[Morgan Stanley Direct Lending Fund Q1 2024 Financial Results and Dividend Announcement](index=1&type=section&id=Morgan%20Stanley%20Direct%20Lending%20Fund%20Announces%20March%2031%2C%202024%20Financial%20Results) [Financial and Quarterly Highlights](index=1&type=section&id=QUARTERLY%20HIGHLIGHTS) MSDL reported strong Q1 2024 results with **$0.63** net investment income per share, stable **$20.67** NAV per share, and a reduced **0.81x** debt-to-equity ratio, declaring a **$0.50** dividend - President and CEO Jeffrey Levin emphasized strong Q1 operating results, stable credit performance, and a resilient middle-market portfolio of senior, sponsor-backed loans[2](index=2&type=chunk) - Net funded portfolio increased by **$96.7 million**, driven by **$168.4 million** in fundings and **$71.7 million** in sales and repayments[5](index=5&type=chunk) Selected Financial Highlights (Q1 2024 vs Q4 2023) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Per Share Data** | | | | Net investment income per share | $0.63 | $0.67 | | Net realized/unrealized gains (losses) per share | $(0.05) | $0.03 | | Earnings per share | $0.59 | $0.70 | | Regular dividend per share | $0.50 | $0.50 | | **Balance Sheet Data ($ in thousands)** | | | | Investments, at fair value | $3,293,205 | $3,193,561 | | Total debt outstanding, at principal | $1,492,257 | $1,502,263 | | Net assets | $1,837,027 | $1,721,151 | | Net asset value per share | $20.67 | $20.67 | | **Leverage** | | | | Debt to equity | 0.81x | 0.87x | | Net debt to equity | 0.77x | 0.83x | [Results of Operations](index=1&type=section&id=RESULTS%20OF%20OPERATIONS) Q1 2024 saw total investment income of **$99.1 million** and reduced operating expenses of **$44.5 million**, leading to a net investment income of **$54.7 million** or **$0.63** per share - Total investment income for Q1 2024 was **$99.1 million**, a slight decrease from **$100.8 million** in Q4 2023 due to lower non-recurring repayment income[4](index=4&type=chunk) - Total operating expenses decreased to **$44.5 million** in Q1 2024 from **$45.3 million**, primarily due to lower interest expenses and incentive fees[6](index=6&type=chunk) - Q1 2024 saw a net change in unrealized appreciation on investments of **$2.7 million**, offset by **$5.6 million** in realized losses[7](index=7&type=chunk) Net Investment Income Comparison | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Net Investment Income | $54.7 million | $55.5 million | | Net Investment Income per Share | $0.63 | $0.67 | [Portfolio and Investment Activity](index=2&type=section&id=PORTFOLIO%20AND%20INVESTMENT%20ACTIVITY) As of March 31, 2024, the **$3.3 billion** investment portfolio, diversified across 178 companies, primarily comprised **94.6%** first lien debt with a **12.0%** weighted average yield and **$232.1 million** in new commitments - The portfolio is diversified across **178 companies** in **31 industries**, with an average investment size of **$18.5 million**, representing **0.6%** of the total portfolio by fair value[8](index=8&type=chunk) - As of March 31, 2024, the weighted average yield of debt investments was **11.9%** at cost and **12.0%** at fair value, with **three investments** on non-accrual status, representing **0.4%** of total investments at cost[8](index=8&type=chunk) Portfolio Composition by Investment Type (at Fair Value) | Investment Type | % of Total (Mar 31, 2024) | % of Total (Dec 31, 2023) | | :--- | :--- | :--- | | First Lien Debt | 94.6% | 94.1% | | Second Lien Debt | 3.6% | 4.1% | | Other Investments | 1.8% | 1.8% | Q1 2024 Investment Activity ($ in thousands) | Activity | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | New investment commitments, at par | $232,120 | $242,891 | | Investment fundings | $168,357 | $253,867 | | Number of new portfolio companies | 9 | 12 | | Number of exited/repaid companies | 3 | 5 | [Capital and Liquidity](index=2&type=section&id=CAPITAL%20AND%20LIQUIDITY) As of March 31, 2024, MSDL reported total principal debt of **$1.49 billion**, **$923.7 million** in credit facility availability, **$64.8 million** in cash, and an improved **0.81x** debt-to-equity ratio due to IPO proceeds - The debt-to-equity ratio declined from **0.87x** to **0.81x** quarter-over-quarter, primarily due to the IPO executed during the first quarter[9](index=9&type=chunk) Capital and Liquidity Summary (as of March 31, 2024) | Metric | Value | | :--- | :--- | | Total Principal Debt Outstanding | $1,492.3 million | | Weighted Average Interest Rate on Debt | 6.69% | | Availability under Credit Facilities | $923.7 million | | Cash | $64.8 million | | Debt to Equity | 0.81x | [Recent Developments](index=3&type=section&id=RECENT%20DEVELOPMENTS) Post-quarter, the Board declared a **$0.50** per share dividend, the Truist Bank credit facility was amended and upsized to **$1.30 billion** with a 2029 maturity, and Fitch Ratings affirmed MSDL's **BBB- (stable)** rating - On May 8, 2024, the Board declared a **$0.50** per share dividend, payable on July 25, 2024, to shareholders of record as of June 28, 2024[13](index=13&type=chunk) - On April 19, 2024, the Senior Secured Revolving Credit Facility with Truist Bank was amended, extending maturity to April 2029 and increasing commitment from **$1.12 billion** to **$1.30 billion**[13](index=13&type=chunk) - In late March, Fitch Ratings affirmed MSDL's investment grade credit rating of **BBB-** with a stable outlook[13](index=13&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Assets and Liabilities](index=4&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of March 31, 2024, MSDL reported total assets of **$3.40 billion**, total liabilities of **$1.56 billion**, total net assets of **$1.84 billion**, and an unchanged NAV per share of **$20.67** Consolidated Statements of Assets and Liabilities (In thousands, except per share amounts) | | March 31, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | **Assets** | | | | Total investments, at fair value | $3,293,205 | $3,193,561 | | Cash | $64,762 | $69,705 | | Total assets | $3,401,347 | $3,306,734 | | **Liabilities** | | | | Debt (net) | $1,486,661 | $1,496,032 | | Total liabilities | $1,564,320 | $1,585,583 | | **Net Assets** | | | | Total net assets | $1,837,027 | $1,721,151 | | **Total