1,990
2,009
2,001
IG Investments Holdings, LLCProfessional ServicesLIBOR (1 month) + 3.50%, Current Coupon 5.19%, Secured Debt (Maturity - October 29, 2021)1,990
2,002
1,992
Jackson Hewitt Tax Service Inc.Diversified Financial ServicesLIBOR (1 month) + 7.00%, Current Coupon 8.38%, Secured Debt (Maturity - July 30, 2020)1,939
1,868
1,922
KMG Chemicals, Inc.ChemicalsLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 17, 2024)863
859
868
KUEHG Corp.Educational ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.44%, Secured Debt (Maturity - August 12, 2022)2,482
2,489
2,493
LANDesk Group, Inc.SoftwareLIBOR (1 month) + 4.25%, Current Coupon 5.82%, Secured Debt (Maturity - January 22, 2024)993
999
947
Learfield Communications LLCMediaLIBOR (1 month) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - December 1, 2023)1,990
2,009
2,007


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
MA FinanceCo., LLCElectric Equipment, Instruments & ComponentsLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 21, 2024)$387
$387
$388
Mohegan Tribal Gaming AuthorityHotels, Restaurants & LeisureLIBOR (1 month) + 4.00%, Current Coupon 5.57%, Secured Debt (Maturity - October 13, 2023)1,985
2,003
2,006
MPH Acquisition Holdings LLCHealth Care TechnologyLIBOR (3 months) + 3.00%, Current Coupon 4.69%, Secured Debt (Maturity - June 7, 2023)2,896
2,935
2,905
NAB Holdings, LLCIT ServicesLIBOR (3 months) + 3.25%, Current Coupon 4.82%, Secured Debt (Maturity - July 1, 2024)1,990
1,981
2,000
Ortho-Clinical Diagnostics, IncLife Sciences Tools & ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.44%, Secured Debt (Maturity - June 30, 2021)1,985
1,980
1,992
PODS, LLCTransportation & LogisticsLIBOR (1 month) + 3.00%, Current Coupon 4.40%, Secured Debt (Maturity - December 6, 2024)1,995
1,994
2,010
Rackspace Hosting, Inc.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - November 3, 2023)3,284
3,309
3,286
Radiate Holdco, LLCMediaLIBOR (3 months) + 3.00%, Current Coupon 4.38%, Secured Debt (Maturity - February 1, 2024)2,570
2,544
2,547
Red Ventures, LLCDirect Marketing ServicesLIBOR (1 month) + 4.00%, Current Coupon 5.57%, Secured Debt (Maturity - November 8, 2024)1,995
1,981
1,996
Scientific Games International, Inc.Leisure ProductsLIBOR (1 month) + 3.25%, Current Coupon 4.67%, Secured Debt (Maturity - August 14, 2024)399
401
403
Seattle Spin Co.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 21, 2024)2,613
2,616
2,618
SeaWorld Parks & Entertainment, Inc.Hotels, Restaurants & LeisureLIBOR (3 months) + 3.00%, Current Coupon 4.69%, Secured Debt (Maturity - April 1, 2024)1,985
1,987
1,966
Signode Industrial Group US Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - April 30, 2021)2,773
2,792
2,785
Staples, Inc.DistributorsLIBOR (3 months) + 4.00%, Current Coupon 5.49%, Secured Debt (Maturity - September 12, 2024)2,000
1,995
1,965
Telenet Financing USD LLCDiversified Telecommunications ServicesLIBOR (1 month) + 2.50%, Current Coupon 3.92%, Secured Debt (Maturity - March 2, 2026)1,655
1,655
1,663
Transdigm, Inc.Aerospace & DefenseLIBOR (1 month) + 2.75%, Current Coupon 4.32%, Secured Debt (Maturity - June 9, 2023)1,985
1,992
1,990
  LIBOR (1 month) + 3.00%, Current Coupon 4.57%, Secured Debt (Maturity - August 22, 2024)1,000
998
1,006
   2,985
2,990
2,996
Travelport Finance (Luxembourg) S.A.R.L.Internet Software & ServicesLIBOR (3 months) + 2.75%, Current Coupon 4.17%, Secured Debt (Maturity - September 2, 2021)1,901
1,901
1,903
Traverse Midstream Partners LLCOil, Gas & Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.85%, Secured Debt (Maturity - September 27, 2024)781
784
793
UFC Holdings, LLCMediaLIBOR (3 months) + 3.25%, Current Coupon 4.81%, Secured Debt (Maturity - August 18, 2023)1,990
2,002
2,003


HMS-ORIX
Loan Portfolio
As of December 31, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Ultra Resources, Inc.Oil, Gas & Consumable FuelsLIBOR (1 month) + 3.00%, Current Coupon 4.41%, Secured Debt (Maturity - April 12, 2024)$2,000
$2,002
$2,002
Utz Quality Foods, LLCCommercial Services and SuppliesLIBOR (1 month) + 3.50%, Current Coupon 5.01%, Secured Debt (Maturity - November 21, 2024)1,600
1,599
1,616
Valeant Pharmaceuticals International, Inc.PharmaceuticalsLIBOR (1 month) + 3.50%, Current Coupon 4.94%, Secured Debt (Maturity - April 1, 2022)1,546
1,553
1,570
Vertiv Group CorporationElectrical EquipmentLIBOR (3 months) + 4.00%, Current Coupon 5.35%, Secured Debt (Maturity - November 30, 2023)1,555
1,569
1,556
Vistra Operations Company LLCElectric UtilitiesLIBOR (2 months) + 2.75%, Current Coupon 4.08%, Secured Debt (Maturity - December 14, 2023)1,985
1,996
2,001
West CorporationDiversified Telecommunications ServicesLIBOR (1 month) + 4.00%, Current Coupon 5.35%, Secured Debt (Maturity - October 10, 2024)1,032
1,022
1,036
WideOpenWest Finance, LLCDiversified Telecommunications ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.75%, Secured Debt (Maturity - August 18, 2023)3,496
3,506
3,470
Total Loan Portfolio   $139,017
$139,012

For the period from inception (April 4, 2017) to December 31, 2017, the Company received $450,000 of dividend income from its investment in HMS-ORIX.

The following tables show the financial information for HMS-ORIX:
HMS-ORIX SLF LLC
Balance Sheet (Unaudited)
(dollars in thousands)
 As of December 31, 2017
Assets 
Portfolio investments at fair value (amortized cost: $139,017)$139,012
Cash and cash equivalents2,681
Interest receivable306
Deferred financing costs, net890
Other assets15
Total assets$142,904
  
Liabilities 
Credit facilities payable$86,500
Payable for securities purchased5,268
Accounts payable and accrued expenses64
Total liabilities91,832
  
Net assets 
Members’ equity51,072
Total net assets51,072
Total liabilities and net assets$142,904



HMS-ORIX SLF LLC
Statement of Operations (Unaudited)
(dollars in thousands)
 Period from inception (April 4, 2017) to December 31, 2017
 
Investment income 
Interest income$3,730
Dividend income—
Fee income—
Other income—
Total investment income3,730
Expenses 
Interest expense1,720
Other expenses34
General and administrative expenses64
Total expenses1,818
Net investment income1,912
Net realized (loss) from investments(85)
Net realized income1,827
Net change in unrealized (depreciation) on investments(5)
Net increase in net assets resulting from operations$1,822

Note 5 — Unconsolidated Significant Subsidiaries


In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, the CompanyMSC Income Fund must determine which of its unconsolidated controlled portfolio companies, if any, are considered "significant“significant subsidiaries." After performing this analysis,” In evaluating its unconsolidated controlled portfolio companies in accordance with Regulation S-X, there are two tests that MSC Income Fund must utilize to determine if any of MSC Income Fund’s Control Investments (as defined in Note A — Organization and Basis of Presentation, including those unconsolidated portfolio companies defined as Control Investments in which MSC Income Fund does not own greater than 50% of the Company determinedvoting securities nor have rights to maintain greater than 50% of the board representation) are considered significant subsidiaries: the investment test and the income test. The investment
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Notes to the Consolidated Financial Statements (Continued)
test is generally measured by dividing MSC Income Fund’s investment in the Control Investment by the value of MSC Income Fund’s total investments. The income test is generally measured by dividing the absolute value of the combined sum of total investment income, net realized gain (loss) and net unrealized appreciation (depreciation) from the relevant Control Investment for the period being tested by the absolute value of MSC Income Fund’s change in net assets resulting from operations for the same period. Rules 3-09 and 4-08(g) of Regulation S-X require MSC Income Fund to include (1) separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which MSC Income Fund owns greater than 50% of the voting securities) in an annual report and (2) summarized financial information of a Control Investment in a quarterly report, respectively, if certain thresholds of the investment or income tests are exceeded and the unconsolidated portfolio company qualifies as a significant subsidiary.
As of December 31, 2023, 2022 and 2021, MSC Income Fund had no single investment that GRT Rubber Technologies, LLC (“GRT”) isqualified as a significant subsidiary under either the investment or income tests.
NOTE D — INVESTMENT IN SIGNAL PEAK CLO 7, LTD.
On December 16, 2021, MSC Income Fund sold its entire position in the Signal Peak CLO 7, Ltd., a limited liability company which invested primarily in broadly-syndicated loans, for $17.4 million, resulting in a realized loss of $3.7 million. For the year December 31, 2021, MSC Income Fund recognized $2.2 million of interest income in respect of its investment in Signal Peak CLO.
NOTE E — DEBT

Summary of MSC Income Fund’s debt as of December 31, 2023 is as follows:
Outstanding Balance
Unamortized Debt Issuance
Costs (1)
Recorded Value
Estimated Fair Value (2)
(dollars in thousands)
SPV Facility$203,688 $— $203,688 $203,688 
Series A Notes150,000 (845)149,155 141,531 
Corporate Facility132,000 — 132,000 132,000 
Total Debt$485,688 $(845)$484,843 $477,219 
_____________________________
(1)The unamortized debt issuance costs for the year endedCredit Facilities are reflected as Deferred financing costs on the Consolidated Balance Sheets, while the deferred debt issuance costs related to the Series A Notes are reflected as a contra-liability to the Series A Notes on the Consolidated Balance Sheets.
(2)Estimated fair value for outstanding debt if MSC Income Fund had adopted the fair value option under ASC 825. See discussion of the methods used to estimate the fair value of MSC Income Fund’s debt in Note B.9. — Summary of Significant Accounting Policies — Fair Value of Financial Instruments.
Summary of MSC Income Fund’s debt as of December 31, 2015,2022 is as follows:
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Outstanding Balance
Unamortized Debt Issuance Costs (1)
Recorded Value
Estimated Fair Value (2)
(dollars in thousands)
SPV Facility$223,688 $— $223,688 $223,688 
Series A Notes150,000 (1,144)148,856 132,955 
Corporate Facility98,000 — 98,000 98,000 
Total Debt$471,688 $(1,144)$470,544 $454,643 
_____________________________
(1)The unamortized debt issuance costs for the Credit Facilities are reflected as Deferred financing costs on the Consolidated Balance Sheets, while the deferred debt issuance costs related to the Series A Notes are reflected as a contra-liability to the Series A Notes on the Consolidated Balance Sheets.
(2)Estimated fair value for outstanding debt if MSC Income Fund had adopted the fair value option under at least oneASC 825. See discussion of the significance conditionsmethods used to estimate the fair value of Rule 4-08(g)MSC Income Fund’s debt in Note B.9. — Summary of Regulation S-X.  The Company had no “significant subsidiaries” under Rule 3-09Significant Accounting Policies — Fair Value of Financial Instruments.
Summarized interest expense for the years ended December 31, 2017, 20162023, 2022 and 2015,2021 is as follows:
Year Ended December 31,
202320222021
(dollars in thousands)
SPV Facility$22,184 $13,856 $8,255 
Series A Notes6,358 6,167 653 
Corporate Facility7,916 4,400 2,681 
Deutsche Bank Credit Facility(1)
— — 1,045 
Main Street Term Loan(2)
— — 1,835 
Total Interest Expense$36,458 $24,423 $14,469 
_____________________________
(1)Deutsche Bank Credit Facility was fully repaid and under Rule 4-08(g) of Regulation S-X for the years ended December 31, 2017extinguished on February 3, 2021.
(2)Main Street Term Loan was fully repaid and 2016.extinguished on October 22, 2021.

Corporate Facility
The following tables show the summarized financial information for GRT (dollars in thousands):
 As of December 31,
 2017 2016
Balance Sheet Data   
Current assets$8,375
 $8,326
Noncurrent assets28,312
 32,107
Current liabilities3,577
 2,941
Non Current liabilities16,067
 18,563

 For the Twelve Months Ended December 31,
 2017 2016 2015
Summary of Operations     
Total revenue$31,165
 $26,140
 $29,838
Gross profit6,737
 6,330
 6,943
Income from operations2,329
 2,154
 2,900
Net income (loss)(103) (270) 86



Note 6 — Borrowings

On March 11, 2014, the Company entered intoMSC Income Fund is a party to a senior secured revolving credit agreement with Capital One, National Associationdated March 6, 2017 (as amended, from time to time, the “Capital One Credit“Corporate Facility”) with Capital One, National Association (“Capital One”)EverBank (formerly known as TIAA Bank), as administrative agent, and with EverBank and other financial institutions as lenders. As of December 31, 2023, the Corporate Facility included (i) total commitments of $165.0 million, (ii) an accordion feature with the right to request an increase in commitments under the facility from new and existing lenders (together with Capital One,on the “Lenders”). On March 6, 2017,same terms and conditions as the Capital One Credit Facility was amendedexisting commitments up to $200.0 million of total commitments and restated to, among other things, (i) extend the(iii) a revolving period and maturity date to September 1, 2025 and March 6, 2020, (ii) reduce revolver commitments1, 2026, respectively, with two, one-year extension options subject to $95.0 million and (iii) assign Capital One’s role as administrative agent to EverBank Commercial Finance, Inc. (“EverBank”). On October 19, 2017, the Company amended the EverBank Credit Facility to increase the revolver commitments to $120.0 million. lender approval.
Borrowings under the EverBank CreditCorporate Facility bear interest, subject to the Company’sMSC Income Fund’s election, on a per annum basis at a rate equal to (i) the adjusted London Interbank Offered Rate (“LIBOR”) rateSOFR plus 2.75%2.50% or (ii) the base rate plus 1.75%1.40%. The base rate is defined as the higher of (a) the primePrime rate, (b) the Federal Funds Rate (as defined in the credit agreement) plus 0.50%0.5% or (c) the adjusted LIBOR rateSOFR plus 1.00%1.1%. The adjusted LIBOR rate is defined in the credit agreement for the EverBank Credit Facility as the one-month LIBOR rate plus such amount as adjusted for statutory reserve requirements for Eurocurrency liabilities. As of December 31, 2017, the one-month LIBOR rate was 1.57%. The CompanyAdditionally, MSC Income Fund pays an annual unused commitment fee of 0.30% per annum on the unused revolverlender commitments if more than 50% or more of the revolverlender commitments are being used and an annual unused commitment fee of 0.625% per annum on the unused revolverlender commitments if less than 50% of the revolverlender commitments are being used.

The EverBank Credit Facility permits the creation of certain “Structured Subsidiaries,” which are not guarantors under the EverBank Credit Facility and which are permitted to incur debt outside of the EverBank Credit Facility. Borrowings under the EverBank CreditCorporate Facility are secured by a first lien on all of the Company’s assets other thanof MSIF and its subsidiaries, excluding the assets of
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Structured Subsidiaries or immaterial subsidiaries, as well as all of the assets, and a pledge of equity ownership interests, of any future subsidiaries of the CompanyMSIF (other than Structured Subsidiaries)Subsidiaries or immaterial subsidiaries). TheIn connection with the Corporate Facility, MSIF has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit agreement forfacilities. Effective April 27, 2023, the EverBank Credit Facility contains affirmative and negative covenants usual and customary for credit facilities of this nature, including: (i) maintaining a minimum interest coverage ratio of at least 2.00 to 1.00; (ii) maintaining an asset coverage ratio of at least 2.10 to 1.00; and (iii) maintaining a minimum consolidated tangible net worth, excluding Structured Subsidiaries, of at least the greater of (a) the aggregate amount of the revolver commitments or (b) $50.0 million. Further, the EverBank Credit Facility contains limitations on incurrence of other indebtedness (other than by the Structured Subsidiaries), limitations on industry concentration, and an anti-hoarding provision to protect the collateralreference rate under the EverBank Credit Facility. Additionally, the Company must provide informationCorporate Facility was amended from LIBOR to EverBank on a regular basis, preserve its corporate existence, comply withSOFR plus an applicable laws, including the 1940 Act, pay obligations when they become due, and invest the proceedscredit spread adjustment of the sales of common stock in accordance with its investment objectives and strategies (as set forth in the EverBank Credit Facility)0.10%. Further, the credit agreement contains usual and customary default provisions including: (i) a default in the payment of interest and principal; (ii) insolvency or bankruptcy of the Company; (iii) a material adverse change in the Company’s business; or (iv) breach of any covenant, representation or warranty in the loan agreement or other credit documents and failure to cure such breach within defined periods. Additionally, the EverBank Credit Facility requires the Company to obtain written approval from the administrative agent prior to entering into any material amendment, waiver or other modification of any provision of the Investment Advisory Agreement.
As of December 31, 2017,2023, the interest rate on the Corporate Facility was 7.84%. The average interest rate for borrowings under the Corporate Facility was 7.54% and 4.11% for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, MSC Income Fund was in compliance with all financial covenants of the Corporate Facility.
SPV Facility
MSIF Funding LLC (“MSIF Funding”), a wholly-owned Structured Subsidiary that primarily holds originated loan investments, is party to a senior secured revolving credit facility dated February 3, 2021 (as amended, the “SPV Facility” and, together with the Corporate Facility, the “Credit Facilities”) with JPMorgan Chase Bank, National Association (“JPM”), as administrative agent, and U.S. Bank, N.A., as collateral agent and collateral administrator, JPM and other financial institutions as lenders and MSIF as portfolio manager. In August 2023, the SPV facility was amended to extend the revolving period expiration date from February 3, 2024 to February 3, 2027 and the maturity date from February 3, 2025 to February 3, 2028. Additionally, total commitments were reduced from $325.0 million to $300.0 million. Advances under the SPV Facility bear interest at a per annum rate equal to the three month SOFR in effect, plus the applicable margin of 3.00%. MSIF Funding also pays a commitment fee of 0.75% per annum on the average daily unused amount of the financing commitments until February 2, 2027. As of December 31, 2023, the SPV Facility included total commitments of $300.0 million and an accordion feature, with the right to request an increase of total commitments and borrowing availability up to $450.0 million. The SPV Facility is secured by a collateral loan on the assets of MSIF Funding. In connection with the SPV Facility, MSIF Funding has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
As of December 31, 2023, the interest rate on the SPV Facility was 8.39%. The average interest rate for borrowings under the SPV Facility was 8.09% and 4.71% for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, MSIF Funding was in compliance with all financial covenants of the SPV Facility.
Series A Notes
Pursuant to a Master Note Purchase Agreement dated October 21, 2021 (the “Note Purchase Agreement”), MSC Income Fund issued $77.5 million of 4.04% Series A Senior Notes due 2026 (the “Series A Notes”) upon entering into the Note Purchase Agreement and an additional $72.5 million on January 21, 2022. The Series A Notes bear a fixed interest rate of 4.04% per year and will mature on October 30, 2026, unless redeemed, purchased or prepaid prior to such date by the Company in accordance with their terms.
Interest on the Series A Notes is due semiannually on April 30 and October 30 each year, beginning on April 30, 2022. The Series A Notes may be redeemed in whole or in part at any time or from time to time at MSC Income Fund’s option at par plus accrued interest to the prepayment date and, if applicable, a make-whole premium. In addition, MSC Income Fund is obligated to offer to prepay the Series A Notes at par plus accrued and unpaid interest up to, but excluding, the date of prepayment, if certain change in control events occur. In the event that a Below Investment Grade Event (as defined in the Note Purchase Agreement) occurs, the Series A Notes will bear interest at a fixed rate of 5.04% per year from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event ends. The Series A Notes are general unsecured obligations of MSIF that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by MSIF.
The Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness of MSIF or subsidiary guarantors subject to a cure pass-through, certain judgments and
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
orders and certain events of bankruptcy. As of December 31, 2023, MSC Income Fund was not awarein compliance with all financial covenants of any instancesthe Note Purchase Agreement.
Main Street Term Loan
On January 27, 2021, the Company entered into a term loan agreement (the “Main Street Term Loan”) with Main Street, which initially provided up to an aggregate principal amount of noncompliance$40.0 million in borrowings. The Company paid a 1.0% upfront fee to Main Street on the closing date. On July 27, 2021, the Company entered into an amendment to the Main Street Term Loan that allowed the Company to draw an additional $20.0 million, with covenantsanother $15.0 million available to be drawn in two separate $7.5 million tranches (each a “Delayed Draw Term Loan”) at a later date.
Borrowings under the Main Street Term Loan were expressly subordinated and junior in right of payment to all secured indebtedness of the Company. On October 22, 2021, in connection with the issuance of the Series A Notes (discussed above), the Company fully repaid all borrowings outstanding under the Main Street Term Loan, and the Main Street Term Loan was extinguished. As a result, the Company recorded a loss on the extinguishment of debt in the amount of $0.3 million, which represented the write-off of the unamortized deferred financing fees related to the EverBankMain Street Term Loan.
Deutsche Bank Credit Facility.

