Table of Contents

​

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,

Washington, D.C. 20549

________________

FORM 10-Q

​

​

​

(Mark One)

​

þ

⌧

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

For the quarterly period ended SeptemberJune 30, 20202021

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

________________

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.)

1300 Post Oak Boulevard, 8th8th Floor


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

77056


(Zip Code)

​

(713) 350-6000

(Registrant’s telephone number including area code)


HMS Income Fund, Inc.
2800 Post Oak Boulevard, Suite 5000
Houston, Texas 77056

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

Title of each class

None

Trading Symbol(s)

​

Name of each exchange on which registered
None

N/A

​

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 every Interactive Data File required to be submitted 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

​

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 ◻oNo þ⌧


The issuer had 79,608,304number of shares outstanding of the issuer’s common stock outstanding as of November 11, 2020.August 13, 2021 was 79,756,460.

​

​

​

​


​


Table of Contents


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—June 30, 2021 (unaudited) and December 31, 2020

1

​

Consolidated Statements of Operations (unaudited)—Three and six months ended June 30, 2021 and 2020

2

​

Condensed

Consolidated Statements of Changes in Net Assets (unaudited)—Six months ended June 30, 2021 and 2020

3

​

Condensed

Consolidated Statements of Cash Flows (unaudited)—Six months ended June 30, 2021 and 2020

4

​

Condensed

Consolidated Schedule of Investments (unaudited)—June 30, 2021

5

​

Consolidated Schedule of Investments—December 31, 2020

21

​

Notes to Consolidated Financial Statements (unaudited)

35

​

Consolidated Schedules of Investments in and Advances to Affiliates (unaudited)—Six months ended June 30, 2021 and 2020

5

66

Notes to the Condensed Consolidated Financial Statements

28

Item 2.

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

50

72

Item 3.

Quantitative and Qualitative Disclosures Aboutabout Market Risk

63

84

Item 4.

Controls and Procedures

66

85

PART II

PART II —

OTHER INFORMATION

Item 1.

Legal Proceedings

86

Item 1.1A.

Legal Proceedings

Risk Factors

67

86

Item 1A.Risk Factors

67

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

86

Item 3.5.

Defaults Upon Senior Securities

Other Information

68

86

Item 4.6.

Mine Safety Disclosures

Exhibits

68

87

Item 5.

​

Other Information

Signatures

68
Item 6.Exhibits
69
Signatures
70

88

​

​

​

​


​


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)

​

​

​

​

​

​

​

​

​

June 30, 

​

December 31, 

​

    

2021

    

2020

​

​

(unaudited)

​

​

​

ASSETS

 

​

​

 

​

  

Investments at fair value:

 

​

​

 

​

  

Control investments (cost: $18,165 and $18,152 as of June 30, 2021 and December 31, 2020, respectively)

​

$

33,841

​

$

33,831

Affiliate investments (cost: $150,164 and $143,740 as of June 30, 2021 and December 31, 2020, respectively)

​

 

170,144

​

 

157,690

Non‑Control/Non‑Affiliate investments (cost: $805,788 and $678,764 as of June 30, 2021 and December 31, 2020, respectively)

​

 

768,018

​

 

634,001

Total investments (cost: $974,117 and $840,656 as of June 30, 2021 and December 31, 2020, respectively)

​

 

972,003

​

 

825,522

Cash and cash equivalents

​

 

8,215

​

 

8,586

Restricted cash

​

​

—

​

​

40,480

Dividends and interest receivable

​

 

11,009

​

 

8,303

Receivable for investments sold

​

​

7,988

​

​

—

Deferred financing costs (net of accumulated amortization of $5,002 and $4,443 as of June 30, 2021 and December 31, 2020, respectively)

​

 

3,720

​

 

2,691

Prepaids and other assets

​

​

1,343

​

​

2,439

Total assets

​

$

1,004,278

​

$

888,021

LIABILITIES

​

 

​

​

 

​

Credit facilities payable

​

$

326,688

​

$

301,816

Unsecured term debt

​

​

40,000

​

​

—

Accounts payable and other liabilities

​

 

1,728

​

 

2,093

Interest payable

​

 

2,771

​

 

286

Dividend payable

​

 

9,964

​

 

—

Management fees payable

​

​

4,158

​

​

4,202

Payable for investment purchases

​

​

20,357

​

​

—

Total liabilities

​

 

405,666

​

 

308,397

Commitments and contingencies (Note I)

​

 

​

​

 

​

NET ASSETS

​

 

​

​

 

​

Common stock, $0.001 par value per share (150,000,000 shares authorized, 79,716,361 and 79,608,304 issued and outstanding at June 30, 2021 and December 31, 2020, respectively)

​

 

80

​

 

80

Additional paid‑in capital

​

 

682,829

​

 

682,028

Total undistributed (overdistributed) earnings

​

 

(84,297)

​

 

(102,484)

Total net assets

​

 

598,612

​

 

579,624

Total liabilities and net assets

​

$

1,004,278

​

$

888,021

NET ASSET VALUE PER SHARE

​

$

7.51

​

$

7.28

​

​

​

​

September 30, 2020December 31, 2019
 (Unaudited)
ASSETS  
Portfolio investments at fair value:  
Non-Control/Non-Affiliate investments (amortized cost: $772,439 and $878,632 as of September 30, 2020 and December 31, 2019, respectively)$709,368 $838,643 
Affiliate investments (amortized cost: $145,735 and $144,006 as of September 30, 2020 and December 31, 2019, respectively)158,505 154,158 
Control investments (amortized cost: $18,287 and $17,417 as of September 30, 2020 and December 31, 2019, respectively)34,785 34,796 
Total portfolio investments (amortized cost: $936,461 and $1,040,055 as of September 30, 2020 and December 31, 2019, respectively)902,658 1,027,597 
Cash and cash equivalents14,682 21,846 
Restricted cash16,611 — 
Interest receivable8,578 8,749 
Prepaid and other assets3,174 4,403 
Deferred financing costs (net of accumulated amortization of $3,541 and $2,990 as of September 30, 2020 and December 31, 2019, respectively)3,067 3,516 
Total assets$948,770 $1,066,111 
LIABILITIES  
Accounts payable and other liabilities$3,721 $1,684 
Stockholder distributions payable— 4,669 
Base management and incentive fees payable4,698 5,388 
Due to affiliates5 44 
Directors’ fees payable76 21 
Credit facilities payable375,129 445,000 
Total liabilities383,629 456,806 
Commitments and Contingencies (Note 11)
NET ASSETS  
Common stock, $.001 par value; 150,000,000 shares authorized, 79,608,304 and 78,463,377 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively80 78 
Additional paid-in capital683,154 675,554 
Accumulated loss(118,093)(66,327)
Total net assets565,141 609,305 
Total liabilities and net assets$948,770 $1,066,111 
Net asset value per share$7.10 $7.77 

1


See notes to the condensed consolidated financial statements.
1

Table of Contents

HMS

MSC Income Fund, Inc.

Condensed

Consolidated Statements of Operations

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

(unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

    

June 30, 

​

June 30, 

    

​

    

2021

    

2020

    

2021

    

2020

​

INVESTMENT INCOME:

 

​

  

 

​

  

 

​

  

 

​

  

 

Interest, fee and dividend income:

 

​

​

​

​

​

 

​

  

 

​

  

 

Control investments

​

$

743

​

$

505

​

$

1,343

​

$

1,096

​

Affiliate investments

​

 

4,446

​

​

3,913

​

 

8,096

​

 

7,453

​

Non‑Control/Non‑Affiliate investments

​

 

17,307

​

​

17,829

​

 

33,329

​

 

37,698

​

Total investment income

​

 

22,496

​

​

22,247

​

 

42,768

​

 

46,247

​

EXPENSES:

​

 

​

​

​

​

​

 

​

​

 

​

​

Interest

​

 

3,300

​

​

4,274

​

 

6,464

​

 

9,503

​

Base management fees

​

 

4,158

​

​

4,630

​

 

8,061

​

 

9,624

​

Internal administrative service expenses

​

​

1,040

​

​

752

​

​

2,095

​

​

1,536

​

Offering costs

​

​

55

​

​

89

​

​

55

​

​

177

​

Professional fees

​

​

250

​

​

791

​

​

808

​

​

1,500

​

Insurance

​

​

115

​

​

104

​

​

229

​

​

207

​

Board of director fees

​

​

90

​

​

121

​

​

198

​

​

223

​

Other general and administrative

​

​

284

​

​

234

​

​

767

​

​

475

​

Total expenses before fee and expense waivers

​

​

9,292

​

​

10,995

​

​

18,677

​

​

23,245

​

Waiver of internal administrative services expenses

​

 

(1,040)

​

​

(752)

​

 

(2,095)

​

 

(1,536)

​

Total expenses, net of fee and expense waivers

​

 

8,252

​

​

10,243

​

 

16,582

​

 

21,709

​

NET INVESTMENT INCOME

​

 

14,244

​

​

12,004

​

 

26,186

​

 

24,538

​

NET REALIZED GAIN (LOSS):

​

 

​

​

​

​

​

 

​

​

 

​

​

Control investments

​

 

(2,470)

​

​

—

​

 

(2,470)

​

 

—

​

Affiliate investments

​

 

—

​

​

(1,010)

​

 

—

​

 

(4,054)

​

Non‑Control/Non‑Affiliate investments

​

 

4,288

​

​

(13,318)

​

 

2,297

​

 

(13,639)

​

Realized loss on extinguishment of debt

​

​

—

​

​

—

​

​

(2,091)

​

​

—

​

Total net realized gain (loss)

​

 

1,818

​

​

(14,328)

​

 

(2,264)

​

 

(17,693)

​

NET UNREALIZED APPRECIATION (DEPRECIATION):

​

 

​

​

​

​

​

 

​

​

 

​

​

Control investments

​

 

63

​

​

(183)

​

 

(3)

​

 

(1,181)

​

Affiliate investments

​

 

5,027

​

​

1,714

​

 

6,030

​

 

(1,540)

​

Non‑Control/Non‑Affiliate investments

​

 

2,737

​

​

22,437

​

 

6,993

​

 

(68,220)

​

Total net change in unrealized appreciation (depreciation)

​

 

7,827

​

​

23,968

​

 

13,020

​

 

(70,941)

​

INCOME TAXES:

​

 

​

​

​

​

​

 

​

​

 

​

​

Federal and state income, excise and other taxes

​

 

434

​

​

19

​

 

830

​

 

95

​

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

​

$

23,455

​

$

21,625

​

$

36,112

​

$

(64,191)

​

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

​

$

0.18

​

$

0.15

​

$

0.33

​

$

0.31

​

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

​

$

0.29

​

$

0.28

​

$

0.45

​

$

(0.81)

​

WEIGHTED AVERAGE SHARES
OUTSTANDING—BASIC AND DILUTED

​

 

79,973,441

​

​

79,016,406

​

 

79,791,881

​

 

78,811,735

​

​

​

​

(Unaudited)

2

 Three Months EndedNine Months Ended
 September 30, 2020September 30, 2019September 30, 2020September 30, 2019
INVESTMENT INCOME:    
From non-control/non-affiliate investments:
Interest income$14,912 $22,243 $51,308 $69,040 
Fee income30 325 943 750 
Dividend income121 (72)510 1,114 
From affiliate investments:
Interest income2,282 2,514 7,035 7,318 
Fee income33 28 97 90 
Dividend income1,361 1,001 3,997 2,035 
From control investments:
Interest income153 161 491 428 
Fee income20 18 59 53 
Dividend income607 1,598 1,326 4,797 
Total investment income19,519 27,816 65,766 85,625 
EXPENSES:    
Interest expense4,000 6,214 13,503 19,942 
Base management and incentive fees4,701 6,707 14,325 20,796 
Internal administrative services expenses959 735 2,495 2,233 
Offering costs28 94 205 285 
Professional fees(106)114 987 814 
Insurance103 114 310 210 
Other general and administrative806 595 1,911 1,651 
Expenses before fee and expense waivers10,491 14,573 33,736 45,931 
Waiver of incentive fees— — — — 
Waiver of internal administrative services expenses(959)(735)(2,495)(2,233)
Total expenses, net of fee and expense waivers9,532 13,838 31,241 43,698 
Net investment income before taxes9,987 13,978 34,525 41,927 
Income tax expense, including excise tax97 82 192 241 
NET INVESTMENT INCOME9,890 13,896 34,333 41,686 
NET REALIZED LOSS ON INVESTMENTS    
Non-Control/Non-Affiliate investments(17,868)(11,026)(31,507)(12,098)
Affiliate investments— — (4,054)(5,266)
Control investments— (35)— (633)
Total net realized loss on investments(17,868)(11,061)(35,561)(17,997)
NET REALIZED INCOME (LOSS)(7,978)2,835 (1,228)23,689 
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS    
Non-Control/Non-Affiliate investments43,467 2,579 (24,753)755 
Affiliate investments4,157 237 2,617 4,674 
Control investments300 112 (881)7,241 
Total net change in unrealized appreciation (depreciation) on investments47,924 2,928 (23,017)12,670 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS$39,946 $5,763 $(24,245)$36,359 
PER SHARE INFORMATION - BASIC AND DILUTED
NET INVESTMENT INCOME PER SHARE$0.12 $0.18 $0.43 $0.53 
NET REALIZED INCOME (LOSS) PER SHARE$(0.11)$0.04 $(0.02)$0.30 
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE (EARNINGS PER SHARE)$0.50 $0.07 $(0.31)$0.46 
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED79,608,304 78,794,751 79,079,204 78,807,179 
See notes to the condensed consolidated financial statements.
2

Table of Contents

HMS

MSC Income Fund, Inc.

Condensed

Consolidated Statements of Changes in Net Assets

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

(unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

​

​

​

​

Common Stock

​

Additional

​

Undistributed

​

​

​

​

​

Number of

​

Par

​

Paid‑In

​

(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)

​

​

(6,093)

​

​

—

​

​

(6,094)

Net decrease resulting from operations

 

—

​

​

—

​

​

—

​

​

(85,816)

​

​

(85,816)

Dividends to stockholders

 

—

​

​

—

​

​

—

​

​

(13,730)

​

​

(13,730)

Balances at March 31, 2020

 

78,423,129

​

$

78

​

$

675,359

​

$

(165,873)

​

$

509,564

Dividend reinvestment

 

894,499

​

​

1

​

​

5,875

​

​

—

​

​

5,876

Net increase resulting from operations

 

—

​

​

—

​

​

—

​

​

21,625

​

​

21,625

Dividends to stockholders

 

—

​

​

—

​

​

—

​

​

(13,790)

​

​

(13,790)

Balances at June 30, 2020

 

79,317,628

​

$

79

​

$

681,233

​

$

(158,038)

​

$

523,275

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

Offering of common stock

​

67,114

​

​

—

​

​

500

​

​

—

​

​

500

Dividend reinvestment

​

424,455

​

​

—

​

​

3,162

​

​

—

​

​

3,162

Common stock repurchased

​

(383,512)

​

​

—

​

​

(2,861)

​

​

—

​

​

(2,861)

Net increase resulting from operations

​

—

​

​

—

​

​

—

​

​

23,455

​

​

23,455

Dividends to stockholders

​

—

​

​

—

​

​

—

​

​

(9,964)

​

​

(9,964)

Balances at June 30, 2021

​

79,716,361

​

$

80

​

$

682,829

​

$

(84,297)

​

$

598,612

(Unaudited)
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Change in Net Assets from Operations:
Net investment income$9,890 $13,896 $34,333 $41,686 
Net realized loss on investments(17,868)(11,061)(35,561)(17,997)
Net change in unrealized appreciation (depreciation) on investments47,924 2,928 (23,017)12,670 
Net increase (decrease) in net assets resulting from operations39,946 5,763 (24,245)36,359 
Change in Net Assets from Stockholders’ Distributions:
Net decrease in net assets resulting from stockholders’ distributions— (13,900)(27,520)(41,260)
Change in Net Assets from Capital Share Transactions:
Reinvestment of stockholder distributions1,920 6,247 13,695 18,982 
Repurchase of common stock— (6,382)(6,094)(19,345)
Net increase (decrease) in net assets resulting from capital share transactions1,920 (135)7,601 (363)
Total Increase (Decrease) in Net Assets41,866 (8,272)(44,164)(5,264)
Net Assets at beginning of the period523,275 628,374 609,305 625,366 
Net Assets at end of the period$565,141 $620,102 $565,141 $620,102 
NAV per share at end of the period$7.10 $7.90 $7.10 $7.90 
Distributions declared per share$— $0.17 $0.35 $0.52 
Common shares outstanding, beginning of the period79,317,628 78,530,056 78,463,377 78,584,824 
Issuance of common shares pursuant to distribution reinvestment plan290,676 773,449 1,936,415 2,342,092 
Repurchase of common shares— (804,779)(791,488)(2,428,190)
Common shares outstanding, end of the period79,608,304 78,498,726 79,608,304 78,498,726 

See

​

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

​


3

3

Table of Contents

HMS

MSC Income Fund, Inc.

Condensed

Consolidated Statements of Cash Flows

(dollars in thousands)

​

(unaudited)

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

June 30,

​

​

2021

​

2020

CASH FLOWS FROM OPERATING ACTIVITIES

​

​

​

​

​

​

Net increase (decrease) in net assets resulting from operations

​

$

36,112

​

$

(64,191)

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

​

​

​

​

​

​

Investments in portfolio companies

​

​

(223,398)

​

​

(64,027)

Proceeds from sales and repayments of debt investments in portfolio companies

​

​

95,134

​

​

127,890

Net change in unrealized (appreciation) depreciation

​

​

(13,020)

​

​

70,941

Net realized loss on the sale of portfolio investments

​

​

173

​

​

17,693

Realized loss on extinguishment of debt

​

​

2,091

​

​

-

Amortization of deferred financing costs

​

​

593

​

​

715

Amortization of deferred offering costs

​

​

55

​

​

177

Accretion of unearned income

​

​

(2,096)

​

​

(3,322)

Payment-in-kind interest

​

​

(3,411)

​

​

(1,977)

Changes in other assets and liabilities:

​

​

​

​

​

​

Dividends and interest receivable

​

​

(2,706)

​

​

(82)

Receivable for investments sold

​

​

(7,988)

​

​

—

Prepaid and other assets

​

​

1,233

​

​

192

Payable for investments purchased

​

​

20,357

​

​

—

Management fees payable

​

​

(44)

​

​

4,236

Interest payable

​

​

2,485

​

​

—

Accounts payable and other liabilities

​

​

(366)

​

​

643

Net cash provided by (used in) operating activities

​

​

(94,796)

​

​

88,888

CASH FLOWS FROM FINANCING ACTIVITIES

​

​

​

​

​

​

Proceeds from offering of common stock

​

​

500

​

​

—

Redemption of common stock

​

​

(2,861)

​

​

(6,094)

Payment of offering costs

​

​

(55)

​

​

(177)

Dividends paid

​

​

(4,798)

​

​

(15,843)

Repayments on Credit Facilities payable

​

​

(311,816)

​

​

(139,418)

Proceeds from Credit Facilities payable

​

​

336,688

​

​

79,326

Proceeds from unsecured term debt

​

​

40,000

​

​

—

Payment of deferred financing costs

​

​

(3,713)

​

​

(604)

Net cash provided by (used in) financing activities

​

​

53,945

​

​

(82,810)

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

​

​

(40,851)

​

​

6,078

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

​

$

8,215

​

$

27,924

​

​

​

​

​

​

​

Supplemental cash flow disclosures:

​

​

​

​

​

​

Cash paid for interest

​

$

3,387

​

$

8,646

Cash paid for taxes

​

$

1,283

​

$

794

Non-cash financing activities:

​

​

​

​

​

​

Dividends declared and unpaid

​

$

9,964

​

$

4,571

Shares issued pursuant to the dividend reinvestment plan

​

$

3,162

​

$

11,775

(Unaudited)
 Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES  
Net increase (decrease) in net assets resulting from operations$(24,245)$36,359 
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash generated from operating activities:
Principal repayments received and proceeds from sales of investments in portfolio companies147,792 280,055 
Investments in portfolio companies(72,635)(222,627)
Net change in unrealized (appreciation) depreciation on portfolio investments23,017 (12,670)
Net realized loss on sale of portfolio investments35,561 17,997 
Amortization of deferred financing costs1,078 1,011 
Amortization of deferred offering costs205 285 
Accretion of unearned income(4,230)(6,152)
Payment-in-kind interest accrual(3,230)(3,351)
Changes in other assets and liabilities: 
Interest receivable171 (298)
Prepaid and other assets1,560 501 
Base management and incentive fees payable(690)852 
Due to affiliates(39)109 
Directors’ fees payable55 6 
Accounts payable and other liabilities364 299 
Net cash generated from operating activities104,734 92,376 
CASH FLOWS FROM FINANCING ACTIVITIES  
Redemption of common stock(6,094)(19,345)
Payment of offering costs(205)(285)
Payment of stockholder distributions(18,494)(22,433)
Repayments on credit facilities payable(149,198)(196,500)
Proceeds from credit facilities payable79,327 145,500 
Payment of deferred financing costs(623)— 
Net cash used in financing activities(95,287)(93,063)
Net increase (decrease) in cash, cash equivalents and restricted cash9,447 (687)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE BEGINNING OF THE PERIOD21,846 21,757 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD$31,293 $21,070 
Supplemental cash flow disclosures:
Cash paid for interest$12,294 $18,999 
Cash paid for income taxes795 1,221 
Non-cash financing activities:
Stockholder distributions declared and unpaid— 4,521 
Stockholder distributions reinvested13,695 18,982 
Unpaid deferred financing costs6 8 
See

​

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

​

​


4

4

HMS Income Fund, Inc.
Condensed Consolidated Schedule of Investments
As of September 30, 2020
(dollars in thousands)
Portfolio Company (1) (3)Investment Date (27)Business DescriptionType of Investment (2) (3)Index Rate (22)Principal (7)Cost (7)Fair Value (26)
Control Investments (6)
CTMH, LP (9) (15)July 17, 2017Investment PartnershipLP Interests (CTMH, LP) (Fully diluted 38.8%)—$— $872 $872 
GRT Rubber Technologies, LLC (10) (13)December 19, 2014Manufacturer of Engineered Rubber ProductsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 7.16%, Secured Debt (Maturity - December 31, 2023) (8)1 month LIBOR8,262 8,245 8,262 
Member Units (2,896 units) (16)—— 6,435 22,374 
14,680 30,636 
Harris Preston Fund Investments (9) (15)August 9, 2017Investment PartnershipLP Interests (2717 MH, LP) (Fully diluted 49.3%)—— 2,735 3,277 
Subtotal Control Investments (6) (4% of total investments at fair value)$18,287 $34,785 
Affiliate Investments (4)
AFG Capital Group, LLC (10) (13)November 7, 2014Provider of Rent-to-Own Financing Solutions and Services10.00% Secured Debt (Maturity - May 25, 2022) (14)None$144 $144 $144 
Member Units (46 units)—— 300 1,340 
444 1,484 
Analytical Systems Keco, LLC (10) (13)February 26, 2018Manufacturer of Liquid and Gas AnalyzersLIBOR Plus 10.00% (Floor 2.00%), Current Coupon 12.00%, Secured Debt (Maturity - August 16, 2024) (8)1 month LIBOR1,306 1,184 1,189 
Preferred Member Units (800 units)—— 800 800 
Warrants (105 Equivalent Shares; Expiration - August 16, 2029; Strike Price - $0.01 per Share)—— 79 88 
2,063 2,077 
Brewer Crane Holdings, LLC (10) (13)January 9, 2018Provider of Crane Rental and Operating ServicesLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (Maturity - January 9, 2023) (8)1 month LIBOR2,170 2,147 2,147 
Preferred Member Units (737 units) (16)—— 1,070 1,403 
3,217 3,550 
Centre Technologies Holdings, LLC (10) (13)January 4, 2019Provider of IT Hardware Services and Software SolutionsLIBOR Plus 10.00% (Floor 2.00%), Current Coupon 12.00%, Secured Debt (Maturity - January 4, 2024) (8)1 month LIBOR2,945 2,898 2,902 
Preferred Member Units (3,174 units)—— 1,460 1,515 
4,358 4,417 
Chamberlin Holding, LLC (10) (13)February 26, 2018Roofing and Waterproofing Specialty SubcontractorLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (Maturity - February 24, 2023) (8)1 month LIBOR3,993 3,925 3,993 
Member Units (1,087 units) (16)—— 2,860 7,001 
Member Units (Chamberlin Langfield Real Estate, LLC) (1 unit) (16)—— 262 230 
7,047 11,224 
Charlotte Russe, Inc.July 14, 2014Fast-Fashion Retailer to Young WomenCommon Stock (14,973 shares)—— 2,470 — 
Charps, LLC (10) (13)February 3, 2017Pipeline Maintenance and Construction15.00% Secured Debt (Maturity - June 5, 2022) (14)None462 462 462 
Preferred Member Units (400 units) (16)—— 100 2,350 
562 2,812 
Clad-Rex Steel, LLC (10) (13)December 20, 2016Specialty Manufacturer of Vinyl-Clad MetalLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity - December 20, 2021) (8)1 month LIBOR2,720 2,703 2,703 
Member Units (179 units) (16)—— 1,820 2,153 
10.00% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity - December 19, 2036)None280 277 277 
Member Units (Clad-Rex Steel RE Investor, LLC) (200 units)—— 53 115 
4,853 5,248 
Cody Pools Holdings, LLC (10) (13)March 6, 2020Designer of Residential and Commercial PoolsLIBOR Plus 10.50% (Floor 1.75%), Current Coupon 12.25%, Secured Debt (Maturity - March 6, 2025) (8)1 Month LIBOR3,900 3,824 3,900 
Preferred Member Units (147 units)—— 2,079 2,961 
5,903 6,861 
Copper Trail Energy Fund I, LP (9) (15) (16)July 17, 2017Investment PartnershipLP Interests (Copper Trail Energy Fund I, LP) (Fully diluted 12.4%)—— 2,161 1,854 
Digital Products Holdings LLC (10) (13)April 2, 2018Designer and Distributor of Consumer ElectronicsLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (Maturity - March 31, 2023) (8)1 month LIBOR$4,625 $4,569 $4,505 
Preferred Member Units (964 units) (16)—— 2,375 1,727 
6,944 6,232 
Direct Marketing Solutions, Inc. (10) (13)February 13, 2018Provider of Omni-Channel Direct Marketing ServicesLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity - February 13, 2023) (8)1 month LIBOR3,772 3,709 3,772 
Preferred Stock (2,100 shares)—— 2,100 5,015 
5,809 8,787 
Freeport Financial Funds (9) (15)July 31, 2015Investment PartnershipLP Interests (Freeport First Lien Loan Fund III, LP) (Fully diluted 6.00%) (16)—— 10,785 10,321 
Gamber-Johnson Holdings, LLC (10) (13)June 24, 2016Manufacturer of Ruggedized Computer Mounting SystemsLIBOR Plus 6.50% (Floor 2.00%), Current Coupon 8.50%, Secured Debt (Maturity - June 24, 2021) (8)1 month LIBOR4,960 4,920 4,960 
Member Units (2,155 units) (16)—— 3,711 13,311 
8,631 18,271 
Gulf Publishing Holdings, LLC (10) (13)April 29, 2016Energy Industry Focused Media and Publishing6.25% Current / 6.25% PIK, Secured Debt (Maturity - April 29, 2021)None3,218 3,207 2,941 
LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 5.25% / 5.25% PIK, Current Coupon Plus PIK 10.50%, Secured Debt (Maturity - September 30, 2020) (8)1 month LIBOR61 61 61 
Member Units (920 units)—— 920 — 
4,188 3,002 
Harris Preston Fund Investments (9) (15)September 19, 2017Investment PartnershipLP Interests (HPEP 3, LP) (Fully diluted 8.20%)—— 3,071 3,071 
Hawk Ridge Systems, LLC (9) (10) (13)December 2, 2016Value-Added Reseller of Engineering Design and Manufacturing Solutions11.00% Secured Debt (Maturity - December 2, 2021)None3,350 3,330 3,350 
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - December 2, 2021) (8)1 month LIBOR246 248 248 
Preferred Member Units (56 units) (16)—— 713 2,008 
Preferred Member Units (HRS Services, ULC) (56 units)—— 38 105 
4,329 5,711 
J&J Services, Inc. (10) (13)October 31, 2019Provider of Dumpster and Portable Toilet Rental Services11.50% Secured Debt (Maturity - October 31, 2024)None3,600 3,541 3,600 
Preferred Stock (696.15 shares)—— 1,771 2,979 
5,312 6,579 
Kickhaefer Manufacturing Company, LLC (10) (13)October 31, 2018Precision Metal Parts Manufacturing9.50% Current / 2.00% PIK Secured Debt (Maturity - October 31, 2023)None5,893 5,773 5,776 
9.00% Secured Debt (Maturity October 31, 2048)None990 980 980 
Member Units (145 units)—— 3,060 3,039 
Member Units (KMC RE Investor, LLC) (200 units) (16)—— 248 290 
10,061 10,085 
Market Force Information, Inc. (10) (13)July 28, 2017Provider of Customer Experience Management Services12.00% PIK Secured Debt (Maturity - July 28, 2023) (18)—6,519 6,463 3,429 
Member Units (185,980 units)—— 4,160 — 
10,623 3,429 
M.H. Corbin Holding LLC (10) (13)August 31, 2015Manufacturer and Distributor of Traffic Safety Products13.00% Secured Debt (Maturity - March 15, 2022)None2,163 2,146 2,150 
Preferred Member Units (16,500 units)—— 1,100 740 
Common Units (1,000 units)—— 1,500 — 
4,746 2,890 
Mystic Logistics Holdings, LLC (10) (13)August 18, 2014Logistics and Distribution Services Provider for Large Volume Mailers12.00% Secured Debt (Maturity - January 17, 2022)None1,683 1,682 1,681 
Common Stock (1,468 shares)—— 680 2,543 
2,362 4,224 
NexRev, LLC (10) (13)February 28, 2018Provider of Energy Efficiency Products & Services11.00% PIK Secured Debt (Maturity - February 28, 2023)None$4,328 $4,277 $4,150 
Preferred Member Units (21,600,000 units) (16)—— 1,720 237 
5,997 4,387 
NuStep, LLC (10) (13)January 31, 2017Designer, Manufacturer and Distributor of Fitness Equipment12.00% Secured Debt (Maturity - January 31, 2022)None4,910 4,880 4,880 
Preferred Member Units (102 units)—— 2,550 2,550 
7,430 7,430 
SI East, LLC (10) (13)August 31, 2018Rigid Industrial Packaging Manufacturing9.50% Secured Debt (Maturity - August 31, 2023)None10,988 10,875 10,988 
Preferred Member Units (52 units) (16)—— 2,000 3,239 
12,875 14,227 
Tedder Acquisition, LLC (10) (13)August 31, 2018Manufacturer of Firearm Holsters and Accessories12.00% Secured Debt (Maturity - August 31, 2023)None4,260 4,177 4,177 
Preferred Member Units (120 units)—— 2,034 2,034 
6,211 6,211 
Trantech Radiator Topco, LLC (10) (13)August 31, 2018Transformer Cooling Products and Services12.00% Secured Debt (Maturity - May 31, 2024)None2,180 2,119 2,180 
Common Stock (154 shares) (16)—— 1,164 1,941 
3,283 4,121 
Subtotal Affiliate Investments (4) (18% of total investments at fair value)$145,735 $158,505 
Non-Control/Non-Affiliate Investments (5)
AAC Holdings Inc. (8)July 10, 2017Substance Abuse Treatment Service ProviderLIBOR Plus 9.75% (Floor 1.00%), Current Coupon 13.00%, Secured Debt (Maturity - June 30, 2023) (18)3 month LIBOR$14,450 $14,129 $6,454 
PRIME Plus 10.00% (Floor 1.00%), Current Coupon 13.25%, Secured Debt (Maturity - March 31, 2021)PRIME3,121 2,967 2,887 
17,096 9,341 
Adams Publishing Group, LLC (8) (11)November 19, 2015Local Newspaper OperatorLIBOR Plus 7.00% (Floor 1.75%), Current Coupon 8.75%, Secured Debt (Maturity - July 3, 2023)1 month LIBOR6,082 5,944 5,938 
ADS Tactical, Inc. (8) (11)December 30, 2016Value-Added Logistics and Supply Chain Solutions Provider to the Defense IndustryLIBOR Plus 6.25% (Floor 0.75%), Current Coupon 7.00%, Secured Debt (Maturity - July 26, 2023)3 month LIBOR15,701 15,754 15,701 
Aethon United BR, LP (8) (11)September 8, 2017Oil & Gas Exploration & ProductionLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (Maturity - September 8, 2023) (14)1 month LIBOR7,000 6,934 6,678 
American Nuts, LLC (8) (11)April 10, 2018Roaster, Mixer and Packager of Bulk Nuts and SeedsLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity - April 10, 2023)3 month LIBOR12,157 11,920 11,889 
American Teleconferencing Services, Ltd. (8)May 19, 2016Provider of Audio Conferencing and Video Collaboration SolutionsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - June 8, 2023)3 month LIBOR14,130 13,776 9,432 
American Trailer Rental Group LLC (10) (13)June 7, 2017Provider of Short Term Trailer and Container RentalMember Units (Milton Meisler Holdings, LLC) (18,373 units)—— 2,149 3,387 
APTIM CorpAugust 17, 2018Engineering, Construction and Procurement7.75% Secured Debt (Maturity - June 15, 2025)None6,952 6,330 3,615 
Arcus Hunting, LLC (8) (11)January 6, 2015Manufacturer of Bowhunting and Archery Products and AccessoriesLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.00%, Secured Debt (Maturity - March 31, 2021)1 month LIBOR6,829 6,797 6,829 
ASC Ortho Management Company, LLC (11)August 31, 2018Provider of Orthopedic ServicesLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - August 31, 2023) (8)3 month LIBOR5,235 5,175 5,052 
13.25% PIK Secured Debt (Maturity - December 1, 2023) (14)None1,980 1,941 1,978 
7,116 7,030 
ATX Networks Corp. (8) (9)July 15, 2015Provider of Radio Frequency Management EquipmentLIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25% / 1.00% PIK, Current Coupon Plus PIK 7.25%, Secured Debt (Maturity - December 31, 2023)3 month LIBOR13,514 13,408 12,365 
BarFly Ventures, LLC (11)August 31, 2015Casual Restaurant Group12.00% Secured Debt (Maturity - August 31, 2020) (18)None$3,395 $3,386 $370 
9.00% PIK Secured Debt (Maturity - March 23, 2021) (18)None37 37 37 
Warrants (.410 equivalent units, Expiration - August 31, 2025)—— 158 — 
Options (.99 equivalent units)—— 202 — 
3,783 407 
BBB Tank Services, LLC (10) (13)April 8, 2016Maintenance, Repair and Construction Services to the Above-Ground Storage Tank MarketLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity - April 8, 2021) (8)1 month LIBOR1,200 1,200 1,177 
Preferred Stock (32,758 units)—— 33 36 
Member Units (200,000 units) (16)—— 200 53 
1,433 1,266 
Berry Aviation, Inc. (11)July 6, 2018Airline Charter Service Operator10.50% Current / 1.50% PIK, Secured Debt (Maturity - January 6, 2024) (14)None4,600 4,554 4,600 
Preferred Member Units (Berry Acquisition, LLC) (1,548,387 units, 8.00% cumulative)——1,548 804 
Preferred Member Units (Berry Acquisition, LLC) (122,416 units, 16.00% cumulative)——122 140 
6,224 5,544 
BigName Commerce, LLC (8) (11)May 11, 2017Provider of Envelopes and Complimentary Stationery ProductsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity - May 11, 2022)1 month LIBOR2,084 2,075 1,988 
Binswanger Enterprises, LLC (11)March 10, 2017Glass Repair and Installation Service ProviderLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - March 9, 2022) (8)3 month LIBOR13,152 12,957 13,152 
Member Units (1,050,000 units)—— 1,050 670 
14,007 13,822 
BLST Operating Company, LLCDecember 19, 2013Multi-Channel Retailer of General MerchandiseLIBOR Plus 8.50% (Floor 1.50%), Current Coupon 10.00%, Secured Debt (Maturity - August 28, 2025) (8)3 month LIBOR6,304 6,304 6,304 
Member Units (700,447 units)—— — — 
6,304 6,304 
Boccella Precast Products, LLC (10) (13)June 30, 2017Manufacturer of Precast Hollow Core ConcreteMember Units (564,000 units) (16)—— 564 1,400 
Brightwood Capital Fund Investments (9) (15)December 31, 2014Investment PartnershipLP Interests (Brightwood Capital Fund III, LP) (Fully diluted 0.60%) (16)—— 3,735 2,760 
LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 1.20%) (16)—— 9,537 8,769 
13,272 11,529 
Buca C, LLC (10) (13)June 30, 2015Casual Restaurant GroupLIBOR Plus 9.25% (Floor 1.00%), Current Coupon 10.25%, Secured Debt (Maturity - June 30, 2020) (8)1 month LIBOR12,670 12,670 11,656 
Preferred Member Units (4 units, 6.00% cumulative) (16)—— 3,040 511 
15,710 12,167 
Cadence Aerospace, LLC (8) (11)November 14, 2017Aerospace ManufacturingLIBOR Plus 3.25% (Floor 1.00%), Current Coupon 4.25% / 5.25% PIK, Current Coupon Plus PIK 9.50%, Secured Debt (Maturity - November 14, 2023)3 month LIBOR19,432 19,267 18,422 
CAI Software, LLC (10) (13)October 10, 2014Provider of Specialized Enterprise Resource Planning Software12.50% Secured Debt (Maturity - December 7, 2023)None2,123 2,141 2,123 
Member Units (16,742 units) (16)—— 188 1,400 
2,329 3,523 
Cenveo CorporationSeptember 4, 2015Provider of Digital Marketing Agency ServicesLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity - June 7, 2023) (8)3 month LIBOR4,269 4,057 4,045 
Common Stock (138,889 shares)—— 4,163 2,066 
8,220 6,111 
Chisholm Energy Holdings, LLC (8) (11)November 14, 2017Oil & Gas Exploration & ProductionLIBOR Plus 6.25% (Floor 1.50%), Current Coupon 7.75%, Secured Debt (Maturity - May 15, 2026) (14)3 month LIBOR3,571 3,485 3,404 
Clarius BIGS, LLC (11)September 23, 2014Prints & Advertising Film Financing15.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None$2,089 $1,831 $23 
20.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None760 667 8 
2,498 31 
Classic H&G Holdings, LLC (10) (13)March 12, 2020Provider of Engineered Packaging Solutions12.00% Secured Debt (Maturity - March 12, 2025)None6,200 6,025 6,200 
Preferred Member Units (38.52 units) (16)—— 1,440 2,137 
7,465 8,337 
Clickbooth.com, LLC (8) (11)December 5, 2017Provider of Digital Advertising Performance Marketing SolutionsLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - January 31, 2025)3 month LIBOR8,357 8,231 8,357 
Construction Supply Investments, LLC (11)December 30, 2016Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry ContractorsMember Units (87,914 units)—— 5,637 8,129 
Corel Corporation (8) (9)July 13, 2020Publisher of Desktop and Cloud-Based SoftwareLIBOR plus 5.00%, (Floor 0.00%), Current Coupon 5.26%, Secured Debt (Maturity - July 2, 2026)3 month LIBOR1,975 1,874 1,928 
CTVSH, PLLC (8) (11) (13)August 3, 2017Emergency Care and Specialty Service Animal HospitalLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - August 3, 2022)1 month LIBOR2,312 2,291 2,312 
Datacom, LLC (10) (13)May 30, 2014Technology and Telecommunications Provider10.50% PIK Secured Debt (Maturity - May 31, 2021) (18)None1,376 1,369 1,116 
8.00% Secured Debt (Maturity - May 31, 2021) (18)None200 200 179 
Class A Preferred Member Units (1,676 units)—— 144 — 
Class B Preferred Member Units (717 units)—— 670 — 
2,383 1,295 
Digital River, Inc. (8)February 24, 2015Provider of Outsourced e-Commerce Solutions and ServicesLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity - February 12, 2023)3 month LIBOR8,377 8,251 8,336 
DTE Enterprises, LLC (11)April 13, 2018Industrial Powertrain Repair and ServicesLIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.00%, Secured Debt (Maturity - April 13, 2023) (8)3 month LIBOR10,992 10,865 10,992 
Class AA Preferred Member Units (non-voting)—— 903 927 
Class A Preferred Member Units (776,316 units)—— 776 1,260 
12,544 13,179 
Dynamic Communities, LLC (8) (11)July 17, 2018Developer of Business Events and Online Community GroupsLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - July 17, 2023)3 month LIBOR5,320 5,254 5,107 
Epic Y-Grade Services, LP (8)June 25, 2018NGL Transportation & StorageLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - June 13, 2024)3 month LIBOR6,944 6,851 5,694 
GoWireless Holdings, Inc. (8)January 10, 2018Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - December 22, 2024)3 month LIBOR14,290 14,198 13,673 
GS Operating, LLC (8) (11)February 24, 2020Distributor of Industrial and Specialty PartsLIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.00%, Secured Debt (Maturity - February 24, 2025)3 month LIBOR12,537 12,216 12,010 
HDC/HW Intermediate Holdings, LLC (8) (11)December 21, 2018Managed Services and Hosting ProviderLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - December 21, 2023)3 month LIBOR1,954 1,927 1,833 
Hoover Group, Inc. (8) (9) (11)October 21, 2016Provider 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 LIBOR14,431 14,291 14,431 
LIBOR Plus 7.25% (Floor 0.00%), Current Coupon 7.51%, Secured Debt (Maturity - January 28, 2021)3 month LIBOR7,500 7,447 7,500 
21,738 21,931 
Hunter Defense Technologies, Inc. (8) (11)March 29, 2018Provider of Military and Commercial Shelters and SystemsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity - March 29, 2023)3 month LIBOR16,823 16,641 16,823 
HW Temps LLC (10) (13)July 2, 2015Temporary Staffing Solutions12.00% Secured Debt (Maturity - March 29, 2023)None2,480 2,447 2,230 
Hydrofarm Holdings, LLC (8) (11)May 18, 2017Wholesaler of Horticultural ProductsLIBOR Plus 8.50%, Current Coupon 8.65%, Secured Debt (Maturity - May 12, 2022)1 month LIBOR$6,866 $6,799 $5,816 
Hyperion Materials & Technologies, Inc. (8) (9)September 12, 2019Manufacturer of Cutting and Machine Tools & Specialty Polishing CompoundsLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity - August 28, 2026)3 month LIBOR7,444 7,312 6,923 
iEnergizer Limited (8) (9) (11)May 8, 2013Provider of Business Outsourcing SolutionsLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - April 17, 2024)1 month LIBOR10,675 10,595 10,675 
Implus Footcare, LLC (8) (11)June 1, 2017Provider of Footwear and Related AccessoriesLIBOR Plus 2.50% (Floor 1.00%), Current Coupon 3.50% / PIK 5.25%, Current Coupon Plus PIK 8.75%, Secured Debt (Maturity - April 30, 2024)3 month LIBOR17,307 17,025 15,852 
Independent Pet Partners Intermediate Holdings, LLC (11)November 20, 2018Omnichannel Retailer of Specialty Pet ProductsLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 11.31%, Secured Debt (Maturity - November 19, 2023) (8) (18)6 month LIBOR14,922 14,561 11,072 
Member Units (1,191,667 units)—— 1,192 — 
15,753 11,072 
Industrial Services Acquisitions, LLC (11)June 17, 2016Industrial Cleaning Services6.00% Current / 7.00% PIK, Current Coupon 13.00%, Unsecured Debt (Maturity - December 17, 2022) (17)None12,665 12,642 12,665 
Member Units (Industrial Services Investments, LLC) (336 units; 10.00% cumulative)—— 202 202 
Preferred Member Units (Industrial Services Investments, LLC) (187 units, 20.00% cumulative)—— 124 124 
Member Units (Industrial Services Investments, LLC) (2,100 units)—— 2,100 1,237 
15,068 14,228 
Interface Security Systems, L.L.C. (8) (11)May 18, 2017Commercial Security and Alarm ServicesLIBOR Plus 7.00% (Floor 1.75%), Current Coupon 8.75% / 3.00% PIK, Current Coupon Plus PIK 11.75%, Secured Debt (Maturity - August 7, 2023)3 month LIBOR7,615 7,502 7,615 
Intermedia Holdings, Inc. (8)August 13, 2018Unified Communications as a ServiceLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - July 19, 2025)1 month LIBOR3,489 3,464 3,478 
Invincible Boat Company, LLC (8) (11)May 18, 2017Manufacturer of Sport Fishing BoatsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity - August 28, 2025)3 month LIBOR9,263 9,174 9,049 
Isagenix International, LLC (8)July 5, 2018Direct Marketer of Health and Wellness ProductsLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity - June 14, 2025)3 month LIBOR5,676 5,634 3,015 
Jackmont Hospitality, Inc. (8) (11)May 26, 2015Franchisee of Casual Dining RestaurantsLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.75%, Secured Debt (Maturity - May 26, 2021)1 month LIBOR7,960 7,958 6,647 
Joerns Healthcare, LLCApril 3, 2013Manufacturer and Distributor of Health Care Equipment & SuppliesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - August 21, 2024) (8)3 month LIBOR3,335 3,293 3,252 
Common Stock (392,514 shares)—— 3,678 2,060 
6,971 5,312 
Kemp Technologies Inc. (8) (11)May 26, 2015Provider of Application Delivery ControllersLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - March 29, 2024)3 month LIBOR7,406 7,291 7,354 
Knight Energy Services LLC (11)November 14, 2018Oil and Gas Equipment and Services8.50% PIK Secured Debt (Maturity - February 9, 2024)None882 882 768 
Class A-2 Shares (25,692 units)—— 1,843 — 
2,725 768 
Kore Wireless Group, Inc.May 17, 2017Mission Critical Software PlatformLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 5.72%, Secured Debt (Maturity - December 20, 2024) (8)3 month LIBOR6,015 5,994 5,714 
Larchmont Resources, LLCOctober 15, 2013Oil & Gas Exploration & Production10.00% PIK, Secured Debt (Maturity - August 9, 2021)None3,614 3,719 1,626 
Member units (Larchmont Intermediate Holdco, LLC) (4,806 units)—— 601 192 
4,320 1,818 
Laredo Energy VI, LP (11)January 15, 2019Oil & Gas Exploration & ProductionMember Units (1,155,952 units)—— 11,560 11,560 
Lightbox Holdings, L.P. (8)May 17, 2017Provider of Commercial Real Estate SoftwareLIBOR Plus 5.00% (Floor 0.00%), Current Coupon 5.15%, Secured Debt (Maturity - May 9, 2026)1 month LIBOR4,938 4,874 4,715 
LL Management, Inc. (8) (11)May 17, 2017Medical Transportation Service ProviderLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity - September 25, 2023)3 month LIBOR$13,615 $13,511 $13,343 
Logix Acquisition Company, LLC (8) (11)June 24, 2016Competitive Local Exchange CarrierLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity - December 22, 2024) (23)1 month LIBOR12,654 12,590 11,705 
LSF9 Atlantis Holdings, LLC (8)May 17, 2017Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - May 1, 2023)1 month LIBOR12,775 12,724 12,445 
Lulu’s Fashion Lounge, LLC (8) (11)September 8, 2017Fast Fashion E-Commerce RetailerLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00% / 2.50% PIK, Current Coupon Plus PIK 10.50%, Secured Debt (Maturity - August 28, 2022)3 month LIBOR5,714 5,616 4,885 
Lynx FBO Operating LLC (11)March 10, 2017Fixed Based Operator in the General Aviation IndustryLIBOR Plus 5.75%, (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - September 30, 2024) (8)3 month LIBOR13,647 13,389 13,101 
Member Units (3,704 units)—— 500 335 
13,889 13,436 
Mac Lean-Fogg Company (11)July 6, 2018Manufacturer and Supplier for Auto and Power MarketsLIBOR Plus 5.00% (Floor 0.00%), Current Coupon 5.15%, Secured Debt (Maturity - December 22, 2025) (8)1 month LIBOR7,081 7,035 6,713 
Preferred Stock (650 shares, 4.50% cash / 9.25% PIK, cumulative) (16)—— 793 756 
7,828 7,469 
Mills Fleet Farm Group, LLC (8) (11)October 24, 2018Omnichannel Retailer of Work, Farm and Lifestyle MerchandiseLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - October 24, 2024)3 month LIBOR13,875 13,582 13,278 
NinjaTrader, LLC (8) (11)June 10, 2014Operator of Futures Trading PlatformLIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (Maturity - December 18, 2024)3 month LIBOR9,125 8,964 9,125 
NNE Partners, LLC (8) (11)March 2, 2017Oil & Gas Exploration & ProductionLIBOR Plus 8.00%, (Floor 0.00%) Current Coupon 8.24%, Secured Debt (Maturity - March 2, 2022)3 month LIBOR20,417 20,345 18,661 
Novetta Solutions, LLC (8)July 26, 2017Provider of Advanced Analytics Solutions for Defense AgenciesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity - October 17, 2022)3 month LIBOR14,707 14,520 14,450 
NTM Acquisition Corp. (8)July 12, 2016Provider of B2B Travel Information ContentLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity - June 7, 2022)3 month LIBOR4,372 4,355 3,935 
Pasha Group (8)February 2, 2018Diversified Logistics and Transportation ProvidedLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity - January 26, 2023)2 month LIBOR7,520 7,338 6,956 
PricewaterhouseCoopers Public Sector LLP (8)June 4, 2018Provider of Consulting Services to GovernmentsLIBOR Plus 8.00% (Floor 0.00%), Current Coupon 8.15%, Secured Debt (Maturity - May 1, 2026) (14)1 month LIBOR14,100 14,061 13,608 
Rise Broadband (8) (11)May 2, 2018Fixed Wireless Broadband ProviderLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 8.17%, Secured Debt (Maturity - May 2, 2023)3 month LIBOR14,606 14,521 14,490 
RM Bidder, LLC (11)November 12, 2015Scripted and Unscripted TV and Digital Programming ProviderCommon Stock (1,854 shares)—— 31 14 
Series A Warrants (124,915 equivalent units, Expiration - October 20, 2025)—— 284 — 
Series B Warrants (93,686 equivalent units, Expiration - October 20, 2025)—— — — 
315 14 
Salient Partners, LP (8) (11)June 25, 2015Provider of Asset Management ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - August 31, 2021)3 month LIBOR6,450 6,558 5,876 
Signal Peak CLO 7, Ltd. (9) (15) (24)May 8, 2019Structured FinanceSubordinated Structured Notes (estimated yield of 8.3% due April 30, 2032)—25,935 21,946 18,411 
Slick Software Holdings LLC (10) (13)September 13, 2018Text Messaging Marketing Platform14.00% Secured Debt (Maturity - September 13, 2023)—1,520 1,304 1,520 
Member units (17,500 units)—— 175 313 
Warrants (4,521 equivalent units, Expiration - September 13, 2028)—— 45 82 
1,524 1,915 
TEAM Public Choices, LLC (8) (11)August 18, 2017Home-Based Care Employment Service ProviderLIBOR Plus 5.50%, (Floor 1.50%), Current Coupon 7.00%, Secured Debt (Maturity - September 20, 2024)1 month LIBOR9,902 9,820 9,614 
TE Holdings, LLCJuly 14, 2014Oil & Gas Exploration & ProductionCommon Units (72,786 units)—— 728 — 
TGP Holdings III LLC (8)October 25, 2018Outdoor Cooking & AccessoriesLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity - September 25, 2025) (14)3 month LIBOR$5,000 $5,000 $4,631 
USA DeBusk LLC (8) (11)August 18, 2017Provider of Industrial Cleaning ServicesLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity - October 22, 2024)3 month LIBOR16,674 16,400 15,874 
U.S. Telepacific Corp. (8)September 14, 2016Provider of Communications and Managed ServicesLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity - May 2, 2023)3 month LIBOR12,500 12,311 10,851 
Vida Capital, Inc. (8)March 9, 2017Alternative Asset ManagerLIBOR Plus 6.00% (Floor 0.00%), Current Coupon 6.16%, Secured Debt (Maturity - October 1, 2026)1 month LIBOR7,303 7,207 7,303 
Vistar Media, Inc. (11)February 17, 2017Operator of Digital Out-of-Home Advertising PlatformLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity - April 3, 2023) (8)3 month LIBOR4,616 4,492 4,616 
Warrants (69,675 equivalent units, Expiration - April 3, 2029)—— — 1,070 
Preferred Stock (70,207 shares)—— 767 1,070 
5,259 6,756 
Volusion, LLC (10) (13)January 26, 2015Provider of Online Software-as-a-Service eCommerce Solutions11.50% Secured Debt (Maturity - January 24, 2020) (19)None8,672 8,636 8,247 
8.00% Unsecured Debt (Maturity - November 16, 2023) (17)None175 175 124 
Preferred Member Units (2,090,001 units)—— 6,000 2,124 
Warrants (784,866.80 equivalent units, Expiration - January 26, 2025)—— 1,104 — 
15,915 10,495 
Wireless Vision Holdings, LLC (8) (11)September 29, 2017Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 8.86% (Floor 1.00%), Current Coupon 9.86% / 1.00% PIK, Current Coupon Plus PIK 10.86%, Secured Debt (Maturity - September 29, 2022) (23)1 month LIBOR6,703 6,586 6,703 
LIBOR Plus 8.91% (Floor 1.00%), Current Coupon 9.91% / 1.00% PIK, Current Coupon Plus PIK 10.91%, Secured Debt (Maturity - September 29, 2022) (23)1 month LIBOR5,826 5,669 5,826 
12,255 12,529 
YS Garments, LLC (8)August 20, 2018Designer and Provider of Branded ActivewearLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity - August 9, 2024)1 month LIBOR7,045 6,995 6,405 
Subtotal Non-Control/Non-Affiliate Investments (5) (78% of total portfolio investments at fair value)$772,439 $709,368 
Total Portfolio Investments$936,461 $902,658 
Short Term Investments (20)
Fidelity Institutional Money Market Funds (21)—Prime Money Market Portfolio, Class III Shares—— $10,389 $10,389 
US Bank Money Market Account (21)———— 16,611 16,611 
Total Short Term Investments$27,000 $27,000 