liabilities and net assets** | $3,401,347 | $3,306,734 | | **Net asset value per share** | $20.67 | $20.67 | [Consolidated Statements of Operations (unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20%28unaudited%29) For Q1 2024, MSDL generated **$99.1 million** in total investment income, with net investment income of **$54.7 million** or **$0.63** per share, leading to a **$51.7 million** net increase in net assets from operations Consolidated Statements of Operations (In thousands, except share amounts) | | For the Three Months Ended Mar 31, 2024 | For the Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Total investment income | $99,101 | $83,639 | | Net expenses | $44,014 | $39,417 | | Net investment income (loss) after taxes | $54,651 | $44,222 | | Net realized and unrealized gain (loss) | $(2,967) | $(445) | | **Net increase in net assets from operations** | **$51,684** | **$43,777** | | Net investment income per share | $0.63 | $0.62 | | Earnings per share | $0.59 | $0.62 | | Weighted average shares outstanding | 87,358,527 | 70,863,184 |

Investment Overview - The total investments as of March 31, 2024, amounted to $3,323,767,000, with a fair value of $3,293,205,000, representing a 3.0% increase from December 31, 2023[248] - First lien debt constituted 94.6% of total investments at fair value, amounting to $3,115,404,000 as of March 31, 2024[248] - The second lien debt represented 3.6% of total investments at fair value, totaling $118,107,000 as of March 31, 2024[248] - The investment portfolio at amortized cost grew from $2,992,717 as of March 31, 2023, to $3,323,767 as of March 31, 2024[260] - The number of portfolio companies increased from 172 as of December 31, 2023, to 178 as of March 31, 2024[252] Revenue Generation - The company primarily generates revenue through interest income from debt investments, with a typical term of five to eight years and interest rates based on benchmarks like SOFR[239] - Total investment income increased from $83,639 in Q1 2023 to $99,101 in Q1 2024, driven by capital deployment and rising SOFR rates[260] - Net investment income after taxes rose from $44,222 in Q1 2023 to $54,651 in Q1 2024[259] Investment Strategy - The investment strategy focuses on middle-market companies with annual EBITDA between $15 million and $200 million, primarily through senior secured term loans[237] - The company’s investment objective is to achieve attractive risk-adjusted returns primarily through current income and, to a lesser extent, capital appreciation[237] Financial Management - The company expects general and administrative expenses to remain stable or decline as a percentage of total assets during periods of asset growth[246] - As of March 31, 2024, total outstanding debt was $2.42 billion, with $1.49 billion principal outstanding and $923.745 million unused[277] - The company had approximately $64.8 million in cash as of March 31, 2024, with additional availability under credit facilities totaling approximately $923.7 million[270] Shareholder Returns - The company closed its Initial Public Offering on January 26, 2024, raising approximately $97.1 million from the issuance of 5,000,000 shares[271] - The company adopted an "opt out" dividend reinvestment plan (DRIP) effective January 26, 2024, allowing stockholders who do not opt out to have cash dividends automatically reinvested in additional shares[273] - For the three months ended March 31, 2024, the declared distribution was $0.50 per share, with 513,697 shares issued, compared to $0.50 per share and 482,781 shares for the same period in 2023[274] - The company declared a distribution of $0.50 per share on May 8, 2024, payable on July 25, 2024[279] - The company issued 618,878 and 445,235 DRIP shares in connection with distributions on January 25, 2024, and January 25, 2023, respectively[274] Debt and Interest Rates - The company’s debt portfolio is characterized by a weighted average interest coverage ratio based on total gross debt commitments, excluding recurring revenue deals[251] - The percentage of performing debt bearing a floating rate remained stable at 99.9% as of March 31, 2024[252] - As of March 31, 2024, approximately 99.9% of the company's debt investments were at floating rates, with potential net income impacts from interest rate changes detailed in a table[287] - Weighted average yield on debt and income-producing investments at cost decreased slightly from 12.0% in Q4 2023 to 11.9% in Q1 2024[259] Risk Factors - The company is subject to financial market risks, including valuation risk, market risk, and interest rate risk, which could materially affect its operations[282][285][286] - The company has not engaged in interest rate hedging activities during the periods covered by the report[286] New Investments - New investments committed in Q1 2024 amounted to $232,120, significantly higher than $126,539 in Q1 2023[253] - Net realized losses on investments were $5,625 in Q1 2024, primarily due to the restructuring of three portfolio companies[267] Management and Governance - The company is externally managed by an adviser that is a wholly owned subsidiary of Morgan Stanley, but it is not a subsidiary of Morgan Stanley[236] - The company has applied for a new exemptive relief order from the SEC to enhance co-investment opportunities, which is currently pending approval[241] Credit Facilities - On April 19, 2024, the company amended the Truist Credit Facility, increasing the facility size to $1.3 billion and extending the maturity date to April 19, 2029[278] - The company entered into a share repurchase plan on January 25, 2024, to acquire up to $100 million of its Common Stock, but no shares were repurchased under this plan as of March 31, 2024[276]

Morgan Stanley Direct Lending Fund (NYSE:MSDL) Q4 2023 Earnings Conference Call March 1, 2024 10:00 AM ET Company Participants Michael Occi - Head of Investor Relations and Chief Administrative Officer Jeff Levin - President and Chief Executive Officer David Pessah - Chief Finance Officer Orit Mizrachi - Chief Operating Officer Conference Call Participants Finian O'Shea - Wells Fargo Securities Robert Dodd - Raymond James Melissa Whittle - JP Morgan Kenneth Lee - RBC Capital Markets Vilas Abraham - UBS Oper ...