Facility
On June 2, 2014,May 18, 2015, HMS Funding I LLC (“HMS Funding”), a wholly-owned Structured Subsidiary, entered into aan amended and restated credit agreement (the(as amended, the “Deutsche Bank Credit Facility”) among HMS Funding, as borrower, the Company,MSC Income Fund, as equityholderequity holder and as servicer, Deutsche Bank AG, New York Branch (“Deutsche Bank”), as administrative agent, the financial institutions party thereto as lenders (together with Deutsche Bank, the “HMS Funding Lenders”), and U.S. Bank National Association, as collateral agent and collateral custodian. The Deutsche Bank Credit Facility was amended and restatedOn February 3, 2021, the total amount outstanding on May 18, 2015 and subsequently has been amended on multiple occasions, most recently on November 20, 2017 to among other things, (i) reduce the interest rate from the sum of the index plus an applicable margin of 2.50% to the sum of the index plus an applicable margin of 2.35%, (ii) extend the maturity date of such facility to November 20, 2022, (iii) increase revolver commitments thereunder by the amount of $50.0 million (from $400.0 million to $450.0 million) and (iv) establish a maximum borrowing capacity thereunder of $550.0 million. The Company contributes certain assets to HMS Funding from time to time, as permitted under the EverBank Credit Facility, as collateral to secure the Deutsche Bank Credit Facility.

Under the Deutsche Bank Credit Facility, interest is calculated as the sum of the index plus the applicable margin of 2.35%. The index will be equal to one-month LIBOR, or, in the event that LIBOR is not reasonably available, the higher of Deutsche Bank’s base commercial lending rate and the interest rate equal to 0.5% above the federal funds rate. As of December 31, 2017, the one-month LIBOR rate was 1.6%. The Deutsche Bank Credit Facility provides for a revolving period until November 20, 2020, unless otherwise extended with the consent of the HMS Funding Lenders. The amortization period begins the day after the last day of the revolving period and ends on November 20, 2022, the maturity date. During the amortization period, the applicable margin will increase by 0.25%. During the revolving period, HMS Funding will pay a utilization fee equal to 2.50% of the undrawn amount of the required utilization, which is 75% of the loan commitment amount. HMS Funding will incur an undrawn fee equal


to 0.40% per annum of the difference between the aggregate commitments and the outstanding advances under the facility provided that the undrawn fee relating to any utilization shortfall will not be payable to the extent that the utilization fee relating to such utilization shortfall is incurred. Additionally, per the terms of a fee letter executed on November 20, 2017, HMS Funding pays Deutsche Bank an administrative agent fee of 0.25% of the aggregate revolver commitments.

HMS Funding’s obligations under the Deutsche Bank Credit Facility are secured bywas fully repaid. As a first priority security interestresult, MSC Income Fund recorded a loss on the extinguishment of debt in its assets, including allthe amount of $2.1 million, which represented the write-off of the present and future property and assets of HMS Funding. The Deutsche Bank Credit Facility contains affirmative and negative covenants usual and customary for credit facilities of this nature, including maintaining a positive tangible net worth, limitations on industry concentration and complying with all applicable laws. The Deutsche Bank Credit Facility contains usual and customary default provisions including: (i) a default in the payment of interest and principal; (ii) insolvency or bankruptcy of the Company; (iii) the occurrence of a change of control; or (iv) any uncured breach of a covenant, representation or warranty in the Deutsche Bank Credit Facility. As of December 31, 2017, the Company was not aware of any instances of noncompliance with covenantsunamortized deferred financing fees related to the Deutsche Bank Credit Facility.

As ofFor the year ended December 31, 2017,2021, the Company hadaverage interest rate for borrowings of $82.0 million outstanding on the EverBank Credit Facility, and had borrowings of $348.0 million outstanding onunder the Deutsche Bank Credit Facility, bothexcluding amortization of which the Company estimated approximated fair value.

deferred financing costs was 2.93% per annum.
A summary of the Company’s significant contractual payment obligations for the repayment of outstanding borrowingsindebtedness at December 31, 20172023 is as follows:
20242025202620272028ThereafterTotal
(dollars in thousands)
SPV Facility(1)
$— $— $— $— $203,688 $— $203,688 
Series A Notes(2)
— — 150,000 — — — 150,000 
Corporate Facility(3)
— — 132,000 — — — 132,000 
Total$— $— $282,000 $— $203,688 $— $485,688 
_____________________________
(1)At December 31, 2023, MSIF Funding had $96.3 million of undrawn lender commitments under the SPV Facility; however, MSIF Funding’s borrowing ability is limited by leverage and borrowing base restrictions imposed by the SPV Facility and the 1940 Act, as discussed above.
(2)MSC Income Fund issued $77.5 million of Series A Notes upon entering into the Note Purchase Agreement on October 22, 2021 and an additional $72.5 million on January 21, 2022.
(3)At December 31, 2023, MSC Income Fund had $33.0 million of undrawn lender commitments under the Corporate Facility; however, MSC Income Fund’s borrowing ability is limited by leverage and borrowing base restrictions imposed by the Corporate Facility and the 1940 Act, as discussed above.
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 Payments Due By Period (dollars in thousands)
 Total Less than 1 year 1-3 years 3-5 years After 5 years
EverBank Credit Facility (1)
$82,000
 $—
 $82,000
 $—
 $—
Deutsche Bank Credit Facility (2)
348,000
 —
 —
 348,000
 —
Total$430,000
 $—
 $82,000
 $348,000
 $—
(1)At December 31, 2017, $38.0 million remained available under the EverBank Credit Facility; however, the Company’s borrowing ability is limited to the asset coverage ratio restrictions imposed by the 1940 Act.
(2)At December 31, 2017, $102.0 million remained available under the Deutsche Bank Credit Facility; however, the Company’s borrowing ability is limited to the asset coverage ratio restrictions imposed by the 1940 Act.

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MSC INCOME FUND, INC.
Note 7 –Notes to the Consolidated Financial HighlightsStatements (Continued)

NOTE F — FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights of the CompanyMSC Income Fund for the years ended December 31, 2017, 2016, 2015, 20142023, 2022, 2021, 2020 and 2013.2019:
Year Ended December 31,
Per Share Data:20232022202120202019
NAV at the beginning of the period$7.61 $7.68 $7.28 $7.77 $7.96 
Net investment income (1)(6)0.72 0.66 0.67 0.59 0.71 
Net realized loss (1)(2)(0.42)(0.05)(0.04)(0.66)(0.23)
Net unrealized appreciation (depreciation) (1)(2)0.58 (0.02)0.31 (0.03)0.04 
Income tax provision (1)(2)(0.05)(0.02)(0.02)(0.02)(0.01)
Net increase (decrease) in net assets resulting from operations (1)0.83 0.57 0.92 (0.12)0.51 
Dividends paid from net investment income(0.70)(0.65)(0.53)(0.35)(0.68)
Dividends paid from capital gains— — — — (0.02)
Dividends paid or accrued (3)(0.70)(0.65)(0.53)(0.35)(0.70)
Accretive effect of stock repurchases (repurchasing shares below NAV) (4)0.03 — — — — 
Other (5)(6)— 0.01 0.01 (0.02)— 
NAV at the end of the period$7.77 $7.61 $7.68 $7.28 $7.77 
Shares outstanding at the end of the period80,108,865 80,105,999 79,826,605 79,608,304 78,463,377 
_____________________________
(1)Based on weighted-average number of common shares outstanding for the period.
(2)Net realized gains or losses, net unrealized appreciation or depreciation and income tax provision or benefit can fluctuate significantly from period to period.
(3)Represents stockholder dividends paid or accrued for the period.

(4)Shares repurchased in connection with the modified Dutch auction tender offers. See Note H — Share Repurchases for additional information.
(5)Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted-average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
(6)Reclassifications have been made to certain prior year per share data. The 2020 “Other” and 2019 “Net investment income” per share amounts have been adjusted to reflect the income tax provision effect separately rather than as a component of these values.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
 Year Ended December 31,
Per Share/Unit Data:2017 2016 2015 2014 2013
NAV at beginning of period$8.15
 $7.88
 $8.40
 $8.91
 $8.86
Results from Operations         
Net investment income (1) (2)
0.76
 0.75
 0.75
 0.70
 0.64
Net realized appreciation (depreciation) (1) (2)
(0.06) (0.34) (0.11) —
 0.01
Net change in unrealized appreciation (depreciation) on investments(1) (2)
(0.02) 0.56
 (0.78) (0.89) 0.16
Net increase (decrease) in net assets resulting from operations0.68
 0.97
 (0.14) (0.19) 0.81
Stockholder distributions (1) (3)
        

Distributions from net investment income (1) (2)
(0.70) (0.70) (0.70) (0.70) (0.69)
Distributions from realized appreciation (1) (2)
—
 —
 —
 —
 (0.01)
Net decrease in net assets resulting from stockholder distributions(0.70) (0.70) (0.70) (0.70) (0.70)
Capital share transactions         
Issuance of common stock above (below) NAV, net of offering costs (1) (4)
0.02
 —
 0.21
 0.09
 (0.06)
Net increase (decrease) in net assets resulting from capital share transactions0.02
 —
 0.21
 0.09
 (0.06)
Other (5)
—
 —
 0.11
 0.29
 —
NAV at end of the period$8.15
 $8.15
 $7.88
 $8.40
 $8.91
Shares/units outstanding at end of period79,511,731
 73,382,971
 62,382,044
 30,967,120
 5,396,967
Weighted average shares/units outstanding77,718,813
 68,029,977
 48,838,114
 16,022,853
 2,648,689
Year Ended December 31,
20232022202120202019
(dollars in thousands)
NAV at end of period$622,307$609,665$613,170$579,624$609,305
Average NAV$613,525$611,214$593,440$557,382$622,708
Average outstanding debt$487,271$494,957$321,973$386,084$474,000
Ratio of total expenses, including income tax expense, to average NAV(1)(2)(4)12.63 %8.60 %6.51 %7.38 %9.11 %
Ratio of operating expenses to average NAV(2)(4)12.02 %8.33 %6.20 %7.16 %9.11 %
Ratio of operating expenses, excluding interest expense, to average NAV(2)(4)6.07 %4.33 %3.76 %4.07 %4.86 %
Ratio of operating expenses, excluding interest expense and incentive fees, to average NAV(2)(4)4.02 %3.98 %3.66 %4.07 %4.22 %
Ratio of net investment income to average NAV(4)9.40 %8.65 %8.99 %8.40 %8.84 %
Portfolio turnover ratio21.82 %18.92 %35.39 %8.93 %33.30 %
Total return based on change in NAV(3)(4)10.86 %7.43 %12.71 %(1.80)%6.41 %

_____________________________

(1)Total expenses are the sum of operating expenses and net income tax provision or benefit. Net income tax provision or benefit includes the accrual of net deferred tax provision or benefit relating to the net unrealized appreciation or depreciation on portfolio investments held in the Taxable Subsidiaries and due to the change in the loss carryforwards, which are non-cash in nature and may vary significantly from period to period. MSC Income Fund is required to include net deferred tax provision or benefit in calculating its total expenses even though these net deferred taxes are not currently payable or receivable.
(1)Based on weighted average number of shares of common stock outstanding for the period.
(2)Change in net realized income and net unrealized appreciation (depreciation) on investments can change significantly from period to period.
(3)The stockholder distributions represent the stockholder distributions declared for the period.
(4)The continuous issuance of shares of common stock may have caused an incremental increase in NAV per share due to the sale of shares at the then prevailing public offering price in excess of NAV per share on each subscription closing date. The per share data were derived by computing (i) the sum of (A) the number of shares issued in connection with subscriptions and/or distribution reinvestment on each share transaction date times (B) the differences between the net proceeds per share and the NAV per share on each share transaction date, divided by (ii) the weighted average shares of common stock outstanding for the period.
(5)Includes the impact
(2)Unless otherwise noted, operating expenses include interest, management fees, incentive fees and general and administrative expenses.
(3)Total return is calculated based on the change in NAV per share and stockholder distributions declared per share during the reporting period, divided by the NAV per share at the beginning of the different share amounts as a result of calculating certain per share data based on the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
 Year Ended December 31,
 2017 2016 2015 2014 2013
 (dollars in thousands)
NAV at end of period$647,789
 $597,833
 $491,652
 $260,063
 $48,077
Average net assets$629,775
 $535,175
 $400,045
 $142,603
 $24,864
Average Credit Facilities borrowings$427,200
 $396,000
 $304,973
 $89,846
 $9,660
          
Ratios to average net assets:         
Ratio of total expenses to average net assets (1)
7.14% 7.12% 7.23% 5.62% 4.24%
Ratio of net investment income to average net assets9.32% 9.81% 9.12% 7.85% 6.86%
Portfolio turnover ratio50.66% 39.01% 24.23% 38.39% 49.37%
Total return (2)
8.59% 12.31% 2.14% 2.13% 8.47%
(1)
For the years ended December 31, 2017 and December 31, 2016, the Adviser did not waive base management fees but waived subordinated incentive fees of approximately $3.0 million and $1.7 million, respectively, and internal administrative services expenses of approximately $3.0 million and $2.3 million, respectively. The ratio is calculated by reducing the expenses to reflect the waiver of expenses and reimbursement of internal administrative services and to reflect the reduction of expenses for expense support provided by the Adviser in both periods presented. Excluding interest expense, the ratio of total expenses to average net assets for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 was 4.23%, 4.25%, 4.44%, 3.29% and 2.55%, respectively. See Note 11 — Related Party Transactions and Arrangements.
(2)Total return is calculated on the change in NAV per share and stockholder distributions declared per share over the reporting period. The total return does not reflect the sales load from the sale of the Company’s common stock.

Note 8 – Stockholder Distributions

The following table reflects the cash distributions per share that the Company declared on its common stock during the years ended December 31, 2017, 2016 and 2015 (dollars in thousands except per share amounts).
 Distributions
For the Period EndedPer Share Amount
2017   
Three months ended December 31, 2017$0.18
 $14,144
Three months ended September 30, 20170.17
 13,910
Three months ended June 30, 20170.18
 13,438
Three months ended March 31, 20170.17
 12,922
2016   
Three months ended December 31, 20160.18
 12,767
Three months ended September 30, 20160.17
 12,307
Three months ended June 30, 20160.18
 11,650
Three months ended March 31, 20160.17
 11,037
2015   
Three months ended December 31, 20150.18
 10,564
Three months ended September 30, 20150.17
 9,373
Three months ended June 30, 20150.18
 7,998
Three months ended March 31, 20150.17
 6,260



On December 14, 2017, with the authorization of the Company’s board of directors, the Company declared distributions to its stockholders for the period of January 2018 through March 2018. These distributions have been, or will be, calculated based on stockholders of record each day from January 1, 2018 through March 31, 2018 in an amount equal to $0.00191781 per share, per day. Distributions are paid on the first business day following the completion of each month to which they relate.
The Company has adopted an “opt in” distribution reinvestment plan for its stockholders. As a result, if the Company makes a distribution, its stockholders will receive distributions in cash unless they specifically “opt in” to the distribution reinvestment plan so as to have their cash distributions reinvested in additional shares of the Company’s common stock.
The following table reflects the sources of the cash distributions that the Company declared and, in some instances, paid on its common stock during the years ended December 31, 2017, 2016 and 2015.
 Year Ended December 31,
 2017 2016 2015
Source of DistributionDistribution
Amount		 Percentage Distribution
Amount		 Percentage Distribution
Amount		 Percentage
Net realized income from operations (before waiver of incentive fees)$51,327
 94.3% $26,689
 55.9% $28,375
 83.0%
Waiver of incentive fees3,029
 5.6
 1,689
 3.5
 2,601
 7.6
Distributions in excess of net realized income from operations (1)
58
 0.1
 19,383
 40.6
 3,219
 9.4
Total$54,414
 100.0% $47,761
 100.0% $34,195
 100.0%
(1)Includes adjustments made to GAAP basis net realized income to arrive at taxable income available for distributions. See Note 9 for the sources of the Company’s cash distributions on a tax basis.

The Company may fund its cash distributions from all sources of funds legally available, including stock offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the saleMSC Income Fund’s common stock.
(4)Net of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies, and fee and expense waivers fromof $8.3 million, $4.5 million, $4.3 million, $3.6 million and $3.1 million in 2023, 2022, 2021, 2020 and 2019, respectively. Excluding these expense waivers, the expense and income ratios are as follows:
Year Ended December 31,
20232022202120202019
Ratio of total expenses, including income tax expense, to average NAV(1)(2)13.98 %9.33 %7.24 %8.11 %9.84 %
Ratio of operating expenses to average NAV(2)13.37 %9.06 %6.92 %7.89 %9.84 %
Ratio of operating expenses, excluding interest expense, to average NAV(2)7.43 %5.07 %4.49 %4.80 %5.58 %
Ratio of operating expenses, excluding interest expense and incentive fees, to average NAV(2)5.38 %4.72 %4.39 %4.80 %4.95 %
Ratio of net investment income to average NAV8.05 %7.90 %8.26 %7.67 %8.11 %
Total return based on change in NAV(3)9.50 %6.69 %11.98 %(2.20)%5.85 %
_____________________________
See footnotes (1), (2), (3) and (4) immediately prior to this table.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
NOTE G — DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME
MSC Income Fund currently pays quarterly dividends to its Advisers. The Companystockholders. Future quarterly dividends, if any, will be determined by its Board of Directors on a quarterly basis. MSC Income Fund paid or accrued dividends to its common stockholders of $56.1 million, or $0.700 per share, during the year ended December 31, 2023, compared to $51.6 million, or $0.645 per share, during the year ended December 31, 2022. For tax purposes, the 2023 dividends, which included the effects of dividends on an accrual basis, totaled $56.1 million, or $0.700 per share, and were comprised of (i) ordinary income totaling $0.596 per share and (ii) qualified dividend income totaling $0.104 per share. As of December 31, 2023, MSC Income Fund estimates that it has not established limits on the amountgenerated undistributed taxable income of funds$14.7 million, or $0.18 per share, that the Company may use from legally available sourceswill be carried forward toward distributions to make distributions. The Company expects that for the foreseeable future, a portion of the distributions may be paid from sources other than net realized income from operations, which may include stock offering proceeds, borrowings, and fee and expense waivers from its Advisers. See Note 11 — Related Party Transactions and Arrangements — Advisory Agreements and Conditional Fee Waiver.in 2024.

The Company’s distributions may exceed its earnings and, as a result, a portion of the distributions it makes may represent a return of capital for U.S. federal income tax purposes. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of directors. 

Note 9 – Taxable Income
The CompanyMSIF has elected to be treated for U.S. federal income tax purposes as a RIC. MSIF’s taxable income includes the taxable income generated by MSIF and certain of its subsidiaries, including the Structured Subsidiaries, which are treated as disregarded entities for tax purposes. As a RIC, the CompanyMSIF generally will not incurpay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that the Company timelyMSIF distributes each taxable year as dividends to its stockholders. To qualify as aMSIF must generally distribute at least 90% of its “investment company taxable income” (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC in any taxable year, the Company must, among other things, satisfy certain source-of-income and asset diversification requirements. In addition, the Company must satisfy the Annual Distribution Requirement.status (pass-through tax treatment for amounts distributed). As a part of maintaining its RIC status, undistributed taxable income (subject to a 4% nondeductible,non-deductible U.S. federal excise tax) pertaining to a given taxablefiscal year may be distributed up to 12twelve months subsequent to the end of that taxablefiscal year, provided such distributionsdividends are declared on or prior to the earlierlater of eight-and-one-half months after the close of that taxable year or the(i) filing of the U.S. federal income tax return for such prior taxable year. In order to avoid the impositionapplicable fiscal year or (ii) the fifteenth day of the 4% nondeductible, U.S. federal excise tax,ninth month following the Company needs to satisfyclose of the Excise Tax Avoidance Requirement. For the taxable year ended December 31, 2015, the Company distributed $3.8 million, or $0.0615 per share, of itsin which such taxable income in 2016, prior to the filing of its U.S. federal income tax return for the 2015 taxable year. As a result, the Company incurred a $119,000 excise tax for the 2015 taxable year. In 2016, the Company distributed $7.1 million, or $0.096753 per share, of our taxable income in 2017, prior to the filing of its U.S. federal income tax return for our 2016 taxable year. As a result, we were subject to a 4% nondeductible, U.S. federal excise tax liability of approximately $239,000. In 2017, the Company distributed $14.9 million, or $0.187394 per share, of our taxable income in 2018, prior to the filing of its U.S. federal income tax return for our 2017 taxable year. As a result, we were subject to a 4% nondeductible, U.S. federal excise tax liability of approximately $392,000.



The Company accounts for income taxes in conformity with ASC Topic 740 - Income Taxes, which provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the Company’s financial statements is the largest benefit or expense that has a greater than 50% likelihood of being realized upon its ultimate settlement with the relevant tax authority. Positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits, if any, in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. Management has analyzed the Company’s tax positions, and has concluded that there were no material uncertain income tax positions through December 31, 2017. The Company identifies its major tax jurisdiction as the United States, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. Tax returns for the 2014 through 2016 taxable years remain subject to examination by U.S. federal and most state tax authorities.

The Company has formed wholly-owned subsidiaries, HMS Equity Holding and HMS Equity Holding II, which have elected to be taxable entities for U.S. tax purposes. HMS Equity Holding and HMS Equity Holding II primarily hold equity investments in portfolio companies which are treated as “pass through” entities for U.S. tax purposes. HMS Equity Holding and HMS Equity Holding II are consolidated for financial reporting purposes, and the portfolio investments held by each entity are included in the consolidated financial statements as portfolio investments recorded at fair value. HMS Equity Holding and HMS Equity Holding II are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of its ownership of certain portfolio investments. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in the Company’s consolidated financial statements.

Listed below is a reconciliation of “Net increase (decrease) in net assets resulting from operations” to taxable income and to total distributions declared to common stockholders for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands).
 Year Ended December 31,
 2017 2016 2015
Net increase (decrease) in net assets resulting from operations$52,626
 $66,584
 $(6,980)
Net change in unrealized (appreciation) depreciation1,730
 (38,206) 37,956
Income tax (benefit) provision624
 336
 127
Pre-tax book (income) loss not consolidated for tax purposes3,532
 21,353
 5,862
Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates3,669
 1,093
 1,024
Estimated taxable income (1)
62,181
 51,160
 37,989
Taxable income earned in prior year and carried forward for distribution in current year7,238
 3,839
 45
Taxable income earned prior to period end and carried forward for distribution next period(19,777) (11,592) (7,556)
Dividend accrued as of period end and paid-in the following period4,772
 4,354
 3,717
Taxable income earned to be carried forward(15,005) (7,238) (3,839)
Total distributions accrued or paid to common stockholders$54,414
 $47,761
 $34,195
(1)The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate.

