What changed in this filing

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Item 1. Business

2022-03-18 compared with 2021-03-19 · 292 added, 223 removed, 640 unchanged (45% of the section changed)

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federal income tax purposes, we have elected to be treated, and intend to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Code.

We are not a subsidiary of or consolidated with Morgan Stanley.

Our investment objective is to achieve attractive risk-adjusted returns via current income and, to a lesser extent, capital appreciation by investing primarily in directly originated senior secured term loans issued by U.S.

middle-market companies backed by financial sponsors.

For the purposes of this Form 10-K, “middle-market companies” refers to companies that, in general, generate annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) in the range of approximately $15 million to $100 million, which we believe is a useful proxy for cash flow.

We intend to achieve our investment objective by investing primarily in directly originated senior secured term loans including first lien senior secured term loans (including unitranche loans) and second lien senior secured term loans, with the balance of our investments expected to be in higher-yielding assets such as mezzanine debt, unsecured debt, equity investments and other opportunistic asset purchases.

We invest primarily in directly originated senior secured term loans including first lien senior secured term loans (including unitranche loans) and second lien senior secured term loans, with the balance of our investments expected to be in higher-yielding assets such as mezzanine debt, unsecured debt, equity investments and other opportunistic asset purchases.

Typical middle-market senior loans may be issued by middle-market companies in the context of leveraged buyouts (“LBOs”), acquisitions, debt refinancings, recapitalizations, and other similar transactions.

We generally expect our debt investments to have a stated term of five to eight years and typically bear interest at a floating rate usually determined on the basis of a benchmark such as the London Inter-bank Offered Rate (“LIBOR”).

We generally expect our debt investments to have a stated term of five to eight years and typically bear interest at a floating rate usually determined on the basis of a benchmark (historically, the London Inter-bank Offered Rate, or LIBOR, and prospectively alternative reference rates including the Secured Overnight Financing Rate, or SOFR).

We generate revenues primarily in the form of interest income from investments we hold.

In addition, we generate income from dividends on any direct equity investments, capital gains on the sale of loans and debt and equity securities, and various other loan origination and other fees, including commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees.

The debt instruments in which we generally invest are typically not initially rated by any rating agency, but we believe that if they were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB–” by Fitch Ratings or lower than “BBB–” by Standard & Poor’s Ratings Services), which under the guidelines established by these entities is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.

In addition, we generate income from dividends on any direct equity investments, capital gains on the sale of loans and debt and equity securities, and various other loan origination and other fees, including commitment, origination, amendment, structuring, syndication or due diligence fees, fees for providing managerial assistance and consulting fees.

The middle-market loans in which we generally invest are typically not rated by any rating agency, but we believe that if they were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB–” by Fitch Ratings or lower than “BBB–” by Standard & Poor’s Ratings Services), which under the guidelines established by these rating agencies is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.

Debt instruments that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.”

Our investment approach is focused on long-term credit performance, risk mitigation and preservation of principal.

Utilizing our proprietary investment approach, we intend to execute on our investment objective by (1) drawing upon Morgan Stanley’s longstanding and deep relationships with middle-market companies, financial sponsors, commercial and investment banks, industry executives and financial intermediaries to provide a strong pipeline of investment opportunities, (2) implementing Morgan Stanley’s rigorous, fundamentals-driven and disciplined investment and risk management process, and (3) accessing Morgan Stanley’s extensive experience in credit and principal investing, credit analysis and structuring.

By leveraging the established origination and underwriting capabilities within the Private Credit platform and targeting an attractive investing area in the U.S.

Utilizing our proprietary investment approach, we intend to execute on our investment objective by (1) drawing upon the Adviser’s and the Firm’s longstanding and deep relationships with middle-market companies, financial sponsors, commercial and investment banks, industry executives and financial intermediaries to provide a strong pipeline of investment opportunities, (2) implementing the Adviser’s rigorous, fundamentals-driven and disciplined investment and risk management process, (3) drawing on the investment committee’s extensive experience in credit and principal investing, credit analysis and structuring, and (4) accessing Morgan Stanley’s global resources.

By leveraging the established origination and underwriting capabilities within the MS Private Credit platform and targeting an attractive investing area in the U.S.

middle-market, we believe we will be able to offer attractive risk-adjusted returns to our investors.

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We remain highly focused on conducting extensive due diligence and leveraging the Morgan Stanley platform.

We continue to seek to invest in companies that are led by strong management teams, generate substantial free cash flow, have leading market positions, benefit from sustainable business models, and are well positioned to perform well despite the impact of Coronavirus.

We believe the current market environment offers opportunities to seek compelling risk adjusted returns.

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See “ —Coronavirus Developments ” below.

On December 23, 2019, we completed our initial closing (“Initial Closing”) of capital commitments to purchase shares of our common stock, par value $0.001 per share (the “Common Stock”), in a private placement pursuant to subscription agreements with investors.

On December 23, 2019, we completed our initial closing (“Initial Closing”) of capital commitments to purchase shares of our common stock in a private placement pursuant to subscription agreements with investors.

Since our Initial Closing, we held additional closings and received aggregate capital commitments to purchase Common Stock.

As of December 31, 2020, total capital commitments was approximately $1,445.8 million.

