QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2020 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Commission File Number 814-01332 Morgan Stanley Direct Lending Fund (Exact name of registrant as specified in its charter) (State or other ...

Part I. Financial Information [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited consolidated financial statements for Morgan Stanley Direct Lending Fund are presented, conforming to U.S. GAAP [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The Fund's total assets reached **$309.96 million** and net assets **$116.34 million** by June 30, 2020, reflecting significant growth Consolidated Balance Sheet Summary | | As of June 30, 2020 (in thousands) | As of December 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | $309,963 | $1,464 | | **Total Liabilities** | $193,621 | $2,585 | | **Total Net Assets** | $116,342 | $(1,121) | | **Net Asset Value Per Share** | $19.21 | $(640.54) | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2020, the Fund reported **$4.81 million** in total investment income and a **$1.59 million** net increase in net assets from operations Consolidated Statements of Operations Summary | (In thousands) | For the three months ended June 30, 2020 | For the six months ended June 30, 2020 | | :--- | :--- | :--- | | **Total Investment Income** | $3,890 | $4,813 | | **Net Expenses** | $1,921 | $2,735 | | **Net Investment Income (Loss)** | $1,969 | $2,078 | | **Net Realized and Unrealized Gains (Loss)** | $3,306 | $(484) | | **Net Increase (Decrease) in Net Assets** | $5,275 | $1,594 | | **Net Earnings Per Share (basic and diluted)** | $0.99 | $0.36 | [Consolidated Statements of Changes in Net Assets](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) For the six months ended June 30, 2020, net assets increased by **$117.46 million** to **$116.34 million**, primarily due to capital transactions Consolidated Statements of Changes in Net Assets Summary | (In thousands) | For the six months ended June 30, 2020 | | :--- | :--- | | **Net Assets at Beginning of Period** | $(1,121) | | **Net Increase from Operations** | $1,594 | | **Net Increase from Capital Transactions** | $115,869 | | **Total Increase in Net Assets** | $117,463 | | **Net Assets at End of Period** | $116,342 | [Consolidated Statement of Cash Flows](index=9&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2020, cash and cash equivalents increased by **$93.06 million**, driven by financing activities offsetting operating cash usage Consolidated Statement of Cash Flows Summary | (In thousands) | For the six months ended June 30, 2020 | | :--- | :--- | | **Net Cash Used in Operating Activities** | $(202,351) | | **Net Cash Provided by Financing Activities** | $295,406 | | **Net Increase in Cash** | $93,055 | | **Cash at Beginning of Period** | $35 | | **Cash at End of Period** | $93,090 | [Consolidated Schedule of Investments](index=10&type=section&id=Consolidated%20Schedule%20of%20Investments) As of June 30, 2020, the Fund's investment portfolio had a fair value of **$204.52 million**, primarily in senior secured debt (93.06% First Lien) Investment Portfolio by Type | Investment Type | Fair Value (in thousands) | % of Total Investments | | :--- | :--- | :--- | | First Lien Debt | $190,333 | 93.06% | | Second Lien Debt | $14,185 | 6.94% | | **Total** | **$204,518** | **100.00%** | - The total portfolio had a fair value of **$204.5 million**, with an amortized cost of **$206.4 million**[29](index=29&type=chunk) - The Fund had unfunded commitments totaling **$25.45 million** as of June 30, 2020, primarily for delayed draw term loans and revolvers[31](index=31&type=chunk) [Notes to the Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section details the Fund's organization, accounting policies, and financial instruments, including its BDC status, credit facility, and **$1.2 billion** in capital commitments - The Company is an externally managed specialty finance company regulated as a **Business Development Company (BDC)** and intends to be treated as a **Regulated Investment Company (RIC)** for tax purposes[34](index=34&type=chunk) - The Fund has a revolving credit agreement (CIBC Subscription Facility) with a maximum principal amount of **$325 million**, of which **$179.35 million** was outstanding as of June 30, 2020[104](index=104&type=chunk)[108](index=108&type=chunk) - As of June 30, 2020, the Fund had total capital commitments from stockholders of **$1.20 billion**, with **$1.08 billion** remaining unfunded[111](index=111&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Fund's financial condition and results, highlighting its strategic positioning amidst COVID-19 and strong liquidity with over **$1.2 billion** in available capital [Overview](index=33&type=section&id=Overview) The Fund is an externally managed BDC investing in senior secured loans to U.S. middle-market companies, strategically positioned for the COVID-19 environment - The Fund's investment objective is to achieve attractive risk-adjusted returns through current income and capital appreciation by investing in directly originated **senior secured term loans** to U.S. middle-market companies[135](index=135&type=chunk) - Management believes the Fund is well-positioned to navigate the **COVID-19 environment** due to its new portfolio, significant