{"url_path":"/sec/msif/10-q/2026/item-3","section_key":"item-3","section_title":"Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-08","source_url":"https://www.sec.gov/Archives/edgar/data/1535778/0001535778-26-000048-index.html","accession_number":"0001535778-26-000048","cik":"0001535778","ticker":"MSIF","issuer_name":"MSC INCOME FUND, INC.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1535778/0001535778-26-000048-index.html","primary_entity_key":"0001535778","primary_entity_name":"MSC INCOME FUND, INC."},"word_count":885,"has_tables":true,"body_markdown":"Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK\n\nMSC Income is subject to financial market risks, including changes in interest rates, and changes in interest rates may affect both the Fund’s interest expense on the debt outstanding under the Credit Facilities and the interest income from portfolio investments. The Fund’s risk management systems and procedures are designed to identify and analyze risk, to set appropriate policies and limits and to continually monitor these risks. The Fund’s investment income will be affected by changes in various interest rate indices, including SOFR and Prime rates, to the extent that any debt investments include floating interest rates. See Risk Factors — Risks Related to MSC Income's Business and Structure — MSC Income is subject to risks associated with the interest rate environment and changes in interest rates will affect its cost of capital, net investment income and the value of its investments. and Risk Factors — Risks Related to Leverage — Because MSC Income borrows money, the potential for gain or loss on amounts invested in MSC Income is magnified and may increase the risk of such investment. included in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for more information regarding risks associated with debt investments and borrowings that utilize SOFR or Prime as a reference rate.\n\nThe majority of MSC Income’s 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 March 31, 2026, 77% of MSC Income’s Investment Portfolio debt investments (at cost) bore interest at floating rates, 97% of which were subject to contractual minimum interest rates. As of March 31, 2026, 46% of MSC Income’s debt obligations bore interest at fixed rates. MSC Income’s interest expense will be affected by changes in the published SOFR in connection with the Credit Facilities; however, the interest rates on the outstanding October 2026 Notes and May 2029 Notes are fixed for the life of such debt. As of March 31, 2026, MSC Income had not entered into any interest rate hedging arrangements. Due to the Fund’s limited use of derivatives, it has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator thereunder. The Fund operates, and expects to continue to operate, as a “limited derivatives user” under Rule 18f-4 under the 1940 Act.\n\nThe approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in the Fund’s investments and borrowings as of March 31, 2026, is as follows:\n\nBasis Point ChangeIncrease\n(Decrease)\nin Interest\nIncome(Increase)\nDecrease\nin Interest\nExpenseIncrease\n(Decrease) in Pre-Incentive Fee Net\nInvestment\nIncome(Increase) Decrease in Incentive Fee on Income Expense (1)Increase (Decrease) in Net Investment IncomeIncrease\n(Decrease) in Net\nInvestment\nIncome per Share\n\n(dollars in thousands, except per share amounts)\n\n(200)$(16,278)$7,000 $(9,278)$3,774 $(5,504)$(0.12)\n\n(175)(14,584)6,125 (8,459)3,364 (5,095)(0.11)\n\n(150)(12,570)5,250 (7,320)2,795 (4,525)(0.10)\n\n(125)(10,474)4,375 (6,099)2,184 (3,915)(0.09)\n\n(100)(8,378)3,500 (4,878)1,574 (3,304)(0.07)\n\n(75)(6,283)2,625 (3,658)964 (2,694)(0.06)\n\n(50)(4,187)1,750 (2,437)426 (2,011)(0.04)\n\n(25)(2,091)875 (1,216)213 (1,003)(0.02)\n\n252,093 (875)1,218 (213)1,005 0.02 \n\n504,145 (1,750)2,395 (419)1,976 0.04 \n\n756,186 (2,625)3,561 (623)2,938 0.06 \n\n1008,226 (3,500)4,726 (827)3,899 0.09 \n\n12510,266 (4,375)5,891 (1,031)4,860 0.11 \n\n15012,307 (5,250)7,057 (1,235)5,822 0.13 \n\n17514,347 (6,125)8,222 (1,439)6,783 0.15 \n\n20016,388 (7,000)9,388 (1,643)7,745 0.17 \n\n_____________________________\n\n115\n\n[Table of contents](#i67b2a34b0c294631ad7f17e74adf23d3_7)\n\n(1)The pro forma changes in the incentive fee on income expense are calculated pursuant to the terms set forth in the Advisory Agreement based upon the incentive fee on income expense for the first quarter of 2026, net of the voluntary permanent incentive fee on income waiver for the first quarter of 2026, in each case on an annualized basis, as adjusted for the pro forma change in pre-incentive fee net investment income resulting from the assumed interest income and interest expense changes reflected in the table, with no other changes in investment income or expenses and with the voluntary permanent incentive fee on income waiver assumed to remain at the first quarter of 2026 annualized amount. There is no guarantee that any incentive fee on income waivers will occur in the future, and any such waivers are entirely at the discretion of the Adviser.\n\nAlthough MSC Income believes that this analysis is indicative of the impact of interest rate changes to net investment income as of March 31, 2026, the analysis does not take into consideration future changes in the credit market, credit quality or other business or economic developments that could affect net investment income. Accordingly, MSC Income can offer no assurances that actual results would not differ materially from the analysis above. The hypothetical results assume that all SOFR and Prime rate changes would be effective on the first day of the period. However, the contractual SOFR and Prime rate reset dates would vary throughout the period. The majority of the Fund’s investments are based on contracts which reset quarterly, while the Corporate Facility and the SPV Facility reset on a monthly and quarterly basis, respectively. The hypothetical results would also be impacted by the changes in the amount of outstanding debt under the Credit Facilities (with an increase (decrease) in the debt outstanding under the Credit Facilities resulting in an (increase) decrease in the hypothetical interest expense)."}