The income tax expense, or benefit, and the related tax assets and liabilities generated by HMS Equity Holding and HMS Equity Holding II, if any, are reflected in the Company’s Consolidated Statement of Operations. For the years ended December 31, 2017, 2016 and 2015, the Company recognized a net income tax (benefit) provision of $624,000, $336,000 and $127,000, respectively, which was comprised of (i) deferred taxes of $3.4 million, $(5.1) million and $(4.4) million, respectively, offset by a valuation allowance of $(3.4) million, $5.1 million and $4.4 million, respectively, and (ii) other taxes of $624,000, $336,000 and $127,000, respectively. For the years ended December 31, 2017, 2016 and 2015, the other taxes included $379,000, $256,000 and $108,000, respectively, related to an accrual for excise tax on the Company’s estimated spillover taxable income and $245,000, $80,000 and $19,000, respectively, related to accruals for state and other taxes.

As of December 31, 2017, the cost basis of investments for tax purposes was $1.0 billion, with such investments having an estimated net unrealized depreciation of $14.9 million, composed of gross unrealized appreciation of $25.2 million and gross unrealized


depreciation of $40.1 million. As of December 31, 2016, the cost basis of investments for tax purposes was $1.0 billion, with such investments having an estimated net unrealized depreciation of $13.2 million, composed of gross unrealized appreciation of $20.3 million and gross unrealized depreciation of $33.5 million.

The net deferred tax asset at both December 31, 2017 and December 31, 2016 was $0, primarily related to loss carryforwards, timing differences in net unrealized depreciation of portfolio investments, and basis differences of portfolio investments held by HMS Equity Holding and HMS Equity Holding II, which are “pass through” entities for tax purposes, offset by a valuation allowance. Based on HMS Equity Holding’s and HMS Equity Holding II’s short operating history, management believes it is more likely than not that there will be inadequate profits in HMS Equity Holding and HMS Equity Holding II against which the deferred tax assets can be offset. Accordingly, the Company recorded a full valuation allowance against such deferred tax assets.

The following table sets forth the significant components of net deferred tax assets and liabilities as of December 31, 2017, 2016 and 2015 (amounts in thousands):
  Year Ended December 31,
  2017 2016 2015
Deferred tax assets:      
Net operating loss carryforwards $1,901
 $2,258
 $2,869
Foreign tax credit carryforwards 10
 —
 —
Capital loss carryforwards 5,390
 8,366
 —
Net unrealized depreciation of portfolio investments —
 20
 2,143
    Total deferred tax assets 7,301
 10,644
 5,012
Deferred tax liabilities:      
Net basis differences in portfolio investments (703) (1,119) (599)
Net unrealized appreciation of portfolio investments (426) —
 —
Other —
 —
 —
    Total deferred tax liabilities (1,129) (1,119) (599)
Valuation allowance (6,172) (9,525) (4,413)
    Total net deferred tax assets (liabilities) $—
 $—
 $—

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. The TCJA significantly changed the U.S. federal income tax laws applicable to businesses and their owners. Technical corrections or other amendments to the TCJA or administrative guidance interpreting the TCJA may be forthcoming at any time. Under the TCJA, the corporate income tax rate is reduced to 21%, and the corporate alternative minimum tax was repealed. The reduced corporate income tax rate, which is effective for taxable years beginning after December 31, 2017, will apply to income earned by HMS Equity Holding and HMS Equity Holding II. The effect of the law change caused a reduction in the deferred tax asset, deferred tax liabilities and valuation allowance by $3.8 million. The net effect of such change is zero. The table above reflects the law change rate reduction in each of the components.

For federal income tax purposes, the net operating loss carryforwards generated prior to December 31, 2017 expire in various taxable years from 2034 through 2037 and the net capital loss carryforwards expire in taxable years 2020 and 2022. The timing and manner in which HMS Equity Holding and HMS Equity Holding II will utilize any net loss carryforwards in such taxable years, or in total, may be limited in the future under the provisions of the Code.

The difference between the Company’s reported income tax expense (benefit), including excise tax and the U.S. federal statutory rate of 35% is as follows (in thousands):
 Year Ended December 31,
 2017 2016 2015
Income tax expense (benefit) at the statutory rate$18,638
35.00 % $23,421
35.00 % $(2,399)35.00 %
Non-taxable RIC income(19,065)(35.80) (28,410)(42.45) (1,811)26.42
State and local taxes202
0.38
 (44)(0.07) (184)2.68
Change in federal tax rate for tax reform3,823
7.18
 —
—
 —
—
Change in valuation allowance for tax reform(3,823)(7.18) —
—
 —
—
Change in valuation allowance from operations470
0.88
 5,113
7.64
 4,413
(64.40)
Other 1
379
0.71
 256
0.38
 $108
(1.58)
Effective tax rate$624
1.17 % $336
0.50 % $127
(1.88)%
1 For the years ended December 31, 2017, 2016 and 2015, the “Other” amount represents federal excise tax.



For the years ended December 31, 2017, 2016 and 2015, respectively, the tax characteristics of distributions paid to shareholders were as follows. No portion of the distributions paid during the years ended December 31, 2017, 2016 and 2015 represented a return of capital.
  Year Ended December 31,
Tax Characteristics of Distributions 2017 2016 2015
          
Ordinary Income $52,473
96.43% $44,848
93.90% $34,085
99.68%
Capital Gain Distributions 1,941
3.57
 2,913
6.10
 110
0.32
    Total Distributions $54,414
100.00% $47,761
100.00% $34,195
100.00%

generated.
The determination of the tax attributes of the Company’sfor MSC Income Fund’s distributions is made annually, at the end of the Company’s taxable year based upon the Company’sits taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The actual tax characteristicsattributes for distributions will generally include both ordinary income and qualified dividends, but may also include either one or both of capital gains and return of capital.
The tax character of distributions to stockholders will be reported to the Internal Revenue Service and stockholders subject to information reporting shortly after the close of each calendar year on Form 1099-DIV.

Dividends from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal tax regulations, which may differ from amounts determined in accordance with GAAP and those differences could be material. These book-to-tax differences are either temporary or permanent in nature. Reclassifications due to permanent book-tax differences, such as the nondeductible excise tax, have no impact on net assets.

Note 10 – Supplemental Cash Flow Disclosures

Listed below are the supplemental cash flow disclosurespaid for the years ended December 31, 2017, 20162023, 2022 and 2015 (dollars2021 was as follows:
Year Ended December 31,
202320222021
(dollars in thousands)
Ordinary income (1)$47,756 $61,854 $29,797 
Qualified dividends8,301 1,727 92 
Distributions on tax basis$56,057 $63,581 $29,889 
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Listed below is a reconciliation of “Net increase in net assets resulting from operations” to taxable income and to total distributions declared to common stockholders for the years ended December 31, 2023, 2022 and 2021.
Year Ended December 31,
202320222021
(estimated, dollars in thousands)
Net increase in net assets resulting from operations$66,209 $45,588 $73,636 
Net unrealized (appreciation) depreciation(46,319)1,702 (25,095)
Income tax provision3,769 1,643 1,890 
Pre-tax book (income) loss not consolidated for tax purposes4,241 (9,748)(17,640)
Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates22,228 9,820 3,171 
Estimated taxable income (1)50,128 49,005 35,962 
Taxable income earned in prior year and carried forward for distribution in current year20,674 23,276 29,173 
Taxable income earned prior to period end and carried forward for distribution next period(28,764)(33,491)(35,250)
Dividend accrued as of period end and paid in the following period14,019 12,817 11,974 
Taxable income earned to be carried forward(14,745)(20,674)(23,276)
Total distributions accrued or paid to common stockholders$56,057 $51,607 $41,859 
_____________________________
(1)MSIF’s taxable income for each period is an estimate and will not be finally determined until MSIF files its tax return for eachyear. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate.
The Taxable Subsidiaries primarily hold certain equity investments for MSC Income Fund. The Taxable Subsidiaries permit MSC Income Fund to hold equity investments in portfolio companies which are “pass-through” entities for tax purposes and to continue to comply with the “source-of-income” requirements contained in the RIC tax provisions of the Code. The Taxable Subsidiaries are consolidated with MSIF for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in MSC Income Fund’s consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with MSIF for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities, as a result of their ownership of certain portfolio investments. The taxable income, or loss, of the Taxable Subsidiaries may differ from their book income, or loss, due to temporary book and tax timing differences and permanent differences. The Taxable Subsidiaries are each taxed at corporate income tax rates based on their taxable income. The income tax expense, or benefit, if any, and the related tax assets and liabilities, of the Taxable Subsidiaries are reflected in MSC Income Fund’s consolidated financial statements.
The income tax provision for MSC Income Fund is generally composed of (i) deferred tax expense (benefit), which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in loss carryforwards, changes in net unrealized appreciation or depreciation, changes in valuation allowance and other temporary book tax differences, and (ii) current tax expense, which is primarily the result of current U.S. federal income and state taxes and excise taxes on MSC Income Fund’s estimated undistributed taxable income. The income tax expense, or benefit, and the related tax assets and liabilities generated by the Taxable Subsidiaries, if any, are reflected in MSC Income Fund’s Consolidated Statements of Operations. MSC Income Fund’s provision for income taxes was comprised of the following for the years ended December 31, 2023, 2022 and 2021:
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)

Year Ended December 31,
202320222021
(dollars in thousands)
Current tax expense:
Federal$13 $33 $— 
State340 495 495 
Excise519 753 1,395 
Total current tax expense872 1,281 1,890 
Deferred tax expense (benefit):
Federal3,450 351 — 
State(553)11 — 
Total deferred tax expense2,897 362 — 
Total income tax provision$3,769 $1,643 $1,890 
MSIF operates in a manner to maintain its RIC status and to eliminate corporate-level U.S. federal income tax (other than the 4% excise tax) by distributing sufficient investment company taxable income and long-term capital gains. As a result, MSIF will have an effective tax rate equal to 0% before the excise tax and income taxes incurred by the Taxable Subsidiaries. As such, a reconciliation of the differences between MSC Income Fund’s reported income tax expense and its tax expense at the federal statutory rate of 21% is not meaningful.
As of December 31, 2023, the cost of investments for U.S. federal income tax purposes was $1,035.0 million, with such investments having an estimated net unrealized appreciation of $57.9 million, composed of gross unrealized appreciation of $154.3 million and gross unrealized depreciation of $96.4 million. As of December 31, 2022, the cost basis of investments for tax purposes was $1,059.9 million, with such investments having an estimated net unrealized appreciation of $8.3 million, composed of gross unrealized appreciation of $122.6 million and gross unrealized depreciation of $114.3 million.
The following table sets forth the significant components of net deferred tax assets and liabilities as of December 31, 2023 and 2022:
Year Ended
December 31,
20232022
(dollars in thousands)
Deferred tax assets:
Net operating loss carryforwards$671 $398 
Interest expense carryforwards3,258 1,426 
General business and foreign tax credit carryforwards329 156 
Capital loss carryforwards6,041 10,013 
Total deferred tax assets10,299 11,993 
Deferred tax liabilities:
Net basis differences in portfolio investments(1,484)(3,777)
Net unrealized appreciation of portfolio investments(12,074)(8,578)
Total deferred tax liabilities(13,558)(12,355)
Total deferred tax liabilities, net$(3,259)$(362)

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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
The net deferred tax liability at December 31, 2023 was $3.3 million. The net deferred tax liability at December 31, 2022 was $0.4 million. Management believes that the realization of the deferred tax assets is more likely than not based on expectations as to future taxable income and scheduled reversals of temporary differences. Accordingly, MSC Income Fund did not record a valuation allowance related to its deferred tax assets as of December 31, 2023 and 2022.
At December 31, 2023, for U.S. federal income tax purposes, the Taxable Subsidiaries had net operating loss carryforwards from prior years which, if unused, will expire in 2037. Any net operating losses generated in 2018 and future periods are not subject to expiration and will carry forward indefinitely until utilized. The net capital loss carryforwards of the Taxable Subsidiaries will expire in various taxable years 2025 through 2027. Additionally, the Taxable Subsidiaries have interest expense limitation carryforwards, which have an indefinite carryforward period. In addition, as of December 31, 2023, for U.S. federal income tax purposes at the RIC level, MSIF did not have capital loss carryforwards available to offset future capital gains, to the extent available and permitted by U.S. federal income tax law.
NOTE H — SHARE REPURCHASES
Under the terms of its share repurchase program, MSC Income Fund offers to purchase shares at the NAV per share on the repurchase date. The amount of shares of MSC Income Fund’s common stock to be repurchased during any calendar quarter may be equal to the lesser of (i) the number of shares of common stock MSC Income Fund could repurchase with the proceeds it received from the issuance of common stock under MSC Income Fund’s dividend reinvestment plan or (ii) 2.5% of the weighted-average number of shares of common stock outstanding in the prior four calendar quarters. Repurchase offers are currently limited to the number of shares of common stock MSC Income Fund can repurchase with 90% of the cash retained as a result of issuances of common stock under its dividend reinvestment plan.
At the discretion of the Board of Directors, MSC Income Fund may also use cash on hand, cash available from borrowings and cash from the sale of investments as of the end of the applicable period to repurchase shares. MSC Income Fund’s Board of Directors may amend, suspend or terminate the share repurchase program upon 30 days’ notice.
In addition to its share repurchase program, during the fiscal year ended December 31, 2023, MSC Income Fund used proceeds from the sale of their shares during 2023 to complete three modified Dutch auction tender offers, pursuant to which MSC Income Fund offered to purchase up to a specified amount of shares of its common stock at the lowest clearing purchase price elected by participating stockholders within a specified range that allowed MSC Income Fund to purchase the maximum amount offered. All shares purchased in a “Dutch auction” tender offer were purchased at the clearing purchase price. SEC rules permitted MSC Income Fund to increase the number of shares accepted for purchase in any offer by up to 2% of MSC Income Fund’s outstanding shares without amending the offer.
Since inception of its share repurchase program, MSC Income Fund has funded the repurchase of $153.5 million in shares of common stock, including the shares repurchased by MSC Income Fund under the “Dutch auction” tender offers, as of December 31, 2023. For the years ended December 31, 2023, 2022 and 2021, MSC Income Fund funded $24.4 million, $16.0 million and $10.1 million, respectively, for shares of its common stock tendered for repurchase under the plan. For the year ended December 31, 2023, MSC Income Fund purchased 1,267,667 shares of its common stock for $7.8 million through its modified Dutch auction tender offers.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Repurchases of MSC Income Fund’s common stock pursuant to its share repurchase program and modified Dutch auction tender offers for the years ended December 31, 2023, 2022 and 2021 are as follows:
PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced plans or programsApproximate dollar value of shares that may yet be purchased under the plans or programs
April 1 through June 30, 2021383,513$7.46 383,513N/A
July 1 through September 30, 2021438,2927.57 438,292N/A
October 1 through December 31, 2021511,3147.60 511,314N/A
January 1 through March 31, 2022489,0317.75 489,031N/A
April 1 through June 30, 2022536,0657.77 536,065N/A
July 1 through September 30, 2022527,5087.64 527,508N/A
October 1 through December 31, 2022522,3107.66 522,310N/A
January 1 through March 31, 2023519,4897.67 519,489N/A
April 1 through June 30, 2023 (1)965,5686.59 965,568N/A
July 1 through September 30, 2023 (2)978,5797.12 978,579N/A
October 1 through December 31, 2023 (3)958,9287.12 958,928N/A
Total6,830,5976,830,597
_____________________________
(1)    Includes 406,904 shares repurchased under the Dutch auction tender offer pursuant to the to the tender offer statement and Offer to Purchase filed with the SEC on May 15, 2023 at a price of $5.50 per share for an aggregate cost of $2.2 million.
(2)    Includes 432,920 shares repurchased under the Dutch auction tender offer pursuant to the to the tender offer statement and Offer to Purchase filed with the SEC on June 14, 2023 at a price of $6.50 per share for an aggregate cost of $2.8 million.
(3)    Includes 427,843 shares repurchased under the Dutch auction tender offer pursuant to the to the tender offer statement and Offer to Purchase filed with the SEC on November 15, 2023 at a price of $6.50 per share for an aggregate cost of $2.8 million
NOTE I — DIVIDEND REINVESTMENT PLAN
MSC Income Fund’s dividend reinvestment plan (the “DRIP”) provides for the reinvestment of dividends on behalf of stockholders. As a result, if MSC Income Fund declares a cash dividend, stockholders who have “opted in” to the DRIP will have their cash dividend automatically reinvested into additional shares of MSC Income Fund common stock. The number of shares of common stock to be issued to a stockholder under the DRIP shall be determined by dividing the total dollar amount of the distribution payable to such stockholder by a price per share of common stock determined by MSC Income Fund’s Board of Directors or a committee thereof, in its sole discretion, that is (i) not less than the NAV per share of common stock determined in good faith by the Board of Directors or a committee thereof, in its sole discretion, within 48 hours prior to the payment of the distribution and (ii) not more than 2.5% greater than the NAV per share as of such date.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
Summarized DRIP information for the years ended December 31, 2023, 2022 and 2021 is as follows:
Year Ended December 31,
202320222021
(dollars in thousands)
DRIP participation$18,417 $17,750 $11,160 
Shares issued for DRIP2,345,246 2,259,611 1,461,776 
NOTE J — COMMITMENTS AND CONTINGENCIES
At December 31, 2023, MSC Income Fund had the following outstanding commitments (in thousands):
Investments with equity capital commitments that have not yet funded:Amount
Brightwood Capital Fund III, LP$216 
Freeport First Lien Loan Fund III LP8,340 
HPEP 3, L.P.1,308 
     Total Equity Commitments$9,864
 
Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded:
CQ fluency, LLC$4,500 
Mako Steel, LP4,057 
Power System Solutions3,989 
Insight Borrower Corporation3,888 
AB Centers Acquisition Corporation2,810 
Garyline, LLC2,626 
SI East, LLC2,125 
Mini Melts of America, LLC1,988 
Bluestem Brands, Inc.1,840 
American Health Staffing Group, Inc.1,667 
IG Parent Corporation1,667 
ArborWorks, LLC1,481 
Infolinks Media Buyco, LLC1,260 
Burning Glass Intermediate Holding Company, Inc.1,239 
Bettercloud, Inc.1,216 
Richardson Sales Solutions1,061 
HEADLANDS OP-CO LLC1,000 
IG Investor, LLC1,000 
NexRev LLC1,000 
SPAU Holdings, LLC1,000 
Roof Opco, LLC972 
Bond Brand Loyalty ULC900 
Classic H&G Holdco, LLC860 
Engineering Research & Consulting, LLC828 
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
  Year Ended December 31,
Supplemental Disclosure of Cash Flow Information 2017 2016 2015
Interest Paid $16,966
 $13,560
 $9,877
Taxes Paid 426
 287
 81
       
Supplemental Disclosure of Non-Cash Flow Information  
  
  
Stockholder distributions declared and unpaid 4,772
 4,354
 3,717
Stockholder distributions reinvested 27,641
 24,769
 16,939
Change in unpaid deferred offering costs (21) 1,129
 1,281
Unpaid deferred financing costs 13
 4
 70
Unpaid sales commissions and dealer manager fees —
 86
 —
VVS Holdco, LLC800 
Cody Pools, Inc.786 
Purge Rite, LLC781 
Acumera, Inc.768 
NinjaTrader, LLC750 
Imaging Business Machines, L.L.C.692 
Centre Technologies Holdings, LLC600 
Paragon Healthcare, Inc.571 
Invincible Boat Company, LLC.561 
AVEX Aviation Holdings, LLC512 
Evergreen North America Acquisitions, LLC501 
Wall Street Prep, Inc.500 
Watterson Brands, LLC484 
GRT Rubber Technologies LLC468 
JTI Electrical & Mechanical, LLC440 
RA Outdoors LLC438 
Microbe Formulas, LLC434 
PTL US Bidco, Inc427 
CaseWorthy, Inc.400 
Trantech Radiator Topco, LLC400 
Chamberlin Holding LLC400 
Johnson Downie Opco, LLC400 
Channel Partners Intermediateco, LLC381 
ITA Holdings Group, LLC366 
Escalent, Inc.349 
South Coast Terminals Holdings, LLC343 
Gamber-Johnson Holdings, LLC300 
Pinnacle TopCo, LLC285 
Batjer TopCo, LLC230 
Metalforming Holdings, LLC205 
Career Team Holdings, LLC200 
ATS Operating, LLC200 
Mystic Logistics Holdings, LLC200 
Orttech Holdings, LLC200 
Analytical Systems Keco Holdings, LLC145 
Elgin AcquireCo, LLC123 
Clad-Rex Steel, LLC100 
Gulf Publishing Holdings, LLC100 
AAC Holdings, Inc.71 
Inspire Aesthetics Management, LLC43 
Adams Publishing Group, LLC5 
Interface Security Systems, L.L.C1 
     Total Loan Commitments$60,934 
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MSC INCOME FUND, INC.
Note 11Notes to the Consolidated Financial Statements (Continued)
     Total Commitments$70,798 
MSC Income Fund will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (which are typically through existing cash and cash equivalents and borrowings under the Credit Facilities). MSC Income Fund follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments as necessary. MSC Income Fund had no unrealized appreciation or depreciation on the outstanding unfunded commitments as of December 31, 2023.
MSC Income Fund may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to impose liability on MSC Income Fund in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, MSC Income Fund does not expect any current matters will materially affect its financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on MSC Income Fund’s financial condition or results of operations in any future reporting period.
NOTE K — Related Party Transactions and ArrangementsRELATED PARTY TRANSACTIONS
1.Advisory Agreements and Conditional Fee WaiverExpense Reimbursement Waivers
The business of the Company is managed by the Adviser (an affiliate of Hines), pursuant toOn October 30, 2020, MSC Income Fund entered into the Investment Advisory Agreement. This agreementAgreement with the Adviser, which states that the Adviser will oversee the management of the Company’sMSC Income Fund’s activities and is responsible for making investment decisions with respect to, and providing day-to-dayday‑to‑day management and administration of, MSC Income Fund’s Investment Portfolio. The Investment Advisory Agreement was most recently re-approved by the Company’s investment portfolio. Additionally,Board of Directors, including a majority of members who are not “interested” persons (as defined by the Company and1940 Act) of MSC Income Fund or the Adviser, have engaged the Sub-Adviser pursuant to the Sub-Advisory Agreement to identify, evaluate, negotiate and structure the Company’s prospective investments, make investment and portfolio management recommendations for approval by the Adviser, monitor the Company’s investment portfolio and provide certain ongoing administrative services to the Adviser in exchange for which the Adviser will pay the Sub-Adviser fifty percent (50%) of the base management fee and incentive fees described below as compensation for its services.

on August 10, 2023.
Pursuant to the Investment Advisory Agreement, the CompanyMSC Income Fund pays the Adviser a base management fee and incentive fees as compensation for the services described above. The base management fee is calculated at an annual rate of 2%1.75% of the Company’sMSC Income Fund’s average gross assets. The term “gross assets” means total assets of the CompanyMSC Income Fund as disclosed on the Company’s balance sheet.MSC Income Fund’s Consolidated Balance Sheets. “Average gross assets” are calculated based on the Company’sMSC Income Fund’s gross assets at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears. The base management fee is expensed as incurred.