available capital, and focus on non-cyclical industries[139](index=139&type=chunk)[142](index=142&type=chunk) - The investment strategy focuses on lending to companies backed by leading **private equity sponsors**, offering advantages like strong deal flow and better due diligence access[149](index=149&type=chunk) [Portfolio and Investment Activity](index=38&type=section&id=Portfolio%20and%20Investment%20Activity) As of June 30, 2020, the portfolio consisted of 13 companies, primarily **93.1% first lien** senior secured debt, with a **7.5% weighted average yield** - As of June 30, 2020, the portfolio consisted of investments in **13 companies**, with **93.1% in first lien** and **6.9% in second lien debt** by fair value, and **100% floating rate**[159](index=159&type=chunk)[160](index=160&type=chunk) Portfolio and Investment Activity Summary | For the Three Months Ended June 30, 2020 | Amount (in thousands) | | :--- | :--- | | **New Investments Committed/Purchased** | $156,163 | | **Investments Funded (at principal)** | $141,609 | | **Proceeds from Investments Sold/Repaid** | $24,299 | | **Weighted Average Yield on Debt Investments (at cost)** | 7.5% | - All investments in the portfolio were assigned an **Internal Risk Rating of 2**, signifying performance in line with initial expectations[164](index=164&type=chunk) [Consolidated Results of Operations](index=40&type=section&id=Consolidated%20Results%20of%20Operations) For the six months ended June 30, 2020, the Fund reported **$4.81 million** in total investment income and a **$1.59 million** net increase in net assets from operations Consolidated Results of Operations Summary | (In thousands) | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | **Total Investment Income** | $3,890 | $4,813 | | **Net Expenses** | $1,921 | $2,735 | | **Net Investment Income** | $1,969 | $2,078 | | **Net Increase in Net Assets from Operations** | $5,275 | $1,594 | - For the six months ended June 30, 2020, net expenses of **$2.74 million** were primarily interest expense, management fees, and incentive fees, partially offset by **$0.45 million** in fee waivers[170](index=170&type=chunk) - For the six months ended June 30, 2020, the Fund recognized a net realized gain of **$1.4 million** and a net change in unrealized depreciation of **$1.8 million**[175](index=175&type=chunk)[176](index=176&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=44&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) The Fund maintained a strong liquidity position as of June 30, 2020, with approximately **$1.2 billion** in total available capital, including cash and uncalled commitments - As of June 30, 2020, the Fund had approximately **$1.2 billion** in available capital, including **$93 million** in cash, **$146 million** in credit facility availability, and **$1.08 billion** in uncalled capital commitments[182](index=182&type=chunk) - Aggregate capital commitments from investors totaled approximately **$1.202 billion** as of June 30, 2020[183](index=183&type=chunk) - The Fund had **$179.4 million** outstanding under its **$325 million** CIBC Subscription Facility as of June 30, 2020[184](index=184&type=chunk)[188](index=188&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Fund is primarily exposed to valuation, market, and interest rate risks, with **100% floating rate** debt; a 100 bps rate rise would decrease annualized net income by **$0.9 million** - The company's main financial risks include **valuation risk** for illiquid securities, **market risk** from economic conditions like COVID-19, and **interest rate risk**[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) Interest Rate Sensitivity Analysis | Basis Point Change - Interest Rates | Annualized Impact on Net Income (in thousands) | | :--- | :--- | | Up 300 basis points | $(239) | | Up 200 basis points | $(578) | | Up 100 basis points | $(917) | | Down 100 basis points | $192 | | Down 200 basis points | $192 | | Down 300 basis points | $192 | [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the Fund's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls - Management concluded that the company's **disclosure controls and procedures** were effective as of the end of the period covered by the report[207](index=207&type=chunk) - There were no material changes in **internal control over financial reporting** during the quarter[208](index=208&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The Fund, its Investment Adviser, and Administrator are not currently subject to any material legal proceedings - The company is not currently a party to any **material legal proceedings**[210](index=210&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section highlights significant risks from COVID-19's capital market disruption and economic uncertainty, impacting portfolio companies and future distributions - The company is operating in a period of significant **capital market disruption** and **economic uncertainty**, primarily due to the **COVID-19 pandemic**, affecting debt and equity markets[212](index=212&type=chunk) - The pandemic poses heightened risks to portfolio companies, including potential **defaults**, difficulty in obtaining **refinancing**, and challenges in **valuing illiquid assets**[212](index=212&type=chunk)[216](index=216&type=chunk) - There is a risk