Executive Summary & Company Overview [1.1 Introduction and CEO Statement](index=1&type=section&id=Introduction) MSDL reported strong Q4 and FY2023 results, positioning for its public debut, driven by rigorous investment selection and strong risk-adjusted returns - **MSDL generated record performance** in 2023, positioning for its public market debut[2](index=2&type=chunk) - The team's **rigorous investment selection and portfolio management** delivered solid year-over-year performance[2](index=2&type=chunk) - The team focuses on leveraging its platform to deliver **strong risk-adjusted returns** to shareholders[2](index=2&type=chunk) [1.2 Quarterly Financial Highlights](index=1&type=section&id=QUARTERLY%20HIGHLIGHTS) MSDL reported Q4 2023 earnings per share of **$0.70**, net investment income of **$0.67** per share, with NAV increasing to **$20.67** and debt-to-equity improving to **0.87x** Selected Financial Highlights (Q4 2023 vs Q3 2023) | Metric | Dec 31, 2023 | Sep 30, 2023 | | :-------------------------------- | :----------- | :----------- | | Net investment income per share | $0.67 | $0.70 | | Net realized and unrealized gains per share | $0.03 | $0.32 | | Earnings per share | $0.70 | $1.02 | | Regular dividend per share | $0.50 | $0.50 | | Special dividend per share | $0.10 | $0.10 | | Investments, at fair value (in thousands) | $3,193,561 | $3,123,450 | | Total debt outstanding, at principal (in thousands) | $1,502,263 | $1,725,252 | | Net assets (in thousands) | $1,721,151 | $1,481,472 | | Net asset value per share | $20.67 | $20.57 | | Debt to equity | 0.87x | 1.16x | | Net debt to equity | 0.83x | 1.11x | Operational and Financial Results [2.1 Results of Operations](index=1&type=section&id=RESULTS%20OF%20OPERATIONS) Total investment income for Q4 2023 increased to **$100.8 million**, driven by capital deployment and rising SOFR rates, resulting in net investment income of **$55.5 million** - Total investment income for Q4 2023 was **$100.8 million**, up from **$94.5 million** in Q3 2023, driven by capital deployment and rising SOFR rates[5](index=5&type=chunk) - Net investment income for Q4 2023 was **$55.5 million**, or **$0.67 per share**[6](index=6&type=chunk)[7](index=7&type=chunk) - Total operating expenses for Q4 2023 were **$45.3 million**, up from **$43.9 million** in Q3 2023, primarily due to interest and financing expenses[7](index=7&type=chunk) - Net change in unrealized appreciation on investments for Q4 2023 was **$1.9 million**[8](index=8&type=chunk) [2.2 Portfolio and Investment Activity](index=2&type=section&id=PORTFOLIO%20AND%20INVESTMENT%20ACTIVITY) MSDL's investment portfolio reached **$3.2 billion** fair value across 172 companies, with **94.1%** in First Lien Debt, and new commitments totaling **$242.9 million** - As of December 31, 2023, the investment portfolio had a fair value of approximately **$3.2 billion**, comprising **172 portfolio companies** with an average investment size of **$18.6 million**[9](index=9&type=chunk) Investment Portfolio Composition (Fair Value) | Investment Type | Dec 31, 2023 (% of Total) | Sep 30, 2023 (% of Total) | | :---------------- | :------------------------ | :------------------------ | | First Lien Debt | 94.1% | 93.9% | | Second Lien Debt | 4.1% | 4.3% | | Other Investments | 1.8% | 1.8% | Investment Activity (Q4 2023 vs Q3 2023) | Activity | Dec 31, 2023 (in thousands) | Sep 30, 2023 (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | | New investment commitments, at par | $242,891 | $195,426 | | Investment fundings | $253,867 | $155,072 | | Number of new Investment commitments in portfolio companies | 12 | 7 | | Number of portfolio companies exited or fully repaid | 5 | 1 | - Total weighted average yield of debt investments remained stable at **12.0%** (amortized cost) and **12.1%** (fair value)[9](index=9&type=chunk) - Floating rate debt investments remained at **99.9%** of the total portfolio on a fair value basis[9](index=9&type=chunk) - As of December 31, 2023, **three investments** were on non-accrual status, representing approximately **0.6%** of total investments at amortized cost[9](index=9&type=chunk) [2.3 Capital and Liquidity](index=2&type=section&id=CAPITAL%20AND%20LIQUIDITY) MSDL reported **$1,502.3 million** in total debt outstanding, a **6.51%** weighted average interest rate, **$917.5 million** in credit facility availability, and an improved debt-to-equity ratio of **0.87x** - As of December 31, 2023, total principal debt outstanding was **$1,502.3 million**[10](index=10&type=chunk) - The combined weighted average interest rate on debt outstanding was **6.51%** for the year ended December 31, 2023[10](index=10&type=chunk) - As of December 31, 2023, the company had **$917.5 million** of availability under credit facilities and **$69.7 million** in cash[10](index=10&type=chunk) - Debt to equity improved to **0.87x** as of December 31, 2023, from **1.16x** in the prior quarter[10](index=10&type=chunk) Corporate Updates [3.1 Recent Developments](index=3&type=section&id=RECENT%20DEVELOPMENTS) MSDL completed its IPO, raising **$97 million**, approved a **$100.0 million** share repurchase program, declared Q1 dividends, and implemented a new advisory agreement with fee waivers - On January 23, 2024, MSDL completed its IPO, raising approximately **$97 million** in net proceeds[15](index=15&type=chunk) - The Board approved a share repurchase program for up to **$100.0 million** of common stock at prices below NAV[15](index=15&type=chunk) - The Board declared a regular Q1 dividend of **$0.50 per share** and two **$0.10 per share** special dividends[15](index=15&type=chunk) - A new advisory agreement includes a waiver to reduce management and incentive fees through January 24, 2025, and institutes an incentive fee lookback[15](index=15&type=chunk) [3.2 Conference Call Information](index=3&type=section&id=CONFERENCE%20CALL%20INFORMATION) MSDL will host a conference call on **March 1, 2024, at 10:00 am ET** to discuss financial results and conduct a Q&A session - Morgan Stanley Direct Lending Fund will host a conference call on **March 1, 2024, at 10:00 am ET** to review financial results