Table of Contents


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

Washington, D.C. 20549

________________

FORM 10-Q

(Mark One)

(Mark One)

þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017March 31, 2021

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromfrom:             to

Commission file number:File Number: 814-00939

________________
HMS

MSC Income Fund, Inc.

(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)

charter)

Maryland


(State or Other Jurisdictionother jurisdiction of Incorporation
incorporation or Organization)
organization)

45-3999996


(I.R.S. Employer
Identification No.)

2800

1300 Post Oak Boulevard, Suite 5000

8th Floor
Houston, Texas
TX
(Address of Principal Executive Offices)
principal executive offices)

77056-6118

77056
(Zip Code)

(888) 220-6121

(713) 350-6000

(Registrant’s telephone number including area code)


Not applicable

n/a

(Former name, former address and formalformer fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which
Registered

None

N/A

N/A

Indicate by check mark whether the registrant: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 o No 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,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ

Smaller reporting company o


Emerging growth company o
(Do not check if a smaller
reporting company)


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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ


The issuer had 80,334,279number of shares outstanding of the issuer’s common stock outstanding as of November 10, 2017.

May 14, 2021 was 80,099,874.





TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION 

Item 1.Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets

1

PART I

FINANCIAL INFORMATION

Item 1.

Condensed

Consolidated Financial Statements

Consolidated Balance Sheets—March 31, 2021 (unaudited) and December 31, 2020

1

Consolidated Statements of Operations (unaudited)—Three months ended March 31, 2021 and 2020

Condensed

Consolidated Statements of Changes in Net Assets (unaudited)—Three months ended March 31, 2021 and 2020

Condensed

Consolidated Statements of Cash Flows (unaudited)—Three months ended March 31, 2021 and 2020

Condensed

Consolidated Schedule of Investments (unaudited)—March 31, 2021

5

Consolidated Schedule of Investments—December 31, 2020

20

Notes to Consolidated Financial Statements (unaudited)

33

Consolidated Schedules of Investments in and Advances to Affiliates (unaudited)—Three months ended March 31, 2021 and 2020

65

Notes to the Condensed Consolidated Financial Statements
Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

71

Item 3.

Quantitative and Qualitative Disclosures Aboutabout Market Risk

82

Item 4.

Controls and Procedures

83

PART II

PART II —

OTHER INFORMATION

Item 1.

Legal Proceedings

83

Item 1.1A.

Legal Proceedings

Risk Factors

83

Item 1A.Risk Factors
Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

83

Item 3.5.

Defaults Upon Senior Securities

Other Information

84

Item 4.6.

Mine Safety Disclosures

Exhibits

85

Item 5.

Other Information

Signatures

Item 6.Exhibits
Signatures
Exhibit Index

86


Table of Contents



PART I — FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

HMS

MSC Income Fund, Inc.

Condensed

Consolidated Balance Sheets

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

March 31, 

December 31, 

    

2021

    

2020

(unaudited)

ASSETS

 

 

  

Investments at fair value:

 

 

  

Control investments (cost: $18,163 and $18,152 as of March 31, 2021 and December 31, 2020, respectively)

$

33,776

$

33,831

Affiliate investments (cost: $156,007 and $143,740 as of March 31, 2021 and December 31, 2020, respectively)

 

170,959

 

157,690

Non‑Control/Non‑Affiliate investments (cost: $685,503 and $678,764 as of March 31, 2021 and December 31, 2020, respectively)

 

644,997

 

634,001

Total investments (cost: $859,673 and $840,656 as of March 31, 2021 and December 31, 2020, respectively)

 

849,732

 

825,522

Cash and cash equivalents

 

28,604

 

8,586

Restricted cash

40,480

Dividends and interest receivable

 

10,659

 

8,303

Deferred financing costs (net of accumulated amortization of $4,740 and $4,443 as of March 31, 2021 and December 31, 2020, respectively)

 

3,975

 

2,691

Prepaids and other assets

1,520

2,439

Receivable for investments sold

1,789

Total assets

$

896,279

$

888,021

LIABILITIES

 

 

Credit facilities payable

$

284,688

$

301,816

Accounts payable and other liabilities

 

2,854

 

2,093

Interest payable

 

1,771

 

286

Dividend payable

 

7,961

 

Base management and incentive fees payable

3,903

4,202

Payable for investment purchases

10,782

Total liabilities

 

311,959

 

308,397

Commitments and contingencies (Note I)

 

 

NET ASSETS

 

 

Common stock, $0.001 par value per share (150,000,000 shares authorized; 79,608,304 and 79,608,304 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively)

 

80

 

80

Additional paid‑in capital

 

682,028

 

682,028

Total undistributed (overdistributed) earnings

 

(97,788)

 

(102,484)

Total net assets

 

584,320

 

579,624

Total liabilities and net assets

$

896,279

$

888,021

NET ASSET VALUE PER SHARE

$

7.34

$

7.28

 September 30, 2017 December 31, 2016
 (Unaudited)  
ASSETS   
Portfolio investments at fair value:   
Non-Control/Non-Affiliate investments (amortized cost: $996,358 and $935,741 as of September 30, 2017 and December 31, 2016, respectively)$967,475
 $916,393
Affiliate investments (amortized cost: $69,734 and $53,771 as of September 30, 2017 and December 31, 2016, respectively)74,104
 56,312
Control investments (amortized cost: $44,794 and $12,883 as of September 30, 2017 and December 31, 2016, respectively)49,127
 16,542
Total portfolio investments (amortized cost: $1,110,886 and $1,002,395 as of September 30, 2017 and December 31, 2016, respectively)1,090,706
 989,247
    
Cash and cash equivalents39,709
 23,719
Interest receivable9,652
 7,204
Receivable for securities sold12,835
 7,610
Prepaid and other assets1,698
 1,268
Deferred offering costs (net of accumulated amortization of $0 and $9,919 as of September 30, 2017 and December 31, 2016, respectively)
 680
Deferred financing costs (net of accumulated amortization of $2,551 and $2,862 as of September 30, 2017 and December 31, 2016, respectively)3,488
 3,840
Total assets$1,158,088
 $1,033,568
    
LIABILITIES 
  
Accounts payable and other liabilities$1,608
 $1,164
Payable for unsettled trades152
 932
Stockholder distributions payable4,565
 4,354
Base management fees payable5,682
 5,054
Due to affiliates306
 184
Directors’ fees payable24
 12
Payable for securities purchased9,806
 11,035
Notes payable490,000
 413,000
Total liabilities512,143
 435,735
    
Commitments and Contingencies (Note 12)   
    
NET ASSETS 
  
Common stock, $.001 par value; 150,000,000 shares authorized, 79,204,960 and 73,382,971 issued and outstanding as of September 30, 2017 and December 31, 2016, respectively79
 73
Additional paid-in capital682,790
 633,855
Accumulated distributions in excess of net investment income(16,266) (22,602)
Net unrealized depreciation(20,658) (13,493)
Total net assets645,945
 597,833
    
Total liabilities and net assets$1,158,088
 $1,033,568
    
Net asset value per share$8.16
 $8.15

See

The accompanying notes to the condensedare an integral part of these consolidated financial statements.


statements


1


HMS

MSC Income Fund, Inc.

Condensed

Consolidated Statements of Operations

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

(unaudited)

Three Months Ended

    

March 31, 

    

2021

    

2020

    

INVESTMENT INCOME:

 

  

 

  

 

Interest, fee and dividend income:

 

 

Control investments

$

600

$

591

Affiliate investments

 

3,650

3,540

Non‑Control/Non‑Affiliate investments

 

16,022

19,869

Total investment income

 

20,272

24,000

EXPENSES:

 

Interest

 

3,164

5,229

Base management fees

 

3,903

4,994

Internal administrative service expenses

1,055

784

Offering costs

88

Professional fees

558

710

Insurance

114

103

Board of director fees

108

102

Other general and administrative

483

240

Total expenses before fee and expense waivers

9,385

12,250

Waiver of internal administrative services expenses

 

(1,055)

(784)

Total expenses, net of fee and expense waivers

 

8,330

11,466

NET INVESTMENT INCOME

 

11,942

12,534

NET REALIZED GAIN (LOSS):

 

Affiliate investments

 

(3,044)

Non‑Control/Non‑Affiliate investments

 

(1,991)

(321)

Realized loss on extinguishment of debt

(2,091)

Total net realized loss

 

(4,082)

(3,365)

NET UNREALIZED APPRECIATION (DEPRECIATION):

 

Control investments

 

(66)

(998)

Affiliate investments

 

1,003

(3,254)

Non‑Control/Non‑Affiliate investments

 

4,256

(90,657)

Total net change in unrealized appreciation (depreciation)

 

5,193

(94,909)

INCOME TAXES:

 

Federal and state income, excise and other taxes

 

396

76

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

$

12,657

$

(85,816)

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

$

0.15

$

0.16

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER
SHARE—BASIC AND DILUTED

$

0.16

$

(1.09)

WEIGHTED AVERAGE SHARES
OUTSTANDING—BASIC AND DILUTED

 

79,608,304

78,607,063

(Unaudited)
 Three Months Ended Nine Months Ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
INVESTMENT INCOME: 
  
  
  
From non-control/non-affiliate investments:       
Interest income$22,752
 $20,055
 $67,852
 $59,731
Fee income145
 134
 1,682
 641
Dividend income188
 250
 572
 436
From affiliate investments:       
Interest income1,307
 1,085
 3,408
 2,080
Fee income53
 37
 156
 170
Dividend income582
 406
 1,563
 939
From control investments:       
Interest income164
 177
 502
 567
Fee income15
 20
 56
 60
Dividend income125
 70
 452
 70
Total interest, fee and dividend income25,331
 22,234
 76,243
 64,694
EXPENSES: 
  
  
  
Interest expense5,004
 3,905
 13,342
 11,219
Base management and incentive fees5,648
 4,905
 18,419
 14,585
Administrative services expenses694
 529
 2,228
 1,636
Offering costs881
 290
 1,679
 422
Professional fees141
 162
 465
 833
Insurance47
 48
 143
 143
Other general and administrative509
 387
 1,128
 1,112
Expenses before fee and expense waivers12,924
 10,226
 37,404
 29,950
Waiver of incentive fees
 
 (2,318) (493)
Waiver of administrative services expenses(694) (529) (2,228) (1,636)
Total expenses, net of fee and expense waivers12,230
 9,697
 32,858
 27,821
Net investment income before taxes13,101
 12,537
 43,385
 36,873
Income tax expense (benefit), including excise tax61
 19
 139
 67
NET INVESTMENT INCOME13,040
 12,518
 43,246
 36,806
NET REALIZED GAIN (LOSS) FROM INVESTMENTS 
  
  
  
Non-Control/Non-Affiliate investments(227) (1,949) 2,408
 (11,964)
Affiliate investments951
 
 951
 
Control investments
 
 
 
Total realized gain (loss) from investments724
 (1,949) 3,359
 (11,964)
NET REALIZED INCOME13,764
 10,569
 46,605
 24,842
NET UNREALIZED APPRECIATION (DEPRECIATION) 
  
  
  
Non-Control/Non-Affiliate investments(5,533) 11,891
 (9,663) 11,187
Affiliate investments(48) (108) 1,824
 438
Control investments531
 (7) 674
 1,304
Total net unrealized appreciation (depreciation)(5,050) 11,776
 (7,165) 12,929
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS$8,714
 $22,345
 $39,440
 $37,771
PER SHARE INFORMATION - BASIC AND DILUTED       
NET INVESTMENT INCOME PER SHARE$0.16
 $0.18
 $0.56
 $0.55
NET REALIZED INCOME PER SHARE$0.18
 $0.15
 $0.61
 $0.37
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE (EARNINGS PER SHARE)$0.11
 $0.32
 $0.51
 $0.57
DISTRIBUTIONS DECLARED PER SHARE$0.17
 $0.17
 $0.52
 $0.52
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED78,807,225
 69,729,799
 76,899,096
 66,576,489
See

The accompanying notes to the condensedare an integral part of these consolidated financial statements.


statements


2


HMS

MSC Income Fund, Inc.

Condensed

Consolidated Statements of Changes in Net Assets

(dollars in thousands, except numbershares)

(unaudited)

Total

Common Stock

Additional

Undistributed

Number of

Par

PaidIn

(Overdistributed)

Total Net

    

Shares

    

Value

    

Capital

    

Earnings

    

Asset Value

Balances at December 31, 2019

 

78,463,377

$

78

$

675,554

$

(66,327)

$

609,305

Dividend reinvestment

 

751,240

1

5,898

5,899

Common stock repurchased

 

(791,488)

(1)

(6,094)

(6,095)

Net decrease resulting from operations

 

(85,816)

(85,816)

Dividends to stockholders

 

(13,729)

(13,729)

Balances at March 31, 2020

 

78,423,129

$

78

$

675,358

$

(165,872)

$

509,564

Balances at December 31, 2020

 

79,608,304

$

80

$

682,028

$

(102,484)

$

579,624

Net increase resulting from operations

12,657

12,657

Dividends to stockholders

(7,961)

(7,961)

Balances at March 31, 2021

79,608,304

$

80

$

682,028

$

(97,788)

$

584,320

The accompanying notes are an integral part of shares)

(Unaudited)
  Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
Change in Net Assets from Operations:    
Net investment income $43,246
 $36,806
Net realized gain (loss) on investments 3,359
 (11,964)
Net unrealized appreciation (depreciation) (7,165) 12,929
Net increase in net assets resulting from operations 39,440
 37,771
     
Change in Net Assets from Stockholders’ Distributions:    
Distributions from net investment income (36,911) (34,994)
Distributions from net realized gain on investments (3,359) 
Net decrease in net assets resulting from stockholders’ distributions (40,270) (34,994)
     
Change in Net Assets from Capital Share Transactions:    
Issuance of common stock, net of issuance costs 42,366
 57,705
Reinvestment of stockholder distributions 20,594
 18,263
Repurchase of common stock (14,018) (8,423)
Net increase in net assets resulting from capital share transactions 48,942
 67,545
     
Total Increase in Net Assets 48,112
 70,322
Net Assets at beginning of the period 597,833
 491,652
Net Assets at end of the period $645,945
 $561,974
     
NAV per share at end of the period $8.16
 $7.92
     
Common shares outstanding, beginning of the period 73,382,971
 62,382,044
Issuance of common shares 5,063,398
 7,328,503
Issuance of common shares pursuant to distribution reinvestment plan 2,466,862
 2,311,510
Repurchase of common shares (1,708,271) (1,079,994)
Common shares outstanding, end of the period 79,204,960
 70,942,063

See notes to the condensedthese consolidated financial statements.statements


3


Table of Contents



HMS

MSC Income Fund, Inc.

Condensed

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

Three Months Ended

March 31,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net increase (decrease) in net assets resulting from operations

$

12,657

$

(85,816)

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash generated from operating activities:

Investments in portfolio companies

(79,381)

(46,895)

Proceeds from sales and repayments of debt investments in portfolio companies

60,744

86,496

Net change in unrealized (appreciation) depreciation

(5,193)

94,909

Net realized loss on the sale of portfolio investments

1,991

3,365

Realized loss on extinguishment of debt

2,091

Amortization of deferred financing costs

311

351

Amortization of deferred offering costs

88

Accretion of unearned income

(959)

(2,021)

Payment-in-kind interest

(1,412)

(828)

Changes in other assets and liabilities:

Dividends and interest receivable

(2,356)

99

Receivable for investments sold

(1,789)

Prepaid and other assets

919

875

Payable for investments purchased

10,782

Base management and incentive fees payable

(299)

(394)

Interest payable

1,485

Accounts payable and other liabilities

620

652

Net cash provided by (used in) operating activities

211

50,881

CASH FLOWS FROM FINANCING ACTIVITIES

Redemption of common stock

(6,094)

Payment of offering costs

(88)

Dividends paid

(7,831)

Repayments on Credit Facilities payable

(311,816)

(117,000)

Proceeds from Credit Facilities payable

294,688

75,000

Payment of deferred financing costs

(3,545)

(462)

Net cash provided by (used in) financing activities

(20,673)

(56,475)

Net increase (decrease) in cash, cash equivalents and restricted cash

(20,462)

(5,594)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE BEGINNING OF THE PERIOD

49,066

21,846

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD

$

28,604

$

16,252

Supplemental cash flow disclosures:

Cash paid for interest

$

1,369

$

4,493

Cash paid for taxes

$

396

$

685

Non-cash financing activities:

Dividends declared and unpaid

$

7,961

$

4,669

Shares issued pursuant to the dividend reinvestment plan

$

$

751

The accompanying notes are an integral part of these consolidated financial statements

(Unaudited)

4


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments

March 31, 2021

(dollars in thousands)

(unaudited)

 Nine Months Ended 
 September 30, 2017
 Nine Months Ended 
 September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES 
  
Net increase in net assets resulting from operations$39,440
 $37,771
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:   
Principal repayments received and proceeds from sales of investments in portfolio companies370,941
 222,423
Investments in portfolio companies(470,875) (275,098)
Net unrealized (appreciation) depreciation of portfolio investments7,165
 (12,929)
Net realized (gain) loss on sale of portfolio investments(3,359) 11,964
Amortization of deferred financing costs1,013
 1,115
Amortization of deferred offering costs1,679
 422
Accretion of unearned income(10,793) (7,778)
Net payment-in-kind interest accrual(897) (255)
Changes in other assets and liabilities:   
Interest receivable(2,448) 873
Prepaid and other assets(390) (9)
Base management fees payable628
 (149)
Due to affiliates(83) 491
Directors’ fees payable12
 15
Accounts payable and other liabilities285
 166
Payable for unsettled trades(780) 709
Net cash used in operating activities(68,462) (20,269)
    
CASH FLOWS FROM FINANCING ACTIVITIES 
  
Proceeds from issuance of common stock46,041
 63,447
Redemption of common shares(14,018) (8,423)
Payment of selling commissions and dealer manager fees(3,511) (5,687)
Payment of offering costs(959) (1,226)
Payment of stockholder distributions(19,465) (16,375)
Repayments on notes payable(339,000) (255,000)
Proceeds from notes payable416,000
 260,000
Payment of deferred financing costs(636) (428)
Net cash provided by financing activities84,452
 36,308
    
Net increase in cash and cash equivalents15,990
 16,039
    
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD23,719
 24,001
    
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$39,709
 $40,040

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Control Investments (5)

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

LP Interests (CTMH, LP)

38.8%

$

835

$

710

(31)

GRT Rubber Technologies LLC ("GRT")

December 19, 2014

Manufacturer of Engineered Rubber Products

Secured Debt

7.12% (L+7.00%)

12/31/2023

$

8,262

8,247

8,262

Member Units

5,879

6,435

22,120

(8)

14,682

30,382

Harris Preston Fund Investments

(12) (13)

October 1, 2017

Investment Partnership

LP Interests (2717 MH, L.P.)

49.3%

2,646

2,684

(31)

Subtotal Control Investments (5.8% of net assets at fair value)

$

18,163

$

33,776

Affiliate Investments (6)

AFG Capital Group, LLC

November 7, 2014

Provider of Rent-to-Own Financing Solutions and Services

Secured Debt

10.00%

5/25/2022

101

101

101

Preferred Member Units

186

300

1,580

401

1,681

Analytical Systems Keco, LLC

August 16, 2019

Manufacturer of Liquid and Gas Analyzers

Secured Debt

12.00% (L+10.00%, Floor 2.00%)

8/16/2024

1,289

1,219

1,219

(9)

Preferred Member Units

3,200

800

680

Warrants

420

8/16/2029

79

-

(27)

2,098

1,899

Brewer Crane Holdings, LLC

January 9, 2018

Provider of Crane Rental and Operating Services

Secured Debt

11.00% (L+10.00%, Floor 1.00%)

1/9/2023

2,108

2,090

2,090

(9)

Preferred Member Units

2,950

1,070

1,370

(8)

3,160

3,460

Centre Technologies Holdings, LLC

January 4, 2019

Provider of IT Hardware Services and Software Solutions

Secured Debt

12.00% (L+10.00%, Floor 2.00%)

1/4/2024

2,869

2,833

2,833

(9)

Preferred Member Units

12,696

1,460

1,540

4,293

4,373

5

See notes to the condensed consolidated financial statements.



HMS Income Fund, Inc.
Condensed Consolidated Schedule of Investments
As of September 30, 2017
(dollars in thousands)
(Unaudited)
Portfolio Company (1) (3)Business DescriptionType of Investment (2) (3)Index Rate (22)Principal (7)Cost (7)Fair Value (27)
       
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 10.24%, Secured Debt (Maturity - December 19, 2019)1 month LIBOR5,925
5,859
5,925
  Member Units (2,896 shares)6,435
10,186
     12,294
16,111
HMS-ORIX SLF LLC (9) (15) (23)Investment PartnershipMembership Interests (Fully diluted 60.00%) (16)30,000
30,516
       
Subtotal Control Investments (6) (5% of total investments at fair value)  $44,794
$49,127
Affiliate Investments (4)
AFG Capital Group, LLC (10) (13)Provider of Rent-to-Own Financing Solutions and ServicesMember Units (46 shares) (16)$
$300
$782
  Warrants (10 equivalent shares, Expiration - November 7, 2024)
65
187
     365
969
Charps, LLC (10) (13)Pipeline Maintenance and Construction12.00% Secured Debt (Maturity - January 31, 2022)None4,600
4,492
4,495
  Preferred Member Units (400 units)100
100
     4,592
4,595
Clad-Rex Steel, LLC (10) (13)Specialty Manufacturer of Vinyl-Clad MetalLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity - December 20, 2021) (8)1 month LIBOR3,420
3,360
3,420
  Member Units (179 units) (16)
1,820
2,130
  10.00% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity - December 19, 2036)None297
293
294
  Member Units (Clad-Rex Steel RE Investor, LLC) (200 units)
53
53
     5,526
5,897
Freeport First Lien Loan Fund III, LP (9) (15)Investment PartnershipLP Interests (Freeport First Lien Loan Fund III, LP) (Fully diluted 5.60%) (16)
7,559
7,507
Gamber-Johnson Holdings, LLC (8) (10) (13)Manufacturer of Ruggedized Computer Mounting SystemsLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.23%, Secured Debt (Maturity - June 24, 2021)1 month LIBOR5,920
5,816
5,920
  Member Units (2,155 units) (16)
3,711
5,740
     9,527
11,660
Guerdon Modular Holdings, Inc. (10) (13)Multi-Family and Commercial Modular Construction Company13.00% Secured Debt (Maturity - August 13, 2019)None2,677
2,640
2,658
  Common Stock (53,008 shares)
746

  Class B Preferred Stock (101,250 shares)
285
237
     3,671
2,895
Gulf Publishing Investor, LLC (10) (13)Energy Focused Media and Publishing12.50% Secured Debt (Maturity - April 29, 2021)None3,200
3,148
3,148
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity - April 29, 2021) (8)3 month LIBOR20
20
20
  Member Units (781 shares)
920
1,082
     4,088
4,250
Harris Preston & Partners Capital Funds (15)(16)Investment PartnershipLP Interests (HPEP 3, LP) (Fully diluted 9.60%) (9)
943
943
  LP Interests (2717 MH, LP)(Fully diluted 7.00%)
400
400
     1,343
1,343
       
       
Hawk Ridge Systems, LLC (9) (10) (13)Value-Added Reseller of Engineering Design and Manufacturing Solutions10.00% Secured Debt (Maturity - December 2, 2021)None$2,375
$2,334
$2,334
  Preferred Member Units (56 units)(16)
713
808
  Preferred Member Units (HRS Services, ULC) (56 units)(16)
38
43
     3,085
3,185
HW Temps LLC (8) (10) (13)Temporary Staffing SolutionsLIBOR Plus 13.00% (Floor 1.00%), Current Coupon 14.24%, Secured Debt (Maturity - July 2, 2020)1 month LIBOR2,494
2,451
2,451
  Preferred Member Units (800 shares) (16)
986
985
     3,437
3,436
Market Force Information, Inc. (8)(10)(13)Provider of Customer Experience Management ServicesLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.32%, Secured Debt (Maturity - July 28, 2022)3 month LIBOR5,880
5,766
5,766
  LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.32%, Secured Debt (Maturity - July 28, 2022)1 month LIBOR128
128
128
  Member Units (170,000 units)
3,675
3,675
     9,569
9,569
M.H. Corbin, Inc. (10) (13)Manufacturer and Distributor of Traffic Safety Products10.00% Secured Debt (Maturity - August 31, 2020)None3,194
3,172
3,172
  Preferred Member Units (1,000 shares)1,500
1,500
     4,672
4,672
Mystic Logistics, Inc. (10) (13)Logistics and Distribution Services Provider for Large Volume Mailers12.00% Secured Debt (Maturity - August 15, 2019)None1,942
1,910
1,942
  Common Stock (1,468 shares) (16)680
1,648
     2,590
3,590
NuStep, LLC (10) (13)Designer, Manufacturer and Distributor of Fitness Equipment12.00% Secured Debt (Maturity - January 31, 2022)None5,150
5,041
5,042
  Preferred Member Units (102 units)2,550
2,550
     7,591
7,592
SoftTouch Medical Holdings LLC (8) (10) (13)Home Provider of Pediatric Durable Medical EquipmentLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.24%, Secured Debt (Maturity - October 31, 2019)1 month LIBOR1,260
1,249
1,260
  Member Units (785 units) (16)
870
1,684
     2,119
2,944
       
Subtotal Affiliate Investments (4) (7% of total investments at fair value)  $69,734
$74,104
       
Non-Control/Non-Affiliate Investments (5)
AAC Holding Corp. (8)Substance Abuse Treatment Service ProviderLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.06%, Secured Debt (Maturity - June 30, 2023)3 month LIBOR$11,826
$11,538
$11,826
Adams Publishing Group, LLC (8) (11)Local Newspaper OperatorLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity - November 3, 2020)3 month LIBOR8,572
8,336
8,411
ADS Tactical, Inc. (8) (11)Value-Added Logistics and Supply Chain Solutions ProviderLIBOR Plus 7.50% (Floor 0.75%), Current Coupon 8.83%, Secured Debt (Maturity - December 31, 2022)3 month LIBOR13,010
12,687
12,753
Aethon United BR, LP (8)(11)Oil & Gas Exploration & ProductionLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.98%, Secured Debt (Maturity - September 8, 2023) (14)3 month LIBOR3,438
3,386
3,386
Ahead, LLC (8) (11)IT Infrastructure Value Added ResellerLIBOR Plus 6.50%, Current Coupon 7.84%, Secured Debt (Maturity - November 2, 2020)3 month LIBOR9,125
8,937
9,122
Allflex Holdings III Inc. (8)Manufacturer of Livestock Identification ProductsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.31%, Secured Debt (Maturity - July 19, 2021) (14)3 month LIBOR14,640
14,730
14,744
American Scaffold Holdings, Inc. (8) (11)Marine Scaffolding Service ProviderLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.83%, Secured Debt (Maturity - March 31, 2022)3 month LIBOR7,125
7,037
7,089
American Teleconferencing Services, Ltd. (8)Provider of Audio Conferencing and Video Collaboration SolutionsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.78%, Secured Debt (Maturity - December 8, 2021)2 month LIBOR$9,663
$8,858
$9,349
  LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity - June 6, 2022) (14)1 month LIBOR5,571
5,324
5,533
     14,182
14,882
Apex Linen Service, Inc. (10) (13)Industrial Launderers13.00% Secured Debt (Maturity - October 30, 2022)None3,604
3,550
3,550
  LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity - October 30, 2022) (8)1 month LIBOR600
600
600
     4,150
4,150
Arcus Hunting, LLC (8) (11)Manufacturer of Bowhunting and Archery Products and AccessoriesLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.30%, Secured Debt (Maturity - November 13, 2019)1 month LIBOR6,521
6,439
6,521
  LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 7.84%, Secured Debt (Maturity - November 13, 2019)1 month LIBOR2,048
2,041
2,041
     8,480
8,562
ATI Investment Sub, Inc. (8)Manufacturer of Solar Tracking SystemsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.49%, Secured Debt (Maturity - June 22, 2021)1 month LIBOR7,614
7,462
7,595
ATX Networks Corp. (8) (9)Provider of Radio Frequency Management EquipmentLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33%, Secured Debt (Maturity - June 11, 2021)3 month LIBOR14,588
14,390
14,442
BarFly Ventures, LLC (11)Casual Restaurant Group12.00% Secured Debt (Maturity - August 31, 2020)None2,905
2,860
2,905
  Warrants (.410 equivalent units, Expiration - August 31, 2025)
158
148
  Options (.731 equivalent units)
133
262
     3,151
3,315
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)None1,007
992
999
  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
145
     1,392
1,344
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
1,393
1,407
  Common Stock (138 shares)100
220
     1,493
1,627
BigName Commerce, LLC (8) (11)Provider of Envelopes and Complimentary Stationery ProductsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.55%, Secured Debt (Maturity - May 11, 2022)1 month LIBOR2,503
2,474
2,474
Binswanger Enterprises, LLC (8) (11)Glass Repair and Installation Service ProviderLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.33%, Secured Debt (Maturity - March 9, 2022)3 month LIBOR15,325
15,046
15,047
  Member Units (1,050,000 Class A units)1,050
940
     16,096
15,987
Bluestem Brands, Inc. (8)Multi-Channel Retailer of General MerchandiseLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.77%, Secured Debt (Maturity - November 6, 2020)3 month LIBOR13,206
13,024
9,366
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
4,000
4,011
  Member Units (540,000 units)540
540
     4,540
4,551
       
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)1,037
1,037
     5,112
4,480
Brundage-Bone Concrete Pumping, Inc.Construction Services Provider10.38% Secured Debt (Maturity - September 1, 2021) (14)None12,000
12,076
12,360
Buca C, LLC (8) (10) (13)Casual Restaurant GroupLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity - June 30, 2020)1 month LIBOR14,136
13,965
13,965
  Preferred Member Units (4 units, 6.00% cumulative) (16)2,702
2,740
     16,667
16,705
CAI Software, LLC (10) (13)Provider of Specialized Enterprise Resource Planning Software12.00% Secured Debt (Maturity - October 10, 2019)None871
859
871
  Member Units (16,339 units) (16)163
760
     1,022
1,631
CapFusion Holding, LLC (9) (10) (13) (18)Business Lender13.00% Secured Debt (Maturity - March 25, 2021) (18)None2,830
2,555
1,661
  Warrants (400 equivalent units, Expiration - March 24, 2026)300

     2,855
1,661
CDHA Management, LLC (8) (11)Dental ServicesLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.68%, Secured Debt (Maturity - December 5, 2021)6 month LIBOR4,345
4,245
4,345
Cengage Learning, Inc. (8)Provider of Educational Print and Digital ServicesLIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.49%, Secured Debt (Maturity - June 7, 2023)1 month LIBOR9,794
9,259
9,056
Cenveo CorporationProvider of Commercial Printing, Envelopes, Labels, Printed Office Products6.00% Secured Debt (Maturity - August 1, 2019)None15,000
13,526
11,888
Charlotte Russe, Inc. (8)Fast-Fashion Retailer to Young WomenLIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.82%, Secured Debt (Maturity - May 22, 2019)3 month LIBOR14,972
14,845
6,635
Clarius BIGS, LLC (11) (18)Prints & Advertising Film Financing15.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None2,140
1,882
64
  20.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None773
680
23
     2,562
87
Construction Supply Investments, LLC (9)(11)Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry ContractorsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.23%, Secured Debt (Maturity - June 30, 2023)(8)7,313
7,276
7,276
  Member units (20,000 units)
3,723
3,723
     10,999
10,999
ContextMedia Health, LLC (8)Provider of Healthcare Media ContentLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (Maturity - December 23, 2021)1 month LIBOR9,625
8,743
9,589
Covenant Surgical Partners, Inc.Ambulatory Surgical Centers8.75% Secured Debt (Maturity - August 1, 2019)None9,500
9,500
9,812
CST Industries, Inc. (8)Storage Tank ManufacturerPrime Plus 5.25% (Floor 2.50%), Current Coupon 9.50%, Secured Debt (Maturity - May 22, 2017)PRIME2,759
2,768
2,690
  Prime Plus 5.25% (Floor 2.50%), Current Coupon 4.10%, Secured Debt (Maturity - October 14, 2017)PRIME482
482
482
     3,250
3,172
CTVSH, PLLC (8)(11)Emergency Care and Specialty Service Animal HospitalLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.31%, Secured Debt (Maturity - August 3, 2022)1 month LIBOR3,000
2,942
2,942
       
       
Datacom, LLC (10) (13)Technology and Telecommunications Provider5.25% Current / 5.25% PIK, Current Coupon 10.50% Secured Debt (Maturity - May 30, 2019)None$1,348
$1,338
$1,263
  8.00% Secured Debt (Maturity - May 30, 2018)None150
150
150
  Class A Preferred Member Units (1,530 units, 15.00% cumulative) (16)
131
151
  Class B Preferred Member Units (717 units)
670

     2,289
1,564
Digital River, Inc. (8)Provider of Outsourced e-Commerce Solutions and ServicesLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity - February 12, 2021)3 month LIBOR14,586
14,496
14,659
Digital Room, LLC (8)Organic Lead Generation for Online Postsecondary SchoolsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity - November 21, 2022)1 month LIBOR7,339
7,207
7,302
East West Copolymer & Rubber, LLC (10) (13) (18)Manufacturer of Synthetic Rubbers12.00% Secured Debt (Maturity - October 17, 2019) (18)None909
859

  Warrants (627,697 equivalent shares, Expiration - October 15, 2024)
13

     872

ECP-PF Holdings Groups, Inc. (8)(11)Fitness Club OperatorLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.30%, Secured Debt (Maturity - November 26, 2019)1 month LIBOR1,875
1,866
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 9.49%, Secured Debt (Maturity - April 28, 2022) (14)1 month LIBOR10,901
10,492
8,971
Extreme Reach, Inc. (8)(12)Integrated TV and Video Advertising PlatformLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.59%, Secured Debt (Maturity - February 7, 2020)3 month LIBOR8,849
8,834
8,845
Felix Investments Holdings II, LLC (8)(11)Oil and Gas Exploration and ProductionLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.81%, Secured Debt (Maturity - August 9, 2022)3 month LIBOR3,333
3,264
3,264
Flavors Holdings, Inc. (8)Global Provider of Flavoring and Sweetening Products and SolutionsLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.08%, Secured Debt (Maturity - April 3, 2020)3 month LIBOR12,592
11,979
11,994
GST Autoleather, Inc. (8)Automotive Leather ManufacturerPrime Plus 6.50% (Floor 2.00%), Current Coupon 10.75%, Secured Debt (Maturity - July 10, 2020)PRIME17,297
16,784
13,405
Guitar Center, Inc.Musical Instruments Retailer6.50% Secured Debt (Maturity - April 15, 2019)None15,015
14,395
13,626
Hojeij Branded Foods, LLC (8) (11)Multi-Airport, Multi-Concept Restaurant OperatorLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31%, Secured Debt (Maturity - July 20, 2022)3 month LIBOR16,957
16,756
16,957
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 8.56%, Secured Debt (Maturity - January 28, 2021)3 month LIBOR14,886
14,011
13,695
Hunter Defense Technologies, Inc. (8)Provider of Military and Commercial Shelters and SystemsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31%, Secured Debt (Maturity - August 5, 2019)3 month LIBOR15,000
14,551
14,888
Hydrofarm Holdings, LLC (8) (11)Wholesaler of Horticultural ProductsLIBOR Plus 7.00%, Current Coupon 8.24%, Secured Debt (Maturity - May 12, 2022)1 month LIBOR6,708
6,582
6,582
iEnergizer Limited (8) (9)Provider of Business Outsourcing SolutionsLIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity - May 1, 2019)1 month LIBOR11,209
10,898
11,181
Implus Footcare, LLC (8) (11)Provider of Footwear and Other AccessoriesLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.08%, Secured Debt (Maturity - April 30, 2021)3 month LIBOR14,529
14,326
14,326
Indivior Finance, LLC (8) (9)Specialty Pharmaceutical Company Treating Opioid DependenceLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.32%, Secured Debt (Maturity - December 19, 2019)3 month LIBOR7,628
7,393
7,694
Industrial Services Acquisitions, LLC (11)Industrial Cleaning Services11.25% Current / 0.75% PIK, Current Coupon 12.00%, Unsecured Debt (Maturity - December 17, 2022) (17)None10,583
10,403
10,583
  Member units (Industrial Services Investments, LLC) (2,100,000 units)
2,100
1,890
     12,503
12,473
Inn of the Mountain Gods Resort and CasinoHotel & Casino Owner & Operator9.25% Secured Debt (Maturity - November 30, 2020)None10,749
10,610
9,674
Intertain Group Limited (8) (9)Business-to-Consumer Online Gaming OperatorLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.74%, Secured Debt (Maturity - April 8, 2022)1 month LIBOR$8,028
$7,891
$8,118
iPayment, Inc. (8)Provider of Merchant AcquisitionLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31%, Secured Debt (Maturity - April 11, 2023)3 month LIBOR12,000
11,887
12,150
iQor US Inc. (8)Business Process Outsourcing Services ProviderLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.30%, Secured Debt (Maturity - April 1, 2021)3 month LIBOR7,698
7,336
7,648
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%)/ 2.50% PIK , Current Coupon 7.99%, Secured Debt (Maturity - May 26, 2021)1 month LIBOR8,780
8,755
8,780
Jacuzzi Brands Corp. (8)Manufacturer of Bath and Spa ProductsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity - June 28, 2023)3 month LIBOR5,963
5,845
5,933
Joerns Healthcare, LLC (8)Manufacturer and Distributor of Health Care Equipment & SuppliesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity - May 9, 2020)3 month LIBOR11,119
10,931
10,429
Kellermeyer Bergensons Services, LLC (8)Outsourced Janitorial Services to Retail/Grocery CustomersLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.81%, Secured Debt (Maturity - April 29, 2022) (14)3 month LIBOR14,700
14,615
14,333
Keypoint Government Solutions, Inc. (8) (11)Provider of Pre-Employment Screening ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity - April 18, 2024)3 month LIBOR12,188
12,072
12,072
LaMi Products, LLC (8) (11)General Merchandise DistributionLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity -September 16, 2020)3 month LIBOR11,239
11,105
11,214
Larchmont Resources, LLC (8)Oil & Gas Exploration & ProductionLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.22%, Secured Debt (Maturity - August 7, 2020)3 month LIBOR4,013
4,013
3,933
  Member units (Larchmont Intermediate Holdco, LLC) (4,806 units)
601
1,658
     4,614
5,591
Legendary Pictures Funding, LLC (8) (11)Producer of TV, Film, and Comic ContentLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33%, Secured Debt (Maturity - April 22, 2020)3 month LIBOR8,020
7,928
7,920
LJ Host Merger Sub, Inc. (8)Managed Services and Hosting ProviderLIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.08%, Secured Debt (Maturity - December 13, 2019)3 month LIBOR16,137
15,694
15,714
  LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.06%, Secured Debt (Maturity - December 13, 2018)3 month LIBOR2,433
2,339
2,293
     18,033
18,007
Logix Acquisition Company, LLC (8) (11)Competitive Local Exchange CarrierLIBOR Plus 8.29% (Floor 1.00%), Current Coupon 9.53%, Secured Debt (Maturity - June 24, 2021) (24)1 month LIBOR8,358
8,241
8,358
LSF9 Atlantis Holdings, LLC (8)Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity - May 1, 2023)1 month LIBOR13,913
13,805
13,997
Lulu’s Fashion Lounge, LLC (8)(11)Fast Fashion E-Commerce RetailerLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.24%, Secured Debt (Maturity - August 23, 2022)1 month LIBOR6,818
6,616
6,767
Meisler Operating, LLC (10) (13)Provider of Short Term Trailer and Container RentalLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.80%, Secured Debt (Maturity - June 7, 2022) (8)3 month LIBOR4,200
4,091
4,100
  Member Units (Milton Meisler Holdings, LLC) (8,000 units)
800
800
     4,891
4,900
MHVC Acquisition Corp. (8)Provider of Differentiated Information Solutions, Systems Engineering and AnalyticsLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.49%, Secured Debt (Maturity - April 29, 2024)1 month LIBOR10,474
10,424
10,592
Minute Key, Inc. (10) (13)Operator of Automated Key Duplication Kiosk12.00% Secured Debt (Maturity - September 19, 2019) (14)None4,146
4,079
4,146
  Warrants (359,352 equivalent units, Expiration - May 20, 2025)
70
263
     4,149
4,409
NBG Acquisition, Inc. (8)Wholesaler of Home Decor ProductsLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.91%, Secured Debt (Maturity - April 26, 2024)6 month LIBOR$4,430
$4,361
$4,408
New Media Holdings II LLC (8) (9)Local Newspaper OperatorLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.49%, Secured Debt (Maturity - July 14, 2022)1 month LIBOR17,075
16,791
17,102
NNE Issuer, LLC (8) (11)Oil & Gas Exploration & ProductionLIBOR Plus 8.00%, Current Coupon 9.32%, Secured Debt (Maturity - March 2, 2022)3 month LIBOR10,500
10,407
10,407
North American Lifting Holdings, Inc. (8)Crane Service ProviderLIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.83%, Secured Debt (Maturity - November 27, 2020)3 month LIBOR6,326
5,634
5,836
Novetta Solutions, LLC (8)(12)Provider of Advanced Analytics Solutions for Defense AgenciesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.34%, Secured Debt (Maturity - October 17, 2022)3 month LIBOR8,649
8,421
8,411
NTM Acquisition Corp. (8)Provider of B2B Travel Information ContentLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.55%, Secured Debt (Maturity - June 7, 2022)3 month LIBOR11,052
10,935
10,997
Pardus Oil & Gas, LLCOil & Gas Exploration and Production13.00% PIK, Secured Debt (Maturity - November 12, 2021)None1,053
1,053
693
  5.00% PIK, Secured Debt (Maturity - May 13, 2022) (14)None543
543
70
  Class A units (1,331 units)
1,331