The incentive fees consistfee under the Investment Advisory Agreement consists of two parts. The first part, referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based on pre-incentive fee net investment incomePre-Incentive Fee Net Investment Income (as defined below) for the immediately preceding quarter. The subordinated incentive fee on income is equal to 20%20.0% of the Company’s pre-incentive fee net investment incomeMSC Income Fund’s Pre-Incentive Fee Net Investment Income for the immediately preceding quarter, expressed as a quarterly rate of return on adjusted capital at the beginning of the most recently completed calendar quarter, exceeding 1.875% (or 7.5% annualized), subject to a “catch up” feature (as described below).

For this purpose, pre-incentive fee net investment incomePre-Incentive Fee Net Investment Income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receiveMSC Income Fund receives from portfolio companies) accrued during the calendar quarter, minus ourMSC Income Fund’s operating expenses for the quarter (including the management fee, expenses payable under any proposed administration agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding taxes and the incentive fee). Pre-incentive fee net investment incomePre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments and PIK interest and zero coupon securities), accrued income that we haveMSC Income Fund has not yet received in cash. Pre-incentive fee net investment incomePre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. For purposes of this fee, adjusted capital means cumulative gross proceeds generated from sales of the Company’sMSC Income Fund’s common stock (including proceeds from the Company’s distribution reinvestment plan)MSC Income Fund’s DRIP) reduced for non-liquidating distributions, other than distributions of profits, paid to the Company’sMSC Income Fund’s stockholders and amounts paid for share repurchases pursuant to the Company’sMSC Income Fund’s share repurchase program. The subordinated incentive fee on income is expensed in the quarter in which it is incurred.

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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
The calculation of the subordinated incentive fee on income for each quarter is as follows:
•No subordinated incentive fee on income shall be payable to the Adviser in any calendar quarter in which MSC Income Fund’s Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.875% (or 7.5% annualized) on adjusted capital;
•100% of MSC Income Fund’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than or equal to 2.34375% in any calendar quarter (9.375% annualized) shall be payable to the Adviser. This portion of the subordinated incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 20.0% on all of MSC Income Fund’s Pre-Incentive Fee Net Investment Income as if the hurdle rate did not apply when the Pre-Incentive Fee Net Investment Income exceeds 2.34375% (9.375% annualized) in any calendar quarter; and
•For any quarter in which MSC Income Fund’s Pre-Incentive Fee Net Investment Income exceeds 2.34375% (9.375% annualized), the subordinated incentive fee on income shall equal 20.0% of the amount of MSC Income Fund’s Pre-Incentive Fee Net Investment Income, as the hurdle rate and catch-up will have been achieved.
The second part of the incentive fee, referred to as the incentive fee on capital gains, is an incentive fee on realized capital gains earned from the portfolio of the CompanyMSC Income Fund and is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). This fee equals 20.0% of the Company’sMSC Income Fund’s incentive fee capital gains, which equals the Company’sMSC Income Fund’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. At the end of each reporting period, the CompanyMSC Income Fund estimates the incentive fee on capital gains and accrues the fee based on a hypothetical liquidation of its portfolio. Therefore, the accrual includes both net realized gains and net unrealized gains (the net unrealized difference between the fair value and the par value of its portfolio), if any. The incentive fee accrued pertaining to the unrealized gain is neither earned nor payable to the AdvisersAdviser until such time it is realized.

The Company and the Adviser may enter into an agreement pursuant to which the Adviser could pay the Company up to 100% of its operating expenses (an “Expense Support Payment”) in order to achieve a reasonable level of expenses relative to its investment income.

The Company and the Advisers entered into a conditional fee waiver agreement (as amended from time to time, the “Conditional Fee Waiver Agreement”), pursuant to which the Advisers could waive certain fees through December 31, 2015 upon the occurrence of any event that, in the Advisers’ sole discretion, causes such waivers to be deemed necessary.

The Company and the Advisers entered into conditional income incentive fee waiver agreements (the “2016-2017 Conditional Income Incentive Fee Waiver Agreements”), most recently on January 31, 2018, pursuant to which, for a period from January 1, 2016 to December 31, 2017, the Advisers could waive the “subordinated incentive fee on income,” as such term is defined in the Investment Advisory Agreement, upon the occurrence of any event that, in the Advisers’ sole discretion, causes such waiver to be deemed necessary. The 2016-2017 Conditional Income Incentive Fee Waiver Agreements may require the Company to repay the Advisers for previously waived reimbursement of Expense Support Payments or waived base management fees or incentive fees under certain circumstances and to the extent eligible for repayment.

Previously waived fees and Expense Support Payments are potentially subject to repayment by the Company, if at all, within a period not to exceed three years from the date of each respective fee waiver or Expense Support Payment. Thus, in any quarter where a surplus exists, that surplus will be available, subject to approval of the board of directors, to reimburse waived fees and Expense Support Payments as follows:

1.First, to reimburse Expense Support Payments, beginning with the earliest year eligible for reimbursement; and
2.Second, to reimburse all waived fees, beginning with the earliest year eligible for reimbursement.

Reimbursement of previously waived fees will only be permitted with the approval of the board of directors and if the operating expense ratio is equal to or less than the operating expense ratio at the time the corresponding fees were waived or Expense Support Payments were made and if the annualized rate of regular cash distributions to stockholders is equal to or greater than the annualized rate of the regular cash distributions at the time the corresponding fees were waived.



For the years ended December 31, 2017, 20162023, 2022 and 2015, the Company2021, MSC Income Fund incurred base management fees of approximately $21.8$19.8 million, $19.2$19.8 million and $15.5$17.3 million, respectively. The Advisers did not waive base management fees in the years ended December 31, 2017, 2016 and 2015. For the years ended December 31, 2017, 20162023, 2022 and 2015, the Company incurred no capital gains incentive fees, and2021, MSC Income Fund incurred subordinated incentive fees on income of $3.0$12.6 million, $1.7$2.1 million and $2.6$0.6 million, respectively, all of which were waived.

Duringrespectively. For the years ended December 31, 2017, 20162023, 2022 and 2015, the Company2021, MSC Income Fund did not record an accrual forincur any previously waivedcapital gains incentive fees. Any reimbursement of previously waived fees to the Advisers will not be accrued until the reimbursement of the waived fees become probable and estimable, which will be upon approval of the Company’s board of directors. To date, none of the previously waived fees has been approved by the board of directors for reimbursement.

The table below presents the fees waived by the Advisers and the timing of potential reimbursement of waived fees (dollars in thousands). Previously waived fees will only be reimbursed with the approval of the Company’s board of directors and if the “Operating Expense Ratio” (as described in footnote 3 to the table below) is equal to or less than the Company’s operating expense ratio at the time the corresponding fees were waived and if the annualized rate of the Company’s regular cash distributions to stockholders is equal to or greater than the annualized rate of the Company’s regular cash distributions at the time the corresponding fees were waived.
 
Management Fee (1)
 
Subordinated Incentive Fee (1)
 
Capital Gain Incentive Fee (1)
 
Expense Support (1)
    
Quarter EndedWaivers
Repaid to Adviser (2)
 Waivers
Repaid to Adviser (2)
 Waivers
Repaid to Adviser (2)
 Payments
Repaid to Adviser (2)
 
Operating Expense Ratio (3)
Annualized Distribution Rate (4)
Eligible to be Repaid Through
6/30/2012$31
$—
 $18
$—
 $—
$—
 $—
$—
 1.35%$0.70
Expired
9/30/2012$97
$—
 $52
$—
 $3
$—
 $—
$—
 1.97%$0.70
Expired
12/31/2012$104
$—
 $53
$—
 $—
$—
 $—
$—
 2.96%$0.70
Expired
3/31/2013$84
$—
 $—
$—
 $—
$—
 $—
$—
 1.86%$0.70
Expired
6/30/2013$118
$—
 $—
$—
 $—
$—
 $—
$—
 1.36%$0.70
Expired
9/30/2013$268
$—
 $—
$—
 $—
$—
 $—
$—
 1.22%$0.70
Expired
12/31/2013$309
$—
 $—
$—
 $5
$—
 $153
$—
 0.49%$0.70
Expired
3/31/2014$306
$—
 $—
$—
 $—
$—
 $—
$—
 1.28%$0.70
Expired
6/30/2014$548
$—
 $—
$—
 $—
$—
 $—
$—
 1.28%$0.70
Expired
9/30/2014$821
$—
 $—
$—
 $—
$—
 $328
$—
 1.23%$0.70
Expired
12/31/2014$148
$—
 $451
$—
 $—
$—
 $—
$—
 1.70%$0.70
Expired
3/31/2015$—
$—
 $358
$—
 $—
$—
 $—
$—
 1.78%$0.70
3/31/2018
6/30/2015$—
$—
 $930
$—
 $—
$—
 $—
$—
 1.69%$0.70
6/30/2018
9/30/2015$—
$—
 $155
$—
 $—
$—
 $—
$—
 2.11%$0.70
9/30/2018
12/31/2015$—
$—
 $1,159
$—
 $—
$—
 $—
$—
 2.27%$0.70
12/31/2018
3/31/2016$—
$—
 $493
$—
 $—
$—
 $—
$—
 1.83%$0.70
3/31/2019
6/30/2016$—
$—
 $—
$—
 $—
$—
 $—
$—
 1.77%$0.70
6/30/2019
9/30/2016$—
$—
 $—
$—
 $—
$—
 $—
$—
 1.73%$0.70
9/30/2019
12/31/2016$—
$—
 $1,196
$—
 $—
$—
 $—
$—
 1.67%$0.70
12/31/2019
3/31/2017$—
$—
 $1,495
$—
 $—
$—
 $—
$—
 1.62%$0.70
3/31/2020
6/30/2017$—
$—
 $823
$—
 $—
$—
 $—
$—
 1.60%$0.70
6/30/2020
9/30/2017$—
$—
 $—
$—
 $—
$—
 $—
$—
 1.77%$0.70
9/30/2020
12/31/2017$—
$—
 $711
$—
 $—
$—
 $—
$—
 1.82%$0.70
12/31/2020
(1)Fees waived pursuant to the Conditional Fee Waiver Agreement and the 2016-2017 Conditional Income Incentive Fee Waiver Agreements.
(2)Subject to the approval of the Company’s board of directors, in future periods, previously waived fees may be paid to the Advisers, if the Company’s cumulative net increase in net assets resulting from operations exceeds the amount of cumulative distributions paid to stockholders. The previously waived fees are potentially subject to repayment by the Company, if at all, within a period not to exceed three years from the date of each respective fee waiver. To date, none of the previously waived fees and Expense Support Payments have been approved for reimbursement by the Company’s board of directors.
(3)The “Operating Expense Ratio” is calculated on a quarterly basis as a percentage of average net assets and includes all expenses borne by the Company, except for base management and incentive fees and administrative expenses waived by the Advisers and organizational and offering expenses.
(4)“Annualized Distribution Rate” equals $0.00191781 per share, per day as declared by the Company’s board of directors.


Administration

Pursuant to the Investment Advisory Agreement, and Sub-Advisory Agreement, the CompanyMSC Income Fund is required to pay or reimburse the AdvisersAdviser for administrative services expenses, which include all costs and expenses related to the Company’sMSC Income Fund’s day-to-day administration and management not related to advisory services, whether such administrative services were performed by a third partythird-party service provider or the Adviser or its affiliates of(to the Advisers (“Internalextent performed by the Adviser or its affiliates, the “Internal Administrative Services”). The Advisers doInternal Administrative Services include, but are not earn any profit under their provisionlimited to, the cost of an Adviser’s personnel performing accounting and compliance functions and other administrative services on behalf of MSC Income Fund.
The Adviser waived reimbursement of all Internal Administrative Services expenses from October 30, 2020 through December 31, 2021. On January 1, 2022, the Adviser assumed responsibility of certain administrative services that were previously provided for MSC Income Fund by a third-party sub-administrator. After December 31, 2021, the Adviser continued to waive reimbursement of all Internal Administrative Services expenses, except for the Company.cost of the services previously provided by the sub-administrator. For the years ended December 31, 2017, 20162023, 2022 and 2015,2021, MSC Income Fund incurred Internal Administrative Services Expenses of $8.9 million, $5.1 million and $4.3 million, respectively. For the Company incurred,years ended December 31, 2023, 2022 and 2021, the AdvisersAdviser waived the reimbursementreimbursements of Internal Administrative Services expenses of approximately $3.0$8.3 million, $2.3$4.5 million and $2.0$4.3 million, respectively. The Company and the Advisers entered into an expense support and conditional reimbursement agreement, as amended from time to time, which extends the period for waiver of reimbursement of Internal Administrative Services expenses accrued pursuant to the Investment Advisory Agreement and the Sub-Advisory Agreement from January 1, 2016 through December 31, 2017. Waived Internal Administrative Services expenses are permanently waived and are not subject to future reimbursement.

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Table of contents
The table below presentsMSC INCOME FUND, INC.
Notes to the Internal Administrative Services expenses waived by the Advisers (dollars in thousands).
Consolidated Financial Statements (Continued)
  Internal Administrative Services      
Quarter Ended WaiversRepaid to Adviser 
Operating Expense Ratio (1)
 
Annualized Distribution Rate (2)
 
Eligible to be Repaid Through (3)
6/30/2012 $25
$—
 1.35% $0.70
 Not Eligible to be Repaid
9/30/2012 $129
$���
 1.97% $0.70
 Not Eligible to be Repaid
12/31/2012 $284
$—
 2.96% $0.70
 Not Eligible to be Repaid
3/31/2013 $233
$—
 1.86% $0.70
 Not Eligible to be Repaid
6/30/2013 $222
$—
 1.36% $0.70
 Not Eligible to be Repaid
9/30/2013 $234
$—
 1.22% $0.70
 Not Eligible to be Repaid
12/31/2013 $329
$—
 0.49% $0.70
 Not Eligible to be Repaid
3/31/2014 $329
$—
 1.28% $0.70
 Not Eligible to be Repaid
6/30/2014 $385
$—
 1.28% $0.70
 Not Eligible to be Repaid
9/30/2014 $371
$—
 1.23% $0.70
 Not Eligible to be Repaid
12/31/2014 $412
$—
 1.70% $0.70
 Not Eligible to be Repaid
3/31/2015 $437
$—
 1.78% $0.70
 Not Eligible to be Repaid
6/30/2015 $480
$—
 1.69% $0.70
 Not Eligible to be Repaid
9/30/2015 $517
$—
 2.11% $0.70
 Not Eligible to be Repaid
12/31/2015 $603
$—
 2.27% $0.70
 Not Eligible to be Repaid
3/31/2016 $533
$—
 1.83% $0.70
 Not Eligible to be Repaid
6/30/2016 $574
$—
 1.77% $0.70
 Not Eligible to be Repaid
9/30/2016 $529
$—
 1.73% $0.70
 Not Eligible to be Repaid
12/31/2016 $679
$—
 1.67% $0.70
 Not Eligible to be Repaid
3/31/2017 $661
$—
 1.62% $0.70
 Not Eligible to be Repaid
6/30/2017 $873
$—
 1.60% $0.70
 Not Eligible to be Repaid
9/30/2017 $694
$—
 1.77% $0.70
 Not Eligible to be Repaid
12/31/2017 $786
$—
 1.82% $0.70
 Not Eligible to be Repaid
(1)The “Operating Expense Ratio” is calculated on a quarterly basis as a percentage of average net assets and includes all expenses borne by the Company, except for base management and incentive fees and Internal Administrative Services expenses waived by the Advisers and organizational and offering expenses.
(2)“Annualized Distribution Rate” equals $0.00191781 per share, per day as declared by the Company’s board of directors.
(3)The Advisers have agreed to permanently waive reimbursement by the Company of Internal Administrative Services expenses through December 31, 2017. Waived Internal Administrative Services expenses are not eligible for future reimbursement from the Company to the Advisers.
2.     Offering Costs
AsIn accordance with MSC Income Fund’s previous investment advisory agreement with the previous investment adviser (“HMS Adviser”), MSC Income Fund reimbursed HMS Adviser for any offering costs that were paid on MSC Income Fund’s behalf, which consisted of, December 31, 2017among other costs, actual legal, accounting, bona fide out-of-pocket itemized and 2016,detailed due diligence costs, printing, filing fees, transfer agent costs, postage, escrow fees, advertising and sales literature and other costs incurred in connection with the Advisers have incurred approximately $13.1 million and $12.0 million, respectively,offering of MSC Income Fund’s common stock, including through MSC Income Fund’s DRIP. HMS Adviser was responsible for the payment of offering costs on the Company’s behalf. As of December 31, 2017 and 2016, approximately $11.8 million and $10.6 million, respectively, of offering costs have been reimbursed to the Advisers. The Company expects to reimburse the Advisers for the balance of such costs incurred on its behalf on a monthly basis up to a maximum aggregate amount ofextent they exceeded 1.5% of the aggregate gross stock offering proceeds.


The table below outlines fees incurred Pursuant to the transaction whereby the Adviser became the investment adviser to MSC Income Fund, HMS Adviser agreed to permanently waive reimbursement of organizational and expense reimbursementsoffering expenses except for $0.6 million which remained payable to Hines, Main StreetHMS Adviser and their affiliates for the years ended December 31, 2017, 2016 and 2015 and amounts unpaidwould be reimbursed as part of December 31, 2017 and 2016 (dollars in thousands).
 Incurred Unpaid as of
 Year Ended December 31, December 31,
Type and Recipient2017 2016 2015 2017 2016
Incentive Fees on Income (1) - the Adviser, Sub-Adviser
$—
 $—
 $—
 $—
 $—
Capital Gains Incentive Fee (1) - the Adviser, Sub-Adviser
—
 —
 —
 —
 —
Offering Costs - the Adviser, Sub-Adviser1,181
 1,581
 3,309
 —
 (23)
Expense Support from Adviser—
 —
 —
 —
 —
Other (2) - the Adviser
693
 458
 463
 59
 121
Selling Commissions - Dealer Manager2,577
 4,772
 17,489
 —
 92
Dealer Manager Fee - Dealer Manager1,453
 2,348
 8,210
 —
 (6)
Due to Affiliates

 

   $59
 $184
          
Base Management Fees (1) - the Adviser, Sub-Adviser
$21,785
 $19,151
 $15,541
 $5,682
 $5,054
(1)Net of amounts waived by the Advisers.
(2)Includes amounts the Adviser paid on behalf of the Company such as general and administrative services expenses.