that the Fund may not be able to pay distributions, or that distributions may not grow, and a portion could be a **return of capital** if economic disruption continues[221](index=221&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter, the Fund issued common stock through a Private Offering, exempt from Securities Act registration, and did not repurchase any equity securities - Issuances of Common Stock during the quarter were made through a **Private Offering** pursuant to Section 4(a)(2) of the Securities Act and Regulation D thereunder[223](index=223&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[225](index=225&type=chunk) [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) There was no other information to be reported under this item for the quarter - None[226](index=226&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act - The exhibits filed with the report include certifications from the **CEO and CFO** pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350 (**Sarbanes-Oxley Act of 2002**)[229](index=229&type=chunk)

[Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) Presents unaudited consolidated financial statements and management's analysis for Q1 2020 [Item 1. Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Provides unaudited consolidated financial statements for Q1 2020, detailing financial position and performance [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Summarizes the company's financial position, highlighting significant asset growth and debt funding in Q1 2020 Consolidated Balance Sheet Summary (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | $227,302 | $1,464 | | **Total Liabilities** | $129,656 | $2,585 | | Debt | $116,000 | $0 | | **Total Net Assets** | $97,646 | $(1,121) | | **Net Asset Value (NAV) per Share** | $18.47 | $(640.54) | - The company significantly ramped up its operations in Q1 2020, with total assets growing from **$1.5 million** to **$227.3 million**, primarily funded by **$116 million** in debt and the issuance of common stock[17](index=17&type=chunk) [Consolidated Statement of Operations](index=7&type=section&id=Consolidated%20Statement%20of%20Operations) Outlines the company's financial performance for Q1 2020, showing investment income and net loss from operations Statement of Operations for the three months ended March 31, 2020 (in thousands) | Metric | Amount | | :--- | :--- | | Total Investment Income | $923 | | Net Expenses | $814 | | **Net Investment Income** | **$109** | | Net Unrealized Loss | $(3,790) | | **Net Decrease in Net Assets from Operations** | **$(3,681)** | | **Earnings Per Share (basic and diluted)** | **$(1.19)** | - For its first quarter of operations, the company generated positive net investment income of **$109 thousand** but experienced a net loss of **$3.7 million** due to unrealized depreciation on its investments[19](index=19&type=chunk) [Consolidated Schedule of Investments](index=10&type=section&id=Consolidated%20Schedule%20of%20Investments) Presents the investment portfolio composition, primarily senior secured debt, as of March 31, 2020 Portfolio Composition as of March 31, 2020 (in thousands) | Investment Type | Cost | Fair Value | % of Net Assets | | :--- | :--- | :--- | :--- | | First Lien Debt | $78,526 | $75,492 | 77.31% | | Second Lien Debt | $14,705 | $13,949 | 14.29% | | **Total Portfolio Investments** | **$93,231** | **$89,441** | **91.60%** | - The investment portfolio is primarily composed of senior secured debt, with a significant concentration in the Software and Services industry[26](index=26&type=chunk)[77](index=77&type=chunk) - As of March 31, 2020, the company had unfunded loan commitments totaling approximately **$9.1 million**[29](index=29&type=chunk) [Notes to the Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Offers detailed disclosures on company formation, accounting policies, credit facilities, and capital commitments - The company was formed in May 2019, converted to a corporation in November 2019, and commenced investing operations on January 31, 2020. It intends to be treated as a Regulated Investment Company (RIC) for tax purposes[34](index=34&type=chunk)[35](index=35&type=chunk) - The Investment Adviser earns a **1.0%** annual base management fee on average gross assets, which is irrevocably waived to **0.25%** prior to an exchange listing. For Q1 2020, base management fees were **$66 thousand**, with **$49 thousand** waived[66](index=66&type=chunk)[67](index=67&type=chunk)[163](index=163&type=chunk) - The company entered into a revolving credit agreement (CIBC Subscription Facility) with a maximum principal amount of **$325 million**. As of March 31, 2020, **$116 million** was outstanding[101](index=101&type=chunk)[104](index=104&type=chunk) - As of March 31, 2020, the company had received total capital commitments of **$1.07 billion**, of which approximately **$968 million** remained unfunded[109](index=109&type=chunk)[116](index=116&type=chunk) Financial Highlights (Per Share Data) | Metric | For the three months ended March 31, 2020 | | :--- | :--- | | Net asset value, beginning of period | $20.00 | | Net investment income (loss) | $0.04 | | Net unrealized and realized gain (loss) | $(1.74) | | **Net asset value, end of period** | **$18.47** | | **Total return based on net asset