     2,927
763
Paris Presents, Inc. (8)Branded Cosmetic and Bath AccessoriesLIBOR Plus 8.75% (Floor 1.00%), Current Coupon 9.99%, Secured Debt (Maturity - December 31, 2021) (14)1 month LIBOR10,000
9,894
9,900
Parq Holdings, LP (8) (9)Hotel and Casino OperatorLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.73%, Secured Debt (Maturity - December 17, 2020)1 month LIBOR12,500
12,337
12,469
Permian Holdco 2, Inc.Storage Tank Manufacturer14.00% PIK Unsecured Debt (Maturity - October 15, 2021) (17)None548
548
548
  Series A Preferred Shares (Permian Holdco 1, Inc.) (386,255 units) (12.00% Cumulative) (16)
2,109
2,109
  Common Shares (Permian Holdco 1, Inc.) (386,255 units)


     2,657
2,657
Permian Holdings, Inc.Storage Tank Manufacturer10.50% Secured Debt (Maturity - January 15, 2018)None1,000
760
290
Pernix Therapeutics Holdings, Inc. (11)Pharmaceutical Royalty - Anti-Migraine12.00% Secured Debt (Maturity - August 1, 2020)None2,737
2,716
1,725
PPC/Shift, LLC (8) (11)Provider of Digital Solutions to Automotive IndustryLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33%, Secured Debt (Maturity - December 22, 2021)3 month LIBOR6,869
6,749
6,869
Prowler Acquisition Corporation (8)Specialty Distributor to the Energy SectorLIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.83%, Secured Debt (Maturity - January 28, 2020)3 month LIBOR12,445
11,101
11,076
PSC Industrial Holdings Corp. (8)Diversified Industrial Service ProviderLIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.99%, Secured Debt (Maturity - December 5, 2020)1 month LIBOR5,596
5,275
5,587
Redbox Automated Retail, LLC (8)Operator of Home Media Entertainment KiosksLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity - September 27, 2021)1 month LIBOR10,500
10,176
10,605
Renaissance Learning, Inc. (8)Technology-based K-12 Learning SolutionsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity - April 11, 2022) (14)3 month LIBOR12,695
12,344
12,854
Resolute Industrial, LLC (8) (11)HVAC Equipment Rental and RemanufacturingLIBOR Plus 6.40% (Floor 1.00%), Current Coupon 7.73%, Secured Debt (Maturity - July 26, 2022) (25)3 month LIBOR17,167
16,622
16,730
  Common Stock (601 units)750
750
     17,372
17,480
RGL Reservoir Operations, Inc. (8) (9)Oil & Gas Equipment & ServicesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.32%, Secured Debt (Maturity - August 13, 2021)3 month LIBOR3,880
3,808
698
       
       
RM Bidder, LLC (11)Full-scale Film and Television Production and DistributionCommon Stock (1,854 units)$
$31
$17
  Series A Warrants (124,915 equivalent units, Expiration - October 20, 2025)284

  Series B Warrants (93,686 equivalent units, Expiration - October 20, 2025)

     315
17
Salient Partners, LP (8)Provider of Asset Management ServicesLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.80%, Secured Debt (Maturity - June 9, 2021)3 month LIBOR11,200
10,884
10,864
Sigma Electric Manufacturing Corp. (8) (9) (11)Manufacturer and Distributor of Electrical Fittings and PartsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.58%, Secured Debt (Maturity - October 13, 2021)3 Month LIBOR12,437
12,176
12,437
Smart Modular Technologies, Inc. (8)(9)(11)Provider of Specialty Memory SolutionsLIBOR Plus 6.25%, (Floor 1.00%), Current Coupon 7.56%, Secured Debt (Maturity - August 9, 2022)3 month LIBOR15,000
14,708
14,925
Sorenson Communications, Inc.Manufacturer of Communication Products for Hearing Impaired9.00% Secured Debt (Maturity - October 31, 2020) (14)None13,210
12,857
12,879
  LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.00%, Secured Debt (Maturity - April 30, 2020)3 month LIBOR2,954
2,938
2,975
     15,795
15,854
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 LIBOR9,625
9,363
9,769
  LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.45%, Secured Debt (Maturity - May 30, 2019)3 month LIBOR500
475
513
     9,838
10,282
Synagro Infrastructure Company, Inc. (8)Waste Management ServicesLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.58%, Secured Debt (Maturity - August 22, 2020)3 month LIBOR5,384
5,250
5,142
TE Holdings, LLCOil & Gas Exploration & ProductionCommon Units (72,785 units)728
218
Teleguam Holdings, LLC (8)Cable and Telecom Services ProviderLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.73%, Secured Debt (Maturity - July 25, 2024) (14)1 month LIBOR7,750
7,598
7,828
TMC Merger Sub Corp (8)Refractory & Maintenance Services ProviderLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - October 31, 2022) (26)1 month LIBOR14,734
14,602
14,808
TOMS Shoes, LLC (8)Global Designer, Distributor, and Retailer of Casual FootwearLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.82%, Secured Debt (Maturity - October 30, 2020)3 month LIBOR4,875
4,595
2,331
Turning Point Brands, Inc. (8) (9) (11)Marketer/Distributor of Tobacco ProductsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.32%, Secured Debt (Maturity - May 17, 2022) (25)3 month LIBOR8,458
8,381
8,436
TVG-I-E CMN Acquisition, LLC (8)(11)Organic Lead Generation for Online Postsecondary SchoolsLIBOR Plus 6.00%, (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity - November 3, 2021)1 month LIBOR6,338
6,229
6,338
U.S. Telepacific Corp. (8)Provider of Communications and Managed ServicesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.32%, Secured Debt (Maturity - May 2, 2023)3 month LIBOR14,963
14,597
14,611
USJ-IMECO Holding Company, LLC (8)Marine Interior Design and InstallationLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.34%, Secured Debt (Maturity - April 16, 2020)3 month LIBOR8,264
8,243
8,202
Valley Healthcare Group, LLC (8) (10) (13)Provider of Durable Medical EquipmentLIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.74%, Secured Debt (Maturity - December 29, 2020)1 month LIBOR2,962
2,918
2,918
  Preferred Member Units (Valley Healthcare Holding, LLC) (400 units)
400
400
     3,318
3,318
VIP Cinema Holdings, Inc. (8)Supplier of Luxury Seating to the Cinema IndustryLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.34%, Secured Debt (Maturity - March 1, 2023)3 month LIBOR9,750
9,705
9,854
       
Vistar Media, Inc. (8) (11)Operator of Digital Out-of-Home Advertising PlatformLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.33%, Secured Debt (Maturity - February 16, 2022)3 month LIBOR$3,375
$3,086
$3,088
  Warrants (64,025 equivalent units, Expiration - February 17, 2027)331
331
     3,417
3,419
Volusion, LLC (10) (13)Provider of Online Software-as-a-Service eCommerce Solutions11.50% Secured Debt (Maturity - January 24, 2020)None7,172
6,385
6,385
  Preferred Member Units (2,090,001 units)6,000
6,000
  Warrants (784,866.80 equivalent units, Expiration - January 26, 2025)1,104
960
     13,489
13,345
Wellnext, LLC (8) (11)Manufacturer of Supplements and VitaminsLIBOR Plus 7.50% (Floor 0.50%), Current Coupon 8.74%, Secured Debt (Maturity - July 21, 2022) (24)1 month LIBOR9,930
9,852
9,930
Wireless Vision Holdings, LLC (8)(11)Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.83%, Secured Debt (Maturity - September 29, 2022) (24)3 month LIBOR6,711
6,369
6,369
Wirepath, LLC (8)E-Commerce Provider Into Connected Home MarketLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.56%, Secured Debt (Maturity - August 5, 2024)3 month LIBOR11,500
11,443
11,593
       
Subtotal Non-Control/Non-Affiliate Investments (5) (89% of total portfolio investments at fair value)  $996,358
$967,475
       
Total Portfolio Investments    $1,110,886
$1,090,706
       
Short Term Investments (20)      
Fidelity Institutional Money Market Funds (21)Prime Money Market Portfolio, Class III Shares$21,316
$21,316
UMB Bank Money Market Account (21)  532
532
US Bank Money Market Account (21)14,409
14,409
       
Total Short Term Investments    $36,257
$36,257
(1) All investments are Middle Market portfolio investments, unless otherwise noted. All

Table of the Company’s assets are encumbered as security for the Company’s credit agreements. See Note 5 - Borrowings.

(16)Contents

MSC Income producing through dividends or distributions.

(17) Unsecured debt investment.
(18) Investment is on non-accrual status as of September 30, 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 September 30, 2017 was approximately 0.01%.
(22) The 1, 2, 3, and 6-month London Interbank Offered Rate (“LIBOR”) rates were 1.24%, 1.27%, 1.34% and 1.51%, respectively, as of September 30, 2017. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of September 30, 2017, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to September 30, 2017. The prime rate was 4.25% as of September 30, 2017.
(23) Transactions for the nine months ended September 30, 2017 with HMS-ORIX SLF LLC are as follows:
    Nine Months Ended September 30, 2017   Nine Months Ended September 30, 2017
Company Fair Value at December 31, 2016 Contributions (Cost) Redemptions (Cost) Net Unrealized Gain (Loss) Fair Value at September 30, 2017 Net Realized Gain (Loss)Dividend Income
HMS-ORIX SLF LLC*
 $
 $30,000
 $
 $516
 $30,516
 $
$
* 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.
(24) 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 Fund, Inc.

Consolidated Schedule of Investments above reflects such higher rate.(Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

(25) As part

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Chamberlin Holding LLC

February 26, 2018

Roofing and Waterproofing Specialty Contractor

Secured Debt

9.00% (L+8.00%, Floor 1.00%)

2/26/2023

3,803

3,751

3,803

(9)

Member Units

4,347

2,860

7,070

(8)

Member Units

1,047,146

330

332

(8) (30)

6,941

11,205

Charlotte Russe, Inc

(11)

May 28, 2013

Fast-Fashion Retailer to Young Women

Common Stock

19,041

2,470

-

Charps, LLC

February 3, 2017

Pipeline Maintenance and Construction

Preferred Member Units

1,600

100

2,830

(8)

Clad-Rex Steel, LLC

December 20, 2016

Specialty Manufacturer of Vinyl-Clad Metal

Secured Debt

10.50% (L+9.50%, Floor 1.00%)

1/15/2024

2,720

2,710

2,710

(9)

Member Units

717

1,820

2,152

(8)

Secured Debt

10.00%

12/20/2036

276

273

273

(30)

Member Units

800

53

132

(30)

4,856

5,267

Cody Pools, Inc.

March 6, 2020

Designer of Residential and Commercial Pools

Secured Debt

12.25% (L+10.50%, Floor 1.75%)

3/6/2025

3,504

3,442

3,504

(9)

Preferred Member Units

587

2,079

4,720

5,521

8,224

Colonial Electric Company LLC

March 31, 2021

Provider of Electrical Contracting Services

Secured Debt

12.00%

3/31/2026

6,300

6,143

6,143

Preferred Member Units

17,280

1,920

1,920

8,063

8,063

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

LP Interests (Copper Trail Energy Fund I, LP)

12.4%

2,161

1,843

(8) (31)

-

-

Datacom, LLC

May 30, 2014

Technology and Telecommunications Provider

Secured Debt

5.00%

12/31/2025

997

901

901

Preferred Member Units

9,000

290

290

1,191

1,191

6


(26) The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Digital Products Holdings LLC

April 1, 2018

Designer and Distributor of Consumer Electronics

Secured Debt

11.00% (L+10.00%, Floor 1.00%)

4/1/2023

4,461

4,416

4,416

(9)

Preferred Member Units

3,857

2,375

2,459

(8)

6,791

6,875

Direct Marketing Solutions, Inc.

February 13, 2018

Provider of Omni-Channel Direct Marketing Services

Secured Debt

12.00% (L+11.00%, Floor 1.00%)

2/13/2023

3,772

3,723

3,723

(9)

Preferred Stock

8,400

2,100

4,460

5,823

8,183

Freeport Financial Funds

(12) (13)

July 31, 2015

Investment Partnership

LP Interests (Freeport First Lien Loan Fund III LP)

6.0%

9,387

8,923

(8) (31)

Gamber-Johnson Holdings, LLC ("GJH")

June 24, 2016

Manufacturer of Ruggedized Computer Mounting Systems

Secured Debt

9.00% (L+7.00%, Floor 2.00%)

6/24/2021

5,160

5,148

5,160

(9)

Member Units

9,042

4,423

13,810

(8)

9,571

18,970

GFG Group, LLC.

March 31, 2021

Grower and Distributor of a Variety of Plants and Products to Other Wholesalers, Retailers and Garden Centers

Secured Debt

12.00%

3/31/2026

3,936

3,818

3,818

Preferred Member Units

226

1,225

1,225

5,043

5,043

Gulf Publishing Holdings, LLC

April 29, 2016

Energy Industry Focused Media and Publishing

Secured Debt

10.50% (5.25% Cash, 5.25% PIK) (L+9.50%, Floor 1.00%)

9/30/2020

64

64

64

(9) (17) (19)

Secured Debt

12.50% (6.25% Cash, 6.25% PIK)

4/29/2021

3,320

3,319

3,048

(19)

Member Units

3,681

920

-

4,303

3,112

Harris Preston Fund Investments

(12) (13)

August 9, 2017

Investment Partnership

LP Interests (HPEP 3, L.P.)

8.2%

3,445

3,632

(31)

7


(27) The fair value of the investment was determined using significant unobservable inputs. See Note 3 - Fair Value Hierarchy for Investments.


See notes to the condensed consolidated financial statements.


(Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

HMS Income Fund, Inc.
Condensed 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 LIBOR12,265
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 LIBOR$8,500
$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
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)None3,905
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 LIBOR$14,822
$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 LIBOR12,950
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 LIBOR8,857
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 LIBOR$3,239
$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 (21)Prime Money Market Portfolio, Class III Shares$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

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Hawk Ridge Systems, LLC

(13)

December 2, 2016

Value-Added Reseller of Engineering Design and Manufacturing Solutions

Secured Debt

10.00%

12/2/2023

3,350

3,339

3,350

Preferred Member Units

226

713

2,330

(8)

Preferred Member Units

226

38

120

(30)

4,090

5,800

J&J Services, Inc.

October 31, 2019

Provider of Dumpster and Portable Toilet Rental Services

Secured Debt

11.50%

10/31/2024

3,200

3,152

3,200

Preferred Stock

2,814

1,771

3,170

4,923

6,370

Kickhaefer Manufacturing Company, LLC

October 31, 2018

Precision Metal Parts Manufacturing

Secured Debt

11.50%

10/31/2023

5,604

5,508

5,508

Member Units

581

3,060

3,060

Secured Debt

9.00%

10/31/2048

986

976

976

Member Units

800

248

290

(8) (30)

9,792

9,834

Market Force Information, LLC

July 28, 2017

Provider of Customer Experience Management Services

Secured Debt

12.00% PIK

7/28/2023

6,520

6,463

3,317

(14) (19)

Member Units

743,921

4,160

-

10,623

3,317

MH Corbin Holding LLC

August 31, 2015

Manufacturer and Distributor of Traffic Safety Products

Secured Debt

13.00% (10.00% Cash, 3.00% PIK)

3/31/2022

2,123

2,113

2,052

(19)

Preferred Member Units

66,000

1,100

300

Preferred Member Units

4,000

1,500

-

4,713

2,352

Mystic Logistics Holdings, LLC

August 18, 2014

Logistics and Distribution Services Provider for Large Volume Mailers

Secured Debt

12.00%

1/17/2022

1,683

1,682

1,682

Common Stock

587278.0%

680

1,820

(8)

2,362

3,502

NexRev LLC

February 28, 2018

Provider of Energy Efficiency Products & Services

Secured Debt

11.00%

2/28/2023

4,220

4,181

4,173

Preferred Member Units

86,400,000

1,720

820

(8)

5,901

4,993

(1) All investments are Middle Market portfolio investments, unless otherwise noted. All

8


Table of the assetsContents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

NuStep, LLC

January 31, 2017

Designer, Manufacturer and Distributor of Fitness Equipment

Secured Debt

12.00%

1/31/2022

4,310

4,293

4,293

Preferred Member Units

406

2,550

2,850

6,843

7,143

Project BarFly, LLC

(10)

August 31, 2015

Casual Restaurant Group

Member Units

12

528

528

SI East, LLC

August 31, 2018

Rigid Industrial Packaging Manufacturing

Secured Debt

9.50%

8/31/2023

9,738

9,654

9,738

Preferred Member Units

157

2,000

3,390

(8)

11,654

13,128

Tedder Industries, LLC

August 31, 2018

Manufacturer of Firearm Holsters and Accessories

Secured Debt

12.00%

8/31/2023

3,700

3,636

3,638

Preferred Member Units

479

2,034

2,034

5,670

5,672

Trantech Radiator Topco, LLC

May 31, 2019

Transformer Cooling Products and Services

Secured Debt

12.00%

5/31/2024

2,180

2,126

2,126

Common Stock

615

1,164

1,420

(8)

3,290

3,546

Subtotal Affiliate Investments (29.3% of net assets at fair value)

$

156,007

$

170,959

Non-Control/Non-Affiliate Investments (7)

AAC Holdings, Inc.

(11)

June 30, 2017

Substance Abuse Treatment Service Provider

Secured Debt

18.00% (10.00% Cash, 8.00% PIK)

6/25/2025

3,422

3,085

3,404

(19)

Common Stock

593,928

3,148

1,930

Warrants

554,353

12/11/2025

-

643

(27)

6,233

5,977

Adams Publishing Group, LLC

(10)

November 19, 2015

Local Newspaper Operator

Secured Debt

8.75% (L+7.00%, Floor 1.75%)

7/3/2023

5,644

5,537

5,599

(9)

ADS Tactical, Inc.

(11)

March 7, 2017

Value-Added Logistics and Supply Chain Provider to the Defense Industry

Secured Debt

6.75% (L+5.75%, Floor 1.00%)

3/19/2026

19,231

18,847

19,135

(9)

American Nuts, LLC

(10)

April 10, 2018

Roaster, Mixer and Packager of Bulk Nuts and Seeds

Secured Debt

9.00% (L+8.00%, Floor 1.00%)

4/10/2023

12,100

11,910

12,100

(9)

9


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

American Teleconferencing Services, Ltd.

(11)

May 19, 2016

Provider of Audio Conferencing and Video Collaboration Solutions

Secured Debt

7.50% (L+6.50%, Floor 1.00%)

6/8/2023

14,118

13,826

7,500

(9)

American Trailer Rental Group LLC

June 7, 2017

Provider of Short-term Trailer and Container Rental

Member Units

73,493

2,149

4,470

(30)

Arcus Hunting LLC

(10)

January 6, 2015

Manufacturer of Bowhunting and Archery Products and Accessories

Secured Debt

11.00% (L+10.00%, Floor 1.00%)

3/31/2022

5,504

5,464

5,504

(9)

ASC Ortho Management Company, LLC

(10)

August 31, 2018

Provider of Orthopedic Services

Secured Debt

8.50% (L+7.50%, Floor 1.00%)

8/31/2023

5,177

5,127

5,125

(9)

Secured Debt

13.25% PIK

12/1/2023

2,118

2,085

2,118

(19)

7,212

7,243

ATX Networks Corp.

(11) (13) (21)

June 30, 2015

Provider of Radio Frequency Management Equipment

Secured Debt

8.75% (7.25% Cash, 1.50% PIK) (1.50% PIK + L+6.25%, Floor 1.00%)

12/31/2023

13,346

13,258

12,212

(9) (19)

BBB Tank Services, LLC

April 8, 2016

Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market

Unsecured Debt

12.00% (L+11.00%, Floor 1.00%)

4/8/2021

1,200

1,200

1,186

(9)

Preferred Stock (non-voting)

15.00% PIK

39

39

(8) (19)

Member Units

800,000

200

70

1,439

1,295

Berry Aviation, Inc.

(10)

July 6, 2018

Charter Airline Services

Secured Debt

12.00% (10.50% Cash, 1.5% PIK)

1/6/2024

4,635

4,595

4,635

(19)

Preferred Member Units

122,416

16.00% PIK

151

151

(8) (19) (30)

Preferred Member Units

1,548,387

8.00% PIK

1,548

1,438

(19) (30)

6,294

6,224

BLST Operating Company, LLC.

(11)

December 19, 2013

Multi-Channel Retailer of General Merchandise

Secured Debt

10.00% (L+8.50%, Floor 1.50%)

8/28/2025

6,304

6,304

5,800

(9)

Common Stock

653,184

-

315

6,304

6,115

10


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

BigName Commerce, LLC

(10)

May 11, 2017

Provider of Envelopes and Complimentary Stationery Products

Secured Debt

8.25% (L+7.25%, Floor 1.00%)

5/11/2022

1,985

1,979

1,985

(9)

Binswanger Enterprises, LLC

(10)

March 10, 2017

Glass Repair and Installation Service Provider

Secured Debt

9.50% (L+8.50%, Floor 1.00%)

3/9/2022

12,765

12,641

12,765

(9)

Member Units

1,050,000

1,050

730

13,691

13,495

Boccella Precast Products LLC

June 30, 2017

Manufacturer of Precast Hollow Core Concrete

Member Units

2,160,000

564

1,438

(8)

Brightwood Capital Fund Investments

(12) (13)

July 21, 2014

Investment Partnership

LP Interests (Brightwood Capital Fund III, LP)

1.6%

3,095

2,067

(8) (31)

LP Interests (Brightwood Capital Fund IV, LP)

0.6%

9,037

9,000

(8) (31)

12,132

11,067

Buca C, LLC

June 30, 2015

Casual Restaurant Group

Secured Debt

10.25% (2.56% Cash, 7.69% PIK) (L+9.25%, Floor 1.00%)

6/30/2020

12,670

12,670

9,255

(9) (17) (19)

Preferred Member Units

6

6.00% PIK

3,040

-

(19)

15,710

9,255

Cadence Aerospace LLC

(10)

November 14, 2017

Aerostructure Manufacturing

Secured Debt

9.50% (4.25% Cash, 5.25% PIK) (5.25% PIK + L+3.25%, Floor 1.00%)

11/14/2023

19,952

19,814

18,317

(9) (19)

CAI Software LLC

October 10, 2014

Provider of Specialized Enterprise Resource Planning Software

Secured Debt

12.50%

12/7/2023

1,939

1,952

1,939

Member Units

77,960

188

1,600

2,140

3,539

Cenveo Corporation

(11)

September 4, 2015

Provider of Digital Marketing Agency Services

Secured Debt

10.50% (L+9.50%, Floor 1.00%)

6/7/2023

4,117

3,946

4,077

(9)

Common Stock

177,130

4,163

1,852

8,109

5,929

11


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Chisholm Energy Holdings, LLC

(10)

May 15, 2019

Oil & Gas Exploration & Production

Secured Debt

7.75% (L+6.25%, Floor 1.50%)

5/15/2026

2,857

2,811

2,573

(9)

Clarius BIGS, LLC

(10)

September 23, 2014

Prints & Advertising Film Financing

Secured Debt

15.00% PIK

1/5/2015

2,849

2,498

31

(14) (17) (19)

Classic H&G Holdings, LLC

March 12, 2020

Provider of Engineered Packaging Solutions

Secured Debt

12.00%

3/12/2025

6,200

6,040

6,200

Preferred Member Units

154

1,440

2,800

(8)

7,480

9,000

Clickbooth.com, LLC

(10)

December 5, 2017

Provider of Digital Advertising Performance Marketing Solutions

Secured Debt

9.50% (L+8.50%, Floor 1.00%)

1/31/2025

7,800

7,688

7,800

(9)

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

LP Interests (CTEF I, LP)

375

-

67

Corel Corporation

(11) (13) (21)

July 13, 2020

Publisher of Desktop and Cloud-based Software

Secured Debt

5.19% (L+5.00%)

7/2/2026

1,950

1,857

1,944

Digital River, Inc.

(11)

February 24, 2015

Provider of Outsourced e-Commerce Solutions and Services

Secured Debt

8.00% (L+7.00%, Floor 1.00%)

2/12/2023

8,377

8,291

8,335

(9)

DTE Enterprises, LLC

(10)

April 13, 2018

Industrial Powertrain Repair and Services

Secured Debt

10.00% (L+8.50%, Floor 1.50%)

4/13/2023

9,333

9,244

8,937

(9)

Class AA Preferred Member Units (non-voting)

10.00% PIK

974

974

(8) (19)

Class A Preferred Member Units

776,316

776

800

10,994

10,711

Dynamic Communities, LLC

(10)

July 17, 2018

Developer of Business Events and Online Community Groups

Secured Debt

12.50% (6.25% Cash, 6.25% PIK) (L+11.50%, Floor 1.00%)

7/17/2023

5,530

5,475

5,222

(9) (19)

EPIC Y-Grade Services, LP

(11)

June 22, 2018

NGL Transportation & Storage

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

6/30/2027

6,944

6,857

6,041

(9)

12


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Flip Electronics LLC

(10)

January 4, 2021

Distributor of Hard-to-Find and Obsolete Electronic Components

Secured Debt

9.17% (L+8.09%, Floor 1.00%)

1/5/2026

6,000

5,875

5,875

(33)

GoWireless Holdings, Inc.

(11)

December 31, 2017

Provider of Wireless Telecommunications Carrier Services

Secured Debt

7.50% (L+6.50%, Floor 1.00%)

12/22/2024

13,876

13,797

13,859

(9)

Gexpro Services

(10)

February 24, 2020

Distributor of Industrial and Specialty Parts

Secured Debt

8.00% (L+6.50%, Floor 1.50%)

2/24/2025

12,474

12,187

12,390

(9)

HDC/HW Intermediate Holdings

(10)

December 21, 2018

Managed Services and Hosting Provider

Secured Debt

8.50% (L+7.50%, Floor 1.00%)

12/21/2023

1,947

1,923

1,885

(9)

Hunter Defense Technologies, Inc.

(10)

March 29, 2018

Provider of Military and Commercial Shelters and Systems

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

3/29/2023

16,563

16,414

16,563

(9)

HW Temps LLC

July 2, 2015

Temporary Staffing Solutions

Secured Debt

8.00%

3/29/2023

2,420

2,393

2,221

Hyperion Materials & Technologies, Inc.

(11) (13)

September 12, 2019

Manufacturer of Cutting and Machine Tools & Specialty Polishing Compounds

Secured Debt

6.50% (L+5.50%, Floor 1.00%)

8/28/2026

7,406

7,285

7,388

(9)

Implus Footcare, LLC

(10)

June 1, 2017

Provider of Footwear and Related Accessories

Secured Debt

8.75% (L+7.75%, Floor 1.00%)

4/30/2024

17,221

17,172

15,796

(9)

Independent Pet Partners Intermediate Holdings, LLC

(10)

November 20, 2018

Omnichannel Retailer of Specialty Pet Products

Secured Debt

6.00% PIK

11/20/2023

9,960

9,092

9,092

(19)

Preferred Stock (non-voting)

2,470

2,470

Preferred Stock (non-voting)

-

-

Member Units

1,558,333

1,192

-

12,754

11,562

Industrial Services Acquisition, LLC

(10)

June 17, 2016

Industrial Cleaning Services

Unsecured Debt

13.00% (6.00% Cash, 7.00% PIK)

12/17/2022

13,123

13,104

13,123

(19)

Preferred Member Units

144

10.00% PIK

265

343

(8) (19) (30)

Preferred Member Units

80

20.00% PIK

171

199

(8) (19) (30)

Member Units

900

2,100

1,610

(30)

15,640

15,275

13


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Interface Security Systems, L.L.C

(10)

August 7, 2019

Commercial Security & Alarm Services

Secured Debt

9.75% (8.75% Cash, 1.00% PIK) (1.00% PIK + L+7.00%, Floor 1.75%)

8/7/2023

7,278

7,188

7,278

(9) (19)

Intermedia Holdings, Inc.

(11)

August 3, 2018

Unified Communications as a Service

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

7/19/2025

7,374

7,351

7,391

(9)

Invincible Boat Company, LLC.

(10)

August 28, 2019

Manufacturer of Sport Fishing Boats

Secured Debt

8.00% (L+6.50%, Floor 1.50%)

8/28/2025

8,661

8,585

8,661

(9)

Isagenix International, LLC

(11)

June 21, 2018

Direct Marketer of Health & Wellness Products

Secured Debt

6.75% (L+5.75%, Floor 1.00%)

6/14/2025

5,469

5,432

4,127

(9)

Jackmont Hospitality, Inc.

(10)

May 26, 2015

Franchisee of Casual Dining Restaurants

Secured Debt

7.75% (L+6.75%, Floor 1.00%)

5/26/2021

7,855

7,854

6,274

(9)

Joerns Healthcare, LLC

(11)

April 3, 2013

Manufacturer and Distributor of Health Care Equipment & Supplies

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

8/21/2024

3,336

3,296

3,226

(9)

Common Stock

472,579

3,678

1,861

6,974

5,087

Kemp Technologies Inc.

(10)

June 27, 2019

Provider of Application Delivery Controllers

Secured Debt

7.50% (L+6.50%, Floor 1.00%)

3/29/2024

7,369

7,269

7,369

(9)

Knight Energy Services LLC

(11)

November 14, 2018

Oil and Gas Equipment & Services

Secured Debt

8.50% PIK

2/9/2024

902

902

683

(17) (19)

Common Stock

25,692

1,843

-

2,745

683

Kore Wireless Group Inc.

(11)

December 31, 2018

Mission Critical Software Platform

Secured Debt

5.70% (L+5.50%)

12/20/2024

5,984

5,965

5,977

Larchmont Resources, LLC

(11)

August 13, 2013

Oil & Gas Exploration & Production

Secured Debt

9.00% (L+8.00%, Floor 1.00%)

8/9/2021

3,715

3,754

1,690

(9)

Member Units

2,828

601

192

(30)

4,355

1,882

Laredo Energy VI, LP

(10)

January 15, 2019

Oil & Gas Exploration & Production

Member Units

1,155,952

11,560

10,118

14


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Lightbox Holdings, L.P.

(11)

May 23, 2019

Provider of Commercial Real Estate Software

Secured Debt

5.20% (L+5.00%)

5/9/2026

4,913

4,854

4,863

LL Management, Inc.

(10)

May 2, 2019

Medical Transportation Service Provider

Secured Debt

8.25% (L+7.25%, Floor 1.00%)

9/25/2023

14,441

14,335

14,441

(9)

Logix Acquisition Company, LLC

(10)

June 24, 2016

Competitive Local Exchange Carrier

Secured Debt

6.75% (L+5.75%, Floor 1.00%)

12/22/2024

12,586

12,530

12,146

(9)

Lulu's Fashion Lounge, LLC

(10)

August 31, 2017

Fast Fashion E-Commerce Retailer

Secured Debt

10.50% (8.00% Cash, 2.50% PIK) (2.50% PIK + L+7.00%, Floor 1.00%)

8/28/2022

5,530

5,459

4,728

(9) (19)

Lynx FBO Operating LLC

(10)

September 30, 2019

Fixed Based Operator in the General Aviation Industry

Secured Debt

7.25% (L+5.75%, Floor 1.50%)

9/30/2024

13,589

13,361

13,589

(9)

Member Units

4,872

500

594

13,861

14,183

Mac Lean-Fogg Company

(10)

April 22, 2019

Manufacturer and Supplier for Auto and Power Markets

Secured Debt

5.63% (L+5.00%, Floor 0.625%)

12/22/2025

7,357

7,316

7,357

(9)

Preferred Stock

13.75% (4.50% Cash, 9.25% PIK)

782

782

782

(8) (19)

8,098

8,139

Mako Steel, LP

(10)

March 15, 2021

Self-Storage Design & Construction

Secured Debt

8.00% (L+7.25%, Floor 0.75%)

3/15/2026

18,863

18,437

18,437

MB2 Dental Solutions, LLC

(11)

January 28, 2021

Dental Partnership Organization

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

1/29/2027

8,322

8,144

8,144

Mills Fleet Farm Group, LLC

(10)

October 24, 2018

Omnichannel Retailer of Work, Farm and Lifestyle Merchandise

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

10/24/2024

15,094

14,831

14,854

(9)

NinjaTrader, LLC

(10)

December 18, 2019

Operator of Futures Trading Platform

Secured Debt

8.25% (L+6.75%, Floor 1.50%)

12/18/2024

16,875

16,541

16,829

(9)

NNE Partners, LLC

(10)

March 2, 2017

Oil & Gas Exploration & Production

Secured Debt

9.44% (4.94% Cash, 4.50% PIK) (4.50% PIK + L+4.75%)

12/31/2023

20,881

20,834

18,981

(19)

15


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Novetta Solutions, LLC

(11)

June 21, 2017

Provider of Advanced Analytics Solutions for Defense Agencies

Secured Debt

6.00% (L+5.00%, Floor 1.00%)

10/17/2022

14,630

14,488

14,602

(9)

Secured Debt

9.50% (L+8.50%, Floor 1.00%)

10/16/2023

1,069

1,069

1,070

15,557

15,672

NTM Acquisition Corp.

(11)

July 12, 2016

Provider of B2B Travel Information Content

Secured Debt

8.25% (7.25% Cash, 1.00% PIK) (1.00%PIK + L+6.25%, Floor 1.00%)

6/7/2024

4,321

4,309

4,213

(9) (19)

Research Now Group, Inc. and Survey Sampling International, LLC

(11)

December 31, 2017

Provider of Outsourced Online Surveying

Secured Debt

6.50% (L+5.50%, Floor 1.00%)

12/20/2024

10,000

10,000

9,947

(9)

RM Bidder, LLC

(10)

November 12, 2015

Scripted and Unscripted TV and Digital Programming Provider

Warrants

187,161

10/20/2025

284

-

(26)

Member Units

2,779

31

23

315

23

Salient Partners L.P.

(11)

June 25, 2015

Provider of Asset Management Services

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

8/31/2021

6,251

6,269

3,374

(9)

Signal Peak CLO 7, Ltd. (Mariner)

(12) (13)

May 8, 2019

Structured Finance

Subordinated Structured Notes

12.00%

4/30/2032

25,935

21,481

17,735

(16)

-

-

Slick Innovations, LLC

September 13, 2018

Text Message Marketing Platform

Secured Debt

12.00%

9/13/2023

1,390

1,220

1,390

Common Stock

70,000

175

380

Warrants

18,084

9/13/2028

45

100

(27)

1,440

1,870

TGP Holdings III LLC

(11)

September 30, 2017

Outdoor Cooking & Accessories

Secured Debt

9.50% (L+8.50%, Floor 1.00%)

9/25/2025

5,000

5,000

4,966

(9)

Time Manufacturing Acquisition LLC

(11)

February 24, 2021

Manufacturer and Distributor of Utility Equipment

Secured Debt

6.00% (L+5.00%, Floor 1.00%)

2/3/2023

1,498

1,494

1,504

The Pasha Group

(11)

February 2, 2018

Diversified Logistics and Transportation Provided

Secured Debt

9.00% (L+8.00%, Floor 1.00%)

1/26/2023

7,361

7,140

7,306

(9)

16


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

U.S. TelePacific Corp.

(11)

September 14, 2016

Provider of Communications and Managed Services

Secured Debt

6.50% (L+5.50%, Floor 1.00%)

5/2/2023

12,500

12,346

11,608

(9)

USA DeBusk LLC

(10)

October 22, 2019

Provider of Industrial Cleaning Services

Secured Debt

6.75% (L+5.75%, Floor 1.00%)

10/22/2024

16,590

16,346

16,417

(9)

Vida Capital, Inc

(11)

October 10, 2019

Alternative Asset Manager

Secured Debt

6.11% (L+6.00%)

10/1/2026

7,134

7,048

6,885

Vistar Media, Inc.

(10)

February 17, 2017

Operator of Digital Out-of-Home Advertising Platform

Secured Debt

13.00% (9.50% Cash, 3.50% PIK) (3.50% PIK + L+7.50%, Floor 2.00%)

4/3/2023

4,697

4,610

4,697

(9) (19)

Preferred Stock

70,207

767

910

Warrants

69,675

4/3/2029

-

920

(25)

5,377

6,527

Volusion, LLC

January 26, 2015

Provider of Online Software-as-a-Service eCommerce Solutions

Secured Debt

11.50%

1/26/2020

8,672

8,654

8,246

(17)

Unsecured Convertible Debt

8.00%

11/16/2023

175

175

125

Preferred Member Units

4,876,670

6,000

2,570

Warrants

1,831,355

1/26/2025

1,104

-

(27)

15,933

10,941

White Cap Parent, LLC

(10)

December 29, 2016

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

(8)

Member Units

3,335

6,050

YS Garments, LLC

(11)

August 22, 2018

Designer and Provider of Branded Activewear

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

8/9/2024

6,952

6,908

6,430

(9)

Subtotal Non-Control/Non-Affiliate Investments (110.4% of net assets at fair value)

$

685,503

$

644,997

Total Portfolio Investments, March 31, 2021 (145.4% of net assets at fair value)

$

859,673

$

849,732

Short Term Investments (34)

Fidelity Institutional Money Market Funds (35)

Prime Money Market Portfolio

$

19,892

$

19,892

USBank Money Market Account (35)

6,001

6,001

17


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Total Short Term Investments

$

25,893

$

25,893

(1)

All investments are Lower Middle Market portfolio investments, unless otherwise noted. See C.2 for a description of Lower Middle Market portfolio investments. All of the Company’s investments, unless otherwise noted, are encumbered as security for the Company’s Credit Facilities.

(2)

Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

(3)

See Note C.2 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.

(5)

Control investments are defined by the Investment Company Act of 1940, as amended ("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.

(6)

Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% (inclusive) of the voting securities are owned and the investments are not classified as Control investments.

(7)

Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)

Income producing through dividends or distributions.

(9)

Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company’s investment portfolio bear interest at a rate that may be determined by reference tto either the London Interbank Offered Rate (“LIBOR”) or or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at March 31, 2021. As noted in this schedule, 76% of the loans (based on the par amount) contain LIBOR floors which range between 0.63% and 2.00%, with a weighted-average LIBOR floor of approximately 1.10%.

(10)

Private Loan portfolio investment. See Note C.2 for a description of Private Loan portfolio investments.

(11)

Middle Market portfolio investment. See Note C.2 for a description of Middle Market portfolio investments.

(12)

Other Portfolio investment. See Note C.2 for a description of Other Portfolio investments.

(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 investment.

(15)

All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities.”

(16)

Our CLO equity position is entitled to recurring distributions which are generally equal to the remaining cash flow of payments made by underlying assets less contractual payments to debt holders and CLO expenses. The effective yield is estimated based upon the current projection of the amount and timing of these recurring distributions in addition to the estimated amount of terminal principal payment. We monitor the anticipated cash flows from our CLO equity position and adjust our effective yield periodically as needed on a prospective basis. The estimated yield and investment cost may ultimately not be realized.

(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.1 for further discussion.

(19)

PIK interest income and cumulative dividend income represent income not paid currently in cash.

(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.

18


Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

March 31, 2021

(dollars in thousands)

(unaudited)

(22)

Not used

(23)

Not used

(24)

Investment date represents the date of initial investment in the portfolio company.

(25)

Warrants are presented in equivalent shares with a strike price of $10.92 per share.

(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)

Not used

(29)

Not used

(30)

Shares/Units represent ownership in an underlying Real Estate or HoldCo entity.

(31)

Investment is not unitized. Presentation is made in percent of fully diluted ownership unless otherwise indicated.

(32)

Not used

(33)

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 will receive priority as to 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 Consolidated Schedule of Investments above reflects such higher rate.

(34)

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. These short term investments are included as Cash and cash equivalents.

(35)

Effective yield as of March 31, 2021 was approximately 0.05% at USBank Money Market Account and 0.01% at Fidelity Institutional Money Market Funds.

19


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Control Investments (5)

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

LP Interests (CTMH, LP)

38.8%

$

872

$

747

(31)

GRT Rubber Technologies LLC ("GRT")

December 19, 2014

Manufacturer of Engineered Rubber Products

Secured Debt

7.15% (L+7.00%)

12/31/2023

$

8,262

8,246

8,262

Member Units

2,896

6,435

22,120

(8)

14,681

30,382

Harris Preston Fund Investments

(12) (13)

October 1, 2017

Investment Partnership

LP Interests (2717 MH, L.P.)

49.3%

2,599

2,702

(31)

Subtotal Control Investments (5.8% of net assets at fair value)

$

18,152

$

33,831

Affiliate Investments (6)

AFG Capital Group, LLC

November 7, 2014

Provider of Rent-to-Own Financing Solutions and Services

Secured Debt

10.00%

5/25/2022

123

123

123

Preferred Member Units

46

300

1,450

423

1,573

Analytical Systems Keco, LLC

August 16, 2019

Manufacturer of Liquid and Gas Analyzers

Secured Debt

12.00% (L+10.00%, Floor 2.00%)

8/16/2024

1,289

1,180

1,180

(9)

Preferred Member Units

800

800

800

Warrants

105

8/16/2029

79

-

(27)

2,059

1,980

Brewer Crane Holdings, LLC

January 9, 2018

Provider of Crane Rental and Operating Services

Secured Debt

11.00% (L+10.00%, Floor 1.00%)

1/9/2023

2,139

2,119

2,119

(9)

Preferred Member Units

737

1,070

1,460

(8)

3,189

3,579

Centre Technologies Holdings, LLC

January 4, 2019

Provider of IT Hardware Services and Software Solutions

Secured Debt

12.00% (L+10.00%, Floor 2.00%)

1/4/2024

2,907

2,868

2,868

(9)

Preferred Member Units

3,174

1,460

1,540

4,328

4,408

Chamberlin Holding LLC

February 26, 2018

Roofing and Waterproofing Specialty Contractor

Secured Debt

9.00% (L+8.00%, Floor 1.00%)

2/26/2023

3,803

3,745

3,803

(9)

Member Units

1,087

2,860

7,020

(8)

Member Units

1

330

318

(8) (30)

6,935

11,141

20


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Charlotte Russe, Inc

(11)

May 28, 2013

Fast-Fashion Retailer to Young Women

Common Stock

14,973

2,470

-

Charps, LLC

February 3, 2017

Pipeline Maintenance and Construction

Secured Debt

15.00%

6/5/2022

167

167

167

Preferred Member Units

400

100

2,630

(8)

267

2,797

Clad-Rex Steel, LLC

December 20, 2016

Specialty Manufacturer of Vinyl-Clad Metal

Secured Debt

10.50% (L+9.50%, Floor 1.00%)

12/20/2021

2,720

2,706

2,706

(9)

Member Units

179

1,820

2,153

(8)

Secured Debt

10.00%

12/20/2036

278

275

275

(30)

Member Units

200

53

132

(30)

4,854

5,266

Cody Pools, Inc.

