Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE HIERARCHY FOR INVESTMENTS???PORTFOLIO COMPOSITION

v3.23.3
FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITION FAIR VALUE HIERARCHY FOR INVESTMENTS—PORTFOLIO COMPOSITIONASC 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. MSC Income Fund accounts for its investments at fair value.
Fair Value Hierarchy
In accordance with ASC 820, MSC Income Fund has categorized its investments based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).
Investments recorded on MSC Income Fund’s Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 — Investments whose values are based on unadjusted quoted prices for identical assets in an active market that MSC Income Fund has the ability to access (examples include investments in active exchange-traded equity securities and investments in most U.S. government and agency securities).
Level 2 — Investments whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the investment. Level 2 inputs include the 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 values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (for example, investments in illiquid securities issued by privately held companies). These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing 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, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
As of September 30, 2023 and December 31, 2022, MSC Income Fund’s Private Loan portfolio investments primarily consisted of investments in interest-bearing secured debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of MSC Income Fund’s Private Loan portfolio investments were categorized as Level 3 as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 and December 31, 2022, all of MSC Income Fund’s LMM portfolio investments consisted of illiquid securities issued by privately held companies and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of MSC Income Fund’s LMM portfolio investments were categorized as Level 3 as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 and December 31, 2022, MSC Income Fund’s Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets
for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of MSC Income Fund’s Middle Market portfolio investments were categorized as Level 3 as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 and December 31, 2022, MSC Income Fund’s Other Portfolio investments consisted of illiquid securities issued by privately held entities and the fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of MSC Income Fund’s Other Portfolio investments were categorized as Level 3 as of September 30, 2023 and December 31, 2022.
The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:
•Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;
•Current and projected financial condition of the portfolio company;
•Current and projected ability of the portfolio company to service its debt obligations;
•Type and amount of collateral, if any, underlying the investment;
•Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/ EBITDA ratio) applicable to the investment;
•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.
The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of MSC Income Fund’s LMM 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 be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital (“WACC”). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. On the contrary, significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of MSC Income Fund’s Private
Loan, LMM and Middle Market securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (see Note B.1. — Summary of Significant Accounting Policies — Valuation of the Investment Portfolio) and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tables below.
The following tables provide a summary of the significant unobservable inputs used to fair value MSC Income Fund’s Level 3 portfolio investments as of September 30, 2023 and December 31, 2022:
Type of
Investment
Fair Value as of
September 30,
2023
(in thousands)
 Valuation Technique Significant
Unobservable Inputs		 Range(3) Weighted Average(3) Median(3)
Equity investments $ 236,631  Discounted cash flow WACC
10.7% - 22.5%
 14.4  % 15.6  %
Market comparable / Enterprise value EBITDA multiple (1)
4.5x - 9.0x (2)
 7.2x 6.4x
Debt investments $ 791,484  Discounted cash flow Risk adjusted discount factor (4)
9.8% - 17.7% (2)
 13.6  % 13.0  %
Expected principal recovery percentage
0.7% - 100.0%
 99.2  % 100.0  %
Debt investments $ 75,698  Market approach Third-party quote
4.5 - 98.4
 86.7 94.0
Total Level 3 investments $ 1,103,813 
_____________________
(1)EBITDA may include proforma adjustments and/or other add-backs based on specific circumstances related to each investment.
(2)Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 2.0x - 15.7x and the range for risk adjusted discount factor is 7.5% - 33.5%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
(4)Discount rate includes the effect of the standard LIBOR and SOFR base rate, as applicable.
Type of
Investment
Fair Value as of
December 31, 2022
(in thousands)
 Valuation Technique Significant
Unobservable Inputs		 Range(3) Weighted
Average(3)		 Median(3)
Equity investments $ 215,861  Discounted cash flow WACC
10.4% - 22.5%
 14.3  % 15.7  %
Market comparable / Enterprise value EBITDA multiple (1)
4.3x - 8.5x (2)
 7.2x 6.4x
Debt investments $ 743,887  Discounted cash flow Risk adjusted discount factor (4)
8.5% - 18.2% (2)
 13.0  % 12.4  %
Expected principal recovery percentage
0.7% - 100.0%
 99.1  % 100.0  %
Debt investments $ 108,395  Market approach Third-party quote
5.6 - 98.5
 85.7 90.0
Total Level 3 investments $ 1,068,143 
_____________________
(1)EBITDA may include proforma adjustments and/or other add-backs based on specific circumstances related to each investment.