and conduct a Q&A session[12](index=12&type=chunk) - Conference Call Dial-in: Domestic: **877-400-0505**, International: **323-701-0225**, Passcode: **1562166**[15](index=15&type=chunk) - An audio webcast link will be available on the MSDL Investor Relations website[12](index=12&type=chunk) Company Information & Disclosures [4.1 About MSDL](index=3&type=section&id=About%20Morgan%20Stanley%20Direct%20Lending%20Fund) MSDL (NYSE: MSDL) is a non-diversified, externally managed specialty finance BDC focused on lending to middle-market companies, managed by MS Capital Partners Adviser Inc - Morgan Stanley Direct Lending Fund (NYSE: MSDL) is a **non-diversified, externally managed specialty finance company** focused on lending to middle-market companies[13](index=13&type=chunk) - MSDL is regulated as a **business development company (BDC)** under the Investment Company Act of 1940[13](index=13&type=chunk) - MSDL is externally managed by **MS Capital Partners Adviser Inc.**, a subsidiary of Morgan Stanley[13](index=13&type=chunk) [4.2 Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding future events or MSDL's performance, which are not guarantees and involve risks and uncertainties - Statements in this report or on the webcast/conference call may constitute **forward-looking statements** related to future events or MSDL's performance[14](index=14&type=chunk) - These statements are **not guarantees of future performance** and involve risks and uncertainties[14](index=14&type=chunk) - MSDL disclaims any duty to update forward-looking statements made in this report or on the webcast/conference call[14](index=14&type=chunk) Consolidated Financial Statements [5.1 Consolidated Statements of Assets and Liabilities](index=4&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) MSDL's total assets increased to **$3,306.7 million** as of December 31, 2023, with net assets growing to **$1,721.2 million** and NAV per share reaching **$20.67** Consolidated Statements of Assets and Liabilities (Selected Items, in thousands) | Item | Dec 31, 2023 | Dec 31, 2022 | | :---------------------------------------------------- | :----------- | :----------- | | Non-controlled/non-affiliated investments, at fair value | $3,193,561 | $2,873,588 | | Cash | $69,705 | $81,215 | | Total assets | $3,306,734 | $2,986,122 | | Debt (net of unamortized debt issuance costs) | $1,496,032 | $1,523,475 | | Total liabilities | $1,585,583 | $1,588,817 | | Total net assets | $1,721,151 | $1,397,305 | | Net asset value per share | $20.67 | $19.81 | [5.2 Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Total investment income significantly increased to **$367.7 million** for FY2023, with net investment income after taxes at **$198.1 million** and earnings per share of **$3.11** Consolidated Statements of Operations (Selected Items, in thousands, except per share) | Item | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | | :---------------------------------------------------- | :----------- | :----------- | :----------- | | Total investment income | $367,738 | $230,593 | $119,816 | | Net expenses | $168,158 | $102,249 | $46,807 | | Net investment income after taxes | $198,061 | $128,010 | $72,929 | | Net realized and unrealized gain (loss) | $32,953 | $(79,468) | $10,326 | | Net increase (decrease) in net assets resulting from operations | $231,014 | $48,542 | $83,255 | | Net investment income (loss) per share (basic and diluted) | $2.67 | $2.08 | $2.34 | | Earnings (loss) per share (basic and diluted) | $3.11 | $0.79 | $2.67 | | Weighted average shares outstanding | 74,239,743 | 61,676,363 | 31,159,302 |

[Part I](index=7&type=section&id=Part%20I) [Business Overview](index=7&type=section&id=Item%201.%20Business) MSDL is a BDC and RIC focused on senior secured loans to U.S. middle-market companies - The company is a BDC and RIC focused on lending to U.S. middle-market companies, defined as those with annual EBITDA of approximately **$15 million to $200 million**[15](index=15&type=chunk)[16](index=16&type=chunk) - The investment strategy primarily targets directly originated senior secured term loans (first and second lien) in sponsor-backed companies, with a focus on **non-cyclical industries** and long-term credit performance[17](index=17&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - On January 26, 2024, the company closed its Initial Public Offering (IPO), issuing **5,000,000 shares** at $20.67 per share and trades on the NYSE under the symbol "MSDL"[22](index=22&type=chunk) - The company is externally managed by MS Capital Partners Adviser Inc, an indirect subsidiary of Morgan Stanley, which managed approximately **$18.5 billion** in committed capital as of January 1, 2024[15](index=15&type=chunk)[26](index=26&type=chunk) [Investment Portfolio](index=21&type=section&id=Investment%20Portfolio) The portfolio is heavily concentrated in senior secured debt to US middle-market companies across diverse industries Portfolio Composition as of December 31, 2023 | Investment Type | Fair Value (in thousands) | % of Total Fair Value | | :--- | :--- | :--- | | First Lien Debt | $3,004,544 | 94.1% | | Second Lien Debt | $132,415 | 4.1% | | Other Investments | $56,602 | 1.8% | | **Total** | **$3,193,561** | **100.0%** | Key Portfolio Statistics (as of Dec 31, 2023 vs Dec 31, 2022) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Number of portfolio companies | 172 | 150 | | Weighted avg. yield on debt (at cost) | 12.0% | 10.9% | | % of floating rate debt (at fair value) | 99.9% | 100% | | % of portfolio on non-accrual (at cost) | 0.6% | 0.1% | | % of debt investments with financial covenants | 74.6% | 78.0% | - The top three industries by fair value as of December 31, 2023 were **Insurance Services (14.9%)**, **Software (14.2%)**, and **Commercial Services & Supplies (9.6%)**[83](index=83&type=chunk) - Geographically, **96.0% of the portfolio** at fair value was invested in the United States as of December 31, 2023[84](index=84&type=chunk) [Investment Advisory and Administration Agreements](index=23&type=section&id=Investment%20Advisory%20and%20Administration%20Agreements) The company operates under an