MSC Income Fund, Inc. Files 2023 Annual Report on Form 10-K

TL;DR

<b>MSC Income Fund, Inc. (MSIF) filed its 2023 10-K, highlighting risks related to fair value accounting, interest rate sensitivity, and competitive pressures in its investment operations.</b>

AI Summary

MSC INCOME FUND, INC. (MSIF) filed a Annual Report (10-K) with the SEC on March 8, 2024. MSC Income Fund, Inc. (MSIF) filed its annual report for the fiscal year ending December 31, 2023. The company operates as a non-diversified investment company under the 1940 Act. MSIF's investment portfolio is recorded at fair value, introducing uncertainty in investment valuation. The company is subject to risks associated with interest rate environments and their impact on capital costs and investment values. MSIF faces increasing competition for investment opportunities and relies on its advisers' ability to attract and retain qualified personnel.

Why It Matters

For investors and stakeholders tracking MSC INCOME FUND, INC., this filing contains several important signals. The filing details the company's operational risks, including dependence on key personnel and the potential for adverse effects from changes in operating policies. MSIF's investment strategy involves significant risks, with potential for total loss on investments and adverse impacts from economic downturns and inflation on portfolio companies.

Risk Assessment

Risk Level: high — MSC INCOME FUND, INC. shows elevated risk based on this filing. The company faces high risk due to its nature as a non-diversified investment company, reliance on fair value accounting, sensitivity to interest rate changes, and the inherent risks in its investment portfolio, including potential for total loss and adverse economic impacts.

Analyst Insight

Investors should carefully review the detailed risk factors outlined in the 10-K, particularly those concerning investment valuation, interest rate sensitivity, and the performance of underlying portfolio companies.

Key Numbers

• 2023-12-31 — Fiscal Year End (Reporting period)
• 2024-03-08 — Filing Date (Date of submission)

Key Players & Entities

• MSC INCOME FUND, INC. (company) — Filer name
• MSIF (company) — Ticker symbol
• 1940 Act (regulator) — Regulation governing investment companies
• 20231231 (date) — Fiscal year end
• 20240308 (date) — Filing date

FAQ

Risk Factors

• Fair Value Accounting Uncertainty [high — financial]: The company's investment portfolio is recorded at fair value, leading to uncertainty regarding the value of its investments.
• Interest Rate Environment Risks [high — financial]: Changes in interest rates will affect the cost of capital, net investment income, and the value of the company's investments.
• Competition for Investment Opportunities [medium — market]: The company faces increasing competition for investment opportunities.
• Dependence on Key Personnel [medium — operational]: The company's future success depends on its key investment personnel.
• Risks of Portfolio Investments [high — financial]: The types of portfolio companies invested in involve significant risks, and the company could lose all or part of its investment.

Key Dates

• 2023-12-31: Fiscal Year End — End of the reporting period for the 10-K filing.
• 2024-03-08: Filing Date — Date the 10-K was officially submitted to the SEC.

Glossary

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (Crucial for valuing MSIF's investment portfolio, but introduces inherent uncertainty.)

1940 Act

The Investment Company Act of 1940 is a United States federal law that regulates the organization of companies, including mutual funds, face-amount certificate companies, and closed-end companies. (Defines MSIF's regulatory framework as a non-diversified investment company.)

Key Financial Figures

• $0.001 — g) of the Act: Common Stock, par value $0.001 per share Indicate by check mark if th
• $9.30 — ssued shares in its public offering was $9.30 per share. Since the registrant closed
• $7.96 — t to the dividend reinvestment plan was $7.96 per share. The number of shares outsta
• $10 million — generally have annual revenues between $10 million and $150 million. Our Middle Market inv
• $150 million — annual revenues between $10 million and $150 million. Our Middle Market investment strategy
• $1.5 billion — nues typically between $150 million and $1.5 billion. Our Private Loan, LMM and Middle Marke
• $1 million — nvestments generally range in size from $1 million to $20 million. Private Loan investmen
• $20 million — erally range in size from $1 million to $20 million. Private Loan investments primarily co
• $3 million — eciation and amortization ("EBITDA") of $3 million to $20 million and commensurate levels