(2)Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 2.0x - 15.7x and the range for risk adjusted discount factor is 6.5% - 43.3%.
(3)Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
(4)Discount rate includes the effect of the standard LIBOR and SOFR base rate, as applicable.
The following tables provide a summary of changes in fair value of MSC Income Fund’s Level 3 portfolio investments for the nine months ended September 30, 2023 and 2022 (amounts in thousands):
Type of
Investment
Fair Value
as of
December 31,
2022
 Transfers
Into
Level 3
Hierarchy		 Redemptions/
Repayments		 New
Investments		 Net
Changes
from
Unrealized
to Realized		 Net
Unrealized
Appreciation
(Depreciation)		 Other(1)
Fair Value
as of
September 30,
2023
Debt $ 852,282  $ —  $ (146,652) $ 155,357  $ 25,417  $ (7,776) $ (11,446) $ 867,182 
Equity 214,687  —  (12,686) 8,713  621  11,854  12,551  235,740 
Equity Warrant 1,174  —  —  523  —  299  (1,105) 891 
$ 1,068,143  $ —  $ (159,338) $ 164,593  $ 26,038  $ 4,377  $ —  $ 1,103,813 
______________________
(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information in the Consolidated Statements of Cash Flows.
Type of
Investment
Fair Value
as of
December 31,
2021
 Transfers
Into
Level 3
Hierarchy		 Redemptions/
Repayments		 New
Investments		 Net
Changes
from
Unrealized
to Realized		 Net
Unrealized
Appreciation
(Depreciation)		 Other(1)
Fair Value
as of
September 30,
2022
Debt $ 879,970  $ —  $ (124,061) $ 168,053  $ 855  $ (33,407) $ (1,733) $ 889,677 
Equity 196,374  —  (18,520) 5,011  (8,806) 30,562  1,733  206,354 
Equity Warrant 792  —  —  —  —  (655) —  137 
$ 1,077,136  $ —  $ (142,581) $ 173,064  $ (7,951) $ (3,500) $ —  $ 1,096,168 
_____________________
(1)Includes the impact of non-cash conversions. These transactions represent non-cash investing activities. See additional cash flow information in the Consolidated Statements of Cash Flows.

At September 30, 2023 and December 31, 2022, MSC Income Fund's investments at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:
Fair Value Measurements
(in thousands)
At September 30, 2023
 Fair Value Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Private Loan portfolio investments $ 608,953  $ —  $ —  $ 608,953 
LMM portfolio investments 367,565  —  —  367,565 
Middle Market portfolio investments 101,104  —  —  101,104 
Other Portfolio investments 26,191  —  —  26,191 
Total investments $ 1,103,813  $ —  $ —  $ 1,103,813 
Fair Value Measurements
(in thousands)
At December 31, 2022
 Fair Value Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)
Private Loan portfolio investments $ 559,763  $ —  $ —  $ 559,763 
LMM portfolio investments 352,661  —  —  352,661 
Middle Market portfolio investments 126,744  —  —  126,744 
Other Portfolio investments 28,975  —  —  28,975 
Total investments $ 1,068,143  $ —  $ —  $ 1,068,143 
Investment Portfolio Composition
MSC Income Fund’s principal investment objective is to maximize its portfolio’s total return by generating current income from its debt investments and current income and capital appreciation from its equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. MSC Income Fund seeks to achieve its investment objective through its Private Loan, LMM and Middle Market investment strategies.
MSC Income Fund’s private loan (“Private Loan”) investment strategy is focused on investments in privately held companies that are generally consistent with the size of its LMM portfolio companies or Middle Market portfolio companies, and its Private Loan investments generally range in size from $1 million to $20 million. MSC Income Fund’s Private Loan investments primarily consist of debt securities that have primarily been originated directly by the Adviser or, to a lesser extent, by the Adviser through its strategic relationships with other investment funds on a collaborative basis through investments that are often referred to in the debt markets as “club deals” because of the small lender group size. In both cases, our Private Loan investments are typically made to support a company owned by or in the process of being acquired by a private equity sponsor. MSC Income Fund’s Private Loan portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date. MSC Income Fund may have the option to co-invest with Main Street and the private equity sponsor in the equity securities of its Private Loan portfolio companies.