advisory agreement with fee waivers and a separate administration agreement - An Amended and Restated Investment Advisory Agreement was entered on January 24, 2024, with the Adviser agreeing to waive the base management fee in excess of **0.75%** and the incentive fee in excess of **15%** for one year[24](index=24&type=chunk)[95](index=95&type=chunk)[105](index=105&type=chunk) - The base management fee is **1.0% of average gross assets** (excluding cash)[95](index=95&type=chunk) - The incentive fee has two parts: an income-based fee subject to a **1.5% quarterly hurdle rate** and a cumulative three-year lookback, and a capital gains fee[97](index=97&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) - The capital gains incentive fee is **17.5%** of cumulative realized capital gains over cumulative realized losses and unrealized depreciation[110](index=110&type=chunk) - The Administrator, an affiliate of Morgan Stanley, provides administrative services, and the Company reimburses it for the allocable portion of expenses, including the cost of the **CFO and CCO**[30](index=30&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) [Regulation](index=39&type=section&id=Regulation) The company is subject to BDC, RIC, and BHCA regulations governing its investments, leverage, and distributions - As a BDC, the company must invest at least **70% of its assets** in "qualifying assets," primarily securities of U.S. private or small public companies[142](index=142&type=chunk) - The company is subject to a minimum asset coverage ratio of **150%**, allowing it to incur debt and issue senior securities up to two times its net asset value[149](index=149&type=chunk) - Due to its affiliation with Morgan Stanley, a Bank Holding Company (BHC), the company is subject to certain provisions of the **Bank Holding Company Act (BHCA)** and the **Volcker Rule**, which may limit its activities[164](index=164&type=chunk)[168](index=168&type=chunk)[170](index=170&type=chunk) - To maintain its RIC status for tax purposes, the company must distribute at least **90% of its investment company taxable income** annually[180](index=180&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from its BDC structure, investment portfolio, market fluctuations, and adviser relationship - **Business & Structure Risks:** Dependence on the Adviser, significant potential conflicts of interest with Morgan Stanley affiliates, and operating in a highly competitive market for investment opportunities[215](index=215&type=chunk)[224](index=224&type=chunk)[245](index=245&type=chunk) - **Investment Risks:** The majority of investments are in illiquid, non-rated, below-investment-grade debt, which carries a higher risk of default, and approximately **24% of the portfolio was in "covenant-lite" loans** as of Dec 31, 2023[301](index=301&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) - **Leverage & Interest Rate Risks:** The use of leverage magnifies potential gains and losses, and changes in interest rates affect net investment income as most assets and liabilities are floating-rate[209](index=209&type=chunk)[256](index=256&type=chunk) - **Market & Stock Risks:** The market price of the company's common stock may be volatile and trade at a discount to its net asset value (NAV), and distributions may not be sustained[346](index=346&type=chunk)[349](index=349&type=chunk) - **General Risks:** The company is exposed to cybersecurity threats, potential litigation, and the impact of economic uncertainty, geopolitical events, and regulatory changes[389](index=389&type=chunk)[393](index=393&type=chunk)[402](index=402&type=chunk) [Cybersecurity](index=105&type=section&id=Item%201C.%20Cybersecurity) Cybersecurity risk is managed through Morgan Stanley's enterprise-level program with no material threats identified in 2023 - The company relies on **Morgan Stanley's enterprise-level Cybersecurity Program** to manage its cybersecurity risks, including threat intelligence, incident response, and third-party vendor risk management[427](index=427&type=chunk)[428](index=428&type=chunk)[430](index=430&type=chunk) - Governance includes oversight from the company's Board, its CCO, and experienced senior officers at Morgan Stanley, including a **CIO and CISO**[433](index=433&type=chunk)[435](index=435&type=chunk)[437](index=437&type=chunk) - During the fiscal year ended December 31, 2023, the company **did not identify any cybersecurity risks or incidents** that it believes have materially affected or are reasonably likely to materially affect its business[438](index=438&type=chunk) [Part II](index=108&type=section&id=Part%20II) [Market for Common Equity and Distributions](index=108&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, with plans for quarterly distributions, a DRIP, and a share repurchase program - The company's common stock began trading on the NYSE on January 24, 2024, under the symbol **"MSDL"**[442](index=442&type=chunk) Distributions Declared (Year Ended Dec 31, 2023) | Date Declared | Per Share Amount | Total Amount (in thousands) | | :--- | :--- | :--- | | March 28, 2023 | $0.50 | $35,377 | | June 27, 2023 | $0.57 | $40,735 | | September 26, 2023 | $0.60 | $43,211 | | December 28, 2023 | $0.60 | $49,968 | | **Total** | **$2.27** | **$169,291** | - Effective January 26, 2024, the company adopted an **"opt-out" Dividend Reinvestment Plan (DRIP)**, automatically reinvesting distributions unless a stockholder elects to receive cash[448](index=448&type=chunk)[498](index=498&type=chunk) - A share repurchase plan of up to **$100 million** was approved to buy back common stock at prices below NAV, set to commence on March 26, 2024[88](index=88&type=chunk)[351](index=351&type=chunk)[506](index=506&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=112&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2023 saw higher investment income and a significant increase in net assets, driven by portfolio growth and market gains [Results of Operations](index=117&type=section&id=Results%20of%20Operations) Operations in 2023 saw significantly higher investment income and a positive shift in unrealized gains Consolidated Results of