(1) All investments are Middle Market (as defined in the notes to the financial statements) portfolio investments, unless otherwise noted. All

Table of the assets of HMSContents

MSC Income Fund, Inc. (together with its consolidated subsidiaries, the “Company”) are encumbered as security for the Company’s credit agreements. See Note 5 — Borrowings.

Consolidated Schedule of Investments

June 30, 2021

(dollars in thousands)

​

(unaudited)

​

(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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

(31)

38.8%

​

​

​

​

$

835

$

710

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

GRT Rubber Technologies LLC

​

December 19, 2014

Manufacturer of Engineered Rubber Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

7.09% (L+7.00%)

12/31/2023

​

8,262

​

8,249

​

8,262

​

​

​

​

Member Units

(8)

2,896

​

​

​

​

​

6,435

​

22,120

​

​

​

​

​

​

​

​

​

​

​

​

14,684

​

30,382

Harris Preston Fund Investments

(12) (13)

October 1, 2017

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (2717 MH, L.P.)

(31)

49.3%

​

​

​

​

​

2,646

​

2,749

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Subtotal Control Investments (5.7% of net assets at fair value)

​

​

​

​

​

​

​

​

​

​

$

18,165

$

33,841

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

​

79

​

79

​

79

​

​

​

​

Preferred Member Units

​

46

​

​

​

​

​

300

​

1,740

​

​

​

​

​

​

​

​

​

​

​

​

379

​

1,819

Analytical Systems Keco Holdings, LLC

​

August 16, 2019

Manufacturer of Liquid and Gas Analyzers

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/16/2024

​

1,271

​

1,203

​

1,203

​

​

​

​

Preferred Member Units

​

800

​

​

​

​

​

800

​

340

​

​

​

​

Preferred Member Units

​

164

​

​

​

​

​

164

​

410

​

​

​

​

Warrants

(27)

105

​

8/16/2029

​

​

​

79

​

-

​

​

​

​

​

​

​

​

​

​

​

​

2,246

​

1,953

Barfly Ventures, LLC

(10)

August 31, 2015

Casual Restaurant Group

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Member Units

​

12

​

​

​

​

​

528

​

567

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Brewer Crane Holdings, LLC

​

January 9, 2018

Provider of Crane Rental and Operating Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/9/2023

​

2,077

​

2,062

​

2,062

​

​

​

​

Preferred Member Units

(8)

737

​

​

​

​

​

1,070

​

1,290

​

​

​

​

​

​

​

​

​

​

​

​

3,132

​

3,352

Centre Technologies Holdings, LLC

​

January 4, 2019

Provider of IT Hardware Services and Software Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/4/2024

​

2,431

​

2,402

​

2,402

​

​

​

​

Preferred Member Units

​

3,174

​

​

​

​

​

1,460

​

1,460

​

​

​

​

​

​

​

​

​

​

​

​

3,862

​

3,862

5

Table of portfolio companies.

(4) Affiliate investments are generally defined by the Investment Company Act of 1940, as amended (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. Fair value as of December 31, 2019 and September 30, 2020 along with transactions during the nine months ended September 30, 2020 in these affiliated investments were as follows (in thousands):
Nine Months Ended September 30, 2020Nine Months Ended September 30, 2020
Portfolio CompanyFair Value at December 31, 2019
Gross Additions (Cost)*
Gross Reductions (Cost)**
Net Unrealized Gain (Loss) ***
Fair Value at September 30, 2020Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
Affiliate Investments
AFG Capital Group, LLC
Term loan$209 $— $(65)$— $144 $— $13 $— $— 
Member units1,295 — — 45 1,340 — — — — 
Analytical Systems Keco, LLC
Term loan$1,266 $9 $(85)$(1)$1,189 $— $131 $— $— 
Preferred member units800 — — — 800 — — — — 
Warrants79 — (1)10 88 — — — — 
Brewer Crane Holdings, LLC
Term loan2,233 6 (92)— 2,147 — 195 — — 
Preferred member units1,070 — — 333 1,403 — — — 23 
Centre Technologies Holdings, LLC
Term loan3,008 11 (117)— 2,902 — 284 — — 
Preferred member units1,460 — — 55 1,515 — — 23 — 
Chamberlin Holding, LLC
Term loan4,443 22 (450)(22)3,993 — 400 — — 
Member units6,009 — — 992 7,001 — — 45 683 
Member units363 — — (133)230 — — — 13 
Charlotte Russe, Inc.
Common stock— — — — — — — — — 
Charps, LLC
Term loan500 — (38)— 462 — 56 — — 
Preferred member units1,730 — — 620 2,350 — — — 113 
Clad-Rex Steel, LLC
Term loan2,696 9 — (2)2,703 — 229 — — 
Member units2,408 — — (255)2,153 — — — 79 
Term loan (Clad-Rex Steel RE Investor, LLC)282 — (5)— 277 — 21 — — 
Member units (Clad-Rex Steel RE Investor, LLC)115 — — — 115 — — — — 
Cody Pools Holdings, LLC
Term loan— 4,008 (184)76 3,900 — 290 — — 
Preferred member units— 2,079 — 882 2,961 — — 15 — 
Copper Trail Energy Fund I, LP
LP interests1,643 1,212 (439)(562)1,854 21 — 14 1,170 
Digital Products Holdings LLC
Term loan4,611 15 (278)157 4,505 — 422 — — 
Preferred member units1,294 — — 433 1,727 — — — 50 
Direct Marketing Solutions, Inc.
Term loan3,929 16 (157)(16)3,772 — 376 — — 
Preferred stock5,051 — — (36)5,015 — — — — 
Freeport Financial Funds
LP interests9,696 990 (160)(205)10,321 — — — 630 
Gamber-Johnson Holdings, LLC
Term loan4,755 419 (203)(11)4,960 — 329 — — 
Member units13,352 — — (41)13,311 — — — 763 
Guerdon Modular Holdings, Inc.
Term loan— 30 (3,147)3,117 — (2,792)30 — — 
Term loan— 1 (253)252 — (252)— — — 
Common stock— — (746)746 — (746)— — — 
Preferred stock— — (285)285 — (285)— — — 
Gulf Publishing Holdings, LLC
Term loan3,124 96 — (279)2,941 — 312 — — 
Revolving line of credit70 1 (10)— 61 — 5 — — 
Member units605 — — (605)— — — — — 
Harris Preston Fund Investments
LP interests (HPEP 3, LP)2,474 597 — — 3,071 — — — — 
Hawk Ridge Systems, LLC
Term loan3,350 12 — (12)3,350 — 139 — — 
Revolving line of credit148 100 — — 248 — — — — 
Preferred member units1,975 — — 33 2,008 — — — 17 
Preferred member units (HRS Services, ULC)105 — — — 105 — — — — 
J&J Services, Inc.
Term Loan4,315 26 (800)59 3,600 — 391 — — 
Preferred stock1,790 — (18)1,207 2,979 — — — — 
Kickhaefer Manufacturer Company, LLC
Term loan$6,146 $371 $(740)$(1)$5,776 $— $587 $— $— 
Term loan977 8 (5)— 980 — 76 — — 
Member units3,060 — — (21)3,039 — — — 17 
Member units (KMC RE Investor, LLC)290 — — — 290 — — — — 
Market Force Information, Inc.
Term loan5,625 790 (59)(2,927)3,429 — 63 — — 
Revolving line of credit674 — (696)22 — — 10 — — 
Member units1,319 — — (1,319)— — — — — 
M.H. Corbin Holding LLC
Term loan2,213 17 (60)(20)2,150 — 223 — — 
Preferred member units1,192 — — (452)740 — — — — 
Common units5 — — (5)— — — — — 
Mystic Logistics Holdings, LLC
Term loan1,561 254 (134)— 1,681 — 156 — — 
Common stock2,103 — — 440 2,543 — — — — 
NexRev, LLC
Term loan4,331 56 (111)(126)4,150 — 378 — — 
Preferred member units1,577 — — (1,340)237 — — — (14)
NuStep, LLC
Term loan4,901 19 (40)— 4,880 — 469 — — 
Preferred member units2,550 — — — 2,550 — — — — 
SI East, LLC
Term loan10,988 25 — (25)10,988 — 827 — — 
Preferred member units2,734 — (1)506 3,239 — — — 431 
Tedder Acquisition, LLC
Term loan4,066 176 — (65)4,177 — 391 — — 
Revolving line of credit158 — (158)— — — 15 — — 
Preferred member units2,034 — — — 2,034 — — — — 
Trantech Radiator Topco, LLC
Term loan2,237 13 (120)50 2,180 — 217 — — 
Common stock1,164 — (1)778 1,941 — — — 22 
Total Affiliate Investments$154,158 $11,388 $(9,658)$2,617 $158,505 $(4,054)$7,035 $97 $3,997 
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, payment-in-kind (“PIK”) interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.
*** Net unrealized gain (loss) does not include unrealized appreciation (depreciation) on unfunded commitments.
(5) Non-Control/Non-Affiliate investments are generally investments that are neither Control investments nor Affiliate investments.
(6) Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained. Fair value as of December 31, 2019 and September 30, 2020 along with transactions during the nine months ended September 30, 2020 in these Control investments were as follows (in thousands):
Nine Months Ended September 30, 2020Nine Months Ended September 30, 2020
Portfolio CompanyFair Value at December 31, 2019
Gross Additions (Cost)*
Gross Reductions (Cost)**
Net Unrealized Gain (Loss)Fair Value at September 30, 2020Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
Control Investments
CTMH, LP
LP interests$872 $— $— $— $872 $— $— $— $125 
GRT Rubber Technologies, LLC
Term loan7,396 870 — (4)8,262 — 491 — — 
Member units23,372 — (1)(997)22,374 — — 59 1,201 
Harris Preston Fund Investments
LP interests (2717 HM, LP)3,156 1 — 120 3,277 — — — — 
Total Control Investments$34,796 $871 $(1)$(881)$34,785 $— $491 $59 $1,326 
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(7) Principal is net of repayments. Cost represents amortized cost which is net of repayments and adjusted for the amortization of premiums and/or accretion of discounts, as applicable.
(8) Index based floating interest rate is subject to contractual minimum interest rates, or floors.
(9) The investment is not a qualifying asset in an eligible portfolio company under Section 55(a) of the 1940 Act. A business development company (“BDC”) may not acquire any asset other than qualifying assets in eligible portfolio companies unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. As of September 30, 2020, approximately 11.5% of the Company’s total assets were considered non-qualifying.
(10) Investment is classified as a LMM (as defined in the notes to the financial statements) portfolio investment.
(11) Investment is classified as a Private Loan (as defined in the notes to the financial statements) portfolio investment.
(12) Investment or portion of investment is under contract to purchase and met trade date accounting criteria as of September 30, 2020. Settlement occurred or is scheduled to occur after September 30, 2020.
(13) Investment serviced by Main Street Capital Corporation (“Main Street”) pursuant to servicing arrangements with the Company.
(14) Second lien secured debt investment.
(15) Investment is classified as an Other Portfolio (as defined in the notes to the financial statements) investment.
(16)Contents

MSC Income producing through dividends or distributions.

(17) Unsecured debt investment.
(18) Investment is on non-accrual status as of September 30, 2020.
(19) Maturity date is under on-going renegotiations 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, 2020 was approximately 0.005% at US Bank Money Market Account and 0.01% at Fidelity Institutional Money Market Funds.
(22) The 1, 2, 3, and 6-month London Interbank Offered Rate (“LIBOR”) were 0.15%, 0.19%, 0.23% and 0.26%, respectively, as of September 30, 2020. The actual LIBOR for each loan listed may not be the applicable LIBOR as of September 30, 2020, as the loan may have been priced or repriced based on a LIBOR prior to September 30, 2020. The prime rate was 3.25% as of September 30, 2020.
(23) The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the credit agreement and the Condensed Fund, Inc.

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

June 30, 2021

(dollars in thousands)

​

(unaudited)

​

​

(24) Investment formerly known as Mariner CLO 7, Ltd. See Note 4 — Investment in HMS-ORIX SLF LLC.
(25) 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)

Chamberlin Holding LLC

​

February 26, 2018

Roofing and Waterproofing Specialty Contractor

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

2/26/2023

​

3,454

​

3,413

​

3,454

​

​

​

​

Member Units

(8)

1,087

​

​

​

​

​

2,860

​

6,660

​

​

​

​

Member Units

(8) (30)

261,786

​

​

​

​

​

330

​

345

​

​

​

​

​

​

​

​

​

​

​

​

6,603

​

10,459

Charps, LLC

​

February 3, 2017

Pipeline Maintenance and Construction

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Preferred Member Units

(8)

400

​

​

​

​

​

100

​

2,900

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Clad-Rex Steel, LLC

​

December 20, 2016

Specialty Manufacturer of Vinyl-Clad Metal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/15/2024

​

2,620

​

2,613

​

2,613

​

​

​

​

Member Units

(8)

179

​

​

​

​

​

1,820

​

2,360

​

​

​

​

Secured Debt

(30)

​

10.00%

12/20/2036

​

274

​

272

​

272

​

​

​

​

Member Units

(30)

200

​

​

​

​

​

53

​

133

​

​

​

​

​

​

​

​

​

​

​

​

4,758

​

5,378

Cody Pools, Inc.

​

March 6, 2020

Designer of Residential and Commercial Pools

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/6/2025

​

2,962

​

2,911

​

2,962

​

​

​

​

Preferred Member Units

​

147

​

​

​

​

​

2,079

​

5,550

​

​

​

​

​

​

​

​

​

​

​

​

4,990

​

8,512

Colonial Electric Company LLC

​

March 31, 2021

Provider of Electrical Contracting Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

12.00%

3/31/2026

​

6,300

​

6,148

​

6,148

​

​

​

​

Preferred Member Units

​

4,320

​

​

​

​

​

1,920

​

1,920

​

​

​

​

​

​

​

​

​

​

​

​

8,068

​

8,068

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (Copper Trail Energy Fund I, LP)

(8) (31)

12.4%

​

​

​

​

​

2,161

​

1,843

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Datacom, LLC

​

May 30, 2014

Technology and Telecommunications Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

5.00%

12/31/2025

​

994

​

900

​

900

​

​

​

​

Preferred Member Units

​

1,000

​

​

​

​

​

290

​

290

​

​

​

​

​

​

​

​

​

​

​

​

1,190

​

1,190

Digital Products Holdings LLC

​

April 1, 2018

Designer and Distributor of Consumer Electronics

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/1/2023

​

4,378

​

4,339

​

4,339

​

​

​

​

Preferred Member Units

(8)

964

​

​

​

​

​

2,375

​

2,459

​

​

​

​

​

​

​

​

​

​

​

​

6,714

​

6,798

6

Table of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the credit agreement and the Condensed Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments above reflects such lower rate.

(26) The fair value of the investment was determined using significant unobservable inputs. See Note 3 — Fair Value Hierarchy for Investments.
(27) Investment date represents the date of initial investment(Continued)

June 30, 2021

(dollars in the portfolio company.


See notes to the condensed consolidated financial statements.thousands)

​

(unaudited)

​

​

5

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

Direct Marketing Solutions, Inc.

​

February 13, 2018

Provider of Omni-Channel Direct Marketing Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

2/13/2023

​

3,772

​

3,729

​

3,729

​

​

​

​

Preferred Stock

​

2,100

​

​

​

​

​

2,100

​

4,460

​

​

​

​

​

​

​

​

​

​

​

​

5,829

​

8,189

Freeport Financial Funds

(12) (13)

June 13, 2013

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

July 31, 2015

​

LP Interests (Freeport First Lien Loan Fund III LP)

(8) (31)

6.0%

​

​

​

​

​

8,468

​

8,004

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gamber-Johnson Holdings, LLC

​

June 24, 2016

Manufacturer of Ruggedized Computer Mounting Systems

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (17)

​

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

6/24/2021

​

5,160

​

5,160

​

5,160

​

​

​

​

Member Units

(8)

2,261

​

​

​

​

​

4,423

​

14,060

​

​

​

​

​

​

​

​

​

​

​

​

9,583

​

19,220

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

​

3,136

​

3,046

​

3,046

​

​

​

​

Preferred Member Units

(8)

56

​

​

​

​

​

1,225

​

1,225

​

​

​

​

​

​

​

​

​

​

​

​

4,271

​

4,271

Gulf Publishing Holdings, LLC

​

April 29, 2016

Energy Industry Focused Media and Publishing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (17) (19)

​

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

9/30/2020

​

64

​

64

​

64

​

​

​

​

Secured Debt

(17) (19)

​

12.50% (6.25% Cash, 6.25% PIK)

4/29/2021

​

3,374

​

3,374

​

2,667

​

​

​

​

Member Units

​

920

​

​

​

​

​

920

​

-

​

​

​

​

​

​

​

​

​

​

​

​

4,358

​

2,731

Harris Preston Fund Investments

(12) (13)

August 9, 2017

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (HPEP 3, L.P.)

(31)

8.2%

​

​

​

​

​

3,445

​

4,164

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Hawk Ridge Systems, LLC

(13)

December 2, 2016

Value-Added Reseller of Engineering Design and Manufacturing Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

9.50%

12/2/2023

​

3,350

​

3,343

​

3,350

​

​

​

​

Preferred Member Units

(8)

56

​

​

​

​

​

713

​

2,658

​

​

​

​

Preferred Member Units

(30)