March 6, 2020

Designer of Residential and Commercial Pools

Secured Debt

12.25% (L+10.50%, Floor 1.75%)

3/6/2025

3,554

3,488

3,554

(9)

Preferred Member Units

147

2,079

3,740

5,567

7,294

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

LP Interests (Copper Trail Energy Fund I, LP)

12.4%

2,161

1,782

(8) (31)

Digital Products Holdings LLC

April 1, 2018

Designer and Distributor of Consumer Electronics

Secured Debt

11.00% (L+10.00%, Floor 1.00%)

4/1/2023

4,543

4,493

4,493

(9)

Preferred Member Units

964

2,375

2,459

(8)

6,868

6,952

Direct Marketing Solutions, Inc.

February 13, 2018

Provider of Omni-Channel Direct Marketing Services

Secured Debt

12.00% (L+11.00%, Floor 1.00%)

2/13/2023

3,772

3,717

3,717

(9)

Preferred Stock

2,100

2,100

4,840

5,817

8,557

-

Freeport Financial Funds

(12) (13)

July 31, 2015

Investment Partnership

LP Interests (Freeport First Lien Loan Fund III LP)

6.0%

10,785

10,321

(8) (31)

Gamber-Johnson Holdings, LLC ("GJH")

June 24, 2016

Manufacturer of Ruggedized Computer Mounting Systems

Secured Debt

9.00% (L+7.00%, Floor 2.00%)

6/24/2021

4,960

4,935

4,960

(9)

Member Units

9,042

3,711

13,120

(8)

21


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

8,646

18,080

Gulf Publishing Holdings, LLC

April 29, 2016

Energy Industry Focused Media and Publishing

Secured Debt

10.50% (5.25% Cash, 5.25% PIK) (L+9.50%, Floor 1.00%)

9/30/2020

63

63

63

(9) (17) (19)

Secured Debt

12.50% (6.25% Cash, 6.25% PIK)

4/29/2021

3,269

3,264

2,988

(19)

Member Units

920

920

-

4,247

3,051

Harris Preston Fund Investments

(12) (13)

August 9, 2017

Investment Partnership

LP Interests (HPEP 3, L.P.)

8.2%

3,071

3,258

(31)

Hawk Ridge Systems, LLC

(13)

December 2, 2016

Value-Added Reseller of Engineering Design and Manufacturing Solutions

Secured Debt

11.00%

12/2/2023

3,350

3,335

3,350

Preferred Member Units

56

713

2,008

(8)

Preferred Member Units

56

38

105

(30)

4,086

5,463

J&J Services, Inc.

October 31, 2019

Provider of Dumpster and Portable Toilet Rental Services

Secured Debt

11.50%

10/31/2024

3,200

3,150

3,200

Preferred Stock

695

1,771

3,170

4,921

6,370

Kickhaefer Manufacturing Company, LLC

October 31, 2018

Precision Metal Parts Manufacturing

Secured Debt

11.50%

10/31/2023

5,604

5,500

5,500

Member Units

145

3,060

3,060

Secured Debt

9.00%

10/31/2048

988

978

978

Member Units

200

248

290

(8) (30)

9,786

9,828

Market Force Information, LLC

July 28, 2017

Provider of Customer Experience Management Services

Secured Debt

12.00% PIK

7/28/2023

6,520

6,463

3,391

(14) (19)

Member Units

185,980

4,160

-

10,623

3,391

MH Corbin Holding LLC

August 31, 2015

Manufacturer and Distributor of Traffic Safety Products

Secured Debt

13.00% (10.00% Cash, 3.00% PIK)

3/31/2022

2,143

2,131

2,070

(19)

Preferred Member Units

16,500

1,100

590

Preferred Member Units

1,000

1,500

-

4,731

2,660

Mystic Logistics Holdings, LLC

August 18, 2014

Logistics and Distribution Services Provider for Large Volume Mailers

Secured Debt

12.00%

1/17/2022

1,683

1,682

1,682

Common Stock

1,468

680

2,248

(8)

22


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

2,362

3,930

NexRev LLC

February 28, 2018

Provider of Energy Efficiency Products & Services

Secured Debt

11.00%

2/28/2023

4,274

4,231

4,177

Preferred Member Units

21,600,000

1,720

370

(8)

5,951

4,547

NuStep, LLC

January 31, 2017

Designer, Manufacturer and Distributor of Fitness Equipment

Secured Debt

12.00%

1/31/2022

4,310

4,288

4,288

Preferred Member Units

102

2,550

2,700

6,838

6,988

���

Project BarFly, LLC

(10)

August 31, 2015

Casual Restaurant Group

Member Units

12

528

528

SI East, LLC

August 31, 2018

Rigid Industrial Packaging Manufacturing

Secured Debt

9.50%

8/31/2023

10,988

10,884

10,986

Preferred Member Units

52

2,000

3,260

(8)

12,884

14,246

Tedder Industries, LLC

August 31, 2018

Manufacturer of Firearm
Holsters and Accessories

Secured Debt

12.00%

8/31/2023

4,100

4,023

4,025

Preferred Member Units

120

2,034

2,034

6,057

6,059

Trantech Radiator Topco, LLC

May 31, 2019

Transformer Cooling Products and Services

Secured Debt

12.00%

5/31/2024

2,180

2,122

2,131

Common Stock

154

1,164

1,510

(8)

3,286

3,641

Subtotal Affiliate Investments (27.2% of net assets at fair value)

$

143,740

$

157,690

Non-Control/Non-Affiliate Investments (7)

��

AAC Holdings, Inc.

(11)

June 30, 2017

Substance Abuse Treatment Service Provider

Secured Debt

18.00% (10.00% Cash, 8.00% PIK)

6/25/2025

3,354

2,998

2,998

(19)

Common Stock

593,927

3,148

3,148

Warrants

197,717

12/11/2025

-

1,048

(27)

6,146

7,194

Adams Publishing Group, LLC

(10)

November 19, 2015

Local Newspaper Operator

Secured Debt

8.75% (L+7.00%, Floor 1.75%)

7/3/2023

5,863

5,742

5,813

(9)

ADS Tactical, Inc.

(10)

March 7, 2017

Value-Added Logistics and Supply Chain Provider to the Defense Industry

Secured Debt

7.00% (L+6.25%, Floor 0.75%)

7/26/2023

15,659

15,700

15,659

(9)

23


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Aethon United BR LP

(10)

September 8, 2017

Oil & Gas Exploration & Production

Secured Debt

7.75% (L+6.75%, Floor 1.00%)

9/8/2023

7,000

6,938

6,852

(9)

American Nuts, LLC

(10)

April 10, 2018

Roaster, Mixer and Packager of Bulk Nuts and Seeds

Secured Debt

9.00% (L+8.00%, Floor 1.00%)

4/10/2023

12,128

11,916

12,109

(9)

American Teleconferencing Services, Ltd.

(11)

May 19, 2016

Provider of Audio Conferencing and Video Collaboration Solutions

Secured Debt

7.50% (L+6.50%, Floor 1.00%)

6/8/2023

14,125

13,803

6,568

(9)

American Trailer Rental Group LLC

June 7, 2017

Provider of Short-term Trailer and Container Rental

Member Units

18,373

2,149

4,000

(30)

APTIM Corp.

(11)

August 17, 2018

Engineering, Construction & Procurement

Secured Debt

7.75%

6/15/2025

6,952

6,356

5,434

Arcus Hunting LLC

(10)

January 6, 2015

Manufacturer of Bowhunting and Archery Products and Accessories

Secured Debt

11.00% (L+10.00%, Floor 1.00%)

3/31/2021

5,504

5,455

5,504

(9)

ASC Ortho Management Company, LLC

(10)

August 31, 2018

Provider of Orthopedic Services

Secured Debt

8.50% (L+7.50%, Floor 1.00%)

8/31/2023

5,206

5,151

5,149

(9)

Secured Debt

13.25% PIK

12/1/2023

2,047

2,011

2,047

(19)

7,162

7,196

ATX Networks Corp.

(11) (13) (21)

June 30, 2015

Provider of Radio Frequency Management Equipment

Secured Debt

8.75% (7.25% Cash, 1.50% PIK) (1.50% PIK + L+6.25%, Floor 1.00%)

12/31/2023

13,435

13,338

12,293

(9) (19)

BBB Tank Services, LLC

April 8, 2016

Maintenance, Repair and Construction Services to the Above-Ground Storage Tank Market

Unsecured Debt

12.00% (L+11.00%, Floor 1.00%)

4/8/2021

1,200

1,200

1,177

(9)

Preferred Stock (non-voting)

15.00% PIK

38

38

(8) (19)

Member Units

200,000

200

70

1,438

1,285

Berry Aviation, Inc.

(10)

July 6, 2018

Charter Airline Services

Secured Debt

12.00% (10.50% Cash, 1.5% PIK)

1/6/2024

4,618

4,575

4,618

(19)

Preferred Member Units

122,416

16.00% PIK

143

143

(8) (19) (30)

Preferred Member Units

1,548,387

8.00% PIK

1,548

904

(19) (30)

6,266

5,665

24


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

BigName Commerce, LLC

(10)

May 11, 2017

Provider of Envelopes and Complimentary Stationery Products

Secured Debt

8.25% (L+7.25%, Floor 1.00%)

5/11/2022

2,037

2,030

2,004

(9)

Binswanger Enterprises, LLC

(10)

March 10, 2017

Glass Repair and Installation Service Provider

Secured Debt

9.50% (L+8.50%, Floor 1.00%)

3/9/2022

12,958

12,801

12,958

(9)

Member Units

1,050,000

1,050

670

13,851

13,628

BLST Operating Company, LLC.

(11)

December 19, 2013

Multi-Channel Retailer of General Merchandise

Secured Debt

10.00% (L+8.50%, Floor 1.50%)

8/28/2025

6,304

6,304

6,304

(9)

Common Stock

700

-

-

6,304

6,304

Boccella Precast Products LLC

June 30, 2017

Manufacturer of Precast Hollow Core Concrete

Member Units

564,000

564

1,510

(8)

Brightwood Capital Fund Investments

(12) (13)

July 21, 2014

Investment Partnership

LP Interests (Brightwood Capital Fund III, LP)

1.2%

3,695

2,867

(8) (31)

LP Interests (Brightwood Capital Fund IV, LP)

0.5%

10,037

9,490

(8) (31)

13,732

12,357

Buca C, LLC

June 30, 2015

Casual Restaurant Group

Secured Debt

10.25% (L+9.25%, Floor 1.00%)

6/30/2020

12,670

12,670

9,504

(9) (17)

Preferred Member Units

4

6.00% PIK

3,040

-

(8) (19)

15,710

9,504

Cadence Aerospace LLC

(10)

November 14, 2017

Aerostructure Manufacturing

Secured Debt

9.50% (4.25% Cash, 5.25% PIK) (5.25% PIK + L+3.25%, Floor 1.00%)

11/14/2023

19,687

19,538

18,732

(9) (19)

CAI Software LLC

October 10, 2014

Provider of Specialized Enterprise Resource Planning Software

Secured Debt

12.50%

12/7/2023

2,086

2,101

2,086

Member Units

16,742

188

1,510

(8)

2,289

3,596

Cenveo Corporation

(11)

September 4, 2015

Provider of Digital Marketing Agency Services

Secured Debt

10.50% (L+9.50%, Floor 1.00%)

6/7/2023

4,117

3,929

3,849

(9)

Common Stock

138,889

4,163

2,049

8,092

5,898

25


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Chisholm Energy Holdings, LLC

(10)

May 15, 2019

Oil & Gas Exploration & Production

Secured Debt

7.75% (L+6.25%, Floor 1.50%)

5/15/2026

3,571

3,512

3,274

(9)

Clarius BIGS, LLC

(10)

September 23, 2014

Prints & Advertising Film Financing

Secured Debt

15.00% PIK

1/5/2015

2,849

2,498

31

(14) (17) (19)

Classic H&G Holdings, LLC

March 12, 2020

Provider of Engineered Packaging Solutions

Secured Debt

12.00%

3/12/2025

6,200

6,033

6,200

Preferred Member Units

39

1,440

2,380

(8)

7,473

8,580

Clickbooth.com, LLC

(10)

December 5, 2017

Provider of Digital Advertising Performance Marketing Solutions

Secured Debt

9.50% (L+8.50%, Floor 1.00%)

1/31/2025

7,850

7,731

7,850

(9)

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

LP Interests (CTEF I, LP)

375

-

67

Corel Corporation

(11) (13) (21)

July 13, 2020

Publisher of Desktop and Cloud-based Software

Secured Debt

5.23% (L+5.00%)

7/2/2026

1,962

1,866

1,934

Datacom, LLC

May 30, 2014

Technology and Telecommunications Provider

Secured Debt

8.00%

5/31/2021

200

200

179

(14)

Secured Debt

10.50% PIK

5/31/2021

1,376

1,369

1,159

(14) (19)

Class A Preferred Member Units

-

144

-

Class B Preferred Member Units

717

670

-

2,383

1,338

Digital River, Inc.

(11)

February 24, 2015

Provider of Outsourced e-Commerce Solutions and Services

Secured Debt

8.00% (L+7.00%, Floor 1.00%)

2/12/2023

8,377

8,344

8,335

(9)

DTE Enterprises, LLC

(10)

April 13, 2018

Industrial Powertrain Repair and Services

Secured Debt

10.00% (L+8.50%, Floor 1.50%)

4/13/2023

9,324

9,225

9,011

(9)

Class AA Preferred Member Units (non-voting)

10.00% PIK

951

951

(8) (19)

Class A Preferred Member Units

776,316

776

880

10,952

10,842

Dynamic Communities, LLC

(10)

July 17, 2018

Developer of Business Events and Online Community Groups

Secured Debt

12.50% (6.25% Cash, 6.25% PIK) (L+11.50%, Floor 1.00%)

7/17/2023

5,425

5,364

5,020

(9) (19)

26


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

EPIC Y-Grade Services, LP

(11)

June 22, 2018

NGL Transportation & Storage

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

6/30/2027

6,944

6,855

5,798

(9)

GoWireless Holdings, Inc.

(11)

December 31, 2017

Provider of Wireless Telecommunications Carrier Services

Secured Debt

7.50% (L+6.50%, Floor 1.00%)

12/22/2024

14,083

13,998

13,970

(9)

Gexpro Services

(10)

February 24, 2020

Distributor of Industrial and Specialty Parts

Secured Debt

8.00% (L+6.50%, Floor 1.50%)

2/24/2025

12,506

12,202

12,408

(9)

HDC/HW Intermediate Holdings

(10)

December 21, 2018

Managed Services and Hosting Provider

Secured Debt

8.50% (L+7.50%, Floor 1.00%)

12/21/2023

1,951

1,926

1,883

(9)

Hunter Defense Technologies, Inc.

(10)

March 29, 2018

Provider of Military and Commercial Shelters and Systems

Secured Debt

8.00% (L+7.00%, Floor 1.00%)

3/29/2023

16,583

16,416

16,583

(9)

HW Temps LLC

July 2, 2015

Temporary Staffing Solutions

Secured Debt

12.00%

3/29/2023

2,450

2,420

2,248

Hyperion Materials & Technologies, Inc.

(11) (13)

September 12, 2019

Manufacturer of Cutting and Machine Tools & Specialty Polishing Compounds

Secured Debt

6.50% (L+5.50%, Floor 1.00%)

8/28/2026

7,425

7,299

6,938

(9)

Implus Footcare, LLC

(10)

June 1, 2017

Provider of Footwear and Related Accessories

Secured Debt

8.75% (L+7.75%, Floor 1.00%)

4/30/2024

17,264

17,113

15,694

(9)

Independent Pet Partners Intermediate Holdings, LLC

(10)

November 20, 2018

Omnichannel Retailer of Specialty Pet Products

Secured Debt

6.00% PIK

11/20/2023

9,944

8,992

8,992

(19)

Preferred Stock (non-voting)

2,470

2,470

Preferred Stock (non-voting)

-

-

Member Units

1,191,667

1,192

-

12,654

11,462

Industrial Services Acquisition, LLC

(10)

June 17, 2016

Industrial Cleaning Services

Unsecured Debt

13.00% (6.00% Cash, 7.00% PIK)

12/17/2022

12,892

12,871

12,892

(19)

Preferred Member Units

336

10.00% PIK

202

202

(8) (19) (30)

Preferred Member Units

187

20.00% PIK

124

124

(8) (19) (30)

Member Units

2,100

2,100

1,237

(30)

15,297

14,455

Interface Security Systems, L.L.C

(10)

August 7, 2019

Commercial Security & Alarm Services

Secured Debt

11.75% (8.75% Cash, 3.00% PIK) (3.00% PIK + L+7.00%, Floor 1.75%)

8/7/2023

7,266

7,168

7,266

(9) (19)

27


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Intermedia Holdings, Inc.

(11)

August 3, 2018

Unified Communications as a Service

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

7/19/2025

3,480

3,456

3,478

(9)

Invincible Boat Company, LLC.

(10)

August 28, 2019

Manufacturer of Sport Fishing Boats

Secured Debt

8.00% (L+6.50%, Floor 1.50%)

8/28/2025

8,876

8,797

8,876

(9)

Isagenix International, LLC

(11)

June 21, 2018

Direct Marketer of Health & Wellness Products

Secured Debt

6.75% (L+5.75%, Floor 1.00%)

6/14/2025

5,572

5,533

3,130

(9)

Jackmont Hospitality, Inc.

(10)

May 26, 2015

Franchisee of Casual Dining Restaurants

Secured Debt

7.75% (L+6.75%, Floor 1.00%)

5/26/2021

7,908

7,906

6,315

(9)

Joerns Healthcare, LLC

(11)

April 3, 2013

Manufacturer and Distributor of Health Care Equipment & Supplies

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

8/21/2024

3,336

3,294

3,336

(9)

Common Stock

392,514

3,678

2,322

6,972

5,658

Kemp Technologies Inc.

(10)

June 27, 2019

Provider of Application Delivery Controllers

Secured Debt

7.50% (L+6.50%, Floor 1.00%)

3/29/2024

7,388

7,280

7,388

(9)

Knight Energy Services LLC

(11)

November 14, 2018

Oil and Gas Equipment & Services

Secured Debt

8.50% PIK

2/9/2024

828

882

745

(17) (19)

Common Stock

25,692

1,843

-

-

2,725

745

-

Kore Wireless Group Inc.

(11)

December 31, 2018

Mission Critical Software Platform

Secured Debt

5.75% (L+5.50%)

12/20/2024

6,000

5,979

5,917

Larchmont Resources, LLC

(11)

August 13, 2013

Oil & Gas Exploration & Production

Secured Debt

11.00% PIK (L+10.00% PIK, Floor 1.00%)

8/9/2021

3,715

3,780

1,672

(9) (19)

Member Units

4,806

601

192

(30)

4,381

1,864

Laredo Energy VI, LP

(10)

January 15, 2019

Oil & Gas Exploration & Production

Member Units

1,155,952

11,560

10,238

Lightbox Holdings, L.P.

(11)

May 23, 2019

Provider of Commercial Real Estate Software

Secured Debt

5.15% (L+5.00%)

5/9/2026

4,925

4,864

4,777

LL Management, Inc.

(10)

May 2, 2019

Medical Transportation Service Provider

Secured Debt

8.25% (L+7.25%, Floor 1.00%)

9/25/2023

13,581

13,485

13,581

(9)

Logix Acquisition Company, LLC

(10)

June 24, 2016

Competitive Local Exchange Carrier

Secured Debt

6.75% (L+5.75%, Floor 1.00%)

12/22/2024

12,620

12,560

11,673

(9)

28


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

LSF9 Atlantis Holdings, LLC

(11)

May 17, 2017

Provider of Wireless Telecommunications Carrier Services

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

5/1/2023

12,600

12,555

12,561

(9)

Lulu's Fashion Lounge, LLC

(10)

August 31, 2017

Fast Fashion E-Commerce Retailer

Secured Debt

10.50% (8.00% Cash, 2.50% PIK) (2.50% PIK + L+7.00%, Floor 1.00%)

8/28/2022

5,622

5,539

4,807

(9) (19)

Lynx FBO Operating LLC

(10)

September 30, 2019

Fixed Based Operator in the General Aviation Industry

Secured Debt

7.25% (L+5.75%, Floor 1.50%)

9/30/2024

13,613

13,370

13,521

(9)

Member Units

3,704

500

594

13,870

14,115

Mac Lean-Fogg Company

(10)

April 22, 2019

Manufacturer and Supplier for Auto and Power Markets

Secured Debt

5.63% (L+5.00%, Floor 0.625%)

12/22/2025

7,375

7,332

7,375

(9)

Preferred Stock

13.75% (4.50% Cash, 9.25% PIK)

1

793

780

(8) (19)

8,125

8,155

Mills Fleet Farm Group, LLC

(10)

October 24, 2018

Omnichannel Retailer of Work, Farm and Lifestyle Merchandise

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

10/24/2024

13,875

13,599

13,623

(9)

NinjaTrader, LLC

(10)

December 18, 2019

Operator of Futures Trading Platform

Secured Debt

8.25% (L+6.75%, Floor 1.50%)

12/18/2024

16,875

16,520

16,828

(9)

NNE Partners, LLC

(10)

March 2, 2017

Oil & Gas Exploration & Production

Secured Debt

9.48% (4.75% Cash, 4.50% PIK) (4.50% PIK + L+4.75%)

12/31/2023

20,649

20,590

18,331

(19)

Novetta Solutions, LLC

(11)

June 21, 2017

Provider of Advanced Analytics Solutions for Defense Agencies

Secured Debt

6.00% (L+5.00%, Floor 1.00%)

10/17/2022

14,668

14,504

14,638

(9)

NTM Acquisition Corp.

(11)

July 12, 2016

Provider of B2B Travel Information Content

Secured Debt

8.25% (7.25% Cash, 1.00% PIK) (1.00% PIK + L+6.25%, Floor 1.00%)

6/7/2024

4,347

4,332

3,912

(9) (19)

PricewaterhouseCoopers Public Sector LLP

(11)

May 24, 2018

Provider of Consulting Services to Governments

Secured Debt

8.15% (L+8.00%)

5/1/2026

14,100

14,063

14,100

RM Bidder, LLC

(10)

November 12, 2015

Scripted and Unscripted TV and Digital Programming Provider

Warrants

218,601

10/20/2025

284

-

(26)

Member Units

1,854

31

17

315

17

29


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

Salient Partners L.P.

(11)

June 25, 2015

Provider of Asset Management Services

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

8/31/2021

6,450

6,505

4,542

(9)

Signal Peak CLO 7, Ltd. (Mariner)

(12) (13)

May 8, 2019

Structured Finance

Subordinated Structured Notes

8.30%

4/30/2032

25,935

21,705

19,300

-

Slick Innovations, LLC

September 13, 2018

Text Message Marketing Platform

Secured Debt

13.00%

9/13/2023

1,430

1,241

1,430

Common Stock

17,500

175

330

Warrants

4,521

9/13/2028

45

90

(27)

1,461

1,850

-

TGP Holdings III LLC

(11)

September 30, 2017

Outdoor Cooking & Accessories

Secured Debt

9.50% (L+8.50%, Floor 1.00%)

9/25/2025

5,000

5,000

4,825

(9)

The Pasha Group

(11)

February 2, 2018

Diversified Logistics and Transportation Provided

Secured Debt

9.00% (L+8.00%, Floor 1.00%)

1/26/2023

7,031

6,916

6,451

(9)

USA DeBusk LLC

(10)

October 22, 2019

Provider of Industrial Cleaning Services

Secured Debt

6.75% (L+5.75%, Floor 1.00%)

10/22/2024

16,632

16,373

16,394

(9)

U.S. TelePacific Corp.

(11)

September 14, 2016

Provider of Communications and Managed Services

Secured Debt

6.50% (L+5.50%, Floor 1.00%)

5/2/2023

12,500

12,329

11,328

(9)

Vida Capital, Inc

(11)

October 10, 2019

Alternative Asset Manager

Secured Debt

6.15% (L+6.00%)

10/1/2026

7,238

7,145

7,002

Vistar Media, Inc.

(10)

February 17, 2017

Operator of Digital Out-of-Home Advertising Platform

Secured Debt

12.00% (8.50% Cash, 3.50% PIK) (3.50% PIK + L+7.50%, Floor 1.00%)

4/3/2023

4,656

4,550

4,656

(9) (19)

Preferred Stock

70,207

767

910

Warrants

69,675

4/3/2029

-

920

(25)

5,317

6,486

Volusion, LLC

January 26, 2015

Provider of Online Software-as-a-Service eCommerce Solutions

Secured Debt

11.50%

1/26/2020

8,672

8,646

8,247

(17)

Unsecured Convertible Debt

8.00%

11/16/2023

175

175

124

Preferred Member Units

2,090,001

6,000

2,570

Warrants

784,867

1/26/2025

1,104

-

(27)

15,925

10,941

White Cap Parent, LLC

(10)

December 29, 2016

Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry Contractors

Member Units

5,637

8,617

30


Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

Portfolio Company (1) (20)

Investment Date (24)

Business Description

Type of Investment (2) (3) (15)

Shares/Units

Rate

Maturity Date

Principal (4)

Cost (4)

Fair Value (18)

YS Garments, LLC

(11)

August 22, 2018

Designer and Provider of Branded Activewear

Secured Debt

7.00% (L+6.00%, Floor 1.00%)

8/9/2024

6,998

6,951

6,457

(9)

Subtotal Non-Control/Non-Affiliate Investments (109.4% of net assets at fair value)

$

678,764

$

634,001

Total Portfolio Investments, December 31, 2020 (142.4% of net assets at fair value)

$

840,656

$

825,522

Short Term Investments (33)

Fidelity Institutional Money Market Funds (34)

Prime Money Market Portfolio

$

3,989

$

3,989

US Bank Money Market Account (34)

40,217

40,217

Total Short Term Investments

$

44,206

$

44,206


(1)

All investments are Lower Middle Market portfolio investments, unless otherwise noted. See C.2 for a description of Lower Middle Market portfolio investments. All of the Company’s investments, unless otherwise noted, are encumbered either as security for the Company’s Credit Facility.

(2)

Debt investments are income producing, unless otherwise noted. Equity and warrants are non-income producing, unless otherwise noted.

(3)

See C.2 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.

(5)

Control investments are defined by the Investment Company Act of 1940, as amended ("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.

(6)

Affiliate investments are defined by the 1940 Act as investments in which between 5% and 25% (inclusive) of the voting securities are owned and the investments are not classified as Control investments.

(7)

Non-Control/Non-Affiliate investments are defined by the 1940 Act as investments that are neither Control investments nor Affiliate investments.

(8)

Income producing through dividends or distributions.

(9)

Index based floating interest rate is subject to contractual minimum interest rate, or floors.

(10)

Private Loan portfolio investment. See C.2 for a description of Private Loan portfolio investments.

(11)

Middle Market portfolio investment. See C.2 for a description of Middle Market portfolio investments.

(12)

Other Portfolio investment. See C.2 for a description of Other Portfolio investments.

(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 investment.

(15)

All of the Company’s portfolio investments are generally subject to restrictions on resale as “restricted securities.”

(16)

Not used

(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 C.1 for further discussion.

(19)

PIK interest income and cumulative dividend income represent income not paid currently in cash.

(20)

All portfolio company headquarters are based in the United States, unless otherwise noted.

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Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

(21)

Portfolio company headquarters are located outside of the United States.

(22)

Not used

(23)

Not used

(24)

Investment date represents the date of initial investment in the portfolio company.

(25)

Warrants are presented in equivalent shares with a strike price of $10.92 per share.

(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)

Not used

(29)

Not used

(30)

Shares/Units represent ownership in an underlying Real Estate or HoldCo entity.

(31)

Investment is not unitized. Presentation is made in percent of fully diluted ownership unless otherwise indicated.

(32)

Not used

(33)

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. These short term investments are included as Cash and cash equivalents.

(34)

Effective yield as of December 31, 2020 was approximately .05% at US Bank Money Market Account and .01% at Fidelity Institutional Money Market Funds.

32


MSC Income Fund, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A—ORGANIZATION AND BASIS OF PRESENTATION

1.           Organization

MSC Income Fund, Inc. (formerly known as HMS Income Fund, Inc. (the “Company”through October 30, 2020) (“MSC Income Fund”) are encumbered as security for the Company’s credit agreements. See Note 5 - 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) Affiliate investments are defined by the 1940 Act, 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.
(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.
(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 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, 2016, approximately 13.8% of the Company’s total assets 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, 2016. Settlement occurred or is scheduled to occur after December 31, 2016. 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, 2016.
(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, 2016 was approximately 0.01%.
(22) The 1 week and 1, 2, 3 and 6 month LIBOR rates were 0.72%, 0.77%, 0.82%, 1.00% and 1.32%, respectively, as of December 31, 2016. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2016, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2016. The prime rate was 3.75% as of December 31, 2016.


See notes to the condensed consolidated financial statements.



HMS Income Fund, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

Note 1 – Principal Business and Organization

HMS Income Fund, Inc. (together(collectively with its consolidated subsidiaries, the “Company”) was formed as a Maryland corporation on November 28, 2011 under the General Corporation Law of the State of Maryland. The Company is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a business development company, or BDC, under the Investment Company Act of 1940, Act. The Companyas amended (the “1940 Act”). MSC Income Fund 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, MSC Income Fund generally will 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 objective of the Company is to generate current dividend income and long-term capital appreciation through suchdirect equity investments 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 debt securities issued by middle market (“Middle Market”) companies that are generally larger in size than the LMM companies, with annual revenues typically between $10 million and $3 billion. Ourcompanies. The Company’s LMM and Middle Market portfolio investments generally range in size from $1 million to $15 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, 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 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 September 30, 2017, the Company raised approximately $172.0 million in the Offering, including proceeds from the distribution reinvestment plan of approximately $45.4 million.

The Company

MSC Income Fund has three wholly-ownedsix wholly owned subsidiaries. HMS Funding I LLC (“HMS Funding”) and, MSIF Funding LLC (“MSIF Funding”), MSC Equity Holding, LLC (“MSC Equity Holding”) (formerly known as HMS Equity Holding, LLC) and MSC California Holdings GP LLC (“MSC California Holdings GP”) (formerly known as HMS Equity Holding”) were bothCalifornia Holdings, GP LLC) are each organized as Delaware limited liability companies, andMSC Equity Holding II, Inc. (“MSC Equity Holding II”) (formerly known as HMS Equity Holding II, Inc. (“HMS Equity Holding II”) wasis organized as a Delaware corporation.corporation and MSC California Holdings LP (“MSC California Holdings”) (formerly known as HMS California Holdings LP) is organized as a Delaware limited partnership. MSC Equity Holding and MSC Equity Holding II, (the “Taxable Subsidiaries”), which have elected to be taxable entities, primarily hold equity investments in portfolio companies which are “pass through” entities for tax purposes. HMS Funding was created pursuant toin connection with the EverBankDeutsche Bank Credit Facility (as defined below in Note 5 - Borrowings) in order to function as a “Structured Subsidiary,” which is permitted to incur debt outside of the EverBankTIAA Credit Facility since it is not a guarantor under the EverBankTIAA Credit Facility. HMS Equity HoldingMSIF Funding was created on December 1, 2020 in connection with the JPM SPV Facility to function as a “Structured Subsidiary,” which is permitted to incur debt outside of the TIAA Credit Facility since it is not a guarantor under the TIAA Credit Facility. The Deutsche Bank Credit Facility, the TIAA Credit Facility, the JPM SPV Facility and HMS Equity Holding II, which have electedthe Main Street Capital Term Loan (each defined below in “Note E- Debt”) are collectively referred to be taxable entities, primarily hold equity investments in certain portfolio companies which are “pass through” entities for tax purposes.herein as our “Credit Facilities”.

Unless otherwise noted or the context otherwise indicates, the terms “we,” “us,” “our,” and the “Company” refer to MSC Income Fund and its consolidated subsidiaries.


33


The

Prior to October 30, 2020, the business of the Company iswas managed by HMS Adviser LP (the “Adviser”(“HMS 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“Original Investment Advisory Agreement”). ThePrior to October 30, 2020, the Company and theHMS Adviser have retained MSC Adviser I, LLC (the “Sub-Adviser”(“MSC 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 theHMS Adviser, monitor the Company’s investment portfolio and provide certain ongoing administrative services to theHMS Adviser. TheHMS Adviser and the Sub-AdviserMSC 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 theHMS Adviser, to serve as the Dealer Manager for previously offered and sold shares of its common stock on a continuous basis pursuant to registration statements on Form N-2 that were filed with and declared effective by the Offering.SEC.

HMS Adviser entered into an asset purchase agreement, dated June 26, 2020 (the “Purchase Agreement”), with MSC Adviser, Main Street (solely for the purposes set forth in the Purchase Agreement) and Hines (solely for the purposes set forth in the Purchase Agreement). The Dealer Manager is responsible for marketingPurchase Agreement contemplated that, subject to approval by the Company’s common stock.




Note 2 –Board of Directors and the Company’s stockholders, the Company would enter into the Investment Advisory and Administrative Services Agreement with MSC Income Fund as sole investment adviser (the “Investment Advisory Agreement”) and that the Original Investment Advisory Agreement and the Sub-Advisory Agreement would terminate concurrently therewith.

On June 29, 2020, the Company’s Board of Directors, including all of its independent directors, unanimously approved and recommended to the stockholders of the Company for approval the Investment Advisory Agreement. On October 28, 2020, the Company’s stockholders approved the Investment Advisory Agreement to take effect upon the closing of the transactions contemplated by the Purchase Agreement (collectively, the “Transaction”). Upon the closing of the Transaction on October 30, 2020, the Company entered into the Investment Advisory Agreement with MSC Adviser and MSC Adviser became the sole investment adviser to the Company. See “Note J — Related Party Transactions” for additional information regarding the Investment Advisory Agreement.

2.           Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Company is an investment company following accounting and Summaryreporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies (“ASC 946”). For each of Significant Accounting Policies

Basisthe periods presented herein, the Company’s consolidated financial statements include the accounts of PresentationMSC Income Fund and Consolidation
its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of the Company’s investments in Private Loan portfolio companies, LMM portfolio companies, Middle Market portfolio companies and Other Portfolio investments (see “Note C.2” for additional discussion of the Company’s Investment Portfolio). The Company’s results of operations and cash flows for the three months ended March 31, 2021 and 2020, and financial position as of March 31, 2021 and December 31, 2020, are presented on a consolidated basis. The effects of all intercompany transactions between MSC Income Fund and its consolidated subsidiaries have been eliminated in consolidation.

The accompanying condensedunaudited consolidated financial statements of the Company have beenare presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the instructionsopinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results to Form 10-Qbe expected for the full year. Also, the unaudited financial statements and accounting principles generally acceptednotes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2020. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures

34


reported in the United States of America (“GAAP”)financial statements and includeaccompanying notes. Such estimates and assumptions could change in the accounts offuture as more information becomes known, which could impact the amounts reported and disclosed herein.

Certain prior period information has been reclassified to conform to the current period presentation. The reclassification has no effect on the Company’s wholly-owned consolidated subsidiaries, HMS Funding, HMS Equity Holding and HMS Equity Holding II. All intercompany accounts and transactions have been eliminated in consolidation. financial position or the consolidated results of operations as previously reported.

Principles of Consolidation

Under the 1940 Act rules, regulations pursuant to Articles 6 and 10 of Regulation S-X and TopicASC 946,Financial Services- Investment Companies, of the Accounting Standards Codification, as amended (the “ASC”), of the Financial Accounting Standards Board (the “FASB”), the Company is precluded from consolidating portfolio companyother entities in which it has equity investments, including those in which the Companyit 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 ownsholds a controlledcontrolling interest in an operating company whose purpose is to providethat provides all or substantially all of its services directly to the Company suchor to its portfolio companies. The Company has determined that none of its portfolio investments qualify for this exception as an investment adviser or transfer agent. None of March 31, 2021. Accordingly, as noted above, the Company’s investments qualifiesconsolidated financial statements include the financial position and operating results for this exception.its wholly-owned subsidiaries, including the Taxable Subsidiaries. Therefore, the Company’s portfolio company investments, including those in which the Company has a controlling interest, areInvestment Portfolio is carried on the Condensed Consolidated Balance Sheetconsolidated balance sheet at fair value, as discussed below,further in Note B.1., with changesany adjustments to fair value recognized as “Net Unrealized Appreciation (Depreciation)” on the Condensed Consolidated Statementsconsolidated statements of Operationsoperations until the investment is realized, usually upon exit, resulting in any gain or loss on exit being recognized as a realized gain“Net Realized Gain (Loss).”

Portfolio Investment Classification

The Company classifies its Investment Portfolio in accordance with the requirements of the 1940 Act. Under the 1940 Act, (a) “Control Investments” are defined as investments in which the Company owns more than 25% of the voting securities or loss. However,has rights to maintain greater than 50% of the board representation, (b) “Affiliate Investments” are defined as investments in which the Company owns between 5% and 25% (inclusive) of the voting securities and does not have rights to maintain greater than 50% of the board representation, and (c) “Non-Control/Non-Affiliate Investments” are defined as investments that are neither Control Investments nor Affiliate Investments. For purposes of determining the classification of its Investment Portfolio, the Company has excluded consideration of any voting securities or board appointment rights held by Main Street and other funds advised by Main Street.

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.           Valuation of the Investment Portfolio

The Company accounts for its Investment Portfolio at fair value. As a result, the Company follows the provisions of 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 the Company to assume that the portfolio investment is to be sold in the eventprincipal 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. Pursuant to its internal valuation process and the requirements under the 1940 Act, the Company performs valuation procedures on each of its portfolio investments quarterly.

The Company’s portfolio strategy calls for it to invest primarily in illiquid debt and equity securities issued by privately held, LMM companies and more liquid debt securities issued by 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 portfolio investments, which are primarily debt securities in privately held companies that have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as “club deals.” 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 investments which primarily consist of investments that are not consistent with the typical profiles for its LMM portfolio investments, Middle Market portfolio investments or Private

35


Loan portfolio investments, including investments which may be managed by third parties. The Company’s portfolio investments may be subject to restrictions on resale.

Private Loan investments may include investments which have no established trading market or have established markets that are not active. LMM investments and Other Portfolio investments (excluding the Company’s investment in Signal Peak CLO 7, Ltd. (the “Signal CLO”)) generally have no established trading market while Middle Market investments and the Signal CLO generally have established markets that are not active. The Company determines in good faith the fair value of its Investment Portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved by its Board of Directors and in accordance with the 1940 Act. The Company’s valuation policies and processes are intended to provide a consistent basis for determining the fair value of the Company’s Investment Portfolio.

For LMM portfolio investments, the Company 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”) for its LMM debt investments. For Middle Market portfolio investments, the Company primarily uses quoted prices in the valuation process. The Company determines the appropriateness of the use of third-party broker quotes, if any, controlled subsidiary exceedsin determining fair value based on its understanding of the testslevel of significanceactual 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. 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 Company generally calculates the fair value of the investment primarily based on the net asset value (“NAV”) of the 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’s portfolio investments estimate the value of the investment as if the Company were to sell, or exit, the investment as of the measurement date.

These valuation approaches consider the value associated with the Company’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 the Company 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 the Company 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 Company 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 allocating 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, other than through a forced or liquidation sale. Typically, privately 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 Company analyzes various factors including the portfolio company’s historical and projected financial results. Due to SEC deadlines for the Company’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 from the Company’s management. In addition, projecting future financial results requires significant judgment regarding future growth assumptions. In evaluating the operating results, the Company also analyzes the impact of exposure to litigation, loss of customers or other contingencies. After determining the appropriate enterprise value, the Company allocates the

36


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 Company assumes the loans are paid off at the principal amount in a change in control transaction and are not assumed by the buyer, which the Company believes is consistent with its past transaction history and standard industry practices.

Under the Yield-to-Maturity valuation method, the Company 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 Rules 3-09 or 4-08(g)the associated loan agreements, as well as the financial position and credit risk of Regulation S-X,the portfolio company. The Company’s estimate of the expected repayment date of its debt securities is generally the maturity date of the instrument, as the Company 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 and other factors. The Company will include required financial informationgenerally use the value determined by the Yield-to-Maturity analysis as the fair value for such subsidiarythat security; however, because of the Company’s general intent to hold its loans to maturity, the fair value will not exceed the principal amount of the debt security valued using the Yield-to-Maturity valuation method. A change in the notesassumptions that the Company 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 Company 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 Company measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date and adjusts the investment’s fair value for factors known to the Company that would affect that fund’s NAV, including, but not limited to, fair values for individual investments held by the fund if the Company holds the same investment or for a publicly traded investment. In addition, in determining the fair value of the investment, the Company considers whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of the Company’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 attachmentimplied market return on equity required by market participants, or other uncertainties surrounding the Company’s ability to realize the full NAV of its interests in the investment fund.

