MSC Income Fund, Inc. (MSIF) Earnings

Management highlights

### Leadership Transition - Nick Meserve, current Managing Director and Head of the Private Credit Investment Group, will transition to Chief Executive Officer in Q4 2026. - Outgoing CEO Dwayne Hyzak will move to the role of Executive Chairman. ### Overall Performance - The fund delivered an annualized return on equity of 15.9% for Q2 2026, with significant net fair value appreciation across the investment portfolio. - The portfolio remains highly diversified, with 144 total portfolio companies across multiple industries; the single largest holding represents less than 4% of total fair value and trailing 12-month investment income. - As of quarter end, 1.9% of total investments by fair value (5.8% by cost) are on non-accrual status. - Net debt to NAV ratio is 0.85, and regulatory asset coverage ratio is 2.13.

Guidance

- The fund expects to reach its target leverage range over the next 3-4 quarters, with progress dependent on private loan investment pipeline volume and repayment levels. - M&A activity is expected to increase in the second half of 2026, which will grow the private loan investment pipeline over time. - The fund will maintain a quarterly dividend policy aligned with ANII before taxes per share; Q4 2026 total dividends are set at $0.36 per share, consisting of $0.11 monthly regular dividends and a $0.03 supplemental dividend, consistent with quarterly dividends since the fund's 2025 public listing. - The newly authorized $20 million open market share repurchase plan (plus an matching $20 million plan from Main Street Capital Corporation, for a total of $40 million in potential purchases) will run from September 2026 through February 2027, for repurchases when shares trade at a predetermined discount to NAV.

Segment performance

As of Q2 2026 end, MSC Income Fund holds two core investment segments: 1. **Private Loan Segment**: Total fair value of $848 million, accounting for 61% of the fund's total investment portfolio at fair value. The segment invested $62 million in new investments during the quarter, resulting in a net increase of $10 million after repayments. It holds investments in 81 portfolio companies, 93% of which are secured debt investments, over 99% are first lien, 95% are floating rate, with a weighted average yield of 10.4%. 2. **Legacy Lower Middle Market Segment**: Total fair value of $504 million, accounting for 36% of the fund's total investment portfolio at fair value. The segment completed $13 million in follow-on investments during the quarter, resulting in a net decrease of $2 million after exits and repayments. It holds investments in 55 portfolio companies, composed of 54% debt investments (99% first lien, weighted average yield of 12.7%) and 46% equity investments, with an average 8% equity ownership across all portfolio companies. Overall aggregate Q2 2026 total investment income was $35.7 million. Adjusted net investment income (ANII) before taxes totaled $16.3 million ($0.36 per share), and ANII after taxes was $14.9 million ($0.33 per share). The fund recorded a net fair value increase of $19 million, consisting of $9.9 million in net realized gains and $9.1 million in net unrealized depreciation. Net increase in net assets from operations was $29.3 million ($0.65 per share), bringing NAV per share to $16.51, a 4% increase from the prior quarter.

Risks & headwinds

- General economic uncertainty across multiple sectors creates ongoing performance risk for portfolio companies; management proactively monitors portfolio exposures but cannot guarantee future results. - The fund faces an upcoming $150 million note maturity on October 30, 2026, requiring active capital structure management. - Muted M&A activity in the private credit space has kept competition for attractive private loan deals high, which can compress pricing spreads. - Non-accrual levels are currently slightly elevated above the fund's long-term historical average (2% of cost, 0.5% above the long-term average target). - Forward-looking statements are based on management assumptions, and actual results may differ materially due to unforeseen market and portfolio risks.

Analyst Q&A

• Q: What is the expected timeframe to reach the fund's target leverage range, and what attractive segments/pricing are currently visible in the private loan pipeline? /

  A: Management projects reaching target leverage over the next 3-4 quarters, with pace dependent on pipeline volume and repayment levels. There is no shift to new industry segments; the fund continues to target the same mature, basic industries it has historically invested in. Pricing spreads have widened since January but remain at similar levels to the prior quarter. (318 chars)

• Q: Why is the private loan pipeline only described as average, and why are non-accruals slightly elevated this quarter? /

  A: Pipeline volume is muted due to ongoing low overall M&A activity, which has kept competition for available deals high. Non-accruals are 2% of cost this quarter, slightly above the long-term average, but many non-accrual assets are small, long-term positions held while management works through multi-year restructuring and recovery, and levels remain manageable. (327 chars)

• Q: How does the fund balance capital allocation between new investments and share repurchases when shares trade at a discount to NAV? /

  A: Management is taking a balanced approach: it views share repurchases at a discount as an attractive way to create shareholder value, but also continues to see attractive opportunities to deploy capital into new private loans and follow-on lower middle market investments to grow and diversify the portfolio. (289 chars)

• Q: Why did the board approve a $20 million 6-month repurchase program rather than a larger 12-month program, and what drove the quarter-over-quarter NAV growth? /

  A: The $20 million fund allocation plus matching $20 million from Main Street Capital (total $40 million over 6 months) was deemed a reasonable size for the fund's market cap. NAV growth came from a $1.5-2 million premium on the Center Technologies exit plus broad fair value appreciation from strong fundamental performance across both segment equity holdings. (351 chars)