Executive Summary

Solid quarter: Investment income rose 5% q/q to $22.23M and 28% y/y, with Net Investment Income (NII) up to $12.52M; EPS (net increase in net assets per share) improved to $0.32 vs $0.27 in Q2 and $(0.18) in Q3’15 .
NAV/share increased to $7.92 from $7.77 in Q2; management raised the public offering price three times in Q4-to-date, signaling higher estimated NAV (to $9.10 as of Dec 15 effective date) .
Distribution coverage held: NII/share was $0.18 vs $0.17 distribution; board kept the daily dividend rate unchanged for Oct–Dec ($0.00191781 per share/day) .
Risks steady: six debt investments (five companies; four energy-related) on non-accrual as of quarter-end; realized losses ($1.95M) persisted while unrealized appreciation rebounded ($11.78M) .

What Went Well and What Went Wrong

What Went Well
- Revenue/NII momentum: Total investment income up to $22.23M (+4.9% q/q, +28% y/y); NII rose to $12.52M (+4% q/q, +31% y/y) .
- NAV trend positive and pricing raised: NAV/share increased to $7.92 (from $7.77), and the company raised its public offering price to $9.00 (Oct 20), $9.05 (Nov 25), and $9.10 (Dec 15) as estimated NAV increased .
- Portfolio marks improved: $11.78M net unrealized appreciation in Q3’16 vs $(19.32)M in Q3’15; management noted intent to “appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook” .
What Went Wrong
- Credit headwinds persist: Six debt investments in five portfolio companies (four in oil & gas) on non-accrual; three debt investments in two companies were >90 days past due .
- Realized losses: Q3 realized losses of $(1.95)M (vs $(0.02)M in Q3’15) reflect continued credit losses, particularly in challenged sectors .
- Ongoing support/waivers: Administrative services expenses continued to be waived ($0.53M in Q3; $1.6M YTD), and for Q4 management added a conditional income incentive fee waiver, highlighting the need to support distributable earnings and operating ratios .

Financial Results

Metric	Q3 2015	Q1 2016	Q2 2016	Q3 2016
Investment Income ($M)	$17.33	$21.26	$21.20	$22.23
Net Investment Income ($M)	$9.54	$12.24	$12.05	$12.52
NII per Share ($)	$0.18	$0.19	$0.18	$0.18
EPS (Net Inc. in Net Assets per Share) ($)	$(0.18)	$(0.04)	$0.27	$0.32
Distributions Declared/Share ($)	$0.17	$0.17	$0.18	$0.17
NAV per Share ($)	$8.35	$7.67	$7.77	$7.92

Segment/asset mix (by fair value)

Mix (% of FV)	Q1 2016	Q2 2016	Q3 2016
First Lien Secured Debt	78.4%	77.9%	78.3%
Second Lien Secured Debt	16.2%	15.2%	14.8%
Unsecured Debt	0.1%	1.1%	1.1%
Equity Investments	5.1%	5.5%	5.6%
Equity Warrants	0.2%	0.3%	0.2%

KPIs (Q3 2016 unless noted)

Weighted avg effective annual yield: ~8.5% (Q3; vs 8.4% Q2; 8.2% Q1) .
Portfolio FV: $932.60M; Cost basis $970.99M .
Non-accruals: six debt investments in five companies (four in oil & gas) .
Borrowings: Capital One $60.0M outstanding/$65.0M available; Deutsche Bank $325.0M outstanding/$60.0M available .
Daily distribution rate for Oct–Dec 2016: $0.00191781/share/day .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Public offering price/share	Effective Oct 20, 2016	$8.90	$9.00	Raised
Public offering price/share	Effective Nov 25, 2016	$9.00	$9.05	Raised
Public offering price/share	Effective Dec 15, 2016	$9.05	$9.10	Raised
Regular cash distributions	Oct–Dec 2016	$0.00191781/day (Jul–Sep)	$0.00191781/day	Maintained
Income incentive fee waiver	Q4 2016	N/A	Conditional waiver in place	New support

Earnings Call Themes & Trends

(No earnings call transcript available for Q3 2016 in our document set.)

Topic	Previous Mentions (Q1 & Q2 2016)	Current Period (Q3 2016)	Trend
Credit/non‑accruals	Q1: 3 debt investments on non‑accrual (2 companies) ; Q2: 6 debt investments (5 companies; 2 >90 days past due) incl. energy	6 debt investments (5 companies; four in oil & gas) on non‑accrual; 2 investments >90 days past due	Deteriorated in Q2; stable in Q3
Portfolio yield	8.2% (Q1)	8.4% (Q2)	8.5% (Q3)
Distributions & coverage	Q1 dist: $0.17; NII/share $0.19	Q2 dist: $0.18; NII/share $0.18	Q3 dist: $0.17; NII/share $0.18
Offering/NAV signaling	Price raised Apr/May (to $8.70/$8.80) ; July raise to $8.90	Oct to $9.00; Nov $9.05; Dec $9.10	Successive raises signal higher estimated NAV
Expense support/waivers	Incentive fee waived $0.493M (Q1); admin expenses waived $0.533M (Q1)	No incentive fee waiver (Q2); admin waiver $0.574M (Q2)	Admin waiver $0.529M (Q3); Q4 conditional incentive fee waiver executed

Management Commentary

Strategy/discipline: “We intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook.”
Portfolio construction: “As of September 30, 2016, approximately 79.8% and 15.1% of our total portfolio investments at fair value... were secured by first priority liens and second priority liens...”
Offering update: “On August 11, 2016, the board... authorized the closing of the Company’s continuous public offering... on or about March 31, 2017” (with flexibility to accelerate/continue) .

Q&A Highlights

No Q3 2016 earnings call transcript found; no Q&A highlights available in our document set.

Estimates Context

Wall Street EPS and revenue consensus from S&P Global for Q3 2016 were unavailable for this ticker (SPGI mapping not found), so we cannot provide a results vs. consensus comparison. If needed, we can source estimates manually once mapping is established.

Key Takeaways for Investors

NII and EPS momentum with positive marks: Strong q/q and y/y growth in investment income/NII and a rebound in unrealized gains drove EPS to $0.32; NAV/share rose to $7.92 .
Dividend covered by NII: $0.18 NII/share vs $0.17 distribution supports sustainability near‑term; daily rate held flat into Q4 .
Successive offering price increases signal rising estimated NAV/share; potential support for secondary market pricing where applicable .
Credit remains the swing factor: Non‑accruals steady at elevated levels (energy exposure concentrated); realized losses continue—watch for further migration/resolutions .
Yield tailwinds: Weighted average effective yield ticked up to ~8.5%; supportive for NII if credit losses contained .
Liquidity intact: $125M Capital One revolver ($65M available) and $385M Deutsche Bank facility ($60M available) provide funding flexibility for portfolio activity .
Near‑term: Expect narrative to focus on credit stabilization in challenged sectors, maintaining distribution coverage, and NAV trajectory as reflected in offering price adjustments .

Supporting documents reviewed in full: Q3 2016 10‑Q (financials, MD&A), Q2/Q1 2016 10‑Qs (trend), and 8‑Ks dated Oct 19, Nov 22, and Dec 13, 2016 (offering price updates; Q4 fee waiver). All figures and quotes are sourced as cited above.

MSC INCOME FUND, INC. (MSCF)·Q3 2016 Earnings Summary