Filing Documents

• msif-20231231.htm (10-K) — 8828KB
• msif-20231231xex311.htm (EX-31.1) — 10KB
• msif-20231231xex312.htm (EX-31.2) — 10KB
• msif-20231231xex321.htm (EX-32.1) — 4KB
• msif-20231231xex322.htm (EX-32.2) — 4KB
• 0001535778-24-000020.txt (&nbsp;) — 34190KB
• msif-20231231.xsd (EX-101.SCH) — 134KB
• msif-20231231_cal.xml (EX-101.CAL) — 68KB
• msif-20231231_def.xml (EX-101.DEF) — 641KB
• msif-20231231_lab.xml (EX-101.LAB) — 927KB
• msif-20231231_pre.xml (EX-101.PRE) — 698KB
• msif-20231231_htm.xml (XML) — 7837KB

Business

Business 3 Item 1A.

Risk Factors

Risk Factors 19 Item 1B. Unresolved Staff Comments 41 I tem 1C. C ybersecurity 41 Item 2.

Properties

Properties 42 Item 3.

Legal Proceedings

Legal Proceedings 42 Item 4. Mine Safety Disclosures 42 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 43 Item 6. [Reserved.] 44 Item 7.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations 45 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 57 Item 8. Consolidated Financial Statements and Supplementary Data 59 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 153 Item 9A.

Controls and Procedures

Controls and Procedures 153 Item 9B. Other Information 153 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 153 PART III Item 10. Directors, Executive Officers and Corporate Governance 154 Item 11.

Executive Compensation

Executive Compensation 159 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 160 Item 13. Certain Relationships and Related Transactions, and Director Independence 161 Item 14. Principal Accountant Fees and Services 162 PART IV Item 15. Exhibits and Consolidated Financial Statement Schedules 164

Signatures

Signatures 167 Table of contents CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements regarding the plans and objectives of management for future operations and which relate to future events or our future performance or financial condition. Any such forward-looking statements may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be 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 forward-looking statements as a result of various factors, including, without limitation, the factors discussed in Item 1A entitled "Risk Factors" in this Annual Report on Form 10-K and elsewhere in this Annual Report on Form 10-K and in other filings we may make with the Securities and Exchange Commission ("SEC") from time to time. Other factors that could cause actual results to differ materially include changes in the economy and future changes in laws or regulations and conditions in our operating areas. We have based the forward-looking statements included in this Annual Report on Form 10-K on information available to us on the date of this Annual Report on Form 10-K, and we assume no obligation to update any such forward-looking statements,

Business

Item 1. Business ORGANIZATION MSC Income Fund, Inc. ("MSIF" or, together with its consolidated subsidiaries, "MSC Income Fund" or the "Company") is a principal investment firm primarily focused on providing debt capital to middle market ("Middle Market") companies and customized debt and equity financing to lower middle market ("LMM") companies. MSC Income Fund's portfolio investments are typically made to support leveraged buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in a variety of industry sectors. MSC Income Fund invests primarily in secured debt investments of Middle Market companies generally headquartered in the United States and in secured debt investments, equity investments, warrants and other securities of LMM companies based in the United States. MSC Income Fund seeks to partner with private equity funds in its Private Loan (as defined below) and Middle Market investment strategies. MSC Income Fund seeks to partner with entrepreneurs, business owners and management teams and generally provides "one-stop" financing alternatives within its LMM investment strategy. MSIF was formed in November 2011 to operate as an externally managed business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). MSIF has elected to be treated for U.S. federal income tax purposes as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, MSIF generally does not pay corporate-level U.S. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders. On October 28, 2020, MSIF's stockholders approved the appointment of MSC Adviser I, LLC (our "Adviser"), which is wholly-owned by Main Street Capital Corporation ("Main Street"), a New York Stock Exchange listed BDC, as MSIF's investment adviser and administrator under an Investment Advisory and Admin

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View this 10-K filing on SEC EDGAR