MSC Income Fund’s LMM investment strategy is focused on investments in secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. MSC Income Fund’s LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $1 million to $20 million. The LMM debt investments are typically secured by a first priority lien on the assets of the portfolio company, can include either fixed or floating rate terms and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, MSC Income Fund receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.
MSC Income Fund’s Middle Market investment strategy is focused on investments in syndicated loans to or debt securities in Middle Market companies, which MSC Income Fund defines as companies with annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $1 million to $20 million. MSC Income Fund’s Middle Market portfolio debt investments are generally secured by a first priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.
MSC Income Fund’s other portfolio (“Other Portfolio”) investments primarily consist of investments that are not consistent with the typical profiles for its Private Loan, LMM or Middle Market portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, MSC Income Fund may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds. For Other Portfolio investments, MSC Income Fund generally receives distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten-year period.
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 nine months ended September 30, 2023 and 2022, MSC Income Fund did not record investment income from any single portfolio company in excess of 10% of total investment income.
The following tables provide a summary of MSC Income Fund’s investments in the Private Loan, LMM and Middle Market portfolios as of September 30, 2023 and December 31, 2022 (this information excludes Other Portfolio investments, which are discussed further below).
As of September 30, 2023
Private Loan LMM (a) Middle Market
(dollars in millions)
Number of portfolio companies 78  49  18 
Fair value $ 609.0  $ 367.6  $ 101.1 
Cost $ 611.3  $ 301.4  $ 130.0 
Debt investments as a % of portfolio (at cost) 95.9  % 70.1  % 93.9  %
Equity investments as a % of portfolio (at cost) 4.1  % 29.9  % 6.1  %
% of debt investments at cost secured by first priority lien 99.4  % 100.0  % 100.0  %
Weighted-average annual effective yield (b) 13.1  % 12.9  % 12.8  %
Average EBITDA (c) $ 32.6  $ 8.6  $ 74.6 
___________________
(a)At September 30, 2023, MSC Income Fund had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 9%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2023, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on MSC Income Fund’s debt portfolio as of September 30, 2023 including debt investments on non-accrual status was 12.3% for its Private Loan portfolio, 12.9% for its LMM portfolio and 10.2% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of MSC Income Fund’s common stock will realize on its investment because it does not reflect MSC Income Fund’s utilization of debt capital in its capital structure, MSC Income Fund’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a weighted-average for the Private Loan and Middle Market portfolios and a simple average for the LMM portfolio. These calculations exclude certain portfolio companies, including one Private Loan portfolio company, as EBITDA is not a meaningful valuation metric for MSC Income Fund’s investment in this portfolio company, and those portfolio companies whose primary purpose is to own real estate.
As of December 31, 2022
Private Loan LMM (a) Middle Market
(dollars in millions)
Number of portfolio companies 70  48  21 
Fair value $ 559.8  $ 352.7  $ 126.7 
Cost $ 563.0  $ 312.5  $ 159.7 
Debt investments as a % of portfolio (at cost) 96.2  % 73.2  % 95.0  %
Equity investments as a % of portfolio (at cost) 3.8  % 26.8  % 5.0  %
% of debt investments at cost secured by first priority lien 99.4  % 99.9  % 98.5  %
Weighted-average annual effective yield (b) 11.8  % 12.1  % 11.3  %
Average EBITDA (c) $ 36.8  $ 8.6  $ 79.2 
___________________
(a)At December 31, 2022, MSC Income Fund had equity ownership in all of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was 9%.
(b)The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2022, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. The weighted-average annual effective yield on MSC Income Fund’s debt portfolio as of December 31, 2022 including debt investments on non-accrual status was 11.4% for its Private Loan portfolio, 11.7% for its LMM portfolio and 9.7% for its Middle Market portfolio. The weighted-average annual effective yield is not reflective of what an investor in shares of MSC Income Fund’s common stock will realize on its investment because it does not reflect MSC Income Fund’s utilization of debt capital in its capital structure, MSC Income Fund’s expenses or any sales load paid by an investor.