For valuation purposes, all of the Company’s Private Loan portfolio investments are non-control investments. For Private Loan portfolio investments 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 such Private Loan debt investments in a 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 condensed consolidatedinternal valuation process, in arriving at estimates of fair value for its investments in its Private Loan portfolio companies, the Company, among other things, consults with a nationally recognized independent financial statements.advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations and an assurance certification regarding the Company’s determinations of the fair value of its Private Loan portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to the Company’s investments in each Private Loan portfolio company at least once every calendar year, and for the Company’s investments in new Private Loan portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, the Company 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 financial advisory services firm on its investments in one or more Private Loan portfolio companies. Such instances include, but are not limited to, situations where the fair value of the Company’s investment in a Private Loan portfolio company is determined to be insignificant relative to the total Investment Portfolio. The Company consulted with and received an assurance certification from its independent financial advisory services firm in arriving at its determination of fair value on its investments in a total of seven Private Loan portfolio companies for the three months ended March 31, 2021, representing approximately 21% of the total Private Loan portfolio at fair value as of March 31, 2021, and on a total of nine Private Loan portfolio companies for the three months ended March 31, 2020,


37


representing approximately 20% of the total Private Loan portfolio at fair value as of March 31, 2020. Excluding its investments in Private Loan portfolio companies that, as of March 31, 2021 and 2020, 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, the percentage of the Private Loan portfolio reviewed and certified by its independent financial advisory services firm for the three months ended March 31, 2021 and 2020 was 23% and 25% of the total Private Loan portfolio at fair value as of March 31, 2021 and 2020, respectively.

In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its LMM portfolio companies, the Company, among other things, consults with a nationally recognized independent financial advisory services firm. The unaudited condensednationally recognized independent financial advisory services firm analyzes and provides observations, recommendations and an assurance certification regarding the Company’s determinations of the fair value of its LMM portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to the Company’s investments in each LMM portfolio company at least once every calendar year, and for the Company’s investments in new LMM portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, the Company 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 financial advisory services firm on its investments in one or more LMM portfolio companies. Such instances include, but are not limited to, situations where the fair value of the Company’s investment in a LMM portfolio company is determined to be insignificant relative to the total Investment Portfolio. The Company consulted with and received an assurance certification from its independent financial advisory services firm in arriving at the Company’s determination of fair value on its investments in a total of nine LMM portfolio companies for the three months ended March 31, 2021, representing approximately 28% of the total LMM portfolio at fair value as of March 31, 2021, and on a total of nine LMM portfolio companies for the three months ended March 31, 2020, representing approximately 31% of the total LMM portfolio at fair value as of March 31, 2020. Excluding its investments in LMM portfolio companies that, as of March 31, 2021 and 2020, 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, the percentage of the LMM portfolio reviewed and certified by its independent financial advisory services firm for the three months ended March 31, 2021 and 2020  was 30% and 35% of the total LMM portfolio at fair value as of March 31, 2021 and 2020, respectively.

For valuation purposes, all of the Company’s Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, the Company 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, the Company 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. Because the vast majority of the Middle Market portfolio investments are typically valued using third-party quotes or other independent pricing services (including 92% and 88% of the Middle Market portfolio investments as of March 31, 2021 and December 31, 2020, respectively), the Company generally does not consult with any financial advisory services firms in connection with determining the fair value of its Middle Market investments.

For valuation purposes, all of the Company’s Other Portfolio investments are non-control investments. The Company’s Other Portfolio investments comprised 5.5% and 6.1% of the Company’s Investment Portfolio at fair value as of March 31, 2021 and December 31, 2020, respectively. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments, except for the Signal CLO, are generally not readily available. For its Other Portfolio equity investments, except for the Signal CLO, the Company generally determines the fair value of these investments using the NAV valuation method. For the Signal CLO, the Company determines the appropriateness of the use of the third-party broker quote 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.

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Due to the inherent uncertainty in the valuation process, the Company’s determination of fair value for its 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. The Company determines the fair value of each individual investment and records changes in fair value as unrealized appreciation or depreciation.

MSC Adviser, the Company’s investment adviser, uses an internally developed portfolio investment rating system in connection with its investment oversight, portfolio management and analysis and investment valuation procedures for the Company’s LMM portfolio companies. This system takes into account both quantitative and qualitative factors of the LMM portfolio company and the investments held therein.

The Board of Directors of the Company has the final responsibility for overseeing, reviewing and approving, in good faith, the Company’s determination of the fair value for its Investment Portfolio, as well as its valuation procedures, consistent with 1940 Act requirements. The Company believes its Investment Portfolio as of March 31, 2021 and December 31, 2020 approximates fair value as of those dates based on the markets in which the Company 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., the consolidated financial statements reflect all normal recurring adjustments, which are,include investments in the opinionInvestment Portfolio whose values have been estimated by the Company with the oversight, review and approval by the Company’s Board of management, necessaryDirectors 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 fair presentationsecurities existed.

The COVID-19 pandemic, and the related effect on the U.S. and global economies, has impacted, and threatens to continue to impact, the businesses and operating results of certain of the Company’s resultsportfolio companies, as well as market interest rate spreads. As a result of these and other current effects of the COVID-19 pandemic, as well as the uncertainty regarding the extent and duration of its impact, the valuation of the Company’s Investment Portfolio has been experiencing increased volatility since the beginning of the COVID-19 pandemic.

3.           Cash, Cash Equivalents and Restricted Cash

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. Cash and cash equivalents are carried at cost, which approximates fair value.

At March 31, 2021, cash balances totaling $2.7 million exceeded Federal Deposit Insurance Corporation insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company’s cash deposits are held at large established high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote. At March 31, 2021, the Company had investments in short-term money market accounts totaling $25.9 million classified as cash equivalents.

Amounts included in restricted cash at December 31, 2020 represented balances in the cash accounts held at HMS Funding, which had been set aside pursuant to an amendment to the Deutsche Bank Credit Facility effective April 24, 2020 (see Note E — Debt) (i) as a reserve for the interim periods presented. The results of operations for interim periods are not indicative of resultsdraws on unfunded commitments related to investments held by HMS Funding or (ii) to be expected forapplied against outstanding advances on the full year.facility. On February 3, 2021, the Deutsche Bank Credit Facility was fully repaid through the use of restricted cash and proceeds from borrowings under the JPM SPV Facility and accordingly, the Company has no other restrictions on cash (or restricted cash requirement) upon the extinguishment of the Deutsche Bank Credit Facility.


39


Amounts as of December 31, 2016 included in the unaudited condensed consolidated financial statements have been derived from the Company’s audited consolidated financial statements as of that date. All intercompany accounts

4.            Interest, Dividend and transactions have been eliminated in consolidation. Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. Fee Income

The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, these financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on March 7, 2017.

Reclassifications

Certain amounts in the Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of Cash Flows related to base management fees payable and directors’ fees payable have been disaggregated from due to affiliates and accounts payable and other liabilities, respectively, as of September 30, 2017. Certain amounts in the Condensed Consolidated Statements of Operations related to income taxes have been disaggregated from other general and administrative expenses as of September 30, 2017. Additionally, the presentation of investment income has been changed to separately stateCompany records interest income, fee income and dividend income in the Condensed Consolidated Statements of Operations. The prior periods have been reclassified to conform to this presentation as of September 30, 2017.

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 the Company are recorded as income upon receipt. Dividend income is recorded whenas dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. AccruedIn accordance with the Company’s valuation policies, the Company 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 if the Company otherwise does not expect the debtor to be able to service all of its debt or other obligations, the debt securityCompany 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 the Company 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, or if a loan or debt security is fully impaired, sold or written off, the Company removes it will be removed from non-accrual status.

As of September 30, 2017,March 31, 2021, the CompanyCompany’s total Investment Portfolio had five debttwo investments in four portfolio companies that were on non-accrual status, including four debt investments in three portfolio companies that were more than 90 days past due. Eachwhich comprised approximately 0.4% of these portfolio companies experienced a significant decline in credit quality raising doubt regarding the Company’s ability to collect the principalits fair value and interest contractually due. Given the credit deterioration1.0% of these portfolio companies, the Company ceased accruing interest income on the non-accrual debt investments and wrote off any previously accrued interest deemed uncollectible. As of September 30, 2017, the Company is not aware of any other material changes to the creditworthiness of the borrowers underlying its debt investments.


cost. As of December 31, 2016,2020, the CompanyCompany’s total Investment Portfolio had five debtthree investments on non-accrual status, which comprised approximately 0.6% of its fair value and 1.3% of its cost.

Interest 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. The Company 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.

The Company 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.


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 actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.8. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though the Company may not have collected the PIK interest and cumulative dividends in cash. For the three months ended March 31, 2021 and 2020, approximately 6.7% and 3.5%, respectively, of the Company’s total investment income was attributable to PIK interest income and cumulative dividend income not paid currently in cash. The Company 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 in arrears is no longer collectible.

As of both September 30, 2017 and December 31, 2016, the Company held 19 investments which contained a PIK provision. As of September 30, 2017, three of the 19 investments with PIK provisions were on non-accrual status. No PIK interest was recorded on these three non-accrual investments during the three and nine months ended September 30, 2017. As of December 31, 2016, two of the 19 investments with PIK provisions were on non-accrual status. No PIK interest was recorded on these investments during the year ended December 31, 2016. For the three months ended September 30, 2017 and 2016, the Company capitalized $58,000 and $131,000, respectively, of PIK interest income. For the nine months ended September 30, 2017 and 2016, the Company capitalized $897,000 and $255,000, respectively, of PIK interest income. The Company stops accruing PIK interest and writes off any accrued and uncollected interest in arrears when it determines that such PIK interest in arrears is no longer collectible.

The Company 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 three months ended September 30, 2017 and 2016, the Company recognized $213,000 and $191,000, respectively, of non-recurring fee income received from its portfolio companies or other third parties, which accounted for approximately 0.8% and 0.9%, respectively, of the Company’s total investment income during such period. For the nine months ended September 30, 2017 and 2016, the Company recognized $1.9 million and $871,000 respectively, of non-recurring fee income received from its portfolio companies or other third parties, which accounted for approximately 2.5% and 1.3%, respectively, of the Company’s total investment income during such period. 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 total investment income the Company received from its Investment Portfolio in each of the periods presented is as follows:

Three Months Ended

March 31, 

    

2021

    

2020

    

(dollars in thousands)

Interest, fee and dividend income:

Interest income

$

16,080

$

21,785

Dividend income

 

3,952

 

1,640

Fee income

 

240

 

575

Total interest, fee and dividend income

$

20,272

$

24,000


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Recent Accounting Pronouncements

5.           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 Credit Facilities (see Note E — Debt) 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.

6.           Equity Offering Costs

In accordance with the Original Investment Advisory Agreement and the Sub-Advisory Agreement, the Company had historically reimbursed HMS Adviser for any offering costs that were 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. In connection with the Transaction, HMS Adviser has agreed to permanently waive its right to receive reimbursement for any and all accrued and unpaid or unreimbursed expenses under the Original Investment Advisory Agreement, except for certain organizational and offering expenses described further in “Note J - Related Party Transactions.

Deferred offering costs were fully amortized to expense upon the closing of the our prior public continuous offering of common stock to new investors. Any future offering costs will be currently expensed as incurred by the Company or as it becomes obligated to reimburse MSC Adviser for such costs.

7.           Unearned Income—Debt Origination Fees and Original Issue Discount and Discounts / Premiums to Par Value

The Company 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 based on the effective interest method over the life of the financing.

In connection with its portfolio debt investments, the Company 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 valued as part of the negotiation process with the particular portfolio company. When the Company 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 based on the effective interest method over the life of the debt investment. The actual collection of this interest is deferred until the time of debt principal repayment.

The Company may purchase debt securities at a discount or at a premium to the par value of the debt security. In the case of a purchase at a discount, the Company records the investment at the 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. In the case of a purchase at a premium, the Company records the investment at the par value of the debt security plus the premium, and the premium is amortized as a reduction to interest income based on the effective interest method over the life of the debt investment.

To maintain RIC tax treatment (as discussed in Note B.8. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though the Company may not have collected the interest income. For the three months ended March 31, 2021 and 2020, approximately 4.8% and 8.4%, respectively, of the Company’s total investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any premium reduction.


41


In May 2014,

8.            Income Taxes

The Company has elected to be treated for U.S. federal income tax purposes as a RIC. The Company’s taxable income includes the FASB issuedtaxable income generated by the Company and certain of its subsidiaries, which are treated as disregarded entities for tax purposes. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that the Company distributes to its stockholders. The Company 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 status (pass-through tax treatment for amounts distributed). As part of maintaining RIC status, undistributed taxable income (subject to a 4% non-deductible U.S. federal excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (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 taxable income was generated.

The Taxable Subsidiaries primarily hold certain portfolio investments for the Company. The Taxable Subsidiaries permit the Company 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 the Company for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in the Company’s consolidated financial statements as portfolio investments and are recorded at fair value. The Taxable Subsidiaries are not consolidated with the Company 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 their normal corporate 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’s consolidated financial statements.

The Taxable Subsidiaries use the liability method in accounting for income 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.

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. Our stockholder’s equity includes 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.

9.         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.

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10.         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 and cash equivalents, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments.

11.         Earnings per Share

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

12.         Recently Issued or Adopted 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 guidancemodifications 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. The Company continues to evaluate the impact that the amendments in this update will have on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligationsits consolidated financial statements and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. disclosures when applied.

In May 2016,2020, the FASB issued ASUSEC published Release No. 2016‑12, Revenue from Contracts33-10786 (the “May 2020 Release”), Amendments to Financial Disclosures about Acquired and Disposed Businesses, announcing its adoption of rules amending Rule 1-02(w)(2) under Regulation S-X used in the determination of a significant subsidiary specific to investment companies, including BDCs. In part, the rules adopted pursuant to the May 2020 Release eliminated the use of the asset test, and amended the income and investment tests for determining whether an unconsolidated subsidiary requires additional disclosure in the footnotes of the financial statements. The Company adopted the rules pursuant to the May 2020 Release during the quarter ended December 31, 2020. The impact of the adoption of these rules on the Company’s consolidated financial statements was not material.

In December 2020, the SEC published Release No. IC-34084 (the “December 2020 Release”) Use of Derivatives by Registered Investment Companies and Business Development Companies, announcing its adoption of Rule 18f-4 and amendment of Rule 6c-11 under the 1940 Act to provide an updated, comprehensive approach to the regulation of registered investment companies’, including BDCs’, use of derivatives and address investor protection concerns. In part, the rules adopted pursuant to the December 2020 Release require that funds using derivatives generally will have to adopt a derivatives risk management program that a derivatives risk manager administers and that the fund’s board of directors oversees, and comply with Customers (Topic 606)-Narrow‑Scope Improvementsan outer limit on fund leverage. Funds that use derivatives only in a limited manner will not be subject to these requirements, but they will have to adopt and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring non-cash consideration,implement policies and certain transition matters. The new guidanceprocedures reasonably designed to manage the fund’s derivatives risks. Funds also will be effective for the annualsubject to 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.and recordkeeping requirements regarding their derivatives use. The Company expectsadopted the rules pursuant to identify similar performance obligations under ASC 606 as compared with deliverables and separate units of account previously identified.the December 2020 Release during the quarter ended March 31, 2021. As a result, the Company expectsis a limited user of derivatives, the timingimpact of its revenue recognition to remain the same.


adoption of these rules on the consolidated financial statements was not material.

From time to time, new accounting pronouncements are issued by the FASB or other standards settingstandard-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.


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Note 3 — Fair Value Hierarchy for Investments

Fair Value Hierarchy

NOTE C—FAIR VALUE HIERARCHY FOR INVESTMENTS AND DEBENTURES—PORTFOLIO COMPOSITION

ASC Topic 820 Fair Value Measurement and Disclosures (“ASC 820”),defines fair value, establishes a hierarchal disclosure framework which prioritizes and ranksfor measuring fair value, establishes a fair value hierarchy based on the level of market price observabilityquality of inputs used in measuringto measure fair value, and enhances disclosure requirements for fair value measurements. The Company accounts for its investments at fair value. Market price observability is affected by a number of factors, including

1.         Fair Value Hierarchy

In accordance with ASC 820, 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.

BasedCompany has categorized its investments based 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 the Company’s balance sheet 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 Company 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—ValuationsInvestments 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 quoted prices for similar assets in active markets, quoted prices for identical or similar assets in non-active markets (for example, thinly traded public companies), pricingthe following:

Quoted prices for similar assets in active markets (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 models whose inputs are observable for substantially the full term of the investment (for example, market interest rate indices); and
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—Investments whose inputsvalues are observable for substantially the full term of the investment, and 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—Valuations 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 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 September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company’s investmentPrivate Loan portfolio was comprisedinvestments primarily consisted of debt securities, equity investments and Other Portfolioin interest-bearing secured debt investments. The fair value determination for these investments primarily consisted of unobservable (Level 3) inputs.


As of September 30, 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 LMM 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 September 30, 2017 and December 31, 2016.

As of September 30, 2017 and December 31, 2016, the Company’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 (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 September 30, 2017 and December 31, 2016.

As of September 30, 2017 and December 31, 2016, the Company’s Private Loan portfolio investments consisted primarily 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’s Private Loan portfolio investments were categorized as Level 3 as of September 30, 2017March 31, 2021 and December 31, 2016.2020.


44


As of September 30, 2017March 31, 2021 and December 31, 2016,2020, all of the Company’s Other PortfolioLMM portfolio investments consisted of illiquid securities issued by private companies.privately held companies and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of the Company’s LMM portfolio investments were categorized as Level 3 as of March 31, 2021 and December 31, 2020.

As of March 31, 2021 and December 31, 2020, the Company’s Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The Company relies primarily on information provided by managers of private investment funds in valuingfair value determination for these investments and considers whether it is appropriate,the Signal CLO consisted of a combination of observable inputs in lightnon-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 relevant circumstances, to valueof the Company’s in Middle Market portfolio investments were categorized as Level 3 as of March 31, 2021 and December 31, 2020.

As of March 31, 2021 and December 31, 2020, the Company’s Other Portfolio investments at(other than the net asset value (“NAV”) reportedSignal CLO) consisted of illiquid securities issued by privately held companies and 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 equity investments were categorized as Level 3 as of September 30, 2017March 31, 2021 and December 31, 2016.


2020.

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;

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;
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
Other factors deemed relevant.

45


The use of significant unobservable inputs creates uncertainty in the measurement of fair value as 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/earnings before interest, tax, depreciation and amortization (“EBITDA”) ratio) applicable to the investment;
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;
Third party pricing for securities with limited observability of inputs determining the pricing; and
Other factors deemed relevant.

The following table presents fair value measurements of the Company’s investments, by major class, as of September 30, 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$
 $
 $866,403
 $866,403
Second lien secured debt investments
 
 108,411
 108,411
Unsecured debt investments
 
 11,131
 11,131
Equity investments(1)

 
 104,761
 104,761
Total$
 $
 $1,090,706
 $1,090,706
(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 September 30, 2017 (dollars in thousands):
 Fair Value Measurements
 Level 1 Level 2 Level 3 Total
LMM portfolio investments$
 $
 $138,943
 $138,943
Private Loan investments
 
 313,734
 313,734
Middle Market investments
 
 591,683
 591,683
Other Portfolio investments
 
 46,346
 46,346
Total$
 $
 $1,090,706
 $1,090,706

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’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 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on March 7, 2017) 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 the Company’s LMM, Middle Market and Private Loan securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (see “Note B.1.—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.



The following table, which is not intended to be all inclusive, presentstables provide a summary of the significant unobservable inputs ofused to fair value the Company’s Level 3 portfolio investments as of September 30, 2017 (dollars in thousands):March 31, 2021 and December 31, 2020:

   

Fair Value as of

   

   

   

   

   

March 31, 

 

Type of

2021

Significant

Weighted

 

Investment

 

(in thousands)

Valuation Technique

Unobservable Inputs

Range

Average(3)

Median(3)

Equity investments

$

185,855

 

Discounted cash flow

 

WACC

 

11.4% - 19.9%

 

14.1

%

15.2

%

 

Market comparable / Enterprise Value

 

EBITDA multiple(1)

 

4.9x - 8.5x(2)

 

6.9x

 

6.4x

Debt investments

$

464,730

 

Discounted cash flow

 

Risk adjusted discount factor

 

6.6% - 15.0%(2)

 

10.4

%

10.0

%

 

Expected principal recovery percentage

 

1.1% - 100.0%

 

99.6

%

100.0

%

Debt investments

$

199,147

 

Market approach

 

Third‑party quote

 

45.5 - 100.4

 

94.5

 

99.1

Total Level 3 investments

$

849,732


(1)EBITDA may include pro forma adjustments and/or other addbacks based on specific circumstances related to each investment.
(2)Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 4.0x - 11.9x and the range for risk adjusted discount factor is 5.1% - 31.7%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

   

Fair Value as of

   

   

   

   

   

 

December 31, 

 

Type of

2020

Significant

Weighted

 

Investment

 

(in thousands)

Valuation Technique

Unobservable Inputs

Range(3)

Average(3)

Median(3)

Equity investments

$

187,099

 

Discounted cash flow

 

WACC

 

11.3%-19.9%

 

14.1

%

15.3

%

 

Market comparable / Enterprise Value

 

EBITDA multiple(1)

 

5.2x-8.5x(2)

 

6.9x

 

6.4x

Debt investments

$

456,576

 

Discounted cash flow

 

Risk adjusted discount factor

 

7.4%-14.2%(2)

 

10.3

%

10.2

%

 

Expected principal recovery percentage

 

1.1%-100.0%

 

99.3

%

100.0

%

Debt investments

$

181,847

 

Market approach

 

Third‑party quote

 

45.0 - 100.0

 

92.0

%

93.4

Total Level 3 investments

$

825,522


(1)EBITDA may include pro forma adjustments and/or other addbacks based on specific circumstances related to each investment.
(2)Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 4.0x - 11.9x and the range for risk adjusted discount factor is 5.4% - 25.0%.

46


(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
 Fair Value 
Valuation
Technique
 Significant Unobservable Inputs Range 
Weighted
Average (2)
LMM equity investments$46,149
 Discounted Cash Flow WACC 11.4% - 16.1% 12.7%
   Market Approach/Enterprise Value 
EBITDA Multiples (1)
 4.0x - 10.0x 7.2x
LMM debt investments92,794
 Discounted Cash Flow Expected Principal Recovery 0.0% - 100.0% 97.7%
     Risk Adjusted Discount Factor 10.0% - 16.5% 11.9%
Private Loan debt investments250,780
 Discounted Cash Flow Expected Principal Recovery 3.0% - 100.0% 99.7%
     Risk Adjusted Discount Factor 4.5% - 28.1% 8.0%
 54,673
 Market Approach Third Party Quotes 92.0% - 100.0% 97.4%
Private Loan equity investments8,281
 Market Approach/Enterprise Value 
EBITDA Multiples (1)
 5.0x - 9.5x 8.1x
   Discounted Cash Flow WACC 9.9% - 12.8% 10.8%
Middle Market debt investments587,698
 Market Approach Third Party Quotes 18.0% - 103.3% 95.8%
Middle Market equity investments3,985
 Market Approach Third Party Quotes $3.0 - $345.0 $305.3
Other Portfolio investments(3)
46,346
 Market Approach 
NAV (1)
 86.1% - 101.7% 100.0%
 $1,090,706
        
(1) May include pro forma adjustments and/or other add-backs based on specific circumstances related to each investment.
(2) Weighted average excludes investments for which the significant unobservable input was not utilized in the fair value determination.
(3) 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 inputs of the Company’s Level 3 investments as of December 31, 2016 (dollars in thousands):

 Fair Value
Valuation
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 - 11.5x6.9x
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 - 9.5x8.3x
  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) May include pro forma adjustments and/or other add-backs based on specific circumstances related to each investment.
(2) Weighted average excludes investments for which the significant unobservable input was not utilized in the fair value determination.



The following table providestables provide a summary of changes in fair value of the Company’s Level 3 portfolio investments for the ninethree-month periods ended March 31, 2021 and 2020 (amounts in thousands):

Net

Fair Value

Transfers

Changes

Net

Fair Value

as of

Into

from

Unrealized

as of

Type of

 

December 31, 

 

Level 3

 

Redemptions/

 

New

 

Unrealized

 

Appreciation

 

March 31, 

Investment

    

2020

    

Hierarchy

    

Repayments

    

Investments

    

to Realized

    

(Depreciation)

    

Other(1)

    

2021

Debt

$

638,423

$

$

($ 63,307)

$

$ 83,329

$

$ 2,125

$

$ 3,597

$

(290)

$

663,877

Equity(2)

185,041

($ 6,385)

$ 4,421

$ 814

$ 12

290

184,192

Equity Warrant

2,058

($ 395)

1,663

$

825,522

$

$

(69,692)

$

87,750

$

2,939

$

3,214

$

$

849,732


(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.
(2)Includes the Company’s investment in CLO subordinated notes. (See Note D — Investment in Signal Peak CLO 7, Ltd.)

    

    

    

    

    

Net

    

    

    

Fair Value

Transfers

Changes

Net

Fair Value

as of

Into

from

Unrealized

as of

Type of

December 31, 

Level 3

Redemptions/

New

Unrealized

Appreciation

March 31, 

Investment

2019

Hierarchy

Repayments

Investments

 

to Realized

(Depreciation)

Other(1)

2020

Debt

$

848,265

$

$

(90,042)

$

43,357

$

2,021

$

(72,050)

$

$

731,551

Equity(2)

 

177,993

 

(246)

6,265

(22,250)

161,762

Equity Warrant

 

1,339

 

212

1,551

$

1,027,597

$

$

(90,288)

$

49,622

$

2,021

$

(94,088)

$

$

894,864


(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information at the consolidated statements of cash flows.
(2)Includes the Company’s investment in CLO subordinated notes. (See Note D — Investment in Signal Peak CLO 7, Ltd.)

At March 31, 2021 and December 31, 2020, the Company's investments were categorized as follows in the fair value hierarchy for ASC 820 purposes:

Fair Value Measurements

(in thousands)

    

    

Quoted Prices in

    

    

Significant

 

Active Markets for

 

Significant Other

 

Unobservable

 

Identical Assets

 

Observable Inputs

 

Inputs

At March 31, 2021

Fair Value

 

(Level 1)

(Level 2)

 

(Level 3)

LMM portfolio investments

$

230,445

$

$

$

230,445

Middle Market portfolio investments

 

203,810

 

 

 

203,810

Private Loan portfolio investments

 

368,816

 

 

 

368,816

Other Portfolio investments(1)

 

46,661

 

 

 

46,661

Total investments

$

849,732

$

$

$

849,732

(1) Includes the Company's investment in CLO subordinated notes. (See Note D — Investment in Signal Peak CLO 7, Ltd.)

47


    

Fair Value Measurements

(in thousands)

Quoted Prices in

Significant

 

Active Markets for

 

Significant Other

Unobservable

 

Identical Assets

 

Observable Inputs

 

Inputs

At December 31, 2020

Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

LMM portfolio investments

$

217,036

$

$

$

217,036

Middle Market portfolio investments

 

191,304

 

 

 

191,304

Private Loan portfolio investments

 

366,649

 

 

 

366,649

Other Portfolio investments(1)

 

50,533

 

 

 

50,533

Total investments

$

825,522

$

$

$

825,522

(1) Includes the Company's investment in CLO subordinated notes. (See Note D — Investment in Signal Peak CLO 7, Ltd.)

2.         Investment Portfolio Composition

The Company’s Private Loan portfolio investments are primarily debt securities in privately held companies that have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as “club deals.” 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 Private Loan portfolio debt investments are generally secured by either a first or second 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.

The Company’s LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. The Company’s LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second 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, the Company receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.

The Company’s Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in the Company’s LMM portfolio. The Company’s Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $3 million to $20 million. The Company’s Middle Market portfolio debt investments are generally secured by either a first or second 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.

The Company’s Other Portfolio investments primarily consist of investments that are not consistent with the typical profiles for its LMM, Middle Market or Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, the Company 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, the Company 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.

Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level of new investment activity, repayments of debt investments or sales of equity interests. Investment

48


income in any given year could also be highly concentrated among several portfolio companies. For the three months ended September 30, 2017 (dollarsMarch 31, 2021 and 2020, the Company did not record investment income from any single portfolio company in thousands):

Type of InvestmentJanuary 1, 2017 Fair Value 
PIK 
Interest
Accrual
 
New Investments(1)
 Sales/ Repayments 
Net Unrealized
Appreciation
(Depreciation)(2)
 Net Realized Gain (Loss) September 30, 2017 Fair Value
LMM Equity$37,616
 $154
 $8,276
 $(622) $1,170
 $(445) $46,149
LMM Debt78,444
 102
 25,191
 (9,057) (1,886) 
 92,794
Private Loan Equity6,323
 
 3,855
 (2,917) (1,528) 2,548
 8,281
Private Loan Debt205,034
 181
 169,214
 (68,482) (494) 
 305,453
Middle Market Debt638,374
 377
 236,193
 (284,372) (3,180) 306
 587,698
Middle Market Equity5,090
 83
 33
 
 (1,221) 
 3,985
Other Portfolio(3)
18,366
 
 37,677
 (10,756) 109
 950
 46,346
Total$989,247
 $897
 $480,439
 $(376,206) $(7,030) $3,359
 $1,090,706
(1) Column includes changes to investments due to the net accretionexcess of discounts/premiums and amortization10% of fees.
(2) Column does not include unrealized appreciation (depreciation) on unfunded commitments.
(3) Includes the Company’stotal investment in HMS-ORIX. (See Note 4 - income.

Investment in HMS-ORIX SLF LLC)


The following table providestables provide a summary of changesthe Company’s investments in the LMM, Middle Market and Private Loan portfolios as of March 31, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments which are discussed further below):

    

As of March 31, 2021

 

LMM (a)

Middle Market

Private Loan

 

(dollars in millions)

 

Number of portfolio companies

36

 

29

 

40

Fair value

$

230.4

 

$

203.8

 

$

368.8

Cost

$

201.9

 

$

226.3

 

$

379.4

Debt investments as a % of portfolio (at cost)

66.2

%

93.8

%

92.0

%

Equity investments as a % of portfolio (at cost)

33.8

%

6.2

%

8.0

%

% of debt investments at cost secured by first priority lien

99.8

%

97.1

%

93.5

%

Weighted-average annual effective yield(b)

11.1

%

7.9

%

9.3

%

Average EBITDA(c)

$

6.7

 

$

79.1

 

$

38.0


(a)At March 31, 2021, the Company had equity ownership in approximately 97% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 9%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of March 31, 2021, 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 is higher than what an investor in shares of the Company’s common stock will realize on its investment because it does not reflect the Company’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including one Middle Market portfolio company and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for The Company’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

    

As of December 31, 2020

 

LMM (a)

Middle Market

Private Loan

 

(dollars in millions)

 

Number of portfolio companies

34

 

28

 

40

Fair value

$

217.0

 

$

191.3

 

$

366.6

Cost

$

191.2

 

$

216.4

 

$

378.2

Debt investments as a % of portfolio (at cost)

66.0

%

93.5

%

91.4

%

Equity investments as a % of portfolio (at cost)

34.0

%

6.5

%

8.6

%

% of debt investments at cost secured by first priority lien

99.7

%

90.6

%

91.3

%

Weighted-average annual effective yield (b)

11.1

%

8.2

%

9.2

%

Average EBITDA (c)

$

6.2

 

$

78.5

 

$

54.1


(a)At December 31, 2020, the Company had equity ownership in approximately 97% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 10%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2020, 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 is higher than what an investor in

49


shares of the Company’s common stock will realize on its investment because it does not reflect the Company’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies, one Middle Market portfolio companies and four Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for the Company’s investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate.

As of March 31, 2021, the Company had Other Portfolio investments in five companies, collectively totaling approximately $46.7 million in fair value and approximately $52.1 million in cost basis and which comprised approximately 5.5% of the Company’s Level 3 portfolioInvestment Portfolio at fair value. As of December 31, 2020, the Company had Other Portfolio investments forin five companies, collectively totaling approximately $50.5 million in fair value and approximately $54.9 million in cost basis and which comprised approximately 6.1% of the nine months ended September 30, 2016 (dollars in thousands):

Type of InvestmentJanuary 1, 2016 Fair Value 
PIK 
Interest
Accrual
 
New Investments(1)
 Sales/ Repayments 
Net Unrealized
Appreciation
(Depreciation)
(2)
 Net Realized Gain (Loss) September 30, 2016 Fair Value
LMM Equity$24,165
 $(72) $5,457
 $
 $2,463
 $
 $32,013
LMM Debt61,295
 134
 16,058
 (7,481) 245
 
 70,251
Private Loan Equity530
 
 2,602
 
 99
 
 3,231
Private Loan Debt110,558
 169
 92,104
 (25,952) 887
 (122) 177,644
Middle Market Debt645,913
 24
 176,767
 (190,142) 9,761
 (11,842) 630,481
Middle Market Equity
 
 2,059
 
 (200) 
 1,859
Other Portfolio10,527
 
 6,537
 
 60
 
 17,124
Total$852,988
 $255
 $301,584
 $(223,575) $13,315
 $(11,964) $932,603
(1) Column includes changes to investments due toCompany’s Investment Portfolio at fair value.

The following tables summarize the net accretion of discounts/premiums and amortization of fees.

(2) Column does not include unrealized appreciation (depreciation) on unfunded commitments.
The total net unrealized appreciation (depreciation) for the nine months ended September 30, 2017 and 2016 included in the Condensed Consolidated Statement of Operations that related to Level 3 assets still held as of September 30, 2017 and 2016 was approximately $(652,000) and $1.0 million, respectively. For the nine months ended September 30, 2017 and 2016, there were no transfers between Level 2 and Level 3 portfolio investments.

Portfolio Investment Composition

The composition of the Company’s total combined LMM portfolio investments, as of September 30, 2017,Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value wasby type of investment 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$892,121
 80.3% $866,403
 79.5%
Second lien secured debt investments109,331
 9.8
 108,411
 9.9
Unsecured debt investments10,951
 1.0
 11,131
 1.0
Equity investments(1)
96,158
 8.7
 102,872
 9.4
Equity warrants2,325
 0.2
 1,889
 0.2
Total$1,110,886
 100.0% $1,090,706
 100.0%
(1) Includesa percentage of the Company’s investment in HMS-ORIX. (See Note 4 - Investment in HMS-ORIX SLF LLC)total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of March 31, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments).

Cost:

 

March 31, 2021

 

December 31, 2020

First lien debt

 

82.5

%  

79.5

%

Equity

 

13.7

%  

13.9

%

Second lien debt

 

1.9

%  

4.6

%

Equity warrants

 

0.2

%  

0.2

%

Other

 

1.7

%  

1.8

%

 

100.0

%  

100.0

%

Fair Value:

 

March 31, 2021

 

December 31, 2020

First lien debt

 

79.1

%  

76.0

%

Equity

 

17.1

%  

17.3

%

Second lien debt

 

1.9

%  

4.6

%

Equity warrants

 

0.2

%  

0.3

%

Other

 

1.7

%  

1.8

%

 

100.0

%  

100.0

%



The following tables summarize the composition of the Company’s total combined LMM portfolio investments, asMiddle Market portfolio investments and Private Loan portfolio investments by geographic region of December 31, 2016,the United States and other countries at cost and fair value was as follows (dollars in thousands):

a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of March 31, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

    

    

 

Cost:

 

March 31, 2021

 

December 31, 2020

Southwest

 

23.2

%  

24.9

%

 

Northeast

 

17.6

%  

18.9

%

 

West

 

19.7

%  

17.5

%

 

Midwest

 

20.6

%  

18.2

%

 

Southeast

 

17.0

%  

18.8

%

 

Canada

 

1.9

%  

1.7

%

 

Other Non-United States

 

%  

%

 

 

100.0

%  

100.0

%

 

 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%

50



Fair Value:

March 31, 2021

December 31, 2020

Aerospace & Defense

 

8.7

%  

8.5

%

Machinery

 

8.5

%  

8.5

%

Commercial Services & Supplies

 

7.1

%  

7.9

%

Internet Software & Services

 

5.9

%  

4.8

%

Construction & Engineering

 

5.1

%  

4.1

%

Oil, Gas & Consumable Fuels

 

5.1

%  

6.1

%

Communications Equipment

 

4.6

%  

4.6

%

Health Care Providers & Services

 

4.5

%  

3.6

%

Specialty Retail

 

3.9

%  

4.1

%

Leisure Equipment & Products

 

3.4

%  

3.5

%

Diversified Telecommunication Services

 

3.4

%  

5.2

%

Diversified Financial Services

 

3.2

%  

3.3

%

Distributors

 

3.1

%  

3.1

%

Building Products

 

3.0

%  

0.7

%

Transportation Infrastructure

 

2.7

%  

2.7

%

IT Services

 

2.6

%  

4.0

%

Media

 

2.5

%  

2.7

%

Computers & Peripherals

 

2.4

%  

2.3

%

Hotels, Restaurants & Leisure

 

2.0

%  

2.1

%

Software

 

1.6

%  

1.7

%

Containers & Packaging

 

1.6

%  

1.8

%

Trading Companies & Distributors

 

1.5

%  

1.6

%

Food & Staples Retailing

 

1.5

%  

1.6

%

Internet & Catalog Retail

 

1.4

%  

1.4

%

Professional Services

 

1.2

%  

1.2

%

Electrical Equipment

 

1.2

%  

0.5

%

Air Freight & Logistics

1.2

%  

1.2

%

Electronic Equipment, Instruments & Components

1.1

%  

1.2

%

Diversified Consumer Services

1.0

%  

0.9

%

Construction Materials

0.9

%  

1.3

%

Other (1)

4.1

%  

3.8

%

 

100.0

%  

100.0

%

Fair Value:

 

March 31, 2021

 

December 31, 2020

Southwest

 

24.5

%

25.7

%

West

 

17.8

%

19.2

%

Northeast

 

18.5

%

16.3

%

Midwest

 

18.7

%

20.1

%

Southeast

 

18.7

%

17.1

%

Canada

 

1.8

%

1.6

%

Other Non-United States

 

%

%

 

100.0

%  

100.0

%

The Company’s LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of the Company’s total combined LMM portfolio investments, Middle Market portfolio investments and

51


Private Loan portfolio investments by geographic region as of September 30, 2017,industry at cost and fair value was as follows (dollars in thousands) (sinceof March 31, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments do not represent a single geographic region, this information excludes Otherinvestments).

Cost:

March 31, 2021

December 31, 2020

Aerospace & Defense

 

8.7

%  

8.4

%

Commercial Services & Supplies

 

7.1

%  

8.1

%

Machinery

 

6.5

%  

6.5

%

Internet Software & Services

 

6.5

%  

5.4

%

Oil, Gas & Consumable Fuels

 

5.9

%  

7.0

%

Communications Equipment

 

5.5

%  

5.7

%

Health Care Providers & Services

 

4.4

%  

3.4

%

Specialty Retail

 

4.3

%  

4.5

%

Construction & Engineering

 

4.3

%  

3.4

%

Diversified Telecommunication Services

 

3.5

%  

5.4

%

Leisure Equipment & Products

 

3.3

%  

3.5

%

Distributors

 

3.1

%  

3.1

%

Hotels, Restaurants & Leisure

 

3.0

%  

3.1

%

Diversified Financial Services

 

3.0

%  

3.1

%

Building Products

 

2.9

%  

0.6

%

IT Services

 

2.6

%  

4.0

%

Transportation Infrastructure

 

2.6

%  

2.6

%

Media

 

2.4

%  

2.5

%

Professional Services

 

2.1

%  

2.2

%

Trading Companies & Distributors

 

1.5

%  

1.6

%

Electronic Equipment, Instruments & Components

 

1.5

%  

1.5

%

Food & Staples Retailing

 

1.5

%  

1.5

%

Internet & Catalog Retail

 

1.5

%  

1.5

%

Containers & Packaging

 

1.4

%  

1.6

%

Software

 

1.2

%  

1.2

%

Computers & Peripherals

 

1.2

%  

1.1

%

Air Freight & Logistics

1.1

%  

1.1

%

Electrical Equipment

1.1

%  

0.4

%

Other (1)

6.3

%  

6.0

%

 

100.0

%  

100.0

%  


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

52


Fair Value:

March 31, 2021

December 31, 2020

Aerospace & Defense

 

8.7

%  

8.5

%

Machinery

 

8.5

%  

8.5

%

Commercial Services & Supplies

 

7.1

%  

7.9

%

Internet Software & Services

 

5.9

%  

4.8

%

Construction & Engineering

 

5.1

%  

4.1

%

Oil, Gas & Consumable Fuels

 

5.1

%  

6.1

%

Communications Equipment

 

4.6

%  

4.6

%

Health Care Providers & Services

 

4.5

%  

3.6

%

Specialty Retail

 

3.9

%  

4.1

%

Leisure Equipment & Products

 

3.4

%  

3.5

%

Diversified Telecommunication Services

 

3.4

%  

5.2

%

Diversified Financial Services

 

3.2

%  

3.3

%

Distributors

 

3.1

%  

3.1

%

Building Products

 

3.0

%  

0.7

%

Transportation Infrastructure

 

2.7

%  

2.7

%

IT Services

 

2.6

%  

4.0

%

Media

 

2.5

%  

2.7

%

Computers & Peripherals

 

2.4

%  

2.3

%

Hotels, Restaurants & Leisure

 

2.0

%  

2.1

%

Software

 

1.6

%  

1.7

%

Containers & Packaging

 

1.6

%  

1.8

%

Trading Companies & Distributors

 

1.5

%  

1.6

%

Food & Staples Retailing

 

1.5

%  

1.6

%

Internet & Catalog Retail

 

1.4

%  

1.4

%

Professional Services

 

1.2

%  

1.2

%

Electrical Equipment

 

1.2

%  

0.5

%

Air Freight & Logistics

1.2

%  

1.2

%

Electronic Equipment, Instruments & Components

1.1

%  

1.2

%

Diversified Consumer Services

1.0

%  

0.9

%

Construction Materials

0.9

%  

1.3

%

Other (1)

4.1

%  

3.8

%

 

100.0

%  

100.0

%


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

At March 31, 2021 and December 31, 2020, the Company had no portfolio investment that was greater than 10% of the Investment Portfolio investments):

 Investments at Cost Cost Percentage of Total Portfolio Investments at Fair Value 
Fair Value
Percentage of
Total Portfolio
Northeast$162,546
 15.3% $161,056
 15.4%
Southeast205,226
 19.3
 212,068
 20.3
West195,171
 18.3
 181,527
 17.4
Southwest190,375
 17.9
 183,679
 17.6
Midwest246,739
 23.2
 243,600
 23.3
Non-United States64,315
 6.0
 62,430
 6.0
Total$1,064,372
 100.0% $1,044,360
 100.0%
The compositionat fair value.