Operations (in thousands) | | For the Year Ended Dec 31, 2023 | For the Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total investment income | $367,738 | $230,593 | | Net expenses | $168,158 | $102,249 | | Net investment income | $199,580 | $128,344 | | Net change in unrealized appreciation (depreciation) | $32,835 | $(80,005) | | **Net increase in net assets from operations** | **$231,014** | **$48,542** | - The increase in total investment income was primarily driven by the deployment of capital into a larger portfolio and the impact of **rising SOFR rates** on floating-rate debt investments[481](index=481&type=chunk) - The increase in expenses was mainly due to higher interest and financing expenses, which rose to **$112.9 million in 2023** from $67.2 million in 2022, a result of higher average borrowings and increased reference rates[484](index=484&type=chunk) - The significant swing from net unrealized depreciation of $80.0 million in 2022 to net unrealized appreciation of **$32.8 million in 2023** was primarily due to changes in credit spreads[489](index=489&type=chunk) [Liquidity and Capital Resources](index=119&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity through credit facilities and has a strong asset coverage ratio - As of December 31, 2023, the company had **$69.7 million in cash** and approximately **$917.5 million of combined availability** under its credit facilities, sufficient to meet its $295.0 million in unfunded commitments[492](index=492&type=chunk)[721](index=721&type=chunk) Debt Obligations as of December 31, 2023 (in thousands) | Facility | Aggregate Committed | Outstanding Principal | | :--- | :--- | :--- | | BNP Funding Facility | $600,000 | $282,000 | | Truist Credit Facility | $1,120,000 | $520,263 | | 2027 Notes (4.50%) | $425,000 | $425,000 | | 2025 Notes (7.55%) | $275,000 | $275,000 | | **Total** | **$2,420,000** | **$1,502,263** | - In October 2023, the company made its final capital call of **$220.2 million**, fully funding all capital commitments from its private placement investors[493](index=493&type=chunk) - The company's asset coverage ratio improved to **214.6%** as of December 31, 2023, from 191.2% a year prior, remaining well above the 150% regulatory requirement[86](index=86&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=122&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, with additional exposure to valuation and broader economic risks - The company's primary market risk is interest rate risk, as **99.9% of its debt portfolio** carried a floating interest rate as of December 31, 2023[514](index=514&type=chunk)[515](index=515&type=chunk) Annualized Impact of Hypothetical Interest Rate Changes on Net Income (as of Dec 31, 2023) | Basis Point Change | Net Income Impact (in thousands) | | :--- | :--- | | +300 bps | $71,968 | | +200 bps | $47,979 | | +100 bps | $23,989 | | -100 bps | $(23,989) | | -200 bps | $(47,979) | | -300 bps | $(71,968) | - The company faces valuation risk as most of its investments are illiquid and valued in good faith using **unobservable (Level 3) inputs**, which requires significant judgment[512](index=512&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=124&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited financial statements for FY2023, showing a 16.40% total return and a NAV per share of $20.67 Financial Highlights (Per Share) | Per Share Data | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Net asset value, beginning of period | $19.81 | $20.91 | | Net investment income (loss) | $2.67 | $2.08 | | Net increase (decrease) in net assets | $3.13 | $0.82 | | Dividends declared | $(2.27) | $(1.92) | | **Net asset value, end of period** | **$20.67** | **$19.81** | Key Ratios and Supplemental Data | Ratio/Data | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total return based on net asset value | 16.40% | 3.99% | | Ratio of net expenses to average net assets | 11.14% | 7.99% | | Asset coverage ratio | 214.57% | 191.19% | | Portfolio turnover rate | 11.98% | 14.87% | - The independent auditor, Deloitte & Touche LLP, issued an **unqualified opinion** on the consolidated financial statements and financial highlights[521](index=521&type=chunk) [Controls and Procedures](index=196&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective as of year-end 2023 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2023[750](index=750&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2023, based on the 2013 COSO framework[754](index=754&type=chunk) - **No material changes** were made to the company's internal control over financial reporting during the fourth quarter of 2023[756](index=756&type=chunk) [Part III](index=196&type=section&id=Part%20III) [Directors, Executive Compensation, and Corporate Governance](index=196&type=section&id=Items%2010-14) Key governance and compensation details are incorporated by reference from the company's forthcoming 2024 Proxy Statement - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, and principal accountant fees is **incorporated by reference** from the forthcoming 2024 Proxy Statement[759](index=759&type=chunk)[761](index=761&type=chunk)[762](index=762&type=chunk) [Part IV](index=198&type=section&id=Part%20IV) [Exhibits and Financial Statement Schedules](index=198&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the report, including key corporate and operational agreements - The financial statements are included in Item 8 of the report, and **no separate financial statement schedules are filed**[766](index=766&type=chunk)[767](index=767&type=chunk) - The exhibits include key corporate and operational documents, such as the **Amended and Restated Investment Advisory Agreement**, Administration Agreement, and agreements governing the company's various debt facilities[769](index=769&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ______________________________________________________________________________________________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 814-01332 Morgan Stanley Direct Lending Fund For the Quarterly Period Ended September 30, 2023 OR TRANSITION REPORT PURSUANT TO SECTION ...