(c)The average EBITDA is calculated using a weighted-average for the Private Loan and Middle Market portfolios and a simple average for the LMM portfolio. These calculations exclude certain portfolio companies, including one Private Loan portfolio company, as EBITDA is not a meaningful valuation metric for MSC Income Fund’s investment in this portfolio company, and those portfolio companies whose primary purpose is to own real estate.
For the three months ended September 30, 2023 and 2022, MSC Income Fund achieved an annualized total return on investments of 12.0% and 10.5%, respectively. For the nine months ended September 30, 2023 and 2022, MSC Income Fund achieved an annualized total return on investments of 12.9% and 8.6%, respectively. For the year ended December 31, 2022, MSC Income Fund achieved a total return on investments of 9.1%. Total return on investments is calculated using the interest, dividend and fee income, as well as the realized and unrealized change in fair value of the Investment Portfolio for the specified period. MSC Income Fund’s total return on investments is not reflective of what an investor in shares of MSC Income Fund’s common stock will realize on its investment because it does not reflect MSC Income Fund’s utilization of debt capital in its capital structure, MSC Income Fund’s expenses or any sales load paid by an investor.
As of September 30, 2023, MSC Income Fund had Other Portfolio investments in four entities, collectively totaling $26.2 million in fair value and $22.4 million in cost basis and which comprised 2.4% and 2.1% of MSC Income Fund’s Investment Portfolio at fair value and cost, respectively. As of December 31, 2022, MSC Income Fund had Other Portfolio investments in four entities, collectively totaling $29.0 million in fair value and $24.7 million in cost basis and which comprised 2.7% and 2.3% of MSC Income Fund’s Investment Portfolio at fair value and cost, respectively.
The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments at cost and fair value by type of investment as a percentage of the total combined Private Loan, LMM and Middle Market portfolio investments, as of September 30, 2023 and December 31, 2022 (this information excludes Other Portfolio investments, which are discussed above).
Cost: September 30, 2023 December 31, 2022
First lien debt 87.7  % 88.5  %
Equity 11.7  10.8 
Second lien debt 0.4  0.3 
Equity warrants 0.2  0.2 
Other —  0.2 
100.0  % 100.0  %
Fair Value: September 30, 2023 December 31, 2022
First lien debt 80.1  % 81.4  %
Equity 19.4  17.9 
Second lien debt 0.4  0.3 
Equity warrants 0.1  0.1 
Other —  0.3 
100.0  % 100.0  %
The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined Private Loan, LMM and Middle Market portfolio investments, as of September 30, 2023 and December 31, 2022 (this information excludes Other Portfolio investments). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.
Cost: September 30, 2023 December 31, 2022
Northeast 22.8  % 20.3  %
Southwest 22.4  22.2 
Southeast 19.6  17.8 
West 17.8  22.9 
Midwest 15.5  15.1 
Other Non-United States 1.1  0.9 
Canada 0.8  0.8 
100.0  % 100.0  %
Fair Value: September 30, 2023 December 31, 2022
Southwest 25.6  % 25.3  %
Northeast 23.0  20.3 
West 16.8  21.1 
Southeast 16.7  15.2 
Midwest 16.1  15.9 
Other Non-United States 1.0  1.0 
Canada 0.8  1.2 
100.0  % 100.0  %
MSC Income Fund’s Private Loan, LMM and Middle Market portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of MSC Income Fund’s total combined Private Loan, LMM and Middle Market portfolio investments by industry at cost and fair value as of September 30, 2023 and December 31, 2022 (this information excludes Other Portfolio investments).