3.         Unconsolidated Significant Subsidiaries

In evaluating its unconsolidated controlled portfolio companies in accordance with the Regulation S-X, there are two tests that the Company must utilize to determine if any of the Company’s investmentsControl Investments (as defined in Note A, including those unconsolidated portfolio companies defined as Control Investments in which the Company does not own greater than 50% of the voting securities or maintain greater than 50% of the board representation) are considered significant subsidiaries: the investment test and the income test. The investment test is generally measured by geographic region as of December 31, 2016, at cost and fairdividing the Company’s investment in the Control Investment by the value was as follows (dollars in thousands) (since the Other Portfolio investments do not represent a single geographic region, this information excludes 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 composition of the Company’s total investmentsinvestments. The income test is generally measured by industrydividing 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 the Company’s change in net assets resulting from operations for the same period. Regulation S-X requires the Company to include (1) separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which the Company 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.

53


As of March 31, 2021 and December 31, 2016, at cost and fair value was2020, the Company had no single investment that qualified as follows (sincea significant subsidiary under either the Other Portfolio investments do not represent a single industry, this information excludes Other Portfolio investments):

 Cost Fair Value

September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Commercial Services and Supplies7.5% 9.1% 7.5% 9.2%
Hotels, Restaurants, and Leisure7.3
 8.0
 7.4
 8.1
Media5.4
 7.7
 5.3
 7.6
Construction and Engineering5.0
 4.6
 5.1
 4.8
Diversified Consumer Services4.7
 2.8
 4.7
 2.7
IT Services4.2
 4.6
 4.4
 4.7
Communications Equipment3.9
 4.7
 4.1
 4.9
Diversified Telecommunication Services3.7
 3.1
 3.7
 3.0
Energy Equipment and Services3.6
 3.7
 2.9
 2.8
Professional Services3.4
 1.0
 3.4
 1.0
Machinery3.3
 1.5
 3.8
 1.9
Internet Software and Services3.2
 5.1
 3.3
 5.2
Aerospace and Defense3.1
 1.9
 3.2
 1.8
Distributors3.0
 1.6
 3.1
 1.7
Leisure Equipment and Products3.0
 0.8
 3.1
 0.8
Specialty Retail2.8
 3.9
 1.9
 3.3
Food Products2.5
 2.7
 2.6
 2.5
Oil, Gas, and Consumable Fuels2.4
 0.9
 2.4
 0.9
Health Care Providers and Services2.3
 2.2
 2.4
 2.4
Computers and Peripherals2.3
 1.0
 2.6
 1.1
Auto Components2.2
 3.1
 1.9
 3.2
Electronic Equipment, Instruments & Components2.0
 3.7
 2.1
 3.7
Health Care Equipment and Supplies1.9
 2.2
 2.0
 2.3
Internet and Catalog Retail1.9
 1.4
 1.5
 1.2
Construction Materials1.5
 1.0
 1.5
 1.1
Household Durables1.5
 
 1.5
 
Diversified Financial Services1.4
 1.9
 1.3
 1.9
Trading Companies and Distributors1.2
 1.0
 1.2
 1.0
Capital Markets1.0
 1.2
 1.0
 1.2
Food & Staples Retailing0.9
 1.4
 1.0
 1.5
Personal Products0.9
 0.8
 0.9
 0.8
Pharmaceuticals0.9
 1.2
 0.9
 1.2
Healthcare Technology0.8
 1.3
 0.9
 1.3
Marine0.8
 0.9
 0.8
 0.9
Tobacco0.8
 1.1
 0.8
 1.1
Electrical Equipment0.7
 0.9
 0.7
 1.0
Building Products0.5
 0.6
 0.6
 0.6
Road & Rail0.5
 
 0.5
 
Software0.4
 2.6
 0.5
 2.7
Textiles, Apparel & Luxury Goods0.4
 0.5
 0.2
 0.4
Publishing0.4
 0.3
 0.4
 0.3
Containers and Packaging0.3
 0.3
 0.3
 0.3
Air Freight & Logistics0.2
 0.3
 0.3
 0.4
Airlines0.1
 0.2
 0.2
 0.2
Chemicals0.1
 0.2
 
 0.2
Oil and Gas Exploration and Production0.1
 0.1
 
 0.1
Insurance
 0.6
 
 0.6
Consumer Finance
 0.3
 0.1
 0.4
Total100.0% 100.0% 100.0% 100.0%





investment or income tests.

Note 4 —D – Investment in HMS-ORIX SLF LLC


Signal Peak CLO 7, LTD.

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 investsinvested 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 havehad 50% voting control of HMS-ORIX and together arewere required to agree on all portfolio and investment decisions as well as all other significant actions for HMS-ORIX. The Company doesdid not operationallyhave sole control of significant actions of HMS-ORIX and, accordingly, doesdid not consolidate the operations of HMS-ORIX within the consolidated financial statements. 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

On May 8, 2019, HMS-ORIX Holdings I LLC, a wholly owned subsidiary of September 30, 2017, HMS-ORIX, had total assets of $146.4 million and HMS-ORIX’s portfolio consisted of 69 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 September 30, 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 September 30, 2017, $90.0 million was outstanding under this facility. Borrowings under the facility are secured by substantiallyheld all of the assetsinvestments in broadly-syndicated loans held by HMS-ORIX, was merged (the “HMS-ORIX Holdings Merger”) into Mariner CLO 7, Ltd., an exempted company incorporated under the laws of HMS-ORIX.

the Cayman Islands (“Mariner CLO”). In connection with the HMS-ORIX Holdings Merger, HMS-ORIX made certain distributions to its members. The following table presents a summaryCompany used the cash proceeds it received from the HMS-ORIX Holdings Merger to purchase an aggregate principal amount of HMS-ORIX’s portfolio asapproximately $25.9 million of September 30, 2017 (dollarsthe “Subordinated Notes” (the equity tranche of the CLO’s securities) due in thousands):
 As of September 30, 2017
  
Total debt investments (1)
$139,700
Weighted average effective yield on loans(2)
4.82%
Largest loan to a single borrower(1)
$3,505
Total of 10 largest loans to borrowers(1)
$31,212
(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 received2032 issued by Mariner CLO in connection with transactions. Investments, if any,an offering of $405.9 million aggregate principal amount of notes. After distribution to its members of residual cash remaining after the HMS-ORIX Holdings Merger, HMS-ORIX was fully liquidated on non-accrual status are assumedSeptember 26, 2019. On October 8, 2020, Mariner CLO changed its name to have a zero yield in the calculation of weighted average effective annual yield.

The following table presents a listing of HMS-ORIX’s individual loans as of September 30, 2017:
HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Acosta, Inc.Commercial Services and SuppliesLIBOR (3 months) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - September 26, 2021)$2,000
$1,873
$1,778
Acrisure, LLCInsuranceLIBOR (1 month) + 5.00%, Current Coupon 6.27%, Secured Debt (Maturity - November 22, 2023)1,990
1,997
2,017
Advantage Sales & Marketing Inc.Commercial Services and SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.56%, Secured Debt (Maturity - July 23, 2021)1,995
1,939
1,882
Air Medical Group Holdings IncHealth Care Providers & ServicesLIBOR (6 months) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - April 28, 2022)1,995
1,985
1,996
Albany Molecular Research, Inc.Life Sciences Tools and ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.58%, Secured Debt (Maturity - August 28, 2024)100
100
100
Alphabet Holding Company, Inc.Food ProductsLIBOR (3 months) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - September 26, 2024)2,000
1,990
1,980


HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
American Seafoods Group LLCFood ProductsLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 21, 2023)$1,500
$1,493
$1,510
Ancestry.com Operations Inc.Internet Software & ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - October 19, 2023)2,000
2,019
2,017
Arch Coal, Inc.Metals & MiningLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - March 7, 2024)1,990
1,997
2,002
AshCo, Inc.Specialty RetailLIBOR (3 months) + 5.00%, Current Coupon 6.30%, Secured Debt (Maturity - December 15, 2023)2,000
1,955
1,889
Asurion, LLCInsuranceLIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - November 3, 2023)1,316
1,316
1,323
Atkore International, Inc.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 3.00%, Current Coupon 4.34%, Secured Debt (Maturity - December 22, 2023)2,985
3,014
3,006
Avantor Performance Materials Holdings, Inc.BiotechnologyLIBOR (1 month) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - March 8, 2024)2,985
3,021
2,998
BCP RenaissanceOil, Gas and Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.32%, Secured Debt (Maturity - September 19, 2024)600
602
607
BMC Software Finance, Inc.SoftwareLIBOR (1 month) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - September 12, 2022)2,972
2,996
2,992
Builders FirstSource, Inc.Building ProductsLIBOR (1 month) + 3.00%, Current Coupon 4.33%, Secured Debt (Maturity - February 29, 2024)2,985
2,981
2,998
Calpine CorporationIndependent Power & Renewable Elec. ProducersLIBOR (3 months) + 2.75%, Current Coupon 4.09%, Secured Debt (Maturity - January 15, 2023)1,995
2,002
1,994
CHS/Community Health Systems, Inc.Health Care Providers & ServicesLIBOR (3 months) + 3.00%, Current Coupon 4.32%, Secured Debt (Maturity - January 27, 2021)1,646
1,640
1,638
Clubcorp Club Operations, Inc.Real Estate Management and DevelopmentLIBOR (3 months) + 3.25%, Current Coupon 4.59%, Secured Debt (Maturity - August 16, 2024)2,000
1,990
1,991
Colorado Buyer IncTechnology Hardware, Storage & PeripheralsLIBOR (3 months) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - May 1, 2024)2,993
3,003
3,011
Confie Seguros Holding II Co.InsuranceLIBOR (1 month) + 5.50%, Current Coupon 6.74%, Secured Debt (Maturity - April 19, 2022)1,990
1,997
1,965
CPI International, Inc.Aerospace & DefenseLIBOR (1 month) + 3.50%, Current Coupon 4.74%, Secured Debt (Maturity - July 26, 2024)2,000
2,000
2,003
Diamond Resorts International, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 6.00%, Current Coupon 7.24%, Secured Debt (Maturity - September 1, 2023)1,990
2,019
2,004
Duff & Phelps CorporationDiversified Financial ServicesLIBOR (3 months) + 3.75%, Current Coupon 5.08%, Secured Debt (Maturity - April 23, 2020)1,990
2,003
1,996
EFS Cogen Holdings I LLCElectric UtilitiesLIBOR (3 months) + 3.50%, Current Coupon 4.84%, Secured Debt (Maturity - June 28, 2023)1,929
1,942
1,955
Endo Luxembourg Finance Company I S.a.r.l.PharmaceuticalsLIBOR (1 month) + 4.25%, Current Coupon 5.50%, Secured Debt (Maturity - April 29, 2024)1,995
2,014
2,017
Envision Healthcare CorporationHealth Care Providers & ServicesLIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - December 1, 2023)2,487
2,488
2,499


HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Everi Payments Inc.Leisure ProductsLIBOR (3 months) + 4.50%, Current Coupon 5.74%, Secured Debt (Maturity - May 9, 2024)$1,995
$1,988
$2,015
First American Payment Systems, L.P.Diversified Financial ServicesLIBOR (1 month) + 5.75%, Current Coupon 6.98%, Secured Debt (Maturity - January 5, 2024)961
972
963
Fitness International, LLCHotels, Restaurants & LeisurePrime + 3.25%, Current Coupon 7.50%, Secured Debt (Maturity - July 1, 2020)2,000
2,027
2,013
Flex Acquisition Company IncContainers and PackagingLIBOR (3 months) + 3.00%, Current Coupon 4.30%, Secured Debt (Maturity - December 29, 2023)2,000
2,010
2,007
Flexera Software LLCSoftwareLIBOR (1 month) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - April 2, 2020)1,995
2,015
2,008
Gardner Denver, Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 4.08%, Secured Debt (Maturity - July 30, 2024)2,000
2,010
2,005
Golden Nugget, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - October 4, 2023)1,995
1,995
2,007
Greatbatch Ltd.Health Care Equipment & SuppliesLIBOR (2 months) + 3.50%, Current Coupon 4.74%, Secured Debt (Maturity - October 27, 2022)2,794
2,811
2,814
GYP Holdings III Corp.Trading Companies & DistributorsLIBOR (1 month) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - March 31, 2023)3,491
3,516
3,521
Harbor Freight Tools USA, Inc.Specialty RetailLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 18, 2023)1,980
1,987
1,990
HD Supply Waterworks, Ltd.Trading Companies & DistributorsLIBOR (3 months) + 3.00%, Current Coupon 4.46%, Secured Debt (Maturity - August 1, 2024)140
140
140
Horizon Pharma, Inc.PharmaceuticalsLIBOR (1 month) + 3.75%, Current Coupon 5.00%, Secured Debt (Maturity - March 29, 2024)1,995
2,014
2,016
IG Investments Holdings, LLCProfessional ServicesLIBOR (1 month) + 4.00%, Current Coupon 5.33%, Secured Debt (Maturity - October 31, 2021)1,990
2,001
2,012
Jackson Hewitt Tax Service Inc.Diversified Consumer ServicesLIBOR (1 month) + 7.00%, Current Coupon 8.31%, Secured Debt (Maturity - July 30, 2020)1,939
1,861
1,876
KC MergerSub, Inc.Diversified Consumer ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.08%, Secured Debt (Maturity - August 12, 2022)2,489
2,495
2,486
KMG Chemicals, Inc.ChemicalsLIBOR (1 month) + 4.25%, Current Coupon 5.49%, Secured Debt (Maturity - June 13, 2024)1,304
1,299
1,326
LANDesk Group, Inc.SoftwareLIBOR (1 month) + 4.25%, Current Coupon 5.49%, Secured Debt (Maturity - January 22, 2024)995
1,001
972
Learfield Communications LLCMediaLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - December 1, 2023)1,995
2,015
2,009
LTS Buyer LLCDiversified Telecommunication ServicesLIBOR (3 months) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - April 13, 2020)2,984
3,008
2,994
MA FinanceCo., LLCElectronic Equipment, Instruments and ComponentsLIBOR (1 month) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - June 21, 2024)387
387
388
Mohegan Tribal Gaming AuthorityHotels, Restaurants & LeisureLIBOR (1 month) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - October 13, 2023)1,990
2,009
2,013


HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
MPH Acquisition Holdings LLCHealth Care TechnologyLIBOR (3 months) + 3.00%, Current Coupon 4.33%, Secured Debt (Maturity - June 7, 2023)$2,991
$3,033
$3,018
NAB Holdings, LLCIT ServicesLIBOR (3 months) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - June 14, 2024)1,995
1,985
2,009
Ortho-Clinical Diagnostics, IncLife Sciences Tools and ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.08%, Secured Debt (Maturity - June 30, 2021)1,990
1,985
1,999
QUIKRETE Holdings, Inc.Construction MaterialsLIBOR (1 month) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - November 15, 2023)2,985
2,985
2,988
Rackspace Hosting, Inc.Electric Equipment, Instruments & ComponentsLIBOR (1 month) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - November 3, 2023)3,292
3,318
3,291
Scientific Games International, Inc.Leisure ProductsLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 14, 2024)400
402
401
Seattle Spin Co.Electronic Equipment, Instruments and ComponentsLIBOR (3 months) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - June 21, 2024)2,613
2,616
2,622
SeaWorld Parks & Entertainment, Inc.Hotels, Restaurants & LeisureLIBOR (3 months) + 3.00%, Current Coupon 4.33%, Secured Debt (Maturity - April 1, 2024)1,990
1,992
1,933
Signode Industrial Group US Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - April 30, 2021)2,840
2,861
2,855
Staples, Inc.DistributorsLIBOR (3 month) + 4.00%, Current Coupon 5.31%, Secured Debt (Maturity - August 15, 2024)2,000
1,995
1,993
Telenet Financing USD LLCDiversified Telecommunication ServicesLIBOR (1 month) + 2.75%, Current Coupon 3.98%, Secured Debt (Maturity - June 30, 2025)3,000
3,013
3,012
Transdigm, Inc.Aerospace & DefenseLIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - June 9, 2023)1,990
1,997
1,997
  LIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - August 22, 2024)1,003
1,000
1,005
   2,993
2,997
3,002
Travelport Finance (Luxembourg) S.A.R.L.Internet Software & ServicesLIBOR (3 months) + 2.75%, Current Coupon 4.06%, Secured Debt (Maturity - September 2, 2021)1,951
1,951
1,951
Traverse Midstream Partners LLCOil, Gas and Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.33%, Secured Debt (Maturity - September 30, 2024)781
784
792
UFC Holdings, LLCMediaLIBOR (3 months) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 18, 2023)1,990
2,002
2,001
Ultra Resources, Inc.Oil, Gas and Consumable FuelsLIBOR (1 month) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - April 12, 2024)2,000
2,002
2,001
Valeant Pharmaceuticals International, Inc.PharmaceuticalsLIBOR (1 month) + 4.75%, Current Coupon 5.99%, Secured Debt (Maturity - April 1, 2022)2,547
2,559
2,596
Vertiv Group CorporationElectrical EquipmentLIBOR (3 months) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - November 30, 2023)2,000
2,019
2,018
Vistra Operations Company LLCElectric UtilitiesLIBOR (2 months) + 2.75%, Current Coupon 3.98%, Secured Debt (Maturity - December 14, 2023)1,990
2,002
1,999


HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
WideOpenWest Finance, LLCDiversified Telecommunication ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.48%, Secured Debt (Maturity - August 18, 2023)$3,505
$3,516
$3,504
Total Loan Portfolio   $139,954
$139,728

ForSignal Peak CLO 7, Ltd. (“Signal Peak CLO”).

During the three and nine months ended September 30, 2017,March 31, 2021 and 2020, respectively, the Company did not accrue dividendrecognized approximately $0.6 million and $0.5 million of interest income in respect of its investment in HMS-ORIX.Signal Peak CLO.

NOTE E—DEBT

Summary of debt as of March 31, 2021 is as follows:

Outstanding Balance

Unamortized Debt Issuance Costs

Recorded Value

Estimated Fair Value (1)

(dollars in thousands)

TIAA Credit Facility

$

34,000

$

(432)

$

33,568

$

33,568

JPM SPV Facility

210,688

(3,157)

207,531

207,531

Main Street Term Loan

40,000

(386)

39,614

39,614

Total Debt

$

284,688

$

(3,975)

$

280,713

$

280,713



(1)

Estimated fair value for outstanding debt if the Company had adopted the fair value option under ASC 825.

Summary of debt as of December 31, 2020 is as follows:

Outstanding Balance

Unamortized Debt Issuance Costs

Recorded Value

Estimated Fair Value (1)

(dollars in thousands)

TIAA Credit Facility

$

44,000

$

(491)

$

43,509

$

43,509

The following tables show the summarized financial information for HMS-ORIX (dollars in thousands):

54


Deutsche Bank Credit Facility

257,816

(2,200)

255,616

255,616

Total Debt

$

301,816

$

(2,691)

$

299,125

$

299,125

Balance Sheet DataAs of September 30, 2017
Assets 
Portfolio investments at fair value$139,728
Cash and cash equivalents5,470
Deferred financing costs989
Other assets230
Total assets$146,417
  
Liabilities 
Debt$90,000
Payable for securities purchased5,371
Accounts payable and accrued expenses186
Total liabilities95,557
Net assets50,860
Total liabilities and net assets$146,417

(1)

Estimated fair value for outstanding debt if the Company had adopted the fair value option under ASC 825.

Summarized interest expense on the Company’s debt for the three months ended March 31, 2021 and 2020 is as follows:

Three Months Ended March 31, 

    

2021

    

2020

(dollars in thousands)

TIAA Credit Facility

$

388

$

1,141

Deutsche Bank Credit Facility

1,046

4,088

JPM SPV Facility

1,367

-

Main Street Term Loan

364

-

Total Interest Expense

$

3,165

$

5,229



 Period from inception (April 4, 2017) to September 30, 2017
 
Selected Statement of Operations Information 
Interest income$2,048
Dividend income
Total income2,048
Interest expense866
Other expenses79
Total expenses945
Net investment income1,103
Unrealized (depreciation) on investments(226)
Realized (losses) from investments(17)
Net increase in net assets$860

Note 5 — Borrowings

1.         TIAA Credit Facility

On March 11, 2014,6, 2017, the Company entered into aan amended and restated senior secured revolving credit agreement (as amended, the “TIAA Credit Facility”) with Capital One, National AssociationTIAA, FSB (“Capital One”TIAA Bank”), as administrative agent, and with Capital OneTIAA Bank and other financial institutions as lenders. OnThe TIAA Credit Facility features aggregate revolver commitments of $130.0 million, with an accordion provision allowing increases in aggregate commitments, not to exceed $150.0 million, with lender consent. The revolving period under the TIAA Credit Facility expires on March 6, 2017, this credit facility was amended2022, and restated (as amended and restated, the “EverBank Credit Facility”) to, among other things, extend



the maturity date toall outstanding advances are payable on March 6, 2020, reduce revolver commitments from $125.0 million2023, with two one-year extension options available for both such dates, subject to $95.0 million, and 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 consent. Borrowings under the EverBankTIAA Credit Facility bear interest, subject to the Company’s election, on a per annum basis at a rate equal to (i) the adjusted London Interbank Offered Rate (“LIBOR”) rateLIBOR plus 2.75%2.60% or (ii) the base rate plus 1.75%1.60%. The base rate is defined as the higher of (a) the prime rate, (b) the Federal Funds Rate (as defined in the credit agreement) plus 0.5% or (c) the adjusted LIBOR rate plus 1.0%. The adjusted LIBOR rate is defined inAdditionally, 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 September 30, 2017, the one-month LIBOR rate was 1.24%. The Company pays an annual unused commitment fee of 0.300%0.30% on the unused revolver commitments if more than 50% of the revolver commitments are being used and an annual unused commitment fee of 0.625% on the unused revolver commitments if less than 50% of the revolver commitments are being used.

The EverBankTIAA Credit Facility permits the creation of certain “Structured Subsidiaries,” which are not guarantors under the EverBankTIAA Credit Facility and which are permitted to incur debt outside of the EverBankTIAA Credit Facility. Borrowings under the EverBankTIAA Credit Facility are secured by all of the Company’s assets, other than the assets of the Structured Subsidiaries, as well as all of the assets, and a pledge of equity ownership interests, of any future subsidiaries of the Company (other than Structured Subsidiaries). The credit agreement for the EverBankTIAA Credit Facility contains affirmative and negative covenants usual and customary for credit facilities of this nature, includingincluding: (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 EverBankTIAA 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 collateral under the EverBankTIAA Credit Facility. Additionally, the Company must provide information to EverBankTIAA Bank on a regular basis, preserve its corporate existence, comply with applicable laws, including the 1940 Act, pay obligations when they become due, and invest the proceeds of the sales of common stock in accordance with its investment objectives and strategies (as set forth in the EverBankTIAA Credit Facility). 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 EverBankTIAA Credit Facility requires the companyCompany 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.

55


As of September 30, 2017,March 31, 2021, the interest rate on the TIAA Credit Facility was 2.72%. The average cost of borrowings on the TIAA Credit Facility, excluding amortization of deferred financing costs, was approximately 2.74% and 4.43% per annum for the three months ended March 31, 2021 and 2020 respectively. As of March 31, 2021, the Company was not aware of any instances of noncompliance with covenants related to the EverBankTIAA Credit Facility.


2.         JPM SPV Facility

On June 2, 2014,February 3, 2021, MSIF Funding, the Company’s wholly-owned subsidiary that primarily holds originated loan investments, entered into a senior secured revolving credit facility (as amended from time to time, the “JPM SPV Facility”) by and among JPMorgan Chase Bank, National Association (“JPM”), as administrative agent, and U.S. Bank, N.A., as collateral agent and collateral administrator and the Company as portfolio manager. The revolving period under the JPM SPV Facility expires on February 3, 2024 and the JPM SPV Facility is scheduled to mature on February 3, 2025. Advances under the JPM SPV Facility bear interest at a per annum rate equal to the three-month LIBOR in effect, plus the applicable margin of 2.90% per annum. MSIF Funding will also pay a commitment fee of 0.75% per annum on the average daily unused amount of the financing commitments until the third anniversary of the JPM SPV Facility. The initial commitment amount of the JPM SPV Facility is $300 million. The JPM SPV Facility has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments and borrowing availability under the JPM SPV Facility to up to $450 million.

Initial proceeds from borrowings under the JPM SPV Facility were used to purchase certain investments and participating interest from HMS Funding. HMS Funding, in turn, used the proceeds from these transactions and restricted cash to fully repay its existing indebtedness under the Deutsche Bank Credit Facility (as defined below). Concurrently, the Company and HMS Funding extinguished the Deutsche Bank Credit Facility and transferred certain portfolio investments previously held by HMS Funding to MSIF Funding. The Deutsche Bank Credit Facility had been in an amortization period, requiring that all principal and interest payments received on investments held by HMS Funding be paid to lenders to retire the outstanding balance under the Deutsche Bank Credit Facility, since April 2020.

As of March 31, 2021, the interest rate on the JPM SPV Facility, excluding amortization of deferred financing costs, was 3.10%. As of March 31, 2021, the Company was not aware of any instances of noncompliance with covenants related to the JPM SPV Facility.

3.         Deutsche Bank Credit Facility

On May 18, 2015, HMS Funding entered into aan amended and restated credit agreement (the(as amended, the “Deutsche Bank Credit Facility”) among HMS Funding, as borrower, the Company, 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. TheOn April 24, 2020, the Deutsche Bank Credit Facility was amended and restated on May 18, 2015 and subsequently has been amended on multiple occasions, most recently on June 30, 2017, increasingto, among other things, terminate the revolver commitments to $400.0 million. The Company contributes certain assets to HMS Funding from time to time, as permitted undereffective on April 24, 2020 and begin the EverBank Credit Facility, as collateral to secureamortization period, through November 20, 2022, the Deutsche Bank Credit Facility.


Undermaturity date. For the three months ended March 31, 2021 and 2020, the average cost of borrowings on the Deutsche Bank Credit Facility, interest is calculated as the sumexcluding amortization of the index plus the applicable margin of 2.50%. If the Deutsche Bank Credit Facility is funded via an asset backed commercial paper conduit, the index will be the related commercial paper rate; otherwise, the index will be equal to one-month LIBOR. As of September 30, 2017, the one-month LIBOR ratedeferred financing costs, was 1.24%. The Deutsche Bank Credit Facility provides for a revolving period until December 16, 2017, unless otherwise extended with the consent of the HMS Funding Lenders. The amortization period begins the day after the last day of the revolving periodapproximately 2.93% and ends on June 16, 2020, 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%3.99% per annum, ofrespectively.

On February 3, 2021, the difference betweentotal amount outstanding on 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 May 18, 2015, 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, the Company 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 inunamortized deferred financing fees related to the Deutsche Bank Credit Facility.

4.         Main Street Term Loan

On January 27, 2021, the Company entered into a term loan agreement (the “Main Street Term Loan”) with Main Street. As of September 30, 2017,March 31, 2021, the Main Street Term Loan was fully drawn at $40.0 million, bearing interest at a fixed rate of 5.00% per annum and maturing on January 27, 2026. The Company paid a 1.0% upfront fee to Main Street on the closing date. Borrowings under the Main Street Term Loan are expressly subordinated and junior in right of payment to all secured indebtedness of the Company and may be prepaid any time after January 27, 2023. As of March 31, 2021, the Company was not aware of any instances of noncompliance with covenants related to the Deutsche Bank Credit Facility.Main Street Term Loan.


56


As of September 30, 2017, the Company had borrowings of $95.0 million outstanding on the EverBank Credit Facility and had borrowings of $395.0 million outstanding on the Deutsche Bank Credit Facility, both of which the Company estimated approximated fair value.

NOTE F—FINANCIAL HIGHLIGHTS

    

Three Months Ended March 31, 

Per Share Data:

    

2021

    

2020

NAV at the beginning of the period

$

7.28

$

7.77

Net investment income(1)

 

0.15

0.16

Net realized loss(1)(2)

 

(0.05)

(0.04)

Net unrealized appreciation (depreciation)

 

0.07

(1.21)

Net increase (decrease) in net assets resulting from operations(1)

 

0.17

(1.09)

Dividends paid (1)(3)

 

(0.10)

(0.17)

Other(4)

 

(0.01)

(0.01)

NAV at the end of the period

$

7.34

$

6.50

Shares of common stock outstanding at end of period

79,608,304

78,423,129

Weighted average shares of common stock outstanding

 

79,608,304

78,607,063


Note 6 – Financial Highlights
The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2017 and 2016.
Per Share Data:Nine Months Ended 
 September 30, 2017
 Nine Months Ended 
 September 30, 2016
NAV at beginning of period$8.15
 $7.88
Results from Operations   
Net investment income (1) (2)
0.56
 0.55
Net realized appreciation (depreciation) (1) (2)
0.04
 (0.19)
Net unrealized appreciation (depreciation) (1) (2)
(0.09) 0.20
Net increase (decrease) in net assets resulting from operations0.51
 0.56
Stockholder distributions (1) (3)
   
Distributions from net investment income (1) (2)
(0.48) (0.52)
Distributions from realized appreciation (1) (2)
(0.04) 
Net decrease in net assets resulting from stockholder distributions(0.52) (0.52)
Capital share transactions   
Issuance of common stock above NAV (4), net of offering costs (1)
0.02
 
Net increase in net assets resulting from capital share transactions0.02
 
NAV at end of the period$8.16
 $7.92
    
Shares outstanding at end of period79,204,960
 70,942,063
Weighted average shares outstanding76,899,096
 66,576,489

(1)Based on weighted averageweighted-average number of shares of common stockshares outstanding for the period.
(2)Changes inNet realized gains or losses, net investment income and realized and unrealized appreciation (depreciation) from investmentsor depreciation, and income taxes can changefluctuate significantly from period to period.
(3)The stockholder distributionsDividends paid represent the stockholder distributions declared forduring the period.
(4)The continuous issuanceIncludes the impact of sharesthe different share amounts as a result of common stock may cause an incremental increase in NAVcalculating 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.

Three Months Ended March 31,

2021

2020

(dollars in thousands)

NAV at end of period

$

584,320

$

509,564

Average NAV

$

581,972

$

559,435

Average outstanding debt

$

249,947

$

424,000

Ratios to average net assets:

Ratio of operating expenses to average NAV(1)(2)

1.44

%

2.06

%

Ratio of operating expenses excluding interest expense to NAV(1)(2)

0.89

%

1.13

%

Ratio of net investment income to average NAV(2)

2.05

%

2.23

%

Portfolio turnover ratio(2)

7.25

%

9.04

%

Total return based on change in NAV(2)(3)

2.20

%

(14.16)

%


(1)Total expenses are the sum of operating expenses and net income tax provision/benefit. Net income tax provision/benefit includes the accrual of net deferred tax provision/benefit relating to the net unrealized appreciation/depreciation on portfolio investments held in Taxable Subsidiaries and due to the sale of shares atchange in the then prevailing public offering priceloss carryforwards, which are non-cash in excess of NAV per share on each subscription closing date.nature and may vary significantly from period to period. The per share data was derived by computing (i) the sum of (A) the number of shares issuedCompany is required to include net deferred tax provision/benefit 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.

 Nine Months Ended 
 September 30, 2017
 Nine Months Ended 
 September 30, 2016
 (dollars in thousands)
NAV at end of period$645,945
 $561,974
Average net assets$625,272
 $519,511
Average Credit Facilities borrowings$426,500
 $391,750
    
Ratios to average net assets:   
Ratio of total expenses to average net assets (1)
5.28% 5.37%
Ratio of net investment income to average net assets (1)
6.92% 7.08%
Portfolio turnover ratio36.85% 25.02%
Total return (2)
6.50% 7.11%
(1)
For the nine months ended September 30, 2017 and 2016, the Advisers did not waive base management fees but waived subordinated incentive fees of approximately $2.3 million and $493,000, respectively, and administrative services expenses of approximately $2.2 million and $1.6 million, respectively. The ratio is calculated by reducing the expenses to reflect the waiver of expenses and reimbursement of administrative services in both periods presented. Excluding interest expense, the ratio ofcalculating its total expenses to averageeven though these net assets for the nine months ended
deferred taxes are not currently payable/receivable.


September 30, 2017 and September 30, 2016 was 3.14% and 3.21%, respectively. See Note 10 - Related Party Transactions and Arrangements for further discussion of fee waivers provided by the Advisers.
(2)Not annualized.
(2)(3)Total return is calculatedbased on the change in NAV per sharenet asset value was calculated using the sum of ending net asset value plus dividends to stockholders and stockholder distributions declared per share overother non-operating changes during the reporting period. The total return does not reflectperiod, as divided by the sales loadbeginning net asset value. Non-operating changes include any items that affect net asset value other than the net increase in net assets resulting from operations, such as the saleeffects of stock offerings, shares issued under the Company’s common stock.dividend reinvestment plan and other miscellaneous items.

57


Note 7 – Stockholder Distributions

NOTE G—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

The following table reflects the cash distributions per share thatCompany’s dividends, if any, will be determined by its Board of Directors on a quarterly basis. During 2021, the Company declared on its common stockdividends of $8.0 million, or $0.10 per share, during the ninethree months ended September 30, 2017 and 2016 (dollars in thousands except per share amounts).

 Distributions
 Per Share Amount
2017   
Three months ended September 30, 2017$0.17
 $13,910
Three months ended June 30, 2017$0.18
 $13,438
Three months ended March 31, 2017$0.17
 $12,922
2016   
Three months ended September 30, 2016$0.17
 $12,307
Three months ended June 30, 2016$0.18
 $11,650
Three months ended March 31, 2016$0.17
 $11,037

On September 19, 2017, with the authorization of the Company’s board of directors, the CompanyMarch 31, 2021, compared to dividends declared distributions to its stockholders for the period of October 2017 through December 2017. These distributions have been, or will be, calculated based on stockholders of record each day from October 1, 2017 through December 31, 2017 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 ninethree months ended September 30, 2017 and 2016.
 Nine Months Ended 
 September 30, 2017
 Nine Months Ended 
 September 30, 2016
 (dollars in thousands)
Source of Distribution
Distribution
Amount
 Percentage 
Distribution
Amount
 Percentage
Net realized income from operations (before waiver of incentive fees)$40,270
 100% $24,349
 70%
Waiver of incentive fees
 
 493
 1
Distributions in excess of net investment income (1)

 
 10,152
 29
Total$40,270
 100% $34,994
 100%
(1)Includes adjustments made to GAAP basis net investment income to arrive at taxable income available for distributions. See Note 8 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 sale of assets, dividendsMarch 31, 2020, totaling approximately $13.7 million, or other distributions paid to it on account of preferred and common equity investments in portfolio companies, and fee and expense waivers from its Advisers. The Company has not established limits on the amount of funds that the Company may use from legally available sources 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 the Advisers. See Note 10 - Related Party Transactions and Arrangements - Advisory Agreements and Conditional Fee Waiver.

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 8 – Taxable Income

$0.17 per share.

The Company has elected to be treated for U.S. federal income tax purposes as a RIC. The Company’s taxable income includes the taxable income generated by the Company and certain of its subsidiaries which are treated as disregarded entities for tax purposes. As a RIC, the Company generally will not incurpay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that the Company timely distributes each taxable year as dividends to its stockholders. To qualify as a RIC in any taxable year, theThe Company must among other things, satisfy certain source-of-income and asset diversification requirements. In addition, the Company mustgenerally distribute an amount in each taxable year 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 to taxation as a RIC.RIC 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 12 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 exciseninth month following the close of the year in which such taxable income was generated.

The determination of the tax attributes for The Company’s distributions is made annually, based upon its taxable income for the Company needs to distribute, in respectfull year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of each calendar year, dividendsthe actual tax attributes of an amount at least equaldistributions 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 sum of: (1) 98.0%extent that the RIC received the income in the form of its net ordinary income (taking into account certain deferralsqualifying dividends from domestic corporations and elections)qualified foreign corporations. The tax attributes 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 perioddistributions will generally ending on October 31 of that calendar year (or, if the Company so elects for that calendar year) and (3) any netinclude both ordinary income and qualified dividends, but may also include either one or both of capital gain net income for preceding years that was not distributed with respect to such yearsgains and on which the Company incurred no U.S. federal income tax. For the taxable year ended December 31, 2015, the Company distributed $3.8 million, or $0.0615 per share,return of its 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 was subject to a $119,000 4% nondeductible, U.S. federal excise tax for the 2015 taxable year. For the taxable year ended December 31, 2016, the Company distributed $7.3 million, or $0.099478 per share, of its taxable income in 2017, prior to the filing of its U.S. federal income tax return for the 2016 taxable year. As a result, the Company was subject to a 4% nondeductible, U.S federal excise tax liability for the 2016 taxable year of approximately $246,000.


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 September 30, 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 condensed 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 condensed consolidated financial statements.

capital.

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 ninethree months ended September 30, 2017March 31, 2021 and 2016 (dollars in thousands).2020.

Three Months Ended
March 31,

2021

2020

(estimated,
dollars in thousands)

Net increase (decrease) in net assets resulting from operations

$

12,657

$

(85,816)

Net change in unrealized (appreciation) depreciation

(5,193)

94,909

Income tax provision

396

76

Pre-tax book (income) loss not consolidated for tax purposes

(2,485)

2,176

Book income (loss) and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates

936

509

Estimated taxable income

6,311

11,854

Taxable income earned in prior year and carried forward for distribution in current year

29,173

17,198

Taxable income earned prior to period end and carried forward for distribution next period

(35,484)

(19,991)

Dividend accrued as of period end and paid-in the following period

7,961

4,669

Taxable income earned to be carried forward

(27,523)

(15,322)

Total distributions accrued or paid to common stockholders

$

7,961

$

13,730


 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
    
Net increase (decrease) in net assets resulting from operations$39,440
 $37,771
Net change in unrealized (appreciation) depreciation7,165
 (12,929)
Income tax (benefit) provision139
 67
Pre-tax book (income) loss not consolidated for tax purposes755
 11,137

58




 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
    
Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates1,526
 427
Estimated taxable income (1)
49,025
 36,473
    
Taxable income earned in prior year and carried forward for distribution in current year7,238
 3,855
    
Taxable income earned prior to period end and carried forward for distribution next period(20,558) (9,407)
Dividend accrued as of period end and paid-in the following period4,565
 4,073
Taxable income earned to be carried forward(15,993) (5,334)
    
Total distributions accrued or paid to common stockholders$40,270
 $34,994
(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 Taxable Subsidiaries primarily hold certain portfolio 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 MSC Income Fund for U.S. GAAP financial reporting purposes, and the portfolio investments held by the Taxable Subsidiaries are included in the Company’s consolidated financial statements as portfolio investments and recorded at fair value. The Taxable Subsidiaries are not consolidated with the Company 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 their normal corporate 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’s consolidated financial statements.

The income tax expense (benefit) for the Company 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 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 the Company’s estimated undistributed taxable income. The income tax expense, or benefit, and the related tax assetsasset and liabilities generated by HMS Equity Holding and HMS Equity Holding II,the Taxable Subsidiaries, if any, are reflected in The Company’s consolidated statement of operations. The Company’s provision for income taxes was comprised of the Company’s Condensed Consolidated Statement of Operations. Forfollowing for the ninethree months ended September 30, 2017March 31, 2021 and 2016, the Company recognized a net income tax (benefit) provision of $139,000 and $67,000, respectively, related to deferred taxes of $1.5 million and $10.7 million, respectively, and other taxes of $139,000 and $67,000, respectively, offset by a valuation allowance of $(1.5) million and $(10.7) million, respectively. For the nine months ended September 30, 2017 and 2016, the other taxes included $139,000 and $67,000, respectively, related to accruals for state and other taxes.2020 (amounts in thousands):

Three Months Ended March 31, 

2021

2020

Current tax expense (benefit):

Federal

$

$

State

87

76

Excise

309

Total current tax expense (benefit)

396

76

Deferred tax expense (benefit):

Federal

State

Total deferred tax expense (benefit)

Total income tax provision (benefit)

$

396

$

76



As of September 30, 2017, the cost basis of investments for tax purposes was $1.1 billion, with such investments having an estimated net unrealized depreciation of $20.2 million, composed of gross unrealized appreciation of $22.8 million and gross unrealized depreciation of $43.0 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 assetliability at both September 30, 2017March 31, 2021 and December 31, 20162020 was $0,$0. Deferred tax asset and liability balances primarily related to net unrealized appreciation or depreciation, loss carryforwards, timingand other temporary book-tax differences in net unrealized depreciation of portfolio investments, and basis differences ofrelating to portfolio investments held by HMS Equity Holding and HMS Equity Holding II, which are “pass through” entities forthe Taxable Subsidiaries. The Company recorded valuation allowance to reduce the carrying value of deferred 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 isassets to the amount that 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 September 30, 2017 and Decemberrealized. At March 31, 2016 (amounts in thousands):
  September 30, 2017 December 31, 2016
Deferred tax assets:    
Net operating loss carryforwards $2,654
 $2,258
Capital loss carryforwards 8,429
 8,366
Net basis differences in portfolio investments 
 
Net unrealized depreciation of portfolio investments 1,205
 20
    Total deferred tax assets 12,288
 10,644
Deferred tax liabilities:    
Net basis differences in portfolio investments (1,294) (1,119)
Net unrealized appreciation of portfolio investments 
 
Other 
 
    Total deferred tax liabilities (1,294) (1,119)
Valuation allowance (10,994) (9,525)
    Total net deferred tax assets (liabilities) $
 $

For2021, for U.S. federal income tax purposes, the Taxable Subsidiaries had net operating loss carryforwards from prior years which, if unused, will expire in various taxable years from 2034 through 20372037. Any net operating losses generated in 2018 and thefuture periods are not subject to expiration and will carryforward indefinitely until utilized. The net capital loss carryforwards of the Company will expire in taxable years 2020 and 2022.2021 through 2025. The timing and manner in which HMS Equity Holding and HMS


Equity Holding IIthe Company 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. Additionally, the Taxable Subsidiaries have interest expense limitation carryforwards which have an indefinite carryforward period.