value** | **(7.65)%** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses business overview, investment strategy, Q1 2020 results, and liquidity, with COVID-19 impact - The company's investment objective is to achieve attractive risk-adjusted returns by investing primarily in directly originated senior secured term loans to U.S. middle-market companies[134](index=134&type=chunk) - Management believes the company is well-positioned to manage the COVID-19 environment due to its new portfolio with no legacy issues, significant available capital (**$1.3 billion**), and a focus on non-cyclical industries[138](index=138&type=chunk)[140](index=140&type=chunk) Q1 2020 Results of Operations Summary (in thousands) | Metric | Three Months Ended March 31, 2020 | | :--- | :--- | | Total investment income | $923 | | Net expenses | $814 | | Net investment income | $109 | | Net unrealized depreciation | $(3,790) | | **Net decrease in net assets** | **$(3,681)** | - Net unrealized losses of **$3.8 million** were primarily driven by a widening credit spread environment and weakness in the broadly syndicated loan market due to the economic impact of COVID-19[167](index=167&type=chunk) - As of March 31, 2020, the company had significant liquidity, including **$134 million** in cash, **$209 million** of availability under its credit facility, and approximately **$968 million** in uncalled capital commitments[171](index=171&type=chunk) - Subsequent to quarter-end, from April 1 to May 8, 2020, the company committed to invest an additional **$57 million** in 8 portfolio companies, taking advantage of market dislocation[183](index=183&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Outlines exposure to market risks, including valuation, general market, and interest rate risks, with sensitivity - The company's primary market risks are valuation risk (due to illiquid Level 3 investments), general market risk (exacerbated by COVID-19), and interest rate risk[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - As of March 31, 2020, **100%** of the company's debt investments at fair value were at floating rates, making net investment income sensitive to changes in benchmark rates like LIBOR[192](index=192&type=chunk) Annualized Impact of Interest Rate Changes on Net Income (in thousands) | Basis Point Change | Impact on Net Income | | :--- | :--- | | Up 300 bps | $(965) | | Up 100 bps | $(322) | | Down 100 bps | $9 | | Down 300 bps | $(290) | [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal controls in Q1 2020 - The company's management concluded that its disclosure controls and procedures were effective as of the end of the period covered by the report[195](index=195&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[196](index=196&type=chunk) [Part II. Other Information](index=50&type=section&id=Part%20II.%20Other%20Information) Presents additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) Reports no material legal proceedings currently or threatened against the company or its affiliates - As of the filing date, the company was not subject to any material legal proceedings[198](index=198&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, emphasizing heightened risks from COVID-19, including market disruption and defaults - The company is operating in a period of capital market disruption and economic uncertainty, primarily due to the COVID-19 pandemic, which could negatively impact its business and operations[200](index=200&type=chunk) - The COVID-19 outbreak has led to extreme market volatility and could result in increased defaults by portfolio companies, difficulty in valuing assets, and increased requests for loan amendments and waivers[200](index=200&type=chunk) - Terrorist attacks, natural disasters, and pandemics like COVID-19 may disrupt the operations of the company, its portfolio companies, and the Investment Adviser, potentially harming business results[207](index=207&type=chunk) - There is a risk that the company may not be able to pay distributions, or that distributions may not grow, due to the economic impact of market disruptions. A portion of distributions could be a return of capital[210](index=210&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Discloses the issuance of common stock during Q1 2020 as part of a private offering exempt from registration - During the quarter, the company issued Common Stock as part of its Private Offering pursuant to Section 4(a)(2) of the Securities Act and Regulation D thereunder[212](index=212&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon the company's senior securities during the period - None[214](index=214&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that this item is not applicable to the company - Not applicable[215](index=215&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) Reports no other information for this item - None[215](index=215&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including credit agreement amendment and CEO/CFO certifications - The exhibit index lists certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002 and an amendment to the company's credit agreement[218](index=218&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 814-01332 Morgan Stanley Direct Lending Fund (Exact name of registrant as specified in charter) Delaware (State or other jurisdiction ...