56

​

​

​

​

​

38

​

140

​

​

​

​

​

​

​

​

​

​

​

​

4,094

​

6,148

7


HMS Income Fund, Inc.
Condensed Consolidated Schedule of Investments
As of December 31, 2019
(dollars in thousands)
Portfolio Company (1) (3)Investment Date (27)Business DescriptionType of Investment (2) (3)Index Rate (22)Principal (7)Cost (7)Fair Value (26)
Control Investments (6)
CTMH, LP (9) (15)July 17, 2017Investment PartnershipLP Interests (CTMH, LP) (Fully diluted 38.80%)—$— $872 $872 
GRT Rubber Technologies, LLC (10) (13)December 19, 2014Manufacturer of Engineered Rubber ProductsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.71%, Secured Debt (Maturity - December 31, 2023) (8)1 month LIBOR7,396 7,375 7,396 
Member Units (2,896 units) (16)—— 6,435 23,372 
13,810 30,768 
Harris Preston Fund Investments (9) (15)August 9, 2017Investment PartnershipLP Interests (2717 MH, LP) (Fully diluted 49.30%)—— 2,735 3,156 
Subtotal Control Investments (6) (3% of total investments at fair value)$17,417 $34,796 
Affiliate Investments (4)
AFG Capital Group, LLC (10) (13)November 7, 2014Provider of Rent-to-Own Financing Solutions and Services10.00% Secured Debt (Maturity - May 25, 2022) (14)None$209 $209 $209 
Member Units (46 units) (16)—— 300 1,295 
509 1,504 
Analytical Systems Keco, LLC (10) (13)February 26, 2018Manufacturer of Liquid and Gas AnalyzersLIBOR Plus 10.00% (Floor 2.00%), Current Coupon 12.13%, Secured Debt (Maturity - August 16, 2024) (8)1 month LIBOR1,391 1,260 1,266 
Preferred Member Units (800 units)—— 800 800 
Warrants (105 equivalent shares; Expiration - August 16, 2029)—— 79 79 
2,139 2,145 
Brewer Crane Holdings, LLC (10) (13)January 9, 2018Provider of Crane Rental and Operating ServicesLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.71%, Secured Debt (Maturity - January 9, 2023) (8)1 month LIBOR2,263 2,233 2,233 
Preferred Member Units (737 units) (16)—— 1,070 1,070 
3,303 3,303 
Centre Technologies Holdings, LLC (10) (13)January 4, 2019Provider of IT Hardware Services and Software SolutionsLIBOR Plus 9.00% (Floor 2.00%), Current Coupon 10.75%, Secured Debt (Maturity - January 4, 2024) (8)1 month LIBOR3,060 3,003 3,008 
Preferred Member Units (3,174 units)—— 1,460 1,460 
4,463 4,468 
Chamberlin Holding, LLC (10) (13)February 26, 2018Roofing and Waterproofing Specialty SubcontractorLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity - February 23, 2023) (8)1 month LIBOR4,443 4,353 4,443 
Member Units (1,087 units) (16)—— 2,860 6,009 
Member Units (Langfield RE, LLC) (1 unit)—— 262 363 
7,475 10,815 
Charlotte Russe, Inc.July 14, 2014Fast-Fashion Retailer to Young WomenCommon Stock (14,973 shares)None— 2,470 — 
Charps, LLC (10) (13)February 3, 2017Pipeline Maintenance and Construction15.00% Secured Debt (Maturity - June 5, 2022) (14)None500 500 500 
Preferred Member Units (400 units) (16)—— 100 1,730 
600 2,230 
Clad-Rex Steel, LLC (10) (13)December 20, 2016Specialty Manufacturer of Vinyl-Clad MetalLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.71%, Secured Debt (Maturity - December 20, 2021) (8)1 month LIBOR2,720 2,694 2,696 
Member Units (179 units) (16)—— 1,820 2,408 
10.00% Secured Debt (Clad-Rex Steel RE Investor, LLC) (Maturity - December 19, 2036)None284 282 282 
Member Units (Clad-Rex Steel RE Investor, LLC) (200 units)—— 53 115 
4,849 5,501 
Copper Trail Fund Investments (9) (15)July 17, 2017Investment PartnershipLP Interests (Copper Trail Energy Fund I, LP) (Fully Diluted 12.40%) (16)—— 1,389 1,643 
Digital Products Holdings LLC (10) (13)April 2, 2018Designer and Distributor of Consumer ElectronicsLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.75%, Secured Debt (Maturity - March 31, 2023) (8)1 month LIBOR$4,905 $4,832 $4,611 
Preferred Member Units (863 units) (16)—— 2,375 1,294 
7,207 5,905 
Direct Marketing Solutions, Inc. (10) (13)February 13, 2018Provider of Omni-Channel Direct Marketing ServicesLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.75%, Secured Debt (Maturity - February 13, 2023) (8)1 month LIBOR3,929 3,851 3,929 
Preferred Stock (2,100 shares)—— 2,100 5,051 
5,951 8,980 
Freeport Financial Funds (9) (15)July 31, 2015Investment PartnershipLP Interests (Freeport First Lien Loan Fund III, LP) (Fully diluted 6.00%) (16)—— 9,956 9,696 
Gamber-Johnson Holdings, LLC (10) (13)June 24, 2016Manufacturer of Ruggedized Computer Mounting SystemsLIBOR Plus 7.50% (Floor 2.00%), Current Coupon 8.50%, Secured Debt (Maturity - June 24, 2021) (8)1 month LIBOR4,755 4,704 4,755 
Member Units (2,155 units) (16)—— 3,711 13,352 
8,415 18,107 
Guerdon Modular Holdings, Inc. (10) (13)August 13, 2014Multi-Family and Commercial Modular Construction Company16.00% Secured Debt (Maturity - October 1, 2019) (18)None3,147 3,116 — 
LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.60%, Secured Debt (Maturity - October 1, 2019) (8) (18)3 month LIBOR253 252 — 
Common Stock (53,008 shares)—— 746 — 
Class B Preferred Stock (101,250 shares)—— 285 — 
4,399 — 
Gulf Publishing Holdings, LLC (10) (13)April 29, 2016Energy Industry Focused Media and Publishing12.50% Secured Debt (Maturity - April 29, 2021)None3,134 3,112 3,124 
LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.21%, Secured Debt (Maturity - September 30, 2020) (8)1 month LIBOR70 70 70 
Member Units (920 units)—— 920 605 
4,102 3,799 
Harris Preston Fund Investments (9) (15)September 19, 2017Investment PartnershipLP Interests (HPEP 3, LP) (Fully diluted 8.20%)—— 2,474 2,474 
Hawk Ridge Systems, LLC (9) (10) (13)December 2, 2016Value-Added Reseller of Engineering Design and Manufacturing Solutions11.00% Secured Debt (Maturity - December 2, 2021)None3,350 3,318 3,350 
LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.71%, Secured Debt (Maturity - December 2, 2021) (8)1 month LIBOR150 148 148 
Preferred Member Units (56 units) (16)—— 713 1,975 
Preferred Member Units (HRS Services, ULC) (56 units)—— 38 105 
4,217 5,578 
J & J Services, Inc. (10) (13)October 31, 2019Provider of Dumpster Rental and Related Services11.50% Secured Debt (Maturity - October 31, 2024)None4,400 4,315 4,315 
Preferred Member Units (704 units)—— 1,790 1,790 
6,105 6,105 
Kickhaefer Manufacturing Company, LLC (10) (13)October 31, 2018Precision Metal Parts Manufacturing11.50% Secured Debt (Maturity - October 31, 2023)None6,300 6,141 6,146 
9.00% Secured Debt (Maturity - October 31, 2048)None995 977 977 
Preferred Member Units (145 units)—— 3,060 3,060 
Member Units (KMC RE Investor, LLC) (200 units) (16)—— 248 290 
10,426 10,473 
Market Force Information, Inc. (10) (13)July 28, 2017Provider of Customer Experience Management Services6.00% Current / 6.00% PIK Secured Debt (Maturity - July 28, 2022)3 month LIBOR5,792 5,732 5,625 
8.00% Secured Debt (Maturity - July 28, 2022)None697 697 674 
Member Units (170,000 units)—— 4,160 1,319 
10,589 7,618 
M.H. Corbin Holding LLC (10) (13)August 31, 2015Manufacturer and Distributor of Traffic Safety Products5.00% Current / 5.00% PIK Secured Debt (Maturity - March 31, 2022)None$2,213 $2,191 $2,213 
Preferred Member Units (16,500 units)—— 1,100 1,192 
Common Units (1,000 units)—— 1,500 5 
4,791 3,410 
Mystic Logistics Holdings, LLC (10) (13)August 18, 2014Logistics and Distribution Services Provider for Large Volume Mailers12.00% Secured Debt (Maturity - August 15, 2019) (19)None1,563 1,561 1,561 
Common Stock (1,468 shares) (16)—— 680 2,103 
2,241 3,664 
NexRev, LLC (10) (13)February 28, 2018Provider of Energy Efficiency Products & Services11.00% Secured Debt (Maturity - February 28, 2023)None4,397 4,331 4,331 
Preferred Member Units (21,600,000 units) (16)—— 1,720 1,577 
6,051 5,908 
NuStep, LLC (10) (13)January 31, 2017Designer, Manufacturer and Distributor of Fitness Equipment12.00% Secured Debt (Maturity - January 31, 2022)None4,949 4,901 4,901 
Preferred Member Units (102 units)—— 2,550 2,550 
7,451 7,451 
SI East, LLC (10) (13)August 31, 2018Rigid Industrial Packaging Manufacturing9.50% Secured Debt (Maturity - August 31, 2023)None10,988 10,849 10,988 
Preferred Member Units (52 units) (16)—— 2,000 2,734 
12,849 13,722 
Tedder Acquisition, LLC (10) (13)August 31, 2018Manufacturer of Firearm Holsters and Accessories12.00% Secured Debt (Maturity - August 31, 2023)None4,100 4,003 4,066 
12.00% Secured Debt (Maturity - August 31, 2020)None160 158 158 
Preferred Member Units (110 units)—— 2,034 2,034 
6,195 6,258 
Trantech Radiator Topco, LLC (10) (13)August 31, 2018Transformer Cooling Products and Services12.00% Secured Debt (Maturity - May 31, 2024)None2,300 2,226 2,237 
Common Stock (154 shares) (16)—— 1,164 1,164 
3,390 3,401 
Subtotal Affiliate Investments (4) (15% of total investments at fair value)$144,006 $154,158 
Non-Control/Non-Affiliate Investments (5)
AAC Holdings Inc. (8)July 10, 2017Substance Abuse Treatment Service ProviderLIBOR Plus 11.75% (Floor 1.00%), Current Coupon 16.75%, Secured Debt (Maturity - June 30, 2023) (18)3 month LIBOR$14,449 $14,078 $9,392 
LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 13.03%, Secured Debt (Maturity - April 15, 2020)3 month LIBOR2,227 2,069 2,172 
16,147 11,564 
Adams Publishing Group, LLC (8) (11)November 19, 2015Local Newspaper OperatorLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.44%, Secured Debt (Maturity - July 3, 2023)3 month LIBOR6,158 6,064 6,158 
LIBOR Plus 7.50% (Floor 1.50%), Current Coupon 9.45%, Secured Debt (Maturity - July 3, 2023)3 month LIBOR197 184 197 
PRIME Plus 4.00% (Floor 1.50%), Current Coupon 8.75%, Secured Debt (Maturity - July 3, 2023)PRIME5,000 4,930 5,000 
11,178 11,355 
ADS Tactical, Inc. (8) (11)December 30, 2016Value-Added Logistics and Supply Chain Solutions Provider to the Defense IndustryLIBOR Plus 6.25% (Floor 0.75%), Current Coupon 8.10%, Secured Debt (Maturity - July 26, 2023)2 month LIBOR15,827 15,817 15,827 
Aethon United BR, LP (8) (11)September 8, 2017Oil & Gas Exploration & ProductionLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.46%, Secured Debt (Maturity - September 8, 2023) (14)1 month LIBOR7,000 6,918 6,846 
Allen Media, LLC (8)September 18, 2018Operator of Cable Television NetworksLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.44%, Secured Debt (Maturity - August 30, 2023)3 month LIBOR16,270 15,895 15,863 
American Nuts, LLC (8) (11)April 10, 2018Roaster, Mixer and Packager of Bulk Nuts and SeedsLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.60%, Secured Debt (Maturity - April 10, 2023)3 month LIBOR$12,241 $11,950 $12,241 
American Teleconferencing Services, Ltd. (8)May 19, 2016Provider of Audio Conferencing and Video Collaboration SolutionsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.32%, Secured Debt (Maturity - June 8, 2023)3 month LIBOR14,150 13,715 8,511 
American Trailer Rental Group LLC (10) (13)June 7, 2017Provider of Short Term Trailer and Container RentalLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.34%, Secured Debt (Maturity - June 7, 2022) (8)1 month LIBOR6,772 6,659 6,772 
Member Units (Milton Meisler Holdings, LLC) (12,139 units)—— 1,214 2,135 
7,873 8,907 
APTIM CorpAugust 17, 2018Engineering, Construction and Procurement7.75% Secured Debt (Maturity - June 15, 2025)None6,952 6,255 4,171 
Arcus Hunting, LLC (8) (11)January 6, 2015Manufacturer of Bowhunting and Archery Products and AccessoriesLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 9.10%, Secured Debt (Maturity - January 13, 2020)1 month LIBOR6,928 6,932 6,928 
ASC Ortho Management Company, LLC (11)August 31, 2018Provider of Orthopedic ServicesLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.60%, Secured Debt (Maturity - August 31, 2023) (8)3 month LIBOR4,543 4,466 4,502 
13.25% PIK Secured Debt (Maturity - December 1, 2023) (14)None1,793 1,754 1,793 
6,220 6,295 
ATI Investment Sub, Inc. (8)July 11, 2016Manufacturer of Solar Tracking SystemsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.06%, Secured Debt (Maturity - June 22, 2021)1 month LIBOR2,885 2,842 2,853 
ATX Networks Corp. (8) (9)July 15, 2015Provider of Radio Frequency Management EquipmentLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.94%, Current Coupon plus PIK 8.94%, Secured Debt (Maturity - June 11, 2021)3 month LIBOR13,638 13,520 12,786 
BarFly Ventures, LLC (11)August 31, 2015Casual Restaurant Group12.00% Secured Debt (Maturity - August 31, 2020)None3,395 3,378 2,580 
Warrants (.410 equivalent units, Expiration - August 31, 2025)—— 158 — 
Options (.99 equivalent units)—— 202 — 
3,738 2,580 
BBB Tank Services, LLC (10) (13)April 8, 2016Maintenance, Repair and Construction Services to the Above-Ground Storage Tank MarketLIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.71%, Secured Debt (Maturity - April 8, 2021) (8)1 month LIBOR1,200 1,197 1,177 
Preferred Stock (non-voting) (28,280 units) (16)—— 33 33 
Member Units (200,000 units)—— 200 73 
1,430 1,283 
Berry Aviation, Inc. (11)July 6, 2018Charter Airline Services10.50% Current / 1.50% PIK, Secured Debt (Maturity - January 6, 2024) (14)None4,548 4,494 4,548 
Preferred Member Units (Berry Acquisition, LLC) (1,548,387 units, 8.00% cumulative) (16)——1,548 776 
Preferred Member Units (Berry Acquisition, LLC) (122,416 units, 16.00% cumulative) (16)——122 125 
6,164 5,449 
BigName Commerce, LLC (8) (11)May 11, 2017Provider of Envelopes and Complimentary Stationery ProductsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.35%, Secured Debt (Maturity - May 11, 2022)3 month LIBOR2,232 2,218 2,232 
Binswanger Enterprises, LLC (11)March 10, 2017Glass Repair and Installation Service ProviderLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.41%, Secured Debt (Maturity - March 9, 2022) (8)3 month LIBOR13,635 13,345 13,635 
Member Units (1,050,000 units)—— 1,050 950 
14,395 14,585 
Bluestem Brands, Inc. (8)December 19, 2013Multi-Channel Retailer of General MerchandiseLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.30%, Secured Debt (Maturity - November 6, 2020)3 month LIBOR11,391 11,339 8,550 
Boccella Precast Products, LLC (10) (13)June 30, 2017Manufacturer of Precast Hollow Core ConcreteLIBOR Plus 10.00% (Floor 1.00%), Current Coupon 14.10%, Secured Debt (Maturity - June 30, 2022) (8)3 month LIBOR$3,311 $3,262 $3,311 
Member Units (540,000 units) (16)—— 564 1,567 
3,826 4,878 
Brightwood Capital Fund Investments (9) (15)December 31, 2014Investment PartnershipLP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.60%) (16)—— 3,815 3,018 
LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.80%) (16)—— 9,037 9,009 
12,852 12,027 
Buca C, LLC (10) (13)June 30, 2015Casual Restaurant GroupLIBOR Plus 9.25% (Floor 1.00%), Current Coupon 10.94%, Secured Debt (Maturity - June 30, 2020) (8)1 month LIBOR12,669 12,639 12,530 
Preferred Member Units (4 units, 6.00% cumulative) (16)—— 3,040 3,135 
15,679 15,665 
Cadence Aerospace, LLC (8) (11)November 14, 2017Aerospace ManufacturingLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.43%, Secured Debt (Maturity - November 14, 2023)3 month LIBOR19,272 19,135 19,273 
CAI Software, LLC (10) (13)October 10, 2014Provider of Specialized Enterprise Resource Planning Software11.00% Secured Debt (Maturity - December 7, 2023)None2,290 2,299 2,290 
Member Units (16,742 units) (16)—— 188 1,303 
2,487 3,593 
Cenveo CorporationSeptember 4, 2015Provider of Digital Marketing Agency ServicesLIBOR Plus 9.50% (Floor 1.00%), Current Coupon 11.21%, Secured Debt (Maturity - June 7, 2023) (8)3 month LIBOR4,449 4,177 4,449 
Common Stock (138,889 shares)——4,163 2,292 
8,340 6,741 
Chisholm Energy Holdings, LLC (8) (11)November 14, 2017Oil and Gas Exploration and ProductionLIBOR Plus 6.25% (Floor 1.50%), Current Coupon 8.16%, Secured Debt (Maturity - May 15, 2026) (14)3 month LIBOR3,571 3,477 3,489 
Clarius BIGS, LLC (11)September 23, 2014Prints & Advertising Film Financing15.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None2,100 1,842 29 
20.00% PIK Secured Debt (Maturity - January 5, 2015) (18)None763 670 11 
2,512 40 
Clickbooth.com, LLC (8) (11)December 5, 2017Provider of Digital Advertising Performance Marketing SolutionsLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.59%, Secured Debt (Maturity - December 5, 2022)3 month LIBOR2,663 2,625 2,663 
Construction Supply Investments, LLC (11)December 30, 2016Distribution Platform of Specialty Construction Materials to Professional Concrete and Masonry ContractorsMember units (42,207 units)—— 4,866 7,669 
CTVSH, PLLC (8) (11) (13)August 3, 2017Emergency Care and Specialty Service Animal HospitalLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.91%, Secured Debt (Maturity - August 3, 2022)1 month LIBOR2,525 2,494 2,525 
Datacom, LLC (10) (13)May 30, 2014Technology and Telecommunications Provider5.25% Current / 5.25% PIK, Current Coupon 10.50% Secured Debt (Maturity - May 31, 2021) (18)None1,376 1,315 1,116 
8.00% Secured Debt (Maturity - May 31, 2021) (18)None200 200 179 
Class A Preferred Member Units (1,530 units)—— 144 — 
Class B Preferred Member Units (717 units)—— 670 — 
2,329 1,295 
Digital River, Inc. (8)February 24, 2015Provider of Outsourced e-Commerce Solutions and ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.90%, Secured Debt (Maturity - February 12, 2021)3 month LIBOR9,759 9,725 9,734 
DTE Enterprises, LLC (11)April 13, 2018Industrial Powertrain Repair and ServicesLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.24%, Secured Debt (Maturity - April 13, 2023) (8)1 month LIBOR$10,992 $10,831 $10,992 
Class AA Preferred Member Units (non-voting) (16)—— 838 859 
Class A Preferred Member Units (776,316 units) (16)—— 776 1,490 
12,445 13,341 
Dynamic Communities, LLC (8) (11)July 17, 2018Developer of Business Events and Online Community GroupsLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.71%, Secured Debt (Maturity - July 17, 2023)3 month LIBOR5,425 5,341 5,425 
Epic Y-Grade Services, LP (8)June 25, 2018NGL Transportation & StorageLIBOR Plus 6.00% (Floor 0.00%), Current Coupon 8.04%, Secured Debt (Maturity - June 13, 2024)3 month LIBOR10,275 10,115 10,050 
Evergreen Skills Lux S.á r.l.
(d/b/a Skillsoft) (8) (9)		April 10, 2015Technology-Based Performance Support SolutionsLIBOR Plus 8.25% (Floor 1.00%), Current Coupon 10.45%, Secured Debt (Maturity - April 28, 2022) (14)6 month LIBOR10,901 10,669 3,060 
Felix Investments Holdings II, LLC (8) (11)August 9, 2017Oil and Gas Exploration and ProductionLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.40%, Secured Debt (Maturity - August 9, 2022)1 month LIBOR5,000 4,937 5,000 
Flavors Holdings, Inc. (8)October 14,2014Global Provider of Flavoring and Sweetening Products and SolutionsLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.69%, Secured Debt (Maturity - April 3, 2020)3 month LIBOR10,719 10,667 10,076 
GoWireless Holdings, Inc. (8)January 10, 2018Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.30%, Secured Debt (Maturity - December 22, 2024)3 month LIBOR14,910 14,803 14,377 
HDC/HW Intermediate Holdings, LLC (8) (11)December 21, 2018Managed Services and Hosting ProviderLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.45%, Secured Debt (Maturity - December 21, 2023)3 month LIBOR1,961 1,928 1,958 
Hoover Group, Inc. (8) (9) (11)October 21, 2016Provider of Storage Tanks and Related Products to the Energy and Petrochemical MarketsLIBOR Plus 7.25% (Floor 1.00%), Current Coupon 9.16%, Secured Debt (Maturity - January 28, 2021)3 month LIBOR22,045 21,529 20,391 
Hunter Defense Technologies, Inc. (8) (11)March 29, 2018Provider of Military and Commercial Shelters and SystemsLIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.94%, Secured Debt (Maturity - March 29, 2023)3 month LIBOR15,944 15,676 15,944 
HW Temps, LLC (10) (13)July 2, 2015Temporary Staffing Solutions8.00% Secured Debt (Maturity - March 29, 2023)None2,545 2,498 2,230 
Hydrofarm Holdings, LLC (8) (11)May 18, 2017Wholesaler of Horticultural ProductsLIBOR Plus 10.00%, Current Coupon 3.54% / 8.26% PIK, Current Coupon Plus PIK 11.80%, Secured Debt (Maturity - May 12, 2022)1 month LIBOR7,658 7,573 6,410 
Hyperion Materials & Technologies, Inc. (8)September 12, 2019Manufacturer of Cutting and Machine Tools and Specialty Polishing CompoundsLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity - August 28, 2026)1 month LIBOR7,500 7,355 7,425 
iEnergizer Limited (8) (9) (11)May 8, 2013Provider of Business Outsourcing SolutionsLIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.79%, Secured Debt (Maturity - April 17, 2024)1 month LIBOR12,963 12,848 12,963 
Implus Footcare, LLC (8) (11)June 1, 2017Provider of Footwear and Related AccessoriesLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.19%, Secured Debt (Maturity - April 30, 2024)3 month LIBOR16,977 16,644 16,655 
Independent Pet Partners Intermediate Holdings, LLC (11)November 20, 2018Omnichannel Retailer of Specialty Pet ProductsLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.89%, Secured Debt (Maturity - November 19, 2023) (8)3 month LIBOR14,376 14,120 14,376 
Member Units (1,191,667 units)—— 1,192 964 
15,312 15,340 
Industrial Services Acquisitions, LLC (11)June 17, 2016Industrial Cleaning Services6.00% Current / 7.00% PIK, Current Coupon 13.00%, Unsecured Debt (Maturity - December 17, 2022) (17)None12,014 11,990 12,014 
Member Units (Industrial Services Investments, LLC) (336 units; 10.00% cumulative)—— 202 202 
Preferred Member Units (Industrial Services Investments, LLC) (187 units; 20.00% cumulative)—— 124 124 
Member Units (Industrial Services Investments, LLC) (2,100 units)—— 2,100 1,191 
14,416 13,531 
Interface Security Systems, L.L.C. (8) (11)May 18, 2017Commercial Security and Alarm ServicesLIBOR Plus 7.00% (Floor 1.75%), Current Coupon 8.80%, Secured Debt (Maturity - August 7, 2023)1 month LIBOR7,500 7,363 7,363 
Intermedia Holdings, Inc. (8)August 13, 2018Unified Communications as a ServiceLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.80%, Secured Debt (Maturity - July 19, 2025)1 month LIBOR$3,516 $3,487 $3,525 
Invincible Boat Company, LLC (8) (11)May 18, 2017Manufacturer of Sport Fishing BoatsLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.45%, Secured Debt (Maturity - August 28, 2025)3 month LIBOR9,873 9,773 9,773 
Isagenix International, LLC (8)July 5, 2018Direct Marketer of Health and Wellness ProductsLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.70%, Secured Debt (Maturity - June 14, 2025)3 month LIBOR5,943 5,893 4,273 
JAB Wireless, Inc. (8) (11)May 2, 2018Fixed Wireless Broadband ProviderLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.74%, Secured Debt (Maturity - May 2, 2023)3 month LIBOR14,775 14,668 14,775 
Jackmont Hospitality, Inc. (8) (11)May 26, 2015Franchisee of Casual Dining RestaurantsLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.45%, Secured Debt (Maturity - May 26, 2021)1 month LIBOR8,119 8,111 8,119 
Joerns Healthcare, LLC (8)April 3, 2013Manufacturer and Distributor of Health Care Equipment & SuppliesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.91%, Secured Debt (Maturity - August 21, 2024)3 month LIBOR3,335 3,276 3,276 
Common Stock (472,579 shares)—— 3,678 3,678 
6,954 6,954 
Kemp Technologies, Inc. (8) (11)May 26, 2015Provider of Application Delivery ControllersLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.17%, Secured Debt (Maturity - March 29, 2024)1 month LIBOR7,463 7,326 7,463 
Knight Energy Services LLC (11)November 14, 2018Oil and Gas Equipment & Services8.50% PIK Secured Debt (Maturity - February 9, 2024)None828 828 828 
Class A-2 Shares (25,692 units)—— 1,843 1,843 
2,671 2,671 
Kore Wireless Group, Inc. (8)May 17, 2017Mission Critical Software PlatformLIBOR Plus 5.50% (Floor 1.00%) PIK, 7.44%, Secured Debt (Maturity - December 20, 2024)3 month LIBOR6,061 6,036 6,023 
Larchmont Resources, LLC (9)October 15, 2013Oil & Gas Exploration & ProductionLIBOR Plus 7.00% (Floor 1.00%) PIK, 8.89% PIK, Secured Debt (Maturity - August 7, 2020) (8)3 month LIBOR3,614 3,638 3,352 
Member units (Larchmont Intermediate Holdco, LLC) (4,806 units)—— 601 1,201 
4,239 4,553 
Laredo Energy VI, LP (8) (11)January 15, 2019Oil & Gas Exploration & ProductionLIBOR Plus 9.63% (Floor 2.00%), Current Coupon 5.38% / 6.26% PIK, Current Coupon PIK 11.64%, Secured Debt (Maturity - November 19, 2021)3 month LIBOR11,228 11,093 10,554 
Lightbox Holdings, L.P. (8)May 17, 2017Provider of Commercial Real Estate SoftwareLIBOR Plus 5.00% (Floor 0.00%), Current Coupon 6.74%, Secured Debt (Maturity - May 9, 2026)1 month LIBOR4,975 4,904 4,913 
LL Management, Inc. (8) (11)May 17, 2017Medical Transportation Service ProviderLIBOR Plus 6.50% (Floor 1.00%), Current Coupon 8.56%, Secured Debt (Maturity - September 25, 2023)3 month LIBOR13,719 13,590 13,719 
Logix Acquisition Company, LLC (8) (11)June 24, 2016Competitive Local Exchange CarrierLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.55%, Secured Debt (Maturity - December 22, 2024) (23)1 month LIBOR12,756 12,682 12,628 
LSF9 Atlantis Holdings, LLC (8)May 17, 2017Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.74%, Secured Debt (Maturity - May 1, 2023)1 month LIBOR13,124 13,059 12,157 
Lulu’s Fashion Lounge, LLC (8) (11)September 8, 2017Fast Fashion E-Commerce RetailerLIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.80%, Secured Debt (Maturity - August 28, 2022)1 month LIBOR5,668 5,533 5,554 
Lynx FBO Operating LLC (11)March 10, 2017Fixed Based Operator in the General Aviation IndustryLIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.86%, Secured Debt (Maturity - September 30, 2024) (8)3 month LIBOR13,750 13,451 13,487 
Member Units (3,704 units)—— 500 500 
13,951 13,987 
Mac Lean-Fogg Company (11)July 6, 2018Manufacturer and Supplier for Auto and Power MarketsLIBOR Plus 5.00% (Floor 0.00%), Current Coupon 6.80%, Secured Debt (Maturity - December 22, 2028) (8)1 month LIBOR7,135 7,083 7,135 
Preferred Stock (650 shares; 4.50% Cash / 9.25% PIK, cumulative) (16)—— 771 771 
7,854 7,906 
Mariner CLO 7, Ltd. (9) (15)May 8, 2019Structured FinanceSubordinated Structured Notes (estimated yield of 8.30% due April 30, 2032)—25,935 22,810 19,028 
Mills Fleet Farm Group LLC (8) (11)October 24, 2018Omnichannel Retailer of Work, Farm and Lifestyle MerchandiseLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.29% / 0.75% PIK, Current Coupon Plus PIK 9.04%, Secured Debt (Maturity - October 24, 2024)3 month LIBOR$14,883 $14,556 $14,184 
NinjaTrader, LLC (8) (11)June 10, 2014Operator of Futures Trading PlatformLIBOR Plus 6.00% (Floor 1.50%), Current Coupon 9.04%, Secured Debt (Maturity - December 18, 2024)1 month LIBOR9,675 9,490 9,490 
NNE Partners, LLC (8) (11)March 2, 2017Oil & Gas Exploration & ProductionLIBOR Plus 8.00%, (Floor 0.00%), Current Coupon 9.91%, Secured Debt (Maturity - March 2, 2022)3 month LIBOR20,417 20,320 20,172 
North American Lifting Holdings, Inc. (8)February 26, 2015Crane Service ProviderLIBOR Plus 4.50% (Floor 1.00%), Current Coupon 6.44%, Secured Debt (Maturity - November 27, 2020)3 month LIBOR6,179 5,959 5,228 
Novetta Solutions, LLC (8)July 26, 2017Provider of Advanced Analytics Solutions for Defense AgenciesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.80%, Secured Debt (Maturity - October 17, 2022)1 month LIBOR14,823 14,573 14,604 
NTM Acquisition Corp. (8)July 12, 2016Provider of B2B Travel Information ContentLIBOR Plus 6.25% (Floor 1.00%), Current Coupon 8.05%, Secured Debt (Maturity - June 7, 2022)1 month LIBOR4,518 4,490 4,518 
Pasha Group (8)February 2, 2018Diversified Logistics and Transportation ProvidedLIBOR Plus 7.50% (Floor 1.00%), Current Coupon 9.35%, Secured Debt (Maturity - January 26, 2023)2 month LIBOR8,984 8,781 9,074 
Permian Holdco 2, Inc.October 31, 2016Storage Tank Manufacturer14.00% PIK Unsecured Debt (Maturity - October 15, 2021) (17)None1,138 1,138 851 
18.00% PIK Unsecured Debt (Maturity - June 30, 2022) (17)None794 794 794 
Series A Preferred Shares (Permian Holdco 1, Inc.) (386,255 shares)—— 1,997 250 
Common Shares (Permian Holdco 1, Inc.) (386,255 shares)—— — — 
3,929 1,895 
PricewaterhouseCoopers Public Sector LLP (8)June 4, 2018Provider of Consulting Services to GovernmentsLIBOR Plus 8.00% (Floor 0.00%), Current Coupon 9.80%, Secured Debt (Maturity - May 1, 2026) (14)1 month LIBOR14,100 14,057 13,889 
RM Bidder, LLC (11)November 12, 2015Scripted and Unscripted TV and Digital Programming ProviderCommon Stock (1,854 shares)—— 31 12 
Series A Warrants (124,915 equivalent units, Expiration - October 20, 2025)—— 284 — 
Series B Warrants (93,686 equivalent units, Expiration - October 20, 2025)—— — — 
315 12 
Salient Partners, LP (8) (11)June 25, 2015Provider of Asset Management ServicesLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.80%, Secured Debt (Maturity - June 9, 2021)1 month LIBOR6,450 6,511 6,450 
Slick Software Holdings LLC (10) (13)September 13, 2018Text Messaging Marketing Platform14.00% Secured Debt (Maturity - September 13, 2023)None1,590 1,336 1,336 
Member units (17,500 units) (16)—— 175 270 
Warrants (4,521 equivalent units, Expiration - September 13, 2028)—— 45 73 
1,556 1,679 
Smart Modular Technologies, Inc. (8) (9) (11)August 18, 2017Provider of Specialty Memory SolutionsLIBOR Plus 6.25%, (Floor 1.00%), Current Coupon 8.16%, Secured Debt (Maturity - August 9, 2022)3 month LIBOR18,484 18,340 18,669 
TEAM Public Choices, LLC (8) (11)August 18, 2017Home-Based Care Employment Service ProviderLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.80%, Secured Debt (Maturity - September 20, 2024)1 month LIBOR9,626 9,530 9,529 
TE Holdings, LLCJuly 14, 2014Oil & Gas Exploration & ProductionCommon Units (72,785 units)—— 728 — 
TGP Holdings III LLC (8)October 25, 2018Outdoor Cooking & AccessoriesLIBOR Plus 8.50% (Floor 1.00%), Current Coupon 10.30%, Secured Debt (Maturity - September 25, 2025) (14)1 month LIBOR5,000 5,000 4,675 
TMC Merger Sub Corp (8)December 22, 2016Refractory & Maintenance Services ProviderLIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.56%, Secured Debt (Maturity - October 31, 2022) (25)1 month LIBOR16,835 16,691 16,689 
TOMS Shoes, LLCNovember 13, 2014Global Designer, Distributor, and Retailer of Casual FootwearLIBOR Plus 5.50% (Floor 1.00%), Current Coupon 7.46%, Secured Debt (Maturity - October 30, 2020)3 month LIBOR$571 $571 $571 
LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.96%, Secured Debt (Maturity - December 31, 2025) (8) (14)3 month LIBOR1,637 1,637 1,637 
Member Units (13,866 units)—— 220 220 
2,428 2,428 
USA DeBusk LLC (8) (11)August 18, 2017Provider of Industrial Cleaning ServicesLIBOR Plus 5.75%, (Floor 1.00%), Current Coupon 7.54%, Secured Debt (Maturity - October 22, 2024)1 month LIBOR20,000 19,615 19,615 
U.S. Telepacific Corp. (8)September 14, 2016Provider of Communications and Managed ServicesLIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.94%, Secured Debt (Maturity - May 2, 2023)3 month LIBOR12,500 12,297 12,032 
Vida Capital, Inc. (8)March 9, 2017Alternative Asset ManagerLIBOR Plus 6.00% (Floor 0.00%), Current Coupon 7.93%, Secured Debt (Maturity - October 1, 2026)3 month LIBOR7,500 7,391 7,425 
VIP Cinema Holdings, Inc. (8)March 9, 2017Supplier of Luxury Seating to the Cinema IndustryLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.91%, Secured Debt (Maturity - March 1, 2023) (18)3 month LIBOR8,750 8,724 4,611 
Vistar Media, Inc. (11)February 17, 2017Operator of Digital Out-of-Home Advertising PlatformLIBOR Plus 8.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity - April 3, 2023) (8)3 month LIBOR4,963 4,790 4,963 
Warrants (69,675 equivalent units, Expiration - April 3, 2029)—— — 1,630 
Preferred Stock (70,207 shares)—— 767 1,610 
5,557 8,203 
Volusion, LLC (10) (13)January 26, 2015Provider of Online Software-as-a-Service eCommerce Solutions11.50% Secured Debt (Maturity - January 24, 2020)None8,672 8,611 8,290 
8.00% Unsecured Convertible Debt (Maturity - November 16, 2023)None175 175 124 
Preferred Member Units (2,090,001 units)—— 6,000 6,000 
Warrants (784,866.80 equivalent units, Expiration - January 26, 2025)—— 1,104 64 
15,890 14,478 
Wireless Vision Holdings, LLC (8) (11)September 29, 2017Provider of Wireless Telecommunications Carrier ServicesLIBOR Plus 9.65% (Floor 1.00%), Current Coupon 11.66% / 1.00% PIK, Current Coupon Plus PIK 12.66%, Secured Debt (Maturity - September 29, 2022) (23)1 month LIBOR7,148 7,023 7,148 
LIBOR Plus 9.91% (Floor 1.00%), Current Coupon 11.61% / 1.00% PIK, Current Coupon Plus PIK 12.61%, Secured Debt (Maturity - September 29, 2022) (23)1 month LIBOR6,213 6,029 6,213 
13,052 13,361 
YS Garments, LLC (8)August 20, 2018Designer and Provider of Branded ActivewearLIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.62%, Secured Debt (Maturity - August 9, 2024)1 month LIBOR7,266 7,206 7,201 
Subtotal Non-Control/Non-Affiliate Investments (5) (82% of total portfolio investments at fair value)$878,632 $838,643 
Total Portfolio Investments$1,040,055 $1,027,597 
Short Term Investments (20)
Fidelity Institutional Money Market Funds (21)—Prime Money Market Portfolio, Class III Shares—— $3,482 $3,482 
US Bank Money Market Account (21)———— 15,973 15,973 
Total Short Term Investments$19,455 $19,455 
(1) All investments are Middle Market portfolio investments, unless otherwise noted. All

Table of the assets of the Company 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. Fair value as of December 31, 2018 and December 31, 2019 along with transactions during the year ended December 31, 2019 in these affiliated investments were as follows (in thousands):
Twelve Months Ended December 31, 2019Twelve Months Ended December 31, 2019
Affiliate InvestmentsFair Value at December 31, 2018
Gross Additions (Cost)*
Gross Reductions (Cost)**
Net Unrealized Gain (Loss)***
Fair Value at December 31, 2019Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
AFG Capital Group, LLC
Term loan$— $260 $(51)$— $209 $— $16 $— $— 
Member units995 1 — 299 1,295 — — — (10)
Warrants237 195 (260)(172)— 195 — — — 
Analytical Systems Keco, LLC
Term loan— 1,403 (143)6 1,266 — 69 — — 
Preferred member units— 800 — — 800 — — — — 
Warrants— 79 — — 79 — — — — 
Brewer Crane Holdings, LLC
Term loan2,347 10 (124)— 2,233 — 297 — — 
Preferred member units1,070 — — — 1,070 — — — 30 
Centre Technologies Holdings, LLC
Term loan— 3,069 (67)6 3,008 — 362 30 — 
Preferred member units— 1,460 — — 1,460 — — — — 
Chamberlin Holding, LLC
Term loan4,933 28 (608)90 4,443 — 633 75 — 
Member units4,735 — — 1,274 6,009 — — — 276 
Member units (Langfield RE, LLC)183 79 — 101 363 — — — 90 
Charlotte Russe, Inc.
Common stock3,090 — (6,236)3,146 — (5,430)(84)— — 
Charps, LLC
Term loan2,975 452 (3,374)(53)— — 236 — — 
Term loan— 500 — — 500 — 4 2 — 
Preferred member units568 — — 1,162 1,730 — — — 134 
Clad-Rex Steel, LLC
Term loan3,020 14 (300)(38)2,696 — 348 — — 
Member units2,653 — — (245)2,408 — 1 — 67 
Term loan (Clad-Rex Steel RE Investor, LLC)288 — (5)(1)282 — 29 — — 
Member units (Clad-Rex Steel RE Investor, LLC)88 — — 27 115 — — — — 
Copper Trail Energy Fund I, LP
LP Interests— 4,029 (1,916)(470)1,643 — — 17 (250)
Digital Products Holdings, LLC
Term loan6,320 42 (1,530)(221)4,611 — 756 — — 
Preferred member units2,116 259 — (1,081)1,294 — — — 37 
Direct Marketing Solutions, Inc.
Term loan4,404 29 (574)70 3,929 — 612 — — 
Preferred stock3,725 — — 1,326 5,051 — — — — 
Freeport Financial Funds
LP interests10,980 798 (1,998)(84)9,696 — — — 1,033 
Gamber-Johnson Holdings, LLC
Term loan5,371 23 (616)(23)4,755 — 503 — — 
Member units11,365 — — 1,987 13,352 — — — 930 
Guerdon Modular Holdings, Inc.
Term loan3,001 11 (19)(2,993)— — (252)— — 
Term loan— 252 — (252)— — 2 3 — 
Common stock— — — — — — — — — 
Class B preferred stock— — — — — — — — — 
Gulf Publishing Holdings, LLC
Term loan3,131 14 (33)12 3,124 — 412 — — 
Revolving line of credit— 80 (10)— 70 — 6 — — 
Member units1,030 1 — (426)605 — — — — 
Harris Preston Fund Investments
LP interests (HPEP 3, LP)1,733 741 — — 2,474 — — — — 
LP interests (2717 HM, LP)1,133 1,195 (2,328)— — — — — — 
Hawk Ridge Systems, LLC
Term loan$3,575 $17 $(225)$(17)$3,350 $— $379 $— $— 
Revolving line of credit— 151 (3)— 148 — 1 — — 
Preferred member units1,815 — — 160 1,975 — — — 94 
Preferred member units (HRS Services, ULC)95 — — 10 105 — — — — 
HW Temps, LLC
Term loan2,484 391 (2,875)— — — — — — 
Preferred member units986 — (986)— — — — — — 
J & J Services, Inc.
Term loan— 4,403 (88)— 4,315 — 90 — — 
Preferred member units— 1,790 — — 1,790 — — — — 
Kickhaefer Manufacturer Company, LLC
Term loan6,795 51 (700)— 6,146 — 846 — — 
Term loan259 3 (266)4 — — 5 — — 
Term loan991 — (14)— 977 — 90 — — 
Preferred member units3,060 — — — 3,060 — — — 27 
Member units (KMC RE Investor, LLC)248 — — 42 290 — — — — 
Market Force Information, Inc.
Term loan5,617 115 (1)(106)5,625 — 787 — — 
Revolving line of credit50 696 (50)(22)674 — 33 — — 
Member units3,275 485 — (2,441)1,319 — — — — 
M.H. Corbin Holding, LLC
Term loan2,934 272 (1,115)122 2,213 10 291 — — 
Preferred member units250 — — (245)5 — — — — 
Common units— 1,100 — 92 1,192 — — — — 
Mystic Logistics Holdings, LLC
Term loan1,877 10 (320)(6)1,561 — 222 — — 
Common stock52 1 — 2,050 2,103 — — — 67 
NexRev, LLC
Term loan4,322 218 (161)(48)4,331 — 506 — — 
Preferred member units1,972 — — (395)1,577 — — — 49 
NuStep, LLC
Term loan5,073 28 (200)— 4,901 — 655 — — 
Preferred member units2,550 — — — 2,550 — — — — 
SI East, LLC
Term loan11,582 41 (762)127 10,988 — 1,227 — — 
Preferred member units2,000 — — 734 2,734 — — — 153 
SoftTouch Medical Holdings, LLC
Term loan— — — — — (41)— — — 
Tedder Acquisition, LLC
Term loan3,983 20 (1)64 4,066 — 518 — — 
Revolving line of credit118 300 (260)— 158 — 16 1 — 
Preferred member units1,869 165 — — 2,034 — — — — 
Trantech Radiator Topco, LLC
Term loan— 2,616 (378)(1)2,237 — 195 — — 
Common stock— 1,164 — — 1,164 — — — 17 
Total Affiliate Investments$149,323 $29,861 $(28,597)$3,571 $154,158 $(5,266)$9,811 $128 $2,744 
* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.
*** Net unrealized gain (loss) does not included unrealized appreciation (depreciation) on unfunded commitments.
(5) Non-Control/Non-Affiliate investments are generally investments that are neither Control investments nor Affiliate investments.
(6) Control investments are defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or where the ability to nominate greater than 50% of the board representation is maintained. Fair value as of December 31, 2018 and December 31, 2019 along with transactions during the year ended December 31, 2019 in these Control investments were as follows (in thousands):
Twelve Months Ended December 31, 2019Twelve Months Ended December 31, 2019
Control InvestmentsFair Value at December 31, 2018
Gross Additions (Cost)**
Gross Reductions (Cost)***
Net Unrealized Gain (Loss)Fair Value at December 31, 2019Net Realized Gain (Loss)Interest IncomeFee IncomeDividend Income
Copper Trail Energy Fund I, LP
LP interests$4,468 $23 $(4,491)$— $— $— $— $— $— 
CTMH, LP
LP interests872 — — — 872 — — — — 
GRT Rubber Technologies, LLC
Term loan4,797 2,603 — (4)7,396 — 596 — — 
Member units19,239 — — 4,133 23,372 — — 71 5,439 
Harris Preston Fund Investments
LP Interests (2717 HM, LP)— 3,328 (497)325 3,156 — — — — 
HMS-ORIX SLF LLC*
Membership interests26,351 — (30,001)3,650 — (633)— — 546 
Total Control Investments$55,727 $5,954 $(34,989)$8,104 $34,796 $(633)$596 $71 $5,985 
* Together with Orix, the Company previously co-invested through HMS-ORIX SLF LLC (“HMS-ORIX”), which was 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 had 50% voting control of HMS-ORIX and together agreed on all portfolio and investment decisions as well as all other significant actions for HMS-ORIX. Although the Company owned more than 25% of the voting securities of HMS-ORIX, the Company did not have sole control over significant actions of HMS-ORIX for purposes of the 1940 Act or otherwise. HMS-ORIX was fully liquidated on September 26, 2019.
** Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
*** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more new securities and the movement of an existing portfolio company out of this category into a different category.
(7) Principal is net of repayments. Cost represents amortized cost which is net of repayments and adjusted for the amortization of premiums and/or accretion of discounts, as applicable.
(8) Index based floating interest rate is subject to contractual minimum interest rates, or floors.
(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, 2019, approximately 12.2% of the Company’s investments were considered non-qualifying.
(10) Investment is classified as a Lower Middle Market investment.
(11) Investment is classified as a Private Loan portfolio investment.
(12) Investment or portion of investment is under contract to purchase and met trade date accounting criteria as of December 31, 2019. Settlement occurred or is scheduled to occur after December 31, 2019. 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)Contents

MSC Income producing through dividends or distributions.

(17) Unsecured debt investment.
(18) Investment is on non-accrual status as of December 31, 2019.
(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, 2019 was approximately 0.15% at US Bank Money Market Account and 1.24% at Fidelity Institutional Money Market Funds.
(22) The 1, 2, 3 and 6 month LIBOR rates were 1.76%, 1.83%, 1.91% and 1.91%, respectively, as of December 31, 2019. The actual LIBOR rate for each loan listed may not be the applicable LIBOR rate as of December 31, 2019, as the loan may have been priced or repriced based on a LIBOR rate prior to or subsequent to December 31, 2019. The prime rate was 4.75% as of December 31, 2019.
(23) The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the credit agreement and the Condensed Fund, Inc.

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

June 30, 2021

(dollars in thousands)

​

(unaudited)

​

​

(24) [Reserved]
(25) The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche

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​

​

​

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​

​

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)

J&J Services, Inc.

​

October 31, 2019

Provider of Dumpster and Portable Toilet Rental Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

11.50%

10/31/2024

​

3,000

​

2,958

​

3,000

​

​

​

​

Preferred Stock

​

703

​

​

​

​

​

1,771

​

3,260

​

​

​

​

​

​

​

​

​

​

​

​

4,729

​

6,260

Kickhaefer Manufacturing Company, LLC

​

October 31, 2018

Precision Metal Parts Manufacturing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

11.50%

10/31/2023

​

5,304

​

5,221

​

5,221

​

​

​

​

Member Units

​

145

​

​

​

​

​

3,060

​

3,060

​

​

​

​

Secured Debt

​

​

9.00%

10/31/2048

​

984

​

974

​

974

​

​

​

​

Member Units

(8) (30)

200

​

​

​

​

​

248

​

302

​

​

​

​

​

​

​

​

​

​

​

​

9,503

​

9,557

Market Force Information, LLC

​

July 28, 2017

Provider of Customer Experience Management Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(14) (19)

​

12.00% PIK

7/28/2023

​

6,520

​

6,463

​

3,317

​

​

​

​

Member Units

​

185,980

​

​

​

​

​

4,160

​

-

​

​

​

​

​

​

​

​

​

​

​

​

10,623

​

3,317

MH Corbin Holding LLC

​

August 31, 2015

Manufacturer and Distributor of Traffic Safety Products

​

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​

​

​

Secured Debt

(19)

​

13.00% (10.00% Cash, 3.00% PIK)

3/31/2022

​

2,103

​

2,096

​

1,904

​

​

​

​

Preferred Member Units

​

16,500

​

​

​

​

​

1,100

​

-

​

​

​

​

Preferred Member Units

​

1,000

​

​

​

​

​

1,500

​

-

​

​

​

​

​

​

​

​

​

​

​

​

4,696

​

1,904

Mystic Logistics Holdings, LLC

​

August 18, 2014

Logistics and Distribution Services Provider for Large Volume Mailers

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

12.00%

1/17/2022

​

1,677

​

1,677

​

1,676

​

​

​

​

Common Stock

(8)

1,468

​

​

​

​

​

680

​

1,480

​

​

​

​

​

​

​

​

​

​

​

​

2,357

​

3,156

NexRev LLC

​

February 28, 2018

Provider of Energy Efficiency Products & Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

11.00%

2/28/2023

​

4,165

​

4,132

​

4,121

​

​

​

​

Preferred Member Units

(8)

21,600,000

​

​

​

​

​

1,720

​

820

​

​

​

​

​

​

​

​

​

​

​

​

5,852

​

4,941

NuStep, LLC

​

January 31, 2017

Designer, Manufacturer and Distributor of Fitness Equipment

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

11.00%

1/31/2022

​

4,310

​

4,298

​

4,310

​

​

​

​

Preferred Member Units

​

102

​

​

​

​

​

2,550

​

3,090

​

​

​

​

​

​

​

​

​

​

​

​

6,848

​

7,400

8

Table of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the credit agreement and the Condensed Contents

MSC Income Fund, Inc.

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

June 30, 2021

(dollars in thousands)

​

(unaudited)

​

​

(26) The fair value

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

SI East, LLC

​

August 31, 2018

Rigid Industrial Packaging Manufacturing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

8.75%

8/31/2023

​

9,725

​

9,668

​

9,724

​

​

​

​

Preferred Member Units

(8)

52

​

​

​

​

​

2,000

​

5,010

​

​

​

​

​

​

​

​

​

​

​

​

11,668

​

14,734

Tedder Industries, LLC

​

August 31, 2018

Manufacturer of Firearm Holsters and Accessories

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

12.00%

8/31/2023

​

3,840

​

3,781

​

3,783

​

​

​

​

Preferred Member Units

​

120

​

​

​

​

​

2,034

​

2,034

​

​

​

​

​

​

​

​

​

​

​

​

5,815

​

5,817

Trantech Radiator Topco, LLC

​

May 31, 2019

Transformer Cooling Products and Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

12.00%

5/31/2024

​

2,180

​

2,130

​

2,130

​

​

​

​

Common Stock

(8)

154

​

​

​

​

​

1,164

​

1,500

​

​

​

​

​

​

​

​

​

​

​

​

3,294

​

3,630

Subtotal Affiliate Investments (28.4% of net assets at fair value)

​

​

​

​

​

​

​

​

​

​

$

150,164

$

170,144

Non-Control Investments (7)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AAC Holdings, Inc.

(11)

June 30, 2017

Substance Abuse Treatment Service Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(19)

​

18.00% (10.00% Cash, 8.00% PIK)

6/25/2025

​

3,491

​

3,164

​

3,387

​

​

​

​

Common Stock

​

593,927

​

​

​

​

​

3,148

​

2,079

​

​

​

​

Warrants

(27)

197,717

​

12/11/2025

​

​

​

-

​

692

​

​

​

​

​

​

​

​

​

​

​

​

6,312

​

6,158

Adams Publishing Group, LLC

(10)

November 19, 2015

Local Newspaper Operator

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

7/3/2023

​

5,139

​

5,048

​

5,099

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ADS Tactical, Inc.

(11)

March 7, 2017

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/19/2026

​

18,990

​

18,622

​

19,133

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

American Nuts, LLC

(10)

April 10, 2018

Roaster, Mixer and Packager of Bulk Nuts and Seeds

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/10/2023

​

12,073

​

11,904

​

12,073

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

American Teleconferencing Services, Ltd.

(11)

May 19, 2016

Provider of Audio Conferencing and Video Collaboration Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (14)

​

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

6/8/2023

​

14,118

​

13,826

​

6,194

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

9

Table of the investment was determined using significant unobservable inputs. See Note 3 — Fair Value Hierarchy for Investments.

(27) Investment date represents the date of initial investment in the portfolio company.


See notes to the condensed consolidated financial statements.

HMSContents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

Arcus Hunting LLC

(10)

January 6, 2015

Manufacturer of Bowhunting and Archery Products and Accessories

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/31/2022

​

6,295

​

6,266

​

6,295

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ASC Ortho Management Company, LLC

(10)

August 31, 2018

Provider of Orthopedic Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/31/2023

​

5,140

​

5,095

​

5,133

​

​

​

​

Secured Debt

(19)

​

13.25% PIK

12/1/2023

​

2,186

​

2,156

​

2,186

​

​

​

​

​

​

​

​

​

​

​

​

7,251

​

7,319

ATX Networks Corp.

(11) (13) (21)

June 30, 2015

Provider of Radio Frequency Management Equipment

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

12/31/2023

​

13,346

​

13,266

​

12,212

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

BBB Tank Services, LLC

​

April 8, 2016

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unsecured Debt

(9) (17)

​

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

4/8/2021

​

1,200

​

1,200

​

1,187

​

​

​

​

Preferred Stock (non-voting)

(8) (19)

​

15.00% PIK

​

​

​

​

41

​

-

​

​

​

​

Member Units

​

200,000

​

​

​

​

​

200

​

-

​

​

​

​

​

​

​

​

​

​

​

​

1,441

​

1,187

Berry Aviation, Inc.

(10)

July 6, 2018

Charter Airline Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(19)

​

12.00% (10.50% Cash, 1.5% PIK)

1/6/2024

​

4,653

​

4,616

​

4,653

​

​

​

​

Preferred Member Units

(8) (19) (30)

122,416

16.00% PIK

​

​

​

​

156

​

156

​

​

​

​

Preferred Member Units

(19) (30)

1,548,387

8.00% PIK

​

​

​

​

1,671

​

1,777

​

​

​

​

​

​

​

​

​

​

​

​

6,443

​

6,586

BigName Commerce, LLC

(10)

May 11, 2017

Provider of Envelopes and Complimentary Stationery Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/11/2022

​

1,938

​

1,934

​

1,938

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Binswanger Enterprises, LLC

(10)

March 10, 2017

Glass Repair and Installation Service Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/9/2022

​

12,387

​

12,298

​

12,387

​

​

​

​

Member Units

​

1,050,000

​

​

​

​

​

1,050

​

730

​

​

​

​

​

​

​

​

​

​

​

​

13,348

​

13,117

10

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

Bluestem Brands, Inc.

(11)

December 19, 2013

Multi-Channel Retailer of General Merchandise

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/28/2025

​

6,304

​

6,304

​

6,272

​

​

​

​

Common Stock

(8)

700,446

​

​

​

​

​

-

​

911

​

​

​

​

​

​

​

​

​

​

​

​

6,304

​

7,183

Boccella Precast Products LLC

​

June 30, 2017

Manufacturer of Precast Hollow Core Concrete

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Member Units

(8)

540,000

​

​

​

​

​

564

​

1,238

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Brightwood Capital Fund Investments

(12) (13)

July 21, 2014

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (Brightwood Capital Fund III, LP)

(8) (31)

1.2%

​

​

​

​

​

2,775

​

1,673

​

​

​

​

LP Interests (Brightwood Capital Fund IV, LP)

(8) (31)

0.5%

​

​

​

​

​

8,737

​

8,700

​

​

​

​

​

​

​

​

​

​

​

​

11,512

​

10,373

Buca C, LLC

​

June 30, 2015

Casual Restaurant Group

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (17)

​

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

6/30/2020

​

13,164

​

13,164

​

9,705

​

​

​

​

Preferred Member Units

(19)

4

6.00% PIK

​

​

​

​

3,040

​

-

​

​

​

​

​

​

​

​

​

​

​

​

16,204

​

9,705

Burning Glass Intermediate Holding Company, Inc.

(10)

June 14, 2021

Provider of Skills-Based Labor Market Analytics

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/10/2028

​

11,262

​

11,012

​

11,012

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cadence Aerospace LLC

(10)

November 14, 2017

Aerostructure Manufacturing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

11/14/2023

​

20,168

​

20,042

​

18,887

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CAI Software LLC

​

October 10, 2014

Provider of Specialized Enterprise Resource Planning Software

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

12.50%

12/7/2023

​

7,751

​

7,762

​

7,751

​

​

​

​

Member Units

(8)

16,742

​

​

​

​

​

-

​

2,550

​

​

​

​

​

​

​

​

​

​

​

​

7,762

​

10,301

Camin Cargo Control, Inc.