59


For

NOTE H—SHARE REPURCHASE PROGRAM

Prior to March 31, 2020, the years ending DecemberCompany historically conducted quarterly tender offers pursuant to its share repurchase program. On March 31, 2016, 2015 and 2014, respectively,2020, the tax characteristicsCompany’s Board of distributions paid to shareholders were as follows (amounts in thousands):

 Year Ended December 31,
Tax Characteristics of Distributions2016 2015 2014
         
Ordinary income$44,848
93.90% $34,085
99.68% $11,162
99.51%
Capital gain distributions2,913
6.10
 110
0.32
 55
0.49
Total$47,761
100.00% $34,195
100.00% $11,217
100.00%

The determination of the tax attributesDirectors unanimously approved a temporary suspension of the Company’s distributionsshare repurchase program commencing with the second quarter of 2020. The Board of Directors determined that it was in the best interest of the Company to suspend the share repurchase program in order to preserve financial flexibility and liquidity given the potential prolonged impact of COVID-19. From April 2020 through March 2021, the Share Repurchase Plan remained suspended due to the impacts of the COVID-19 pandemic. On March 8, 2021, the Company announced that its Board of Directors approved the reinstatement of the share repurchase program following the payment of the dividend declared by the Board of Directors for payment on April 1, 2021.

Under the terms of the reinstated 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 amount of shares of the Company’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 the Company could repurchase with the proceeds it received from the issuance of common stock under the Company’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. Upon resuming making offers to repurchase shares pursuant to the share repurchase program, the Company is initially limiting repurchase offers to the number of shares of common stock it can repurchase with 90% of the cash retained as a result of issuances of common stock under the Company’s dividend reinvestment plan.

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. Since inception of its share repurchase program, the Company funded the repurchase of $103.0 million in shares. For the three months ended March 31, 2021 the Company did not repurchase any shares of its common stock. For the three months ended March 31, 2020 the Company funded $6.1 million for shares of its common stock tendered for repurchase under the plan approved by the Board of Directors.

60


NOTE I—COMMITMENTS AND CONTINGENCIES

At March 31, 2021, the Company had the following outstanding commitments (in thousands):

Investments with equity capital commitments that have not yet funded:

    

Amount

 

 

Brightwood Capital Fund III, LP

$

1,000

Freeport First Lien Loan Fund III LP

3,113

HPEP 3, L.P.

1,555

Total equity commitments

$

5,668

Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded:

Adams Publishing Group, LLC

$

5,000

NinjaTrader, LLC

3,078

Mako Steel LP

2,637

MB2 Dental Solutions, LLC

2,569

SI East, LLC

2,500

Lynx FBO Operating LLC

1,875

Hunter Defense Technologies, Inc.

1,770

Arcus Hunting, LLC

1,446

Invincible Boat Company, LLC

1,080

Classic H&G AcquireCo, LLC

1,000

DTE Enterprises, LLC

750

GRT Rubber Technologies LLC

660

Eastern Wholesale Fence LLC

565

Hawk Ridge Systems, LLC

500

Clickbooth.Com, LLC

457

Chamberlin Holdco, LLC

400

Cody Pools Holdings, LLC

400

Direct Marketing Solutions, Inc.

400

Trantech Radiator Topco LLC

400

Gamber-Johnson, LLC

300

Tedder Acquisition, LLC

300

Dynamic Communities, LLC

250

American Nuts, LLC

247

Mystic Logistics Holdings, LLC

200

Klein Hersh, LLC

179

Total loan commitments

$

28,963

Total commitments

$

34,631

The Company 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 annually(which are typically through existing cash and cash equivalents and borrowings under the Credit Facilities). The Company follows a process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments as necessary. The Company had no unrealized depreciation on the outstanding unfunded commitments as of March 31, 2021.

NOTE J - RELATED PARTY TRANSACTIONS

1.          Advisory Agreements and Conditional Fee and Expense Reimbursement Waivers

Prior to October 30, 2020, the business of the Company was managed by HMS Adviser (an affiliate of Hines), pursuant to Original Investment Advisory Agreement. On October 30, 2020, the Company entered into the Investment Advisory Agreement with MSC Adviser, which includes similar terms to those contained in Original Investment

61


Advisory Agreement with HMS Adviser. The agreements state that the respective adviser will oversee the management of the Company’s activities and is responsible for making investment decisions with respect to, and providing day-to-day management and administration of, the Company’s investment portfolio. Prior to October 30, 2020, the Company and HMS Adviser had engaged MSC Adviser pursuant to a sub-advisory agreement to identify, evaluate, negotiate and structure the Company’s prospective investments, make investment and portfolio management recommendations for approval by HMS Adviser, monitor the Company’s investment portfolio and provide certain ongoing administrative services to HMS Adviser in exchange for which HMS Adviser agreed to pay MSC Adviser 50.0% of the base management fee and incentive fees described below as compensation for its services.

Pursuant to the Original Investment Advisory Agreement, the Company paid HMS Adviser a base management fee and incentive fees as compensation for the services described above. The base management fee was calculated at an annual rate of 2.0% of the Company’s average gross assets. The term “gross assets” means total assets of the Company as disclosed on the Company’s balance sheet. “Average gross assets” are calculated based on the Company’s gross assets at the end of the Company’s taxable yeartwo most recently completed calendar quarters. The base management fee was payable quarterly in arrears. Under the Investment Advisory Agreement, the Company pays a 1.75% base management fee to MSC Adviser on substantially the same terms as the Original Investment Advisory Agreement. The base management fee is expensed as incurred.

The incentive fee under the Original Investment Advisory Agreement and under the Investment Advisory Agreement is the same. The incentive fees consist of two parts. The first part, referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based upon the Company’s taxableon pre-incentive fee net investment income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination madeimmediately preceding quarter. The subordinated incentive fee on an interim basis may not be representative of the actual tax attributes of distributions for a full year. If the Company had determined the tax attributes of its distributions taxable year-to-date as of September 30, 2017, 100% would be from its current and accumulated earnings and profits. However, there can be no certaintyincome is equal to stockholders that this determination is representative of what the actual tax attributes20.0% of the Company’s anticipated fiscalpre-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 income means interest income, dividend income and taxable years ending December 31, 2017any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our 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 the incentive fee). Pre-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 have not yet received in cash. Pre-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’s common stock (including proceeds from the Company’s dividend reinvestment plan) reduced for non-liquidating distributions, to stockholders will be. The actual tax characteristicsother than distributions of distributions to stockholders will be reportedprofits, paid to the Internal Revenue ServiceCompany’s stockholders and stockholders subjectamounts paid for share repurchases pursuant to information reporting shortly after the closeCompany’s share repurchase program. The subordinated incentive fee on income is expensed in the quarter in which it is incurred.

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 MSC Adviser in any calendar quarter in which the Company’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 the Company’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 MSC Adviser. This portion of the subordinated incentive fee on income is referred to as the “catch up” and is intended to provide MSC Adviser with an incentive fee of 20.0% on all of the Company’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 the Company’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 the

62


Company’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 Company and is determined and payable in arrears as of the end of each calendar year on Form 1099-DIV.


Dividends from net investment income and distributions from net(or upon termination of the Investment Advisory Agreement). This fee equals 20.0% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains are determined in accordance with U.S. federal tax regulations, which may differon a cumulative basis from amounts determined in accordance with GAAPinception, calculated as of the end of each calendar year, computed net of all realized capital losses and those differences could be material. These book-to-tax differences are either temporary or permanent in nature. Reclassifications due to permanent book-to-tax differences, such asunrealized capital depreciation on a cumulative basis, less the non-deductible excise tax, have no impact on net assets.

Note 9 – Supplemental Cash Flow Disclosures
Listed below areaggregate amount of any previously paid capital gain incentive fees. At the supplemental cash flow disclosures for the nine months ended September 30, 2017 and 2016 (dollars in thousands):
Supplemental Disclosure of Cash Flow Information Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
Cash paid for interest $12,296
 $10,078
Cash paid for income taxes 358
 265
     
Supplemental Disclosure of Non-Cash Flow Information  
  
Stockholder distributions declared and unpaid 4,565
 4,073
Stockholder distributions reinvested 20,594
 18,263
Change in unpaid deferred offering costs (40) 1,107
Unpaid deferred financing costs 25
 4
Unpaid sales commissions and dealer manager fee 251
 57

Note 10 — Related Party Transactions and Arrangements
Advisory Agreements and Conditional Fee Waiver
The Company and the Adviser have entered into two expense support and conditional reimbursement agreements (as amended from time to time, the “2013 and 2014 Expense Reimbursement Agreements”), pursuant to which the Adviser could payend of each reporting period, the Company up to 100% of its operating expenses through December 31, 2014 (the “Expense Support Payment”) in order to achieve a reasonable level of expenses relative to its investment income (the “Operating Expense Objective”). The Company’s board of directors, in its sole discretion, may approveestimates the repayment of unreimbursed Expense Support Payments upon a determination by the board of directors that the Company has achieved the Operating Expense Objective in any quarter following receipt by the Company of an Expense Support Payment. The Company may reimburse any unreimbursed Expense Support Payments for up


to three years from the date each respective Expense Support Payment was determined. Any Expense Support Payments that remain unreimbursed three years after such payment will be permanently waived.

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 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.

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 October 19, 2017, pursuant to which, for a period from January 1, 2016 through September 30, 2017, the Advisers could waive the “subordinated incentive fee on income,” ascapital 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 MSC Adviser until such termtime it 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.

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. 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 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.

realized.

For the three months ended September 30, 2017March 31, 2021 and 2016,2020, the Company incurred base management fees of approximately $5.6$3.9 million and $4.9$5.0 million, respectively, and the Advisers waived no base management fees in either period.respectively. For the three months ended September 30, 2017March 31, 2021 and 2016,2020, the Company incurred no capital gains incentive fees ordid not incur subordinated incentive fees on income in either period. For the three months ended September 30, 2017 and 2016, the Advisers waived noor any capital gains incentive fees nor subordinated incentive fees in either period.


For the nine months ended September 30, 2017 and 2016, the Company incurred base management fees of approximately $16.1 million and $14.1 million, respectively, and the Advisers waived no base management fees in either period. For the nine months ended September 30, 2017 and 2016, the Company incurred no capital gains incentive fees in either period, and incurred subordinated incentive fees on income of approximately $2.3 million and $493,000, respectively, which were fully waived by the Advisers.

For the nine months ended September 30, 2017 and 2016, the Company did not record an accrual for any previously waived fees. Any future reimbursement of previously waived fees

Pursuant to the Advisers will not be accrued until the reimbursement of the waived fees becomes 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%7.00%Expired


 
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
9/30/2012$97
$
 $52
$
 $3
$
 $
$
 1.97%7.00%Expired
12/31/2012$104
$
 $53
$
 $
$
 $
$
 2.96%7.00%Expired
3/31/2013$84
$
 $
$
 $
$
 $
$
 1.86%7.00%Expired
6/30/2013$118
$
 $
$
 $
$
 $
$
 1.36%7.00%Expired
9/30/2013$268
$
 $
$
 $
$
 $
$
 1.22%7.00%Expired
12/31/2013$309
$
 $
$
 $5
$
 $153
$
 0.49%7.00%Expired
3/31/2014$306
$
 $
$
 $
$
 $
$
 1.28%7.00%Expired
6/30/2014$548
$
 $
$
 $
$
 $
$
 1.28%7.00%Expired
9/30/2014$821
$
 $
$
 $
$
 $328
$
 1.23%7.00%Expired
12/31/2014$148
$
 $451
$
 $
$
 $
$
 1.70%7.00%12/31/2017
3/31/2015$
$
 $358
$
 $
$
 $
$
 1.78%7.18%3/31/2018
6/30/2015$
$
 $930
$
 $
$
 $
$
 1.69%7.07%6/30/2018
9/30/2015$
$
 $155
$
 $
$
 $
$
 2.11%7.07%9/30/2018
12/31/2015$
$
 $1,159
$
 $
$
 $
$
 2.27%7.78%12/31/2018
3/31/2016$
$
 $493
$
 $
$
 $
$
 1.83%8.14%3/31/2019
6/30/2016$
$
 $
$
 $
$
 $
$
 1.76%7.95%6/30/2019
9/30/2016$
$
 $
$
 $
$
 $
$
 1.73%7.87%9/30/2019
12/31/2016$
$
 $1,196
$
 $
$
 $
$
 1.68%7.69%12/31/2019
3/31/2017$
$
 $1,495
$
 $
$
 $
$
 1.68%7.53%3/31/2020
6/30/2017$
$
 $823
$
 $
$
 $
$
 1.67%7.53%6/30/2020
9/30/2017$
$
 $
$
 $
$
 $
$
 1.91%7.53%9/30/2020
(1)Fees waived pursuant to the Conditional Fee Waiver Agreement and the 2016-2017 Conditional Income Incentive Fee Waiver Agreements and Expense Support Payments pursuant to the 2013 and 2014 Expense Reimbursement 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. For the quarter ended December 31, 2013, expenses have been reduced by $153,000, the amount of the Expense Support Payment received in 2013 from the Adviser. For the quarter ended September 30, 2014, expenses have been reduced by $328,000, which Expense Support Payment was received from the Adviser on October 30, 2014.
(4)“Annualized Distribution Rate” equals $0.00191781 per share, per day. “Annualized Distribution Rate” does not include the special stock dividend paid to stockholders on September 14, 2012 and was based on the Company’s offering price per share as of the final day of the quarter.

Pursuant to theOriginal Investment Advisory Agreement and Sub-Advisory Agreement, the Company is required to pay or reimburse the Advisers for administrative services expenses, which include all costs and expenses related to the Company’s day-to-day administration and management not related to advisory services.services, whether such administrative services to the extent performed by the Advisers or their affiliates, were performed by a third party service provider or affiliates of the Advisers (“Internal Administrative Services”). The Advisers do not earn any profit under their provision of administrative services to the Company. For the three months ended September 30, 2017March 31, 2021, and 2016, the Company incurred, and the Advisers waived the reimbursement of, administrative services expenses of approximately $694,000 and $529,000, respectively. For the nine months ended September 30, 2017 and 2016,2020, the Company incurred, and the Advisers waived the reimbursements of, administrative servicesInternal Administrative Services expenses of approximately $2.2$1.1 million, and $1.6$0.8 million, respectively. On October 19, 2017, theThe Company and the Advisers agreedentered into an expense support and conditional reimbursement agreement, as amended from time to further amend the 2014 Expense Reimbursement Agreement,time, which extended the period for waiver of reimbursement of administrative servicesInternal Administrative Services expenses accrued pursuant to the Original Investment Advisory Agreement and the Sub-Advisory Agreement through DecemberOctober 29, 2020. MSC Adviser also agreed to waive reimbursement of Internal Administrative Expenses from October 30, 2020 through March 31, 2017.2021. Since inception, the Advisers waived the reimbursement of total Internal Administrative Services expenses of $20.8 million. Waived administrative servicesInternal Administrative Services expenses are permanently waived and are not subject to future reimbursement.



The table below presents the administrative services expenses waived by the Advisers (dollars in thousands).
  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% 7.00% Not Eligible to be Repaid
9/30/2012 $129
$
 1.97% 7.00% Not Eligible to be Repaid
12/31/2012 $284
$
 2.96% 7.00% Not Eligible to be Repaid
3/31/2013 $233
$
 1.86% 7.00% Not Eligible to be Repaid
6/30/2013 $222
$
 1.36% 7.00% Not Eligible to be Repaid
9/30/2013 $234
$
 1.22% 7.00% Not Eligible to be Repaid
12/31/2013 $329
$
 0.49% 7.00% Not Eligible to be Repaid
3/31/2014 $329
$
 1.28% 7.00% Not Eligible to be Repaid
6/30/2014 $385
$
 1.28% 7.00% Not Eligible to be Repaid
9/30/2014 $371
$
 1.23% 7.00% Not Eligible to be Repaid
12/31/2014 $412
$
 1.70% 7.00% Not Eligible to be Repaid
3/31/2015 $437
$
 1.78% 7.18% Not Eligible to be Repaid
6/30/2015 $480
$
 1.69% 7.07% Not Eligible to be Repaid
9/30/2015 $517
$
 2.11% 7.07% Not Eligible to be Repaid
12/31/2015 $603
$
 2.27% 7.78% Not Eligible to be Repaid
3/31/2016 $533
$
 1.83% 8.14% Not Eligible to be Repaid
6/30/2016 $574
$
 1.76% 7.95% Not Eligible to be Repaid
9/30/2016 $529
$
 1.73% 7.87% Not Eligible to be Repaid
12/31/2016 $679
$
 1.68% 7.69% Not Eligible to be Repaid
3/31/2017 $661
$
 1.68% 7.53% Not Eligible to be Repaid
6/30/2017 $873
$
 1.67% 7.53% Not Eligible to be Repaid
9/30/2017 $694
$
 1.91% 7.53% 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 administrative expenses waived by the Advisers and organizational and offering expenses. For the quarter ended December 31, 2013, expenses have been reduced by $153,000, the amount of the Expense Support Payment received in 2013 from the Adviser. For the quarter ended September 30, 2014, expenses have been reduced by $328,000, which Expense Support Payment was received from the Adviser on October 30, 2014.
(2)“Annualized Distribution Rate” equals $0.00191781 per share, per day. “Annualized Distribution Rate” does not include the special stock dividend paid to stockholders on September 14, 2012 and was based on the Company’s offering price per share as of the last day of the quarter.
(3)The Advisers have agreed to permanently waive reimbursement by the Company of administrative expenses through December 31, 2017. The waiver of reimbursement of administrative expenses is not eligible for future reimbursement from the Company to the Advisers.

The table below outlines fees incurred and expense reimbursements payable to Hines, Main Street and their affiliates for the three and nine months ended September 30, 2017 and 2016 and amounts unpaid as of September 30, 2017 and December 31, 2016 (dollars in thousands).
 Incurred Incurred Unpaid as of
 Three Months Ended September 30, Nine Months Ended September 30, September 30, 2017 December 31, 2016
Type and Recipient20172016 20172016 
Incentive Fees on Income (1) - the Adviser, Sub-Adviser
$
$
 $
$
 $
 $
Offering Costs - the Adviser, Sub-Adviser272
405
 1,000
1,226
 18
 (23)
Other (2) - the Adviser
81
125
 551
278
 37
 121
Selling Commissions - Dealer Manager501
1,242
 2,368
3,884
 127
 92
Dealer Manager Fee - Dealer Manager307
608
 1,307
1,859
 124
 (6)
Due to Affiliates  
  
 
 $306
 $184
          
Base Management Fees (1) - the Adviser, Sub-Adviser
$5,648
$4,905
 $16,101
$14,092
 $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.



2.          Offering Costs


In accordance with the Original Investment Advisory Agreement and the Sub-Advisory Agreement, the Company reimbursesreimbursed the Advisers for any offering costs that are paid on the Company’s behalf, which consistconsisted 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, advertising and sales literature and other costs incurred in connection with an offering costs. Pursuant to the terms of the Investment Advisory Agreement and the Sub-Advisory Agreement, the Company expects to reimburse the Advisers for such costs incurred onincluding the Company’s behalf on a monthly basis, up to a maximum aggregate amount of 1.5% of the gross stock offering proceeds.dividend reinvestment plan. The Advisers arewere responsible for the payment of offering costs to the extent they exceedexceeded 1.5% of the aggregate gross stock offering proceeds.


Pursuant to the Transaction, HMS Adviser agreed to permanently waive reimbursement of organizational and offering expenses except for $676,603 which remained payable to HMS Adviser. No outstanding amount was payable to MSC Adviser. As of September 30, 2017,March 31, 2021, $676,603 of the Company’s reimbursement obligation for organizational and offering expenses remained outstanding.

As of March 31, 2021, the Company has reimbursed theHMS Advisers approximately $11.6$12.8 million since inception for offering costs. As

63



Note 11 – Share Repurchase Plan
Since inception of the share repurchase program, the Company funded the repurchase of $28.0 million in shares. For the nine months ended September 30, 2017 and 2016, the Company funded $14.0 million and $8.4 million, respectively, for shares tendered for repurchase under the plan approved by the board of directors. Since inception of the share repurchase program, the Company has funded all redemption requests validly tendered and not withdrawn.
For the Quarter Ended Repurchase Date Shares Repurchased Percentage of Shares Tendered that were Repurchased 
Repurchase Price
per Share
 Aggregate Consideration for Repurchased Shares
March 31, 2017 3/23/2017 614,179.64 100% $8.23
 $5,054,698
June 30, 2017 6/15/2017 and 6/16/2017 346,306.52 100% $8.20
 $2,839,713
September 30, 2017 9/21/2017 747,784.63 100% $8.19
 $6,124,356

Note 12 – Commitments and Contingencies

At September 30, 2017, the Company had a total of approximately $57.6 million in outstanding commitments comprising (i) 30 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 depreciation of approximately $473,000 on the outstanding unfunded loan commitments and no unrealized appreciation or depreciation on the outstanding unfunded capital commitments during the nine months ended September 30, 2017. At December 31, 2016, the Company had a total of approximately $42.7 million in outstanding commitments comprising (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. The Company recognized unrealized depreciation of $266,000 on the outstanding unfunded loan commitments and unrealized appreciation of $14,000 on the outstanding unfunded capital commitments during the year ended December 31, 2016.
 Commitments and Contingencies
 (dollars in thousands)
 September 30, 2017 December 31, 2016
Unfunded Loan Commitments
  
Adams Publishing Group, LLC$2,216

$
Apex Linen Services, Inc.403
 397
Arcus Hunting, LLC120
 2,136
BarFly Ventures, LLC
 881
BigName Holdings, LLC101


Boccella Precast Products, LLC500
 
Buca C, LLC

1,548
CapFusion Holding, LLC
 394
CDHA Management, LLC3,373
 3,259
Charps, LLC1,000
 
Clad-Rex Steel, LLC100


CST Industries, Inc.602


CTVSH, PLLC200


Datacom, LLC50
 1,302


 Commitments and Contingencies
 (dollars in thousands)
 September 30, 2017 December 31, 2016
Unfunded Loan Commitments
  
Felix Investments Holdings II LLC$1,667

$
Gamber-Johnson Holdings, LLC300
 300
Guerdon Modular Holdings, Inc.400
 400
Hawk Ridge Systems, LLC400
 400
Hojeij Branded Foods, Inc.2,090
 2,000
Hostway Corporation67


HW Temps LLC200
 50
Jackmont Hospitality, Inc.
 1,200
LaMi Products, LLC1,029
 1,729
Market Force Information, Inc.272


Meisler Operating, LLC400


Minute Key, Inc.2,000
 197
Mystic Logistics, Inc.200
 194
NNE Issuer, LLC7,000


NuStep, LLC300


Pardus Oil & Gas, LLC357
 357
Permian Holdco 2290
 290
PPC/Shift, LLC500
 500
Resolute Industrial LLC5,750


Strike, LLC
 2,475
Unirush LLC
 980
Volusion, LLC
 2,955
Wireless Vision8,289


Unfunded Capital Commitments   
Brightwood Capital Fund III, LP1,000
 1,000
Brightwood Capital Fund IV, LP9,000
 10,000
Copper Trail Energy Fund2,500
 
Freeport First Lien Loan Fund III, LP4,941
 7,737
Total$57,617
 $42,681

Note 13 – Subsequent Events
From October 1, 2017 through November 10, 2017, the Company funded approximately $1.9 million in investments and received proceeds from repayments and dispositions of approximately $62.0 million.

3.          Main Street Term Loan

On October 19, 2017,January 27, 2021, the Company entered into an amendmentthe Main Street Term Loan with Main Street. As of March 31, 2021, the Main Street Term Loan was fully drawn at $40.0 million, bearing interest at a fixed rate of 5.00% per annum and maturing on January 27, 2026. The Company paid a 1.0% upfront fee to Main Street on the EverBank Credit Facility, which increasedclosing date. Borrowings under the revolver commitments by the amountMain Street Term Loan are expressly subordinated and junior in right of $25.0 million (from $95.0 millionpayment to $120.0 million).


On October 19, 2017,all secured indebtedness of the Company the Adviser and the Sub-Adviser entered into a conditional income incentive fee agreement (the “Third Quarter 2017 Fee Waiver Agreement”), pursuant to which,may be prepaid any time after January 27, 2023. See Note E – Debt for a period from July 1, 2017 through September 30, 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 Third Quarter 2017 Fee Waiver Agreement may require the Company to repay the Advisers for previously waived Expense Support Payments or waived base management fees or incentive fees under certain circumstances. 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.

further discussion.

NOTE K—SUBSEQUENT EVENTS

On October 19, 2017, the Company’s board of directors approved an amendment and restatement of the Company’s distribution reinvestment plan (the “Amended DRP”). Under the Amended DRP, in the event that a continuous offering of the Company’s common stock is suspended or terminated, cash distributions paid to participating stockholders will be reinvested in additional common stock at a purchase price determined by the board of directors, or a committee thereof, in its sole discretion, that is (i) not less than the NAV per share determined in good faith by the board of directors, or a committee thereof, in its sole discretion, within forty-eight hours prior to the payment of the distribution (the “NAV Per Share”) and (ii) not more than 2.5% greater than



the NAV Per Share as of such date. The Amended DRP will be effective as of, and will first apply to the reinvestment of cash distributions paid on or after, November 1, 2017.

On November 3, 2017,April 10, 2021, the Company filed a tender offer statement on Schedule TO (the “Offer”) with the SEC, to commence an offer by the Company to purchase as approved by its boarda number of directors, 1,619,437.09 shares of our issued and outstandingthe Company’s common stock par value $0.001 per share.equal 90% of the amount of the DRIP proceeds resulting from shares issued in lieu of cash distributions from the April 1, 2021 dividend payment, approximately $2,846,049. The offer is for cashOffer will expire on May 17, 2021 and shares validly tendered and not withdrawn will be purchased at a purchase price equal to the NAVCompany’s net asset value per share as of May 31, 2021.

On May 11, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.125 per share payable August 2, 2021 to stockholders as of June 30, 2021.

64


Schedule 12-14

MSC Income Fund, Inc.

Consolidated Schedule of Investments In and Advances to Affiliates

March 31, 2021

(dollars in thousands)

(unaudited)

Amount of

Interest,

Fees or

Amount of

Amount of

Dividends

December 31, 

March 31, 

Realized

Unrealized

Credited to

2020

Gross

Gross

2021

Company

    

Investment(1)(10)(11)

    

Geography

    

Gain/(Loss)

    

Gain/(Loss)

    

Income(2)

    

Fair Value

    

Additions(3)

    

Reductions(4)

    

Fair Value

  

  

  

  

  

  

  

  

  

GRT Rubber Technologies LLC

 

(L+7.00%) Secured Debt

 

(8)

 

-

(1)

152

8,262

3,465

-

8,262

 

Member Units

 

(8)

 

-

-

448

22,120

-

3,465

22,120

Harris Preston Fund Investments

 

LP Interests (2717 MH, L.P.)

 

(8)

 

-

(65)

-

2,702

47

65

2,684

Copper Trail Energy Fund I, LP - CTMH

 

LP Interests (CTMH, LP)

 

(9)

 

-

-

-

727

-

37

710

Other
Amounts related to
investments transferred to
or from other
1940 Act classification
during the period

-

-

-

-

-

-

-

Total Control Investments

$

-

$

(66)

$

600

$

33,811

$

3,512

$

3,567

$

33,776

Affiliate Investments

AFG Capital Group, LLC

 

Preferred Member Units

 

(8)

$

-

$

130

$

-

$

1,450

$

130

$

-

$

1,580

 

10.00% Secured Debt

 

(8)

 

-

-

3

123

-

22

101

ASK (Analytical Systems Keco Holdings, LLC)

 

Preferred Member Units

 

(8)

 

-

(120)

-

800

-

120

680

 

(L+10.00%, Floor 2.00%) Secured Debt

 

(8)

 

-

-

79

1,180

39

-

1,219

 

Warrants

 

(8)

 

-

-

-

-

-

-

-

 

Member Units

 

(5)

 

-

-

-

528

-

-

528

Brewer Crane Holdings, LLC

 

Preferred Member Units

 

(9)

 

-

(90)

8

1,460

-

90

1,370

 

(L+10.00%, Floor 1.00%) Secured Debt

 

(9)

 

-

-

63

2,119

2

31

2,090

Centre Technologies Holdings, LLC

 

(L+10.00%, Floor 2.00%) Secured Debt

 

(8)

 

-

-

92

2,868

3

38

2,833

 

Preferred Member Units

 

(8)

 

-

-

-

1,540

-

-

1,540

Chamberlin Holding LLC

 

(L+8.00%, Floor 1.00%) Secured Debt

 

(8)

 

-

(6)

102

3,803

6

6

3,803

 

Member Units

 

(8)

 

-

50

290

7,020

50

-

7,070

 

Member Units

 

(8)

 

-

15

4

317

15

-

332

Charps, LLC

 

Preferred Member Units

 

(5)

 

-

200

261

2,630

200

-

2,830

 

0.15 Secured Debt

 

(5)

 

-

-

9

167

-

167

-

Clad-Rex Steel, LLC

 

(L+9.50%, Floor 1.00%) Secured Debt

 

(5)

 

-

-

76

2,706

4

-

2,710

 

Member Units

 

(5)

 

-

(1)

68

2,153

-

1

2,152

 

Member Units

 

(5)

 

-

-

-

132

-

-

132

 

10.00% Secured Debt

 

(5)

 

-

-

7

275

-

2

273

Cody Pools, Inc.

 

(L+10.50%, Floor 1.75%) Secured Debt

 

(8)

-

(4)

119

3,554

4

54

3,504

 

Preferred Member Units

 

(8)

-

980

-

3,740

980

-

4,720

Colonial Electric Company LLC

 

12.00% Secured Debt

 

(6)

 

-

-

-

-

6,143

-

6,143

 

Preferred Member Units

 

(6)

 

-

-

-

-

1,920

-

1,920

Copper Trail Energy Fund I, LP

 

LP Interests (Copper Trail Energy Fund I, LP)

 

(9)

 

-

61

98

1,782

61

-

1,843

Datacom, LLC

 

8.00% Secured Debt

 

(8)

 

-

-

-

-

-

-

-

 

Preferred Member Units

 

(8)

 

-

-

-

-

290

-

290

 

10.50% PIK Secured Debt

 

(8)

 

-

-

-

-

-

-

-

 

Preferred Member Units

 

(8)

 

-

-

-

-

-

-

-

 

Preferred Member Units

 

(8)

 

-

-

-

-

-

-

-

 

5.00% Secured Debt

 

(8)

 

-

-

4

-

904

3

901

Digital Products Holdings LLC

 

(L+10.00%, Floor 1.00%) Secured Debt

 

(5)

 

-

-

133

4,493

6

83

4,416

 

Preferred Member Units

 

(5)

 

-

-

13

2,459

-

-

2,459

Direct Marketing Solutions, Inc.

 

Preferred Stock

 

(9)

 

-

(380)

-

4,840

-

380

4,460

 

(L+11.00%, Floor 1.00%) Secured Debt

 

(9)

 

-

-

122

3,717

10

4

3,723

Freeport Financial Funds

 

LP Interests (Freeport First Lien Loan Fund III LP)

 

(5)

 

-

-

274

10,321

1,398

-

8,923

Gamber-Johnson Holdings, LLC

 

(L+7.00%, Floor 2.00%) Secured Debt

 

(5)

 

-

(12)

127

4,960

798

598

5,160

 

Member Units

 

(5)

 

-

(22)

119

13,120

712

22

13,810

GFG Group, LLC.

 

Preferred Member Units

 

(5)

 

-

-

-

-

1,225

-

1,225

 

12.00% Secured Debt

 

(5)

 

-

-

-

-

3,818

-

3,818

Gulf Publishing Holdings, LLC

 

(5.25% Cash, 5.25% PIK) (L+9.50%, Floor 1.00%) Secured Debt

 

(8)

 

-

-

2

63

1

-

64

 

(6.25% Cash, 6.25% PIK) Secured Debt

 

(8)

 

-

5

125

2,988

60

-

3,048

Hawk Ridge Systems, LLC

 

10.00% Secured Debt

 

(9)

 

-

-

7

-

-

-

-

 

10.00% Secured Debt

 

(9)

 

-

(4)

98

3,350

4

4

3,350

 

Preferred Member Units

 

(9)

 

-

321

77

2,008

322

-

2,330

 

Preferred Member Units

 

(9)

 

-

15

-

105

15

-

120

HPEP 3, L.P.

 

LP Interests (HPEP 3, L.P.)

 

(8)

 

-

-

-

3,258

374

-

3,632

J&J Services, Inc.

 

11.50% Secured Debt

 

(7)

 

-

(2)

102

3,200

2

2

3,200

 

Preferred Stock

 

(7)

 

-

-

-

3,170

-

-

3,170

65


Kickhaefer Manufacturing Company, LLC

 

Member Units

 

(5)

 

-

-

4

3,060

-

-

3,060

 

11.50% Secured Debt

 

(5)

 

-

-

178

5,500

5,375

5,367

5,508

 

9.00% Secured Debt

 

(5)

 

-

-

21

978

-

2

976

 

Member Units

 

(5)

 

-

-

-

290

-

-

290

 

PIK Secured Debt

 

(9)

 

-

(74)

-

3,391

-

74

3,317

MH Corbin Holding LLC

 

(10.00% Cash, 3.00% PIK) Secured Debt

 

(5)

 

-

-

74

2,070

2

20

2,052

 

Preferred Member Units

 

(5)

 

-

(290)

-

590

-

290

300

Mystic Logistics Holdings, LLC

 

12.00% Secured Debt

 

(6)

 

-

-

52

1,682

248

248

1,682

 

Common Stock

 

(6)

 

-

(428)

51

2,248

-

428

1,820

NexRev LLC

 

Preferred Member Units

 

(8)

 

-

450

5

370

450

-

820

 

11.00% Secured Debt

 

(8)

 

-

46

125

4,177

248

252

4,173

NuStep, LLC

 

Preferred Member Units

 

(5)

 

-

150

-

2,700

150

-

2,850

 

12.00% Secured Debt

 

(5)

 

-

-

153

4,288

5

-

4,293

SI East, LLC (Stavig)

 

9.50% Secured Debt

 

(7)

 

-

(19)

288

10,987

20

1,269

9,738

Tedder Industries, LLC

 

12.00% Secured Debt

 

(9)

 

-

-

138

4,025

13

400

3,638

 

Preferred Member Units

 

(9)

 

-

-

-

2,034

-

-

2,034

 

12.00% Secured Debt

 

(9)

 

-

-

1

-

-

-

-

Trantech Radiator Topco, LLC

 

Common Stock

 

(7)

 

-

(90)

7

1,510

-

90

1,420

 

12.00% Secured Debt

 

(7)

 

-

(8)

71

2,131

3

8

2,126

 

Preferred Member Units

 

(7)

 

-

130

-

3,260

130

-

3,390

Other
Amounts related to
investments transferred to
or from other
1940 Act classification
during the period

-

-

-

-

-

-

-

Total Affiliate investments

$

-

$

1,003

$

3,650

$

157,690

$

26,140

$

10,075

$

170,959


(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.
(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 March 31, 2021 for affiliate investments located in this region was $67,766. This represented 11.6% of net assets as of March 31, 2021.
(6)Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of March 31, 2021 for affiliate investments located in this region was $11,565. This represented 2.0% of net assets as of March 31, 2021.
(7)Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of March 31, 2021 for affiliate investments located in this region was $23,043. This represented 3.9% of net assets as of March 31, 2021.
(8)Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of March 31, 2021 for control investments located in this region was $33,066. This represented 5.7% of net assets as of March 31, 2021. The fair value as of March 31, 2021 for affiliate investments located in this region was $40,310. This represented 6.9% of net assets as of March 31, 2021.

66


(9)Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of March 31, 2021 for control investments located in this region was $710. This represented 0.1% of net assets as of March 31, 2021. The fair value as of March 31, 2021 for affiliate investments located in this region was $28,274. This represented 4.8% of net assets as of March 31, 2021.
(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 notes to the consolidated financial statements. Supplemental information can be located within the schedule of 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.

67


Schedule 12-14

MSC Income Fund, Inc.

Consolidated Schedule of Investments in and Advances to Affiliates

March 31, 2020

(dollars in thousands)

(unaudited)

Amount of

Interest,

Fees or

���

Amount of

Amount of

Dividends

December 31, 

March 31, 

Realized

Unrealized

Credited to

2019

Gross

Gross

2020

Company

    

Investment(1)(10)(11)

    

Geography

    

Gain/(Loss)

    

Gain/(Loss)

    

Income(2)

Fair Value

Additions(3)

Reductions(4)

Fair Value

GRT Rubber Technologies LLC

LIBOR Plus 7.00%

(8)

$

-

$

(2)

$

180

$

7,396

$

868

$

2

$

8,262

Member Units

(8)

-

(996)

331

-

23,372

-

-

-

997

-

22,375

Copper Trail Fund Investments

LP Interests (CTMH, LP)

(9)

-

-

80

-

872

-

-

-

-

-

872

Harris Preston Fund Investments

LP Interests (2717 MH, L.P.)

(8)

-

-

-

-

3,156

-

-

-

-

-

3,156

Other

-

Amounts related to investments transferred to or from other 1940 Act classification during the period

-

-

-

-

-

-

-

Total Control investments

$

-

$

(998)

$

591

$

34,796

$

868

$

999

$

34,665

Affiliate Investments

AFG Capital Group, LLC

10.00% Secured Debt

(8)

$

-

$

-

$

5

$

209

$

-

$

21

$

188

Preferred Member Units

(8)

-

(30)

-

-

1,295

-

-

-

30

-

1,265

Analytical Systems Keco, LLC

LIBOR Plus 10.00% (Floor 2.00%)

(8)

-

-

44

-

1,266

-

2

-

17

-

1,251

Preferred Member Units

(8)

-

215

-

-

800

-

215

-

-

-

1,015

Warrants

(8)

-

56

-

-

79

-

56

-

-

-

135

Brewer Crane Holdings, LLC

LIBOR Plus 10.00% (Floor 1.00%)

(9)

-

-

68

-

2,233

-

2

-

31

-

2,204

Preferred Member Units

(9)

-

-

5

-

1,070

-

-

-

-

-

1,070

Centre Technologies Holdings, LLC

LIBOR Plus 10.00% (Floor 2.00%)

(8)

-

-

94

-

3,008

-

3

-

39

-

2,972

Preferred Member Units

(8)

-

-

7

-

1,460

-

-

-

-

-

1,460

Chamberlin Holding LLC

LIBOR Plus 10.00% (Floor 1.00%)

(8)

-

(5)

139

-

4,443

-

5

-

5

-

4,443

Member Units

(8)

-

28

46

-

6,009

-

28

-

-

-

6,037

Member Units

(8)

-

(133)

4

-

363

-

-

-

133

-

230

Charps, LLC

15.00% Secured Debt

(5)

-

-

19

-

500

-

-

-

-

-

500

Preferred Member Units

(5)

-

160

6

-

1,730

-

160

-

-

-

1,890

Clad-Rex Steel, LLC

LIBOR Plus 9.50% (Floor 1.00%)

(5)

-

21

77

-

2,696

-

24

-

-

-

2,720

Member Units

(5)

-

(255)

18

-

2,408

-

-

-

255

-

2,153

10% Secured Debt

(5)

-

-

7

-

282

-

-

-

2

-

280

Member Units

(5)

-

-

-

-

115

-

-

-

-

-

115

Cody Pools, Inc.

LIBOR Plus 10.50% (Floor 1.75%)

(8)

-

4

37

-

-

-

4,005

-

84

-

3,921

Preferred Member Units

(8)

-

-

-

-

-

-

2,079

-

-

-

2,079

Copper Trail Fund Investments

LP Interests (Copper Trail Energy Fund I, LP)

(9)

-

(29)

8

-

1,643

-

-

-

184

-

1,459

Direct Marketing Solutions, Inc.

LIBOR Plus 11.00% (Floor 1.00%)

(9)

-

(6)

132

-

3,929

-

6

-

65

-

3,870

Preferred Stock

(9)

-

(36)

-

-

5,051

-

-

-

36

-

5,015

Digital Products Holdings LLC

LIBOR Plus 10.00% (Floor 1.00%)

(5)

-

(82)

149

-

4,611

-

5

-

165

-

4,451

Preferred Member Units

(5)

-

(700)

13

-

1,294

-

-

-

700

-

594

LP Interests (Freeport First Lien Loan Fund III LP)

(5)

-

(1,054)

255

-

9,696

-

989

-

1,054

-

9,631

Gamber-Johnson Holdings, LLC

LIBOR Plus 6.50% (Floor 2.00%)

(5)

-

(6)

105

-

4,755

-

6

-

201

-

4,560

Member Units

(5)

-

(41)

514

-

13,352

-

-

-

41

-

13,311

Guerdon Modular Holdings, Inc.

16.00% Secured Debt

(9)

(2,792)

3,117

30

-

-

-

3,147

-

3,147

-

-

LIBOR Plus 8.50% (Floor 1.00%)

(9)

(252)

252

-

-

-

-

253

-

253

-

-

Preferred Stock

(9)

-

-

-

-

-

-

-

-

-

-

-

Common Stock

(9)

-

-

-

-

-

-

-

-

-

-

-

Gulf Publishing Holdings, LLC

LIBOR Plus 9.50% (Floor 1.00%)

(8)

-

-

2

-

70

-

-

-

10

-

60

12.50% Secured Debt

(8)

-

(38)

103

-

3,124

-

4

-

38

-

3,090

Member Units

(8)

-

(605)

-

-

605

-

-

-

605

-

-

Harris Preston Fund Investments

LP Interests (HPEP 3, L.P.)