Cost: September 30, 2023 December 31, 2022
Commercial Services & Supplies 10.4  % 11.3  %
Internet Software & Services 8.6  7.8 
Health Care Providers & Services 6.2  4.9 
Machinery 5.3  5.9 
Professional Services 5.2  3.7 
IT Services 5.1  4.9 
Diversified Consumer Services 5.0  4.7 
Distributors 4.3  5.0 
Leisure Equipment & Products 3.7  3.7 
Electrical Equipment 3.4  1.8 
Textiles, Apparel & Luxury Goods 3.1  2.0 
Computers & Peripherals 2.9  1.9 
Specialty Retail 2.8  4.0 
Communications Equipment 2.7  3.5 
Media 2.6  2.4 
Construction & Engineering 2.5  2.5 
Diversified Telecommunication Services 2.4  3.4 
Containers & Packaging 2.3  3.4 
Aerospace & Defense 2.2  3.6 
Building Products 2.1  2.4 
Hotels, Restaurants & Leisure 2.0  2.0 
Household Products 2.0  1.5 
Diversified Financial Services 1.7  1.7 
Internet & Catalog Retail 1.6  1.3 
Software 1.4  1.3 
Health Care Equipment & Supplies 1.3  1.2 
Energy Equipment & Services 1.2  1.2 
Food Products 0.9  1.1 
Other (1) 5.1  5.9 
100.0  % 100.0  %
___________________
(1)Includes various industries with each industry individually less than 1.0% of the total combined Private Loan, LMM and Middle Market portfolio investments at each date.
Fair Value: September 30, 2023 December 31, 2022
Commercial Services & Supplies 8.4  % 10.3  %
Internet Software & Services 7.3  6.7 
Machinery 6.8  7.5 
Diversified Consumer Services 6.3  5.9 
Health Care Providers & Services 5.8  4.6 
Professional Services 5.1  2.8 
IT Services 5.0  4.7 
Distributors 4.6  5.5 
Computers & Peripherals 4.3  2.8 
Electrical Equipment 3.5  1.9 
Leisure Equipment & Products 3.4  3.7 
Construction & Engineering 3.0  2.9 
Textiles, Apparel & Luxury Goods 2.9  2.0 
Specialty Retail 2.7  3.1 
Media 2.7  2.6 
Containers & Packaging 2.7  3.8 
Diversified Telecommunication Services 2.3  3.6 
Construction Materials 2.2  2.1 
Aerospace & Defense 2.1  3.5 
Building Products 2.0  2.5 
Household Products 1.9  1.3 
Software 1.7  1.7 
Internet & Catalog Retail 1.6  1.9 
Air Freight & Logistics 1.6  1.2 
Diversified Financial Services 1.6  1.8 
Hotels, Restaurants & Leisure 1.5  1.5 
Communications Equipment 1.2  1.3 
Energy Equipment & Services 1.0  1.0 
Other (1) 4.8  5.8 
100.0  % 100.0  %
___________________
(1)Includes various industries with each industry individually less than 1.0% of the total combined Private Loan, LMM and Middle Market portfolio investments at each date.
At September 30, 2023 and December 31, 2022, MSC Income Fund had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.
Unconsolidated Significant Subsidiaries
In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, MSC Income Fund must determine which of its unconsolidated controlled portfolio companies, if any, are considered “significant subsidiaries.” In evaluating its unconsolidated controlled portfolio companies in accordance with Regulation S-X, there are two tests that MSC Income Fund must utilize to determine if any of MSC Income Fund’s Control Investments (as defined in Note A — Organization and Basis of Presentation, including those unconsolidated portfolio companies defined as Control Investments in which MSC Income Fund does not own greater than 50% of the voting securities nor have rights to maintain greater than 50% of the board representation) are considered significant subsidiaries: the investment test and the income test. The investment
test is generally measured by dividing MSC Income Fund’s investment in the Control Investment by the value of MSC Income Fund’s total investments. The income test is generally measured by dividing the absolute value of the combined sum of total investment income, net realized gain (loss) and net unrealized appreciation (depreciation) from the relevant Control Investment for the period being tested by the absolute value of MSC Income Fund’s change in net assets resulting from operations for the same period. Rules 3-09 and 4-08(g) of Regulation S-X require MSC Income Fund to include (1) separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which MSC Income Fund owns greater than 50% of the voting securities) in an annual report and (2) summarized financial information of a Control Investment in a quarterly report, respectively, if certain thresholds of the investment or income tests are exceeded and the unconsolidated portfolio company qualifies as a significant subsidiary.
As of September 30, 2023 and December 31, 2022, MSC Income Fund had no single investment that qualified as a significant subsidiary under either the investment or income tests.