(11)

June 14, 2021

Provider of Mission Critical Inspection, Testing and Fuel Treatment Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/4/2026

​

8,000

​

7,921

​

7,960

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cenveo Corporation

(11)

September 4, 2015

Provider of Digital Marketing Agency Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Common Stock

​

253,194

​

​

​

​

​

4,848

​

1,804

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

11

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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

(9)

​

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

5/15/2026

​

2,857

​

2,813

​

2,658

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Clarius BIGS, LLC

(10)

September 23, 2014

Prints & Advertising Film Financing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(14) (17) (19)

​

15.00% PIK

1/5/2015

​

2,820

​

2,473

​

1

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Classic H&G Holdings, LLC

​

March 12, 2020

Provider of Engineered Packaging Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

10.00%

3/12/2025

​

4,819

​

4,704

​

4,819

​

​

​

​

Preferred Member Units

(8)

39

​

​

​

​

​

1,440

​

2,940

​

​

​

​

​

​

​

​

​

​

​

​

6,144

​

7,759

Clickbooth.com, LLC

(10)

December 5, 2017

Provider of Digital Advertising Performance Marketing Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/31/2025

​

7,750

​

7,644

​

7,750

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Construction Supply Investments, LLC

(10)

December 29, 2016

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Member Units

(8)

861,618

​

​

​

​

​

3,335

​

7,525

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Copper Trail Fund Investments

(12) (13)

July 17, 2017

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (CTEF I, LP)

​

375

​

​

​

​

​

-

​

103

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Corel Corporation

(11) (13) (21)

July 24, 2019

Publisher of Desktop and Cloud-based Software

​

​

​

​

​

​

​

​

​

​

​

​

​

July 13, 2020

​

Secured Debt

​

​

5.14% (L+5.00%)

7/2/2026

​

2,330

​

2,239

​

2,335

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DTE Enterprises, LLC

(10)

April 13, 2018

Industrial Powertrain Repair and Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/13/2023

​

9,345

​

9,266

​

9,082

​

​

​

​

Class AA Preferred Member Units (non-voting)

(8) (19)

​

10.00% PIK

​

​

​

​

999

​

999

​

​

​

​

Class A Preferred Member Units

​

776,316

​

​

​

​

​

776

​

630

​

​

​

​

​

​

​

​

​

​

​

​

11,041

​

10,711

Dynamic Communities, LLC

(10)

July 17, 2018

Developer of Business Events and Online Community Groups

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

7/17/2023

​

5,639

​

5,589

​

5,506

12

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

EPIC Y-Grade Services, LP

(11)

June 22, 2018

NGL Transportation & Storage

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/30/2027

​

6,926

​

6,843

​

6,026

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Flip Electronics LLC

(10)

January 4, 2021

Distributor of Hard-to-Find and Obsolete Electronic Components

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/2/2026

​

6,000

​

5,880

​

5,880

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

GoWireless Holdings, Inc.

(11)

December 31, 2017

Provider of Wireless Telecommunications Carrier Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/22/2024

​

15,487

​

15,413

​

15,503

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

GS Operating, LLC

(10)

February 24, 2020

Distributor of Industrial and Specialty Parts

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

2/24/2025

​

11,000

​

10,760

​

11,000

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

HDC/HW Intermediate Holdings

(10)

December 21, 2018

Managed Services and Hosting Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/21/2023

​

1,943

​

1,921

​

1,802

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Hunter Defense Technologies, Inc.

(10)

March 29, 2018

Provider of Military and Commercial Shelters and Systems

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/29/2023

​

16,102

​

15,974

​

16,102

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

HW Temps LLC

​

July 2, 2015

Temporary Staffing Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

8.00%

3/29/2023

​

1,991

​

1,988

​

1,924

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Hybrid Promotions, LLC

(10)

June 30, 2021

Wholesaler of Licensed, Branded and Private Label Apparel

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

9.25% (L+8.25%, Floor 1.00%)

6/30/2026

​

7,875

​

7,718

​

7,718

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Hyperion Materials & Technologies, Inc.

(11) (13) (21)

September 12, 2019

Manufacturer of Cutting and Machine Tools & Specialty Polishing Compounds

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/28/2026

​

7,388

​

7,271

​

7,390

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Implus Footcare, LLC

(10)

June 1, 2017

Provider of Footwear and Related Accessories

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/30/2024

​

17,178

​

17,163

​

16,055

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Independent Pet Partners Intermediate Holdings, LLC

(10)

November 20, 2018

Omnichannel Retailer of Specialty Pet Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(19)

​

6.00% PIK

11/20/2023

​

10,104

​

9,318

​

9,318

13

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

​

​

​

​

Preferred Stock (non-voting)

​

​

​

​

​

​

​

2,470

​

2,620

​

​

​

​

Preferred Stock (non-voting)

​

​

​

​

​

​

​

-

​

-

​

​

​

​

Member Units

​

1,191,667

​

​

​

​

​

1,192

​

-

​

​

​

​

​

​

​

​

​

​

​

​

12,980

​

11,938

Industrial Services Acquisition, LLC

(10)

June 17, 2016

Industrial Cleaning Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unsecured Debt

(19)

​

12.00% (11.25% Cash, 0.75% PIK)

12/17/2022

​

13,352

​

13,336

​

13,352

​

​

​

​

Preferred Member Units

(8) (19) (30)

336

10.00% PIK

​

​

​

​

270

​

347

​

​

​

​

Preferred Member Units

(8) (19) (30)

187

20.00% PIK

​

​

​

​

177

​

205

​

​

​

​

Member Units

(30)

2,100

​

​

​

​

​

2,100

​

1,610

​

​

​

​

​

​

​

​

​

​

​

​

15,883

​

15,514

Interface Security Systems, L.L.C

(10)

August 7, 2019

Commercial Security & Alarm Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

8/7/2023

​

7,296

​

7,215

​

7,296

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Intermedia Holdings, Inc.

(11)

August 3, 2018

Unified Communications as a Service

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

7/19/2025

​

9,949

​

9,927

​

9,949

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Invincible Boat Company, LLC.

(10)

August 28, 2019

Manufacturer of Sport Fishing Boats

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/28/2025

​

18,598

​

18,428

​

18,598

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

INW Manufacturing, LLC

(11)

May 19, 2021

Manufacturer of Nutrition and Wellness Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

6.50% (L+5.75%, Floor 0.75%)

3/25/2027

​

7,453

​

7,233

​

7,304

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Isagenix International, LLC

(11)

June 21, 2018

Direct Marketer of Health & Wellness Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/14/2025

​

5,365

​

5,331

​

4,404

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Jackmont Hospitality, Inc.

(10)

May 26, 2015

Franchisee of Casual Dining Restaurants

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

7/30/2021

​

7,802

​

7,802

​

6,395

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Joerns Healthcare, LLC

(11)

April 3, 2013

Manufacturer and Distributor of Health Care Equipment & Supplies

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/21/2024

​

3,336

​

3,299

​

3,110

​

​

​

​

Common Stock

​

392,514

​

​

​

​

​

3,678

​

1,350

​

​

​

​

​

​

​

​

​

​

​

​

6,977

​

4,460

14

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

Kemp Technologies Inc.

(10)

June 27, 2019

Provider of Application Delivery Controllers

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/29/2024

​

7,350

​

7,258

​

7,350

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Knight Energy Services LLC

(11)

November 14, 2018

Oil and Gas Equipment & Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(17) (19)

​

8.50% PIK

2/9/2024

​

941

​

941

​

656

​

​

​

​

Common Stock

​

25,692

​

​

​

​

​

1,843

​

-

​

​

​

​

​

​

​

​

​

​

​

​

2,784

​

656

Kore Wireless Group Inc.

(11)

December 31, 2018

Mission Critical Software Platform

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

5.65% (L+5.50%)

12/20/2024

​

5,969

​

5,951

​

5,969

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Larchmont Resources, LLC

(11)

August 13, 2013

Oil & Gas Exploration & Production

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/9/2021

​

3,715

​

3,727

​

1,672

​

​

​

​

Member Units

(30)

4,806

​

​

​

​

​

601

​

192

​

​

​

​

​

​

​

​

​

​

​

​

4,328

​

1,864

Laredo Energy VI, LP

(10)

January 15, 2019

Oil & Gas Exploration & Production

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Member Units

​

1,155,952

​

​

​

​

​

11,560

​

9,771

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lightbox Holdings, L.P.

(11)

May 23, 2019

Provider of Commercial Real Estate Software

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

5.15% (L+5.00%)

5/9/2026

​

5,916

​

5,855

​

5,887

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LL Management, Inc.

(10)

May 2, 2019

Medical Transportation Service Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

9/25/2023

​

14,407

​

14,311

​

14,407

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Logix Acquisition Company, LLC

(10)

June 24, 2016

Competitive Local Exchange Carrier

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/22/2024

​

12,552

​

12,499

​

11,987

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lulu's Fashion Lounge, LLC

(10)

August 31, 2017

Fast Fashion E-Commerce Retailer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

8/28/2022

​

5,437

​

5,379

​

4,648

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lynx FBO Operating LLC

(10)

September 30, 2019

Fixed Based Operator in the General Aviation Industry

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

9/30/2024

​

14,305

​

14,091

​

14,305

​

​

​

​

Member Units

​

3,704

​

​

​

​

​

500

​

594

​

​

​

​

​

​

​

​

​

​

​

​

14,591

​

14,899

15

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

Mac Lean-Fogg Company

(10)

April 22, 2019

Manufacturer and Supplier for Auto and Power Markets

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

5.38% (L+4.75%, Floor 0.625%)

12/22/2025

​

7,339

​

7,299

​

7,339

​

​

​

​

Preferred Stock

(19)

​

13.75% (4.50% Cash, 9.25% PIK)

​

​

​

​

771

​

771

​

​

​

​

​

​

​

​

​

​

​

​

8,070

​

8,110

Mako Steel, LP

(10)

March 15, 2021

Self-Storage Design & Construction

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/13/2026

​

19,469

​

19,061

​

19,061

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

MB2 Dental Solutions, LLC

(11)

January 28, 2021

Dental Partnership Organization

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/29/2027

​

8,653

​

8,481

​

8,481

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Mills Fleet Farm Group, LLC

(10)

October 24, 2018

Omnichannel Retailer of Work, Farm and Lifestyle Merchandise

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

10/24/2024

​

15,088

​

14,841

​

15,082

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NinjaTrader, LLC

(10)

December 18, 2019

Operator of Futures Trading Platform

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/18/2024

​

16,875

​

16,559

​

16,831

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NNE Partners, LLC

(10)

March 2, 2017

Oil & Gas Exploration & Production

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(19)

​

9.38% (4.88% Cash, 4.50% PIK) (4.50% PIK + L+4.75%)

12/31/2023

​

21,121

​

21,087

​

19,563

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Novetta Solutions, LLC

(11)

June 21, 2017

Provider of Advanced Analytics Solutions for Defense Agencies

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

10/17/2022

​

14,591

​

14,471

​

14,609

​

​

​

​

Secured Debt

(9)

​

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

10/16/2023

​

880

​

880

​

882

​

​

​

​

​

​

​

​

​

​

​

​

15,351

​

15,491

NTM Acquisition Corp.

(11)

July 12, 2016

Provider of B2B Travel Information Content

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

6/7/2024

​

4,303

​

4,293

​

4,195

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NWN Corporation

(10)

May 7, 2021

Value Added Reseller and Provider of Managed Services to a Diverse Set of Industries

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/7/2026

​

21,457

​

20,934

​

20,934

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

16

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

PaySimple, Inc.

(10)

September 9, 2019

Leading Technology Services Commerce Platform

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

5.61% (L+5.50%)

8/23/2025

​

7,481

​

7,481

​

7,444

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

RA Outdoors LLC

(10)

April 8, 2021

Software Solutions Provider for Outdoor Activity Management

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/8/2026

​

18,765

​

18,573

​

18,573

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(11)

December 31, 2017

Provider of Outsourced Online Surveying

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/20/2024

​

9,948

​

9,948

​

9,857

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

RM Bidder, LLC

(10)

November 12, 2015

Scripted and Unscripted TV and Digital Programming Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Member Units

​

1,854

​

​

​

​

​

31

​

23

​

​

​

​

Warrants

(26)

​

​

10/20/2025

​

​

​

284

​

-

​

​

​

​

​

​

​

​

​

​

​

​

315

​

23

Rug Doctor, LLC.

(10)

June 30, 2021

Carpet Cleaning Products and Machinery

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

6.25% (L+5.25%, Floor 1.00%)

5/16/2022

​

10,945

​

10,726

​

10,726

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Salient Partners L.P.

(11)

June 25, 2015

Provider of Asset Management Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (14)

​

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

8/31/2021

​

6,251

​

6,292

​

2,607

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Savers, Inc.

(11)

May 14, 2021

For-Profit Thrift Retailer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

6.50% (L+5.75%, Floor 0.75%)

4/26/2028

​

12,900

​

12,773

​

13,051

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Signal Peak CLO 7, Ltd. (Mariner)

(12) (13)

May 8, 2019

Structured Finance

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Subordinated Structured Notes

(16)

​

12.00%

4/30/2032

​

25,935

​

21,226

​

18,879

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Slick Innovations, LLC

​

September 13, 2018

Text Message Marketing Platform

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

12.00%

9/13/2023

​

1,350

​

1,199

​

1,350

​

​

​

​

Common Stock

​

17,500

​

​

​

​

​

175

​

380

​

​

​

​

Warrants

(27)

4,521

​

9/13/2028

​

​

​

45

​

100

​

​

​

​

​

​

​

​

​

​

​

​

1,419

​

1,830

Student Resource Center, LLC

(10)

June 25, 2021

Higher Education Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/25/2026

​

12,500

​

12,234

​

12,234

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Team Public Choices, LLC

(11)

October 28, 2019

Home-Based Care Employment Service Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/18/2027

​

3,990

​

3,960

​

3,970

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

17

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

The Pasha Group

(11)

February 2, 2018

Diversified Logistics and Transportation Provided

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/26/2023

​

7,007

​

6,931

​

6,955

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Time Manufacturing Acquisition LLC

(11)

February 24, 2021

Manufacturer and Distributor of Utility Equipment

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

2/3/2023

​

1,476

​

1,473

​

1,481

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

U.S. TelePacific Corp.

(11)

May 17, 2017

Provider of Communications and Managed Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/2/2023

​

12,500

​

12,364

​

11,564

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

USA DeBusk LLC

(10)

October 22, 2019

Provider of Industrial Cleaning Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

10/22/2024

​

16,548

​

16,321

​

16,548

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Vida Capital, Inc

(11)

October 10, 2019

Alternative Asset Manager

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

6.10% (L+6.00%)

10/1/2026

​

7,031

​

6,949

​

6,785

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Vistar Media, Inc.

(10)

February 17, 2017

Operator of Digital Out-of-Home Advertising Platform

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/3/2023

​

4,652

​

4,561

​

4,652

​

​

​

​

Preferred Stock

​

70,207

​

​

​

​

​

767

​

1,273

​

​

​

​

Warrants

(25)

69,675

​

4/3/2029

​

​

​

-

​

1,290

​

​

​

​

​

​

​

​

​

​

​

​

5,328

​

7,215

Volusion, LLC

​

January 26, 2015

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(17)

​

11.50%

1/26/2020

​

8,672

​

8,663

​

8,672

​

​

​

​

Unsecured Convertible Debt

​

​

8.00%

11/16/2023

​

175

​

175

​

175

​

​

​

​

Preferred Member Units

​

2,090,001

​

​

​

​

​

6,000

​

2,570

​

​

​

​

Warrants

(27)

784,867

​

1/26/2025

​

​

​

1,104

​

-

​

​

​

​

​

​

​

​

​

​

​

​

15,942

​

11,417

18

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 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)

YS Garments, LLC

(11)

August 22, 2018

Designer and Provider of Branded Activewear

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/9/2024

​

6,564

​

6,525

​

6,293

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Subtotal Non-Control/Non-Affiliate Investments (128.3% of net assets at fair value)

​

​

​

​

​

​

​

​

​

​

$

805,788

$

768,018

Total Portfolio Investments, June 30, 2021 (162.4% of net assets at fair value)

​

​

​

​

​

​

​

​

​

​

$

974,117

$

972,003

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Short Term Investments (34)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

USBank Money Market Account (35)

​

​

​

​

​

​

​

​

​

​

$

5,363

$

5,363

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Short Term Investments

​

​

​

​

​

​

​

​

​

​

$

5,363

$

5,363

​

​

​

​

(1)

All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note C for a description of Lower Middle Market portfolio investments. All of the Company’s investments, unless otherwise noted, are encumbered either as security for one of 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 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 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 to either LIBOR 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 June 30, 2021. As noted in this schedule, 82% 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 1.08%.

(10)

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

(11)

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

(12)

Other Portfolio investment. See Note C 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

19

Table of Contents

MSC Income Fund, Inc.

Consolidated Schedule of Investments (Continued)

June 30, 2021

(dollars in thousands)

​

(unaudited)

​

​

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 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.

(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)

Not used

(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 June 30, 2021 was approximately 0.05% at US Bank Money Market Account

​

​

​

20

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)

(31)

38.8%

​

​

​

​

$

872

$

747

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(8)

2,896

​

​

​

​

​

6,435

​

22,120

​

​

​

​

​

​

​

​

​

​

​

​

14,681

​

30,382

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Harris Preston Fund Investments

(12) (13)

October 1, 2017

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (2717 MH, L.P.)

(31)

49.3%

​

​

​

​

​

2,599

​

2,702

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(9)

​

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

8/16/2024

​

1,289

​

1,180

​

1,180

​

​

​

​

Preferred Member Units

​

800

​

​

​

​

​

800

​

800

​

​

​

​

Warrants

(27)

105

​

8/16/2029

​

​

​

79

​

-

​

​

​

​

​

​

​

​

​

​

​

​

2,059

​

1,980

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Brewer Crane Holdings, LLC

​

January 9, 2018

Provider of Crane Rental and Operating Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/9/2023

​

2,139

​

2,119

​

2,119

​

​

​

​

Preferred Member Units

(8)

737

​

​

​

​

​

1,070

​

1,460

​

​

​

​

​

​

​

​

​

​

​

​

3,189

​

3,579

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Centre Technologies Holdings, LLC

​

January 4, 2019

Provider of IT Hardware Services and Software Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/4/2024

​

2,907

​

2,868

​

2,868

​

​

​

​

Preferred Member Units

​

3,174

​

​

​

​

​

1,460

​

1,540

​

​

​

​

​

​

​

​

​

​

​

​

4,328

​

4,408

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

Chamberlin Holding LLC

​

February 26, 2018

Roofing and Waterproofing Specialty Contractor

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

2/26/2023

​

3,803

​

3,745

​

3,803

​

​

​

​

Member Units

(8)

1,087

​

​

​

​

​

2,860

​

7,020

​

​

​

​

Member Units

(8) (30)

1

​

​

​

​

​

330

​

318

​

​

​

​

​

​

​

​

​

​

​

​

6,935

​

11,141

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(8)

400

​

​

​

​

​

100

​

2,630

​

​

​

​

​

​

​

​

​

​

​

​

267

​

2,797

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Clad-Rex Steel, LLC

​

December 20, 2016

Specialty Manufacturer of Vinyl-Clad Metal

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/20/2021

​

2,720

​

2,706

​

2,706

​

​

​

​

Member Units

(8)

179

​

​

​

​

​

1,820

​

2,153

​

​

​

​

Secured Debt

(30)

​

10.00%

12/20/2036

​

278

​

275

​

275

​

​

​

​

Member Units

(30)

200

​

​

​

​

​

53

​

132

​

​

​

​

​

​

​

​

​

​

​

​

4,854

​

5,266

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cody Pools, Inc.

​

March 6, 2020

Designer of Residential and Commercial Pools

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/6/2025

​

3,554

​

3,488

​

3,554

​

​

​

​

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)

(8) (31)

12.4%

​

​

​

​

​

2,161

​

1,782

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Digital Products Holdings LLC

​

April 1, 2018

Designer and Distributor of Consumer Electronics

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/1/2023

​

4,543

​

4,493

​

4,493

​

​

​

​

Preferred Member Units

(8)

964

​

​

​

​

​

2,375

​

2,459

​

​

​

​

​

​

​

​

​

​

​

​

6,868

​

6,952

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Direct Marketing Solutions, Inc.

​

February 13, 2018

Provider of Omni-Channel Direct Marketing Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

2/13/2023

​

3,772

​

3,717

​

3,717

​

​

​

​

Preferred Stock

​

2,100

​

​

​

​

​

2,100

​

4,840

​

​

​

​

​

​

​

​

​

​

​

​

5,817

​

8,557

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

Freeport Financial Funds

(12) (13)

July 31, 2015

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (Freeport First Lien Loan Fund III LP)

(8) (31)

6.0%

​

​

​

​

​

10,785

​

10,321

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gamber-Johnson Holdings, LLC ("GJH")

​

June 24, 2016

Manufacturer of Ruggedized Computer Mounting Systems

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/24/2021

​

4,960

​

4,935

​

4,960

​

​

​

​

Member Units

(8)

9,042

​

​

​

​

​

3,711

​

13,120

​

​

​

​

​

​

​

​

​

​

​

​

8,646

​

18,080

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gulf Publishing Holdings, LLC

​

April 29, 2016

Energy Industry Focused Media and Publishing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (17) (19)

​

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

9/30/2020

​

63

​

63

​

63

​

​

​

​

Secured Debt

(19)

​

12.50% (6.25% Cash, 6.25% PIK)

4/29/2021

​

3,269

​

3,264

​

2,988

​

​

​

​

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.)

(31)

8.2%

​

​

​

​

​

3,071

​

3,258

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(8)

56

​

​

​

​

​

713

​

2,008

​

​

​

​

Preferred Member Units

(30)

56

​

​

​

​

​

38

​

105

​

​

​

​

​

​

​

​

​

​

​

​

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

(8) (30)

200

​

​

​

​

​

248

​

290

​

​

​

​

​

​

​

​

​

​

​

​

9,786

​

9,828

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

Market Force Information, LLC

​

July 28, 2017

Provider of Customer Experience Management Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(14) (19)

​

12.00% PIK

7/28/2023

​

6,520

​

6,463

​

3,391

​

​

​

​

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

(19)

​

13.00% (10.00% Cash, 3.00% PIK)

3/31/2022

​

2,143

​

2,131

​

2,070

​

​

​

​

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

(8)

1,468

​

​

​

​

​

680

​

2,248

​

​

​

​

​

​

​

​

​

​

​

​

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

(8)

21,600,000

​

​

​

​

​

1,720

​

370

​

​

​

​

​

​

​

​

​

​

​

​

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

(8)

52

​

​

​

​

​

2,000

​

3,260

​

​

​

​

​

​

​

​

​

​

​

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

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

(8)

154

​

​

​

​

​

1,164

​

1,510

​

​

​

​

​

​

​

​

​

​

​

​

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

(19)

​

18.00% (10.00% Cash, 8.00% PIK)

6/25/2025

​

3,354

​

2,998

​

2,998

​

​

​

​

Common Stock

​

593,927

​

​

​

​

​

3,148

​

3,148

​

​

​

​

Warrants

(27)

197,717

​

12/11/2025

​

​

​

-

​

1,048

​

​

​

​

​

​

​

​

​

​

​

​

6,146

​

7,194

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Adams Publishing Group, LLC

(10)

November 19, 2015

Local Newspaper Operator

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

7/3/2023

​

5,863

​

5,742

​

5,813

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ADS Tactical, Inc.

(10)

March 7, 2017

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

7/26/2023

​

15,659

​

15,700

​

15,659

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Aethon United BR LP

(10)

September 8, 2017

Oil & Gas Exploration & Production

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

9/8/2023

​

7,000

​

6,938

​

6,852

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

American Nuts, LLC

(10)

April 10, 2018

Roaster, Mixer and Packager of Bulk Nuts and Seeds

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/10/2023

​

12,128

​

11,916

​

12,109

American Teleconferencing Services, Ltd.

(11)

May 19, 2016

Provider of Audio Conferencing and Video Collaboration Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/8/2023

​

14,125

​

13,803

​

6,568

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

American Trailer Rental Group LLC

​

June 7, 2017

Provider of Short-term Trailer and Container Rental

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Member Units

(30)

18,373

​

​

​

​

​

2,149

​

4,000

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

APTIM Corp.

(11)

August 17, 2018

Engineering, Construction & Procurement

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

​

​

7.75%

6/15/2025

​

6,952

​

6,356

​

5,434

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

Arcus Hunting LLC

(10)

January 6, 2015

Manufacturer of Bowhunting and Archery Products and Accessories

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/31/2021

​

5,504

​

5,455

​

5,504

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ASC Ortho Management Company, LLC

(10)

August 31, 2018

Provider of Orthopedic Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/31/2023

​

5,206

​

5,151

​

5,149

​

​

​

​

Secured Debt

(19)

​

13.25% PIK

12/1/2023

​

2,047

​

2,011

​

2,047

​

​

​

​

​

​

​

​

​

​

​

​

7,162

​

7,196

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

ATX Networks Corp.

(11) (13) (21)

June 30, 2015

Provider of Radio Frequency Management Equipment

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

BBB Tank Services, LLC

​

April 8, 2016

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unsecured Debt

(9)

​

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

4/8/2021

​

1,200

​

1,200

​

1,177

​

​

​

​

Preferred Stock (non-voting)

(8) (19)

​

15.00% PIK

​

​

​

​

38

​

38

​

​

​

​

Member Units

​

200,000

​

​

​

​

​

200

​

70

​

​

​

​

​

​

​

​

​

​

​

​

1,438

​

1,285

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Berry Aviation, Inc.

(10)

July 6, 2018

Charter Airline Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(19)

​

12.00% (10.50% Cash, 1.5% PIK)

1/6/2024

​

4,618

​

4,575

​

4,618

​

​

​

​

Preferred Member Units

(8) (19) (30)

122,416

16.00% PIK

​

​

​

​

143

​

143

​

​

​

​

Preferred Member Units

(19) (30)

1,548,387

8.00% PIK

​

​

​

​

1,548

​

904

​

​

​

​

​

​

​

​

​

​

​

​

6,266

​

5,665

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

BigName Commerce, LLC

(10)

May 11, 2017

Provider of Envelopes and Complimentary Stationery Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/11/2022

​

2,037

​

2,030

​

2,004

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Binswanger Enterprises, LLC

(10)

March 10, 2017

Glass Repair and Installation Service Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/9/2022

​

12,958

​

12,801

​

12,958

​

​

​

​

Member Units

​

1,050,000

​

​

​

​

​

1,050

​

670

​

​

​

​

​

​

​

​

​

​

​

​

13,851

​

13,628

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

BLST Operating Company, LLC.

(11)

December 19, 2013

Multi-Channel Retailer of General Merchandise

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/28/2025

​

6,304

​

6,304

​

6,304

​

​

​

​

Common Stock

​

700

​

​

​

​

​

-

​

-

​

​

​

​

​

​

​

​

​

​

​

​

6,304

​

6,304

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Boccella Precast Products LLC

​

June 30, 2017

Manufacturer of Precast Hollow Core Concrete

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Member Units

(8)

564,000

​

​

​

​

​

564

​

1,510

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Brightwood Capital Fund Investments

(12) (13)

July 21, 2014

Investment Partnership

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LP Interests (Brightwood Capital Fund III, LP)

(8) (31)

1.2%

​

​

​

​

​

3,695

​

2,867

​

​

​

​

LP Interests (Brightwood Capital Fund IV, LP)

(8) (31)

0.5%

​

​

​

​

​

10,037

​

9,490

​

​

​

​

​

​

​

​

​

​

​

​

13,732

​

12,357

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Buca C, LLC

​

June 30, 2015

Casual Restaurant Group

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (17)

​

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

6/30/2020

​

12,670

​

12,670

​

9,504

​

​

​

​

Preferred Member Units

(8) (19)

4

6.00% PIK

​

​

​

​

3,040

​

-

​

​

​

​

​

​

​

​

​

​

​

​

15,710

​

9,504

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cadence Aerospace LLC

(10)

November 14, 2017

Aerostructure Manufacturing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(8)

16,742

​

​

​

​

​

188

​

1,510

​

​

​

​

​

​

​

​

​

​

​

​

2,289

​

3,596

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cenveo Corporation

(11)

September 4, 2015

Provider of Digital Marketing Agency Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/7/2023

​

4,117

​

3,929

​

3,849

​

​

​

​

Common Stock

​

138,889

​

​

​

​

​

4,163

​

2,049

​

​

​

​

​

​

​

​

​

​

​

​

8,092

​

5,898

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Chisholm Energy Holdings, LLC

(10)

May 15, 2019

Oil & Gas Exploration & Production

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/15/2026

​

3,571

​

3,512

​

3,274

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Clarius BIGS, LLC

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(10)

September 23, 2014

Prints & Advertising Film Financing

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(14) (17) (19)

​

15.00% PIK

1/5/2015

​

2,849

​

2,498

​

31

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

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

(8)

39

​

​

​

​

​

1,440

​

2,380

​

​

​

​

​

​

​

​

​

​

​

​

7,473

​

8,580

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Clickbooth.com, LLC

(10)

December 5, 2017

Provider of Digital Advertising Performance Marketing Solutions

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/31/2025

​

7,850

​

7,731

​

7,850

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(14)

​

8.00%

5/31/2021

​

200

​

200

​

179

​

​

​

​

Secured Debt

(14) (19)

​

10.50% PIK

5/31/2021

​

1,376

​

1,369

​

1,159

​

​

​

​

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

(9)

​

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

2/12/2023

​

8,377

​

8,344

​

8,335

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

DTE Enterprises, LLC

(10)

April 13, 2018

Industrial Powertrain Repair and Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/13/2023

​

9,324

​

9,225

​

9,011

​

​

​

​

Class AA Preferred Member Units (non-voting)

(8) (19)

​

10.00% PIK

​

​

​

​

951

​

951

​

​

​

​

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

(9) (19)

​

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

7/17/2023

​

5,425

​

5,364

​

5,020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

EPIC Y-Grade Services, LP

(11)

June 22, 2018

NGL Transportation & Storage

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/30/2027

​

6,944

​

6,855

​

5,798

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

GoWireless Holdings, Inc.

(11)

December 31, 2017

Provider of Wireless Telecommunications Carrier Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/22/2024

​

14,083

​

13,998

​

13,970

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gexpro Services

(10)

February 24, 2020

Distributor of Industrial and Specialty Parts

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

2/24/2025

​

12,506

​

12,202

​

12,408

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

HDC/HW Intermediate Holdings

(10)

December 21, 2018

Managed Services and Hosting Provider

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/21/2023

​

1,951

​

1,926

​

1,883

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Hunter Defense Technologies, Inc.

(10)

March 29, 2018

Provider of Military and Commercial Shelters and Systems

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

3/29/2023

​

16,583

​

16,416

​

16,583

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(9)

​

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

8/28/2026

​

7,425

​

7,299

​

6,938

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Implus Footcare, LLC

(10)

June 1, 2017

Provider of Footwear and Related Accessories

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

4/30/2024

​

17,264

​

17,113

​

15,694

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Independent Pet Partners Intermediate Holdings, LLC

(10)

November 20, 2018

Omnichannel Retailer of Specialty Pet Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(19)

​

6.00% PIK

11/20/2023

​

9,944

​

8,992

​

8,992

​

​

​

​

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

(19)

​

13.00% (6.00% Cash, 7.00% PIK)

12/17/2022

​

12,892

​

12,871

​

12,892

​

​

​

​

Preferred Member Units

(8) (19) (30)

336

10.00% PIK

​

​

​

​

202

​

202

​

​

​

​

Preferred Member Units

(8) (19) (30)

187

20.00% PIK

​

​

​

​

124

​

124

​

​

​

​

Member Units

(30)

2,100

​

​

​

​

​

2,100

​

1,237

​

​

​

​

​

​

​

​

​

​

​

​

15,297

​

14,455

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)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interface Security Systems, L.L.C

(10)

August 7, 2019

Commercial Security & Alarm Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Intermedia Holdings, Inc.

(11)

August 3, 2018

Unified Communications as a Service

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

7/19/2025

​

3,480

​

3,456

​

3,478

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Invincible Boat Company, LLC.

(10)

August 28, 2019

Manufacturer of Sport Fishing Boats

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/28/2025

​

8,876

​

8,797

​

8,876

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Isagenix International, LLC

(11)

June 21, 2018

Direct Marketer of Health & Wellness Products

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

6/14/2025

​

5,572

​

5,533

​

3,130

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Jackmont Hospitality, Inc.

(10)

May 26, 2015

Franchisee of Casual Dining Restaurants

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/26/2021

​

7,908

​

7,906

​

6,315

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Joerns Healthcare, LLC

(11)

April 3, 2013

Manufacturer and Distributor of Health Care Equipment & Supplies

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/21/2024

​

3,336

​

3,294

​

3,336

​

​

​

​

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

(9)

​

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

3/29/2024

​

7,388

​

7,280

​

7,388

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Knight Energy Services LLC

(11)

November 14, 2018

Oil and Gas Equipment & Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(17) (19)

​

8.50% PIK

2/9/2024

​

828

​

882

​

745

​

​

​

​

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

(9) (19)

​

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

8/9/2021

​

3,715

​

3,780

​

1,672

​

​

​

​

Member Units

(30)

4,806

​

​

​

​

​

601

​

192

​

​

​

​

​

​

​

​

​

​

​

​

4,381

​

1,864

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

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

(9)

​

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

9/25/2023

​

13,581

​

13,485

​

13,581

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Logix Acquisition Company, LLC

(10)

June 24, 2016

Competitive Local Exchange Carrier

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/22/2024

​

12,620

​

12,560

​

11,673

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LSF9 Atlantis Holdings, LLC

(11)

May 17, 2017

Provider of Wireless Telecommunications Carrier Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/1/2023

​

12,600

​

12,555

​

12,561

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lulu's Fashion Lounge, LLC

(10)

August 31, 2017

Fast Fashion E-Commerce Retailer

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Lynx FBO Operating LLC

(10)

September 30, 2019

Fixed Based Operator in the General Aviation Industry

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

9/30/2024

​

13,613

​

13,370

​

13,521

​

​

​

​

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

(9)

​

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

12/22/2025

​

7,375

​

7,332

​

7,375

​

​

​

​

Preferred Stock

(8) (19)

​

13.75% (4.50% Cash, 9.25% PIK)

​

​

1

​

793

​

780

​

​

​

​

​

​

​

​

​

​

​

​

8,125

​

8,155

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Mills Fleet Farm Group, LLC

(10)

October 24, 2018

Omnichannel Retailer of Work, Farm and Lifestyle Merchandise

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

10/24/2024

​

13,875

​

13,599

​

13,623

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NinjaTrader, LLC

(10)

December 18, 2019

Operator of Futures Trading Platform

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

12/18/2024

​

16,875

​

16,520

​

16,828

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

31

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)

NNE Partners, LLC

(10)

March 2, 2017

Oil & Gas Exploration & Production

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(19)

​

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

12/31/2023

​

20,649

​

20,590

​

18,331

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Novetta Solutions, LLC

(11)

June 21, 2017

Provider of Advanced Analytics Solutions for Defense Agencies

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

10/17/2022

​

14,668

​

14,504

​

14,638

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

NTM Acquisition Corp.

(11)

July 12, 2016

Provider of B2B Travel Information Content

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9) (19)

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(26)

218,601

​

10/20/2025

​

​

​

284

​

-

​

​

​

​

Member Units

​

1,854

​

​

​

​

​

31

​

17

​

​

​

​

​

​

​

​

​

​

​

​

315

​

17

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Salient Partners L.P.

(11)

June 25, 2015

Provider of Asset Management Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/31/2021

​

6,450

​

6,505

​

4,542

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(27)

4,521

​

9/13/2028

​

​

​

45

​

90

​

​

​

​

​

​

​

​

​

​

​

​

1,461

​

1,850

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

TGP Holdings III LLC

(11)

September 30, 2017

Outdoor Cooking & Accessories

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

9/25/2025

​

5,000

​

5,000

​

4,825

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

The Pasha Group

(11)

February 2, 2018

Diversified Logistics and Transportation Provided

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

1/26/2023

​

7,031

​

6,916

​

6,451

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

USA DeBusk LLC

(10)

October 22, 2019

Provider of Industrial Cleaning Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

10/22/2024

​

16,632

​

16,373

​

16,394

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

32

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)

U.S. TelePacific Corp.

(11)

September 14, 2016

Provider of Communications and Managed Services

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

5/2/2023

​

12,500

​

12,329

​

11,328

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

(9) (19)

​

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

​

​

​

​

Preferred Stock

​

70,207

​

​

​

​

​

767

​

910

​

​

​

​

Warrants

(25)

69,675

​

4/3/2029

​

​

​

-

​

920

​

​

​

​

​

​

​

​

​

​

​

​

5,317

​

6,486

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Volusion, LLC

​

January 26, 2015

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(17)

​

11.50%

1/26/2020

​

8,672

​

8,646

​

8,247

​

​

​

​

Unsecured Convertible Debt

​

​

8.00%

11/16/2023

​

175

​

175

​

124

​

​

​

​

Preferred Member Units

​

2,090,001

​

​

​

​

​

6,000

​

2,570

​

​

​

​

Warrants

(27)

784,867

​

1/26/2025

​

​

​

1,104

​

-

​

​

​

​

​

​

​

​

​

​

​

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

YS Garments, LLC

(11)

August 22, 2018

Designer and Provider of Branded Activewear

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Secured Debt

(9)

​

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

8/9/2024

​

6,998

​

6,951

​

6,457

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

​

​

​

​

33

Table of Contents

MSC Income Fund

Consolidated Schedule of Investments (Continued)

December 31, 2020

(dollars in thousands)

​

(1)

All investments are Lower Middle Market portfolio investments, unless otherwise noted. See Note C 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 Note C 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 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 Note C for a description of Private Loan portfolio investments.

(11)

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

(12)

Other Portfolio investment. See Note C 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 Note C 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.

(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 0.05% at US Bank Money Market Account and 0.01% at Fidelity Institutional Money Market Funds.

​

​

​

​

34

Table of Contents

MSC Income Fund, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)


Note 1 — Principal Business and

NOTE A—ORGANIZATION AND BASIS OF PRESENTATION

1.           Organization


MSC Income Fund, Inc. (formerly known as HMS Income Fund, Inc. through October 30, 2020), (collectively (“MSC Income Fund” and 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,(“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 direct 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.companies. 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 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 distribution 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 and declared effective by the SEC 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, 2020, the Company raised approximately $250.0 million in the Offering, including proceeds from the distribution reinvestment plan of approximately $118.3 million.

MSC Income Fund has six 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”)California Holdings, GP LLC) are both wholly owned subsidiaries of the Company that wereeach organized as Delaware limited liability companies.companies, MSC Equity Holding II, Inc. (“MSC Equity Holding II”) (formerly known as HMS Equity Holding II, Inc. (“HMS Equity Holding II”) is a wholly owned subsidiary of the Company that was organized as a Delaware corporation.corporation, and MSC California Holdings LP (“MSC California Holdings”) (formerly known as HMS California Holdings LP (“HMS California Holdings”)LP) is a wholly owned subsidiary of the Company that was organized as a Delaware limited partnership. HMS California Holdings GP LLC (“HMS California Holdings GP”MSC Equity Holding and MSC Equity Holding II, (the “Taxable Subsidiaries”) is a wholly owned subsidiary of the Company that was organized as a Delaware limited liability company., 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 forin connection with the Deutsche 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 TIAA Credit Facility (as defined below in Note 5 — Borrowings) since it is not a guarantor under the TIAA Credit Facility. TwoMSIF 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 Company’s wholly owned subsidiaries, HMS Equity HoldingTIAA 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, have elected to be taxable entities and primarily hold equity investments in certain portfolio companies which are “pass through” entities for tax purposes.


As of October 30, 2020, the Company is managed by MSC Adviser I, LLC (the “Sub-Adviser” or “MSC Adviser”), a wholly owned subsidiary of Main Street Capital Corporation (“Main Street”Term Loan (each defined below in “Note E — Debt”), a New York Stock Exchange listed BDC, under an Investment Advisory are collectively referred to herein as our “Credit Facilities”.

Unless otherwise noted or the context otherwise indicates, the terms “we,” “us,” “our,” and Administrative Services Agreement dated October 30, 2020 (the “New Investment Advisory Agreement”). See Note 13 for additional information regarding the New Investment Advisory Agreement.“Company” refer to MSC Income Fund and its consolidated subsidiaries.


35

Table of Contents

Prior to October 30, 2020, the business of the Company was 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”). Prior to October 30, 2020, the Company and theHMS Adviser retained the Sub-AdviserMSC Adviser I, LLC (“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-

6

AdvisorySub-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 28, 2020. 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 Initial Offering and the Offering.

TheSEC.

HMS Adviser entered into an asset purchase agreement, dated June 26, 2020 (the “Purchase Agreement”), with the Sub-Adviser,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 Purchase Agreement contemplated that, subject to approval by the Company’s boardBoard of directorsDirectors and the Company’s stockholders, the Company would enter into the New 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 boardBoard of directors,Directors, including all of its independent directors, unanimously approved and recommended to the stockholders of the Company for approval the New Investment Advisory Agreement. On October 28, 2020, the Company’s stockholders approved the New 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 New Investment Advisory Agreement with MSC Adviser and MSC Adviser became the sole investment adviser to the Company.


Note 2 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 for the three and six months ended June 30, 2021 and 2020, cash flows for the six months ended June 30, 2021 and 2020, and financial position as of June 30, 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 and six months ended June 30, 2021 and 2020 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

36

Table of Contents

disclosures 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. 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 TopicASC 946,Financial Services- Investment Companies, of the Accounting Standards Codification, as amended (the “ASC 946”), 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 June 30, 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 Change in Unrealized Appreciation (Depreciation) on Investments”” 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

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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, excluding its investment in Signal CLO, 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

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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, changes in market-based interest rates 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 12 Private Loan portfolio companies for the six months ended June 30, 2021, representing approximately 30% of the total Private Loan portfolio at fair value as of June 30, 2021, and on a total of 14 Private Loan portfolio companies for the six months ended June 30, 2020,


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representing approximately 32% of the total Private Loan portfolio at fair value as of June 30, 2020. Excluding its investments in Private Loan portfolio companies that, as of June 30, 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 six months ended June 30, 2021 and 2020 was 42% and 35% of the total Private Loan portfolio at fair value as of June 30, 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 18 LMM portfolio companies for the six months ended June 30, 2021, representing approximately 55% of the total LMM portfolio at fair value as of June 30, 2021, and on a total of 18 LMM portfolio companies for the six months ended June 30, 2020, representing approximately 58% of the total LMM portfolio at fair value as of June 30, 2020. Excluding its investments in LMM portfolio companies that, as of June 30, 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 six months ended June 30, 2021 and 2020 was 59% and 63% of the total LMM portfolio at fair value as of June 30, 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 93% and 88% of the Middle Market portfolio investments as of June 30, 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 4.8% and 6.1% of the Company’s Investment Portfolio at fair value as of June 30, 2021 and December 31, 2020, respectively. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments, except for the Company’s investment in Signal CLO, are generally not readily available. For its Other Portfolio equity investments, except for the Company’s investment in Signal CLO, the Company generally determines the fair value of these investments using the NAV valuation method. For the Company’s investment in 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 SEC recently adopted new Rule 2a-5 under the 1940 Act, which permits a BDC’s board of directors to designate its executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active oversight of the board. The Company’s board of directors has approved policies and procedures pursuant to Rule 2a-5 (the “Valuation Procedures”) and has designated MSC Adviser, and specifically a group of its executive officers, to serve as the Board’s valuation designee. The Company adopted the Valuation Procedures effective April 1, 2021. The Company believes its Investment Portfolio as of June 30, 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, pursuant to valuation policies and procedures approved and overseen 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 results forportfolio companies, as well as market interest rate spreads. As a result of these and other current effects of the interim periods presented. The resultsCOVID-19 pandemic, as well as the uncertainty regarding the extent and duration of operations for interim periods are not indicativeits impact, the valuation of results to be expected for the full year.


Amounts as of December 31, 2019 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 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 andInvestment Portfolio has been condensedexperiencing 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 omitted herein. The current period’s resultsless at the date of operationspurchase. Cash and cash equivalents are not necessarily indicativecarried at cost, which approximates fair value.

At June 30, 2021, cash balances totaling $2.3 million exceeded Federal Deposit Insurance Corporation insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of results that ultimately may be achieved for the year. Therefore, these financial statements should be read in conjunction with the Company’s cash deposits are held at large established high credit quality financial statementsinstitutions and notes related thereto includedmanagement believes that the risk of loss associated with any uninsured balances is remote. At June 30, 2021, the Company had investments in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 19, 2020.


Restricted Cash

short-term money market accounts totaling $5.4 million classified as cash equivalents.