(8)

-

-

-

-

2,474

-

345

-

-

-

2,819

Hawk Ridge Systems, LLC

LIBOR Plus 6.00% (Floor 1.00%)

(9)

-

-

-

-

148

-

1

-

-

-

149

11.00% Secured Debt

(9)

-

(4)

100

-

3,350

-

4

-

4

-

3,350

Preferred Member Units

(9)

-

(145)

-

-

1,975

-

-

-

145

-

1,830

Preferred Member Units

(9)

-

(7)

-

-

105

-

-

-

7

-

98

J&J Services, Inc.

11.50% Secured Debt

(7)

-

-

132

-

4,315

-

4

-

-

-

4,319

68


Preferred Stock

(7)

-

-

-

-

1,790

-

-

-

-

-

1,790

Kickhaefer Manufacturing Company, LLC

11.50% Secured Debt

(5)

-

(5)

191

-

6,146

-

151

-

105

-

6,192

Member Units

(5)

-

-

32

-

290

-

-

-

-

-

290

9.00% Secured Debt

(5)

-

-

-

-

977

-

8

-

2

-

983

Member Units

(5)

-

(199)

5

-

3,060

-

-

-

199

-

2,861

Market Force Information, LLC

8% PIK Secured Debt

(9)

-

(94)

15

-

674

-

-

-

94

-

580

12.00% PIK Secured Debt

(9)

-

(1,295)

182

-

5,625

-

94

-

1,295

-

4,424

Member Units

(9)

-

(1,319)

-

-

1,319

-

-

-

1,319

-

-

MH Corbin Holding LLC

13.00% Secured Debt

(5)

-

(20)

75

-

2,213

-

12

-

40

-

2,185

Preferred Member Units

(5)

-

(100)

-

-

1,192

-

-

-

100

-

1,092

Preferred Member Units

(5)

-

(5)

-

-

5

-

-

-

5

-

-

Mystic Logistics Holdings, LLC

12.00% Secured Debt

(6)

-

(2)

55

-

1,561

-

251

-

76

-

1,736

Common Stock

(6)

-

444

-

-

2,103

-

444

-

-

-

2,547

NexRev LLC

11.00% PIK Secured Debt

(8)

-

(392)

125

-

4,331

-

5

-

447

-

3,889

Preferred Member Units

(8)

-

(1,577)

(24)

-

1,577

-

-

-

1,577

-

-

NuStep, LLC

12.00% Secured Debt

(5)

-

-

156

-

4,901

-

7

-

40

-

4,868

Preferred Member Units

(5)

-

-

-

-

2,550

-

-

-

-

-

2,550

SI East, LLC

9.50% Current, Secured Debt

(7)

-

(8)

274

-

10,988

-

8

-

8

-

10,988

Preferred Member Units

(7)

-

150

119

-

2,734

-

150

-

-

-

2,884

Tedder Industries, LLC

12.00% Secured Debt

(9)

-

-

130

-

4,066

-

5

-

-

-

4,071

12.00% Secured Debt

(9)

-

-

5

-

158

-

-

-

-

-

158

Preferred Member Units

(9)

-

-

-

-

2,034

-

-

-

-

-

2,034

Trantech Radiator Topco, LLC

12% Secured Debt

(7)

-

(1)

74

-

2,237

-

5

-

81

-

2,161

Common Stock

(7)

-

491

7

-

1,164

-

491

-

-

-

1,655

Other

-

Amounts related to investments transferred to or from other 1940 Act classification during the period

-

-

-

-

-

-

-

Total Affiliate investments

$

(3,044)

$

(3,254)

$

3,540

$

154,158

$

12,974

$

12,660

$

154,472


(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.
(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 March 31, 2020 for affiliate investments located in this region was $61,226. This represented 12.0% of net assets as of March 31, 2020.
(6)Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of March 31, 2020 for affiliate investments located in this region was $4,283. This represented 0.8% of net assets as of March 31, 2020.
(7)Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of March 31, 2020 for affiliate investments located in this region was $23,797. This represented 4.7% of net assets as of March 31, 2020.

69


(8)Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of March 31, 2020 for control investments located in this region was $33,793. This represented 6.6% of net assets as of March 31, 2020. The fair value as of March 31, 2020 for affiliate investments located in this region was $34,854. This represented 6.8% of net assets as of March 31, 2020.
(9)Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of March 31, 2020 for control investments located in this region was $872. This represented 0.2% of net assets as of March 31, 2020. The fair value as of March 31, 2020 for affiliate investments located in this region was $30,312. This represented 5.9% of net assets as of March 31, 2020.
(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 notes to the consolidated financial statements. Supplemental information can be located within the schedule of 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.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements regarding the plans and objectives of management for future operations and which relate to future events or our future performance or financial condition. Any such forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be determined within 48 hoursmaterially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the repurchase date.



Item 2.    Management’s Discussion and Analysiswords “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of Financial Condition and Results of Operations.
The following discussion isthese words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the condensed consolidated financialprojections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of September 30, 2017 (unaudited)various factors, including, without limitation: changes in laws and December 31, 2016regulations and for the three and nine months ended September 30, 2017 and 2016. Amounts as of December 31, 2016 includedadverse changes in the unaudited condensed consolidated financial statements have been derivedeconomy generally or in the industries in which our portfolio companies operate, including with respect to changes from the Company’s audited consolidated financial statements asimpact of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated financial statementsCOVID-19 pandemic, and the notes thereto, as well as the audited consolidated financial statements, notesresulting impacts on our and management’s discussionour portfolio companies’ business and analysisoperations, liquidity and access to capital; and such other factors referenced in Item 1A entitled “Risk Factors” below in Part 2 of financial conditionthis Quarterly Report on Form 10-Q, if any, and resultsdiscussed in Item 1A entitled “Risk Factors” in Part I of operations included in our Annual Report on Form 10-K for the year ended December 31, 2016. Capitalized terms used in this Item 2 have2020, filed with the same meaning as in the accompanying condensed consolidated financial statements in Item 1 unless otherwise defined in this Report.

We refer to HMS Income Fund, Inc. as the “Company,”Securities and the use of “we,” “our,” “us” or similar pronouns in this Report refers to HMS Income Fund, Inc.

Forward-Looking Statements
Some of the statements in this Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this Report may include statements as to:
our future operating results;
our business prospects and the prospects of our current and prospective portfolio companies;
the impact of the investments that we expect 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 successExchange Commission (“SEC”) 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, HMS Adviser LP (the “Adviser”), a Texas limited partnership, 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.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Report involve risks and uncertainties.

Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part II-Item 1A. Risk Factors”March 30, 2021 and elsewhere in this Quarterly Report and set forth in our annual report on Form 10-K for the year ended December 31, 2016. Other factors that could cause actual results to differ materially include:
changes in the economy;
risks associated with possible disruption in10-Q and our operations or the economy generally; and
future changes in laws or regulations and conditions in our operating areas.

other SEC filings.

We have based the forward-looking statements included in this Quarterly Report on Form 10-Q on information available to us on the date of this Report. Except as required by the federal securities laws,Quarterly Report on Form 10-Q, and we assume no obligation to revise or update any such forward-looking statements, whether as a result of new information, future events or otherwise.


Youunless 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 Securities and Exchange Commission (the “SEC”),SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Qsubsequent periodic and current reportsreports.

COVID-19 UPDATE

The COVID-19 pandemic, and the related effect on Form 8-K. The forward-looking statementsthe U.S. and projections containedglobal economies, has had, and threatens to continue to have, adverse consequences for our business and operating results, and the businesses and operating results of our portfolio companies. During the quarter ended March 31, 2021, MSC Adviser continued to work collectively with its personnel and portfolio companies to navigate the significant challenges created by the COVID-19 pandemic. MSC Adviser remains focused on ensuring the safety of its personnel and the employees of our portfolio companies, while also managing our ongoing business activities. In this regard, MSC Adviser remains heavily engaged with our portfolio companies. As discussed in this Report are excluded fromour public SEC filings, our investment income, principally our interest and dividend income, was negatively impacted by the safe harbor protection provided by Section 27Aeconomic effects of the Securities ActCOVID-19 pandemic in 2020. However, we maintain access to multiple sources of 1933, as amended,liquidity, including cash and Section 21Eunused capacity under our Credit Facilities. In February 2021 we entered into a $300 million senior secured revolving credit facility with JPM to replace the Deutsche Bank Credit Facility to improve our liquidity. As of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).




OVERVIEW

We are a specialty finance company sponsored by Hines Interests Limited Partnership (“Hines”) that makesMarch 31, 2021, we were in compliance with all debt covenants applicable to us and equity investments in middle market (“Middle Market”) companies, which we define as companiesdo not anticipate any issues with annual revenues generally between $10 million and $3 billion and in lower middle market (“LMM”) companies, which we define as companies with annual revenues generally between $10 million and $150 million. We are an externally managed, non-diversified closed-end 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”). We are, therefore, requiredour ability to comply with certain regulatory requirements. We have electedall covenants in the future. Refer to be treated“— Financial Condition, Liquidity and Capital Resources” below for U.S. federal income tax purposesfurther discussion as a regulated investment company (“RIC”), under Subchapter Mof March 31, 2021.

Neither our management, MSC Adviser nor our Board of Directors is able to predict the full impact of the Internal Revenue CodeCOVID-19 pandemic, including its duration and the magnitude of 1986, as amended (the “Code”).its economic and societal impact. As such, while we will continue to monitor the evolving situation and guidance from U.S. authorities, including federal, state and local public health authorities, we are unable to predict with any certainty the extent to which the outbreak will negatively affect our portfolio companies’ operating results and financial condition or the impact that such disruptions may have on our results of operations and financial condition in the future.

71


OVERVIEW

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 such equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities. Our portfolio strategy calls 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 and have annual revenues typically between $150 million and $1.5 billion. Our LMM and Middle Market companiesportfolio investments generally range 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 loanssize from $1 million 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 Capital Corporation, a New York Stock Exchange listed BDC (“Main Street”), and/or its affiliates as a result of our sub-advisory relationship described below.$15 million. We categorize some of our 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 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 in our LMM portfolio and Middle Market portfolio. Our investment portfolio also includes other portfolio (“Other Portfolio”) investments primarily consisting of our investment in HMS-ORIX SLF LLC (“HMS-ORIX”) and investments managed by third parties, which may differ from the typical profiles for our other types of investments.


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 in the Initial Offering, including proceeds from the dividend 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 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 In our board of directors, we closed the Offering to new investors effective September 30, 2017. Through September 30, 2017, we raised approximately $172.0 million in the Offering, including proceeds from the distribution reinvestment plan of approximately $45.4 million.

Our business is managed by the Adviser, an affiliate of Hines, under an Investment Advisory and Administrative Services Agreement dated May 31, 2012, as amended (the “Investment Advisory Agreement”). We and the Adviser have retained MSC Adviser I, LLC (the “Sub-Adviser”), a wholly owned subsidiary of Main Street, as our 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 our 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 under the Investment Advisers Act of 1940, as amended. Upon the execution of the Sub-Advisory Agreement, Main Street became our affiliate. Our board of directors most recently reapproved the Investment Advisory Agreement and Sub-Advisory Agreement on May 12, 2017. We have engaged Hines Securities, Inc. (the “Dealer Manager”), an affiliate of the Adviser, to serve as the Dealer Manager for our offerings. The Dealer Manager is responsible for marketing our shares of common stock being offered pursuant to our offerings.

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 an order from the SEC, that permits us, subject to certain conditions, to co-invest with Main Street in certain transactions originated by Main Street and/or our Advisers. 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,Other Portfolio, we may continue to co-invest with Main Street and/or its affiliates in syndicated dealsincur indirect fees and secondary loan market purchases in accordance with applicable regulatory guidance or interpretations where price is the only negotiated point.

As of September 30, 2017, we had investments in 67 Middle Market debt investments, 40 Private Loan debt investments, 31 LMM debt investments, 31 LMM equity investments, five Middle Market equity investments, 11 Private Loan equity investments and seven Other Portfolio investments with an aggregate fair value of approximately $1,090.7 million, a cost basis of approximately


$1,110.9 million, and a weighted average effective annual yield of approximately 8.5%. The weighted average annual yield was calculated using the effective interest rates for all investments at September 30, 2017, including accretion of original issue discount and amortization of premium to par value, the amortization of fees receivedexpenses in connection with transactions, and assumes zero yield for investments on non-accrual status. Approximately 82.9% and 10.4% of our total portfoliomanaged by third parties, such as investments (at fair value, excluding our Other Portfolio investments) were secured by first priority liens and second priority liens on portfolio company assets, respectively, with the remainder in unsecured debt investments and equity investments.
other investment companies or private funds.

The level of new portfolio investment activity will fluctuatefluctuates 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 close onconsummate the identified transactions.opportunities. 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,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.

Investment Income
We have generated,

Our LMM investments include customized direct secured and planunsecured loans to continueand equity securities of LMM companies. Companies that issue customized LMM securities to generate, investment income primarilyus are privately held at the time we invest in them. Our investments in LMM companies are co-investments with Main Street and/or its affiliates and, as a result, we obtained an exemptive order from the formSEC, as discussed below, to permit us to do so. While the structure of interest on theour investments in customized LMM securities is likely to vary, we may invest in senior secured debt, securities that we hold, dividendssenior unsecured debt, subordinated secured debt, subordinated unsecured debt, mezzanine debt, convertible debt, convertible preferred equity, preferred equity, common equity, warrants and other distributions with respect to any equity interests that we holdinstruments, many of which generate current yields. We will make other investments as allowed by the 1940 Act 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 connectionconsistent with our investments and recognizedcontinued qualification as earned or as additional yield over the lifea RIC. For a discussion of the debt investment. To daterisks inherent in our investment income has been interest income on debtportfolio investments, accretion of original issue discounts, dividend income, amortization of premiums and fees received from transactions and net realized/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 distributionssee “Item 1A. Risk Factors — Risks Relating to our stockholders. Our primary operating expenses will be debt service payments, generalBusiness 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 expect our expenses to fluctuate based upon the amount of assets under management.
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 net asset value (“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 of 2002, the 1940 Act, and other applicable federal and state securities laws and regulations;


costs associated with our reporting and compliance obligations under the 1940 Act and other applicable federal and state securities laws;
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, Incentive Fee and Administrative Services Expense Reimbursement Waiver Agreements

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

Administration

Pursuant to the Investment Advisory Agreement and Sub-Advisory Agreement, we are required to pay or reimburse our Advisers for administrative services expenses, which include all costs and expenses related to our day-to-day administration and management not related to advisory services. For the three months ended September 30, 2017 and 2016, we incurred, and our Advisers waived the reimbursement of, administrative services expenses of approximately $694,000 and $529,000, respectively. For the nine months ended September 30, 2017 and 2016, we incurred, and our Advisers waived the reimbursement of, administrative services expenses of approximately $2.2 million and $1.6 million, respectively. On October 19, 2017, we and the Advisers agreed to an amendment to the 2014 Expense Reimbursement Agreement, which extended the period for waiver of reimbursement of administrative expenses accrued pursuant to the Investment Advisory Agreement and the Sub-Advisory Agreement through December 31, 2017. The waiver of the reimbursement of administrative service expenses is not subject to future reimbursement. See Note 10 - Related Party Transactions and Arrangements - Advisory Agreements and Conditional Fee Waiver to our condensed consolidated financial statements included elsewhere in this Report for additional information on our fee waivers and expense reimbursements.

CRITICAL ACCOUNTING POLICIES
Each of our critical accounting policies involves the use of estimates that require management to make assumptions that are subjective in nature. Management relies on its experience, collects historical and current market data, and analyzes these assumptions in order to arrive at what it believes to be reasonable estimates. In addition, application of these accounting policies involves the exercise of judgments regarding assumptions as to future uncertainties. Actual results could materially differ from these estimates. A disclosure of our critical accounting policies is includedStructure” in our Annual Report on Form 10-K for the fiscal year ended December 31, 20162020.

Our investments may include other equity investments, such as warrants, options to buy a minority interest in Management’s Discussiona 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 MSC Adviser to be in our best interest, we, in conjunction with other investment funds managed by or affiliated with MSC Adviser, may acquire a controlling interest in a portfolio company. Any warrants we receive with our debt securities may require only a nominal cost to exercise, and Analysis of Financial Condition and Results of Operations. There have been no changesthus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We intend to structure such warrants to include provisions protecting our critical accounting policies during 2017, exceptrights as a minority-interest or, if applicable, controlling-interest holder, as well as puts, or rights to sell such securities back to the extent described below.company upon the occurrence of specified events. In addition, we may obtain demand or “piggyback” registration rights in connection with these equity interests.

We plan to hold many of our investments to maturity or repayment but may 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.


72


Basis of Presentation

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. In April 2014, we received an exemptive order from the SEC permitting co-investments by us and Consolidation


Our condensed consolidated financial statementsMain Street in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. During December 2020, we received an amended exemptive order from the SEC permitting co-investments by us, Main Street and other funds advised by MSC Adviser in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. We have been preparedmade co-investments with Main Street and in the future intend to make co-investments with Main Street and other funds advised by MSC Adviser, in accordance with the instructionsconditions of the order. The order requires, among other things, that we and MSC Adviser consider whether each such investment opportunity is appropriate for us and Main Street and other funds advised by MSC Adviser, as applicable, and if it is appropriate, to Form 10-Qpropose an allocation of the investment opportunity between such parties. Because MSC Adviser is not managing our investment activities as its sole activity, this may provide MSC Adviser an incentive to allocate opportunities to other funds instead of us. However, MSC Adviser has policies and accounting principles generally acceptedprocedures in place to manage this conflict, including oversight by the independent members of our Board of Directors and the independent members of the Board of Directors of Main Street. Additional information regarding the operation of the co-investment program is set forth in the United Statesorder 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 this Form 10-Q and in the SEC’s order for co-investment exemptive relief, we may continue to co-invest in syndicated deals and secondary loan market transactions where only price is negotiated by MSC Adviser and its affiliates.

See “Note C.2 – Investment Portfolio Composition” in the notes to consolidated financial statements for a summary of Americathe Company’s investments in the LMM, Middle Market and Private Loan portfolios as of March 31, 2021 and December 31, 2020.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and contingent assets and liabilities at the date of the financial 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 make subjective or complex judgments about the effect of matters that are inherently uncertain and may change in subsequent periods. Changes that may be required in the underlying assumptions or estimates in these 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 accountsInvestment Portfolio Valuation and Revenue Recognition policies described below. Our significant accounting policies are described in greater detail in Note B to the consolidated financial statements included in “Item 1.– Consolidated Financial Statements” of this Quarterly Report on Form 10-Q.

Investment Portfolio Valuation

The most significant determination inherent in the preparation of our wholly-owned consolidated subsidiaries. All intercompany accountsfinancial statements is the valuation of our Investment Portfolio and transactionsthe 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 March 31, 2021 and December 31, 2020, our Investment Portfolio valued at fair value represented approximately 95% and 93% of our total assets, respectively. 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.—Valuation of the Investment Portfolio” in

73


the notes to consolidated financial statements 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 eliminateddetermined had a ready market for the securities existed. In addition, changes in consolidation. Underthe 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.

Our Board of Directors has the final responsibility for overseeing, reviewing and approving, in good faith, our determination of the fair value for our Investment Portfolio and our valuation procedures, consistent with 1940 Act requirements. We believe our Investment Portfolio as of March 31, 2021 and December 31, 2020 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

The SEC recently adopted new Rule 2a-5 under the 1940 Act, rules, regulations pursuant to Articles 6 and 10 of Regulation S-X and Topic 946-Financial Services-Investment Companies which establishes requirements for determining fair value in good faith for purposes of the Accounting Standards Codification, as amended (the “ASC”),1940 Act. The rule permits boards to designate the determination of fair value to a fund’s executive officers or investment adviser, subject to the active oversight of the Financial Accounting Standards Board (“FASB”), weboard. We will comply with the new rule’s valuation requirements on or before the SEC’s required compliance date in 2022.

Revenue Recognition

Interest and Dividend Income

We record interest and dividend income on the accrual basis to the extent amounts are precluded from consolidating portfolio company investments, including those in which we have a controlling interest, unlessexpected to be collected. Dividend income is recorded as dividends are declared by the portfolio company isor at the point an obligation exists for the portfolio company to make a wholly-owned investment company. An exception to this general principle occursdistribution. In accordance with our valuation policies, 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 own a controlled operating company whose purpose isotherwise do not expect the debtor to provide servicesbe able to us such as an investment adviserservice all of its debt or transfer agent. None of our investments qualifies for this exception. Therefore, our portfolio company investments, including those in whichother obligations, we have a controllingwill generally place the loan or debt security on non-accrual status and cease recognizing interest are carriedincome on the Consolidated Balance Sheet at fair value with changes to fair value recognized as “Net Unrealized Appreciation (Depreciation)” on the Consolidated Statements of Operationsthat loan or debt security until the investmentborrower 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 or other obligations, or if a loan or debt security is realized, usually



upon exit, resultingsold or written off, we remove it from non-accrual status.

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 gaindividends 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 loss on exit being recognized as a realized gain or loss. However,sold. To maintain RIC tax treatment (as discussed in the event that any controlled subsidiary exceeds the tests“Income Taxes” within “Note B. Summary of significance set forth in Rules 3-09 or 4-08(g) of Regulation S-X, we will include required financial information for such subsidiarySignificant Accounting Policies” in the notes or as an attachment to our condensedthe consolidated financial statements.


statements), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended March 31, 2021 and 2020, (i) approximately 6.7% and 3.5%, respectively, of our total investment income was attributable to PIK interest income and cumulative dividend income not paid currently in cash.

INVESTMENT PORTFOLIO INVESTMENT COMPOSITION


Our Middle MarketLMM portfolio investments primarily consist of secured debt, equity warrants and direct or secondary purchasesequity investments in privately held, LMM companies based in the United States. Our LMM portfolio companies generally

74


have annual revenues between $10 million and $150 million, and our LMM investments generally largerrange in size than thefrom $1 million to $15 million. The LMM companies included in our LMM portfolio. While our Middle Market debt investments are generallytypically secured by either a first priority lien, 16.8% of the fair value of our Middle Market portfolio is secured byor second priority liens.

Our current LMM portfolio consists of debt investments secured by first and second priority liens (63.8% and 3.0% of the total fair value of the LMM portfolio, respectively)lien on the assets of the portfolio companiescompany, can include either fixed or floating rate terms and equity investments (33.2%generally have a term of the total fair value of the LMM portfolio) in privately held LMM companies as of September 30, 2017. The LMM debt investments generally mature between five and seven years from the original investment date. TheIn most LMM portfolio investments, we receive nominally priced equity warrants and/or make direct equity investments represent an equity positionin connection with a debt investment.

Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the rightUnited States that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $1 million to acquire an equity position through warrants.


$15 million. Our Private LoanMiddle Market portfolio primarily consists of debt investments are generally secured by either a first andor second priority liens (92.5% and 1.5% of the total fair value of the Private Loan portfolio, respectively)lien on the assets of the portfolio companies, unsecured debt investments (3.4% of the total fair value of the Private Loan portfolio)company and equity investments (2.6% of the total fair value of the Private Loan portfolio) in Private Loan companies as of September 30, 2017. The Private Loan debt investments typically have stated termsa term of between three and seven years from the original investment date. The

Our Private Loan equityportfolio investments represent an equity positionare primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis and are often referred to in the debt markets as “club deals.” 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 either a first or second priority lien on the right to acquire an equity position through warrants.


assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

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 fromare not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments.investments, including investments which may be managed by third parties. 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 nine months ended September 30, 2017, For Other Portfolio investments, we funded investment purchases of approximately $470.9 million and had two investments under contract to purchase as of September 30, 2017, for approximately $9.8 million, which settled or we scheduled to settle after September 30, 2017. We also received proceeds from sales and repayments of existing portfolio investments of approximately $370.9 million including $40.8 million in sales. Additionally, we had two investments under contract to sell as of September 30, 2017, for approximately $12.8 million, which represented the contract sales price. The combined result of these transactions increased our portfolio, on a cost basis, by approximately $108.5 million, or 10.8%, and the number of portfolio investments by 14 or 7.9%, comparedgenerally receive distributions related to the portfolio as of December 31, 2016. As of September 30, 2017, the largest investment in an individual portfolio company represented approximately 2.8% of our portfolio’s fair value with the remaining investments in an individual portfolio company ranging from 0.0% to 1.6%. The average investment in our portfolio is approximately $5.7 million or 0.5% of the total portfolio. Our portfolio is 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 82.9% first lien debt securities and 10.4% second lien debt securities, with the remainder in unsecured debt investments and equity investments. First lien debt securities have priority over subordinated debt owedassets held by the issuer with respectportfolio company. Those assets are typically expected to the collateral pledged as security for the loan. Duebe liquidated over a five to the relative priority of payment of first lien investments, these generally have lower yields than lower priority, less secured investments.

During the nine months ended September 30, 2016, we made investment purchases of approximately $275.1 million and had four investments under contract to purchase as of September 30, 2016 for approximately $30.4 million, which settled after September 30, 2016. We also received proceeds from sales and repayments of existing portfolio investments of approximately $222.4 million including $85.2 million in sales and had two investments under contract to sell as of September 30, 2016 for approximately $2.6 million, which represented the contract sales price.

ten-year period.

The result of these transactions further diversified our geographic and industry concentrations and based upon our investment rating system, which is described further below, the weighted average rating of our LMM was approximately 2.7 and 2.6 as of September 30, 2017 and December 31, 2016, respectively. Lastly, the overall weighted average effective yield on our investment portfolio decreased from 8.9% as of December 31, 2016 to 8.5% as of September 30, 2017.




Summaries offollowing tables summarize the composition of our total investmentcombined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value are shown inby type of investment as a percentage of the following tablestotal combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments as of March 31, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments):.

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Cost:

 

March 31, 2021

 

December 31, 2020

First lien debt

 

82.5

%  

79.5

%

Equity

 

13.7

%  

13.9

%

Second lien debt

 

1.9

%  

4.6

%

Equity warrants

 

0.2

%  

0.2

%

Other

 

1.7

%  

1.8

%

 

100.0

%  

100.0

%

 September 30, 2017 December 31, 2016
Cost:LMM Private Loan Middle Market Total LMM Private Loan Middle Market Total
First Lien Secured Debt67.9% 92.5% 82.8% 83.8% 67.9% 92.0% 81.5% 82.3%
Second Lien Secured Debt3.1
 1.5
 16.3
 10.3
 3.5
 0.7
 16.9
 11.9
Unsecured Debt
 3.3
 0.1
 1.0
 
 4.9
 0.9
 1.6
Equity27.9
 2.5
 0.8
 4.7
 26.9
 2.0
 0.7
 3.9
Equity warrants1.1
 0.2
 
 0.2
 1.7
 0.4
 
 0.3
Total100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Fair Value:

 

March 31, 2021

 

December 31, 2020

First lien debt

 

79.1

%  

76.0

%

Equity

 

17.1

%  

17.3

%

Second lien debt

 

1.9

%  

4.6

%

Equity warrants

 

0.2

%  

0.3

%

Other

 

1.7

%  

1.8

%

 

100.0

%  

100.0

%


 September 30, 2017 December 31, 2016
Fair Value:LMM Private Loan Middle Market Total LMM Private Loan Middle Market Total
First Lien Secured Debt63.8% 92.5% 82.4% 82.9% 64.3% 91.5% 81.3% 81.5%
Second Lien Secured Debt3.0
 1.5
 16.8
 10.4
 3.3
 0.7
 17.0
 11.8
Unsecured Debt
 3.4
 0.1
 1.1
 
 4.9
 0.9
 1.7
Equity32.2
 2.4
 0.7
 5.4
 30.7
 2.1
 0.8
 4.6
Equity warrants1.0
 0.2
 
 0.2
 1.7
 0.8
 
 0.4
Total100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


For

Our LMM portfolio investments, Middle Market portfolio investments and Private Loan 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 our Annual Report on Form 10-K for the tables showing our total investment portfolio composition by geographic region and by industry, see Note 3 - Fair Value Hierarchyfiscal year ended December 31, 2020 for Investments - Portfolio Investment Composition to our condensed consolidated financial statements included elsewhere in this Report.


Investment in HMS-ORIX

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. Pursuant to the termsmore complete discussion 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 September 30, 2017, we and Orix have committed to provide, and have funded, an aggregate of $50.0 million of equity to HMS-ORIX,risks involved with us providing $30.0 million (60% of the equity) and Orix providing $20.0 million (40% of the equity).

As of September 30, 2017, HMS-ORIX had total assets of $146.4 million and HMS-ORIX’s portfolio consisted of 69 broadly-syndicated loans, generallyinvesting in industries similar to those in which we may directly invest.

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 September 30, 2017, $90.0 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 September 30, 2017, our asset coverage ratio as of such date would have been 207%, assuming unfunded commitments are treated as senior securities.



The following table presents a summary of HMS-ORIX’s portfolio as of September 30, 2017 (dollars in thousands):
 As of September 30, 2017
  
Total debt investments (1)
$139,700
Weighted average effective yield on loans(2)
4.82%
Largest loan to a single borrower(1)
$3,505
Total of 10 largest loans to borrowers(1)
$31,212
(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. Investments, if any, on non-accrual status are assumed to have a zero yield in the calculation of weighted average effective annual yield.

The following table presents a listing of HMS-ORIX’s individual loans as of September 30, 2017:
HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Acosta, Inc.Commercial Services and SuppliesLIBOR (3 months) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - September 26, 2021)$2,000
$1,873
$1,778
Acrisure, LLCInsuranceLIBOR (1 month) + 5.00%, Current Coupon 6.27%, Secured Debt (Maturity - November 22, 2023)1,990
1,997
2,017
Advantage Sales & Marketing Inc.Commercial Services and SuppliesLIBOR (1 month) + 3.25%, Current Coupon 4.56%, Secured Debt (Maturity - July 23, 2021)1,995
1,939
1,882
Air Medical Group Holdings IncHealth Care Providers & ServicesLIBOR (6 months) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - April 28, 2022)1,995
1,985
1,996
Albany Molecular Research, Inc.Life Sciences Tools and ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.58%, Secured Debt (Maturity - August 28, 2024)100
100
100
Alphabet Holding Company, Inc.Food ProductsLIBOR (3 months) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - September 26, 2024)2,000
1,990
1,980
American Seafoods Group LLCFood ProductsLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 21, 2023)1,500
1,493
1,510
Ancestry.com Operations Inc.Internet Software & ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - October 19, 2023)2,000
2,019
2,017
Arch Coal, Inc.Metals & MiningLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - March 7, 2024)1,990
1,997
2,002
AshCo, Inc.Specialty RetailLIBOR (3 months) + 5.00%, Current Coupon 6.30%, Secured Debt (Maturity - December 15, 2023)2,000
1,955
1,889
Asurion, LLCInsuranceLIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - November 3, 2023)1,316
1,316
1,323
Atkore International, Inc.Electric Equipment, Instruments & ComponentsLIBOR (3 months) + 3.00%, Current Coupon 4.34%, Secured Debt (Maturity - December 22, 2023)2,985
3,014
3,006
Avantor Performance Materials Holdings, Inc.BiotechnologyLIBOR (1 month) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - March 8, 2024)2,985
3,021
2,998
BCP RenaissanceOil, Gas and Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.32%, Secured Debt (Maturity - September 19, 2024)600
602
607


HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
BMC Software Finance, Inc.SoftwareLIBOR (1 month) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - September 12, 2022)$2,972
$2,996
$2,992
Builders FirstSource, Inc.Building ProductsLIBOR (1 month) + 3.00%, Current Coupon 4.33%, Secured Debt (Maturity - February 29, 2024)2,985
2,981
2,998
Calpine CorporationIndependent Power & Renewable Elec. ProducersLIBOR (3 months) + 2.75%, Current Coupon 4.09%, Secured Debt (Maturity - January 15, 2023)1,995
2,002
1,994
CHS/Community Health Systems, Inc.Health Care Providers & ServicesLIBOR (3 months) + 3.00%, Current Coupon 4.32%, Secured Debt (Maturity - January 27, 2021)1,646
1,640
1,638
Clubcorp Club Operations, Inc.Real Estate Management and DevelopmentLIBOR (3 months) + 3.25%, Current Coupon 4.59%, Secured Debt (Maturity - August 16, 2024)2,000
1,990
1,991
Colorado Buyer IncTechnology Hardware, Storage & PeripheralsLIBOR (3 months) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - May 1, 2024)2,993
3,003
3,011
Confie Seguros Holding II Co.InsuranceLIBOR (1 month) + 5.50%, Current Coupon 6.74%, Secured Debt (Maturity - April 19, 2022)1,990
1,997
1,965
CPI International, Inc.Aerospace & DefenseLIBOR (1 month) + 3.50%, Current Coupon 4.74%, Secured Debt (Maturity - July 26, 2024)2,000
2,000
2,003
Diamond Resorts International, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 6.00%, Current Coupon 7.24%, Secured Debt (Maturity - September 1, 2023)1,990
2,019
2,004
Duff & Phelps CorporationDiversified Financial ServicesLIBOR (3 months) + 3.75%, Current Coupon 5.08%, Secured Debt (Maturity - April 23, 2020)1,990
2,003
1,996
EFS Cogen Holdings I LLCElectric UtilitiesLIBOR (3 months) + 3.50%, Current Coupon 4.84%, Secured Debt (Maturity - June 28, 2023)1,929
1,942
1,955
Endo Luxembourg Finance Company I S.a.r.l.PharmaceuticalsLIBOR (1 month) + 4.25%, Current Coupon 5.50%, Secured Debt (Maturity - April 29, 2024)1,995
2,014
2,017
Envision Healthcare CorporationHealth Care Providers & ServicesLIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - December 1, 2023)2,487
2,488
2,499
Everi Payments Inc.Leisure ProductsLIBOR (3 months) + 4.50%, Current Coupon 5.74%, Secured Debt (Maturity - May 9, 2024)1,995
1,988
2,015
First American Payment Systems, L.P.Diversified Financial ServicesLIBOR (1 month) + 5.75%, Current Coupon 6.98%, Secured Debt (Maturity - January 5, 2024)961
972
963
Fitness International, LLCHotels, Restaurants & LeisurePrime + 3.25%, Current Coupon 7.50%, Secured Debt (Maturity - July 1, 2020)2,000
2,027
2,013
Flex Acquisition Company IncContainers and PackagingLIBOR (3 months) + 3.00%, Current Coupon 4.30%, Secured Debt (Maturity - December 29, 2023)2,000
2,010
2,007
Flexera Software LLCSoftwareLIBOR (1 month) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - April 2, 2020)1,995
2,015
2,008
Gardner Denver, Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 4.08%, Secured Debt (Maturity - July 30, 2024)2,000
2,010
2,005
Golden Nugget, Inc.Hotels, Restaurants & LeisureLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - October 4, 2023)1,995
1,995
2,007
Greatbatch Ltd.Health Care Equipment & SuppliesLIBOR (2 months) + 3.50%, Current Coupon 4.74%, Secured Debt (Maturity - October 27, 2022)2,794
2,811
2,814


HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
GYP Holdings III Corp.Trading Companies & DistributorsLIBOR (1 month) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - March 31, 2023)$3,491
$3,516
$3,521
Harbor Freight Tools USA, Inc.Specialty RetailLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 18, 2023)1,980
1,987
1,990
HD Supply Waterworks, Ltd.Trading Companies & DistributorsLIBOR (3 months) + 3.00%, Current Coupon 4.46%, Secured Debt (Maturity - August 1, 2024)140
140
140
Horizon Pharma, Inc.PharmaceuticalsLIBOR (1 month) + 3.75%, Current Coupon 5.00%, Secured Debt (Maturity - March 29, 2024)1,995
2,014
2,016
IG Investments Holdings, LLCProfessional ServicesLIBOR (1 month) + 4.00%, Current Coupon 5.33%, Secured Debt (Maturity - October 31, 2021)1,990
2,001
2,012
Jackson Hewitt Tax Service Inc.Diversified Consumer ServicesLIBOR (1 month) + 7.00%, Current Coupon 8.31%, Secured Debt (Maturity - July 30, 2020)1,939
1,861
1,876
KC MergerSub, Inc.Diversified Consumer ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.08%, Secured Debt (Maturity - August 12, 2022)2,489
2,495
2,486
KMG Chemicals, Inc.ChemicalsLIBOR (1 month) + 4.25%, Current Coupon 5.49%, Secured Debt (Maturity - June 13, 2024)1,304
1,299
1,326
LANDesk Group, Inc.SoftwareLIBOR (1 month) + 4.25%, Current Coupon 5.49%, Secured Debt (Maturity - January 22, 2024)995
1,001
972
Learfield Communications LLCMediaLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - December 1, 2023)1,995
2,015
2,009
LTS Buyer LLCDiversified Telecommunication ServicesLIBOR (3 months) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - April 13, 2020)2,984
3,008
2,994
MA FinanceCo., LLCElectronic Equipment, Instruments and ComponentsLIBOR (1 month) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - June 21, 2024)387
387
388
Mohegan Tribal Gaming AuthorityHotels, Restaurants & LeisureLIBOR (1 month) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - October 13, 2023)1,990
2,009
2,013
MPH Acquisition Holdings LLCHealth Care TechnologyLIBOR (3 months) + 3.00%, Current Coupon 4.33%, Secured Debt (Maturity - June 7, 2023)2,991
3,033
3,018
NAB Holdings, LLCIT ServicesLIBOR (3 months) + 3.50%, Current Coupon 4.83%, Secured Debt (Maturity - June 14, 2024)1,995
1,985
2,009
Ortho-Clinical Diagnostics, IncLife Sciences Tools and ServicesLIBOR (1 month) + 3.75%, Current Coupon 5.08%, Secured Debt (Maturity - June 30, 2021)1,990
1,985
1,999
QUIKRETE Holdings, Inc.Construction MaterialsLIBOR (1 month) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - November 15, 2023)2,985
2,985
2,988
Rackspace Hosting, Inc.Electric Equipment, Instruments & ComponentsLIBOR (1 month) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - November 3, 2023)3,292
3,318
3,291
Scientific Games International, Inc.Leisure ProductsLIBOR (1 month) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 14, 2024)400
402
401
Seattle Spin Co.Electronic Equipment, Instruments and ComponentsLIBOR (3 months) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - June 21, 2024)2,613
2,616
2,622
SeaWorld Parks & Entertainment, Inc.Hotels, Restaurants & LeisureLIBOR (3 months) + 3.00%, Current Coupon 4.33%, Secured Debt (Maturity - April 1, 2024)1,990
1,992
1,933


HMS-ORIX
Loan Portfolio
As of September 30, 2017
(dollars in thousands)
Portfolio CompanyIndustryType of InvestmentPrincipalCostFair Value
      
Signode Industrial Group US Inc.MachineryLIBOR (1 month) + 2.75%, Current Coupon 3.99%, Secured Debt (Maturity - April 30, 2021)$2,840
$2,861
$2,855
Staples, Inc.DistributorsLIBOR (3 month) + 4.00%, Current Coupon 5.31%, Secured Debt (Maturity - August 15, 2024)2,000
1,995
1,993
Telenet Financing USD LLCDiversified Telecommunication ServicesLIBOR (1 month) + 2.75%, Current Coupon 3.98%, Secured Debt (Maturity - June 30, 2025)3,000
3,013
3,012
Transdigm, Inc.Aerospace & DefenseLIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - June 9, 2023)1,990
1,997
1,997
  LIBOR (1 month) + 3.00%, Current Coupon 4.24%, Secured Debt (Maturity - August 22, 2024)1,003
1,000
1,005
    2,997
3,002
Travelport Finance (Luxembourg) S.A.R.L.Internet Software & ServicesLIBOR (3 months) + 2.75%, Current Coupon 4.06%, Secured Debt (Maturity - September 2, 2021)1,951
1,951
1,951
Traverse Midstream Partners LLCOil, Gas and Consumable FuelsLIBOR (3 months) + 4.00%, Current Coupon 5.33%, Secured Debt (Maturity - September 30, 2024)781
784
792
UFC Holdings, LLCMediaLIBOR (3 months) + 3.25%, Current Coupon 4.49%, Secured Debt (Maturity - August 18, 2023)1,990
2,002
2,001
Ultra Resources, Inc.Oil, Gas and Consumable FuelsLIBOR (1 month) + 3.00%, Current Coupon 4.31%, Secured Debt (Maturity - April 12, 2024)2,000
2,002
2,001
Valeant Pharmaceuticals International, Inc.PharmaceuticalsLIBOR (1 month) + 4.75%, Current Coupon 5.99%, Secured Debt (Maturity - April 1, 2022)2,547
2,559
2,596
Vertiv Group CorporationElectrical EquipmentLIBOR (3 months) + 4.00%, Current Coupon 5.24%, Secured Debt (Maturity - November 30, 2023)2,000
2,019
2,018
Vistra Operations Company LLCElectric UtilitiesLIBOR (2 months) + 2.75%, Current Coupon 3.98%, Secured Debt (Maturity - December 14, 2023)1,990
2,002
1,999
WideOpenWest Finance, LLCDiversified Telecommunication ServicesLIBOR (1 month) + 3.25%, Current Coupon 4.48%, Secured Debt (Maturity - August 18, 2023)3,505
3,516
3,504
Total Loan Portfolio   $139,954
$139,728

For the three and nine months ended September 30, 2017, we did not accrue dividend income in respect of our investment in HMS-ORIX.



The following tables show the summarized financial information for HMS-ORIX (dollars in thousands):
 As of
Balance Sheet DataSeptember 30, 2017
Assets 
Portfolio investments at fair value$139,728
Cash and cash equivalents5,470
Deferred financing costs989
Other assets230
Total assets$146,417
  
Liabilities 
Debt$90,000
Payable for securities purchased5,371
Accounts payable and accrued expenses186
Total liabilities95,557
Net assets50,860
Total liabilities and net assets$146,417

 Period from inception (April 4, 2017) to September 30, 2017
 
Selected Statement of Operations Information 
Interest income$2,048
Dividend income
Total income2,048
Interest expense866
Other expenses79
Total expenses945
Net investment income1,103
Unrealized (depreciation) on investments(226)
Realized (losses) from investments(17)
Net increase in net assets$860

Investment Portfolio.