Note 12 – Share Repurchase Plan
The Company conducts quarterly tender offers pursuant to its share repurchase program. Under the terms of the plan, the Company will offer to purchase shares at the estimated NAV per share, as determined within 48 hours prior to the repurchase date. The Company currently limits the number of shares to be repurchased (i) during any calendar year to the proceeds it receives from the issuance of shares of its common stock under its distribution reinvestment plan during the trailing four quarters and (ii) in any calendar quarter to 2.5% of the weighted average number of sharesfuture issuances of common stock outstanding during the trailing four quarters. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from the sale of investments as of the end of the applicable period to repurchase shares. The Company’s board of directors may amend, suspend or terminate the share repurchase program upon 30 days’ notice. The Company’s first repurchase date was October 1, 2013. Since inception of our share repurchase program, the Company funded the repurchase of $37.0 million in shares.by MSC Income Fund. For the years ended December 31, 20172023 and 2016, the Company funded approximately $23.02022, MSC Income Fund reimbursed HMS Adviser $0.1 million and $10.9$0.3 million, respectively, in connection with stock issuances. As of June 30, 2023, MSC Income Fund’s reimbursement obligation to HMS Adviser for shares tenderedorganizational and offering expenses was fully repaid.
3.     Indemnification
The Investment Advisory Agreement provides that the Adviser and its officers, directors, controlling persons and any other person or entity affiliated with it acting as MSC Income Fund’s agent are entitled to indemnification (including reasonable attorneys’ fees and amounts reasonably paid in settlement) for repurchaseany liability or loss suffered by such indemnitee, and such indemnitee will be held harmless for any loss or liability suffered by MSC Income Fund, if (i) the indemnitee has determined, in good faith, that the course of conduct which caused the loss or liability was in MSC Income Fund’s best interests, (ii) the indemnitee was acting on behalf of or performing services for MSC Income Fund, (iii) the liability or loss suffered was not the result of negligence, willful malfeasance, bad faith or misconduct by the indemnitee or an affiliate thereof acting as MSC Income Fund’s agent and (iv) the indemnification or agreement to hold the indemnitee harmless is only recoverable out of MSC Income Fund’s net assets and not from MSC Income Fund’s stockholders.
4.     Co-Investment
In the ordinary course of business, MSC Income Fund enters into transactions with other parties that may be considered related party transactions. MSC Income Fund has implemented certain policies and procedures, both written and unwritten, to ensure that it does not engage in any prohibited transactions with any persons affiliated with MSC Income Fund. If such affiliations are found to exist, MSC Income Fund seeks the Board of Directors and/or appropriate Board of Directors committee review and approval for such transactions and otherwise comply with, or seek, orders for exemptive relief from the SEC, as appropriate.
MSC Income Fund has received an exemptive order from the SEC permitting co-investments among MSC Income Fund, Main Street and other funds and clients advised by the Adviser in certain negotiated transactions where co-investing would otherwise be prohibited under the plan1940 Act. MSC Income Fund has made co-investments, and in the future intends to continue to make co-investments with Main Street and other funds and clients advised by the Adviser, in accordance with the conditions of the order. The order requires, among other things, that the Adviser and Main Street consider whether each such investment opportunity is appropriate for MSC Income Fund, Main Street and the other funds and clients advised by the Adviser, as applicable, and if it is appropriate, to propose an allocation of the investment opportunity between such parties. Because the Adviser is wholly-owned by Main Street and is not managing MSC Income Fund’s investment activities as its sole activity, this may provide the Adviser an incentive to allocate opportunities to other participating funds and clients instead of MSC Income Fund. However, the Adviser has policies and procedures in place to manage this conflict, including oversight by the independent members of the Board of Directors. Additional information regarding the operation of the co-investment program is set forth in the order granting exemptive relief, which may be reviewed on the SEC’s website at www.sec.gov. In addition to the co-investment program described above, MSC Income Fund also co-invests in syndicated deals and other transactions where price is the only negotiated point by MSC Income Fund and its affiliates.
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MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
5.     Other Related Party Transactions
On January 27, 2021, MSC Income Fund entered into the Main Street Term Loan, which initially provided for an aggregate principal amount of $40.0 million in borrowings. MSC Income Fund paid a 1.0% upfront fee to Main Street on the closing date.
On July 27, 2021, MSC Income Fund entered into an amendment to the Main Street Term Loan that allowed MSC Income Fund to initially draw an additional $20.0 million, with another $15.0 million available to be drawn in two separate $7.5 million tranches at a later date. Following the amendment, as of September 30, 2021, the aggregate principal amount outstanding under the Main Street Term Loan was $60.0 million bearing interest at a fixed rate of 5.00% per annum and maturing on January 27, 2026.
Borrowings under the Main Street Term Loan were expressly subordinated and junior in right of payment to all secured indebtedness of MSC Income Fund. The Main Street Term Loan was unanimously approved by the boardBoard of directors. Since inceptionDirectors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the share repurchase program,1940 Act, of MSC Income Fund or the Adviser. On October 22, 2021, MSC Income Fund fully repaid all borrowings outstanding under the Main Street Term Loan and the Main Street Term Loan was extinguished.
On May 2, 2022, the Company has funded all redemption requestssold 94,697 shares of its common stock to Main Street at $7.92 per share, the price at which the Company issued new shares in connection with reinvestments of the May 2, 2022 dividend pursuant to the DRIP, for total proceeds to the Company of $750,000. The issuance and sale were made pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and were unanimously approved by the Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser.
On May 1, 2023, the Company sold 255,754 shares of its common stock to Main Street at $7.82 per share, the price at which the Company issued new shares in connection with reinvestments of the May 1, 2023 dividend pursuant to the DRIP, for total proceeds to the Company of $2.0 million. The issuance and sale were made pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and were unanimously approved by the Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser.
On August 1, 2023, the Company sold 348,542 shares of its common stock to Main Street at $7.89 per share, the price at which the Company issued new shares in connection with reinvestments of the August 1, 2023 dividend pursuant to the DRIP, for total proceeds to the Company of $2.8 million. The issuance and sale were made pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and were unanimously approved by the Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser.
On November 1, 2023, the Company sold 475,888 shares of its common stock to Main Street at $7.88 per share, the price at which the Company issued new shares in connection with reinvestments of the November 1, 2023 dividend pursuant to the DRIP, for total proceeds to the Company of $3,750,000. The issuance and sale were made pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and were unanimously approved by the Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser.
In September 2023, pursuant to the August Dutch auction tender offer, Main Street purchased 115,385 shares of MSC Income Fund common stock from MSC Income Fund stockholders at the August Clearing Price, or $6.50 per share, for an aggregate cost of $0.8 million. See Note H – Share Repurchases for more information. The August Dutch auction tender offer, including Main Street’s participation, were unanimously approved by the Board of Directors, including each director who is not an “interested person,” as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser.
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Table of contents
MSC INCOME FUND, INC.
Notes to the Consolidated Financial Statements (Continued)
NOTE L — SUBSEQUENT EVENTS
On January 31, 2024, the Company sold 314,070 shares of its common stock to Main Street at $7.96 per share,
the price at which the Company issued new shares in connection with reinvestments of the January 31, 2024 dividend
pursuant to the DRIP, for total proceeds to the Company of $2.5 million. The issuance and sale were made pursuant to the
exemption from registration under Section 4(a)(2) of the Securities Act and were unanimously
approved by the Board of Directors, including each director who is not an “interested person,” as such term is defined in
Section 2(a)(19) of the 1940 Act, of the Company or the Adviser.

On January 31, 2024, MSC Income Fund repurchased 518,173 shares of its common stock validly tendered and not withdrawn.

Repurchases of our common stock pursuant to our tender offer are as follows:
For the Three Months Ended Repurchase Date Shares Repurchased Percentage of Shares Tendered that were Repurchased 
Repurchase Price
per Share
 Aggregate Consideration for Repurchased Shares
September 30, 2013 —
 —
 100% $—
 $—
December 31, 2013 12/31/2013
 395
 100% 8.89
 3,512
March 31, 2014 3/31/2014
 1,667
 100% 8.85
 14,753
June 30, 2014 6/30/2014
 9,763
 100% 8.87
 86,598
September 30, 2014 9/30/2014
 6,093
 100% 8.82
 53,740
December 31, 2014 12/17/2014
 340
 100% 8.51
 2,893
March 31, 2015 3/25/2015
 33,842
 100% 8.54
 289,011
June 30, 2015 6/24/2015
 52,799
 100% 8.71
 459,879
September 30, 2015 9/23/2015
 82,165
 100% 8.48
 696,759
December 31, 2015 12/23/2015
 191,534
 100% 7.88
 1,509,288
March 31, 2016 3/30/2016 and 3/31/2016
 200,508
 100% 7.62
 1,527,873
June 30, 2016 6/23/2016
 639,880
 100% 7.81
 4,997,465
September 30, 2016 9/22/2016
 239,605
 100% 7.92
 1,897,674
December 31, 2016 12/22/2016
 306,426
 100% 8.08
 2,475,925
March 31, 2017 3/23/2017
 614,180
 100% 8.23
 5,054,698
June 30, 2017 6/16/2017
 346,307
 100% 8.20
 2,839,713
September 30, 2017 9/21/2017
 747,785
 100% 8.19
 6,124,356
December 31, 2017 12/21/2017
 1,105,578
 100% 8.10
 8,955,178
    4,578,867
     $36,989,315



Note 13 – Commitments and Contingencies

At December 31, 2017, the Company had a total of approximately $45.4 million in outstanding commitments comprised of (i) 28 commitments to fund revolving loans that had not been fully drawn or term loans that had not been funded and (ii) four capital commitments that had not been fully called. The Company recognized unrealized appreciation of $14,000withdrawn on the outstanding unfunded loan commitments and no unrealized appreciation or depreciation onterms set forth in the outstanding unfunded capital commitments during the year ended December 31, 2017. At December 31, 2016, the Company had a total of approximately $42.7 million in outstanding commitments comprised of (i) 22 commitments to fund revolving loans that had not been fully drawn or term loans that had not been funded and (ii) three capital commitment that had not been fully called. The Company recognized unrealized depreciation of $266,000 on the outstanding unfunded loan commitments and unrealized appreciation of approximately $14,000 on the outstanding unfunded capital commitments during the year ended December 31, 2016.
 Commitments and Contingencies
 (dollars in thousands)
 December 31, 2017 December 31, 2016
    
Unfunded Loan Commitments   
Apex Linen Services, Inc.$403
 $397
Arcus Hunting, LLC976
 2,136
BarFly Ventures, LLC613
 881
BigName Holdings, LLC101
 —
Boccella Precast Products, LLC500
 —
Buca C, LLC—
 1,548
CapFusion Holding, LLC—
 394
CDHA Management, LLC2,343
 3,259
Charps, LLC1,000
 —
Clad-Rex Steel, LLC100
 —
CTVSH, PLLC200
 —
Datacom, LLC25
 1,302
Felix Investments Holdings II LLC1,667
 —
Gamber-Johnson Holdings, LLC300
 300
GST Autoleather Inc.1,281
 —
Guerdon Modular Holdings, Inc.400
 400
Hawk Ridge Systems, LLC400
 400
Hojeij Branded Foods, Inc.1,923
 2,000
Hostway corporation7
 —
HW Temps LLC200
 50
Jackmont Hospitality, Inc.—
 1,200
LaMi Products, LLC294
 1,729
Market Force Information, Inc.400
 —
Meisler Operating, LLC400
 —
Minute Key, Inc.—
 197
Mystic Logistics, Inc.200
 194
NNE Issuer, LLC5,542
 —
NuStep, LLC300
 —
Pardus Oil & Gas, LLC—
 357
Permian Holdco 2, Inc.97
 290
PPC/Shift, LLC500
 500
Resolute Industrial LLC5,750
 —
Strike, LLC—
 2,475
Unirush, LLC—
 980
Volusion, LLC—
 2,955
Wireless Vision Holdings, LLC2,084
 —
Unfunded Capital Commitments   
Brightwood Capital Fund III, LP1,000
 1,000
Brightwood Capital Fund IV, LP9,000
 10,000
Copper Trail Energy Fund I LP2,500
 —
Freeport First Lien Loan Fund III, LP4,941
 7,737
Total$45,447
 $42,681


Note 14 – Subsequent Events

On February 2, 2018, the Company filed a tender offer statement on Schedule TO and Offer to Purchase filed with the SEC on December 21, 2023. The shares were repurchased at a price of $7.81 per share, which was MSC Income Fund’s NAV per share as of January 31, 2024, for an aggregate purchase price of $4.0 million (an amount equal to commence90% of the proceeds MSC Income Fund received from the issuance of shares under MSC Income Fund’s DRIP from the January 31, 2024 dividend payment).

On February 5, 2024, MSC Income Fund commenced a modified “Dutch Auction” tender offer (the “February Dutch Auction Tender Offer”) pursuant to the Offer to Purchase, dated February 5, 2024, which expired on March 4, 2024. Pursuant to the February Dutch Auction Tender Offer, MSC Income Fund repurchased 357,143 shares on March 8, 2024, at a price of $7.00 per share for an aggregate cost of $2.5 million, excluding fees and expenses related to the February Dutch Auction Tender Offer.
On March 7, 2024, the Board of Directors declared a quarterly cash dividend of $0.185 per share payable May 1, 2024 to stockholders of record as of March 29, 2024. Additionally, the Board of Directors approved a repurchase offer by the Companypursuant to purchase, as approved by the Company’s boardshare repurchase program in an amount equal to 90% of directors, 1,942,970.33the proceeds resulting from shares issued in lieu of cash distributions from the May 1, 2024 dividend payment.


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Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates
December 31, 2023
(dollars in thousands)

CompanyTotal RateBase RateSpreadPIK RateType of Investment(1)(10)(11)GeographyAmount of
Realized
Gain/(Loss)		Amount of
Unrealized
Gain/(Loss)		Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)		December 31,
2022 Fair Value (13)		Gross
Additions(3)		Gross
Reductions(4)		December 31,
2023 Fair Value (13)
Control Investments
Copper Trail Fund InvestmentsLP Interests (CTMH, LP)(9)$— $— $38 $588 $— $20 $568 
GRT Rubber Technologies LLC11.48%SF+6.00%Secured Debt (12)(8)— 3 88 330 852 — 1,182 
13.48%SF+8.00%Secured Debt(8)— (50)2,696 19,943 51 50 19,944 
Member Units(8)— — 90 21,890 — — 21,890 
Harris Preston Fund InvestmentsLP Interests (2717 MH, L.P.)(8)2,223 (952)142 7,552 2,796 4,298 6,050 
Volusion, LLC10.00%Secured Debt(8)— — 69 — 900 — 900 
11.50%Secured Debt(8)(1,366)780 71 6,392 — 6,392 — 
8.00%Unsecured Convertible Debt(8)(175)175 — — 175 175 — 
Preferred Member Units(8)— — 1 — — — — 
Preferred Member Units(8)— (596)— — 4,906 1,796 3,110 
Preferred Member Units(8)— — — — — — — 
Common Stock(8)— (1,104)— — 1,104 1,104 — 
Warrants(8)— 1,104 — — — — — 
Other
Amounts related to
investments transferred to
or from other
1940 Act classification
during the period		1,541 (649)(94)(6,392)6,392 — — 
Total Control Investments$2,223 $(1,289)$3,101 $50,303 $17,176 $13,835 $53,644 
Affiliate Investments
AFG Capital Group, LLCPreferred Member Units(8)$1,800 $(2,050)$— $2,350 $1,800 $4,150 $— 
Analytical Systems Keco Holdings, LLC15.38%SF+10.00%Secured Debt (12)(8)— — 4 (2)56 — 54 
15.38%SF+10.00%Secured Debt(8)— — 188 1,135 21 136 1,020 
14.13%Preferred Member Units(8)— — — — — — — 
Preferred Member Units(8)— 330 — 880 330 — 1,210 
Warrants(8)— — — — — — — 
ATX Networks Corp.L+7.50%Secured Debt(6)— (102)856 6,368 545 6,913 — 
10.00%Unsecured Debt(6)— (276)1,135 2,614 1,135 3,749 — 
Common Stock(6)3,178 (3,290)— 3,290 3,178 6,468 — 
Barfly Ventures, LLCMember Units(5)— 273 — 1,107 273 — 1,380 
Batjer TopCo, LLC10.00%Secured Debt (12)(8)— 1 — (1)1 — — 
10.00%Secured Debt (12)(8)— — 2 — 70 40 30 
10.00%Secured Debt(8)— 15 129 1,205 21 51 1,175 
Preferred Stock(8)— 225 76 455 225 — 680 
Brewer Crane Holdings, LLC15.46%L+10.00%Secured Debt(9)— — 224 1,491 8 125 1,374 
Preferred Member Units(9)— (370)30 1,770 — 370 1,400 
Centre Technologies Holdings, LLCSF+9.00%Secured Debt (12)(8)— — 3 — — — — 
14.48%SF+9.00%Secured Debt(8)— 29 572 3,731 663 — 4,394 
Preferred Member Units(8)— 590 30 2,170 590 — 2,760 
Chamberlin Holding LLCSF+6.00%Secured Debt (12)(8)— 49 11 — — — — 
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Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2023
(dollars in thousands)
CompanyTotal RateBase RateSpreadPIK RateType of Investment(1)(10)(11)GeographyAmount of
Realized
Gain/(Loss)		Amount of
Unrealized
Gain/(Loss)		Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)		December 31,
2022 Fair Value (13)		Gross
Additions(3)		Gross
Reductions(4)		December 31,
2023 Fair Value (13)
13.49%SF+8.00%Secured Debt(8)— (4)553 4,236 4 335 3,905 
Member Units(8)— 1,599 1,045 5,728 1,602 — 7,330 
Member Units(8)— 37 23 678 38 1 715 
Charps, LLCPreferred Member Units(5)— 590 366 3,330 590 — 3,920 
Clad-Rex Steel, LLC11.50%Secured Debt (12)(5)— — — — — — — 
11.50%Secured Debt(5)— (37)284 2,620 — 517 2,103 
10.00%Secured Debt(5)— — 26 260 — 9 251 
Member Units(5)— (760)69 2,060 — 760 1,300 
Member Units(5)— 55 — 152 130 — 282 
Cody Pools, Inc.12.50%Secured Debt (12)(8)— 2 1 — — — — 
12.50%Secured Debt(8)— 22 562 — 7,872 761 7,111 
L+10.50%Secured Debt(8)— (11)26 273 14 287 — 
L+10.50%Secured Debt(8)— (96)500 6,882 — 6,882 — 
Preferred Member Units(8)— 3,570 1,219 14,550 3,570 — 18,120 
Colonial Electric Company LLCSecured Debt(6)— — 12 — 400 400 — 
12.00%Secured Debt(6)— (41)471 5,729 34 356 5,407 
Preferred Member Units(6)— 360 — — 600 — 600 
Preferred Member Units(6)— (370)— 2,290 — 370 1,920 
Compass Systems & Sales, LLC13.50%Secured Debt(5)— — — — — — — 
13.50%Secured Debt(5)— — 69 — 4,175 — 4,175 
Preferred Equity(5)— — — — 1,863 — 1,863 
Datacom, LLC7.50%Secured Debt(8)— — 4 25 89 65 49 
10.00%Secured Debt(8)— (14)107 865 22 43 844 
Preferred Member Units(8)— (290)— 300 — 290 10 
Digital Products Holdings LLC15.38%SF+10.00%Secured Debt(5)— (17)586 3,878 — 205 3,673 
Preferred Member Units(5)— — 50 2,459 — — 2,459 
Direct Marketing Solutions, Inc.14.00%Secured Debt(9)— (2)13 — 227 10 217 
14.00%Secured Debt(9)— (19)730 5,352 19 369 5,002 
Preferred Stock(9)— (380)43 5,558 — 378 5,180 
Flame King Holdings, LLCL+6.50%Secured Debt(9)— (15)121 1,900 15 1,915 — 
L+9.00%Secured Debt(9)— (123)478 5,300 123 5,423 — 
Preferred Equity(9)— 2,570 814 4,400 2,570 — 6,970 
Freeport Financial FundsLP Interests (Freeport First Lien Loan Fund III LP) (12)(5)— — 598 5,848 — 2,143 3,705 
Gamber-Johnson Holdings, LLCSF+7.50%Secured Debt (12)(5)— — 2 — — — — 
10.50%SF+7.50%Secured Debt(5)— (88)1,727 16,020 88 2,588 13,520 
Member Units(5)— 11,460 1,491 12,720 11,460 — 24,180 
GFG Group, LLC8.00%Secured Debt(5)— (25)263 2,836 25 525 2,336 
Preferred Member Units(5)— 1,080 200 1,790 1,080 — 2,870 
Gulf Publishing Holdings, LLCSF+9.50%Secured Debt (12)(8)— — — — — — — 
12.50%Secured Debt(8)— — 73 571 — — 571 
Preferred Equity(8)— (330)— 950 — 330 620 
Member Units(8)— — — — — — — 
143
Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2023
(dollars in thousands)
CompanyTotal RateBase RateSpreadPIK RateType of Investment(1)(10)(11)GeographyAmount of
Realized
Gain/(Loss)		Amount of
Unrealized
Gain/(Loss)		Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)		December 31,
2022 Fair Value (13)		Gross
Additions(3)		Gross
Reductions(4)		December 31,
2023 Fair Value (13)
HPEP 3, L.P.LP Interests (HPEP 3, L.P.) (12)(8)— 156 4 4,331 403 509 4,225 
IG Investor, LLCSecured Debt (12)(6)— — 5 — 173 200 (27)
13.00%Secured Debt(6)— — 692 — 9,179 110 9,069 
Common Equity(6)— — — — 3,774 174 3,600 
Independent Pet Partners Intermediate Holdings, LLCCommon Equity(6)— (220)— — 6,540 220 6,320 
Integral Energy Services13.16%SF+7.50%Secured Debt(8)— (787)2,773 18,425 94 2,287 16,232 
10.00%10.00%Preferred Equity(8)— 85 — — 350 — 350 
Common Stock(8)— (1,300)50 1,490 — 1,300 190 
Kickhaefer Manufacturing Company, LLC12.00%Secured Debt(5)— (18)668 5,093 58 218 4,933 
9.00%Secured Debt(5)— — 86 961 — 10 951 
Preferred Equity(5)— 620 — 1,800 620 — 2,420 
Member Units(5)— (30)29 713 — 30 683 
Market Force Information, LLCL+11.00%Secured Debt(9)(6,465)6,060 — 403 6,060 6,463 — 
Member Units(9)(4,160)4,160 — — 4,160 4,160 — 
MH Corbin Holding LLC13.00%Secured Debt(5)— 307 190 1,137 308 189 1,256 
Preferred Member Units(5)— 80 — — 80 — 80 
Preferred Member Units(5)— — — — — — — 
Mystic Logistics Holdings, LLCSecured Debt (12)(6)— — 1 — — — — 
10.00%Secured Debt(6)— — 146 1,436 — — 1,436 
Common Stock(6)— 890 1,131 5,708 890 — 6,598 
NexRev LLC10.00%Secured Debt (12)(8)— — — — — — — 
10.00%Secured Debt(8)— 708 289 2,119 729 413 2,435 
Preferred Member Units(8)— 1,310 166 280 1,310 — 1,590 
NuStep, LLC11.98%SF+6.50%Secured Debt(5)— (2)120 1,100 1 202 899 
12.00%Secured Debt(5)— — 564 4,603 3 — 4,606 
Preferred Member Units(5)— 300 — 2,010 300 — 2,310 
Preferred Member Units(5)— — — 1,290 — — 1,290 
Oneliance, LLC16.48%SF+11.00%Secured Debt(7)— (7)231 1,380 6 47 1,339 
Preferred Stock(7)— — — 264 18 — 282 
Orttech Holdings, LLCSF+11.00%Secured Debt (12)(5)— 2 1 (2)2 — — 
16.48%SF+11.00%Secured Debt(5)— 58 955 5,814 86 390 5,510 
Preferred Stock(5)— 1,320 274 2,940 1,320 — 4,260 
Pinnacle TopCo, LLC8.00%Secured Debt (12)(8)— — 1 — 105 — 105 
13.00%Secured Debt(8)— — 34 — 7,472 — 7,472 
Preferred Equity(8)— — — — 3,135 — 3,135 
Robbins Bros. Jewelry, Inc.12.50%Secured Debt(9)— — 4 (8)2 — (6)
12.50%Secured Debt(9)— (323)507 3,902 18 499 3,421 
Preferred Equity(9)— (1,650)— 1,650 — 1,650 — 
SI East, LLC11.25%Secured Debt (12)(7)— 6 28 — 625 250 375 
12.47%Secured Debt(7)— 161 1,278 — 18,179 — 18,179 
9.50%Secured Debt(7)— (134)1,403 29,929 — 29,929 — 
Preferred Member Units(7)— 1,737 399 4,550 1,840 — 6,390 
Student Resource Center, LLC8.50%8.50%Secured Debt(6)— (1,881)364 5,063 244 1,764 3,543 
144
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MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2023
(dollars in thousands)
CompanyTotal RateBase RateSpreadPIK RateType of Investment(1)(10)(11)GeographyAmount of
Realized
Gain/(Loss)		Amount of
Unrealized
Gain/(Loss)		Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)		December 31,
2022 Fair Value (13)		Gross
Additions(3)		Gross
Reductions(4)		December 31,
2023 Fair Value (13)
Preferred Equity(6)— — — — — — — 
Tedder Industries, LLC12.00%Secured Debt(9)— (28)56 460 — 28 432 
12.00%Secured Debt(9)— (218)466 3,780 3 218 3,565 
Preferred Member Units(9)— (1,920)— 1,920 — 1,920 — 
Preferred Member Units(9)— (141)— — 124 124 — 
Preferred Member Units(9)— (165)— — 165 165 — 
Trantech Radiator Topco, LLC8.00%Secured Debt (12)(7)— (2)3 — 2 2 — 
12.00%Secured Debt(7)— (14)255 1,980 14 14 1,980 
Common Stock(7)— 1,230 29 1,950 1,230 — 3,180 
VVS Holdco LLCSF+6.00%Secured Debt (12)(5)— — 10 (5)5 — — 
11.50%Secured Debt(5)— — 904 7,421 55 550 6,926 
Preferred Equity(5)— (30)54 2,990 100 30 3,060 
Other
Amounts related to
investments transferred to
or from other
1940 Act classification
during the period		(1,541)649 (151)— — — — 
Total Affiliate investments$(7,188)$25,116 $29,805 $277,000 $115,308 $101,029 $291,279 
145
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MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2023
(dollars in thousands)