Amounts included in restricted cash representat December 31, 2020 represented balances in the cash accounts held at HMS Funding, which havehad been set aside pursuant to an amendment to the Deutsche Bank Credit Facility effective April 24, 2020 (see Note 5E — Borrowings)Debt) (i) as a

7

reserve for draws on unfunded commitments related to investments held by HMS Funding or (ii) to be applied against outstanding advances on the facility.

The following table provides a reconciliation On February 3, 2021, the Deutsche Bank Credit Facility was fully repaid through the use of cash, cash equivalents and restricted cash reported withinand proceeds from borrowings under the condensed consolidated balance sheets that sum toJPM SPV

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Facility and accordingly, the totalCompany has no other restrictions on cash (or restricted cash requirement) upon the extinguishment of the same such amounts shown in the condensed consolidated statements of cash flows.

Nine Months Ended
September 30, 2020September 30, 2019
Cash and cash equivalents$14,682 $21,070 
Restricted cash16,611 — 
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$31,293 $21,070 

Deutsche Bank Credit Facility.

4.            Interest, Dividend and Fee and Dividend Income

Interest

The Company records interest and dividend income are recorded on the accrual basis to the extent amounts are expected to be collected. Prepayment penalties received by the Company are recorded as income upon receipt. Dividend income is recorded 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, itthe Company 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 June 30, 2021, the Company’s total Investment Portfolio had four investments on non-accrual status, which comprised approximately 1.2% of its fair value and 3.0% of its cost. As of December 31, 2020, the Company’s total Investment Portfolio had three 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 the “equity” class of security 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 expected cash inflows from its investment in a CLO, including the expected residual payments, and the effective yield is determined and updated periodically.


As of September 30, 2020, the

The Company had nineholds certain debt investments in six portfolio companies that were on non-accrual status, all but one of which was more than 90 days past due, and one additional investment that was more than 90 days past due but not on non-accrual status. The debt investments on non-accrual status comprised approximately 2.5% of the Company’s total investment portfolio at fair value and 4.6% of the total investment portfolio at cost.


As of December 31, 2019, the Company had eight debt investments in five portfolio companies which were on non-accrual status, including seven debt investments in four portfolio companies that were more than 90 days past due. The debt investments on non-accrual status comprised approximately 1.5% of the Company’s total investment portfolio at fair value and 2.9% of the total investment portfolio at cost.

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 June 30, 2021 and 2020, approximately 2.5% and 5.0%, respectively, of the Company’s total investment income was attributable to PIK interest income and cumulative dividend income not paid currently in cash. For the six months ended June 30, 2021 and 2020, approximately 2.4% and 4.1%, 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.

8

As of September 30, 2020 and December 31, 2019, the Company held 37 and 26 investments, respectively, which contained a PIK provision. As of September 30, 2020, six of the 37 investments with PIK provisions were on non-accrual status. As of December 31, 2019, five of the 26 investments with PIK provisions were on non-accrual status. No PIK interest was recorded on these investments during the year ended December 31, 2019. For the three months ended September 30, 2020 and 2019, the Company capitalized approximately $2.1 million and $1.0 million, respectively, of PIK interest income. For the nine months ended September 30, 2020 and 2019, the Company capitalized approximately $3.2 million and $3.4 million, respectively, of PIK interest income.

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, 2020 and 2019, the Company recognized approximately $0.1 million and $0.4 million, respectively, of non-recurring fee income received from its portfolio companies or other third parties, which accounted for approximately 0.4% and 1.3%, respectively, of the Company’s total investment income during such period. For the nine months ended September 30, 2020 and 2019, the Company recognized approximately $1.1 million and $0.9 million, respectively, of non-recurring fee income received from its portfolio companies or other third parties, which accounted for approximately 1.7% and 1.0%, 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.


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Recent Accounting Pronouncements

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

​

Six Months Ended

​

​

​

June 30, 

​

June 30, 

​

​

    

2021

    

2020

    

2021

    

2020

    

​

​

(dollars in thousands)

​

Interest, fee and dividend income:

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest income

​

$

17,320

​

$

19,702

​

$

33,400

​

$

41,487

​

Dividend income

​

 

5,026

​

 

2,104

​

 

8,978

​

 

3,744

​

Fee income

​

 

150

​

 

441

​

 

390

​

 

1,016

​

Total interest, fee and dividend income

​

$

22,496

​

$

22,247

​

$

42,768

​

$

46,247

​


​

​

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 August 2018,accordance with the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820),” which is intended to improve fair value disclosure requirements by removing disclosuresOriginal Investment Advisory Agreement and the Sub-Advisory Agreement, the Company had historically reimbursed HMS Adviser for any offering costs that are not cost-beneficial, clarifying disclosures’ specific requirements, and adding relevant disclosure requirements. The amendments took effect for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this standard did not have a material impactwere paid on the Company’s condensedbehalf, 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

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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 June 30, 2021 and 2020, approximately 4.8% and 5.9%, 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. For the six months ended June 30, 2021 and 2020, approximately 4.9% and 3.3%, 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.

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 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 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 disclosures.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. The Company’s 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


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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.

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

In March 2020, the FASB issued ASU 2020-04, “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 certain 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. Such contractContract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The Company adopted this amendment in March 2020 and plans to apply the amendments in this update to account for contract modifications due to changes in reference rates if applicable.when LIBOR reference is no longer used. The Company continues to evaluate the impact that the amendments in this update will have on its condensed consolidated financial statements and disclosures when applied.


In May 2020, the SEC adopted rulespublished Release No. 33-10786 (the “SEC“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.subsidiary specific to investment companies, including BDCs. In part, the SECrules 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 SECCompany adopted the rules pursuant to the May 2020 Release is effective January 1, 2021, and early adoption is permitted.during the quarter ended December 31, 2020. The impact of the adoption of the SEC Releasethese rules on the Company’s condensed 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 an 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 implement policies and procedures reasonably designed to manage the fund’s derivatives risks. Funds also will be subject to reporting and recordkeeping requirements regarding their derivatives use. The Company adopted the rules pursuant to the December 2020 Release during the quarter ended March 31, 2021. As the Company is a limited user of derivatives, the impact of the adoption of these rules on the consolidated financial statements was not expected to be material.


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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.


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

9

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 SeptemberJune 30, 20202021 and December 31, 2019,2020, 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 a combination of observable inputs in non-active markets for which sufficient observable inputs were not

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available to determine the fair value of these investments and unobservable (Level 3) inputs.


As a result, all of Septemberthe Company’s Private Loan portfolio investments were categorized as Level 3 as of June 30, 20202021 and December 31, 2019,2020.

As of June 30, 2021 and December 31, 2020, all of the Company’s LMM portfolio investments consisted of illiquid securities issued by private companies. Theprivately held companies and the fair value determination for the LMM portfoliothese investments primarily consisted of unobservable inputs. As a result, all of the Company’s LMM portfolio investments were categorized as Level 3 as of SeptemberJune 30, 20202021 and December 31, 2019.


2020.

As of SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company’s Middle Market portfolio investments consisted primarily of Middle Market investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of (1) observable inputs in non-active markets for which sufficient observable inputs were available to determineand 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, 2020 and December 31, 2019.


As of September 30, 2020 and December 31, 2019, the Company’s Private Loan portfolio investments consisted primarily of debt investments. The fair value determination for Private Loan investmentsSignal CLO 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 Loanin Middle Market portfolio investments were categorized as Level 3 as of SeptemberJune 30, 20202021 and December 31, 2019.

2020.

As of SeptemberJune 30, 20202021 and December 31, 2019, the Company’s Other Portfolio investments consisted primarily of illiquid securities issued by private companies. The Company relies primarily on information provided by managers of private investment funds in valuing these investments and considers whether it is appropriate, in light of all relevant circumstances, to value the Other Portfolio investments at the net asset value (“NAV”) reported by the private investment fund at the time of valuation or to adjust the value to reflect a premium or discount. Additionally, as of September 30, 2020, the Company’s Other Portfolio investments included an investment in subordinated notes(other than the Signal CLO) consisted of a CLO, which are carried at a fair value determinedilliquid securities issued by taking into account information received from a third-party, independent valuation firm. Theprivately held companies and the fair value determination for the Company’s Other Portfoliothese investments primarily consisted of unobservable inputs. As a result, all of the Company’s Other Portfolio investments were categorized as Level 3 as of SeptemberJune 30, 20202021 and December 31, 2019.

10


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.

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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;
•External occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company, including but not limited to impacts from the coronavirus (“COVID-19”) pandemic and oil price volatility;
•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 type of investment, as of September 30, 2020 according to the fair value hierarchy (dollars in thousands):
 Fair Value Measurements
 Level 1Level 2Level 3Total
First lien secured debt investments$— $— $676,882 $676,882 
Second lien secured debt investments— — 35,505 35,505 
Unsecured debt investments— — 12,789 12,789 
Equity investments (1)
— — 177,482 177,482 
Total$— $— $902,658 $902,658 
(1) Includes the Company’s investments in CLO subordinated notes. (See Note 4 — Investment in HMS-ORIX SLF LLC)

The following table presents fair value measurements of the Company’s investments, by type of investment, as of December 31, 2019 according to the fair value hierarchy (dollars in thousands):
 Fair Value Measurements
 Level 1Level 2Level 3Total
First lien secured debt investments$— $— $800,361 $800,361 
Second lien secured debt investments— — 40,646 40,646 
Unsecured debt investments— — 13,783 13,783 
Equity investments (1)
— — 172,807 172,807 
Total$— $— $1,027,597 $1,027,597 
(1) Includes the Company’s investment in CLO subordinated notes. (See Note 4 — Investment in HMS-ORIX SLF LLC)


11

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, 2020 (dollars in thousands):
 Fair Value Measurements
 Level 1Level 2Level 3Total
LMM portfolio investments$— $— $219,910 $219,910 
Private Loan investments— — 445,055 445,055 
Middle Market investments— — 188,358 188,358 
Other Portfolio investments (1)
— — 49,335 49,335 
Total$— $— $902,658 $902,658 
(1) Includes the Company’s investments in CLO subordinated notes. (See Note 4 — Investment in HMS-ORIX SLF LLC)

The following table presents fair value measurements of the Company’s investments, by investment classification, segregated by the level within the fair value hierarchy as of December 31, 2019 (dollars in thousands):
 Fair Value Measurements
 Level 1Level 2Level 3Total
LMM portfolio investments$— $— $225,121 $225,121 
Private Loan investments— — 481,152 481,152 
Middle Market investments— — 272,428 272,428 
Other Portfolio investments (1)
— — 48,896 48,896 
Total$— $— $1,027,597 $1,027,597 
(1) Includes the Company’s investment in CLO subordinated notes. (See Note 4 — Investment in HMS-ORIX SLF LLC)

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, 2019, which was filed with the SEC on March 19, 2020) 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.



12

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 SeptemberJune 30, 2020 (dollars in thousands):

 Fair ValueValuation
Technique		Significant Unobservable InputsRange
Weighted
Average (2)
LMM equity investments$95,531 Discounted Cash FlowsWACC11.7% - 19.9%14.0%
Market Approach/Enterprise Value
EBITDA Multiples (1)
4.0x - 10.5x6.8x
LMM debt investments124,379 Discounted Cash FlowsExpected Principal Recovery78.0% - 100.0%99.2%
  Risk Adjusted Discount Factor8.0% - 21.1%13.6%
Private Loan debt investments378,236 Discounted Cash FlowsExpected Principal Recovery1.1% - 100.0%99.6%
Risk Adjusted Discount Factor5.9% - 26.6%10.2%
38,521 Market ApproachThird Party Quotes85.5% - 100.0%95.9%
Private Loan equity investments28,298 Market Approach/Enterprise Value
EBITDA Multiples (1)
4.9x - 11.9x7.8x
Discounted Cash FlowsWACC11.2% - 16.4%12.9%
Middle Market debt investments9,556 Discounted Cash FlowsExpected Principal Recovery100.0% - 100.0%100.0%
Risk Adjusted Discount Factor7.9% - 7.9%7.9%
174,484 Market ApproachThird Party Quotes44.7% - 100.0%89.0%
Middle Market equity investments4,318 Market ApproachThird Party Quotes$0.0 - $49.6$48.1
Discounted Cash FlowsWACC11.8% - 18.0%11.8%
Market Approach/Enterprise Value
EBITDA Multiples (1)
3.9x - 7.7x7.7x
Other Portfolio investments (3)
30,924 Market Approach
NAV (1)
73.9% - 108.8%94.5%
18,411 Discounted Cash FlowsConstant Default Rate1.0%1.0%
Constant Prepayment Rate20.0%20.0%
Reinvestment Spread3.3%3.3%
Reinvestment Price99.5%99.5%
Recovery Rate70.0%70.0%
Yield to Maturity13.2%13.2%
$902,658 
(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 CLO subordinated notes. (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 of2021 and December 31, 2019 (dollars in thousands):2020:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

   

Fair Value as of

   

​

   

​

   

​

   

​

   

​

​

​

​

June 30, 

​

​

​

​

​

​

​

​

​

​

 

Type of

​

2021

​

​

​

Significant

​

​

​

Weighted

​

​

 

Investment

 

(in thousands)

​

Valuation Technique

​

Unobservable Inputs

​

Range

​

Average(3)

​

Median(3)

​

Equity investments

​

$

187,597

 

Discounted cash flow

 

WACC

 

10.2% - 19.3%

 

13.7

%

14.9

%

​

​

​

​

 

Market comparable / Enterprise Value

 

EBITDA multiple(1)

 

4.9x - 9.0x(2)

 

7.3x

 

6.4x

​

Debt investments

​

​

559,089

 

Discounted cash flow

 

Risk adjusted discount factor

 

5.6% - 15.7%(2)

 

9.7

%

9.3

%

​

​

​

​

​

​

 

Expected principal recovery percentage

 

0.0% - 100.0%

 

99.7

%

100.0

%

Debt investments

​

​

225,317

 

Market approach

 

Third‑party quote

 

43.9 - 101.2

 

95.6

 

99.4

​

Total Level 3 investments

​

$

972,003

​

​

​

​

​

​

​

​

​

​

​

 Fair ValueValuation
Technique		Significant Unobservable InputsRange
Weighted
Average (2)
LMM equity investments$95,554 Discounted Cash FlowsWACC11.0% - 18.3%13.6%
Market Approach/Enterprise Value
EBITDA Multiples (1)
4.5x - 12.0x6.9x
LMM debt investments129,567 Discounted Cash FlowsExpected Principal Recovery100.0% - 100.0%100.0%
   Risk Adjusted Discount Factor8.0% - 19.0%12.1%
Private Loan debt investments403,194 Discounted Cash FlowsExpected Principal Recovery1.4% - 100.0%99.9%
Risk Adjusted Discount Factor4.6% - 21.7%7.9%
57,242 Market ApproachThird Party Quotes92.5% - 101.0%97.2%
Private Loan equity investments20,716 Market Approach/Enterprise Value
EBITDA Multiples (1)
4.9x - 9.5x7.8x
Discounted Cash FlowsWACC10.7% - 14.6%12.1%
Middle Market debt investments250,194 Market ApproachThird Party Quotes28.1% - 101.0%92.0%
14,593 Discounted Cash FlowsExpected Principal Recovery52.7% - 100.0%76.1%
Risk Adjusted Discount Factor8.6% - 38.0%19.9%
Middle Market equity investments7,641 Market ApproachThird Party Quotes$0.00 - $200.0$104.9
Discounted Cash FlowsWACC17.5% - 18.0%17.5%
Market Approach/Enterprise Value
EBITDA Multiples (1)
3.9x - 5.5x5.5x
Other Portfolio investments (3)
29,868 Market Approach
NAV (1)
80.7% - 118.3%99.9%
19,028 Discounted Cash FlowsConstant Default Rate1.0%1.0%
Constant Prepayment Rate20.0%20.0%
Reinvestment Spread3.4%3.4%
Reinvestment Price99.5%99.5%
Recovery Rate70.0%70.0%
Yield to Maturity12.0%12.0%
$1,027,597 
(1)EBITDA may include proforma 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 - 15.0x and the range for risk adjusted discount factor is 4.8% - 38.0%.
(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) May include pro forma adjustments and/or other add-backs
(1)EBITDA may include proforma 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%.
(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 CLO subordinated notes. (See Note 4 — Investment in HMS-ORIX SLF LLC)

13

48


Table of Contents

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

​

​

​

​

The following table providestables provide a summary of changes in fair value of the Company’s Level 3 portfolio investments for the nine monthssix-month periods ended SeptemberJune 30, 2021 and 2020 (dollars(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

​

​

​

 

June 30, 

Investment

    

2020

    

Hierarchy

    

Repayments

    

Investments

    

to Realized

    

(Depreciation)

    

Other(1)

    

2021

Debt

​

$

638,423

​

$

—

​

$

(95,997)

​

$

235,609

​

$

3,165

​

$

4,183

​

$

(976)

​

$

784,406

Equity(2)

​

​

185,041

​

​

—

​

​

(12,997)

​

​

4,750

​

​

993

​

​

6,751

​

​

976

​

​

185,515

Equity Warrant

​

​

2,058

​

​

—

​

​

—

​

​

—

​

​

—

​

​

24

​

​

—

​

​

2,082

​

​

$

825,522

​

$

—

​

$

(108,994)

​

$

240,359

​

$

4,158

​

$

10,958

​

$

—

​

$

972,003

Type of InvestmentDecember 31, 2019 Fair ValuePIK 
Interest
Accrual
New Investments(1)
Sales/ Repayments
Net Change in Unrealized
Appreciation
(Depreciation) (2)
Net Realized Gain (Loss)September 30, 2020 Fair Value
LMM Equity$95,554 $— $4,451 $(19)$(3,422)$(1,033)$95,531 
LMM Debt129,567 220 13,503 (15,333)(533)(3,045)124,379 
Private Loan Equity20,716 100 12,350 (32)(4,836)— 28,298 
Private Loan Debt460,436 2,378 32,758 (63,473)(15,254)(88)416,757 
Middle Market Debt264,787 532 12,578 (69,776)5,119 (29,200)184,040 
Middle Market Equity7,641 — — — (1,106)(2,217)4,318 
Other Portfolio (3)
48,896 — 1,225 510 (1,318)22 49,335 
Total$1,027,597 $3,230 $76,865 $(148,123)$(21,350)$(35,561)$902,658 
(1) Column includes changes to investments due to the net accretion of discounts/premiums and amortization of fees.
(2) Column does not include unrealized appreciation (depreciation) on unfunded commitments of approximately $(1.7) million.
(3)Includes the Company’s investments in CLO subordinated notes. (See Note 4 — Investment in HMS-ORIX SLF LLC)

The following table provides a summary of changes in fair value of the Company’s Level 3 portfolio investments for the nine months ended September 30, 2019 (dollars in thousands):
Type of InvestmentDecember 31, 2018 Fair ValuePIK 
Interest
Accrual
New Investments(1)
Sales/ Repayments
Net Change in Unrealized
Appreciation
(Depreciation) (2)
Net Realized Gain (Loss)September 30, 2019 Fair Value
LMM Equity$79,641 $174 $5,130 $(1,198)$6,519 $148 $90,414 
LMM Debt130,633 220 15,709 (16,319)(1,032)10 129,221 
Private Loan Equity16,905 56 2,366 (2,128)4,543 1,026 22,768 
Private Loan Debt392,034 2,543 141,698 (92,457)10,628 (2,224)452,222 
Middle Market Debt428,569 358 29,959 (134,202)(6,572)(16,323)301,789 
Middle Market Equity5,702 — 3,679 — (1,524)— 7,857 
Other Portfolio (3)
53,084 — 30,834 (33,710)(363)(634)49,211 
Total$1,106,568 $3,351 $229,375 $(280,014)$12,199 $(17,997)$1,053,482 
(1) Column includes changes to investments due to the net accretion of discounts/premiums and amortization of fees.
(2) Column does not include unrealized appreciation (depreciation) on unfunded commitments of approximately $0.5 million.
(3) Includes the Company’s investments in both HMS-ORIX and CLO subordinated notes. (See Note 4 — Investment in HMS-ORIX SLF LLC)

The total net change in unrealized appreciation (depreciation) for the nine months ended September 30, 2020 and 2019 included in the Condensed Consolidated Statements of Operations that related to Level 3 assets still held as of September 30, 2020 and 2019 was approximately $(59.3) million and $3.1 million, respectively. For the nine months ended September 30, 2020 and 2019, there were no transfers between Level 2 and Level 3 portfolio investments.

Portfolio Investment Composition

The composition of the Company’s investments as of September 30, 2020, at cost and fair value, was as follows (dollars in thousands):
 Investments at CostCost Percentage of Total PortfolioInvestments at Fair ValueFair Value
Percentage of
Total Portfolio
First lien secured debt investments$725,875 77.5 %$676,882 75.0 %
Second lien secured debt investments36,581 3.9 35,505 3.9 
Unsecured debt investments12,817 1.4 12,789 1.4 
Equity investments (1)
159,518 17.0 176,242 19.5 
Equity warrants1,670 0.2 1,240 0.2 
Total$936,461 100.0 %$902,658 100.0 %
(1)
(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

​

​

​

​

June 30, 

Investment

​

2019

​

Hierarchy

​

Repayments

​

Investments

 

to Realized

​

(Depreciation)

​

Other(1)

​

2020

Debt

​

$

848,265

​

$

—

​

$

(150,864)

​

$

49,800

​

$

3,322

​

$

(49,505)

​

$

(11,560)

​

$

689,460

Equity(2)

​

 

177,993

​

 

—

​

​

(671)

​

​

18,094

​

​

—

​

​

(20,173)

​

​

11,560

​

​

186,802

Equity Warrant

​

 

1,339

​

 

—

​

​

—

​

​

—

​

​

—

​

​

(23)

​

​

—

​

​

1,316

​

​

$

1,027,597

​

$

—

​

$

(151,535)

​

$

67,894

​

$

3,322

​

$

(69,701)

​

$

—

​

$

877,578

(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 June 30, 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 June 30, 2021

​

Fair Value

 

(Level 1)

​

(Level 2)

 

(Level 3)

LMM portfolio investments

​

$

231,308

​

$

—

​

$

—

​

$

231,308

Middle Market portfolio investments

​

 

222,463

​

 

—

​

 

—

​

 

222,463

Private Loan portfolio investments

​

 

471,410

​

 

—

​

 

—

​

 

471,410

Other Portfolio investments (1)

​

 

46,822

​

 

—

​

 

—

​

 

46,822

Total investments

​

$

972,003

​

$

—

​

$

—

​

$

972,003

​

(1) Includes the Company's investment in CLO subordinated notes. (See Note 4D — Investment in HMS-ORIX SLF LLCSignal Peak CLO 7, Ltd.)

​

14

49


Table of Contents

The composition of the Company’s investments as of December 31, 2019, at cost and fair value, was as follows (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

​

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

 Investments at CostCost Percentage of Total PortfolioInvestments at Fair ValueFair Value
Percentage of
Total Portfolio
First lien secured debt investments$831,414 79.9 %$800,361 77.9 %
Second lien secured debt investments48,715 4.7 40,646 4.0 
Unsecured debt investments14,097 1.4 13,783 1.3 
Equity investments (1)
144,159 13.8 170,961 16.6 
Equity warrants1,670 0.2 1,846 0.2 
Total$1,040,055 100.0 %$1,027,597 100.0 %

(1) Includes the Company’sCompany's investment in CLO subordinated notes. (See Note 4D — Investment in HMS-ORIX SLF LLC)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 $1 million to $15 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 $1 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 income in any given year could also be highly concentrated among several portfolio companies. For the three and six months ended June 30, 2021 and 2020, the Company did not record investment income from any single portfolio company in excess of 10% of total investment income.


50

Table of Contents

The compositionfollowing tables provide a summary of the Company’s investments by geographic region as of September 30, 2020, at cost and fair 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 CostCost Percentage of Total PortfolioInvestments at Fair ValueFair Value
Percentage of
Total Portfolio
Southeast$211,802 24.0 %$209,114 24.5 %
Midwest202,234 23.0 205,889 24.1 
Southwest205,083 23.3 190,936 22.4 
Northeast115,600 13.1 113,919 13.4 
West122,897 13.9 110,425 12.9 
Non-United States24,003 2.7 23,040 2.7 
Total$881,619 100.0 %$853,323 100.0 %
The composition of the Company’s investments by geographic region as of December 31, 2019, at cost and fair 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 CostCost Percentage of Total PortfolioInvestments at Fair ValueFair Value
Percentage of
Total Portfolio
Midwest$223,575 22.7 %$229,246 23.4 %
Southeast215,254 21.8 218,819 22.4 
Southwest207,284 21.0 202,918 20.7 
West183,955 18.6 174,871 17.9 
Northeast130,531 13.2 127,098 13.0 
Non-United States26,368 2.7 25,749 2.6 
Total$986,967 100.0 %$978,701 100.0 %


15

The composition of the Company’s total investments by industry as of September 30, 2020 and December 31, 2019, at cost and fair value, was as follows (since the Other Portfolio investments do not represent a single industry, this information excludes Other Portfolio investments):
CostFair Value
September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Machinery6.0 %5.9 %8.0 %7.7 %
Commercial Services and Supplies7.3 8.5 7.0 8.2 
Aerospace and Defense5.7 5.0 5.8 5.1 
Oil, Gas, and Consumable Fuels6.2 6.3 5.7 6.3 
IT Services4.7 4.5 4.8 4.5 
Communications Equipment5.6 5.0 4.7 4.4 
Diversified Telecommunication Services4.8 4.4 4.7 4.3 
Health Care Providers and Services5.3 4.7 4.5 4.2 
Internet Software and Services4.8 3.9 4.3 3.8 
Construction and Engineering3.1 3.3 3.8 3.4 
Distributors3.6 2.5 3.7 2.4 
Leisure Equipment and Products3.3 4.0 3.5 3.6 
Trading Companies and Distributors3.2 1.6 3.2 1.6 
Specialty Retail3.6 3.3 2.9 3.0 
Energy Equipment and Services2.8 2.8 2.7 2.6 
Media2.2 4.2 2.5 4.5 
Transportation Infrastructure2.4 2.3 2.4 2.3 
Diversified Consumer Services2.1 2.4 2.3 1.6 
Hotels, Restaurants, and Leisure3.1 2.8 2.2 2.7 
Computers and Peripherals1.0 2.7 2.1 3.8 
Diversified Financial Services1.8 1.7 1.9 1.7 
Wireless Telecommunication Services1.7 1.5 1.7 1.5 
Containers and Packaging1.5 1.3 1.7 1.4 
Software1.1 0.8 1.5 1.1 
Food & Staples Retailing1.4 1.2 1.4 1.2 
Household Durables1.4 1.2 1.3 1.1 
Internet and Catalog Retail1.4 1.7 1.3 1.4 
Professional Services2.0 1.8 1.1 1.5 
Construction Materials0.7 0.9 1.1 1.3 
Other (1)
6.2 7.8 6.2 7.8 
Total100.0 %100.0 %100.0 %100.0 %
(1) Includes various industries with each industry individually less than 1.0% of the total combined LMM, Middle Market and Private Loan portfolios as of June 30, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments which are discussed further below):

​

​

​

​

​

​

​

​

​

​

​

​

​

    

As of June 30, 2021

 

​

​

LMM (a)

​

Middle Market

​

Private Loan

 

​

​

(dollars in millions)

 

Number of portfolio companies

​

​

35

 

​

30

 

​

47

​

Fair value

​

$

231.3

 

$

222.5

 

$

471.4

​

Cost

​

$

201.7

 

$

243.8

 

$

478.3

​

Debt investments as a % of portfolio (at cost)

​

​

67.2

%

​

95.0

%

​

93.6

%

Equity investments as a % of portfolio (at cost)

​

​

32.8

%

​

5.0

%

​

6.4

%

% of debt investments at cost secured by first priority lien

​

​

99.8

%

​

99.6

%

​

94.7

%

Weighted-average annual effective yield(b)

​

​

10.9

%

​

7.6

%

​

8.8

%

Average EBITDA(c)

​

$

6.4

 

$

82.3

 

$

41.6

​

(a)At June 30, 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 10%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of June 30, 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 two 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 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

51

Table of Contents

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 June 30, 2021, the Company had Other Portfolio investments in five companies, collectively totaling approximately $46.8 million in fair value and approximately $50.3 million in cost basis and which comprised approximately 4.8% of the Company’s Investment Portfolio at fair value. As of December 31, 2020, the Company had Other Portfolio investments in 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 Company’s Investment Portfolio at fair value.

The following tables summarize the composition of the Company’s total combined LMM portfolio investments.investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of June 30, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments).

​

​

​

​

​

​

​

Cost:

 

June 30, 2021

 

December 31, 2020

​

First lien debt

 

85.7

%  

79.5

%

Equity

 

11.5

%  

13.9

%

Second lien debt

 

1.1

%  

4.6

%

Equity warrants

 

0.2

%  

0.2

%

Other

 

1.5

%  

1.8

%

​

 

100.0

%  

100.0

%

​

​

​

​

​

​

​

Fair Value:

 

June 30, 2021

 

December 31, 2020

​

First lien debt

 

82.3

%  

76.0

%

Equity

 

14.9

%  

17.3

%

Second lien debt

 

1.1

%  

4.6

%

Equity warrants

 

0.2

%  

0.3

%

Other

 

1.5

%  

1.8

%

​

 

100.0

%  

100.0

%

​

The following tables summarize the composition of the Company’s total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of June 30, 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:

 

June 30, 2021

 

December 31, 2020

​

​

Southwest

 

24.2

%  

24.9

%

 

Northeast

 

20.3

%  

18.9

%

 

Southeast

 

19.9

%  

18.8

%

 

West

 

19.6

%  

17.5

%

 

Midwest

 

14.3

%  

18.2

%

 

Canada

 

1.7

%  

1.7

%

 

​

 

100.0

%  

100.0

%

 

​


52

Table of Contents

​

​

​

​

​

​

Fair Value:

 

June 30, 2021

 

December 31, 2020

​

Southwest

 

25.3

%

25.7

%

Northeast

 

20.6

%

19.2

%

West

 

18.7

%

16.3

%

Southeast

 

18.2

%

17.1

%

Midwest

 

15.6

%

20.1

%

Canada

 

1.6

%

1.6

%

​

 

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 Private Loan portfolio investments by industry at cost and fair value as of June 30, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments).

​

​

​

​

​

​

​

​

Cost:

​

June 30, 2021

​

​

December 31, 2020

​

Aerospace & Defense

 

7.6

%  

​

8.4

%

Internet Software & Services

 

6.9

%  

​

5.4

%

Commercial Services & Supplies

 

5.9

%  

​

8.1

%

Machinery

 

5.6

%  

​

6.5

%

Diversified Telecommunication Services

 

5.5

%  

​

5.4

%

Oil, Gas & Consumable Fuels

 

5.2

%  

​

7.0

%

Specialty Retail

 

4.9

%  

​

4.5

%

Communications Equipment

 

4.8

%  

​

5.7

%

Health Care Providers & Services

 

4.4

%  

​

3.4

%

Leisure Equipment & Products

 

4.0

%  

​

3.5

%

Construction & Engineering

 

3.7

%  

​

3.4

%

IT Services

 

3.3

%  

​

4.0

%

Professional Services

 

3.0

%  

​

2.2

%

Hotels, Restaurants & Leisure

 

2.7

%  

​

3.1

%

Building Products

 

2.6

%  

​

0.6

%

Diversified Financial Services

 

2.6

%  

​

3.1

%

Distributors

 

2.5

%  

​

3.1

%

Transportation Infrastructure

 

2.3

%  

​

2.6

%

Media

 

2.1

%  

​

2.5

%

Diversified Consumer Services

 

1.9

%  

​

0.7

%

Software

 

1.7

%  

​

1.2

%

Energy Equipment & Services

 

1.6

%  

​

0.9

%

Textiles, Apparel & Luxury Goods

 

1.5

%  

​

0.9

%

Food Products

 

1.4

%  

​

0.7

%

Containers & Packaging

 

1.3

%  

​

1.6

%

Food & Staples Retailing

 

1.3

%  

​

1.5

%

Internet & Catalog Retail

​

1.3

%  

​

1.5

%

Trading Companies & Distributors

​

1.2

%  

​

1.6

%

Household Products

​

1.2

%  

​

—

%

Computers & Peripherals

​

1.0

%  

​

1.1

%

Electrical Equipment

​

1.0

%  

​

0.4

%

Air Freight & Logistics

​

1.0

%  

​

1.1

%

Electronic Equipment, Instruments & Components

​

0.8

%  

​

1.5

%

Other (1)

​

2.2

%  

​

2.8

%

​

 

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.

​

53

Table of Contents

​

​

​

​

​

​

​

Fair Value:

​

June 30, 2021

​

​

December 31, 2020

​

Aerospace & Defense

 

7.5

%  

​

8.5

%

Machinery

 

7.3

%  

​

8.5

%

Internet Software & Services

 

6.4

%  

​

4.8

%

Commercial Services & Supplies

 

5.7

%  

​

7.9

%

Diversified Telecommunication Services

 

5.4

%  

​

5.2

%

Specialty Retail

 

4.8

%  

​

4.1

%

Health Care Providers & Services

 

4.4

%  

​

3.6

%

Oil, Gas & Consumable Fuels

 

4.4

%  

​

6.1

%

Construction & Engineering

 

4.3

%  

​

4.1

%

Leisure Equipment & Products

 

4.1

%  

​

3.5

%

Communications Equipment

 

3.9

%  

​

4.6

%

IT Services

 

3.3

%  

​

4.0

%

Diversified Financial Services

 

2.7

%  

​

3.3

%

Building Products

 

2.6

%  

​

0.7

%

Distributors

 

2.6

%  

​

3.1

%

Transportation Infrastructure

 

2.4

%  

​

2.7

%

Software

 

2.2

%  

​

1.7

%

Professional Services

 

2.2

%  

​

1.2

%

Diversified Consumer Services

 

2.2

%  

​

0.9

%

Media

 

2.2

%  

​

2.7

%

Computers & Peripherals

 

2.1

%  

​

2.3

%

Hotels, Restaurants & Leisure

 

1.8

%  

​

2.1

%

Containers & Packaging

 

1.6

%  

​

1.8

%

Textiles, Apparel & Luxury Goods

 

1.5

%  

​

0.8

%

Food Products

 

1.3

%  

​

0.4

%

Food & Staples Retailing

 

1.3

%  

​

1.6

%

Internet & Catalog Retail

​

1.3

%  

​

1.4

%

Energy Equipment & Services

​

1.2

%  

​

0.5

%

Trading Companies & Distributors

​

1.2

%  

​

1.6

%

Household Products

​

1.2

%  

​

—

%

Air Freight & Logistics

​

1.1

%  

​

1.2

%

Electrical Equipment

​

1.0

%  

​

0.5

%

Construction Materials

​

0.9

%  

​

1.3

%

Electronic Equipment, Instruments & Components

​

0.4

%  

​

1.2

%

Other (1)

​

1.5

%  

​

2.1

%

​

 

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 June 30, 2021 and December 31, 2020, the Company had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.

3.         Unconsolidated Significant Subsidiaries

In evaluating its unconsolidated controlled portfolio companies in accordance with Regulation S-X, there are two tests that the Company must utilize to determine if any of the Company’s Control Investments (as defined in Note 4 —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 dividing the Company’s investment in the Control Investment by the value of the Company’s total investments. The income test is generally measured by dividing the absolute value of the combined sum of total investment income, net realized gain (loss) and net unrealized appreciation (depreciation) from the relevant Control Investment for the period being tested by the absolute value of the Company’s change in net assets resulting from operations for the same period.

54

Table of Contents

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 HMS-ORIX SLF LLC


a quarterly report, respectively, if certain thresholds of the investment or income tests are exceeded and the unconsolidated portfolio company qualifies as a significant subsidiary.

As of June 30, 2021 and December 31, 2020, the Company had no single investment that qualified as a significant subsidiary under either the investment or income tests.

Note D – Investment in 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 invested 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 had 50% voting control of HMS-ORIX and together were required to agree on all portfolio and investment decisions as well as all other significant actions for HMS-ORIX. The Company did not have sole control of significant actions of HMS-ORIX and, accordingly, did not consolidate the operations of HMS-ORIX within the consolidated financial statements. The Company and Orix 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).


On May 8, 2019, HMS-ORIX Holdings I LLC, a wholly owned subsidiary of HMS-ORIX, which held all of the investments 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 the Cayman Islands (“Mariner CLO”). In connection with the HMS-ORIX Holdings Merger, HMS-ORIX made certain distributions to its members. The Company used the cash proceeds it received from the HMS-ORIX Holdings Merger to purchase an aggregate principal amount of approximately $25.9 million of the “Subordinated Notes” (the equity tranche of the CLO’s securities) due in 2032 issued by Mariner CLO in connection with an offering of $405.9 million aggregate principal amount of notes (the “CLO Offering”).notes. After distribution to its members of

16

residual cash remaining after the HMS-ORIX Holdings Merger, HMS-ORIX was fully liquidated on September 26, 2019. On October 8, 2020, Mariner CLO changed its name to Signal Peak CLO 7, Ltd. (“Signal Peak CLO”).

For

During the ninethree months ended SeptemberJune 30, 2019,2021 and 2020, respectively, the Company recognized approximately $0.6 million and $0.5 million of dividendinterest income in respect of its investment in HMS-ORIX.Signal Peak CLO. During the six months ended June 30, 2021 and 2020, respectively, the Company recognized approximately $1.3 million and $1.0 million of interest income in respect of its investment in Signal Peak CLO.

NOTE E—DEBT

Summary of debt as of June 30, 2021 is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Outstanding Balance

​

Unamortized Debt Issuance Costs

​

Recorded Value

​

Estimated Fair Value (1)

​

(dollars in thousands)

TIAA Credit Facility

​

$

87,000

​

$

(401)

​

$

86,599

​

$

86,599

JPM SPV Facility

​

​

239,688

​

​

(2,953)

​

​

236,735

​

​

236,735

Main Street Term Loan

​

​

40,000

​

​

(366)

​

​

39,634

​

​

39,634

Total Debt

​

$

366,688

​

$

(3,720)

​

$

362,968

​

$

362,968


(1)

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

The following table shows

55

Table of Contents

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

Deutsche Bank Credit Facility

​

​

257,816

​

​

(2,200)

​

​

255,616

​

​

255,616

Total Debt

​

$

301,816

​

$

(2,691)

​

$

299,125

​

$

299,125

(1)

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

Summarized interest expense on the summarized financial information for HMS-ORIXCompany’s debt for the three and ninesix months ended SeptemberJune 30, 2019 (dollars in thousands):2021 and 2020 is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 

​

Six Months Ended June 30,

​

    

2021

    

2020

    

2021

    

2020

​

​

(dollars in thousands)

TIAA Credit Facility

​

$

568

​

$

807

​

$

956

​

$

1,947

Deutsche Bank Credit Facility

​

​

—

​

​

3,467

​

​

1,046

​

​

7,556

JPM SPV Facility

​

​

2,206

​

​

—

​

​

3,572

​

​

—

Main Street Term Loan

​

​

526

​

​

—

​

​

890

​

​

—

Total Interest Expense

​

$

3,300

​

$

4,274

​

$

6,464

​

$

9,503

HMS-ORIX SLF LLC
Statement of Operations
(dollars in thousands)
Three Months Ended September 30, 2019Nine Months Ended 
 September 30, 2019
Investment income
Interest income$2 $3,030 
Dividend income— — 
Fee income— — 
Other income— — 
Total investment income2 3,030 
Expenses
Interest expense— 2,130 
Other expenses— — 
General and administrative expenses60 96 
Total expenses60 2,226 
Net investment income (loss)(58)804 
Net realized loss from investments— (1,514)
Net realized loss(58)(710)
Net change in unrealized appreciation on investments— 6,647 
Net increase (decrease) in net assets resulting from operations$(58)$5,937 

Note 5 — Borrowings
A BDC is permitted, under specified conditions, to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that its asset coverage, as that term is defined in the 1940 Act, immediately after each such issuance is at least equal to the percentage set forth in Section 61 of the 1940 Act that is applicable to the BDC at such time. Prior to the enactment of the Small Business

1.         TIAA Credit Availability Act (the “SBCAA”) in March 2018, the asset coverage requirement applicable to BDCs was 200%. The SBCAA permits a BDC to be subject to an asset coverage requirement of 150% so long as it meets certain disclosure requirements and obtains certain approvals and, in the case of an unlisted BDC, makes an offer to repurchase the shares of its stockholders as of the date of the requisite approval. The reduced asset coverage requirement permits a BDC to have a ratio of total consolidated assets to outstanding indebtedness of 2:1 as compared to a maximum of 1:1 under the 200% asset coverage requirements. Effectiveness of the reduced asset coverage requirements to a BDC requires approval by either (1) a “required majority” (as defined in Section 57(o) of the 1940 Act) of such BDC’s board of directors with effectiveness one year after the date of such approval or (2) a majority of the votes cast at a special or annual meeting of such BDC’s stockholders at which a quorum is present, which is effective the day after such stockholder approval. The Company has not requested or obtained any such approval and, as a result, remains subject to the 200% asset coverage requirement.


Facility

On March 6, 2017, the Company entered into an amended and restated senior secured revolving credit agreement (as amended, the “TIAA Credit Facility”) with TIAA, FSB (formerly known as EverBank Commercial Finance, Inc. prior to June 18, 2018) (“TIAA Bank”), as administrative agent, and with TIAA Bank and other financial institutions as lenders. The TIAA Credit Facility as amended most recently on March 5, 2020, 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 revolver commitments terminaterevolving period under the TIAA Credit Facility expires on March 6, 2022, and all outstanding advances are payable on March 6, 2023, with two one-year extension options available for both such dates, subject to lender consent. Borrowings under the TIAA Credit Facility bear interest, subject to the Company’s election, on a per annum basis at a rate equal to (i) LIBOR plus 2.60% or (ii) the base rate plus 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) LIBOR plus 1.0%. As of September 30, 2020, the one-month LIBOR was 0.15%. Additionally,

17

the Company pays an annual unused commitment fee of 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. For

The TIAA Credit Facility permits the nine months ended Septembercreation of certain “Structured Subsidiaries,” which are not guarantors under the TIAA Credit Facility and which are permitted to incur debt outside of the TIAA Credit Facility. Borrowings under the TIAA Credit Facility are secured by all of the Company’s assets, other than the assets of 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 TIAA Credit Facility contains affirmative and negative covenants usual and customary for credit facilities of this nature, including: (i) maintaining a minimum interest coverage ratio of at least 2.00 to 1.00; (ii) maintaining an asset coverage ratio of at least 2.10 to 1.00; and (iii) maintaining a minimum consolidated tangible net worth, excluding Structured Subsidiaries, of at least the greater of (a) the aggregate amount of the revolver commitments or (b) $50.0 million. Further, the TIAA 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 TIAA Credit Facility. Additionally, the Company must provide information to TIAA 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 TIAA Credit Facility). Further, the credit

56

Table of Contents

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 TIAA Credit Facility requires the Company to obtain written approval from the administrative agent prior to entering into any material amendment, waiver or other modification of any provision of the Investment Advisory Agreement. See “Note K – Subsequent Events” below for a discussion of amendments to the TIAA Credit Facility made subsequent to June 30, 2020,2021.

As of June 30, 2021, the interest rate on the TIAA Credit Facility was 2.69%. The average cost of borrowings on the TIAA Credit Facility, excluding amortization of deferred financing costs and unused fees, was approximately 3.66%2.71% and 3.11% per annum. annum for the three months ended June 30, 2021 and 2020, respectively. The average costs of borrowings was approximately 2.70% and 3.77% per annum for the six months ended June 30, 2021 and 2020, respectively. As of SeptemberJune 30, 2020,2021, the Company was not aware of any instances of noncompliance with covenants related to the TIAA Credit Facility.