PORTFOLIO ASSET QUALITY

As of September 30, 2017, we owned a broad portfolio of 192 investments in 132 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:

67 debt investments in 59 Middle Market portfolio companies with an aggregate fair value of approximately $587.7 million and a cost basis of approximately $611.3 million. The Middle Market debt investments had a weighted average annual effective yield of approximately 8.8%, which is calculated assuming the investments on non-accrual status are non-yielding, and 83.0% of the Middle Market debt investments were secured by first priority liens. Further, 87.4% of the Middle Market 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.

40 debt investments in 38 Private Loan portfolio companies with an aggregate fair value of approximately $305.5 million and a cost basis of approximately $306.9 million. The Private Loan debt investments had a weighted average annual effective yield of approximately 8.9%, 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, 94.5% 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.



31 debt investments in 28 LMM portfolio companies with an aggregate fair value of approximately $92.8 million and a cost basis of approximately $94.2 million. The LMM debt investments had a weighted average annual effective yield of approximately 11.7% and 95.5% of the debt investments were secured by first priority liens. Also, 45.4% of the LMM debt investments are fixed rate investments with fixed interest rates between 7.2% and 15.0%. Further, 22 LMM debt investments, representing approximately 54.6% of the LMM debt investments have variable rates subject to a contractual minimum base interest rate of 100 basis points.

45 equity investments and nine equity warrant investments in 26 LMM portfolio companies, eight Private Loan portfolio companies, four Middle Market portfolio companies and five Other Portfolio companies with an aggregate fair value of approximately $104.8 million and a cost basis of approximately $98.5 million.

Overall, as of September 30, 2017, our investment portfolio had a weighted average effective yield on our investments of approximately 8.5%, and 79.5% of our total portfolio’s investment composition (including our Other Portfolio investments) was secured by first priority liens.

As of September 30, 2017, we had five investments in four portfolio companies that were on non-accrual status, which comprised approximately 0.3% of our total investment portfolio at fair value and 1.1% of the total investment portfolio at cost. As of December 31, 2016, we had three investments in two portfolio companies that were on non-accrual status, which comprised approximately 0.2% of the total investment portfolio at fair value and 0.8% of the total investment portfolio at cost. For those investments in which S&P credit ratings are available, which represents approximately 33.3% of the portfolio as of September 30, 2017, the portfolio had a weighted average effective credit rating of B.

We utilize aan internally developed investment rating system developed by our Sub-Adviser to rate the performance of each LMM portfolio company and to monitor our expected level of returns on each of our LMM investments in relation to our expectations for the portfolio company. The investment rating system takes into consideration various factors, including 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, and the portfolio company’s future outlook.


outlook and other factors that are deemed to be significant to the portfolio company.

As of March 31, 2021, our total Investment Rating 1 represents a LMM portfolio company that is performing in a mannerPortfolio had two investments on non-accrual status, which significantly exceeds expectations.

comprised approximately 0.4% of its fair value and 1.0% of its cost. As of December 31, 2020, our total 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 portfolioPortfolio had three investments receive an initial Investment Rating 3.
Investment Rating 4 represents a LMM portfolio company that is underperforming expectations, requiring increased monitoringon non-accrual status, which comprised approximately 0.6% of its fair value and scrutiny by us.
Investment Rating 5 represents a LMM portfolio company that is significantly underperforming, requiring heightened levels1.3% of monitoring and scrutiny by us and involves the recognition of significant unrealized depreciation on such investment.

its cost.

The following table shows the distributionoperating results of our LMM portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In periods during which the United States economy contracts, as it did due to the impact of COVID-19, 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 1 to 5 investment rating scale at fair value asperformance of September 30, 2017 and December 31, 2016 (dollars in thousands):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.

76


  September 30, 2017 December 31, 2016
Investment Rating Investments at Fair Value Percentage of Total LMM Portfolio Investments at Fair Value Percentage of Total LMM Portfolio
1 $2,600
 1.9% $1,541
 1.3%
2 44,611
 32.1
 56,244
 48.5
3 84,268
 60.6
 50,764
 43.7
4 5,803
 4.2
 7,511
 6.5
5 1,661
 1.2
 
 
Total $138,943
 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 September 30, 2017 and December 31, 2016, respectively.

DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS COMPARISONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

Total Investment Income, Operating Expenses, Net Assets
For

Comparison of the three months ended September 30, 2017March 31, 2021 and 2016, our totalMarch 31, 2020

Three Months Ended

 

March 31, 

Net Change

    

2021

    

2020

    

Amount

    

%

(dollars in thousands)

Total investment income

$

20,272

$

24,000

$

(3,728)

(16)

%

Total expenses (net of fee and expense waivers)

8,330

11,466

(3,136)

(27)

%

Net investment income

11,942

12,534

(592)

(5)

%

Net realized loss from investments

(4,082)

(3,365)

(717)

NM

Net unrealized appreciation (depreciation) from investments

5,193

(94,909)

100,102

NM

Income tax benefit (provision)

(396)

(76)

(320)

NM

Net increase (decrease) in net assets resulting from operations

$

12,657

$

(85,816)

$

98,473

NM


NM

Not Meaningful

Total Investment Income

Total investment income was approximately $25.3 million and $22.2 million, respectively, consisting predominately of interest income. As of September 30, 2017, the portfolio had a weighted



average annual effective yield on investments of approximately 8.5% compared to 8.5% as of September 30, 2016, and our average investment portfolio for the three months ended September 30, 2017March 31, 2021 was $1,067.8$20.3 million, a 16% decrease from the $24.0 million of total investment income for the corresponding period of 2020. The following table provides a summary of the changes in the comparable period activity.

Three Months Ended

 

March 31, 

Net Change

    

2021

    

2020

    

Amount

    

%

(dollars in thousands)

Interest income

$

16,080

$

21,785

$

(5,705)

(26)

%

(a)

Dividend income

 

3,952

1,640

2,312

141

%

(b)

Fee income

240

575

(335)

(58)

%

Total investment income

$

20,272

$

24,000

$

(3,728)

(16)

%

(a)The decrease in interest income was primarily due to lower floating interest rates on investment portfolio debt investments based upon the decline in the LIBOR and the reduction in our total portfolio debt investments.
(b)The increase in dividend income from equity investments is primarily a result of improved operating results, financial condition and liquidity positions of certain of our portfolio companies.

77


Expenses

Total expenses, net of fee and expense waivers, for the three months ended March 31, 2021 were $8.3 million, an 27% decrease from the $11.5 million in the corresponding period of 2020. The following table provides a summary of the changes in the comparable period activity.

Three Months Ended

March 31, 

Net Change

2021

2020

Amount

%

(dollars in thousands)

Interest expense

$

3,164

$

5,229

$

(2,065)

(39)

%

(a)

Base management and incentive fees

3,903

4,994

(1,091)

(22)

%

(b)

Internal administrative services fees

1,055

784

271

35

%

Offering costs

-

88

(88)

(100)

%

Professional fees

558

710

(152)

(21)

%

Insurance

114

103

11

11

%

Board of director fees

108

102

6

6

%

Other general and administrative

483

240

243

101

%

Total expenses before fee and expense waivers

9,385

12,250

(2,865)

(23)

%

Waiver of internal administrative services expenses

(1,055)

(784)

(271)

35

%

Total expenses

$

8,330

$

11,466

$

(3,136)

(27)

%

(a)The decrease in interest expense was primarily due to lower floating interest rates on our revolving lines of credit based upon the decline in LIBOR and lower amounts outstanding under our Credit Facilities.
(b)The decrease in the base management fees relates to a decrease in the base management fee from 2.00% to 1.75% as the result Main Street becoming the sole investment manager to the Company and lower average gross assets subject to base management fees.

Net Investment Income

Net investment income for the three months ended March 31, 2021 decreased 5% to $11.9 million, or $0.15 per share, compared to $931.5net investment income of $12.5 million, or $0.16 per share, for the corresponding period of 2020. The decrease in net investment income was principally attributable to the decrease in total investment income partially offset by the decrease in total expenses, both as discussed above.

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 $2.0 million (excludes realized loss on extinguishment of debt of $2.1 million) for the three months ended March 31, 2021:

Three Months Ended March 31, 2021

Full Exits

Restructures

Total

Net Gain/(Loss)

# of Investments

Net Gain/(Loss)

# of Investments

Net Gain/(Loss)

# of Investments

(dollars in thousands)

LMM Portfolio

$

$

(1,193)

1

$

(1,193)

1

Middle Market Portfolio

(798)

1

(798)

1

Total Net Realized Gain/(Loss)

$

(798)

1

$

(1,193)

1

$

(1,991)

2

78


Net Unrealized Appreciation (Depreciation)

The following table provides a summary of the total net unrealized appreciation of $5.2 million for the three months ended September 30, 2016. Additionally,March 31, 2021:

Three Months Ended March 31, 2021

Middle

Private

    

LMM(a)

    

Market (b)

    

Loan (c)

    

Other

Total

 

(dollars in millions)

Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains/income) losses recognized during the current period

$

1.0

$

0.9

$

0.1

$

$

2.0

Net unrealized appreciation (depreciation) relating to portfolio investments

 

1.7

 

1.7

 

0.8

 

(1.0)

 

3.2

Total net appreciation depreciation relating to portfolio investments

$

2.7

$

2.6

$

0.9

$

(1.0)

$

5.2


(a)LMM includes unrealized appreciation on 16 LMM portfolio investments and unrealized depreciation on 16 LMM portfolio investments.
(b)Middle Market includes unrealized appreciation on 19 Middle Market portfolio investments and unrealized depreciation on 8 Middle Market portfolio investments.
(c)Private Loan includes unrealized appreciation on 17 Private Loan portfolio investments and unrealized depreciation on 19 Private Loan portfolio investments.

Income Tax Benefit (Provision)

The income tax provision for the three months ended March 31, 2021 of $0.4 million consisted of a current tax provision of $0.4 million, related to a $0.3 million provision for excise tax on our estimated undistributed taxable income and $0.1 million provision for current U.S. federal and state income taxes.

Net Increase (Decrease) in Net Assets Resulting from Operations

The net increase in net assets resulting from operations for the three months ended March 31, 2021 was $12.7 million, or $0.16 per share, compared with a net decrease in net assets of $85.8 million, or $1.09 per share, during the three months ended September 30, 2017 and 2016, we accreted approximately $2.9 million and $2.7 million, respectively,March 31, 2020. The tables above provide a summary of unearned income into 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 our amended and restated senior secured revolving credit facility (the “EverBank Credit Facility”) entered into by us, HMS Equity Holding, LLC and HMS Equity Holding II, Inc., our wholly-owned subsidiaries, with EverBank Commercial Finance, Inc. as administrative agent and certain financial institutions as lenders, and the amended and restated credit agreement entered into by HMS Funding I, LLC, our wholly owned subsidiary, with Deutsche Bank AG, New York Branch as administrative agent (the “Deutsche Bank Credit Facility,” and, together with our EverBank Credit Facility, the “Credit Facilities”) and (ii) acceleration of the accretion of original issuance discounts primarily resulting from principal repayments on certain portfolio 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 information on the Credit Facilities, see Note 5 - Borrowings to our condensed consolidated financial statements included elsewhere in this report.


For the three months ended September 30, 2017 and 2016, we recognized $213,000 and $191,000, respectively, of non-recurring fee income received from our portfolio companies or other third parties, which accounted for approximately 0.8% and 0.9%, respectively, of our total investment income during such period.  Such fee income is transaction based and typically consists of prepayment fees, structuring fees, amendment and consent fees and other non-recurring fees. As such, future fee income is generally dependent on new direct origination investments and the occurrence of prepayments and other events at existing portfolio companies resulting in such fees.
For the three months ended September 30, 2017 and 2016, expenses, net of incentive fee and administrative services expense waivers, were approximately $12.3 million and $9.7 million, respectively. The increase in expenses is primarily due to (i) an increase in interest expense of $1.1 million, (ii) an increase in base management fees and incentive fees (net of fee waivers) of $0.7 million and (iii) an increase in amortization of offering costs of $0.6 million. Interest expense increased primarily due to an increase in our average borrowings of approximately $57.5 million during the period and an increase in our cost of borrowing on the Credit Facilities. Average borrowings were $453.5 million for the three months ended September 30, 2017 compared to $396.0 million for the three months ended September 30, 2016. As of September 30, 2017 and 2016, the annualized interest rate on our borrowings was 4.0% and 3.3%, respectively. Base management fees and incentive fees (net of fee waivers) increased primarily due to an increase in our average gross assets.

For the three months ended September 30, 2017, the net increase in net assets resulting from operations (gross of stockholder distributions declared) was approximately $8.7 million. The increase was attributable to (i) net investment income of approximately $13.0 million and (ii) realized gains of approximately $0.7 million, offset by unrealized depreciation on investments of approximately $5.1 million.

Forfor the three months ended September 30, 2016,March 31, 2021.

Liquidity and Capital Resources

This “Liquidity and Capital Resources” section should be read in conjunction with the net increase in net assets resulting from operations (gross of stockholder distributions declared) was approximately $22.3 million. The increase was primarily attributable to (i) net investment income of approximately $12.5 million“COVID-19 Update” section above.

Cash and (ii) unrealized appreciation on investments of approximately $11.8 million, offset by net realized losses of approximately $1.9 million.


RESULTS COMPARISONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016

Total Investment Income, Operating Expenses, Net Assets
For the nine months ended September 30, 2017 and 2016, our total investment income was approximately $76.2 million and $64.7 million, respectively, consisting predominately of interest income. Cash Equivalents

As of September 30, 2017, the portfolio had a weighted average annual effective yield on investments of approximately 8.5% compared to 8.5% as of September 30, 2016, and our average investment portfolio for the nine months ended September 30, 2017 was $1,021.0 million compared to $893.4 million for the nine months ended September 30, 2016. Additionally, during the nine months ended September 30, 2017 and 2016, we accreted approximately $10.8 million and $7.8 million, respectively, of unearned income into 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 and (ii) acceleration of the accretion of original issuance discounts primarily resulting from principal repayments on certain portfolio 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 nine months ended September 30, 2017 and 2016, we recognized $1.9 million and $871,000, respectively, of non-recurring fee income received from our portfolio companies or other third parties, which accounted for approximately 2.5% and 1.3%, respectively, of our total investment income during such period.  Such fee income is transaction based and typically consists of prepayment fees, structuring fees, amendment and consent fees and other non-recurring fees. As such, future fee income is generally dependent on new direct origination investments and the occurrence of prepayments and other events at existing portfolio companies resulting in such fees.
For the nine months ended September 30, 2017 and 2016, expenses, net of incentive fee and administrative services expense waivers, were approximately $33.0 million and $27.9 million, respectively. The increase in expenses is primarily due to (i) an increase in interest expense of $2.1 million, (ii) an increase in base management fees and incentive fees (net of fee waivers) of $2.0 million and (iii) an increase in the amortization of offering costs of $1.3 million. Base management fees and incentive fees (net of fee waivers) increased primarily due to an increase in our average gross assets. Interest expense increased primarily due to an increase in our average borrowings of approximately $34.8 million during the period and an increase in our cost of borrowing on the Credit Facilities. Average borrowings were $426.5 million for the nine months ended September 30, 2017 compared to $391.8 million for the nine months ended September 30, 2016. As of September 30, 2017 and 2016, the annualized interest rate on borrowings was 4.0% and 3.3%, respectively.

For the nine months ended September 30, 2017, the net increase in net assets resulting from operations (gross of stockholder distributions declared) was approximately $39.4 million. The increase was attributable to (i) net investment income of approximately $43.2 million and (ii) net realized gains of approximately $3.4 million, offset by unrealized depreciation on investments of approximately $7.2 million. The realized gains were primarily the result of the exit of one Private Loan equity investment and one Other Portfolio investment.

For the nine months ended September 30, 2016, the net increase in net assets resulting from operations (gross of stockholder distributions declared) was approximately $37.8 million. The increase was attributable to (i) net investment income of approximately $36.8 million and (ii) unrealized appreciation on investments of approximately $12.9 million, offset by realized losses of approximately $12.0 million.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Overview

As of September 30, 2017,March 31, 2021, we had approximately $39.7$28.6 million in cash and cash equivalents, which we held in various custodial accounts. In addition, asaccounts and our NAV totaled approximately $584.3 million, equating to approximately $7.34 per share. As of September 30, 2017,December 31, 2020, we had $5.0approximately $49.1 million in capacity available under the Credit Facilities. To seek to enhance our returns, we intend to continue to employ leverage as market conditions permitcash 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 “Liquidity and Cash Flows - Financing Arrangements.

As of September 30, 2017, we had 30 senior secured loan investments andfour equity investments with aggregate unfunded commitments of $57.6 million. We believe that we maintain sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.

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

Prior to investing in securities of portfolio companies, we invest the net proceeds from our Offering, 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 maturingwhich we held in one year or less from the time of investment, consistent with our BDC electionvarious custodial accounts and our electionNAV totaled approximately $579.6 million equating to be taxed as a RIC.

Liquidity and Capital Resources
approximately $7.28 per share.

Cash Flows


For the ninethree months ended September 30, 2017,March 31, 2021, we experienced a net increasedecrease in cash and cash equivalents of approximately $16.0 million. During that period, approximately $68.5$20.5 million, which is the net result of $0.2 million of cash wasprovided by our operating activities and $20.7 million of cash used in our financing activities.

79


The $0.2 million of cash provided by our operating activities resulted primarily from (i) cash proceeds totaling $60.7 million from the sales and repayments of debt investments and sales of and return on capital of equity investments, (ii) cash flows we generated from the operating profits earned totaling $9.5 million, which principally consistedis 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 of expenses for deferred financing costs and (iii) cash proceeds of $9.4 million related to the change in other assets and liabilities, partially offset by the purchase of new portfolio investments of $470.9$79.4 million.

The $20.7 million and accretion of unearned income of $10.8 million, offset by principal repayments from and sales of investmentsused in portfolio companies of $370.9 million and a net increase in net assets resulting from operations of approximately $39.4 million. During the nine months ended September 30, 2017, approximately



$84.5 million was provided by financing activities which principally consisted of $41.6a net $17.1 million decrease in borrowings outstanding under our Credit Facilities and $3.6 million in net stock offering proceeds receiveddebt issuance costs.

Share Repurchase Program

On March 31, 2020, the Company’s Board of Directors unanimously approved a temporary suspension of the Company’s share repurchase program commencing with the second quarter of 2020. The Board of Directors determined that it was the best interest of the Company to suspend the share repurchase program in order to preserve the financial flexibility and a net $77.0 million increaseliquidity given the prolonged impact of COVID-19.

On March 2, 2021, the Company’s Board of Directors approved the reinstatement of the Company’s share repurchase program commencing in borrowings under the Credit Facilities, offset by $19.5 million in cash distributions paid to stockholders and $14.0 million in cash used for the redemption of our common stock.


April 2021. For the nine months ended September 30, 2016,purposes of the first repurchase beginning in April 2021, the Company has determined that the aggregate repurchase will equal 90% of the amount of the dividend reinvestment plan proceeds resulting from the April 1, 2021 dividend payment.

Capital Resources

As of March 31, 2021, we experienced a net increasehad $28.6 million in cash and cash equivalents of approximately $16.0 million. During that period, approximately $20.3and $185.3 million of cash was used inunused capacity under our operating activities, which principally consisted of the purchase of new portfolio investments of $275.1 million, offset by principal repayments from and sales of investments in portfolio companies of $222.4 million and a net increase in net assets resulting from operations of approximately $37.8 million. During the nine months ended September 30, 2016, approximately $36.3 million was provided by financing activities, which principally consisted of $56.5 million in net stock offering proceeds received and a net $5.0 million increase in borrowings under the Credit Facilities, offset by $16.4which we maintain to support our investment and operating activities. As of March 31, 2021, our net asset value totaled $584.3 million, in cash distributions paid to stockholders and $8.4 million in cash distributions used for the redemptionor $7.34 per share.

As of our common stock.


Continuous Public Offering
With the approval of our board of directors, we closed the Offering to new investors effective September 30, 2017. During the nine months ended September 30, 2017, we raised proceeds of $66.6 million from the Offering, including proceeds from the distribution reinvestment plan, and incurred $3.7 million for selling commissions and Dealer Manager fees. We also incurred an obligation for $1.0 million of costs related to the Offering.

During the nine months ended September 30, 2016, we raised proceeds of $81.7 million from the Offering, including proceeds from the distribution reinvestment plan, and incurred $5.7 million for selling commissions and Dealer Manager fees. We also incurred an obligation for $1.2 million of costs related to the Offering.

Distributions

The following table reflects the cash distributions per share that we have declared on our common stock during the nine months ended September 30, 2017 and 2016 (dollars in thousands except per share amounts).
 Distributions
 Per Share Amount
2017   
Three months ended September 30, 2017$0.17
 $13,910
Three months ended June 30, 2017$0.18
 $13,438
Three months ended March 31, 2017$0.17
 $12,922
2016   
Three months ended September 30, 2016$0.17
 $12,307
Three months ended June 30, 2016$0.18
 $11,650
Three months ended March 31, 2016$0.17
 $11,037

On September 19, 2017, with the authorization of our board of directors, we declared distributions to our stockholders for the period of October 2017 through December 2017. These distributions have been, or will be, calculated based on stockholders of record each day from October 1, 2017 through DecemberMarch 31, 2017 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.
For the years ending December 31, 2016, 2015 and 2014, respectively, the tax characteristics of distributions paid to shareholders were as follow (amounts in thousands):
 Year Ended December 31,
Tax Characteristics of Distributions2016 2015 2014
         
Ordinary income$44,848
93.90% $34,085
99.68% $11,162
99.51%
Capital gain distributions2,913
6.10
 110
0.32
 55
0.49
Total$47,761
100.00% $34,195
100.00% $11,217
100.00%
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. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. If2021, we had determined the tax attributes of our distributions taxable year-to-date as of September 30, 2017, 100% would be from our current and accumulated earnings and profits. However, there can be no certainty to stockholders that this determination is representative of what the actual tax


attributes of our anticipated fiscal and taxable years ending December 31, 2017 distributions to stockholders will be. The actual tax characteristics of distributions to stockholders will be reported to the Internal Revenue Service and stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

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 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 RICs, we are required to distribute substantially all of our taxable income to our stockholders on an annual basis. However, we may elect to spill over certain excess undistributed taxable income from one taxable year into the next taxable year, which may require us to incur a 4% nondeductible U.S. federal excise tax on such excess undistributed taxable income. In order to avoid the imposition of the 4% nondeductible excise tax, we need to distribute, in respect of each calendar year dividends for U.S. federal income tax purposes of an amount at least equal to the sum of (1) 98.0% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain in excess of capital loss, or capital gain net income, adjusted for certain ordinary losses, generally for the one-year period ending on October 31 of such calendar year (or, if we so elect, for the calendar year) and (3) any net ordinary income and capital gain net income for the preceding calendar years that was not distributed during such calendar years and on which we incurred no U.S. federal income tax.

Financing Arrangements

We anticipate that we will continue to fund our investment activities through existing cash, capital raised from our stock offerings, and borrowings on the Credit Facilities. However, with the approval of our board of directors, we closed the Offering to new investors effective September 30, 2017. Our primary uses of funds in both the short-term and long-term are expected to be investments in portfolio companies, operating expenses and cash distributions to holders of our common stock.
As of September 30, 2017, we had $95.0$34.0 million outstanding and $0.0$96.0 million availableof undrawn commitments under our EverBankTIAA Credit Facility, and $395.0 $210.7 million outstanding and $5.0$89.3 million availableof undrawn commitments under the Deutsche Bank CreditJPM SPV Facility, both of which we estimatedestimate approximated fair value. At March 31, 2021, we had $40 million outstanding on our Main Street Term Loan. Availability under the TIAA Credit FacilitiesFacility is subject to certain borrowing base limitations and the asset coverage restrictionsrestrictions. Availability under the 1940 Act.JPM SPV Facility is subject to certain borrowing base limitations. For further information on our Credit Facilities, including key terms and financial covenants, refer to Note 5 -“Note E — BorrowingsDebt to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 as well as Note 5 - Borrowings to the condensed consolidated financial statements included elsewhere in this Report.
AsQuarterly Report on Form 10-Q.

We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities and utilization of available borrowings under our Credit Facilities. Our primary uses of funds will be investments in portfolio companies, operating expenses, cash distributions to holders of our common stock and share repurchases under our share repurchase program.

We periodically invest excess cash balances into marketable securities and idle 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 LMM, Middle Market and Private Loan 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.

In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders, 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. In addition, as a BDC, we generally are required to meet a 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). AsThis requirement limits the amount that we may borrow.

80



Although we have been able to secure access to potential additional liquidity, including through proceeds from the Offering and also by entering into theour Credit Facilities, there is no assurance that equitydebt or debtequity capital will be available to us in the future on favorable terms, or at all.


Related-Party Transactions

Recently Issued or Adopted Accounting Standards

See “Note B.12 – Recently Issued or Adopted Accounting Standards” to the consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently issued or adopted accounting standards.

From time to time, new accounting pronouncements are issued by the FASB or other standard-setting bodies that are adopted by us as of the specified effective date. We believe that the impact of recently issued standards and Agreementsany that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

Inflation

Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results, including periodic escalations in their costs for labor, raw materials, third-party services and required energy consumption.

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 balance sheet. At March 31, 2021, we had a total of $35.2 million in outstanding commitments comprised of (i) twenty-six investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional commitments not yet funded and (ii) three investments with equity capital commitments that had not been fully called.

Contractual Obligations

As of March 31, 2021, we had $284.7 million in borrowings outstanding under our Credit Facilities. The TIAA Credit Facility will mature on March 6, 2022. JPM SPV Facility will mature on February 3, 2025. The Main Street Term Loan will mature on January 27, 2026. The Deutsche Bank Credit Facility, which was scheduled to mature on November 20, 2022, was fully repaid on February 3, 2021. See further discussion of the terms of our Credit Facilities in Note E —Debt” to the consolidated financials statements included elsewhere in this Quarterly Report on Form 10-Q.

2021

    

2022

    

2023

    

2024

    

2025

    

Thereafter

    

Total

(dollars in thousands)

TIAA Credit Facility

$

$

$

34,000

$

-

$

$

$

34,000

JPM SPV Facility

210,688

210,688

Main Street Term Loan

-

40,000

40,000

Interest Due on Main Street Term Loan

1,883

2,028

2,028

2,033

2,028

150

10,150

Total

$

1,883

$

2,028

$

36,028

$

212,721

$

2,028

$

40,150

$

294,838


Related Party Transactions

We have entered into agreements with ourHMS Adviser, our Sub-AdviserMSC Adviser and ourthe Dealer Manager, whereby we pay certain fees and reimbursements to these entities. These includeincluded payments to ourthe Dealer Manager for selling commissions and the Dealer Manager fee and include payments to ourHMS Adviser and MSC Adviser 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 ourMSC Adviser, and Sub-Adviser, pursuant to various agreements that we have entered into. See Note 10 - J — Related Party Transactions and Arrangementsto the financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding related party transactions.


81


 Contractual Obligations
As of September 30, 2017, we had $490.0 million in borrowings outstanding under the Credit Facilities. Our EverBank Credit Facility will mature March 6, 2020, with two one-year extension options, subject to lender approval, and the Deutsche Bank Credit Facility will mature on June 16, 2020. See Note 5 - Borrowings to the financial statements included elsewhere in this Report for a description of the Credit Facilities.
A summary of our significant contractual payment obligations for the repayment of outstanding borrowings at September 30, 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)
$95,000
 $
 $95,000
 $
 $
Deutsche Bank Credit Facility(2)
395,000
 
 395,000
 
 
Total Credit Facilities$490,000
 $
 $490,000
 $
 $
(1)At September 30, 2017, $0.0 million remained available under our EverBank Credit Facility.
(2)At September 30, 2017, $5.0 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.

Off-Balance Sheet Arrangements
At September 30, 2017, we had a total of approximately $57.6 million in outstanding commitments comprised of (i) 30 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. We recognized unrealized appreciation of approximately $473,000 on our outstanding unfunded loan commitments and no unrealized appreciation or depreciation on our outstanding unfunded capital commitments during the nine months ended September 30, 2017. We reasonably believe that we have sufficient assets to adequately cover and allow us to satisfy our outstanding unfunded commitments. At December 31, 2016, we 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 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.
 Commitments and Contingencies
 (dollars in thousands)
 September 30, 2017 December 31, 2016
Unfunded Loan Commitments   
Adams Publishing Group, LLC$2,216
 $
Apex Linen Services, Inc.403
 397
Arcus Hunting, LLC120
 2,136
BarFly Ventures, LLC
 881
BigName Holdings, LLC101
 
Boccella Precast Products, LLC500
 
Buca C, LLC
 1,548
CapFusion Holding, LLC
 394
CDHA Management, LLC3,373
 3,259
Charps, LLC1,000
 
Clad-Rex Steel, LLC100
 
CST Industries, Inc.602
 
CTVSH, PLLC200
 
Datacom, LLC50
 1,302
Felix Investments Holdings II LLC1,667
 
Gamber-Johnson Holdings, LLC300
 300
Guerdon Modular Holdings, Inc.400
 400
Hawk Ridge Systems, LLC400
 400


 Commitments and Contingencies
 (dollars in thousands)
 September 30, 2017 December 31, 2016
Hojeij Branded Foods, Inc.$2,090
 $2,000
Hostway Corporation67
 
HW Temps LLC200
 50
Jackmont Hospitality, Inc.
 1,200
LaMi Products, LLC1,029
 1,729
Market Force Information, Inc.272
 
Meisler Operating, LLC400
 
Minute Key, Inc.2,000
 197
Mystic Logistics, Inc.200
 194
NNE Issuer, LLC7,000
 
NuStep, LLC300
 
Pardus Oil & Gas, LLC357
 357
Permian Holdco 2290
 290
PPC/Shift, LLC500
 500
Resolute Industrial LLC5,750
 
Strike, LLC
 2,475
Unirush LLC
 980
Volusion, LLC
 2,955
Wireless Vision8,289
 
Unfunded Capital Commitments   
Brightwood Capital Fund III, LP1,000
 1,000
Brightwood Capital Fund IV, LP9,000
 10,000
Copper Trail Energy Fund2,500
 
Freeport First Lien Loan Fund III, LP4,941
 7,737
Total$57,617
 $42,681

Recent Developments and Subsequent Events

From October 1, 2017 through November

On April 10, 2017, we funded approximately $1.9 million in investments and received proceeds from repayments and dispositions of approximately $62.0 million.


On October 19, 2017, we entered into an amendment to the EverBank Credit Facility, which increased the revolver commitments by the amount of $25.0 million (from $95.0 million to $120.0 million).

On October 19, 2017, we, our Adviser and our Sub-Adviser entered into a conditional income incentive fee agreement (the “Third Quarter 2017 Fee Waiver Agreement”), pursuant to which, for a period from July 1, 2017 through September 30, 2017, our 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 our Advisers’ sole discretion, causes such waiver to be deemed necessary. The Third Quarter 2017 Fee Waiver Agreement may require us to repay our Advisers for previously waived payments of up to 100% of our operating expenses or waived base management fees or incentive fees under certain circumstances. The previously waived fees are potentially subject to repayment by us, if at all, within a period not to exceed three years from the date of each respective fee waiver.

On October 19, 2017, our board of directors approved an amendment and restatement of our distribution reinvestment plan (the “Amended DRP”). Under the Amended DRP, for so long as our Offering is suspended to new investors or otherwise is terminated, cash distributions paid to participating stockholders will be reinvested in additional common stock at a purchase price determined by our board of directors, or a committee thereof, in its sole discretion, that is (i) not less than the NAV per share determined in good faith by our board of directors or a committee thereof, in its sole discretion, within forty-eight hours prior to the payment of the distribution (the “NAV Per Share”) and (ii) not more than 2.5% greater than the NAV Per Share as of such date. The Amended DRP will be effective as of, and will first apply to the reinvestment of cash distributions paid on or after, November 1, 2017.

On November 3, 2017,2021, we filed a tender offer statement on Schedule TO (the “Offer”) with the SEC, to commence an offer by us to purchase as approved by our boarda number of directors, 1,619,437.09 shares of our issued and outstanding common stock par value $0.001 per share.equal 90% of the amount of the DRIP proceeds resulting from shares issued in lieu of cash distributions from the April 1, 2021 dividend payment, approximately $2,846,049. The offer is for cashOffer will expire on May 17, 2021 and shares validly tendered and not withdrawn will be purchased at a purchase price equal to the NAVour net asset value per share as of May 31, 2021.

On May 11, 2021, our Board of Directors declared a quarterly cash dividend of $0.125 per share payable August 2, 2021 to be determined within 48 hoursstockholders as of the repurchase date.



June 30, 2021.

Item 3. 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, including LIBOR and prime rates, to the extent that any of our debt investments include floating interest rates. We generally invest in floating rate debt instruments, meaning thatSee “Risk Factors — Risks Relating to Our Investments — Changes related to the interest rate payable on such instrument resets periodically based upon changes in a specified interest rate index, typicallyLIBOR calculation process, the one-month or three-month LIBOR. Asphase-out of September 30, 2017, approximately 85.6%LIBOR and the use of replacement rates for LIBOR may adversely affect the value of our LMM, Private Loan, and Middle Market portfolio debt investments (based on cost) contained floating interest rates. At September 30, 2017, the one-month LIBOR was approximately 1.24% and the three-month LIBOR was approximately 1.34%. However, many of our investments provide that the specified interest rate index on such instruments will never fall below a level, or floor, generally between 100 and 150 basis points regardless of the level of the specified index rate, which minimizes the negative impactsecurities.” , “Risk Factors — Risk Related to our interest income that would result from a declineOur Investments — Changes in index rates.

In addition, any fluctuations in prevailing interest rates may affect our cost of capital, net investment income and the fair value of our fixed rate debt instrumentsinvestments.” 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“Risk Factors — Risk Related to Debt Financing — Because we borrow money, the potential for gain or loss on amounts invested in use is magnified and may increase the risk of investing in us.” included in our Form 10-K for the fiscal year ended December 31, 2020 for more information regarding risks associated with our debt investments and borrowings that utilize LIBOR as a reference rate.

The majority of our debt investments are made with either fixed interest rates or floating rates that are subject to make investments,contractual minimum interest rates for the term of the investment. As of March 31, 2021, approximately 83% of our netdebt investment income is partially dependent uponportfolio (at cost) bore interest at floating rates, 92% of which were subject to contractual minimum interest rates. Our interest expense will be affected by changes in the difference betweenpublished LIBOR rate in connection with our Credit Facilities; however, the interest rate at whichon our outstanding Main Street Term Loan is fixed for the life of such debt. As of March 31, 2021, we invest borrowed funds and thehad not entered into any interest rate at which we borrow funds. In periodshedging arrangements. Due to our limited use of rising interest rates and whenderivatives, we have borrowed capital with floating interest rates, our interest expense will increase, which will increase our financing costsclaimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, reduce our net investment income, especiallytherefore, are not subject to the extent we hold fixed-rate debt investments. Asregistration or regulation 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.

pool operator under such Act. 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 September 30, 2017.March 31, 2021.

    

Increase

    

(Increase)

    

Increase

    

Increase

(Decrease)

Decrease

(Decrease) in Net

(Decrease) in Net

in Interest

in Interest

Investment

Investment

Basis Point Change

    

Income

    

Expense

    

Income

    

Income per Share

(dollars in thousands, except per share amounts)

(150)

$

(84)

$

463

$

379

$

(125)

 

(84)

 

463

 

379

 

(100)

 

(84)

 

463

 

379

 

(75)

 

(84)

 

463

 

379

 

(50)

 

(84)

 

463

 

379

 

(25)

 

(84)

 

463

 

379

 

25

 

123

 

(612)

 

(489)

 

(0.01)

50

 

246

 

(1,223)

 

(977)

 

(0.01)

75

422

(1,835)

(1,413)

(0.02)

100

 

1,285

 

(2,447)

 

(1,162)

 

(0.01)

125

2,494

(3,059)

(565)

(0.01)

150

3,833

(3,670)

163

82


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 $(2,999) $(4,900) $1,901
Down 50 basis points (2,722) (2,450) (272)
Up 50 basis points 4,420
 2,450
 1,970
Up 100 basis points 8,844
 4,900
 3,944
Up 200 basis points 17,718
 9,800
 7,918
Up 300 basis points 26,591
 14,700
 11,891

Although we believe

The hypothetical results assume that this analysis is indicative of our existing sensitivity to interestall LIBOR and prime rate changes it does not adjustwould be effective on the first day of the period. However, the contractual LIBOR and prime rate reset dates would vary throughout the period, on either a monthly or quarterly basis, for both our investments and our Credit Facilities. The hypothetical results would also be impacted by the changes in the credit market, credit quality,amount of debt outstanding under our Credit Facilities (with an increase (decrease) in the size and composition of the assets in our portfolio and other business developments, including borrowingdebt outstanding under the Credit Facilities or other borrowings, that could affect net increase in net assets resulting from operations, or net 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 rate risk management techniques 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 conditionexpense).

Item 4. Controls and results of operations. Procedures

As of September 30, 2017, we had not entered into any interest rate hedging arrangements.



Item 4.    Controls and Procedures.
In accordance with the Exchange Act, Rules 13a-15 and 15d-15,end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, andPresident, Chief Financial Officer, Chief Compliance Officer and Chief Accounting Officer, of the effectiveness of the design and operation 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 September 30, 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.

No change occurredAct. There have been no changes in our internal controlscontrol over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act),that occurred during the nine monthsquarter ended September 30, 2017March 31, 2021 that hashave materially affected, or isare reasonably likely to materially affect, our internal controlscontrol over financial reporting.

We have not experienced any material impact to our internal control over financial reporting despite the fact that many of MSC Adviser’s employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

PART 



PART II — II—OTHER INFORMATION

Item 1. Legal Proceedings.

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 MSC Adviser may, from time to time, we may be party to certain legal proceedings, including proceedings relating to the enforcementinvolved in litigation arising out of our rights under contractsrespective operations in the normal course of business or otherwise. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect that theseany current matters will materially affect our or MSC Adviser’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 or MSC Adviser’s financial condition or results of operations.

operations in any future reporting period.

Item 1A. Risk Factors.

Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 that we filed with the SEC on March 30, 2021, which could materially affect our business, financial condition and/or operating results. There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2020.

The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we filed with the SEC on March 7, 2017.


currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

RepurchasesProceeds

During the three months ended March 31, 2021, we issued no shares of our common stock, pursuant toincluding under our tender offer are as follows:dividend reinvestment plan.

During the three months ended March 31, 2021, there were no shares of our common stock repurchased under our share repurchase program.

83


Period Total Number of Shares Purchased Average Price per Share Cumulative Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
      
  
July 1, 2017 through July 31, 2017 
 $
 
 
August 1, 2017 through August 31, 2017 
 $
 
 
September 1, 2017 through September 30, 2017 747,784,633
 $8.19
 747,784,633
 

Item 3.    Defaults upon Senior Securities.
None.
Item 4.    Mine Safety Disclosures.
Not applicable.

Item 5. Other Information.

Information

Not applicable.


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Table of Contents



Item 6. Exhibits.


Exhibits

Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):

Exhibit
Number

Description of Exhibit

Exhibit No.

Description

10.1*

Second Quarter 2017 Conditional Income Incentive Fee Waiver

Fourth Amendment to Amended and Restated Senior Secured Revolving Credit Agreement dated as of July 26, 2017, by and among the Registrant, HMS Adviser LP and MSC Adviser I, LLC (FiledJanuary 27, 2021 (previously filed as Exhibit 10.1 to the Registrant’s current reportMSC Income Fund, Inc.’s Current Report on Form 8-K filed on July 31, 2017January 28, 2021 (File No. 814-00939) and incorporated herein by reference)).

10.2*

Term Loan Agreement dated January 27, 2021 (previously filed as Exhibit 10.2 to MSC Income Fund, Inc.’s Current Report on Form 8-K filed on January 28, 2021 (File No. 814-00939)).

10.3*

Loan and Security Agreement dated February 3, 2021 (previously filed as Exhibit 10.1 to MSC Income Fund, Inc.’s Current Report on Form 8-K filed on February 4, 2021 (File No. 814-00939)).

31.1

Certification of Chief Executive Officer of the Registrant, pursuantPursuant to Rule 13a-14(a) ofunder the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).1934.

Certification of Chief Financial Officer of the Registrant, pursuantPursuant to Rule 13a-14(a) ofunder the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).1934.

Certification of Chief Executive Officer and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)(18 U.S.C. 1350).

32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

*

Exhibit previously filed with the Securities and Exchange Commission, as indicated, and incorporated herein by reference.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HMS

MSC INCOME FUND, INC.

Date:

November 14, 2017By:

/s/ SHERRI W. SCHUGARTDWAYNE L. HYZAK

Date: May 14, 2021

Sherri W. Schugart

Dwayne L. Hyzak

Chairman,

Chief Executive Officer and President

(principal executive officer)

Date:

November 14, 2017By:

/s/ RYAN T. SIMSBRENT D. SMITH

Date: May 14, 2021

Ryan T. Sims

Brent D. Smith

Chief Financial Officer and SecretaryTreasurer

(principal financial officer)

/s/ CORY E. GILBERT

Date: May 14, 2021

Cory E. Gilbert

Chief Accounting Officer

(principal accounting officer)



D


EXHIBIT INDEX

86

Exhibit No.Description
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).
Certification of Chief Executive Officer of the Registrant, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).
Certification of Chief Financial Officer of the Registrant, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).
Certification of Chief Executive Officer and Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith).


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