(1)The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the Consolidated Schedule of Investments included in Item 8. Consolidated Financial Statements of this Annual Report on Form 10-K.
(2)Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in “Amounts related to investments transferred to or from other 1940 Act classifications during the period.”
(3)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2023 for affiliate investments located in this region was $107,201. This represented 17.2% of net assets as of December 31, 2023.
(6)Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2023 for affiliate investments located in this region was $38,466. This represented 6.2% of net assets as of December 31, 2023.
(7)Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2023 for affiliate investments located in this region was $31,725. This represented 5.1% of net assets as of December 31, 2023.
(8)Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2023 for control investments located in this region was $53,076. This represented 8.5% of net assets as of December 31, 2023. The fair value as of December 31, 2023 for affiliate investments located in this region was $86,332. This represented 13.9% of net assets as of December 31, 2023.
(9)Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of December 31, 2023 for control investments located in this region was $568. This represented 0.1% of net assets as of December 31, 2023. The fair value as of December 31, 2023 for affiliate investments located in this region was $27,555. This represented 4.4% of net assets as of December 31, 2023.
(10)All of the Company’s issuedportfolio investments are generally subject to restrictions on resale as “restricted securities,” unless otherwise noted.
(11)This schedule should be read in conjunction with the Consolidated Schedule of Investments and outstanding common stock, par value $0.001 per share. The offer is for cash at a purchase price equalNotes to the NAV per shareConsolidated Financial Statements included in Item 8. Consolidated Financial Statements of this Annual Report on Form 10-K. Supplemental information can be located within the Consolidated Schedule of
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Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to beAffiliates (Continued)
December 31, 2023
(dollars in thousands)
Investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined within 48 hoursusing significant unobservable inputs.
(12)Investment has an unfunded commitment as of December 31, 2023 (see Note J — Commitments and Contingencies in Item 8. Consolidated Financial Statements of this Annual Report on Form 10-K). The fair value of the repurchase date.investment includes the impact of the fair value of any unfunded commitments.


(13)Negative fair value is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

147
Note 15 – Quarterly
Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates
December 31, 2022
(dollars in thousands)
CompanyTotal RateBase RateSpreadPIK RateType of Investment(1)(10)(11)GeographyAmount of
Realized
Gain/(Loss)		Amount of
Unrealized
Gain/(Loss)		Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)		December 31,
2021 Fair Value		Gross
Additions(3)		Gross
Reductions(4)		December 31,
2022 Fair Value (13)
Control Investments
GRT Rubber Technologies LLC10.12%L+6.00%Secured Debt(8)$— $6 $7 $— $330 $— $330 
12.12%L+8.00%Secured Debt(8)— (32)1,972 19,152 824 33 19,943 
Member Units(8)— (860)1,244 22,750 — 860 21,890 
Harris Preston Fund InvestmentsLP Interests (2717 MH, L.P.)(8)— 2,389 — 3,971 3,581 — 7,552 
Copper Trail Fund InvestmentsLP Interests (CTMH, LP)(9)— — — 710 — 122 588 
Other
Amounts related to
investments transferred to
or from other
1940 Act classification
during the period		— — — — — — — 
Total Control Investments$— $1,503 $3,223 $46,583 $4,735 $1,015 $50,303 
Affiliate Investments
AFG Capital Group, LLC10.00%Secured Debt(8)$— $— $1 $36 $— $36 $— 
Preferred Member Units(8)— 420 50 1,930 420 — 2,350 
Analytical Systems Keco Holdings, LLCL+10.00%Secured Debt(8)— — 2 (4)2 — (2)
14.13%L+10.00%Secured Debt(8)— — 174 1,182 23 70 1,135 
14.13%Preferred Member Units(8)— — — — — — — 
Preferred Member Units(8)— (340)— 1,220 — 340 880 
Warrants(8)— — — — — — — 
ATX Networks Corp.12.23%L+7.50%Secured Debt(6)— 135 756 7,121 364 1,117 6,368 
10.00%10.00%Unsecured Debt(6)— 309 327 1,977 637 — 2,614 
Common Stock(6)— 3,290 — — 3,290 — 3,290 
Barfly Ventures, LLCMember Units(5)— 463 — 643 464 — 1,107 
Batjer TopCo, LLCSecured Debt(8)— — — — 50 51 (1)
11.00%Secured Debt(8)— — 116 — 1,205 — 1,205 
Preferred Stock(8)— — 70 — 455 — 455 
Brewer Crane Holdings, LLC14.12%L+10.00%Secured Debt(9)— — 220 2,005 10 524 1,491 
Preferred Member Units(9)— (160)207 1,930 — 160 1,770 
Centre Technologies Holdings, LLCL+9.00%Secured Debt(8)— — 7 — 360 360 — 
13.13%L+9.00%Secured Debt(8)— 115 445 2,216 1,612 97 3,731 
Preferred Member Units(8)— 639 30 1,460 710 — 2,170 
Chamberlin Holding LLCL+6.00%Secured Debt(8)— — 2 — — — — 
12.13%L+8.00%Secured Debt(8)— (42)486 4,454 42 260 4,236 
Member Units(8)— (300)463 6,030 — 302 5,728 
Member Units(8)— 180 19 385 293 — 678 
Charps, LLCPreferred Member Units(5)— (170)190 3,500 — 170 3,330 
Clad-Rex Steel, LLCSF+9.00%Secured Debt(5)— — 1 — — — — 
13.23%SF+9.00%Secured Debt(5)— — 304 2,620 — — 2,620 
10.00%Secured Debt(5)— — 27 268 — 8 260 
Member Units(5)— (500)190 2,560 — 500 2,060 
Member Units(5)— 20 — 133 19 — 152 
Cody Pools, Inc.15.38%L+10.50%Secured Debt(8)— 11 20 (6)1,033 754 273 
15.38%L+10.50%Secured Debt(8)— (30)963 7,187 30 335 6,882 
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Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2022
(dollars in thousands)
CompanyTotal RateBase RateSpreadPIK RateType of Investment(1)(10)(11)GeographyAmount of
Realized
Gain/(Loss)		Amount of
Unrealized
Gain/(Loss)		Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)		December 31,
2021 Fair Value		Gross
Additions(3)		Gross
Reductions(4)		December 31,
2022 Fair Value (13)
Preferred Member Units(8)— 2,640 1,004 11,910 2,640 — 14,550 
Colonial Electric Company LLCSecured Debt(6)— — 12 — 400 400 — 
12.00%Secured Debt(6)— — 761 6,007 37 315 5,729 
Preferred Member Units(6)— 10 349 2,280 10 — 2,290 
Datacom, LLC7.50%Secured Debt(8)— — — — 25 — 25 
7.50%Secured Debt(8)— 20 98 852 43 30 865 
Preferred Member Units(8)— 10 11 290 10 — 300 
Digital Products Holdings LLC14.13%L+10.00%Secured Debt(5)— — 510 4,186 22 330 3,878 
Preferred Member Units(5)— — 50 2,459 — — 2,459 
Direct Marketing Solutions, Inc.L+11.00%Secured Debt(9)— 5 42 (7)757 750 — 
15.13%L+11.00%Secured Debt(9)— 46 — — 5,352 — 5,352 
L+11.00%Secured Debt(9)— (54)661 4,705 — 4,705 — 
Preferred Stock(9)— 970 343 4,590 968 — 5,558 
Flame King Holdings, LLC10.75%L+6.50%Secured Debt(9)— 15 167 1,581 319 — 1,900 
13.25%L+9.00%Secured Debt(9)— 123 706 5,145 155 — 5,300 
Preferred Equity(9)— 1,800 538 2,600 1,800 — 4,400 
Freeport Financial FundsLP Interests (Freeport First Lien Loan Fund III LP)(5)— (57)421 7,231 — 1,383 5,848 
Gamber-Johnson Holdings, LLCSF+8.50%Secured Debt(5)— — 2 — — — — 
11.50%SF+8.50%Secured Debt(5)— 272 113 — 16,020 — 16,020 
L+7.50%Secured Debt(5)— (17)559 5,400 — 5,400 — 
Member Units(5)— 290 224 12,430 290 — 12,720 
GFG Group, LLC9.00%Secured Debt(5)— (26)329 3,136 26 326 2,836 
Preferred Member Units(5)— 40 144 1,750 40 — 1,790 
Gulf Publishing Holdings, LLCL+9.50%Secured Debt(8)— — 2 64 — 64 — 
6.25%Secured Debt(8)(1,455)962 126 2,429 — 2,429 — 
12.50%Secured Debt(8)— (29)19 — 600 29 571 
Member Units(8)— — — — — — — 
Preferred Equity(8)— (450)— — 1,400 450 950 
HPEP 3, L.P.LP Interests (HPEP 3, L.P.)(8)779 254 (50)4,712 587 968 4,331 
Kickhaefer Manufacturing Company, LLC11.50%Secured Debt(5)— 18 630 5,040 53 — 5,093 
9.00%Secured Debt(5)— — 88 970 — 9 961 
Preferred Equity(5)— (1,280)— 3,080 — 1,280 1,800 
Member Units(5)— 98 28 615 99 1 713 
Market Force Information, LLC12.00%12.00%Secured Debt(9)— (1,831)— 2,234 — 1,831 403 
Member Units(9)— — — — — — — 
MH Corbin Holding LLC13.00%Secured Debt(5)— 175 250 1,484 177 524 1,137 
Preferred Member Units(5)— — — — — — — 
Preferred Member Units(5)— — — — — — — 
Mystic Logistics Holdings, LLCSecured Debt(6)— — 1 — — — — 
10.00%Secured Debt(6)— — 152 1,595 — 159 1,436 
Common Stock(6)— 3,500 1,050 2,210 3,498 — 5,708 
NexRev LLCSecured Debt(8)— — 7 199 — 199 — 
11.00%Secured Debt(8)— (188)486 3,311 — 1,192 2,119 
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MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2022
(dollars in thousands)
CompanyTotal RateBase RateSpreadPIK RateType of Investment(1)(10)(11)GeographyAmount of
Realized
Gain/(Loss)		Amount of
Unrealized
Gain/(Loss)		Amount of
Interest,
Fees or
Dividends
Credited to
Income(2)		December 31,
2021 Fair Value		Gross
Additions(3)		Gross
Reductions(4)		December 31,
2022 Fair Value (13)
Preferred Member Units(8)— (723)20 670 333 723 280 
NuStep, LLC10.63%L+6.50%Secured Debt(5)— 2 78 430 670 — 1,100 
12.00%Secured Debt(5)— (1)545 4,310 294 1 4,603 
Preferred Member Units(5)— (1,370)— 3,380 — 1,370 2,010 
Preferred Member Units(5)— 775 — — 1,290 — 1,290 
Oneliance, LLC15.13%L+11.00%Secured Debt(7)— — 190 1,374 6 — 1,380 
Preferred Stock(7)— — 1 264 — — 264 
Orttech Holdings, LLCL+11.00%Secured Debt(5)— — 5 41 1 44 (2)
15.13%L+11.00%Secured Debt(5)— — 815 5,937 27 150 5,814 
Preferred Stock(5)— 440 225 2,500 440 — 2,940 
Robbins Bros. Jewelry, Inc.Secured Debt(9)— — 5 — 2 10 (8)
12.50%Secured Debt(9)— — 529 — 3,977 75 3,902 
Preferred Equity(9)— 420 62 — 1,650 — 1,650 
SI East, LLCSecured Debt(7)— — 78 750 1,250 2,000 — 
9.50%Secured Debt(7)— 76 2,708 21,200 10,375 1,646 29,929 
Preferred Member Units(7)— 690 216 3,860 690 — 4,550 
Sonic Systems International, LLC11.24%L+7.50%Secured Debt(8)— 282 1,676 13,738 4,687 — 18,425 
Common Stock(8)— (94)50 1,250 334 94 1,490 
Student Resource Center, LLC13.27%L+8.50%Secured Debt(6)— — — — 5,063 — 5,063 
Secured Debt(6)(6,651)4,438 12 — 6,524 6,524 — 
Preferred Equity(6)— — — — — — — 
Tedder Industries, LLC12.00%Secured Debt(9)— — 55 259 201 — 460 
12.00%Secured Debt(9)— (17)505 3,754 43 17 3,780 
Preferred Member Units(9)— (391)— 2,145 166 391 1,920 
Trantech Radiator Topco, LLCSecured Debt(7)— 3 3 (6)6 — — 
12.00%Secured Debt(7)— (17)273 2,180 17 217 1,980 
Common Stock(7)— (210)29 2,160 — 210 1,950 
VVS Holdco LLCL+6.00%Secured Debt(5)— — 13 292 203 500 (5)
11.50%Secured Debt(5)— — 932 7,375 46 — 7,421 
Preferred Equity(5)— 30 129 2,960 30 — 2,990 
Other
Amounts related to
investments transferred to
or from other
1940 Act classification
during the period		— — — — — — — 
Total Affiliate investments$(7,327)$15,689 $24,057 $234,158 $84,672 $41,830 $277,000 
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Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2022
(dollars in thousands)

(1)The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the Consolidated Schedule of Investments included in Item 8. Consolidated Financial Data (UNAUDITED)Statements of this Annual Report on Form 10-K.


The following table presents selected unaudited quarterly financial data(2)Represents the total amount of interest, fees and dividends credited to income for each quarterthe portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the years endedperiod, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in “Amounts related to investments transferred to or from other 1940 Act classifications during the period.”
(3)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.
(4)Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.
(5)Portfolio company located in the Midwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2017, 20162022 for affiliate investments located in this region was $92,945. This represented 15.2% of net assets as of December 31, 2022.
(6)Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2022 for affiliate investments located in this region was $32,498. This represented 5.3% of net assets as of December 31, 2022.
(7)Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of December 31, 2022 for affiliate investments located in this region was $40,053. This represented 6.6% of net assets as of December 31, 2022.
(8)Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of December 31, 2022 for control investments located in this region was $49,715. This represented 8.2% of net assets as of December 31, 2022. The fair value as of December 31, 2022 for affiliate investments located in this region was $73,626. This represented 12.1% of net assets as of December 31, 2022.
(9)Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of December 31, 2022 for control investments located in this region was $588. This represented 0.1% of net assets as of December 31, 2022. The fair value as of December 31, 2022 for affiliate investments located in this region was $37,878. This represented 6.2% of net assets as of December 31, 2022.
(10)All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities,” unless otherwise noted.
(11)This schedule should be read in conjunction with the Consolidated Schedule of Investments and 2015 (dollarsNotes to the Consolidated Financial Statements included in thousands except per share amounts):

Item 8. Consolidated Financial Statements of this Annual Report on Form 10-K. Supplemental information can be located within the Consolidated Schedule of
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Table of contentsSchedule 12-14
MSC INCOME FUND
Consolidated Schedule of Investments In and Advances to Affiliates (Continued)
December 31, 2022
(dollars in thousands)
 Quarter Ended
 March 31, 2017 June 30, 2017 September 30, 2017 December 31, 2017
Total interest, fee and dividend income$25,364
 $25,548
 $25,331
 $27,417
Net investment income$15,142
 $15,064
 $13,040
 $15,473
Net realized gain (loss) from investments$2,640
 $(5) $724
 $(7,722)
Net change in unrealized appreciation (depreciation) on investments$(4,516) $2,401
 $(5,050) $5,435
Net increase in net assets resulting from operations$13,266
 $17,460
 $8,714
 $13,186
Net investment income per share – basic and diluted$0.20
 $0.20
 $0.16
 $0.20
Net increase in net assets resulting from operations per share – basic and diluted$0.18
 $0.22
 $0.11
 $0.17
Investments including end of period interest rate, preferred dividend rate, maturity date, investments not paid currently in cash and investments whose value was determined using significant unobservable inputs.

(12)Investment has an unfunded commitment as of December 31, 2022 (see Note J — Commitments and Contingencies in Item 8. Consolidated Financial Statements of this Annual Report on Form 10-K). The fair value of the investment includes the impact of the fair value of any unfunded commitments.

(13)Negative fair value is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

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 Quarter Ended
 March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016
Total interest, fee and dividend income$21,259
 $21,201
 $22,234
 $24,705
Net investment income$12,240
 $12,048
 $12,518
 $14,463
Net realized loss from investments$(646) $(9,369) $(1,949) $(10,927)
Net change in unrealized appreciation (depreciation) on investments$(14,263) $15,416
 $11,776
 $25,277
Net increase (decrease) in net assets resulting from operations$(2,669) $18,095
 $22,345
 $28,813
Net investment income per share – basic and diluted$0.19
 $0.18
 $0.18
 $0.20
Net increase (decrease) in net assets resulting from operations per share – basic and diluted$(0.04) $0.27
 $0.32
 $0.42


 Quarter Ended
 March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015
Total interest, fee and dividend income$11,793
 $15,381
 $17,325
 $20,890
Net investment income$6,327
 $8,791
 $9,543
 $11,823
Net realized gain (loss) from investments$20
 $127
 $(17) $(5,638)
Net change in unrealized appreciation (depreciation) on investments$3,840
 $3,967
 $(19,324) $(26,439)
Net increase (decrease) in net assets resulting from operations$10,187
 $12,885
 $(9,798) $(20,254)
Net investment income per share – basic and diluted$0.17
 $0.19
 $0.18
 $0.20
Net increase (decrease) in net assets resulting from operations per share – basic and diluted$0.28
 $0.28
 $(0.18) $(0.34)


Item 9.Changes in and Disagreements Withwith Accountants on Accounting and Financial Disclosure
Not applicable.
None.
Item 9A. Controls and Procedures
(a)Evaluation of Disclosure Controls and Procedures
In accordance with Exchange Act Rules 13a-15 and 15d-15,As of the end of the period covered by this annual report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, andPresident, Chief Financial Officer, of the effectivenessChief Compliance Officer and Chief Accounting Officer, of our disclosure controls and procedures as(as defined in Rule 13a-15 of the end of the period covered by this report.Exchange Act). Based on that evaluation, our Chief Executive Officer, andPresident, Chief Financial Officer, Chief Compliance Officer and Chief Accounting Officer have concluded that our current disclosure controls and procedures wereare effective asin timely alerting them of December 31, 2017,material information relating to provide reasonable assuranceus that informationis required to be disclosed in ourthe reports filedwe file or submittedsubmit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover our failures to disclose material information otherwise required to be set forth in our periodic reports.Act.
(b)Management’s Annual Report on Internal Control Over Financial Reporting
OurThe Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Our systemreporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting is designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control, no matter how well designed, over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management’s assessment of the effectiveness of our internal control system as of December 31, 2017 was based on the criteria for effective internal control over financial reporting describedestablished in the 2013 Internal Control -— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on ourthe Company’s evaluation under the framework in the 2013 Internal Control -— Integrated Framework, issued by COSO, our management concluded that our system ofthe Company’s internal control over financial reporting was effective as of December 31, 2017.

2023.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report wasWe were not subjectrequired to attestation by the Company’shave, nor have we, engaged our independent registered public accounting firm to perform an audit of the Company’s internal control over financial reporting as of December 31, 2023 pursuant to Section 989Gthe rules of the Dodd-Frank Act, which exempts non-accelerated filers from the auditor attestation requirement of Section 404(b) of the Sarbanes-Oxley Act.SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

March 21, 2018
(c)Changes in Internal Control Overover Financial Reporting
During the quarter ended December 31, 2017, there wereThere have been no changes in our internal control over financial reporting identified in connection withthat occurred during the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Actfiscal quarter ended December 31, 2023 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.Other Information
None.


Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III

Certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of
our definitive Proxy Statement that specifically address the items set forth herein are incorporated by reference.

Item 10.Directors, Executive Officers and Corporate Governance
Directors
The following table sets forth certain information requiredregarding our directors:
Name and Principal Occupation(1)AgeDirector
Since(2)
Independent Directors
Robert L. Kay712020
Mr. Kay has been an independent director since October 2020. Mr. Kay has more than 40 years of broad based banking, investments, private equity intermediary and private business management experience, including commercial loan and venture capital investment portfolio oversight. After spending the first 10 years of his career as a corporate lender with a major Texas bank holding company in Dallas, he returned to his hometown in Austin where he spent the next eight years in the venture investing arena. Beginning in 1990, Mr. Kay served as Chief Executive Officer and/or Chief Operating Officer of multiple start up, growth phase and turnaround operating company situations, including serving as Chief Operating Officer and Chief Financial Officer of DrillingInfo from 2006 until its sale in 2012. Mr. Kay has served as the managing member and chief executive officer of Excelleration Partners, an early stage investment firm since 2012. Mr. Kay currently serves as Chief Executive Officer of Halfile Systems Corporation, a software and data subscription business located in Kyle, Texas, as a Director of Myocardial Solutions, Inc., a healthcare technology company located in Raleigh, North Carolina, and as a Director of The Muny Conservancy, a non-profit organization located in Austin, Texas. Mr. Kay earned a B.B.A. in general business (accounting concentration) from the University of Texas.
John O. Niemann, Jr.672012
Mr. Niemann has been an independent director since 2012 and Chairman of the Nominating and Corporate Governance Committee since October 2020. He is the President and Chief Operating Officer of Arthur Andersen LLP and has been since 2003. He previously served as a Managing Director of Andersen Tax LLC from June 2013 until his retirement from this position in March 2023. He previously served on the administrative board of Arthur Andersen LLP and on the board of partners of Andersen Worldwide. He began his career at Arthur Andersen LLP in 1978 and has served in increasing responsibilities in senior management positions, since 1992. Mr. Niemann has served as a director and Chairman of the Audit Committee of Hines Global Income Trust since July 2014 and as the lead independent director since May 2019 and as a director and Chairman of the Audit Committee of Adams Resources & Energy, Inc. since May 2019. He joined Professional Asset Indemnity Limited as a Director in October 2021, which is a non-public Bermuda captive insurance company. Mr. Niemann has served on the board of directors of many Houston area non-profit organizations, including Strake Jesuit College Preparatory School (past chair of the board), The Regis School of the Sacred Heart (past chair of the board), The Houston Symphony, The University of St. Thomas, The Alley Theatre and Taping for the Blind, Inc. He graduated with a B.A. in Managerial Studies (magna cum laude) and a master’s degree in accounting from Rice University, received a J.D. (summa cum laude) from the South Texas College of Law and an LL.M. in taxation (summa cum laude) from the University of San Francisco School of Law.
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Name and Principal Occupation(1)AgeDirector
Since(2)
Jeffrey B. Walker632020
Mr. Walker has been an independent director and Chairman of the Audit Committee since October 2020. Mr. Walker retired in May 2020 after a successful 38 year career in public accounting with Arthur Andersen and, more recently, Deloitte Tax, LLP where he held several leadership roles including, most recently, Vice Chairman from 2014 until May 2020. Mr. Walker served as a member of Deloitte LLP’s board from 2011 until 2015 and also served as the Chief Development Officer of Deloitte Tax from 2013 until 2015. Mr. Walker is a certified public accountant and a member of the AICPA and Texas State Board of CPAs and earned a B.B.A. in Accounting and Economics from the University of Mississippi.
Interested Directors
Mr. Hyzak is an interested person, as defined in the 1940 Act, due to his positions at MSC Income Fund.
Dwayne L. Hyzak512018
Mr. Hyzak has been a member of our board of directors since June 2020 and has served as our Chief Executive Officer and Chairman since October 2020. Since 2018, Mr. Hyzak has also served as Main Street’s Chief Executive Officer and as a member of Main Street’s board of directors. Mr. Hyzak also serves as a member of Main Street’s management team’s executive and investment committees. Previously, he served as Main Street’s President (2015 until November 2018), Chief Operating Officer (2014 until November 2018), Chief Financial Officer (2011 until 2014) and Senior Managing Director since 2011 and also served in other senior executive positions at Main Street prior to 2011. Prior to its IPO in 2007, Mr. Hyzak served as a Senior Managing Director and other executive positions of several Main Street predecessor funds and entities, which are now subsidiaries of Main Street. Mr. Hyzak joined Main Street in 2002, becoming one of the founding members of the firm. Prior to joining Main Street, Mr. Hyzak was a Director of Integration with Quanta Services, Inc. (NYSE: PWR), which provides specialty contracting services to the power, natural gas and telecommunications industries, where he was principally focused on the company’s mergers and acquisitions and corporate finance activities. Previously, Mr. Hyzak was a Manager with Arthur Andersen in its Transaction Advisory Services group. Mr. Hyzak currently serves on the board of directors of Child Advocates, a non-profit organization that trains and supports advocates to serve the interests of abused or neglected children in the greater Houston area.
_____________________________
(1)The address of each director is c/o MSC Income Fund, Inc., 1300 Post Oak Boulevard, 8th Floor, Houston, Texas 77056. The age given for each of our directors is as of March 8, 2024.
(2)Directors serve for a term until the next annual meeting of stockholders and until their successors are duly elected and qualified or until their earlier removal or resignation.
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Executive Officers
The following table sets forth information regarding our executive officers and certain significant personnel:
NameAgePosition(s) HeldOfficer Since
Dwayne L. Hyzak(1)(2)
51Chairman of the Board and Chief Executive Officer2020
David L. Magdol(1)(2)
53President and Chief Investment Officer2020
Jesse E. Morris(2)
56Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer2020
Jason B. Beauvais(2)
48Executive Vice President, General Counsel and Secretary2020
Nicholas T. Meserve44Managing Director2020
Cory E. Gilbert51Vice President, Chief Accounting Officer and Assistant Treasurer2020
Adam W. Park37Chief Compliance Officer, Assistant General Counsel and Assistant Secretary2020
_____________________________
(1)Member of our Adviser’s investment committee. The investment committee is responsible for all aspects of our investment processes, including approval of investments. Vincent D. Foster, senior advisor to Main Street and Chairman of its board of directors, is also a member of our Adviser’s investment committee.
(2)Executive officer and member of our management team’s executive committee.
The address for each person in the table above is 1300 Post Oak Boulevard, 8th Floor, Houston, Texas 77056. The age given for each person is as of March 8, 2024. Each officer holds office until his successor is chosen and qualified or until his earlier death, removal or resignation.
For more information on Mr. Hyzak, Chairman of the Board and Chief Executive Officer, see his biographical information above.
David L. Magdol is our President and Chief Investment Officer. Mr. Magdol also serves as the President and Chief Investment Officer of Main Street and as a member of Main Street’s management team’s executive and investment committees. Previously, he also served as Vice Chairman and Senior Managing Director and in other senior executive positions at Main Street. Prior to its IPO in 2007, Mr. Magdol served as a Senior Managing Director and other executive positions of several Main Street predecessor funds and entities, which are now subsidiaries of Main Street. Mr. Magdol joined Main Street in 2002, becoming one of the founding members of the firm. Prior to joining Main Street, Mr. Magdol was a Vice President in the investment banking group at Lazard Freres & Co. Previously, he managed a portfolio of private equity investments for the McMullen Group, a private investment firm/family office capitalized by Dr. John J. McMullen, the former owner of the New Jersey Devils and the Houston Astros. Mr. Magdol began his career in the structured finance services group of JP Morgan Chase.

Jesse E. Morris is our Executive Vice President, Chief Financial Officer and Chief Operating Officer. Mr. Morris also serves as the Executive Vice President, Chief Financial Officer and Chief Operating Officer of Main Street, serves as a member of Main Street’s management team’s executive committee and has held various management roles since joining Main Street in July 2019. Mr. Morris has management responsibility over Main Street’s finance, treasury and internal operations. He is also a Senior Managing Director on Main Street’s lower middle market investment team where his responsibilities include managing a portfolio of lower middle market investments where he is an active board member and assists those companies with various strategic initiatives, capital raises and M&A activity. Mr. Morris is also responsible for originating and executing new investments for the firm. Prior to joining Main Street in 2019, Mr. Morris served in various roles of increasing responsibility with Quanta Services, Inc. (NYSE: PWR) from 2014 to 2019 including most recently as Executive Vice President – Finance and President – Infrastructure Solutions. In this Itemposition, he oversaw the accounting, treasury, tax and financial planning and analysis activities and led Quanta’s public-private partnership (P3) concession and private infrastructure investment activities. Prior to joining Quanta, Mr. Morris served in various financial and accounting positions of increasing responsibility with Sysco Corporation (NYSE: SYY) including as Vice President and Chief Financial Officer – Foodservice Operations and Vice President of Finance and Chief Financial Officer – Broadline Operations. Mr. Morris began his career as a certified public accountant and was an Experienced Manager with Arthur Andersen.
Jason B. Beauvais is incorporatedour Executive Vice President, General Counsel and Secretary. Mr. Beauvais also serves as the Executive Vice President, General Counsel, Chief Compliance Officer and Secretary of Main Street, serves as a member of Main Street’s management team’s executive committee and has held various management roles since joining
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Main Street in 2008. He has management responsibility over the firm’s legal, compliance, human resources and technology functions. He also currently serves as a member of the Board of Directors of the Houston Arboretum & Nature Center, a non-profit urban nature sanctuary. Prior to joining Main Street, Mr. Beauvais was an attorney with Occidental Petroleum Corporation (NYSE: OXY), an international oil and gas exploration and production company. Before that, Mr. Beauvais practiced corporate and securities law at Baker Botts L.L.P., where he primarily counseled companies in public issuances and private placements of debt and equity and handled a wide range of general corporate and securities matters as well as mergers and acquisitions.
Nicholas T. Meserve is our Managing Director. Mr. Meserve also serves as a Managing Director on Main Street’s private credit investment team. Mr. Meserve previously served on our Board of Directors from April 2016 until June 2020. Mr. Meserve’s responsibilities have included managing a portfolio of private loan and middle market investments. He is also responsible for sourcing, originating and executing new investments for the firm. Prior to joining Main Street in 2012, Mr. Meserve was at Highland Capital Management, LP, a large alternative credit manager, and certain of its affiliates, where he managed a portfolio of senior loans and high yield bonds across a diverse set of industries. Prior to Highland, he was a Credit Analyst at JP Morgan Chase & Co.
Cory E. Gilbert is our Vice President, Chief Accounting Officer and Assistant Treasurer. He also serves as Main Street’s Vice President of Finance and Chief Accounting Officer – Asset Management Business and Assistant Treasurer. Prior to joining Main Street in 2019, Mr. Gilbert served as the Chief Financial Officer and Treasurer for OHA Investment Corporation, a publicly traded business development company externally managed by referenceOak Hill Advisors LLP. Prior to joining OHA Investment Corporation, Mr. Gilbert worked at RED Capital Group, the commercial mortgage banking arm of ORIX USA, where he most recently served as their Chief Financial Officer. Prior to that, from September 2008 to August 2013, Mr. Gilbert served as a line of business controller of ORIX USA. Mr. Gilbert began his career and was a manager with KPMG LLP’s financial services practice in the Dallas-Fort Worth area. Mr. Gilbert is a certified public accountant.
Adam W. Park has served as our definitive Proxy Statement relatingChief Compliance Officer since August 2023 and as Assistant General Counsel and Assistant Secretary and since October 2020. Mr. Park also serves as the Assistant General Counsel, Assistant Compliance Officer and Assistant Secretary of Main Street and has served in these roles since September 2020. Prior to joining Main Street, Mr. Park practiced corporate and securities law at Baker & Hostetler LLP, where he counseled companies in capital markets transactions, mergers and acquisitions and advised on a wide range of corporate governance matters, and at Eversheds Sutherland (US) LLP, where his practice focused on the formation, regulation and operation of public and private funds, including business development companies.
Code of Ethics
We and MSC Adviser have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. The code of ethics is available on the EDGAR Database on the SEC’s website at http://www.sec.gov.
In addition, our 2018Code of Business Conduct and Ethics, which is applicable to all of officers, directors and personnel, requires that all officers, directors and personnel avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Our Code of Business Conduct and Ethics is available under the “Governance” tab on our website at www.mscincomefund.com/investors. We intend to disclose any substantive amendments to, or waivers from, this code of conduct within four business days of the waiver or amendment through a website posting.

Insider Trading Policy

The Company has adopted an Insider Trading Policy, which, among other things, governs the purchase, sale, and/or other disposition of the Company’s securities by the Company’s directors, officers and personnel, and which the Company believes is reasonably designed to promote compliance with insider trading laws, rules and regulations. Our insider trading policy prohibits all directors, officers and personnel from, directly or indirectly, trading while in the possession of material nonpublic information related to the Company’s securities and from engaging in short sales and short-term or other speculative trading of our securities and any transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of securities issued by us. Prohibited hedging activity includes market transactions in puts, calls and other derivatives and the purchase of prepaid variable forward contracts, equity swaps and
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collars. Pledging our securities in a margin account or as collateral for a loan is also prohibited under the policy except in limited circumstances that are pre-approved by our chief compliance officer.
Board of Directors and its Committees
Board of Directors. Our Board met five times and acted by unanimous written consent 25 times during 2023. All incumbent directors attended at least 75% of the meetings of the Board and of the committees on which they served during 2023 and all then-serving directors attended the 2023 Annual Meeting of Stockholders in person. Our Board expects each director to make a diligent effort to attend all Board and committee meetings, as well as each annual meeting of stockholders.
Committees.
Our Board of Directors currently has, and appoints the members of, standing Audit and Nominating and Corporate Governance Committees. Each of those committees is comprised entirely of independent directors and has a written charter approved by our Board of Directors. The current members of the committees are identified in the following table.
Board Committees
DirectorAudit
Nominating and
Corporate
Governance
Robert L. Kayxx
John O. Niemann, Jr.xChair
Jeffrey B. WalkerChairx
The Board also maintains a Pricing Committee that is comprised of Messrs. Hyzak and Kay. Mr. Kay also serves as the Board’s liaison to our Adviser’s Conflicts Committee, described further below.
Audit Committee. During the year ended December 31, 2023, the Audit Committee met four times. The Audit Committee is responsible for selecting, engaging and discharging our independent accountants, reviewing the plans, scope and results of the audit engagement with our independent accountants, approving professional services provided by our independent accountants (as well as the compensation for those services), reviewing the independence of our independent accountants and reviewing the adequacy of our internal control over financial reporting. In addition, the Audit Committee is responsible for assisting our Board of Directors with its oversight of our investment valuation policy and procedures and monitoring and overseeing the Company’s policy standards and guidelines for risk assessment and risk management, including with respect to information technology and cybersecurity policies, procedures and incidents. Our Board has determined that each of Messrs. Kay, Niemann and Walker is an “audit committee financial expert” as defined by the SEC. For more information on the backgrounds of these directors, see their biographical information under “Election of Directors” above.
Nominating and Corporate Governance Committee. During the year ended December 31, 2023, the Nominating and Corporate Governance Committee met five times. The Nominating and Corporate Governance Committee is responsible for determining criteria for service on our Board, identifying, researching and recommending to the Board director nominees for election by our stockholders, selecting nominees to fill vacancies on our Board or a committee of the Board, developing and recommending to our Board any amendments to our corporate governance principles and overseeing the self-assessment of our Board and its committees. The Nominating and Corporate Governance Committee also oversees the Company’s strategy, initiatives, policies and reporting related to Environmental, Social and Governance (ESG) activities.
Pricing Committee. Unless our stockholders allow us to do so, we are prohibited from selling, or issuing pursuant to our dividend reinvestment plan, shares of our Common Stock at a price below the then-current net asset value (“NAV”) per share, exclusive of any distributing commission or discount, as applicable. The Pricing Committee is currently responsible for assisting the Board in determining the price at which we issue shares in any private sales and pursuant to our dividend reinvestment plan and ensuring that such price does not contravene this restriction. Additionally, the Pricing Committee is responsible for assisting the Board in determining the price at which we purchase shares pursuant to our share repurchase program. The Pricing Committee considers various factors, including the valuations of our investment portfolio, in determining whether the Company is issuing shares of Common Stock at a price below the then-current NAV
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per share. During the year ended December 31, 2023, the Pricing Committee met twice and acted by unanimous written consent twice.
MSC Adviser Conflicts Committee. Our Adviser maintains a Conflicts Committee that reviews and approves specific matters that may involve conflicts of interest among Main Street and its accounts, including the Company. The Board has appointed Mr. Kay to represent the Company’s interest as liaison to our Adviser’s Conflicts Committee.
Item 11. Executive Compensation
Compensation Discussion and Analysis
None of our executive officers receives direct compensation from us. The compensation of the principals and other investment professionals of our Adviser is paid by our Adviser or its affiliates. The compensation of our executive officers for administrative services provided to the Company is paid by our Adviser, but we reimburse our Adviser for, among other things, our allocable portion of the actual cost (without markup) of the persons performing the functions of chief financial officer and chief compliance officer and other personnel engaged to provide such administrative services (including, without limitation, direct compensation costs including the allocable portion of salaries, bonuses, benefits and other direct costs associated therewith) and related overhead costs, including rent. To the extent that our Adviser outsources any of its functions as administrator, we will pay the fees associated with such functions on a direct basis without profit to our Adviser. See “Certain Relationships and Related Transactions, and Director Independence” below for a discussion of fees and expenses payable to our Adviser.
The Board of Directors has not established a standing compensation committee because the executive officers of the Company do not receive any direct compensation from the Company.
Director Compensation
Our independent directors are entitled to an annual retainer of $120,000. Non-employee directors do not receive fees based on meetings attended absent circumstances that require an exceptionally high number of meetings within an annual period. We do not pay compensation to our interested directors.
Additionally, the Chairpersons of certain committees of the Board of Directors are entitled to the following annual retainer amounts:
•$15,000 to the Chair of the Audit Committee of the Board of Directors; and
•$10,000 to the Chair of the Nominating and Corporate Governance Committee of the Board of Directors.
We also pay a $10,000 annual retainer to the member of the Board of Directors appointed to be filed with the SEC within 120 days following the endliaison to our Adviser’s Conflicts Committee and reimburse all of our fiscal year.directors for reasonable out-of-pocket expenses incurred in connection with their service on the Board of Directors.

159
Item 11.  Executive Compensation

The information required by this Item is incorporated by referencefollowing table sets forth the compensation that we paid during the year ended December 31, 2023 to our definitive Proxy Statement relating tonon-interested directors. Directors who are also employees of Main Street or any of its subsidiaries do not receive compensation for their services as directors.
2023 Director Compensation
Name of Director
Fees Earned or
Paid in Cash
All Other
Compensation(1)
Total
Compensation(2)
Interested Directors:
Dwayne L. Hyzak$— $— $— 
Independent Directors:
Robert L. Kay126,500 — 126,500 
John O. Niemann, Jr.126,500 — 126,500 
Jeffrey B. Walker131,500 — 131,500 
_____________________________
(1)We did not award any portion of the fees earned by our 2018 Annual Meeting of Stockholders, to be filed withdirectors in stock or options during the SEC within 120 days followingyear ended December 31, 2023. We do not have a profit-sharing, compensation or retirement plan, and directors do not receive any pension or retirement benefits.
(2)The amounts listed are for the end of our fiscal year.year ending December 31, 2023.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Ownership
No person is deemed to control us, as such term is defined in the 1940 Act, through beneficial ownership of our common stock. The following table sets forth, as of March 1, 2024, information with respect to the beneficial ownership of our common stock by:
•each person known to us to beneficially own more than 5% of the outstanding shares of our common stock;
•each of our directors and executive officers; and
•all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. There is no common stock subject to options that are currently exercisable or exercisable within 60 days of March 1, 2024. Percentage of beneficial ownership is based on 80,469,732 shares of common stock outstanding as of March 1, 2024.
160
Unless otherwise indicated, all shares of common stock in the table below are owned directly and the named person has sole voting and investment power. None of the shares of common stock beneficially owned by our officers or directors has been pledged as security for an obligation.
Shares beneficially owned
as of March 1, 2024
Name and AddressNumber
Percentage of
Current
Ownership
Interested Directors:
Dwayne L. Hyzak20,979*
Independent Directors:
Robert L. Kay20,000*
John O. Niemann, Jr.46,429*
Jeffrey B. Walker30,129*
Executive Officers (that are not directors):
David L. Magdol16,783*
Jesse E. Morris—— 
Jason B. Beauvais8,392*
All executive officers and directors as a group (7 persons)142,712*
_____________________________
*Amount represents less than 1.0%.
The information requiredfollowing table sets forth the dollar range of equity securities of the Company that were beneficially owned by this Itemeach director as of March 1, 2024:
Name and Address(1)
Dollar Range of
Equity Securities
Beneficially
Owned(2)(3)(4)
Interested Directors:
Dwayne L. HyzakOver $100,000
Independent Directors:
Robert L. KayOver $100,000
John O. Niemann, Jr.Over $100,000
Jeffrey B. WalkerOver $100,000
_____________________________
(1)The address of each director is incorporatedc/o MSC Income Fund, Inc., 1300 Post Oak Boulevard, 8th Floor, Houston, Texas 77056.
(2)Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) under the Exchange Act.
(3)The dollar range of equity securities beneficially owned by reference to our definitive Proxy Statement relating todirectors is based on our 2018 Annual MeetingNAV per share of Stockholders, to be filed with the SEC within 120 days following the end$7.77 as of our fiscal year.December 31, 2023.