Investment Portfolio - As of June 30, 2023, the company had investments in 159 portfolio companies across 29 industries, with approximately 100% of its debt portfolio invested in floating interest rate debt[244] - Approximately 98.5% of the company's debt investments were in loans and other debt issued by middle-market companies backed by private equity sponsors, with about 79.0% supporting leveraged buyouts (LBOs) and acquisitions[245] - The weighted average total yield of investments in debt securities at amortized cost was 10.9% as of December 31, 2022[246] - The investment portfolio at fair value increased from $2.681 billion as of June 30, 2022 to $2.984 billion as of June 30, 2023[257] - Weighted average yield on debt investments at cost increased from 8.2% at June 30, 2022 to 11.8% at June 30, 2023[257] - Approximately 77.0% of debt investments had one or more financial covenants[248] - No realized losses due to loan defaults or credit deterioration since January 31, 2020, through June 30, 2023[248] - The average position size of investments was approximately $18.8 million, representing 0.6% of total fair value[248] Financial Performance - Total investment income increased from $49.994 million for the three months ended June 30, 2022 to $88.894 million for the three months ended June 30, 2023[256] - Net investment income for the three months ended June 30, 2023 was $47.795 million, compared to $29.409 million for the same period in 2022[255] - Total expenses for the three months ended June 30, 2023 were $46.683 million, compared to $25.487 million for the same period in 2022[259] - Interest expense for the three months ended June 30, 2023, was $27,907, an increase from $13,781 in the same period of 2022, primarily due to higher average borrowings and increased reference rates[260] - The income-based incentive fee for the three months ended June 30, 2023, was $10,138, compared to $5,879 in the same period of 2022, indicating a rise in pre-incentive fee net investment income[264] Capital Structure and Liquidity - As of June 30, 2023, the company had approximately $52.9 million in cash and $230.0 million and $626.5 million available under credit facilities, indicating strong liquidity[273] - Total investor capital commitments to purchase shares of Common Stock were approximately $1,629.4 million as of June 30, 2023, with no capital calls issued during the six months ended June 30, 2023[274] - The outstanding debt obligations as of June 30, 2023, totaled $1,562,259, with an unused portion of $856,491, indicating a robust capital structure[280] Management and Operations - The company is externally managed by an adviser that is a wholly owned subsidiary of Morgan Stanley, but it is not a subsidiary of Morgan Stanley[232] - The company monitors the evolving market environment to adjust its operations as necessary in response to external factors[237] - The company expects its general and administrative expenses to be stable or decline as a percentage of total assets during periods of asset growth[243] - The company has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940[232] Market Conditions and Risks - The current inflationary environment and potential global recession could impact the company's portfolio companies and financial condition[237] - A hypothetical increase of 300 basis points in interest rates would result in an annualized net income increase of $65.191 million, while a decrease of 300 basis points would lead to a net income decrease of $65.191 million[288] - The company has not engaged in interest rate hedging activities during the periods covered by the report[288] Legal and Compliance - There have been no changes in internal control over financial reporting that materially affected the company for the three months ended June 30, 2023[290] - The company is not currently subject to any material legal proceedings, nor is any material proceeding threatened against it[291] Recent Investments - As of August 9, 2023, the company closed approximately $71.6 million in new/add-on investments, with $71.5 million in first lien senior secured loans[281] - The company remains focused on investing in companies with strong management, substantial free cash flow, and sustainable business models despite market volatility[281]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ______________________________________________________________________________________________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2023 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 Number 814-01332 Morgan Stanley Direct Le ...

Capital Management - As of March 1, 2023, the MS Private Credit platform managed committed capital of approximately $14.9 billion at fair value[24] - Direct Lending strategy managed approximately $13.0 billion in committed capital as of March 1, 2023[26] - Opportunistic Credit managed approximately $1.9 billion in committed capital as of March 1, 2023[26] - As of December 31, 2022, IM managed approximately $1.3 trillion in assets under management across various business lines[28] Investment Strategy - The Company's investment strategy focuses on U.S. middle-market companies with annual EBITDA of $15 million to $200 million[37] - The company aims to maintain a debt-to-equity ratio of 1.0x – 1.25x, with a cap of 2.0x[35] - The company benefits from a differentiated direct origination platform, leveraging relationships with middle-market private equity firms and companies[54] - The Adviser employs a rigorous due diligence process, including financial analysis, ESG considerations, and management background checks[61] Portfolio Composition - As of December 31, 2022, the company had investments in 150 portfolio companies across 30 industries, with a total investment portfolio at fair value of $2,873,588,000[78] - Approximately 100% of the debt portfolio was invested in floating interest rate debt, with a weighted average total yield of 10.9%[78] - The composition of the investment portfolio at fair value included 93.8% in First Lien Debt, 4.5% in Second Lien Debt, and 1.7% in Other Securities[79] - The geographic composition of investments shows 95.6% in the United States, with a total cost of $2,809,482,000[80] Financial Health - The asset coverage ratio as of December 31, 2022, was 191.2%, indicating strong financial health[82] - The company anticipates generating cash from operations, including interest received on debt investments, and plans to distribute substantially all net income to stockholders[81] Fees and Incentives - The base management fee is calculated at an annual rate of 1.0% of average gross assets, with a waiver of excess fees prior to an Exchange Listing[85] - The incentive fee structure includes no fees if pre-incentive fee net investment income does not exceed a hurdle rate of 1.50%[90] - The incentive fee on capital gains is calculated at 17.5% of realized capital gains, net of losses, with cumulative capital gains considered[94] Regulatory Compliance - The company is subject to regulatory restrictions on co-investments and joint transactions with affiliates, which may limit investment opportunities[72] - The SEC has granted an exemptive order allowing the company to co-invest with affiliated accounts under certain conditions, ensuring fair terms[73] - The company must distribute most of its income to qualify as a RIC, which affects