2.         JPM SPV Facility

On 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 June 30, 2021, the interest rate on the JPM SPV Facility, excluding amortization of deferred financing costs and unused fees, was 3.10%. The average cost of borrowings on the JPM SPV Facility, excluding amortization of deferred financing costs and unused fees, was approximately 3.10% per annum for each of the three and six months ended June 30, 2021. As of June 30, 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 an amended and restated credit agreement (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. On April 24, 2020, the Deutsche Bank Credit Facility was amended to, among other things, terminate the revolver commitments effective on April 24, 2020 and begin the amortization period, which will end onthrough November 20, 2022, the maturity date. DuringOn February 3, 2021, the amortization period, (i) no further advances or reinvestment of principal collections are permitted, and all monthly interest and principal proceeds fromtotal amount outstanding on the Company’s investments securingfacility under the Deutsche Bank Credit Facility (net of certain fees and expenses) will be applied againstwas fully repaid. As a result, the outstanding advancesCompany recorded a loss on the facility, (ii) outstanding advances bear interest on a per annum basis at a rate equalextinguishment of debt in the amount of $2.1 million, which represented the write-off of the unamortized deferred financing fees related to the sum of one-month LIBOR plus the applicable margin of (a) 2.85% if the effective advance rate (as defined in the Deutsche Bank Credit Facility) is greater than 50.0% or (b) 2.60% if the effective advance rate is less than 50.0% and (iii) HMS Funding incurs an administrative agent feeFacility.

57

Table of (a) 0.97% per annum if the effective advance rate is greater than 50.0% or (b) 0.83% per annum if the effective advance rate is less than 50.0%. As of September 30, 2020, the one-month LIBOR was 0.15%. HMS Funding incurs no undrawn fees or utilization fees during the amortization period. Contents

For the ninethree months ended SeptemberJune 30, 2020, the average cost of borrowings on the Deutsche Bank Credit Facility, excluding amortization of deferred financing costs, was approximately 4.29%3.22% per annum. For the six months ended June 30, 2021 and 2020, the average cost of borrowings on the Deutsche Bank Credit Facility was approximately 2.93% and 3.61% per annum, respectively.

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 SeptemberJune 30, 2020,2021, 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, as of June 30, 2021, may be prepaid any time after January 27, 2023. As of June 30, 2021, the Company was not aware of any instances of noncompliance with covenants related to the Deutsche Bank Credit Facility.Main Street Term Loan. See “Note K – Subsequent Events” below for a discussion of amendments to the Main Street Term Loan made subsequent to June 30, 2021.

NOTE F—FINANCIAL HIGHLIGHTS

​

​

​

​

​

​

​

​

​

    

Six Months Ended June 30, 

Per Share Data:

    

2021

    

2020

NAV at the beginning of the period

​

$

7.28

​

$

7.77

Net investment income(1)

​

 

0.33

​

​

0.31

Net realized loss(1)(2)

​

 

(0.04)

​

​

(0.22)

Net unrealized appreciation (depreciation)(2)

​

 

0.16

​

​

(0.90)

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

​

 

0.45

​

​

(0.81)

Dividends paid(1)(3)

​

 

(0.23)

​

​

(0.35)

Other(4)

​

 

0.01

​

​

(0.01)

NAV at the end of the period

​

$

7.51

​

$

6.60

Shares of common stock outstanding at end of period

​

​

79,716,361

​

​

78,317,628

Weighted average shares of common stock outstanding

​

 

79,791,881

​

​

78,811,735


(1)Based on weighted-average number of common shares outstanding for the period.
(2)Net realized gains or losses, net unrealized appreciation or depreciation, and income taxes can fluctuate significantly from period to period.
(3)Dividends paid represent the stockholder distributions declared during the period.
(4)Includes the impact of the different share amounts as a result of calculating 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.
As of September 30, 2020, the Company had borrowings of $90.0 million outstanding on the TIAA Credit Facility and had borrowings of $285.1 million outstanding on the Deutsche Bank Credit Facility, both of which the Company estimated approximated fair value.

A summary of the Company’s significant contractual payment obligations for the repayment of outstanding borrowings at September 30, 2020 is as follows:
 Payments Due By Period (dollars in thousands)
 TotalLess than 1 year1-3 years3-5 yearsAfter 5 years
TIAA Credit Facility (1)
$90,000 $— $90,000 $— $— 
Deutsche Bank Credit Facility285,129 — 285,129 — — 
Total Credit Facilities$375,129 $— $375,129 $— $— 
(1)At September 30, 2020, the Company had $40.0 million of undrawn revolver commitments under the TIAA Credit Facility; however, the Company’s borrowing ability is limited by borrowing base restrictions and asset coverage restrictions imposed by the 1940 Act, as discussed above.

18

58


Table of Contents

Note 6 – Financial Highlights

​

​

​

​

​

​

​

​

​

Six Months Ended June 30,

​

​

2021

​

​

​

2020

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

NAV at end of period

$

598,612

​

​

$

523,275

​

Average NAV

$

587,519

​

​

$

547,381

​

Average outstanding debt

$

260,568

​

​

$

410,969

​

Ratios to average net assets:

​

​

​

​

​

​

​

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

​

2.82

%

​

​

3.97

%

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

​

1.72

%

​

​

2.23

%

Ratio of net investment income to average NAV(2)

​

4.46

%

​

​

4.48

%

Portfolio turnover ratio(2)

​

11.17

%

​

​

14.34

%

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

​

6.32

%

​

​

(10.55)

%

(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 change in the loss carryforwards, which are non-cash in nature and may vary significantly from period to period. The Company is required to include net deferred tax provision/benefit in calculating its total expenses even though these net deferred taxes are not currently payable/receivable.
(2)Not annualized.
(3)Total return is based on change in net asset value as calculated using the sum of ending net asset value plus dividends to stockholders and other non-operating changes during the period, as divided by the beginning 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 effects of stock offerings, shares issued under the dividend reinvestment plan and other miscellaneous items.

​

NOTE G—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

The following isCompany’s dividends, if any, will be determined by its Board of Directors on a schedulequarterly basis. The company declared dividends of financial highlights of$10.0 million, or $0.125 per share during the Company for the ninethree months ended SeptemberJune 30, 2021, and $17.9 million, or $0.225 per share, during the six months ended June 30, 2021, compared to dividends of approximately $13.8 million, or $0.175 per share, during the three months ended June 30, 2020, and 2019.

Per Share Data:Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019
NAV at beginning of period$7.77 $7.96 
Results from Operations
Net investment income (1) (2)
0.43 0.53 
Net realized loss on investments (1) (2)
(0.45)(0.23)
Net change in unrealized appreciation (depreciation) on investments (1) (2)
(0.29)0.16 
Net increase (decrease) in net assets resulting from operations(0.31)0.46 
Stockholder distributions (1) (3)
Distributions from net investment income (1) (2)
(0.35)(0.52)
Distributions in excess of net investment income (1) (2)
— — 
Net decrease in net assets resulting from stockholder distributions(0.35)(0.52)
Other (4)
(0.01)— 
NAV at end of the period$7.10 $7.90 
Shares of common stock outstanding at end of period79,608,304 78,498,726 
Weighted average shares of common stock outstanding79,079,204 78,807,179 
(1)Based on weighted average number of shares of common stock outstanding for the period.
(2)Changes in net investment income and net realized loss and unrealized appreciation (depreciation) on investments can change significantly from period to period.
(3)The stockholder distributions represent the stockholder distributions declared for the period.
(4)Includes the impact of the different share amounts as a result of calculating certain$27.5 million, or $0.350 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.
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019
(dollars in thousands)
Net assets at end of period$565,141 $620,102 
Average net assets$551,821 $626,059 
Average Credit Facilities borrowings$402,009 $481,250 
Ratios to average net assets:
Ratio of total expenses to average net assets (1)
5.70 %7.02 %
Ratio of net investment income to average net assets (1)
6.22 %6.66 %
Portfolio turnover ratio16.00 %25.82 %
Total return (2)
(4.12)%5.78 %
(1)Ratio of total expenses to average net assets is calculated net of waiver of reimbursement of internal administrative services expenses. For the ninesix months ended September 30, 2020 and 2019, the Advisers waived reimbursement of internal administrative services expenses of approximately $2.5 million and $2.2 million, respectively. Excluding interest expense, the ratio of total expenses to average net assets for the nine months ended September 30, 2020 and 2019 was 3.25% and 3.83%, respectively. See Note 9 — Related Party Transactions and Arrangements for further discussion of fee waivers provided by the Advisers.
(2)Total return is calculated as the change in NAV per share and stockholder distributions declared per share over the reporting period, divided by the NAV per share at the beginning of the period. The total return does not reflect the sales load from the sale of the Company’s common stock.

19

Note 7 – Stockholder Distributions

The following table reflects the cash distributions per share that the Company declared on its common stock during the nine months ended September 30, 2020 and 2019 (dollars in thousands except per share amounts).
 Distributions
Per ShareAmount
2020
Three months ended September 30, 2020$— $— 
Three months ended June 30, 2020$0.18 $13,790 
Three months ended March 31, 2020$0.17 $13,730 
2019
Three months ended September 30, 2019$0.17 $13,900 
Three months ended June 30, 2019$0.18 $13,754 
Three months ended March 31, 2019$0.17 $13,606 

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 Company may fund its cash distributions from all sources of funds legally available, including stock offering proceeds, if any, 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 it on account of preferred and common equity investments in portfolio companies, and fee 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, if any, borrowings, and fee waivers from the Advisers. See Note 9 — Related Party Transactions and Arrangements — Advisory Agreements and Conditional Fee Waiver and Expense Reimbursement Waivers.

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. 

Under certain applicable provisions of the Code and the Treasury regulations, distributions payable in cash or in shares of stock at the election of the stockholders are treated as taxable dividends. The Internal Revenue Service has published guidance indicating that this rule will apply even where the total amount of cash that may be distributed is limited to no less than 10% of the total distribution, for distributions declared on or before December 31, 2020, and after that, to no less than 20% of the total distribution. Under this guidance if too many stockholders elect to receive their distributions in cash, the cash available for distribution must be allocated among the stockholders electing to receive cash (with the balance of the distribution paid in stock). If the Company decides to make any distributions consistent with this guidance that are payable in part in its stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend (whether received in cash, shares of the Company’s stock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of the Company’s current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the value of the Company’s stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, the Company may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock.

Recent market events caused by the global outbreak of COVID-19 have impacted the financial markets and significantly disrupted U.S. and global economies. In light of the current uncertainty surrounding the duration and ultimate impact of the COVID-19 pandemic on the global financial markets and the Company’s portfolio specifically, on June 29, 2020, the Company’s board of directors unanimously approved the suspension of all distributions to its stockholders, effective after payment of previously-declared distributions for the period through June 30, 2020 in order to preserve financial flexibility and liquidity given the potential prolonged impact of COVID-19. Distributions for future periods will be reevaluated by the Company’s board of directors based on circumstances and expectations at the time of consideration.


20

Note 8 – Taxable Income

2020.

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 later of eight-and-one-half months after(i) filing of the U.S. federal income tax return for the applicable fiscal year or (ii) the fifteenth day of the ninth month following the close of the taxable year in which such taxable income was generated or the extended due date for the timely filinggenerated.

The determination of the tax return related toattributes for the tax year in which such taxable income was generated and paid to the shareholders in the 12-month period following the close of such taxable year and not later than the date of the first dividend payment of the same type of dividendCompany’s distributions is made after such declaration. For the taxable year ended December 31, 2018, the Company distributed $20.5 million, or $0.260865 per share, ofannually, based upon its taxable income in 2019, priorfor the full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to filing of its U.S. federal income tax return for its 2018 taxable year. As a result, the Company was subject to a 4% nondeductible, U.S. federal excise tax liability of approximately $0.8 million. Forextent that the taxable year ended December 31, 2019,RIC received the Company distributed $17.1 million, or $0.217936 per share, of its taxable income in 2020, prior to filingthe form of its U.S. federal incomequalifying dividends from domestic corporations and qualified foreign corporations. The tax returnattributes for its 2019 taxable year. As a result, the Company was subject to a 4% nondeductible, U.S. federal excise tax liability of approximately $0.6 million.


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, 2020. 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 2016 through 2018 taxable years remain subject to examination by U.S. federal and most state tax authorities.

Two of the Company’s wholly owned subsidiaries, HMS Equity Holding and HMS Equity Holding II, 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.


21

59


Table of Contents

distributions will generally include both ordinary income and qualified dividends, but may also include either one or both of capital gains and return of capital.

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 ninesix months ended SeptemberJune 30, 20202021 and 2019 (dollars2020.

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended
June 30,

​

​

​

2021

​

​

​

2020

​

​

​

(estimated,
dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net increase (decrease) in net assets resulting from operations

​

$

36,112

​

​

$

(64,191)

​

Net change in unrealized (appreciation) depreciation

​

​

(13,020)

​

​

​

70,941

​

Income tax provision

​

​

830

​

​

​

95

​

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

​

​

(8,770)

​

​

​

14,482

​

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

​

​

673

​

​

​

690

​

Estimated taxable income (1)

​

​

15,825

​

​

​

22,017

​

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

​

​

(37,037)

​

​

​

(16,266)

​

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

​

​

9,964

​

​

​

4,571

​

Taxable income earned to be carried forward

​

​

(27,073)

​

​

​

(11,695)

​

Total distributions accrued or paid to common stockholders

​

$

17,925

​

​

$

27,520

​

(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 thousands).

Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Net increase (decrease) in net assets resulting from operations$(24,245)$36,359 
Net change in unrealized (appreciation) depreciation23,017 (12,670)
Income tax provision192 241 
Pre-tax book loss not consolidated for tax purposes31,317 10,799 
Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains and changes in estimates893 273 
Estimated taxable income (1)
31,174 35,002 
Taxable income earned in prior year and carried forward for distribution in current year16,796 20,574 
Taxable income earned prior to period end and carried forward for distribution next period(20,450)(18,837)
Dividend accrued as of period end and paid-in the following period— 4,521 
Taxable income earned to be carried forward$(20,450)$(14,316)
Total distributions accrued or paid to common stockholders$27,520 $41,260 
(1)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 taxableconsolidated financial statements.

The income tax expense (benefit) for each period is an estimate and will not be finally determined until the Company files itsis generally composed of (i) deferred tax return for each year. Therefore,expense (benefit), which is primarily the final taxableresult 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 earned in each period and carried forward for distribution in the following period, may be different than this estimate.


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 Condensed Consolidated Financial Statements. For

60

Table of Contents

consolidated statement of operations. The Company’s provision for income taxes was comprised of the ninefollowing for the three months ended SeptemberJune 30, 2021 and 2020 and 2019, the Company recognized a net income tax (benefit) provision of $0.2 million and $0.2 million, respectively, related to deferred taxes (benefit) of $8.0 million and $0.5 million, respectively, and other taxes (benefit) of $0.2 million and $0.2 million, respectively, offset by a valuation allowance of $(8.0) million and $(0.5) million, respectively. For the nine months ended September 30, 2020 and 2019, the other taxes (benefit) included $0.2 million and $0.2 million, respectively, related to accruals for state and other taxes.(amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

   

​

    

   

​

    

   

​

    

   

​

​

Three Months Ended June 30, 

​

Six Months Ended June 30, 

​

2021

​

2020

​

2021

​

2020

Current tax expense (benefit):

​

​

​

​

​

​

​

​

​

​

​

Federal

$

—

​

$

—

​

$

—

​

$

—

State

​

82

​

​

19

​

​

169

​

​

95

Excise

​

352

​

​

—

​

​

661

​

​

—

Total current tax expense (benefit)

​

434

​

​

19

​

​

830

​

​

95

Deferred tax expense (benefit):

​

​

​

​

​

​

​

​

​

​

​

Federal

​

—

​

​

—

​

​

—

​

​

—

State

​

—

​

​

—

​

​

—

​

​

—

Total deferred tax expense (benefit)

​

—

​

​

—

​

​

—

​

​

—

​

​

​

​

​

​

​

​

​

​

​

​

Total income tax provision (benefit)

$

434

​

$

19

​

$

830

​

$

95


As of September 30, 2020, the cost basis of the Company’s portfolio investments for tax purposes was $936.5 million, with such investments having an estimated net unrealized depreciation of $33.8 million, composed of gross unrealized appreciation of $56.2 million and gross unrealized depreciation of $90.0 million. As of December 31, 2019, the cost basis of investments for tax purposes was $1.0 billion, with such investments having an estimated net unrealized depreciation of $12.5 million, composed of gross unrealized appreciation of $55.3 million and gross unrealized depreciation of $68.5 million.

​

The net deferred tax assetsliability at both SeptemberJune 30, 20202021 and December 31, 20192020 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 offset bythe Taxable Subsidiaries. The Company recorded a valuation allowance. Based on HMS Equity Holding’s and HMS Equity Holding II’s short operating history, management believes it isallowance to reduce the carrying value of deferred tax assets 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.



22

The following table sets forth the significant components of net deferred tax assets and liabilities as of Septemberrealized. At June 30, 2020 and December 31, 2019 (amounts in thousands):
September 30, 2020December 31, 2019
Deferred tax assets:
Net operating loss carryforwards$2,509 $2,420 
Foreign tax credit carryforwards10 10 
Capital loss carryforwards23,150 14,750 
Net basis differences in portfolio investments67 — 
Net unrealized depreciation of portfolio investments(1,012)67 
    Total deferred tax assets24,724 17,247 
Deferred tax liabilities:
Net basis differences in portfolio investments(4,183)(3,217)
Net unrealized appreciation of portfolio investments(16)(1,576)
Other— — 
    Total deferred tax liabilities(4,199)(4,793)
Valuation allowance(20,525)(12,454)
    Total net deferred tax assets (liabilities)$— $— 

For2021, for U.S. federal income tax purposes, the Taxable Subsidiaries had net operating loss carryforwards generatedfrom prior to December 31, 2017years which, if unused, will expire in various taxable years from 2034 through 2037. Any net operating losses generated in 2018 and future periods are not subject to expiration and will have an indefinite carryforward.carryforward indefinitely until utilized. The net capital loss carryforwards of the Company will expire in taxable years 20202021 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.
Federal legislation intended

​

NOTE H—SHARE REPURCHASE PROGRAM

Prior to ameliorateMarch 31, 2020, the economicCompany historically conducted quarterly tender offers pursuant to its 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 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,pandemic. On March 8, 2021, the Coronavirus Aid, Relief and Economic Security Act, orCompany announced that its Board of Directors approved the CARES Act, has been enacted that makes technical corrections to, or modifies on a temporary basis, certainreinstatement of the provisionsshare repurchase program following the payment of the Tax Cut and Jobs Actdividend declared by the Board of 2017.Directors for payment on April 1, 2021.

Under the terms of the reinstated share repurchase program, 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 currently assessing the impact, if any,initially limiting repurchase offers to the condensed consolidated financial statements and disclosuresnumber of shares of common stock it can repurchase with 90% of the Companycash retained as a result of issuances of common stock under the CARES Act.

The determination ofCompany’s dividend reinvestment plan.

At the tax attributesdiscretion of the Company’s distributions is made annually atBoard 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 taxable year basedBoard of Directors may amend, suspend or terminate the share repurchase program upon 30 days’ notice. Since inception of its share repurchase program, the Company’s taxable incomeCompany has funded the repurchase of $105.9 million in shares of common stock. For the three months ended June 30, 2021 and 2020, the Company has funded $2.9 million and $6.1 million, respectively, for shares of its common stock tendered for repurchase under the full taxable yearplan. For the six months ended

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June 30, 2021 and distributions paid2020, the Company funded $2.9 million and $6.1 million, respectively, for shares of its common stock tendered for repurchase under 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. Ifplan.

NOTE I—COMMITMENTS AND CONTINGENCIES

At June 30, 2021, the Company had determined the tax attributesfollowing 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

​

NWN Corporation

​

​

3,837

​

NinjaTrader, LLC

​

​

3,078

​

SI East, LLC

​

​

2,500

​

MB2 Dental Solutions, LLC

​

​

2,216

​

Mako Steel, LP

​

​

2,187

​

Hunter Defense Technologies, Inc.

​

​

1,770

​

Burning Glass Intermediate Holding Company, Inc.

​

​

1,518

​

RA Outdoors (Aspira) LLC

​

​

1,377

​

Lynx FBO Operating LLC

​

​

1,125

​

Invincible Boat Company, LLC.

​

​

1,080

​

Classic H&G Holdings, LLC

​

​

1,000

​

Student Resource Center, LLC

​

​

917

​

DTE Enterprises, LLC

​

​

750

​

GRT Rubber Technologies LLC

​

​

660

​

Arcus Hunting LLC

​

​

602

​

Hawk Ridge Systems, LLC

​

​

500

​

Clickbooth.com, LLC

​

​

457

​

Chamberlin Holding LLC

​

​

400

​

Cody Pools, Inc.

​

​

400

​

Colonial Electric Company LLC

​

​

400

​

Direct Marketing Solutions, Inc.

​

​

400

​

Trantech Radiator Topco, LLC

​

​

400

​

Gamber-Johnson Holdings, LLC

​

​

300

​

NuStep, LLC

​

​

300

​

Dynamic Communities, LLC

​

​

250

​

American Nuts, LLC

​

​

247

​

ASK (Analytical Systems Keco Holdings, LLC)

​

​

200

​

Mystic Logistics Holdings, LLC

​

​

200

​

Klein Hersh, LLC

​

​

179

​

Tedder Industries, LLC

​

​

160

​

Eastern Wholesale Fence LLC

​

​

125

​

HW Temps LLC

​

​

100

​

Acousti Engineering Company of Florida

​

​

46

​

​

​

​

​

​

Total loan commitments

​

$

34,681

​

​

​

​

​

​

Total commitments

​

$

40,349

​

​

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 (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

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has available capital to fund its distributions taxable year-to-dateunfunded commitments as necessary. The Company had no unrealized depreciation on the outstanding unfunded commitments as of SeptemberJune 30, 2020, 100% would be from its 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 the Company’s anticipated fiscal and taxable years ending December 31, 2020 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 shortly after the close of each calendar year on Form 1099-DIV.


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


Note 9 — Related Party Transactions and Arrangements
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 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 Advisers entered into conditional incomeCompany’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 two 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 waiver agreements (the “2016-2018 Conditional Income Incentive Fee Waiver Agreements”), most recently on March 4, 2019, pursuantunder 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 which, for a period from January 1, 2016 through December 31, 2018,as the Advisers would waive payments in respect of the “subordinatedsubordinated incentive fee on income,” is calculated and payable quarterly in arrears based on pre-incentive fee net investment income for the immediately preceding quarter. The subordinated incentive fee on income is equal to 20.0% of the Company’s pre-incentive fee net investment income for the immediately preceding quarter, expressed as a quarterly rate of return on adjusted capital at the beginning of the most recently completed calendar quarter, exceeding 1.875% (or 7.5% annualized), subject to a “catch up” feature (as described below).

For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such termas 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, other than distributions of profits, paid to the Company’s stockholders and amounts paid for share repurchases pursuant to the Company’s share repurchase program. The subordinated incentive fee on income is definedexpensed 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;

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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 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 (or upon termination of the Investment Advisory Agreement, upon the occurrence of any event that, in the Advisers’ sole discretion, causes such waiver to be deemed necessary. The 2016-2018 Conditional Income Incentive Fee Waiver Agreements may require the Company to repay base management fees or incentive fees previously waived by the Advisers under certain circumstances and to the extent eligible for repayment.


23

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 respectiveAgreement). This fee waiver. Thus, in any quarter where a surplus exists and the conditions described below are satisfied, the surplus will be available, subject to approvalequals 20.0% of the Company’s board of directors, to reimburse waived fees. The Company shall only reimburse fees ifincentive fee capital gains, which equals the Company’s operating expense ratio at the time of reimbursement 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 raterealized capital gains on a cumulative basis from inception, calculated as of the regular cash distributions atend of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. At the end of each reporting period, the Company estimates the incentive fee on capital gains and accrues the fee based on a hypothetical liquidation of its portfolio. Therefore, the accrual includes both net realized gains and net unrealized gains (the net unrealized difference between the fair value and the par value of its portfolio), if any. The incentive fee accrued pertaining to the unrealized gain is neither earned nor payable to MSC Adviser until such time the corresponding fees were waived.

it is realized.

For the three months ended SeptemberJune 30, 20202021 and 2019,2020, the Company incurred base management fees of approximately $4.7$4.2 million and $5.5$4.6 million, respectively,respectively. For the three months ended June 30, 2021 and 2020, the Company did not incur any subordinated incentive fees on income of $0.0 and $1.2 million, respectively. For each of the three months ended September 30, 2020 and 2019, the Company did not incuror any capital gains incentive fees. For the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company incurred base management fees of approximately $14.3$8.1 million and $16.9 million, respectively, and subordinated incentive fees on income of $0.0 and $3.9$9.6 million, respectively. For each of the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company did not incur any subordinated incentive fees on income or any capital gains incentive fees.


For the nine months ended September 30, 2020 and 2019, the Company did not record an accrual for any previously waived fees. Any future reimbursement of previously waived fees 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 Company’s 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)
Quarter EndedWaivers
Repaid to Adviser (2)
Waivers
Repaid to Adviser (2)
Operating
Expense
Ratio (3)
Annualized Distribution Rate (4)
Eligible to be Repaid Through (5)
9/30/2018$— $— $2,535 $— 2.01%$0.709/30/2021
12/31/2018$— $— $798 $— 2.32%$0.7012/31/2021
(1)Fees waived pursuant to the 2016-2018 Conditional Income Incentive Fee Waiver Agreements.
(2)Subject to the approval of the Company’s board of directors, in future periods previously waived fees may be paid to the Advisers, if the Company’s cumulative net increase in net assets resulting from operations exceeds the amount of cumulative distributions paid to stockholders. The previously waived fees are potentially subject to repayment by the Company, if at all, within a period not to exceed three years from the date of each respective fee waiver. To date, none of the previously waived fees have been approved for reimbursement by the Company’s board of directors.
(3)The “Operating Expense Ratio” is calculated on a quarterly basis as a percentage of average net assets and includes all expenses borne by the Company, except for base management and incentive fees and administrative expenses waived by the Advisers and organizational and offering expenses.
(4)“Annualized Distribution Rate” equals $0.00191781 per share, per day based on the distributions declared by the Company’s board of directors.
(5)Prior to September 30, 2017, the Advisers waived total management fees of $2.8 million and total subordinated incentive fees of $4.2 million. Due to the passage of time, such waived fees are not eligible for repayment under the applicable fee waiver agreements.

Pursuant to the Investment Advisory Agreement and Sub-Advisorythe Original Advisory Agreement, the Company is required, and has been required, to pay or reimburse the AdvisersMSC Adviser or its prior investment adviser, HMS Adviser, as applicable, 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, whether such administrative services were performed by a third party service provider or affiliates of the Advisers (“Internalapplicable investment adviser (to the extent performed by MSC Adviser, HMS Adviser or their affiliates, the “Internal Administrative Services”). The Advisers doMSC Adviser does not, and HMS Adviser did not, earn any profit under their provision of administrative services to the Company. For the three months ended SeptemberJune 30, 20202021 and 2019,2020, the Company incurred, and the Advisers, as applicable, waived the reimbursements of, Internal Administrative Services expenses of approximately $1.0 million, and $0.7$0.8 million, respectively. For the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the Company incurred, and the Advisers, as applicable, waived the reimbursements of, Internal Administrative Services expenses of approximately $2.5$2.1 million, and $2.2$1.5 million, respectively. The Company and the Advisers have entered into (and prior to the Transaction, had entered into) an expense support and conditional reimbursement agreement, as amended from time to time, which extendsextended the period for waiver of reimbursement of Internal Administrative Services expenses accrued pursuant to the Original Investment Advisory Agreement and the Sub-Advisory Agreement through October 29, 2020. MSC Adviser also agreed to waive reimbursement of Internal Administrative Expenses from October 30, 2020 through June 30, 2021. Since inception, the Advisers waived the reimbursement of total Internal Administrative Services expenses of $18.6$21.8 million. Waived Internal Administrative Services expenses are permanently waived and are not subject to future reimbursement.


24

The table below outlines fees incurred and expense reimbursements payable to the Adviser, the Sub-Adviser and their respective affiliates for the three and nine months ended September 30, 2020 and 2019 and amounts unpaid as of September 30, 2020 and December 31, 2019 (dollars in thousands).
 IncurredIncurredUnpaid as of
 Three Months Ended September 30,Nine Months Ended September 30,September 30, 2020December 31, 2019
Type and Recipient2020201920202019
Offering Costs - the Adviser, Sub-Adviser$28 $94 $205 $285 $— $— 
Other (2) - the Adviser
191 263 472 644 5 44 
Due to Affiliates   $5 $44 
Base Management Fees - the Adviser, Sub-Adviser
4,701 5,498 14,325 16,857 $4,698 $5,388 
Incentive Fees on Income - the Adviser, Sub-Adviser (1)
— 1,209 — 3,939 — — 
Base Management and Incentive Fees Payable$4,698 $5,388 
(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 of the Company including the Company’s distributiondividend reinvestment plan. 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 on the Company’s behalf on a monthly basis, up to a maximum aggregate amount of 1.5% of the gross stock offering proceeds. The Advisers are were

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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 $580,338 which remained payable to HMS Adviser. No outstanding amount was payable to MSC Adviser. As of SeptemberJune 30, 2020,2021, $525,405 of the Company’s reimbursement obligation for organizational and offering expenses remained outstanding.

As of June 30, 2021, the Company has reimbursed theHMS Advisers approximately $12.8 million since inception for offering costs. As of September 30, 2020, the Advisers carried a balance of approximately $0.6 million for offering costs incurred on the Company’s behalf, net of reimbursement payments from the Company.


Note 10 – Share Repurchase Plan
Since inception of the share repurchase program in 2015, the Company has funded the repurchase of $103.0 million in shares of common stock. For the nine months ended September 30, 2020 and 2019, the Company funded $6.1 million and $19.3 million, respectively, for shares of common stock tendered for repurchase under the plan approved by the board of directors.
For the Quarter EndedRepurchase DateShares RepurchasedPercentage of Shares Tendered that were RepurchasedRepurchase Price
per Share		Aggregate Consideration for Repurchased Shares
March 31, 2020February 21, 2020791,488.1226.5%$7.70 $6,094,455 

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 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. Share repurchases for future quarters will be reevaluated by the board of directors based on circumstances and expectations at the time of consideration.

Note 11 – Commitments and Contingencies

As of September 30, 2020, the Company had a total of approximately $39.1 million in outstanding commitments comprising (i) 31 commitments to fund revolving loans that had not been fully drawn or term loans that had not been funded and (ii) five capital commitments that had not been fully called. The Company recognized unrealized depreciation of approximately $1.7 million 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, 2020. As of December 31, 2019, the Company had a total of approximately $46.3 million in outstanding commitments comprising (i) 36 commitments to fund revolving loans that had not been fully drawn or term loans that had not been funded and (ii) five capital commitments that had not been fully called. The Company recognized unrealized appreciation of $0.3 million on the outstanding unfunded loan commitments and
25

no unrealized appreciation or depreciation on the outstanding unfunded capital commitments during the year ended December 31, 2019.
 Commitments and Contingencies
(dollars in thousands)
 September 30, 2020December 31, 2019
Unfunded Loan Commitments
Adams Publishing Group, LLC$5,000 $762 
American Nuts, LLC247 247 
American Trailer Rental Group, LLC— 400 
Analytical Systems Keco, LLC200 200 
Arcus Hunting, LLC120 1,398 
ASC Ortho Management Company, LLC— 750 
Boccella Precast Products, LLC— 500 
Centre Technologies Holdings, LLC600 600 
Chamberlin Holding, LLC400 400 
Chisholm Energy Holdings, LLC— 1,429 
Classic H&G Holdings, LLC1,000 — 
Cody Pools Holdings, LLC400 — 
CTVSH, PLLC200 200 
Direct Marketing Solutions, Inc.400 400 
DTE Enterprises, LLC750 750 
Dynamic Communities, LLC250 250 
Gamber-Johnson Holdings, LLC300 300 
GRT Rubber Technologies, Inc.660 1,526 
Gulf Publishing Holdings, LLC40 — 
Guerdon Modular Holdings, Inc.— 148 
Hawk Ridge Systems, LLC254 350 
Hunter Defense Technologies, Inc.1,770 3,540 
HW Temps LLC200 200 
Independent Pet Partners Intermediate Holdings, LLC6,126 9,357 
Invincible Boat Company, LLC1,080 648 
J & J Services, Inc.3,000 3,000 
Kickhaefer Manufacturing Company, LLC500 500 
LL Management, Inc.— 1,182 
Lynx FBO Operating LLC1,875 1,875 
Mac Lean-Fogg Company313 313 
Market Force Information, Inc.— 3 
Mystic Logistics Holdings, LLC200 200 
NexRev, LLC798 800 
NinjaTrader, LLC750 200 
NuStep, LLC300 300 
SI East , LLC2,500 2,500 
TEAM Public Choices, LLC— 351 
Tedder Acquisition, LLC140 140 
Trantech Radiator Topco, LLC400 400 
Unfunded Capital Commitments
Brightwood Capital Fund III, LP1,340 1,260 
Brightwood Capital Fund IV, LP500 1,000 
Copper Trail Energy Fund I LP2,839 3,416 
Freeport Financial Funds1,715 1,945 
Harris Preston Fund Investments1,929 2,526 
Total$39,096 $46,266 


26

Note 12 – Subsequent Events
The Transaction and the New Investment Advisory Agreement with MSC Adviser

On June 26, 2020 the Adviser entered into the Purchase Agreement with MSC Adviser,

3.          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 Purchase Agreement contemplated that the Company would enter into the New Investment Advisory Agreement and that the Investment Advisory Agreement and the Sub-Advisory Agreement would terminate concurrently therewith. Term Loan

On October 28, 2020, stockholders of the Company approved the New Investment Advisory Agreement to take effect upon the closing of the Transaction and the Transaction closed on October 30, 2020. Upon the closing of the Transaction on October 30, 2020,January 27, 2021, the Company entered into the New Investment Advisory AgreementMain Street Term Loan with MSC AdviserMain Street. As of June 30, 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 MSC Adviser becamematuring on January 27, 2026. The Company paid a 1.0% upfront fee to Main Street on the sole investment adviserclosing 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. See Note E – Debt and Note K – Subsequent Events for further discussion.

NOTE K—SUBSEQUENT EVENTS

On July 27, 2021, the Company entered into the Fifth Amendment (the “Amendment”) to the Company.


Concurrently withTIAA Credit Facility. The Amendment, among other things, permits the closingCompany to increase the amount of outstanding unsecured subordinated indebtedness that is junior in right of payment to borrowings under the Transaction, the previously disclosed resignations of Peter Shaper, Gregory R. Geib and Janice E. Walker from the Company’s board of directors were accepted and each of Robert L. Kay and Jeffrey B. Walker were appointed and qualified as directors. Additionally, each of the Company’s existing officers resigned from their positions and the following persons were appointed to serve as the Company’s officers in the following capacities: Dwayne L. Hyzak as Chief Executive Officer and Senior Managing Director, David L. Magdol as President, Chief Investment Officer and Senior Managing Director, Jesse E. Morris as Executive Vice President and Chief Operating Officer, Jason B. Beauvais as Senior Vice President, General Counsel, Chief Compliance Officer and Secretary, Brent D. Smith as Chief Financial Officer and Treasurer and Cory E. Gilbert as Chief Accounting Officer and Assistant Treasurer.

Name Change

TIAA Credit Facility.

In connection with the Transaction described above,Amendment, on July 27, 2021 the Company changedalso amended and restated the term loan agreement governing the Main Street Capital Term Loan (the “Amended Term Loan Agreement”). The Amended Term Loan Agreement provides for up to an additional $35.0 million of borrowings to the Company on substantially the same terms of existing borrowings under the Main Street Capital Term Loan. At closing, $20.0 million of borrowings under the Amended Term Loan Agreement was funded and the Company may request two additional advances of $7.5 million each (each, a “Delayed Draw Term Loan”) during the period ending six months after the closing date of the Amended Term Loan Agreement.

Borrowings under the Amended Term Loan Agreement will mature on January 27, 2026, are expressly subordinated and junior in right of payment to all secured indebtedness of the Company and may be prepaid any time after July 27, 2023 (or the second anniversary of the latest date that a Delayed Draw Term Loan is borrowed) in accordance with the additional conditions described in the Amended Term Loan Agreement.

On August 2, 2021, the Company repurchased 437,869 shares of its name from “HMS Income Fund, Inc.”common stock validly tendered and not withdrawn on the terms set forth in the Company’s tender offer statement on Schedule TO and Offer to “MSC Income Fund, Inc.”Repurchase filed with the SEC on June 11, 2021. The Company amended its articlesshares were repurchased at a price of incorporation and its bylaws, both effective$7.57 per share, which was the net asset value per share as of October 30, 2020,August 2, 2021, for an aggregate purchase price of $3.3 million (an amount equal to 90% of the sole purposeproceeds the Company received from the issuance of effectuatingshares under its distribution reinvestment plan from the name change.


27

Item 2.    Management’s Discussion and AnalysisCompany’s August 2, 2021 dividend payment).

On August 10, 2021, the Company’s Board of Financial Condition and ResultsDirectors declared a quarterly cash dividend of Operations.

The following discussion is based on the condensed consolidated financial statements$0.15 per share payable November 1, 2021 to stockholders of record as of September 30, 2020 (unaudited)2021.

65

Table of Contents

Schedule 12-14

MSC Income Fund, Inc.

Consolidated Schedule of Investments In and December 31, 2019Advances to Affiliates

June 30, 2021

(dollars in thousands)

(unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest,

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fees or

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

Amount of

​

Dividends

​

December 31, 

​

​

​

​

​

​

​

June 30, 

​

​

​

​

​

​

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

 

7.09% (L+7.00%) Secured Debt

 

(8)

​

 

-

​

​

(3)

​

​

298

​

​

8,262

​

​

3

​

​

3

​

​

8,262

​

 

Member Units

 

(8)

​

 

-

​

​

-

​

​

1,045

​

​

22,120

​

​

-

​

​

-

​

​

22,120

Harris Preston Fund Investments

 

LP Interests (2717 MH, L.P.)

 

(8)

​

 

-

​

​

-

​

​

-

​

​

2,702

​

​

47

​

​

-

​

​

2,749

Copper Trail Energy Fund I, LP - CTMH

 

LP Interests (CTMH, LP)

 

(9)

​

 

-

​

​

-

​

​

-

​

​

747

​

​

-

​

​

37

​

​

710

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

​

​

​

​

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

Total Control Investments

​

​

​

​

​

$

-

​

$

(3)

​

$

1,343

​

$

33,831

​

$

50

​

$

40

​

$

33,841

Affiliate Investments

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AFG Capital Group, LLC

 

Preferred Member Units

 

(8)

​

$

-

​

$

290

​

$

-

​

$

1,450

​

$

290

​

$

-

​

$

1,740

​

 

10.00% Secured Debt

 

(8)

​

 

-

​

​

-

​

​

5

​

​

123

​

​

-

​

​

44

​

​

79

ASK (Analytical Systems Keco Holdings, LLC)

 

Preferred Member Units

 

(8)

​

 

-

​

​

(460)

​

​

-

​

​

800

​

​

-

​

​

460

​

​

340

​

​

Preferred Member Units

​

(8)

​

​

-

​

​

246

​

​

-

​

​

-

​

​

410

​

​

-

​

​

410

​

 

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

 

(8)

​

 

-

​

​

(4)

​

​

122

​

​

1,180

​

​

45

​

​

22

​

​

1,203

​

 

Warrants

 

(8)

​

 

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

Barfly Ventures, LLC

 

Preferred Member Units

 

(5)

​

 

-

​

​

39

​

​

-

​

​

528

​

​

39

​

​

-

​

​

567

Brewer Crane Holdings, LLC

 

Preferred Member Units

 

(9)

​

 

-

​

​

(170)

​

​

92

​

​

1,460

​

​

-

​

​

170

​

​

1,290

​

 

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

 

(9)

​

 

-

​

​

-

​

​

121

​

​

2,119

​

​

5

​

​

62

​

​

2,062

Centre Technologies Holdings, LLC

 

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

 

(8)

​

 

-

​

​

-

​

​

171

​

​

2,868

​

​

11

​

​

477

​

​

2,402

​

 

Preferred Member Units

 

(8)

​

 

-

​

​

(80)

​

​

-

​

​

1,540

​

​

-

​

​

80

​

​

1,460

Chamberlin Holding LLC

 

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

 

(8)

​

 

-

​

​

(17)

​

​

182

​

​

3,803

​

​

17

​

​

366

​

​

3,454

​

 

Member Units

 

(8)

​

 

-

​

​

(360)

​

​

860

​

​

7,020

​

​

-

​

​

360

​

​

6,660

​

 

Member Units

 

(8)

​

 

-

​

​

28

​

​

8

​

​

317

​

​

28

​

​

-

​

​

345

Charps, LLC

 

Preferred Member Units

 

(5)

​

 

-

​

​

270

​

​

386

​

​

2,630

​

​

270

​

​

-

​

​

2,900

​

 

0.15 Secured Debt

 

(5)

​

 

-

​

​

-

​

​

1

​

​

167

​

​

-

​

​

167

​

​

-

Clad-Rex Steel, LLC

 

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

 

(5)

​

 

-

​

​

-

​

​

172

​

​

2,706

​

​

7

​

​

100

​

​

2,613

​

 

Member Units

 

(5)

​

 

-

​

​

207

​

​

36

​

​

2,153

​

​

207

​

​

-

​

​

2,360

​

 

Member Units

 

(5)

​

 

-

​

​

1

​

​

-

​

​

132

​

​

1

​

​

-

​

​

133

​

 

10.00% Secured Debt

 

(5)

​

 

-

​

​

-

​

​

14

​

​

275

​

​

1

​

​

4

​

​

272

Cody Pools, Inc.

 

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

 

(8)

​

​

-

​

​

(15)

​

​

218

​

​

3,554

​

​

15

​

​

607

​

​

2,962

​

 

Preferred Member Units

 

(8)

​

​

-

​

​

1,810

​

​

-

​

​

3,740

​

​

1,810

​

​

-

​

​

5,550

Colonial Electric Company LLC

 

12.00% Secured Debt

 

(6)

​

 

-

​

​

-

​

​

199

​

​

-

​

​

6,148

​

​

-

​

​

6,148

​

 

Preferred Member Units

 

(6)

​

 

-

​

​

-

​

​

-

​

​

-

​

​

1,920

​

​

-

​

​

1,920

Copper Trail Energy Fund I, LP

 

LP Interests (Copper Trail Energy Fund I, LP)

 

(9)

​

 

-

​

​

60

​

​

317

​

​

1,782

​

​

61

​

​

-

​

​

1,843

Datacom, LLC

 

Preferred Member Units

 

(8)

​

 

-

​

​

-

​

​

-

​

​

-

​

​

290

​

​

-

​

​

290

​

 

5.00% Secured Debt

 

(8)

​

 

-

​

​

-

​

​

32

​

​

-

​

​

906

​

​

6

​

​

900

Digital Products Holdings LLC

 

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

 

(5)

​

 

-

​

​

-

​

​

256

​

​

4,493

​

​

11

​

​

165

​

​

4,339

​

 

Preferred Member Units

 

(5)

​

 

-

​

​

-

​

​

25

​

​

2,459

​

​

-

​

​

-

​

​

2,459

Direct Marketing Solutions, Inc.