(4)The dollar range of equity securities beneficially owned is: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or over $100,000.
Item 13.Certain Relationships and Related Transactions, and Director Independence
We have procedures in place for the review, approval and monitoring of transactions involving us and certain persons related to us. As a BDC, the 1940 Act restricts us from participating in transactions with any persons affiliated with us, including our or our Adviser’s officers, directors and personnel and any person controlling or under common control with us or our Adviser, subject to certain exceptions. In addition, the Audit Committee reviews and considers related party transactions.
161
In addition, our Code of Business Conduct and Ethics, which is applicable to all of our personnel, officers and directors, requires that all personnel, officers and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Our Code of Business Conduct and Ethics is available at www.mscincomefund.com under “Governance – Governance Documents” in the “Investors” section of our website.
The information required by this Item is disclosed in Note K — Related Party Transactions included Item 8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K and incorporated herein by referencereference. In addition, we may be subject to the additional relationships and related party transactions described below:
Allocation of MSC Adviser’s Time
We rely on MSC Adviser to manage our definitive Proxy Statement relatingday-to-day activities and to implement our 2018 Annual Meetinginvestment strategy. MSC Adviser and certain of Stockholders,its affiliates are presently, and plan in the future to continue to be, involved with activities which are unrelated to us. Additionally, except for certain restrictions on MSC Adviser set forth in the Investment Advisory Agreement, MSC Adviser and its affiliates are not restricted from forming additional investment funds, from entering into other investment advisory relationships or from engaging in other business activities, even though such activities may be in competition with us and/or may involve substantial time and resources of MSC Adviser. As a result of these activities, MSC Adviser and certain of its affiliates and their personnel will have conflicts of interest in allocating their time between us and other activities in which they are or may become involved. Therefore, MSC Adviser, and certain of its affiliates and their personnel may experience conflicts of interest in allocating management time, services, and functions among us and any other business ventures in which they or any of their key personnel, as applicable, are or may become involved. This could result in actions that are more favorable to other affiliated entities than to us. However, MSC Adviser believes that it and its affiliates have sufficient personnel to discharge fully their responsibilities to all activities in which they are involved.
Director Independence
While we are not listed on any public securities exchange, we comply with corporate governance rules of the New York Stock Exchange (“NYSE”) requiring listed companies to have a board of directors with at least a majority of independent directors. The NYSE listing standards provide that a director of a BDC will be considered to be independent if he or she is not an “interested person” of such company, as defined in Section 2(a)(19) of the 1940 Act. The 1940 Act also requires that we, as a BDC, maintain a majority of independent directors on our Board of Directors. On an annual basis, each member of our Board of Directors is required to complete a questionnaire designed to provide information to assist the Board of Directors in determining whether the director is independent under the NYSE’s corporate governance rules, the applicable provisions of the Exchange Act and the 1940 Act. Based on these independence standards and the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors has affirmatively determined that each of our directors, other than Mr. Hyzak, is independent under such standards.

Our Board of Directors considered certain portfolio investments and other transactions in which our independent directors may have had a direct or indirect interest, including the transactions, if any, described or cross-referenced in this “Certain Relationships and Related Transactions, and Director Independence” section, in evaluating each director’s independence under the 1940 Act and NYSE standards, and the Board of Directors determined that no such transaction would impact the ability of any director to exercise independent judgment or impair his or her independence.
Item 14. Principal Accountant Fees and Services
Our Board of Directors has ratified the decision of the Audit Committee to appoint Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm for the fiscal year ending December 31, 2024.
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For the fiscal years ended December 31, 2023 and 2022, MSC Income Fund incurred the following fees for services provided by Grant Thornton, including expenses:

Fiscal Year
Ended
December 31,
2023		Fiscal Year
Ended
December 31,
2022
Audit Fees$482,300$476,940
Audit Related Fees——
Tax Fees——
All Other Fees——
Total Fees$482,300$476,940
Audit Fees. Audit fees include fees for services that normally would be provided by the accountant in connection with statutory and regulatory filings or engagements and that generally only the independent accountant can provide. In addition to fees for the audit of our annual financial statements and the review of our quarterly financial statements in accordance with generally accepted auditing standards, this category contains fees for comfort letters, statutory audits, consents and assistance with and review of documents filed with the SEC within 120 days followingSEC.
Audit Related Fees. Audit related fees are assurance related services that traditionally are performed by the endindependent accountant, such as attest services that are not required by statute or regulation.
Tax Fees. Tax fees include corporate and subsidiary compliance and consulting.
All Other Fees. Fees for other services would include fees for products and services other than the services reported above.
During the fiscal years ended December 31, 2023 and 2022, Grant Thornton LLP did not bill any non-audit fees for services rendered to MSC Income Fund or for services rendered to our Adviser or its parent company, Main Street.
Pre-approval Policies and Procedures
It is the policy of our fiscal year.

Item 14.  Principal Accounting FeesAudit Committee to preapprove all audit, review or attest engagements and Services

The information required by this Item is incorporated by reference to our definitive Proxy Statement relating to our 2018 Annual Meeting of Stockholders,permissible non-audit services to be filedperformed by our independent registered public accounting firm, subject to, and in compliance with, the SEC within 120 days followingde minimis exception for non-audit services described in Section 10A(i)(1)(B) of the endExchange Act and the applicable rules and regulations of the SEC. Our Audit Committee did not rely on the de minimis exception for any of the fees disclosed above.
All services performed for us for the fiscal years ended December 31, 2023 and 2022 were pre-approved or ratified by our fiscal year.Audit Committee.

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PART IV
Item 15. Exhibits and Consolidated Financial Statement Schedules
The following documents are filed or incorporated by reference as part of this Annual Report:
a.Consolidated Financial Statements
a.Consolidated Financial Statements
The following financial statements are set forth in Item 8:
6960
Audited Financial Statements
7062
7163
7264
7365
7466
76104
b.Consolidated Financial Statement SchedulesSchedule
Report of Independent Registered Public Accounting Firm
Consolidated Schedule of Investments in and Advances to Affiliates for the Year Ended December 31, 2017
c.Exhibits 
142


c.Exhibits
The following exhibits are filed as part of this Form 10-K or hereby incorporated by reference to exhibits previously filed with the SEC:
3.1
2.1
Agreement and Plan of Merger (filed as Exhibit (k)(3) to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2, filed on May 31, 2012 (File No. 333-178548) and incorporated herein by reference).
3.1
Articles of Amendment and Restatement of the Registrant (filed as Exhibit 3.1 to the Registrant’s current report on Form 8-K, filed on December 21, 2016 (File No. 814-00939) and incorporated herein by reference).
3.2
Amended and Restated Bylaws of the Registrant (filed as Exhibit 3.2 to the Registrant’s current report on Form 8-K, filed on November 3, 2020 (File No. 814-00939) and incorporated herein by reference).
3.3
Articles of Amendment to the Registrant’s Articles of Amendment and Restatement (filed as Exhibit 3.1 to the Registrant’s current report on Form 8-K, filed on September 24, 2015November 3, 2020 (File No. 814-00939) and incorporated herein by reference).
4.1
Distribution Reinvestment Plan (filed as Exhibit (e) to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2, filed on November 23, 2015 (File No. 333-204659) and incorporated herein by reference).
4.2
4.1		Form of Subscription Agreement (filed as Appendix A to the Supplement on Form 497 to the Registrant’s Registration Statement on Form N-2, filed on October 6, 2016 (File No. 333-204659) and incorporated herein by reference).
4.3
Amended and Restated Distribution Reinvestment Plan, effective as of November 1, 2017 (filed as Exhibit 4.1 to the Registrant’s current report on Form 8-K, filed on October 19, 2017 (File No. 814-00939) and incorporated herein by reference).
10.1
4.2Loan and Security Agreement
Description of Securities (filed as Exhibit (k)(2)4.4 to the Registrant’s Registration Statementannual report on Form N-2,10-K, filed on December 16, 2011March 30, 2021 (File No. 333-178548)814-00939) and incorporated herein by reference).
10.2
10.1
Investment Advisory and Administrative Services Agreement by and between the Registrant and HMS Adviser LP (filed as Exhibit (g)(1) to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2, filed on May 31, 2012 (File No. 333-178548) and incorporated herein by reference).
10.3
Investment Sub-Advisory Agreement by and among the Registrant, HMS Adviser LP, Main Street Capital Partners, LLC and Main Street Capital Corporation (filed as Exhibit (g)(2) to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2, filed on May 31, 2012 (File No. 333-178548) and incorporated herein by reference).
10.4
Assignment and Assumption of Investment Sub-Advisory Agreement by and among Main Street Capital Partners, LLC, Main Street Capital Corporation and MSC Adviser I, LLC (filed as Exhibit (g)(3)10.1 to the Registrant’s Post-Effective Amendment No. 6 to the Registration Statementcurrent report on Form N-28-K, filed with the SEC on March 17, 2014November 3, 2020 (File No. 333-178548)814-00939) and incorporated herein by reference).
10.5
Dealer Manager Agreement by and between the Registrant and Hines Securities, Inc. (filed as Exhibit (h)(1) to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2, filed on November 23, 2015 (File No. 333-204659) and incorporated herein by reference).
10.6
10.2
Form of Indemnification for Affiliated Directors and Officers (filed as Exhibit (k)(5) to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2, filed on May 31, 2012 (File No. 333-178548) and incorporated herein by reference).


10.7
10.3
Form of Indemnification for Independent Directors (filed as Exhibit (k)(6) to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2, filed on May 31, 2012 (File No. 333-178548) and incorporated herein by reference).
10.8
Escrow Agreement by and among the Registrant, Hines Securities, Inc. and UMB Bank, N.A. (filed as Exhibit (k)(7) to Post-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form N-2, filed on June 25, 2012 (File No. 333-178548) and incorporated herein by reference).
10.9
10.4		Amended and Restated Conditional Fee Waiver Agreement, dated as of March 26, 2013, by and among the Registrant, HMS Adviser LP, Main Street Capital Corporation and Main Street Capital Partners, LLC (filed as Exhibit 10.11 to the Registrant’s annual report on Form 10-K, filed on March 27, 2013 (File No. 814-00939) and incorporated herein by reference).
10.10
First Amendment to Amended and Restated Conditional Fee Waiver Agreement, dated as of May 14, 2013, by and among the Registrant, HMS Adviser LP, Main Street Capital Corporation and Main Street Capital Partners, LLC (filed as Exhibit (k)(8) to Post-Effective Amendment No. 5 to the Registrant’s Registration Statement on Form N-2, filed on May 14, 2013 (File No. 333-178548) and incorporated herein by reference).
10.11
Second Amendment to Amended and Restated Conditional Fee Waiver Agreement, dated as of June 28, 2013, by and among the Registrant, HMS Adviser LP, Main Street Capital Corporation and Main Street Capital Partners, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on June 28, 2013 (File No. 814-00939) and incorporated herein by reference).
10.12
Third Amendment to Amended and Restated Conditional Fee Waiver Agreement, dated as of December 30, 2013, by and among the Registrant, HMS Adviser LP, Main Street Capital Corporation and Main Street Capital Partners, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on January 6, 2014 (File No. 814-00939) and incorporated herein by reference).
10.13
Expense Support and Conditional ReimbursementCustodian Agreement by and between the Registrant and HMS Adviser LPState Street Bank and Trust Company (filed as Exhibit 10.2 to the Registrant’s current report on Form 8-K, filed on January 6, 2014November 3, 2020 (File No. 814-00939) and incorporated herein by reference).
10.14
Amendment dated March 31, 2014 to Expense Support and Conditional Reimbursement Agreement by and between the Registrant and HMS Adviser LP (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on April 2, 2014 (File No. 814-00939) and incorporated herein by reference).
10.15
Second Amended and Restated Custody Agreement, dated May 29, 2014, by and among the Registrant, HMS Equity Holding, LLC and Amegy Bank National Association (Filed as Exhibit (j)(2) to the Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 filed with the SEC on July 17, 2015 (File No. 333-204659) and incorporated herein by reference).
10.16
Securities Account Control Agreement, dated June 2, 2014, by and between HMS Funding I LLC, as pledgor, and U.S. Bank National Association, as collateral agent and securities intermediary (Filed as Exhibit (j)(3) to the Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 filed with the SEC on July 17, 2015 (File No. 333-204659) and incorporated herein by reference).
10.17
Second Amendment to the Expense Support and Conditional Reimbursement Agreement, dated June 30, 2014, by and between the Registrant and HMS Adviser LP (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on June 30, 2014 (File No. 814-00939) and incorporated herein by reference).
10.18
Third Amendment to the Expense Support and Conditional Reimbursement Agreement, dated September 30, 2014, by and between the Registrant and HMS Adviser LP (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on September 30, 2014 (File No. 814-00939) and incorporated herein by reference).
10.19
Fourth Amendment to Amended and Restated Conditional Fee Waiver Agreement, dated April 15, 2015, by and among HMS Income Fund, Inc., HMS Adviser LP, and MSC Adviser I, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on April 21, 2015 (File No. 814-00939) and incorporated herein by reference).
10.20
Fourth Amendment to Expense Support and Conditional Reimbursement Agreement, dated April 15, 2015, by and between HMS Income Fund, Inc. and HMS Adviser LP (filed as Exhibit 10.3 to the Registrant’s current report on Form 8-K, filed on April 21, 2015 (File No. 814-00939) and incorporated herein by reference).
10.21
Amended and Restated Loan Financing and Servicing Agreement, dated as of May 18, 2015, by and between HMS Funding I LLC, as Borrower, HMS Income Fund, Inc, as Equityholder and Servicer, the financial institutions party thereto as lenders, Deutsche Bank AG, New York branch, as Administrative Agent and as a lender, and U.S. Bank National Association, as Collateral Agent and Collateral Custodian (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on May 22, 2015 (File No. 814-00939) and incorporated herein by reference).
10.22
First Amendment to the Amended and Restated Loan Financing and Servicing Agreement, dated as of June 17, 2015, by and among HMS Funding I, LLC, as Borrower, HMS Income Fund, Inc., as Equityholder and Servicer, the financial institutions party thereto as Lenders, U.S. Bank National Association, as Collateral Agent and Deutsche Bank AG, New York Branch, as Administrative Agent (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on June 23, 2015 (File No. 814-00939) and incorporated herein by reference).


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10.23
10.5		Second Amendment to the Amended and Restated Loan Financing and Servicing Agreement, dated as of September 23, 2015, by and among HMS Funding I LLC, as Borrower, HMS Income Fund, Inc., as Equityholder and Servicer, the financial institutions party thereto as Lenders, U.S. Bank National Association, as Collateral Agent and Deutsche Bank AG, New York Branch, as Administrative Agent (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on September 24, 2015 (File No. 814-00939) and incorporated herein by reference).
Third Amendment to the Amended and Restated Loan Financing and Servicing Agreement, dated as of February 9, 2016, by and among HMS Funding I LLC, as borrower, HMS Income Fund, Inc., as Equityholder and Servicer, the financial institutions party thereto as lenders, Deutsche Bank AG, New York Branch, as administrative agent, and U.S. Bank National Association, as collateral agent (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on February 11, 2016 (File No. 814-00939) and incorporated herein by reference).
10.25
Conditional Income Incentive Fee Waiver Agreement, dated as of May 9, 2016, by and among the Registrant, HMS Adviser LP and MSC Adviser I, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on May 13, 2016 (File No. 814-00939) and incorporated herein by reference).
10.26
Third Quarter 2016 Conditional Income Incentive Fee Waiver Agreement, dated as of October 7, 2016, by and among the Registrant, HMS Adviser LP and MSC Adviser I, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on October 11, 2016 (File No. 814-00939) and incorporated herein by reference).
10.27
Fourth Quarter 2016 Conditional Income Incentive Fee Waiver Agreement, dated as of December 13, 2016, by and among the Registrant, HMS Adviser LP and MSC Adviser I, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on December 14, 2016 (File No. 814-00939) and incorporated herein by reference).
10.28
Amended and Restated Senior Secured Revolving Credit Agreement, dated as of March 6, 2017, by and among the Registrant, HMS Equity Holding, LLC, HMS Equity Holding II, Inc., the financial institutions party thereto and EverBank Commercial Finance, Inc. (filed as Exhibit 10.40 to the Registrant’s annual report on Form 10-K, filed on March 7, 2017 (File No. 814-00939) and incorporated herein by reference).
10.29
HMS-ORIX SLF LLC Limited Liability Company Agreement, dated as of April 4, 2017, by and between the Registrant and ORIX Funds Corp. (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on April 10, 2017 (File No. 814-00939) and incorporated herein by reference).
10.30
10.6		First Quarter 2017 Conditional Income Incentive Fee Waiver Agreement, dated as of April 24, 2017, by and among the Registrant, HMS Adviser LP and MSC Adviser I, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on April 27, 2017 (File No. 814-00939) and incorporated herein by reference).
Fourth Amendment to the Amended and Restated Loan Financing and Servicing Agreement, dated as of June 30, 2017, by and among HMS Funding I LLC, as borrower, the Registrant as equityholder and servicer, the financial institutions party thereto as lenders, Deutsche Bank AG, New York Branch, as administrative agent, and U.S. Bank National Association, as collateral agent (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on July 5, 2017 (File No. 814-00939) and incorporated herein by reference).
10.32
Second Quarter 2017 Conditional Income Incentive Fee Waiver Agreement, dated as of July 26, 2017, by and among the Registrant, HMS Adviser LP and MSC Adviser I, LLC (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on July 31, 2017 (File No. 814-00939) and incorporated herein by reference).
10.33
First Amendment to the Amended and Restated Senior Secured Revolving Credit Agreement, dated as of October 19, 2017, by and among the Registrant, HMS Equity Holding, LLC, HMS Equity Holding II, Inc., the financial institutions party thereto and EverBank Commercial Finance, Inc. (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on October 19, 2017 (File No. 814-00939) and incorporated herein by reference).
10.34
10.7Third Quarter 2017 Conditional Income Incentive Fee Waiver
10.35
Fifth Amendment to the Amended and Restated Loan Financing and Servicing Agreement, dated as of November 20, 2017, by and among HMS Funding I LLC, as borrower, the Registrant as equityholder and servicer, the financial institutionslenders party thereto as lenders, Deutsche Bank AG, New York Branch, as administrative agent and lender, and U.S. Bank National Association, as collateral agent and collateral custodianTIAA, FSB. (filed as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on November 27, 2017March 5, 2020 (File No. 814-00939) and incorporated herein by reference).
11.1Computation of per share earnings (included in the notes to the audited financial statements included in this report).
14.1
10.8		Code of Ethics of the Registrant (filed herewith).
Code of Ethics of HMS Adviser LP (filed herewith).
14.3
Fourth Amendment to Amended and Restated CodeSenior Secured Revolving Credit Agreement, dated as of Ethics of Main Street Capital CorporationJanuary 27, 2021, by and among the Registrant, MSC Adviser I,Equity Holding, LLC, MSC Equity Holding II, Inc., MSC California Holdings GP LLC, MSC California Holdings LP, the lenders party thereto and TIAA, FSB (filed herewith)as Exhibit 10.1 to the Registrant’s current report on Form 8-K, filed on January 28, 2021 (File No. 814-00939) and incorporated herein by reference).
10.9
10.10
10.11
10.12
10.13
10.14
Second Amendment to Loan and Security Agreement, dated August 31, 2023, by and among MSIF Funding, LLC, as borrower; MSC Income Fund, Inc., as portfolio manager; U.S. Bank Trust Company, National Association, as collateral agent and collateral administrator; U.S. Bank National Association, as securities intermediary; and JPMorgan Chase Bank, National Association, as administrative agent and lender.
10.15
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21.1
31.1
31.2


32.1
32.2
101The following financial information from our Annual Report on Form 10-K for the fourth quarter of fiscal year 2023, filed with the SEC on March 8, 2024, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets at December 31, 2023 and December 31, 2022, (ii) the Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021, (iii) the Consolidated Statements of Changes in Net Assets for the periods ended December 31, 2023, 2022 and 2021, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021, (v) the Consolidated Schedule of Investments for the periods ended December 31, 2023 and December 31, 2022, (vi) the Notes to Consolidated Financial Statements and (vii) the Consolidated Schedule 12-14 for the years ended December 31, 2023 and 2022 (filed herewith).
104Cover Page Interactive Data File (embedded within the Inline XBRL document) (filed herewith)
* * * * * *


166
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HMSMSC INCOME FUND, INC.
Date: March 8, 2024By:/s/ DWAYNE L. HYZAK
Date:March 21, 2018By:/s/ SHERRI W. SCHUGARTDwayne L. Hyzak
Sherri W. Schugart
Chairman and Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENT, each person whose signature appears below hereby constitutes and appoints Sherri W. Schugart and Ryan T. Sims, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicatedand on the dates indicated.
SignatureTitleDate
SignatureTitleDate
/s/ Sherri W. Schugart  DWAYNE L. HYZAK
Chairman of the Board and Chief Executive Officer President and Director
March 21, 2018
Sherri W. Schugart  
(Principal Executive Officer)
March 8, 2024
Dwayne L. Hyzak
/s/ Ryan T. SimsJESSE E. MORRIS
Executive Vice President, Chief Financial Officer, Chief Operating Officer and Secretary
March 21, 2018
Ryan T. SimsTreasurer
(Principal Financial Officer)
March 8, 2024
Jesse E. Morris
/s/ David M. CovingtonCORY E. GILBERTVice President, Chief Accounting Officer and Assistant TreasurerMarch 21, 2018
David M. Covington
(Principal Accounting Officer)		March 8, 2024
Cory E. Gilbert
/s/ ROBERT L. KAYDirectorMarch 8, 2024
Robert L. Kay
/s/ JohnJOHN O. Niemann, Jr.NIEMANN, JR.DirectorMarch 21, 20188, 2024
John O. Niemann, Jr.
/s/ JEFFREY B. WALKERDirectorMarch 8, 2024
Jeffrey B. Walker
/s/  Peter ShaperDirectorMarch 21, 2018
Peter Shaper
/s/  Gregory GeibDirectorMarch 21, 2018
Gregory Geib
/s/  Nicholas T. MeserveDirectorMarch 21, 2018
Nicholas T. Meserve

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