its ability to raise additional capital[115] - The company operates under the constraints of being a BDC, which limits operational flexibility and investment strategies[113] Risk Management - The Adviser has developed risk policies to regularly assess the risk profile of each debt investment, enhancing proactive management[66] - Investments are classified into four risk categories, with Category 1 indicating the least risk and Category 4 indicating substantial risk of loss[67] - The company is exposed to risks from the current interest rate environment, with a significant portion of its debt portfolio (approximately 56%) linked to floating rates based on LIBOR[190] Conflicts of Interest - The Adviser may face conflicts of interest due to its affiliation with Morgan Stanley, which could affect the company's investment returns[203] - The company cannot assure that it will replicate the historical investment returns achieved by other Morgan Stanley funds, as market conditions may differ[198] - The Adviser may receive an incentive fee even during periods of net loss, creating potential conflicts of interest[215] Tax Considerations - To maintain RIC status, the company must distribute at least 90% of its investment company taxable income as dividends[156] - The company may incur a 4% nondeductible federal excise tax if it fails to meet the Excise Tax Avoidance Requirement[160] - The company is required to diversify its holdings, ensuring at least 50% of asset value consists of cash and government securities, and no more than 25% is invested in any single issuer[165] Operational Structure - The company does not currently have any employees, with day-to-day operations managed by its Adviser[181] - The company relies heavily on the expertise and network of investment professionals from its Adviser, with no internal management capacity[191]

Investment Portfolio - As of September 30, 2022, the company had investments in 139 portfolio companies across 29 industries, with over 99.9% of its debt portfolio invested in floating interest rate debt[238]. - The company primarily generates revenue from interest income on debt investments, along with income from dividends, capital gains, and various fees[230]. - The company’s investment objective is to achieve attractive risk-adjusted returns primarily through current income and, to a lesser extent, capital appreciation[228]. - As of September 30, 2022, 77% of the company's investments were loans supporting LBOs and acquisitions by private equity sponsors[240]. - The weighted average EBITDA of portfolio companies was approximately $120 million, with a net leverage of 6.1x and a loan-to-value ratio of 45%[242]. - The average position size of investments was approximately $19.8 million, with the top ten portfolio companies representing 22.9% of total fair value[242]. - The company had 139 portfolio companies as of September 30, 2022, compared to 77 as of September 30, 2021[250]. Financial Performance - Total investment income increased from $31.7 million for the three months ended September 30, 2021, to $62.7 million for the same period in 2022, driven by capital deployment[250]. - For the nine months ended September 30, 2022, net investment income was $89.7 million, up from $44.9 million in the same period in 2021[249]. - Net realized gain on investments for the nine months ended September 30, 2022, was $556, compared to $120 for the same period in 2021, reflecting a 363% increase[256]. - The net change in unrealized depreciation on investments for the nine months ended September 30, 2022, was $61,869, compared to an unrealized appreciation of $11,824 in 2021[257]. Debt and Financing - As of September 30, 2022, total outstanding debt obligations amounted to $1,524.6 million, with an unused portion of $984.3 million[265]. - The CIBC Subscription Facility had an outstanding principal of $220.4 million, while the BNP Funding Facility had $322.0 million[265]. - The total aggregate principal of debt obligations increased from $1,975.0 million as of December 31, 2021, to $2,510.0 million as of September 30, 2022[265]. - The company had borrowings denominated in Euros (EUR) amounting to €238 as of September 30, 2022, which was a new development compared to December 31, 2021[265]. Risk Management - The company is exposed to risks from potential disruptions in operations due to economic conditions, including inflationary environments and supply chain interruptions[232]. - Approximately 82% of debt investments had one or more financial covenants, indicating a strong risk management approach[242]. - The company reported no realized losses from loan defaults since inception through September 30, 2022[242]. - A hypothetical increase of 300 basis points in interest rates would result in an annualized net income increase of $59.0 million[274]. - The company emphasizes extensive due diligence in its investment strategy to achieve compelling risk-adjusted returns[266]. Expenses and Distributions - For the three months ended September 30, 2022, net expenses were $28,905, compared to $12,909 for the same period in 2021, representing a 123% increase[252]. - Total expenses for the nine months ended September 30, 2022, were $81,927, up from $36,970 in 2021, indicating a 121% increase[252]. - Total distributions declared for the nine months ended September 30, 2022, amounted to $86,667, with a per share distribution of $1.42[263]. - The company has not accrued any U.S. federal excise tax for the nine months ended September 30, 2022, compared to $5 accrued in 2021[255]. - The company intends to distribute at least 90% of its investment company taxable income to maintain its tax treatment as a RIC[255]. Regulatory Compliance - The company has elected to be regulated as a Business Development Company (BDC) and intends to comply with requirements to qualify as a Regulated Investment Company (RIC)[227]. - As of December 31, 2021, approximately 99.3% of the debt portfolio had an interest rate floor denoted in LIBOR, with a weighted average interest rate floor of approximately 0.9%[239]. - The company is permitted to co-invest with affiliates under certain conditions, ensuring that transactions are fair and consistent with the interests of its stockholders[231]. - The company did not engage in interest rate hedging activities during the periods covered by the report[274]. Capital Commitments - Aggregate capital commitments received as of September 30, 2022, totaled approximately $1,624.0 million, with a one-year extension of the Investment Period until December 23, 2023[261]. - Total shares issued and proceeds received related to capital drawdowns for the nine months ended September 30, 2022, were 7,451,363 shares, amounting to $154.7 million[262]. - Approximately $45.3 million of new/add-on investments were closed or approved from September 30, 2022, to November 8, 2022, with $43.0 million in first lien senior secured loans[266]. Market Focus - The company remains focused on investing in companies with strong management teams and sustainable business models despite market volatility[266]. - The company’s debt investments typically have a stated term of five to eight years and bear interest at a floating rate based on benchmarks like LIBOR or SOFR[229]. - 100% of the income-producing senior secured debt investments were at floating rates as of September 30, 2022[273].