 

Preferred Stock

 

(9)

​

 

-

​

​

(383)

​

​

-

​

​

4,840

​

​

-

​

​

383

​

​

4,457

​

 

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

 

(9)

​

 

-

​

​

-

​

​

239

​

​

3,717

​

​

15

​

​

-

​

​

3,732

Freeport Financial Funds

 

LP Interests (Freeport First Lien Loan Fund III LP)

 

(5)

​

 

-

​

​

-

​

​

455

​

​

10,321

​

​

-

​

​

2,317

​

​

8,004

Gamber-Johnson Holdings, LLC

 

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

 

(5)

​

 

-

​

​

(25)

​

​

256

​

​

4,960

​

​

225

​

​

25

​

​

5,160

​

 

Member Units

 

(5)

​

 

-

​

​

228

​

​

825

​

​

13,120

​

​

940

​

​

-

​

​

14,060

GFG Group, LLC.

 

Preferred Member Units

 

(5)

​

 

-

​

​

-

​

​

73

​

​

-

​

​

1,225

​

​

-

​

​

1,225

​

 

12.00% Secured Debt

 

(5)

​

 

-

​

​

-

​

​

95

​

​

-

​

​

3,846

​

​

800

​

​

3,046

Gulf Publishing Holdings, LLC

 

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

 

(8)

​

 

-

​

​

-

​

​

4

​

​

63

​

​

1

​

​

-

​

​

64

​

 

12.50% (6.25% Cash, 6.25% PIK) Secured Debt

 

(8)

​

 

-

​

​

(431)

​

​

215

​

​

2,988

​

​

110

​

​

431

​

​

2,667

Hawk Ridge Systems, LLC

 

9.50% Secured Debt

 

(9)

​

 

-

​

​

(9)

​

​

173

​

​

3,350

​

​

9

​

​

9

​

​

3,350

​

 

Preferred Member Units

 

(9)

​

 

-

​

​

649

​

​

173

​

​

2,008

​

​

650

​

​

-

​

​

2,658

​

 

Preferred Member Units

 

(9)

​

 

-

​

​

35

​

​

-

​

​

105

​

​

35

​

​

-

​

​

140

HPEP 3, L.P.

 

LP Interests (HPEP 3, L.P.)

 

(8)

​

 

-

​

​

531

​

​

-

​

​

3,258

​

​

905

​

​

-

​

​

4,163

J&J Services, Inc.

 

11.50% Secured Debt

 

(7)

​

 

-

​

​

(8)

​

​

198

​

​

3,200

​

​

8

​

​

208

​

​

3,000

​

 

Preferred Stock

 

(7)

​

 

-

​

​

90

​

​

-

​

​

3,170

​

​

90

​

​

-

​

​

3,260

Kickhaefer Manufacturing Company, LLC

 

Member Units

 

(5)

​

 

-

​

​

-

​

​

13

​

​

3,060

​

​

-

​

​

-

​

​

3,060

​

 

11.50% Secured Debt

 

(5)

​

 

-

​

​

-

​

​

337

​

​

5,500

​

​

21

​

​

300

​

​

5,221

​

 

9.00% Secured Debt

 

(5)

​

 

-

​

​

-

​

​

44

​

​

978

​

​

-

​

​

4

​

​

974

​

 

Member Units

 

(5)

​

 

-

​

​

13

​

​

-

​

​

290

​

​

13

​

​

-

​

​

303

Market Force Information, LLC

 

PIK Secured Debt

 

(9)

​

 

-

​

​

(74)

​

​

-

​

​

3,391

​

​

-

​

​

74

​

​

3,317

66

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest,

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fees or

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

Amount of

​

Dividends

​

December 31, 

​

​

​

​

​

​

​

June 30, 

​

​

​

​

​

​

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

MH Corbin Holding LLC

 

13.00% (10.00% Cash, 3.00% PIK) Secured Debt

 

(5)

​

 

-

​

​

(131)

​

​

143

​

​

2,070

​

​

5

​

​

171

​

​

1,904

​

 

Preferred Member Units

 

(5)

​

 

-

​

​

(590)

​

​

-

​

​

590

​

​

-

​

​

590

​

​

-

Mystic Logistics Holdings, LLC

 

12.00% Secured Debt

 

(6)

​

 

-

​

​

(1)

​

​

102

​

​

1,682

​

​

2

​

​

8

​

​

1,676

​

 

Common Stock

 

(6)

​

 

-

​

​

(768)

​

​

137

​

​

2,248

​

​

-

​

​

768

​

​

1,480

NexRev LLC

 

Preferred Member Units

 

(8)

​

 

-

​

​

450

​

​

10

​

​

370

​

​

450

​

​

-

​

​

820

​

 

11.00% Secured Debt

 

(8)

​

 

-

​

​

43

​

​

241

​

​

4,177

​

​

53

​

​

109

​

​

4,121

NuStep, LLC

 

Preferred Member Units

 

(5)

​

 

-

​

​

390

​

​

-

​

​

2,700

​

​

390

​

​

-

​

​

3,090

​

 

12.00% Secured Debt

 

(5)

​

 

-

​

​

12

​

​

259

​

​

4,288

​

​

22

​

​

-

​

​

4,310

SI East, LLC (Stavig)

 

8.75% Secured Debt

 

(7)

​

 

-

​

​

(27)

​

​

482

​

​

10,987

​

​

27

​

​

1,290

​

​

9,724

​

​

Preferred Member Units

 

(7)

​

 

-

​

​

1,750

​

​

-

​

​

3,260

​

​

1,750

​

​

-

​

​

5,010

Tedder Industries, LLC

 

12.00% Secured Debt

 

(9)

​

 

-

​

​

-

​

​

247

​

​

4,025

​

​

18

​

​

400

​

​

3,643

​

 

Preferred Member Units

 

(9)

​

 

-

​

​

-

​

​

-

​

​

2,034

​

​

-

​

​

-

​

​

2,034

​

 

12.00% Secured Debt

 

(9)

​

 

-

​

​

-

​

​

6

​

​

-

​

​

140

​

​

-

​

​

140

Trantech Radiator Topco, LLC

 

Common Stock

 

(7)

​

 

-

​

​

(10)

​

​

15

​

​

1,510

​

​

-

​

​

10

​

​

1,500

​

 

12.00% Secured Debt

 

(7)

​

 

-

​

​

(7)

​

​

137

​

​

2,131

​

​

6

​

​

7

​

​

2,130

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

​

​

​

​

​

​

(2,470)

​

​

2,458

​

​

-

​

​

-

​

​

2,470

​

​

2,470

​

​

-

Total Affiliate investments

​

​

​

​

​

$

(2,470)

​

$

6,030

​

$

8,096

​

$

157,690

​

$

25,918

​

$

13,464

​

$

170,144

(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 June 30, 2021 for affiliate investments located in this region was $65,998. This represented 11.0% of net assets as of June 30, 2021.
(6)Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2021 for affiliate investments located in this region was $11,224. This represented 1.9% of net assets as of June 30, 2021.
(7)Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2021 for affiliate investments located in this region was $24,624. This represented 4.1% of net assets as of June 30, 2021.
(8)Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of June 30, 2021 for control investments located in this region was $33,131. This represented 5.5% of net

67

Table of Contents

assets as of June 30, 2021. The fair value as of June 30, 2021 for affiliate investments located in this region was $39,630. This represented 6.6% of net assets as of June 30, 2021.
(9)Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of June 30, 2021 for control investments located in this region was $710. This represented 0.1% of net assets as of June 30, 2021. The fair value as of June 30, 2021 for affiliate investments located in this region was $28,665. This represented 4.8% of net assets as of June 30, 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.

​

68

Table of Contents

Schedule 12-14

MSC Income Fund, Inc.

Consolidated Schedule of Investments in and for the three and nine months ended SeptemberAdvances to Affiliates

June 30, 2020

(dollars in thousands)

(unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest,

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fees or

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

Amount of

​

Dividends

​

December 31, 

​

​

​

​

​

​

​

June 30, 

​

​

​

​

​

​

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)

​

$

-

​

​

-

​

​

110

​

​

872

​

​

-

​

​

-

​

​

872

​

​

Member Units

​

(8)

​

​

-

​

​

(3)

​

​

338

​

​

7,396

​

​

869

​

​

3

​

​

8,262

Copper Trail Fund Investments

​

LP Interests (CTMH, LP)

​

(9)

​

​

-

​

​

(997)

​

​

648

​

​

23,372

​

​

-

​

​

998

​

​

22,374

Harris Preston Fund Investments

​

LP Interests (2717 MH, L.P.)

​

(8)

​

​

-

​

​

(181)

​

​

-

​

​

3,156

​

​

1

​

​

181

​

​

2,976

Other

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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

​

​

​

​

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

Total Control investments

​

​

​

​

​

$

-

​

$

(1,181)

​

$

1,096

​

$

34,796

​

$

870

​

$

1,182

​

$

34,484

Affiliate Investments

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

AFG Capital Group, LLC

​

10.00% Secured Debt

​

(8)

​

$

-

​

$

-

​

$

9

​

$

209

​

$

-

​

$

43

​

$

166

​

​

Preferred Member Units

​

(8)

​

​

-

​

​

(3)

​

​

-

​

​

1,295

​

​

-

​

​

3

​

​

1,292

Analytical Systems Keco, LLC

​

LIBOR Plus 10.00% (Floor 2.00%)

​

(8)

​

​

-

​

​

(1)

​

​

88

​

​

1,266

​

​

6

​

​

68

​

​

1,204

​

​

Preferred Member Units

​

(8)

​

​

-

​

​

173

​

​

-

​

​

800

​

​

173

​

​

-

​

​

973

​

​

Warrants

​

(8)

​

​

-

​

​

49

​

​

-

​

​

79

​

​

49

​

​

1

​

​

127

Brewer Crane Holdings, LLC

​

LIBOR Plus 10.00% (Floor 1.00%)

​

(9)

​

​

-

​

​

-

​

​

132

​

​

2,233

​

​

4

​

​

61

​

​

2,176

​

​

Preferred Member Units

​

(9)

​

​

-

​

​

-

​

​

13

​

​

1,070

​

​

-

​

​

-

​

​

1,070

Centre Technologies Holdings, LLC

​

LIBOR Plus 10.00% (Floor 2.00%)

​

(8)

​

​

-

​

​

-

​

​

189

​

​

3,008

​

​

7

​

​

78

​

​

2,937

​

​

Preferred Member Units

​

(8)

​

​

-

​

​

-

​

​

15

​

​

1,460

​

​

-

​

​

-

​

​

1,460

Chamberlin Holding LLC

​

LIBOR Plus 10.00% (Floor 1.00%)

​

(8)

​

​

-

​

​

(10)

​

​

270

​

​

4,443

​

​

10

​

​

10

​

​

4,443

​

​

Member Units

​

(8)

​

​

-

​

​

28

​

​

371

​

​

6,009

​

​

28

​

​

-

​

​

6,037

​

​

Member Units

​

(8)

​

​

-

​

​

(133)

​

​

8

​

​

363

​

​

-

​

​

133

​

​

230

Charlotte Russe, Inc

​

Common Stock

​

(9)

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

​

​

-

Charps, LLC

​

15.00% Secured Debt

​

(5)

​

​

-

​

​

-

​

​

38

​

​

500

​

​

-

​

​

-

​

​

500

​

​

Preferred Member Units

​

(5)

​

​

-

​

​

303

​

​

77

​

​

1,730

​

​

303

​

​

-

​

​

2,033

Clad-Rex Steel, LLC

​

LIBOR Plus 9.50% (Floor 1.00%)

​

(5)

​

​

-

​

​

(2)

​

​

153

​

​

2,696

​

​

6

​

​

2

​

​

2,700

​

​

Member Units

​

(5)

​

​

-

​

​

(255)

​

​

61

​

​

2,408

​

​

-

​

​

255

​

​

2,153

​

​

10% Secured Debt

​

(5)

​

​

-

​

​

-

​

​

14

​

​

282

​

​

-

​

​

3

​

​

279

​

​

Member Units

​

(5)

​

​

-

​

​

-

​

​

-

​

​

115

​

​

-

​

​

-

​

​

115

Cody Pools, Inc.

​

LIBOR Plus 10.50% (Floor 1.75%)

​

(8)

​

​

-

​

​

4

​

​

164

​

​

-

​

​

4,009

​

​

134

​

​

3,875

​

​

Preferred Member Units

​

(8)

​

​

-

​

​

-

​

​

7

​

​

-

​

​

2,079

​

​

-

​

​

2,079

Copper Trail Fund Investments

​

LP Interests (Copper Trail Energy Fund I, LP)

​

(9)

​

​

21

​

​

(682)

​

​

1,182

​

​

1,643

​

​

1,212

​

​

1,034

​

​

1,821

Direct Marketing Solutions, Inc.

​

LIBOR Plus 11.00% (Floor 1.00%)

​

(9)

​

​

-

​

​

(12)

​

​

254

​

​

3,929

​

​

12

​

​

129

​

​

3,812

​

​

Preferred Stock

​

(9)

​

​

-

​

​

(36)

​

​

-

​

​

5,051

​

​

-

​

​

36

​

​

5,015

Digital Products Holdings LLC

​

LIBOR Plus 10.00% (Floor 1.00%)

​

(5)

​

​

-

​

​

85

​

​

286

​

​

4,611

​

​

95

​

​

165

​

​

4,541

​

​

Preferred Member Units

​

(5)

​

​

-

​

​

(144)

​

​

38

​

​

1,294

​

​

-

​

​

144

​

​

1,150

​

​

LP Interests (Freeport First Lien Loan Fund III LP)

​

(5)

​

​

-

​

​

43

​

​

80

​

​

9,696

​

​

1,033

​

​

160

​

​

10,569

Gamber-Johnson Holdings, LLC

​

LIBOR Plus 6.50% (Floor 2.00%)

​

(5)

​

​

-

​

​

(4)

​

​

215

​

​

4,755

​

​

412

​

​

207

​

​

4,960

​

​

Member Units

​

(5)

​

​

-

​

​

(41)

​

​

652

​

​

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)

​

​

(285)

​

​

285

​

​

-

​

​

-

​

​

285

​

​

285

​

​

-

​

​

Common Stock

​

(9)

​

​

(746)

​

​

746

​

​

-

​

​

-

​

​

746

​

​

746

​

​

-

Gulf Publishing Holdings, LLC

​

LIBOR Plus 9.50% (Floor 1.00%)

​

(8)

​

​

-

​

​

-

​

​

4

​

​

70

​

​

1

​

​

10

​

​

61

​

​

6.25% Current / 6.25% PIK

​

(8)

​

​

-

​

​

(277)

​

​

206

​

​

3,124

​

​

41

​

​

277

​

​

2,888

​

​

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

​

​

2

​

​

-

​

​

150

​

​

11.00% Secured Debt

​

(9)

​

​

-

​

​

(8)

​

​

137

​

​

3,350

​

​

8

​

​

8

​

​

3,350

​

​

Preferred Member Units

​

(9)

​

​

-

​

​

(145)

​

​

11

​

​

1,975

​

​

-

​

​

145

​

​

1,830

​

​

Preferred Member Units

​

(9)

​

​

-

​

​

(7)

​

​

-

​

​

105

​

​

-

​

​

7

​

​

98

69

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest,

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fees or

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of

​

Amount of

​

Dividends

​

December 31, 

​

​

​

​

​

​

​

June 30, 

​

​

​

​

​

​

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

J&J Services, Inc.

​

11.50% Secured Debt

​

(7)

​

​

-

​

​

66

​

​

273

​

​

4,315

​

​

85

​

​

600

​

​

3,800

​

​

Preferred Stock

​

(7)

​

​

-

​

​

703

​

​

-

​

​

1,790

​

​

703

​

​

18

​

​

2,475

Kickhaefer Manufacturing Company, LLC

​

9.50% Current/2.00% PIK Secured Debt

​

(5)

​

​

-

​

​

(1)

​

​

386

​

​

6,146

​

​

320

​

​

241

​

​

6,225

​

​

Member Units

​

(5)

​

​

-

​

​

-

​

​

-

​

​

290

​

​

-

​

​

-

​

​

290

​

​

9.00% Secured Debt

​

(5)

​

​

-

​

​

-

​

​

53

​

​

977

​

​

8

​

​

4

​

​

981

​

​

Member Units

​

(5)

​

​

-

​

​

(199)

​

​

11

​

​

3,060

​

​

-

​

​

199

​

​

2,861

Market Force Information, LLC

​

12.00% PIK Secured Debt

​

(9)

​

​

-

​

​

(2,790)

​

​

63

​

​

5,625

​

​

790

​

​

2,849

​

​

3,566

​

​

Member Units

​

(9)

​

​

-

​

​

(1,319)

​

​

-

​

​

1,319

​

​

-

​

​

1,319

​

​

-

MH Corbin Holding LLC

​

13.00% Secured Debt

​

(5)

​

​

-

​

​

(20)

​

​

149

​

​

2,213

​

​

15

​

​

61

​

​

2,167

​

​

Preferred Member Units

​

(5)

​

​

-

​

​

(334)

​

​

-

​

​

1,192

​

​

-

​

​

334

​

​

858

​

​

Preferred Member Units

​

(5)

​

​

-

​

​

(5)

​

​

-

​

​

5

​

​

-

​

​

5

​

​

-

Mystic Logistics Holdings, LLC

​

10.00% Secured Debt

​

(6)

​

​

-

​

​

-

​

​

104

​

​

1,561

​

​

253

​

​

74

​

​

1,740

​

​

Common Stock

​

(6)

​

​

-

​

​

495

​

​

-

​

​

2,103

​

​

495

​

​

-

​

​

2,598

NexRev LLC

​

11.00% PIK Secured Debt

​

(8)

​

​

-

​

​

(400)

​

​

251

​

​

4,331

​

​

51

​

​

455

​

​

3,927

​

​

Preferred Member Units

​

(8)

​

​

-

​

​

(1,577)

​

​

(19)

​

​

1,577

​

​

-

​

​

1,577

​

​

-

NuStep, LLC

​

12.00% Secured Debt

​

(5)

​

​

-

​

​

-

​

​

312

​

​

4,901

​

​

13

​

​

40

​

​

4,874

​

​

Preferred Member Units

​

(5)

​

​

-

​

​

-

​

​

-

​

​

2,550

​

​

-

​

​

-

​

​

2,550

SI East, LLC

​

9.50% Current, Secured Debt

​

(7)

​

​

-

​

​

(16)

​

​

549

​

​

10,988

​

​

16

​

​

16

​

​

10,988

​

​

Preferred Member Units

​

(7)

​

​

-

​

​

370

​

​

178

​

​

2,734

​

​

370

​

​

-

​

​

3,104

Tedder Industries, LLC

​

12.00% Secured Debt

​

(9)

​

​

-

​

​

(65)

​

​

259

​

​

4,066

​

​

13

​

​

66

​

​

4,013

​

​

12.00% Secured Debt

​

(9)

​

​

-

​

​

-

​

​

10

​

​

158

​

​

-

​

​

-

​

​

158

​

​

Preferred Member Units

​

(9)

​

​

-

​

​

-

​

​

-

​

​

2,034

​

​

-

​

​

-

​

​

2,034

Trantech Radiator Topco, LLC

​

12% Secured Debt

​

(7)

​

​

-

​

​

54

​

​

145

​

​

2,237

​

​

63

​

​

80

​

​

2,220

​

​

Common Stock

​

(7)

​

​

-

​

​

756

​

​

15

​

​

1,164

​

​

756

​

​

-

​

​

1,920

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

​

​

​

​

​

​

-

​

���

22

​

​

10

​

​

674

​

​

22

​

​

696

​

​

-

Total Affiliate investments

​

​

​

​

​

$

(4,054)

​

$

(1,540)

​

$

7,453

​

$

154,158

​

$

18,239

​

$

16,824

​

$

155,573

​

​

​

​

​

(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 June 30, 2020 for affiliate investments located in this region was $63,117. This represented 12.4% of net assets as of June 30, 2020.
(6)Portfolio company located in the Northeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2020 for affiliate investments located in this region was $4,338. This represented 0.9% of net assets as of June 30, 2020.

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(7)Portfolio company located in the Southeast region as determined by location of the corporate headquarters. The fair value as of June 30, 2020 for affiliate investments located in this region was $22,587. This represented 4.4% of net assets as of June 30, 2020.
(8)Portfolio company located in the Southwest region as determined by location of the corporate headquarters. The fair value as of June 30, 2020 for control investments located in this region was $12,110. This represented 2.4% of net assets as of June 30, 2020. The fair value as of June 30, 2020 for affiliate investments located in this region was $34,518. This represented 6.8% of net assets as of June 30, 2020.
(9)Portfolio company located in the West region as determined by location of the corporate headquarters. The fair value as of June 30, 2020 for control investments located in this region was $22,374. This represented 4.4% of net assets as of June 30, 2020. The fair value as of June 30, 2020 for affiliate investments located in this region was $29,093. This represented 5.7% of net assets as of June 30, 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 2019. Amounts asobjectives of December 31, 2019management 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 materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that the projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the unaudited condensed consolidated financialforward-looking statements have been derivedas a result of various factors, including, without limitation: changes in laws and regulations and adverse changes in the economy 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 II 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, 2019. 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 MSC Income Fund, Inc. (formerly known as HMS Income Fund, Inc.), collectively with its consolidated subsidiaries, as the “Company,”Securities and the use of “we,” “our,” “us” or similar pronouns in this Report refers to MSC 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, including as a result of the COVID-19 pandemic and recent drop in oil and gas prices;
•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 that could result in changes to the value of our assets, including changes from the impact of the current COVID-19 pandemic;
•the impact of increased competition;
•our ability to continue to effectively manage our business due to the disruptions caused by the current COVID-19 pandemic;
•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 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, 2019 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. Other factors that could cause actual results to differ materially include:
•changes in the economy;
•risks associated with possible disruption in our operations or the economy generally; and
•future changes in laws or regulations and conditions in our operating areas.

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 filing 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
28

on Form 10-Qsubsequent periodic and current reports on Form 8-K. reports.

COVID-19 UPDATE

The forward-looking statements and projections contained in this Report are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

COVID-19 Developments

The rapid spread of COVID-19,pandemic, and the related effect on the U.S. and world economy,global economies, has had, adverse consequences on the business operations of some of our portfolio companies and has adversely affected, and threatens to continue to adversely affect, our operations and the operations of our Advisers (including those relating to us). Our Advisers have, been monitoring the COVID-19 pandemic and its impact onadverse consequences for our business and operating results, and the businessbusinesses and operating results of our portfolio companies. During the quarter ended June 30, 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, and have been focused on proactively engagingwhile also managing our ongoing business activities. In this regard, MSC Adviser remains heavily engaged with our portfolio companiescompanies. As discussed in orderour public SEC filings, our investment income, principally our interest and dividend income, was negatively impacted by the economic effects of the COVID-19 pandemic in 2020. However, we continue to collaboratemaintain access to multiple sources of liquidity, including cash and unused capacity under our TIAA Credit Facility and JPM SPV Facility (see Note – E Debt to our financial statements for these defined terms) (together, the “Credit Facilities”). As of June 30, 2021, we were in compliance with all debt covenants applicable to us and do not anticipate any issues with our ability to comply with all covenants in the future. Refer to “— Financial Condition, Liquidity and Capital Resources” below for further discussion as of June 30, 2021.

Neither our management, teamsMSC Adviser nor our Board of Directors is able to assess and evaluate the steps each portfolio company can take in response to the impacts of COVID-19.


We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide and the magnitude of its economic and societal impact. As such, while we will continue to monitor the economic impact of the outbreak,evolving situation and guidance from U.S. authorities, including with respect to the travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local,federal, state and federal governmentallocal public health authorities, as well as non-U.S. governmental authorities. As such,we are unable to predict with any certainty the extent to which COVID-19 and/or other health pandemics may continue tothe outbreak will negatively affect our portfolio companies’ operating results and financial condition or the duration of any potential business or supply-chain disruption for us, our Advisers and/or our portfolio companies, is uncertain. Depending on the duration and extent of the disruption to the operations of our portfolio companies, we expectimpact that certain portfolio companies, particularly those in at-risk industries such as retail, travel, hospitality and leisure, and oil, gas, and consumable fuels, among others, will continue to experience financial distress and possibly default on their financial obligations to us and their other capital providers. We also expect that some of our portfolio companiesdisruptions may continue to significantly curtail business operations, furlough or lay off employees and terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a permanent basis. These developments would likely result in additional decreases in the value of our investment in any such portfolio company.

The COVID-19 pandemic and the related disruption and financial distress experienced by our portfolio companies have already had adverse material effects on our results of operations, which are described in further detail below, and we expect that such adverse effects will continue for the duration of the pandemic and potentially for some time thereafter. The effects of the COVID-19 pandemic have already caused a steep decline in leveraged loan market values, which affects the value of many of the loans we hold. In connection with the adverse effects of the COVID-19 pandemic, we have restructured certain of our investments and may need to restructure other of our investments in portfolio companies, which could result in reduced or deferred interest or amortization payments or additional investments placed on non-accrual status, an increase the amount of PIK interest we receive, or result in permanent impairments on our investments. The effects of the COVID-19 pandemic discussed above increase the risk that more of our portfolio investments may be placed on non-accrual status in the future. Any decreases in our net investment income would increase the portion of our cash flows dedicated to servicing our existing borrowings under the Credit Facilities and distribution payments to stockholders. In light of the effects of the COVID-19 pandemic discussed above, on June 29, 2020, our board of directors unanimously approved the suspension of all distributions to our stockholders, effective immediately. The board of directors determined that it was in the best interest of the Company to suspend distributions in order to preserve financial flexibility and liquidity given the potential prolonged impact of COVID-19. Distributions for the future will be reevaluated by our board of directors based on circumstances and expectations at the time of consideration; however, we intend to make distributions in an amount sufficient to maintain its RIC status and to avoid any federal income taxes on income.

As of September 30, 2020, we are permitted under the 1940 Act, as a business development company (“BDC”), to borrow amounts such that our asset coverage, as defined in the Investment Company Act of 1940, as amended, (the “1940 Act”), equals at least 200% after such borrowing. While we are in compliance with our asset coverage requirements under the 1940 Act as of September 30, 2020, the TIAA Credit Facility contains affirmative and negative covenants usual and customary for leveraged financings, including maintaining a minimum interest coverage ratio, maintaining a minimum asset coverage ratio, and maintaining a minimum consolidated tangible net worth. Similarly, the Deutsche Bank Credit Facility contains affirmative and negative covenants usual and customary for leveraged financings, including maintaining a positive tangible net worth and limitations on industry concentration. The Credit Facilities contain usual and customary default provisions, including default in payment of interest and principal or a breach of any covenant in the loan agreement or other credit documents and failure to cure such breach within defined periods. If we or HMS Funding fail to satisfy the respective covenants in each of the TIAA Credit Facility and the Deutsche Bank Credit Facility or are unable to cure any event of default or obtain a waiver from the applicable lender, it could result in foreclosure by the lenders under the applicable Credit Facility, which would accelerate our or HMS Funding’s respective repayment obligations under the facilities and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders. See “Item 1A
29

— “Risk Factors — Risks Relating to Debt Financing — In addition to regulatory limitations on our ability to raise capital, the Credit Facilities contain various covenants, which, if not complied with, could accelerate our repayment obligations under the Credit Facilities, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions” included in our most recent Annual Report on Form 10-K and the other risk factors contained therein and in our subsequent filings with the SEC, including this Quarterly Report on Form 10-Q. Neither we nor HMS Funding were in default under either of the Credit Facilities as of September 30, 2020.

We are also subject to financial risks, including changes in market interest rates. As of September 30, 2020, approximately $662.7 million (amortized cost) of our debt portfolio investments bore interest at variable rates, which generally are LIBOR-based (or based on an equivalent applicable currency rate), and many of which are subject to certain floors. In addition, each of the Credit Facilities have floating rate interest provisions. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates, and LIBOR has also decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

In response to COVID-19, our Sub-Adviser (as defined below) has focused its portfolio investment team’s efforts on proactively engaging with our portfolio companies. More specifically, its efforts are focused on collaborating with the management teams of the Company’s LMM portfolio companies to assess and evaluate the steps each portfolio company can take in response to the impacts of COVID-19, including offering insights and assistance to these companies as they navigate this environment and analyze the numerous government programs which are now available.We will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it will have a material adverse impact on our future net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of our portfolio companies.

OVERVIEW

We are a specialty finance company that makes debt and equity investments in middle market (“Middle Market”) companies, which we define as companies 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 management investment company that has elected to be treated as a BDC under the 1940 Act. We are, therefore, required to comply with certain regulatory requirements. We have elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
future.

OVERVIEW

Our primary investment objective is to generate current income through debt and equity investments. A secondary objective is to generate dividend income and long-term capital appreciation through directsuch equity investments and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities. Our portfolio strategy is to invest primarily

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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. The investment in LMM companies 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 are completed through co-investments 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.$20 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 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
30

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. With the approval of In our board of directors, we closed the Offering to new investors effective September 30, 2017. Through September 30, 2020, we raised approximately $250.0 million in the Offering, including proceeds from the distribution reinvestment plan of approximately $118.3 million.

As of October 30, 2020, we are managed by MSC Adviser I, LLC (“MSC Adviser” or the “Sub-Adviser”), a wholly owned subsidiary of Main Street, under an Investment Advisory and Administrative Services Agreement between us and MSC Adviser, dated October 30, 2020 (the “New Investment Advisory Agreement”).

Prior to October 30, 2020, we were managed by HMS Adviser LP (the “Adviser”), an affiliate of Hines Interests Limited Partnership (“Hines”), under an Investment Advisory and Administrative Services Agreement dated May 31, 2012 (as amended, the “Investment Advisory Agreement”). Prior to October 30, 2020, we and the Adviser retained the Sub-Adviser 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 the Sub-Advisory Agreement on May 28, 2020. We engaged Hines Securities, Inc. (the “Dealer Manager”), an affiliate of the Adviser, to serve as the Dealer Manager for the Initial Offering and the Offering.

As a BDC, we are subject to certain regulatory restrictions in making our investments, including limitations on our ability to co-invest with certain affiliates, including Main Street. However, we received exemptive relief from the SEC, that permits us, subject to certain conditions, to co-invest with Main Street and/or its affiliates in certain transactions originated by Main Street and/or our Advisers. 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.

The Adviser entered into an asset purchase agreement, dated June 26, 2020 (the “Purchase Agreement”), with the Sub-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 Purchase Agreement contemplated that we would enter into the New Investment Advisory Agreement and that the Investment Advisory Agreement and the Sub-Advisory Agreement would terminate concurrently therewith.

On June 29, 2020, our board of directors, including all of our independent directors, unanimously approved and recommended to our stockholders for approval the New Investment Advisory Agreement. On October 28, 2020, our stockholders approved the New 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, we entered into the New Investment Advisory Agreement with MSC Adviser and MSC Adviser became our sole investment adviser.

As of September 30, 2020, we had investments in 27 Middle Market debt investments, 50 Private Loan debt investments, 38 LMM debt investments, 43 LMM equity investments, six Middle Market equity investments, 21 Private Loan equity investments and eight Other Portfolio investments with an aggregate fair value of approximately $902.7 million, a cost basis of approximately $936.5 million and a weighted average effective annual yield of approximately 7.5%. The weighted average annual yield was calculated using the effective interest rates for all investments at September 30, 2020, 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 79.3% and 4.2% 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, respectively, on portfolio company assets 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)losses and

31

unrealized appreciation or (depreciation)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)losses and unrealized appreciation or (depreciation)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, net realized gain (loss) on investments and net change in unrealized appreciation (depreciation) on investments.


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.
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 repurchases 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 and regulations;
●
brokerage commissions for our investments;
●
all other expenses incurred by our Advisers in performing their obligations, subject to the limitations included in the applicable 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.


32

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

From time to time, our Advisers may waive certain fees and expense reimbursements accrued under the Investment Advisory Agreement and the Sub-Advisory Agreement, as applicable. Under certain circumstances, we may reimburse such waived fees within three years from the date of each respective fee reimbursement waiver. See Note 9 — Related Party Transactions and Arrangements — Advisory Agreements and Conditional Fee and Expense Reimbursement Waivers to our condensed consolidated financial statements included elsewhere in this Report for additional information on our fee and expense reimbursement waivers.

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. 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 our portfolio companies, as well as market interest 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 our investment portfolio is volatile. 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, 20192020.

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 2020, 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.

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 Main 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


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Basis of Presentation

permitting co-investments by us, Main Street and Consolidation


Our condensed consolidated financial statementsother 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 June 30, 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: HMS Funding I LLCfinancial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. We consider this determination to be a critical accounting estimate, given the significant judgments and subjective measurements required. As of June 30, 2021 and December 31, 2020 our Investment Portfolio valued at fair value represented approximately 97% 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 (“HMS Funding”), HMS Equity Holding, LLC (“HMS Equity Holding”), HMS Equity Holding II, Inc. (“HMS Equity Holding II”), HMS California Holdings LP (“HMS California Holdings”) and HMS California Holdings GP LLC (“HMS California Holdings GP”ASC 820”). All intercompany accountsASC 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 transactionsenhances 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 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. Under Topic 946, Financial Services - Investment Companies the market environment, portfolio company performance and other events that may occur

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over the lives of the Accounting Standards Codification,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 amended (the “ASC”),unrealized appreciation or depreciation.

The SEC recently adopted new Rule 2a-5 under the 1940 Act, which permits a BDC’s board of directors to designate its executive officers or investment adviser as a valuation designee to determine the fair value for its investment portfolio, subject to the active oversight of the Financial Accounting Standardsboard. Our Board (“FASB”), we are precluded from consolidatingof Directors has approved the Valuation Procedures pursuant to Rule 2a-5 and has designated MSC Adviser, and specifically a group of its executive officers, to serve as the Board’s valuation designee. We adopted the Valuation Procedures effective April 1, 2021. We believe our investment portfolio company investments, includingas of June 30, 2021 and December 31, 2020 approximates fair value as of those dates based on the markets in which we have a controllingoperate and other conditions in existence on those reporting dates.

Revenue Recognition

Interest and Dividend Income

We record interest unlessand dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company 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 qualify 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 Change in Unrealized Appreciation (Depreciation) on Investments” 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.


Restricted Cash

Amounts included in restricted cash represent balancesstatements), these non-cash sources of income may need to be paid out to stockholders in the cash accounts held at HMS Funding, whichform of distributions, even though we may not have been set aside pursuantcollected 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 June 30, 2021 and 2020, approximately 2.5% and 5.0%, respectively, of our total investment income was attributable to an amendmentPIK interest income and cumulative dividend income not paid currently in cash. For the six months ended June 30, 2021 and 2020, approximately 2.4% and 4.1%, respectively, of our total investment income was attributable to the Deutsche Bank Credit Facility effective April 24, 2020 (see Note 5 — Borrowings) (i) as a reserve for draws on unfunded commitments related to investments held by HMS Funding or (ii) to be applied against outstanding advances on the facility.

33

The following table provides a reconciliation of cash, cash equivalentsPIK interest income and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts showncumulative dividend income not paid currently in the condensed consolidated statements of cash flows.
Nine Months Ended
September 30, 2020September 30, 2019
Cash and cash equivalents$14,682 $21,070 
Restricted cash16,611 — 
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$31,293 $21,070 

cash.

INVESTMENT PORTFOLIO INVESTMENT COMPOSITION


Our Middle MarketLMM portfolio investments primarily consist of secured debt, equity warrants and direct or secondary purchases of interest-bearing debt securitiesequity investments in privately held, LMM companies that arebased in the United States. Our LMM portfolio companies generally largerhave annual revenues between $10 million and $150 million, and our LMM investments generally range in size than thefrom $1 million to $20 million. The LMM companies included in our LMM portfolio. While our Middle Market debt investments are generallytypically secured by either a first priority lien, 9.7% of the fair value of our Middle Market portfolio, as of September 30, 2020, is secured byor second priority liens.

As of September 30, 2020, our LMM portfolio primarily consists of debt investments secured by a first priority lien (56.2% of the total fair value of the LMM portfolio) on the assets of the portfolio companiescompany, can include either fixed or floating rate terms and equity investments (43.4%generally have a term of the total fair value of the LMM portfolio) in privately held LMM companies. 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

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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.


As of September 30, 2020, our Private Loan$15 million. Our Middle Market portfolio primarily consists of debt investments are generally secured by either a first andor second priority liens (87.1% and 3.7% of the total fair value of the Private Loan portfolio, respectively)lien on the assets of the portfolio companies, unsecured debt investments (2.9% of the total fair value of the Private Loan portfolio)company and equity investments (6.3% of the total fair value of the Private Loan portfolio) in Private Loan companies. 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 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 or collateralized loan obligations (“CLOs”).


During the nine months ended September 30, 2020,funds. For Other Portfolio investments, we funded investment purchases of approximately $72.6 million and had no investments under contract to purchase as of September 30, 2020. We also received proceeds from sales and repayments of existing portfolio investments of approximately $147.8 million, including $58.5 million in sales and had no investments under contract to sell as of September 30, 2020. The combined result of these transactions, and the net realized losses on investments exited during the period decreased our portfolio, on a cost basis, by approximately $103.6 million, or 10.0%, and decreased the number of portfolio investments by 17, or 8.1%, comparedgenerally receive distributions related to the portfolio as of December 31, 2019. As of September 30, 2020, the largest investment in an individual portfolio company represented approximately 3.4% of our portfolio’s fair value, with remaining investments in any individual portfolio company ranging from 0.0% to 2.4%. The average investment in our portfolio is approximately $4.7 million or 0.5% of our total portfolio as of September 30, 2020. Our portfolio extends across individual portfolio investments, geographic regions, and industries. Further, our total portfolio’s investment composition (excluding our Other Portfolio investments) at fair value comprises 79.3% first lien debt securities and 4.2% 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, 2019, we made investment purchases of approximately $222.6 million and had one investment under contract to purchase as of September 30, 2019 for an aggregate purchase price of approximately $0.6 million, which settled after September 30, 2019. We also received proceeds from sales and repayments of existing portfolio investments of approximately $280.1 million including $168.4 million in sales and had no investments under contract to sell as of September 30, 2019.

34

Based upon our investment rating system, which is described further below, the weighted average rating of our LMM investment portfolio was approximately 2.3 and 2.4 as of September 30, 2020 and December 31, 2019, respectively. See “Portfolio Asset Quality” below for a description of the system used to rate our investments. Lastly, the overall weighted average effective yield on our investment portfolio was 7.5% and 8.7% as of September 30, 2020 and December 31, 2019, respectively.

Summaries often-year period.

The following 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 June 30, 2021 and December 31, 2020 (this information excludes the Other Portfolio investments):.

​

​

​

​

​

​

​

Cost:

 

June 30, 2021

 

December 31, 2020

​

First lien debt

 

85.7

%  

79.5

%

Equity

 

11.5

%  

13.9

%

Second lien debt

 

1.1

%  

4.6

%

Equity warrants

 

0.2

%  

0.2

%

Other

 

1.5

%  

1.8

%

​

 

100.0

%  

100.0

%

​

 September 30, 2020December 31, 2019
Cost:LMMPrivate LoanMiddle MarketTotalLMMPrivate LoanMiddle MarketTotal
First Lien Secured Debt66.1 %87.3 %86.2 %82.3 %68.0 %90.4 %84.8 %84.3 %
Second Lien Secured Debt0.3 3.6 8.6 4.2 0.4 3.5 10.1 4.9 
Unsecured Debt0.1 2.7 — 1.4 0.1 2.5 0.6 1.4 
Equity
32.9 6.3 5.2 11.9 30.9 3.5 4.5 9.2 
Equity warrants0.6 0.1 — 0.2 0.6 0.1 — 0.2 
Total100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %

​

​

​

​

​

​

Fair Value:

 

June 30, 2021

 

December 31, 2020

​

First lien debt

 

82.3

%  

76.0

%

Equity

 

14.9

%  

17.3

%

Second lien debt

 

1.1

%  

4.6

%

Equity warrants

 

0.2

%  

0.3

%

Other

 

1.5

%  

1.8

%

​

 

100.0

%  

100.0

%

 September 30, 2020December 31, 2019
Fair Value:LMMPrivate LoanMiddle MarketTotalLMMPrivate LoanMiddle MarketTotal
First Lien Secured Debt56.2 %87.1 %88.0 %79.3 %57.2 %89.7 %88.1 %81.8 %
Second Lien Secured Debt0.3 3.7 9.7 4.2 0.3 3.5 8.5 4.1 
Unsecured Debt0.1 2.9 — 1.5 0.1 2.5 0.6 1.4 
Equity43.3 6.1 2.3 14.9 42.3 4 2.8 12.5 
Equity warrants0.1 0.2 — 0.1 0.1 0.3 — 0.2 
Total100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %100.0 %

For the tables showing our total investment

​

Our LMM portfolio composition by geographic region and by industry, see Note 3 — Fair Value Hierarchy for Investments — Portfolio Investment Composition to our condensed consolidated financial statements included elsewhere in this Report.


Investment in HMS-ORIX

We previously co-invested in broadly-syndicated loans with Orix through our investment in HMS-ORIX, which was organized as a Delaware limited liability company. On November 20, 2018, HMS-ORIX closed on a $170.0 million credit facility with Citibank, N.A. (the “Refinanced HMS-ORIX Credit Facility”). The proceeds from the Refinanced HMS-ORIX Credit Facility were used to pay off the outstanding balance on the Initial HMS-ORIX Credit Facility, which was subsequently terminated. On May 8, 2019, HMS-ORIX Holdings I LLC, a wholly owned subsidiary of HMS-ORIX, which held all of the investments, 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 the Cayman Islands (“Mariner CLO”). Proceeds from the HMS-ORIX Holdings Merger were used to pay off the Refinanced HMS-ORIX Credit Facility. HMS-ORIX was fully liquidated on September 26, 2019. On October 8, 2020, Mariner CLO changed its name to Signal Peak CLO 7, Ltd. (“Signal Peak CLO”).
For the nine months ended September 30, 2019, we recognized approximately $0.5 million of dividend income in respect of our investment in HMS-ORIX.

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The following table shows the summarized financial information for HMS-ORIX for the three months ended September 30, 2019 (dollars in thousands):
HMS-ORIX SLF LLC
Statement of Operations
(dollars in thousands)
Three Months Ended September 30, 2019Nine Months Ended 
 September 30, 2019
Investment income
Interest income$2 $3,030 
Dividend income— — 
Fee income— — 
Other income— — 
Total investment income2 3,030 
Expenses
Interest expense— 2,130 
Other expenses— — 
General and administrative expenses60 96 
Total expenses60 2,226 
Net investment income (loss)(58)804 
Net realized loss from investments— (1,514)
Net realized loss(58)(710)
Net change in unrealized appreciation on investments— 6,647 
Net increase (decrease) in net assets resulting from operations$(58)$5,937 

PORTFOLIO ASSET QUALITY
As of September 30, 2020, we owned a broad portfolio of 193 investments in 116 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:

▪27 debt investments in 26 Middle Market portfolio companies with an aggregate fair value of approximately $184.0 millioninvestments and a cost basis of approximately $210.9 million. The Middle Market debt investments had a weighted average annual effective yield of approximately 7.5%, which is calculated assuming the investments on non-accrual status have a zero yield, and 90.1% of the Middle Market debt investments were secured by first priority liens. Further, 97.2% of the Middle Market debt investments contain variable interest rates, though a majority of the investments with variable rates are subject to contractual minimum base interest rates between 100 and 150 basis points.

