MSC Income Fund (MSIF) risk factors, FY2024 10-K

RISKS RELATED TO OUR BUSINESS AND STRUCTURE

1. 01Because our Investment Portfolio is recorded at fair value, there is and will continue to be uncertainty as to the value of our portfolio investments
2. 02Our financial condition and results of operations depends on our Adviser’s ability to effectively manage and deploy capital
3. 03We are subject to risks associated with the interest rate environment and changes in interest rates will affect our cost of capital, net investment income and the value of our investments
4. 04We face increasing competition for investment opportunities
5. 05We are dependent upon our Adviser’s key investment personnel for our future success
6. 06Our success depends on our Adviser’s ability to attract and retain qualified personnel in a competitive environment
7. 07growth opportunities. Many of the entities, including investment funds (such as private equity funds, debt funds and mezzanine funds) and traditional financial services companies, with which our Adviser competes for experienced personnel have greater resources than our Adviser
8. 08We may not replicate the historical results achieved by Main Street or by other advisory clients of our Adviser
9. 09Our business model depends to a significant extent upon strong referral relationships
10. 10Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse
11. 11We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer
12. 12investment portfolio may, from time to time, be comprised of assets that could permit us to qualify as a “diversified” investment company under the 1940 Act. To the extent that we operate as a non-diversified investment company, we may be subject to greater risk
13. 13We are subject to risks related to corporate social responsibility
14. 14Our bylaws include an exclusive forum selection provision, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other agents

RISKS RELATED TO OUR INVESTMENTS

1. 15The types of portfolio companies in which we invest involve significant risks and we could lose all or part of our investment
2. 16Economic recessions or downturns could impair our portfolio companies’ performance and defaults by our portfolio companies will harm our operating results
3. 17Rising credit spreads could affect the value of our investments, and rising interest rates make it more difficult for portfolio companies to make periodic payments on their loans
4. 18Inflation could adversely affect the business, results of operations and financial condition of our portfolio companies
5. 19We may be exposed to higher risks with respect to our investments that include original issue discount or PIK interest
6. 20The lack of liquidity in our investments may adversely affect our business
7. 21We may not have the funds or ability to make additional investments in our portfolio companies
8. 22There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims
9. 23We generally will not control our portfolio companies
10. 24Defaults by our portfolio companies will harm our operating results
11. 25Any unrealized depreciation that we experience in our portfolio may be an indication of future realized losses, which could reduce our income and gains available for distribution
12. 26Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity
13. 27We may be subject to risks associated with “covenant-lite” loans
14. 28We may not realize gains from our equity investments
15. 29Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments

RISKS RELATED TO LEVERAGE

1. 30Because 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
2. 31_____________________________
3. 32(2)In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2024 total assets of at least 3.0%
4. 33Substantially all of our assets are subject to security interests under our senior securities and if we default on our obligations under our senior securities, we may suffer adverse consequences, including foreclosure on our assets
5. 34We are subject to risks associated with any revolving credit facility that utilizes a Structured Subsidiary as our interests in any Structured Subsidiary are subordinated and we could be prevented from receiving cash on our equity interests from a Structured Subsidiary
6. 35The ability to sell investments held by a Structured Subsidiary is limited
7. 36We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage

RISKS RELATED TO OUR ADVISER AND ITS AFFILIATES

1. 37Our Adviser has conflicts of interest that may create an incentive for the Adviser to enter into investments that are riskier or more speculative than would otherwise be the case and our Adviser may have an incentive to increase portfolio leverage in order to earn higher management fees
2. 38The Advisory Agreement entitles our Adviser to receive incentive compensation on income regardless of any capital losses. In such case, we may be required to pay our Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter
3. 39Our Adviser may face conflicts of interest in allocating investment opportunities between us, Main Street and the other advisory clients of our Adviser
4. 40Main Street owns approximately 2.9% of our common stock, which could result in its influence over the outcome of matters submitted to the vote of our stockholders
5. 41Our Adviser’s liability is limited under the Advisory Agreement, and we have agreed to indemnify our Adviser against certain liabilities, which may lead our Adviser to act in a riskier manner on our behalf than it would when acting for its own account
6. 42Our Adviser can resign on 120 days’ notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations

RISKS RELATED TO BDCs

1. 43Failure to maintain our status as a BDC would reduce our operating flexibility
2. 44Operating under the constraints imposed on us as a BDC and RIC may hinder the achievement of our investment objectives
3. 45Regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital

RISKS RELATED TO OUR SECURITIES

1. 46Investing in our securities may involve a high degree of risk
2. 47Shares of closed-end investment companies, including BDCs, may trade at a discount to their NAV per share
3. 48The market price of our securities may be volatile and fluctuate significantly
4. 49We may not be able to pay distributions to our stockholders, our distributions may not grow over time, and a portion of distributions paid to our stockholders may be a return of capital
5. 50Stockholders may incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current NAV per share of our common stock or issue securities to subscribe to, convert to or purchase shares of our common stock
6. 51NAV per share of our common stock and a proportionately greater decrease in a stockholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance
7. 52Our common stockholders’ interest in us will be diluted if we issue additional shares, which could reduce the overall value of their investment
8. 53Purchases of shares of our common stock by us or Main Street under open-market purchase programs may result in the price of shares of our common stock being higher than the price that otherwise might exist in the open market
9. 54Provisions of the Maryland General Corporation Law and our articles of incorporation and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock
10. 55We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock
11. 56Our credit ratings may not reflect all risks of an investment in our debt securities
12. 57We will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under Subchapter M of the Code
13. 58We may have difficulty paying the distributions required to maintain RIC tax treatment under the Code if we recognize income before or without receiving cash representing such income
14. 59We may in the future choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive
15. 60Stockholders may have current tax liability on dividends they elect to reinvest in our common stock but would not receive cash from such dividends to pay such tax liability
16. 61Legislative or regulatory tax changes could adversely affect our stockholders
17. 62Events outside of our control, including public health crises, supply chain disruptions and inflation, could negatively affect our portfolio companies and the results of our operations
18. 63Market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations
19. 64Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations
20. 65Failure to comply with applicable laws or regulations and changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy
21. 66We may experience fluctuations in our operating results
22. 67Technological innovations and industry disruptions may negatively impact us
23. 68We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends
24. 69The failure in cybersecurity systems, as well as the occurrence of events unanticipated in our and our Adviser’s disaster recovery systems and management continuity planning could impair our ability to conduct business effectively
25. 70We are subject to risks associated with artificial intelligence and machine learning technology
26. 71companies. In addition, the use of AI by bad actors could heighten the sophistication and effectiveness of cyber and security attacks experienced by us, our Adviser or our portfolio companies