▪50 debt investments in 45 Private Loan portfolio investments carry a number of risks including: (1) investing in companies with an aggregate fair value of approximately $416.8 millionwhich 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 fiscal year ended December 31, 2020 for a cost basis of approximately $435.4 million. The Private Loan debt investments had a weighted average annual effective yield of approximately 8.6%, which is calculated assuming the investments on non-accrual status have a zero yield, and 93.0%more complete discussion of the Private Loan debt investments were secured by first priority liens. Further, 95.1% of the Private Loan debt investments contain variable interest rates, though a majority of the investmentsrisks involved with variable interest rates are subject to contractual minimum base interest rates between 100 and 150 basis points.

▪38 debt investmentsinvesting in 32 LMM portfolio companies with an aggregate fair value of approximately $124.4 million and a cost basis of approximately $128.9 million. The LMM debt investments had a weighted average annual effective yield of approximately 10.7%, and 99.4% of the debt investments were secured by first priority liens. Also, 58.6% of the LMM debt investments are fixed rate investments with fixed interest rates between 8.0% and 15.0%. Also, 26 LMM debt investments, representing approximately 41.4% of the LMM debt investments have variable interest rates subject to a contractual minimum base interest rate of 100 basis points.

▪71 equity investments and seven equity warrant investments in 33 LMM portfolio companies, 13 Private Loan portfolio companies, six Middle Market portfolio companies and six Other Portfolio companies with an aggregate fair value of approximately $177.5 million and a cost basis of approximately $161.2 million.

Overall, as of September 30, 2020, our investment portfolio had a weighted average effective yield on our investments of approximately 7.5%, and 75.0% of our total portfolio’s investments (including our Other Portfolio investments) were secured by first priority liens.

As of September 30, 2020, we had nine investments in six portfolio companies that were on non-accrual status, which comprised approximately 2.5% of our total investment portfolio at fair value and 4.6% of the total investment portfolio at cost.
36

As of December 31, 2019, we had eight investments in five portfolio companies that were on non-accrual status, which comprised approximately 1.5% of the total investment portfolio at fair value and 2.9% of the total investment portfolio at cost. For those investments in which S&P credit ratings are available, which represents approximately 19.1% of the portfolio as of September 30, 2020, the portfolio had a weighted average effective credit rating of B-.

Investment Portfolio.

PORTFOLIO ASSET QUALITY

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 companies.company. The investment rating system takes into consideration various factors, including each

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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 June 30, 2021, our total Investment Rating 1 represents a LMM portfolio company that is performing in a mannerPortfolio had four investments on non-accrual status, which significantly exceeds expectations.

•comprised approximately 1.2% of its fair value and 3.0% 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 systemperformance of certain portfolio companies will not be negatively impacted by future economic cycles or other conditions, which could also have a negative impact on our Sub-Adviser at fair value as of September 30, 2020 and December 31, 2019 (dollars in thousands):

 September 30, 2020December 31, 2019
Investment RatingInvestments at Fair ValuePercentage of Total LMM PortfolioInvestments at Fair ValuePercentage of Total LMM Portfolio
1$86,964 39.5 %$86,453 38.4 %
242,311 19.2 28,130 12.5 
343,242 19.7 48,597 21.6 
443,964 20.0 61,941 27.5 
53,429 1.6 — — 
Total$219,910 100.0 %$225,121 100.0 %
Based upon this investment rating system, the weighted average rating of our LMM portfolio at fair value was approximately 2.3 and 2.4 as of September 30, 2020 and December 31, 2019, respectively.
future results.

DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS COMPARISONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

Total Investment Income, Expenses, Net Assets
For

Comparison of the three months ended SeptemberJune 30, 20202021 and 2019, ourJune 30, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

 

​

​

June 30, 

​

Net Change

​

    

2021

    

2020

    

Amount

    

%

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

Total investment income

​

$

22,496

​

$

22,247

​

$

249

​

1

%

Total expenses (net of fee and expense waivers)

​

​

8,252

​

​

10,243

​

​

(1,991)

​

(19)

%

Net investment income

​

​

14,244

​

​

12,004

​

​

2,240

​

19

%

Net realized gain (loss) from investments

​

​

1,818

​

​

(14,328)

​

​

16,146

​

NM

​

Net unrealized appreciation (depreciation) from investments

​

​

7,827

​

​

23,968

​

​

(16,141)

​

NM

​

Income tax benefit (provision)

​

​

(434)

​

​

(19)

​

​

(415)

​

NM

​

Net increase (decrease) in net assets resulting from operations

​

$

23,455

​

$

21,625

​

$

1,830

​

NM

​

NM

Not Meaningful

Total Investment Income

Total investment income for the three months ended June 30, 2021 was $22.5 million, a 1% increase from the $22.2 million of total investment income was approximately $19.5 million and $27.8 million, respectively, consisting predominatelyfor the corresponding period of interest income and dividend income. 2020. The following table provides a summary of the changes in the comparable period activity.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

 

​

​

​

June 30, 

​

Net Change

​

​

    

2021

    

2020

    

Amount

    

%

​

​

​

(dollars in thousands)

​

Interest income

​

$

17,320

​

$

19,702

​

$

(2,382)

​

(12)

%

(a)

Dividend income

​

 

5,026

​

​

2,104

​

​

2,922

​

139

%

(b)

Fee income

​

​

150

​

​

441

​

​

(291)

​

(66)

%

​

Total investment income

​

$

22,496

​

$

22,247

​

$

249

​

1

%

​

(a)The decrease in interest income was primarily due to the reduction in the principal value of our total debt investment portfolio.

77

Table of Contents

(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.

Expenses

Total expenses, net of fee and expense waivers, for the three months ended June 30, 2021 were $8.3 million, a 19% decrease from $10.2 million in the corresponding period of 2020. The following table provides a summary of the changes in the comparable period activity.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

​

​

​

​

June 30, 

​

Net Change

​

​

​

2021

​

2020

​

Amount

​

%

​

​

​

​

(dollars in thousands)

​

​

Interest expense

​

$

3,300

​

$

4,274

​

$

(974)

​

(23)

%

(a)

Base management and incentive fees

​

​

4,158

​

​

4,630

​

​

(472)

​

(10)

%

(b)

Internal administrative services fees

​

​

1,040

​

​

752

​

​

288

​

38

%

​

Offering costs

​

​

55

​

​

89

​

​

(34)

​

(38)

%

​

Professional fees

​

​

250

​

​

791

​

​

(541)

​

(68)

%

(c)

Insurance

​

​

115

​

​

104

​

​

11

​

11

%

​

Board of director fees

​

​

90

​

​

121

​

​

(31)

​

(26)

%

​

Other general and administrative

​

​

284

​

​

234

​

​

50

​

21

%

​

Total expenses before fee and expense waivers

​

​

9,292

​

​

10,995

​

​

(1,703)

​

(15)

%

​

Waiver of internal administrative services expenses

​

​

(1,040)

​

​

(752)

​

​

(288)

​

38

%

​

Total expenses

​

$

8,252

​

$

10,243

​

$

(1,991)

​

(19)

%

​

(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 percentage from 2.00% to 1.75% as a result of MSC Adviser becoming the sole investment manager to the Company.
(c)The decrease in professional fees is primarily due to lower legal fees. For the three months ended June 30, 2020, the company incurred $0.5 million of legal fees in connection with the Purchase Agreement between HMS Adviser and MSC Adviser and related transactions.

Net Investment Income

Net investment income for the three months ended June 30, 2021 increased 19% to $14.2 million, or $0.18 per share, compared to net investment income of $12.0 million, or $0.15 per share, for the corresponding period of 2020. The increase in net investment income was principally attributable to the decrease in total expenses, as supplemented by the increase in total investment income, was primarily driven byboth as discussed above.

Net Realized Gain (Loss) from Investments

The following table provides a decrease in interest incomesummary of approximately $7.6 million and a decrease in dividend incomethe primary components of approximately $0.4 million. The decrease in interest income was primarily due to a decrease in the weighted average annual effective yieldtotal net realized gain on investments in our portfolio from 9.0% as of September 30, 2019 to 7.5% as of September 30, 2020.


For the three months ended September 30, 2020 and 2019, we recognized $0.1 million and $0.4 million, respectively, of non-recurring fee income received from our portfolio companies or other third parties, which accounted for approximately 0.4% and 1.3%, respectively, of our total investment income during such periods.  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, 2020 and 2019, expenses, net of internal administrative services expense waivers, were approximately $9.6 million and $13.9 million, respectively. The decrease in expenses is primarily due to (i) a decrease in interest expense of approximately $2.2 million, (ii) a decrease in the subordinated incentive fee on income of $1.2 million, and (iii) a decrease in base management fees of $0.8 million. Interest expense decreased primarily due to a decrease in our average borrowings of approximately $78.0 million during the period and a decrease in our cost of borrowing on the Credit Facilities.
37

Average borrowings under the Credit Facilities were $380.0$1.8 million for the three months ended SeptemberJune 30, 2020 compared to $458.02021:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2021

​

​

Full Exits

​

Partial Exits

​

Restructures

​

Total

​

​

Net Gain/(Loss)

​

# of Investments

​

Net Gain/(Loss)

​

# of Investments

​

Net Gain/(Loss)

​

# of Investments

​

Net Gain/(Loss)

​

# of Investments

​

​

(dollars in thousands)

LMM Portfolio

​

$

(2,470)

​

1

​

$

-

​

-

​

$

-

​

-

​

$

(2,470)

​

1

Middle Market Portfolio

​

​

-

​

-

​

​

4,262

​

1

​

​

-

​

-

​

​

4,262

​

1

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Net Realized Gain/(Loss)

​

$

(2,470)

​

1

​

$

4,262

​

1

​

$

-

​

-

​

$

1,792

​

2

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

78

Table of Contents

Net Unrealized Appreciation (Depreciation)

​

The following table provides a summary of the total net unrealized appreciation of $7.8 million for the three months ended SeptemberJune 30, 2019. As of September 30, 2020 and 2019, the annualized interest rate on our borrowings was 3.7% and 4.6%, respectively. Due to a decline in net investment2021:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended June 30, 2021

​

​

​

​

​

Middle

​

Private

​

​

​

​

​

​

​

    

LMM(a)

    

Market

    

Loan

    

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

​

$

(2.3)

​

$

2.3

​

$

—

​

$

—

​

$

—

Net unrealized appreciation (depreciation) relating to portfolio investments

​

 

3.4

​

 

(1.2)

​

 

3.6

​

 

2.0

​

 

7.8

Total net appreciation relating to portfolio investments

​

$

1.1

​

$

1.1

​

$

3.6

​

$

2.0

​

$

7.8

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(a)LMM includes unrealized appreciation on 15 LMM portfolio investments and unrealized depreciation on 9 LMM portfolio investments.

Income Tax Benefit (Provision)

The income which is the metric on which the subordinated incentive fee on income is calculated, the Advisers did not earn a subordinated incentive fee on incometax provision for the three months ended SeptemberJune 30, 2020, while the Advisers earned2021 of $0.4 million consisted of a subordinated incentive feecurrent tax provision of $0.4 million, related to a $0.3 million provision for excise tax on our estimated undistributed taxable income of $1.2and $0.1 million provision for current 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 SeptemberJune 30, 2019. The decrease2021 was $23.5 million, or $0.29 per share, compared with a net increase in base management feesnet assets of $0.8$21.6 million, is due to a decline in the average gross assets, from $1,099.1 million foror $0.28 per share, during the three months ended SeptemberJune 30, 2019 to $938.3 million for the three months ended September 30, 2020.


For the three months ended September 30, 2020, The tables above provide a summary of the net increase in net assets resulting from operations for the three months ended June 30, 2021.

Comparison of the six months ended June 30, 2021 and June 30, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

​

​

​

 

​

​

June 30, 

​

Net Change

​

    

2021

    

2020

    

Amount

    

%

​

​

(dollars in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

Total investment income

​

$

42,768

​

$

46,247

​

$

(3,479)

​

(8)

%

Total expenses (net of fee and expense waivers)

​

​

16,582

​

​

21,709

​

​

(5,127)

​

(24)

%

Net investment income

​

​

26,186

​

​

24,538

​

​

1,648

​

7

%

Net realized loss from investments

​

​

(2,264)

​

​

(17,693)

​

​

15,429

​

NM

​

Net unrealized appreciation (depreciation) from investments

​

​

13,020

​

​

(70,941)

​

​

83,961

​

NM

​

Income tax benefit (provision)

​

​

(830)

​

​

(95)

​

​

(735)

​

NM

​

Net increase (decrease) in net assets resulting from operations

​

$

36,112

​

$

(64,191)

​

$

100,303

​

NM

​

NM

Not Meaningful

Total Investment Income

Total investment income for the six months ended June 30, 2021 was approximately $39.9 million.$42.8 million, an 8% decrease from the $46.2 million of total investment income for the corresponding period of 2020. The increase was attributablefollowing table provides a summary of the changes in the comparable period activity.

79

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

​

​

​

​

​

​

​

June 30, 

​

Net Change

​

​

​

2021

​

2020

​

Amount

​

%

​

​

​

​

(dollars in thousands)

​

​

Interest Income

​

$

33,400

​

$

41,487

​

$

(8,087)

​

(19)

%

(a)

Dividend Income

​

​

8,978

​

​

3,744

​

​

5,234

​

140

%

(b)

Fee Income

​

​

390

​

​

1,016

​

​

(626)

​

(62)

%

​

Total Investment Income

​

$

42,768

​

$

46,247

​

$

(3,479)

​

(8)

%

​

(a)The decrease in interest income was primarily due to the reduction in the principal value of our total debt investment portfolio.
(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.

Expenses

Total expenses, net of fee and expense waivers, for the six months ended June 30, 2021 were $16.6 million, a 24% decrease from $21.7 million in the corresponding period of 2020. The following table provides a summary of the changes in the comparable period activity.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended

​

​

​

​

​

​

​

​

​

June 30, 

​

Net Change

​

​

​

2021

​

2020

​

Amount

​

%

​

​

​

​

(dollars in thousands)

​

​

Interest expense

​

$

6,464

​

$

9,503

​

$

(3,039)

​

(32)

%

(a)

Base management and incentive fees

​

​

8,061

​

​

9,624

​

​

(1,563)

​

(16)

%

(b)

Internal administrative services fees

​

​

2,095

​

​

1,536

​

​

559

​

36

%

​

Offering costs

​

​

55

​

​

177

​

​

(122)

​

(69)

%

​

Professional fees

​

​

808

​

​

1,500

​

​

(692)

​

(46)

%

​

Insurance

​

​

229

​

​

207

​

​

22

​

11

%

​

Board of director fees

​

​

198

​

​

223

​

​

(25)

​

(11)

%

​

Other general and administrative

​

​

767

​

​

475

​

​

292

​

61

%

​

Total expenses before fee and expense waivers

​

​

18,677

​

​

23,245

​

​

(4,568)

​

(20)

%

​

Waiver of internal administrative services expenses

​

​

(2,095)

​

​

(1,536)

​

​

(559)

​

36

%

​

Total expenses

​

$

16,582

​

$

21,709

​

$

(5,127)

​

(24)

%

​

(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 a result of MSC Adviser 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 six months ended June 30, 2021 increased 7% to (i) a net change in unrealized appreciation on investments of approximately $47.9$26.2 million, and (ii)or $0.33 per share, compared to net investment income of approximately $9.9$24.5 million, or $0.31 per share, for the corresponding period of 2020. The increase in net investment income was principally attributable to the decrease in total expenses, partially offset by the decrease in total investment income, both as discussed above.

Net Realized Gain (Loss)

The net realized loss of $2.3 million for the six months ended June 30, 2021 includes a realized loss on extinguishment of debt of $2.1 million and a net realized loss from investments of $0.2 million. The following table

80

Table of Contents

provides a summary of the primary components of the total net realized loss on investments of approximately $17.9 million.


For$0.2 million for the threesix months ended SeptemberJune 30, 2019,2021:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2021

​

​

Full Exits

​

Partial Exits

​

Restructures

​

Total

​

​

Net Gain/(Loss)

​

# of Investments

​

Net Gain/(Loss)

​

# of Investments

​

Net Gain/(Loss)

​

# of Investments

​

Net Gain/(Loss)

​

# of Investments

​

​

(dollars in thousands)

LMM Portfolio

​

$

(2,470)

​

1

​

$

-

​

-

​

$

(1,192)

​

1

​

$

(3,662)

​

2

Middle Market Portfolio

​

​

(798)

​

1

​

​

4,262

​

1

​

​

-

​

-

​

​

3,464

​

2

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total Net Realized Gain/(Loss)

​

$

(3,268)

​

2

​

$

4,262

​

1

​

$

(1,192)

​

1

​

$

(198)

​

4

Net Unrealized Appreciation (Depreciation)

​

The following table provides a summary of the total net unrealized appreciation of $13.0 million for the six months ended June 30, 2021:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 2021

​

​

​

​

​

Middle

​

Private

​

​

​

​

​

​

​

    

LMM(a)

    

Market

    

Loan

    

Other

​

Total

​

 

(dollars in millions)

Accounting reversals of net unrealized appreciation recognized in prior periods due to net realized losses recognized during the current period

​

$

(1.3)

​

$

3.2

​

$

0.1

​

$

—

​

$

2.0

Net unrealized appreciation relating to portfolio investments

​

 

5.1

​

 

0.5

​

 

4.4

​

 

1.0

​

 

11.0

Total net unrealized appreciation relating to portfolio investments

​

$

3.8

​

$

3.7

​

$

4.5

​

$

1.0

​

$

13.0

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(a)LMM includes unrealized appreciation on 17 LMM portfolio investments and unrealized depreciation on 13 LMM portfolio investments.

Income Tax Benefit (Provision)

The income tax provision for the six months ended June 30, 2021 of $0.8 million consisted of a current tax provision of $0.8 million, related to a $0.7 million provision for excise tax on our estimated undistributed taxable income and $0.1 million provision for current state income taxes.

Net Increase (Decrease) in Net Assets Resulting from Operations

The net increase in net assets resulting from operations for the six months ended June 30, 2021 was $36.1 million, or $0.45 per share, compared with a net decrease in net assets of $64.2 million, or $0.81 per share, during the six months ended June 30, 2020. The tables above provide a summary of the net increase in net assets resulting from operations (gross of stockholder distributions declared) was approximately $5.8 million. The increase was attributable to (i) net investment income of approximately $13.9 million and (ii) net change in unrealized appreciation on investments of approximately $2.9 million offset by net realized loss on investments of approximately $11.1 million.


RESULTS COMPARISONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30, 2019

Total Investment Income, Operating Expenses, Net Assets
Forfor the ninesix months ended SeptemberJune 30, 20202021.

Financial Condition, Liquidity and 2019, our total investment income was approximately $65.8 millionCapital Resources

This “Financial Condition, Liquidity and $85.6 million, respectively, consisting predominately of interest incomeCapital Resources” section should be read in conjunction with the “COVID-19 Update” section above.

Cash and dividend income. The decrease in total investment income was primarily driven by a decrease in interest income of approximately $18.0 million and a decrease in dividend income of approximately $2.1 million. The decrease in interest income was primarily due to a decrease in the weighted average annual effective yield on investments in our portfolio from 9.0% as of September 30, 2019 to 7.5% as of September 30, 2020.


For the nine months ended September 30, 2020 and 2019, we recognized $1.1 million and $0.9 million, respectively, of non-recurring fee income received from our portfolio companies or other third parties, which accounted for approximately 1.7% and 1.0%, 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, 2020 and 2019, expenses, net of internal administrative services expense waivers, were approximately $31.4 million and $43.9 million, respectively. The decrease in expenses is primarily due to (i) a decrease in interest expense of $6.4 million, (ii) a decrease in incentive fees of $3.9 million and (iii) a decrease in base management fees of $2.5 million. Interest expense decreased primarily due to a decrease in our average borrowings of approximately $79.2 million during the period and a decrease in our cost of borrowing on the Credit Facilities. Average borrowings under the Credit Facilities were $402.0 million for the nine months ended September 30, 2020 compared to $481.3 million for the nine months ended September 30, 2019. Cash Equivalents

As of SeptemberJune 30, 2020 and 2019, the annualized interest rate on borrowings was 3.7% and 4.6%, respectively. Due to a decline in net investment income, which is the metric on which the subordinated incentive fee on income is calculated, the Advisers did not earn a subordinated incentive fee on income for the nine months ended September 30, 2020, while the Advisers earned a subordinated incentive fee on income of $3.9 million for the nine months ended September 30, 2019. The decrease in base management fees of $2.5 million is due to a decline in the average gross assets, from $1,114.8 million for the nine months ended September 30, 2019 to $934.7 million for the nine months ended September 30, 2020.


For the nine months ended September 30, 2020, the net decrease in net assets resulting from operations (gross of stockholder distributions declared) was approximately $24.2 million. The decrease was attributable to (i) net unrealized depreciation on investments of approximately $23.0 million and (ii) realized losses on investments of approximately $35.6 million, offset by net investment income of approximately $34.3 million.

For the nine months ended September 30, 2019, the net increase in net assets resulting from operations (gross of stockholder distributions declared) was approximately $36.4 million. The increase was attributable to (i) net investment income of approximately $41.7 million and (ii) net unrealized appreciation on investments of approximately $12.7 million, offset by realized losses of approximately $18.0 million.
38

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Overview

As of September 30, 2020,2021, we had approximately $31.3$8.2 million in cash and cash equivalents, and restricted cash, which we held in various custodial accounts. In addition, asaccounts and our NAV totaled approximately $598.6 million, equating to approximately $7.51 per share. As of September 30,December 31, 2020, we had $40.0 million in undrawn commitments under the TIAA Credit Facility, subject to borrowing base restrictions and asset coverage limitations under the 1940 Act. To seek to enhance our returns, we intend to continue to employ leverage as market conditions permit and at the discretion of MSC Adviser, subject to asset coverage restrictions under the 1940 Act. See “Financial Condition, Liquidity and Capital Resources — Financing Arrangements.”

As of September 30, 2020, we had 31 senior secured loan investments and five equity investments with aggregate unfunded commitments of $39.1 million. We believe that we maintain sufficient cash, cash equivalents and restricted cash on hand and available borrowings to fund such unfunded commitments should the need arise.

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

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

Liquidity and Capital Resources
Cash Flows

For the nine months ended September 30, 2020, we experienced a net increase in cash, cash equivalents and restricted cash of approximately $9.4 million. During that period, approximately $104.7 million of cash was generated from our operating activities, which principally consisted of principal repayments from and sales of investments in portfolio companies of $147.8 million, offset by the purchase of new portfolio investments of $72.6 million. During the nine months ended September 30, 2020, approximately $95.3 million was used in financing activities, which principally consisted of a net $69.9 million decrease in borrowings under the Credit Facilities, $6.1 million used for the redemption of our common stock and $18.5$49.1 million in cash distributions paidand cash equivalents, which we held in various custodial accounts and our NAV totaled approximately $579.6 million equating to stockholders.approximately $7.28 per share.


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Cash Flows

For the ninesix months ended SeptemberJune 30, 2019,2021, we experienced a net decrease in cash and cash equivalents of approximately $0.7 million. During that period, approximately $92.4$40.9 million, which is the net result of $94.8 million of cash was generated fromused in our operating activities which principally consistedand $53.9 million of cash provided by our financing activities.

The $94.8 million of cash used in our operating activities resulted primarily from the principal repayments from and sales of investments in portfolio companies of $280.1 million and a net increase in net assets resulting from operations of approximately $36.4 million, offset by the purchasefunding of new portfolio investments of $222.6 million. During$223.4 million, partially offset by (i) cash proceeds totaling $95.1 million from the nine months ended September 30, 2019, approximately $93.1sales 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 $20.6 million, was usedwhich is our net investment income, excluding the non-cash effects of the accretion of unearned income, payment-in-kind interest income, cumulative dividends and the amortization of expenses for deferred financing costs and (iii) cash proceeds of $12.8 million related to the change in other assets and liabilities.

The $53.9 million provided by financing activities which principally consisted of a$64.9 million net $51.0 million decrease in borrowings under thecash proceeds related to our Credit Facilities $19.3and $0.5 million usednet cash proceeds related to our common stock issuance, as described below in “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” of Part II of this Quarterly Report on Form 10-Q, partially offset by (i) $4.8 million in cash dividends paid to stockholders, (ii) $3.7 million for deferred financing costs, (iii) $2.9 million for the redemption of our common stock and $22.4(iv) $0.1 million in offering 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 liquidity given the prolonged impact of COVID-19.

On March 2, 2021, the Company’s Board of Directors unanimously approved the reinstatement of the Company’s share repurchase program commencing in April 2021 with quarterly repurchases effectuated via tender offers and generally equal to 90% of the amount of the dividend reinvestment plan proceeds resulting from dividend payments. See “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” of Part II of the Quarterly Report on Form 10-Q for more information.

Capital Resources

As of June 30, 2021, we had $8.2 million in cash distributions paidand cash equivalents and $136.9 million of unused capacity under our Credit Facilities, which we maintain to stockholders.


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, 2020, we raised proceeds of $13.7 million from our distribution reinvestment plan. During the nine months ended September 30, 2019, we raised proceeds of $19.0 million from our distribution reinvestment plan.

Financing Arrangements

We anticipate that we will continue to fundsupport our investment activities through existing cash, capital raised from our stock offerings, if any, proceeds from our dividend reinvestment plan, if any, 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. Due to the impacts of the COVID-19 pandemic, our primary uses of funds in the short-term are expected to be to fund draws on unfunded commitments on existing investments in portfolio companies, operating expenses and cash distributions, if any, to holders of our common stock.
39

activities. As of SeptemberJune 30, 2020,2021, our net asset value totaled $598.6 million, or $7.51 per share.

As of June 30, 2021, we had $90.0$87.0 million outstanding and $40.0$43.0 million of undrawn commitments under our TIAA Credit Facility, and $285.1$239.7 million outstanding and $60.3 million of undrawn commitments under the Deutsche Bank CreditJPM SPV Facility, both of which we estimatedestimate approximated fair value. Effective April 24, 2020, HMS Funding amended the Deutsche Bank Credit Facility to, among other things, terminate the facility’s revolver commitments and begin the amortization period of the facility. During such amortization period, no further advances or reinvestment of principal proceeds are permitted and all interest and principal proceeds received from the investments securing the facility (net of certain fees and expenses) will be applied against theAt June 30, 2021, we had $40 million outstanding advances on the facility.our Main Street Term Loan. Availability under the TIAA Credit Facility 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 6“Note E — BorrowingsDebt” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 as well as Note 5 — Borrowings to the condensed consolidated financial statements included elsewhere in this Report.Quarterly Report on Form 10-Q. See “Recent Developments” below for a discussion of amendments to the TIAA Credit Facility and Main Street Term Loan made subsequent to quarter-end.

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, utilization of available borrowings under our Credit Facilities and future issuances of debt capital. 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

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As

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 permitted, under specified conditions,required to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that our assetmeet a coverage as that term is definedratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the 1940 Act, immediately after each such issuance isfuture, of at least equal to200% (or 150% if certain requirements are met). This requirement limits the percentage set forth in Section 61 of the 1940 Actamount that is applicable to us at such time. Prior to the enactment of the SBCAA in March 2018, the asset coverage requirement applicable to BDCs was 200%. Subject to the receipt of certain approvals, a BDCwe may be subject to a reduced asset coverage of 150%. We have not requested or obtained any of the types of approval necessary to reduce the asset coverage requirement applicable to us. As of September 30, 2020 and December 31, 2019, our asset coverage ratio under BDC regulations was 251% and 237%, respectively.


borrow.

Although in the past 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.


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 any 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

As

We may be a party to financial instruments with off-balance sheet risk in the normal course of Septemberbusiness 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 June 30, 2020,2021, we had a total of approximately $39.1$40.3 million in outstanding commitments comprised of (i) 31thirty-five investments with commitments to fund revolving loans that had not been fully drawn or term loans that hadwith additional commitments not beenyet funded and (ii) fivethree investments with equity capital commitments that had not been fully called.

Contractual Obligations

As of June 30, 2021, we had $366.7 million in borrowings outstanding under our Credit Facilities and unsecured term debt. The TIAA Credit Facility will mature on March 6, 2023. The 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 financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2021

    

2022

    

2023

    

2024

    

2025

    

Thereafter

    

Total

​

​

​

(dollars in thousands)

TIAA Credit Facility

​

​

$

—

​

$

—

​

$

87,000

​

$

—

​

$

—

​

$

—

​

$

87,000

JPM SPV Facility

​

​

​

—

​

​

—

​

​

—

​

​

—

​

​

239,688

​

​

—

​

​

239,688

Main Street Term Loan

​

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

40,000

​

​

40,000

Interest Due on Main Street Term Loan

​

​

​

1,528

​

​

2,028

​

​

2,028

​

​

2,033

​

​

2,028

​

​

144

​

​

9,789

Total

​

​

$

1,528

​

$

2,028

​

$

89,028

​

$

2,033

​

$

241,716

​

$

40,144

​

$

376,477

​

Related Party Transactions

We recognized unrealized depreciationhave entered into agreements with HMS Adviser, MSC Adviser and the Dealer Manager, whereby we pay certain fees and reimbursements to these entities. These included payments to the Dealer Manager for selling commissions and the Dealer Manager fee and include payments to HMS Adviser and MSC Adviser for reimbursement of approximately $1.7 million onoffering costs. In addition, we make payments for certain services that include the identification, execution, and management of our outstanding unfunded loan commitmentsinvestments and no unrealized appreciation or depreciation onalso the management of our outstanding unfunded capital commitments during the nine months ended September 30, 2020. We reasonably believeday-to-day operations provided to us by MSC Adviser, pursuant to various agreements that we maintain sufficient assetshave entered into. See “Note J — Related Party Transactions and available borrowingsArrangements” to adequately cover and allow us to satisfy our outstanding unfunded commitments should the need arise. As of December 31, 2019, we had a total of approximately $46.3 millionfinancial statements included elsewhere in outstanding commitments comprised of (i) 36 commitments to fund revolving loans that had not been fully drawn or term loans that had not been funded and (ii) five capital commitments that had not been fully called. We recognized unrealized appreciation of approximately $323,000this Quarterly Report on our outstanding unfunded loan commitments and no unrealized appreciation or depreciation on our outstanding unfunded capital commitments during the year ended December 31, 2019.


Recent Developments and Subsequent Events

On June 26, 2020 the Adviser entered into 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 Purchase Agreement contemplated that we would enter into the New Investment Advisory Agreement and that the Investment Advisory Agreement and the Sub-Advisory Agreement would terminate concurrently therewith. On October 28, 2020, our stockholders approved the New Investment Advisory Agreement to take effect upon the closing of the Transaction and the Transaction closed on October 30, 2020.

Upon the closing of the Transaction, the previously disclosed resignations of Peter Shaper, Gregory R. Geib and Janice E. Walker from our board of directors were accepted and each of Robert L. Kay and Jeffrey B. Walker were appointed and qualified as directors. Additionally, each of our existing officers resigned from their positions and the following persons were appointed to serve as our officers in the following capacities: Dwayne L. Hyzak as Chief Executive Officer and Senior Managing Director, David L. Magdol as President, Chief Investment Officer and Senior Managing Director, Jesse E. Morris as Executive Vice President and Chief Operating Officer, Jason B. Beauvais as Senior Vice President, General Counsel, Chief Compliance Officer and Secretary, Brent D. Smith as Chief Financial Officer and Treasurer and Cory E. Gilbert as Chief Accounting Officer and Assistant Treasurer.

See Note 13 – Subsequent EventsForm 10-Q for additional information regarding the New Investment Advisory Agreement, which has been in effect since October 30, 2020.

40

related party transactions.

Recent Developments

On October 30, 2020, MSC Adviser entered into a sub-administration agreement (the “Sub-Administration Agreement”) with State Street Bank and Trust Company (“State Street”), pursuant to which State Street will provide certain administrative and professional services. We will bear all of the costs and expenses of the Sub-Administration Agreement.


On October 30, 2020,July 27, 2021, we entered into a Custodian Agreement (the “Custody Agreement”) with State Street, pursuantthe Amendment to which State Street was appointed as our custodianthe TIAA Credit Facility. The Amendment, among other things, permits us to hold certain securities, loans, cash, and other assets on our behalf. Either party may terminateincrease the Custody Agreement at any time upon 60 days’ prior written notice.

amount of outstanding unsecured subordinated indebtedness that is junior in right of payment to borrowings under the TIAA Credit Facility.

In connection with the TransactionAmendment, on July 27, 2021 we also entered into the Amended Term Loan Agreement with Main Street. The Amended Term Loan Agreement provides us with up to an additional $35.0 million of borrowings on substantially the same terms of existing borrowings under the Main Street Capital Term Loan. At closing, $20.0 million of borrowings was funded under the Amended Term Loan Agreement, and we may request two additional Delayed Draw Term Loans of $7.5 million each during the period ending six months after the closing date of the Amended Term Loan Agreement.

Borrowings under the Amended Term Loan Agreement will mature on January 27, 2026, are expressly subordinated and junior in right of payment to all of our secured indebtedness and may be prepaid any time after July 27, 2023 (or the second anniversary of the latest date that a Delayed Draw Term Loan is borrowed) in accordance with the additional conditions described above,in the Amended Term Loan Agreement.

On August 2, 2021, we changedrepurchased 437,869 shares of our name from “HMS Income Fund, Inc.”common stock validly tendered and not withdrawn on the terms set forth in our tender offer statement on Schedule TO and Offer to “MSC Income Fund, Inc.” We amendedRepurchase filed with the SEC on June 11, 2021. The shares were repurchased at a price of $7.57 per share, which was our articles of incorporation and bylaws, both effectivenet asset value per share as of OctoberAugust 2, 2021, for an aggregate purchase price of $3.3 million (an amount equal to 90% of the proceeds we received from the issuance of shares under our distribution reinvestment plan from our August 2, 2021 dividend payment).

On August 10, 2021, our Board of Directors declared a quarterly cash dividend of $0.15 per share payable November 1, 2021 to stockholders of record as of September 30, 2020, for the sole purpose of effectuating the name change.









41

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, and market risk.


Interest Rate Risk

Changeschanges 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 investSee “Risk Factors — Risks Relating to Our Investments — Changes relating to the LIBOR calculation process, the phase-out of LIBOR and the use of replacement rates for LIBOR may adversely affect the value of our portfolio securities.” , “Risk Factors — Risk Related to Our Investments — Changes in interest rates may affect

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our cost of capital, net investment income and the value of our investments.” and “Risk Factors — Risk Related to Debt Financing — Because we borrow money, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.” included in 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 contractual minimum interest rates for the term of the investment. As of June 30, 2021, approximately 83% of our debt investment portfolio (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 published LIBOR rate debt instruments, meaning thatin connection with our Credit Facilities; however, the interest rate payable on our outstanding Main Street Term Loan is fixed for the life of such instrument resets periodically based upon changes in a specifieddebt. As of June 30, 2021, we had not entered into any interest rate index, typically the one-month or three-month LIBOR. As of September 30, 2020, approximately 85.5% of our LMM, Private Loan, and Middle Market portfolio debt investments (based on cost) contained floating interest rates. As of September 30, 2020, the one-month LIBOR was approximately 0.15% and the three-month LIBOR was approximately 0.23%. 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 impact to our interest income that would result from a decline in index rates.


The COVID-19 pandemic has resulted in a decrease in LIBOR and a general reduction of certain interest rates by the U.S. Federal Reserve and other central banks. A continued decline in interest rates, including LIBOR, could result in a reduction of our gross investment income. In addition, our net investment income could also decline if such decreases in LIBOR are not offset by, among other things, a corresponding increase in the spread over LIBOR in our portfolio investments, a decrease in our operating expenses, or a decrease in the interest rates of our liabilities that are tied to LIBOR. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — COVID-19 Developments.”

In addition, any fluctuations in prevailing interest rates may affect the fair value of our fixed rate debt instruments and result in changes in unrealized gains and losses, and may also affect a net increase or decrease in net assets resulting from operations. Such changes in unrealized appreciation and depreciation will materialize into realized gains and losses if we sell our investments before their respective debt maturity dates.

Further, because we borrow money to make investments, our net investment income is partially dependent upon the difference between the interest rate at which we invest borrowed funds and the interest rate at which we borrow funds. In periods of rising interest rates and when we have borrowed capital with floating interest rates, our interest expense will increase, which will increase our financing costs and reduce our net investment income, especially to the extent we hold fixed-rate debt investments. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
hedging arrangements. Due to our limited use of derivatives, we have claimed an exclusion from the definition of the term "commodity“commodity pool operator"operator” under the Commodity Exchange Act and, therefore, are not subject to registration or regulation as a 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 SeptemberJune 30, 2020.2021.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

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)

​

$

(75)

​

$

545

​

$

470

​

$

0.01

(100)

​

​

(75)

​

​

545

​

​

470

​

​

0.01

(50)

​

​

(75)

​

​

545

​

​

470

​

​

0.01

(25)

​

​

(75)

​

​

545

​

​

470

​

​

0.01

25

​

​

145

​

​

(817)

​

​

(672)

​

​

(0.01)

50

​

​

291

​

​

(1,633)

​

​

(1,342)

​

​

(0.02)

75

​

​

510

​

​

(2,450)

​

​

(1,940)

​

​

(0.02)

100

​

​

1,419

​

​

(3,267)

​

​

(1,848)

​

​

(0.02)

125

​

​

2,902

​

​

(4,084)

​

​

(1,182)

​

​

(0.01)

150

​

​

4,498

​

​

(4,900)

​

​

(402)

​

​

(0.01)

Change in interest ratesIncrease (Decrease) in
Interest Income		Increase (Decrease) in
Interest Expense		Net Increase (Decrease) in Net
Investment Income
Down 100 basis points$(161)$(600)$439 
Down 50 basis points(145)(600)455 
Up 50 basis points367 1,876 (1,509)
Up 100 basis points1,878 3,751 (1,873)
Up 200 basis points8,260 7,503 757 
Up 300 basis points14,969 11,254 3,715 

42

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, 2020, we had not entered into any interest rate hedging arrangements.

Market Risk

The market value of a security may move up or down, sometimes rapidly and unpredictably. These fluctuations may cause a security to be worth less than the price originally paid for it, or less than it was worth at an earlier time. Market risk may affect a single issuer, industry, sectorend of the economy or the market as a whole. Global economies and financial markets are increasingly interconnected, which increases the probabilities that conditions in one country or region might adversely impact issuers in a different country or region. Conditions affecting the general economy, including political, social, or economic instability at the local, regional, or global level may also affect the market value of a security. Health crises, such as pandemic and epidemic diseases, as well as other incidents that interrupt the expected course of events, such as natural disasters, war or civil disturbance, acts of terrorism, power outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have and may in the future have an adverse effect on a company’s investments and net asset value and can lead to increased market volatility. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — COVID-19 Developments.”



43

Item 4.    Controls and Procedures.
In accordance with the Exchange Act, Rules 13a-15 and 15d-15,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, 2020material information relating to provide reasonable assuranceus that informationis required to be disclosed in ourthe reports filedwe file or submittedsubmit under the Exchange Act. Except for the adoption of policies and procedures pursuant to Rule 2a-5 under the 1940 Act is (i) recorded, processed, summarized and reported within the time periods specified(as discussed 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. WeNote B.1 above), there have not experienced any material impact tobeen no changes in our internal control over financial reporting to date as a result of the majority of the employees of our Advisers working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the effects of the COVID-19 pandemic on our internal control over financial reporting to seek to minimize any impact to their operating effectiveness.

No changethat occurred in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act), during the three monthsquarter ended SeptemberJune 30, 20202021 that hashave materially affected, or isare reasonably likely to materially affect, our internal controlscontrol over financial reporting.


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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 risk factors set forth below, if any, and the other information set forth in this report, you should carefully consider the “Riskrisk factors described in Part I, “Item 1A. Risk Factors” discussed in our annual reportAnnual Report on Form 10-K for the fiscal year ended December 31, 2019 and our quarterly reports2020 that we filed with the SEC on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020,2021, 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, 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 currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.



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

Issuer PurchasesProceeds

During the three months ended June 30, 2021, we issued 424,455 shares of Equityour common stock under our dividend reinvestment plan and, on April 1, 2021, sold 67,114 shares at per share of $7.45, the price set by the Company to issue shares under the distribution reinvestment plan for the April 1, 2021 dividend payment, to certain of our officers and a member of our board of directors in transactions exempt from registration under section 4(a)(2) of the Securities Act of 1933, as amended. The aggregate value of the shares of common stock issued during the three months ended June 30, 2021 under the dividend reinvestment plan and pursuant to exempt sales transactions was approximately $3.7 million.

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​

​

​

​

​

​

​

​

​

Period

Total number of shares purchased

  

​

Average price paid per share

  

Total number of shares purchased as part of publicly announced plans or programs

  

Approximate dollar value of shares that may yet be purchased under the plans or programs

April 1 through April 30, 2021

—

​

​

—

​

—

​

—

May 1 through May 31, 2021

—

​

​

—

​

—

​

—

June 1 through June 30, 2021

383,513

(1)​

$

7.46

​

383,513

​

N/A


None.

​

(1)On June 1, 2021, pursuant to our tender offer to purchase shares of our common stock on the terms set forth in our tender offer statement on Schedule TO and Offer to Repurchase filed with the SEC on April 12, 2021, we purchased a total of 383,513 shares validly tendered and not withdrawn at a price of $7.46 per share, which was our net asset value per share as of May 31, 2021, for an aggregate purchase price of $2.9 million (an amount equal to 90% of the proceeds we received from the issuance of shares under our distribution reinvestment plan in connection with our April 1, 2021 dividend payment).
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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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 No.
Number

Description of Exhibit

3.1

10.1

​

Articles of

Fifth Amendment to the Registrant’s Articles of Amendment and Restatement (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on November 3, 2020 (File No. 814-00939) and incorporated herein by reference).

3.2
Amended and Restated BylawsSenior Secured Revolving Credit Agreement, dated as of July 27, 2021, by and among the Registrant, MSC Equity Holding, LLC, MSC Equity Holding II, Inc., MSC California Holdings GP LLC, MSC California Holdings LP, the lenders party thereto and TIAA, FSB (filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on November 3, 2020 (File No. 814-00939) and incorporated herein by reference).
10.1
Investment Advisory and Administrative Services Agreement by and between the Registrant and MSC Adviser I, LLC (filed as Exhibitexhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 3, 2020July 27, 2021 (File No. 814-00939) and incorporated herein by reference).

10.2

​

Custodian

Amended and Restated Term Loan Agreement, dated as of July 27, 2021 by and between the Registrant and StateMain Street Bank and Trust Company (filed asCapital Corporation (incorporated by reference to Appendix B to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on November 3, 2020 (File No. 814-00939) and incorporated herein by reference)10.1 hereto).

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.

31.2

​

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.

32.1

​

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).

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​

​

​

​

​

​

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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.

​

​

​

​

MSC INCOME FUND, INC.

​

​

Date:

​

November 12, 2020By:

/s/ DWAYNE L. HYZAK

Date: August 13, 2021

Dwayne L. Hyzak

​

Chairman,

Chief Executive Officer and President

​

(principal executive officer)

Date:

​

November 12, 2020By:

/s/ BRENT D. SMITH

Date: August 13, 2021

Brent D. Smith

​

Chief Financial Officer and Treasurer

​

(principal financial officer)

Date:

​

November 12, 2020By:

/s/ CORY E. GILBERT

Date: August 13, 2021

Cory E. Gilbert

​

Chief Accounting Officer

​

(principal accounting officer)


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