We may draw down capital commitments to make investments at any time during the Investment Period.

After the end of the Investment Period, we may draw down capital commitments to the extent necessary to:

(a) pay our expenses, including management fees, any amounts that may become due under any borrowings or other financings or similar obligations, any indemnity obligations

and any other liabilities, contingent or otherwise, and/or (b) complete investments or obligations (including guarantees) in any transactions for which we have entered into a letter of intent, memorandum of understanding, written bid letter, written agreement in principle, or binding written agreement as of the end of the Investment Period (including investments that are funded in phases).

As of December 31, 2021, total capital commitments were approximately $1,585.5 million.

We may draw down capital commitments to make investments or pay expenses at any time through December 23, 2022, the third anniversary of the Initial Closing, subject to extension for up to an additional one-year period pursuant to the Adviser’s recommendation with the approval of our board of directors (“Board of Directors”) (such period, including any extensions, the

“Investment Period”).

After the end of the Investment Period, we may draw down remaining capital commitments, if any, to the extent necessary to:

(a) pay our expenses, including management fees, incentive fees and any amounts that may become due under any borrowings or other financings or similar obligations, any indemnity obligations and any other liabilities, contingent or otherwise, and/or (b) complete investments or obligations (including guarantees) in any transactions for which we have entered into a letter of intent, memorandum of understanding, written bid letter, written agreement in principle, or binding written agreement as of the end of the Investment Period (including investments that are funded in phases).

We reserve the right to conduct new or additional offerings of securities in the future.

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The Company’s term is perpetual.

Subject to market conditions and Board approval, we will target a quotation or listing of our Common Stock on a national securities exchange, including an initial public offering (an “Exchange Listing”), within four years from the Initial Closing.

Subject to market conditions and approval of the Board of Directors, we will target a quotation or listing of our Common Stock on a national securities exchange, including an initial public offering (an “Exchange Listing”), within four years from the Initial Closing.

However, if the Company has not consummated a Liquidity Event by the sixth anniversary from Initial Closing, as may be extended by up to an additional one-year period pursuant to the Adviser’s recommendation with the approval of the Board of Directors, the Board of Directors (subject to market conditions and any necessary approvals of our stockholders and applicable requirements of the 1940 Act) will use its commercially reasonable efforts to wind down, sell and/or liquidate and dissolve the Company in an orderly manner.

Morgan Stanley is a global financial services firm whose predecessor companies date back to 1924 and, through its subsidiaries and affiliates, advises, originates, trades, manages and distributes capital for governments, institutions and individuals.

Morgan Stanley maintains a significant market position in each of its business divisions—Institutional Securities (“IS”), Wealth Management (“WM”) and Investment Management (“IM”).

As of December 31, 2020 and December 31, 2019, IM had managed approximately $781 and $552 billion, respectively, in assets under management (“AUM”) across its business lines, which include equity, fixed income, liquidity, real assets and private investment funds.

Included in this AUM is approximately $61 and $54 billion of AUM in IM’s strategies that primarily invest in private markets and private securities as of December 31, 2020 and December 31, 2019, respectively.

Our Adviser, an indirect wholly owned subsidiary of Morgan Stanley, was established in 2007 and serves as the investment adviser for the funds and accounts on the Private Credit platform, including SL Investment Corp., a BDC with a similar investment strategy and investment objective to ours (“SLIC”).

The Private Credit platform includes dedicated strategies targeting different credit products, asset yields and issuer sizes, resulting in a platform that is well positioned to provide scale and flexible financing solutions to borrowers, maximizes deal origination and enhances the ability to generate attractive risk adjusted returns for our investors.

Our Adviser’s investment committee servicing the Company is comprised of ten senior investment professionals of IM and is chaired by our Chief Executive Officer and President, Jeffrey S.

Levin (the “Investment Committee”).

The Investment Committee members have an average of 22+ years of relevant industry experience and have experience investing across multiple credit cycles and different investing environments.

Our Adviser, a wholly owned subsidiary of Morgan Stanley, was established in 2007 and serves as the investment adviser for various funds, accounts and strategies, including the funds and accounts on the MS Private Credit platform, such as other BDCs, each with a similar investment strategy and investment objective to ours (each an “MS BDC” and, together, the “MS BDCs”).

The MS Private Credit platform was launched in 2010 and includes dedicated strategies targeting different credit products, asset yields and issuer sizes, resulting in a platform that we believe is well positioned to provide scale and flexible financing solutions to borrowers, maximizes deal origination and enhances the ability to generate attractive risk adjusted returns for our investors.

Our Adviser’s investment committee (the “Investment Committee”) servicing the Company is comprised of ten senior investment professionals of IM and is chaired by Jeffrey S.

Levin, our Chief Executive Officer and President and a member of our Board of Directors.

The Investment Committee members have an average of over 21 years of relevant industry experience and have experience investing across multiple credit cycles and different investing environments.

All investment decisions are reviewed and approved by the Investment Committee, which has principal responsibility for approving new investments and overseeing the management of existing investments.

Our Adviser is served by experienced investment professionals (the “Investment Team”) within the Private Credit platform.

Our Adviser is served by experienced investment professionals (the “Investment Team”) within the MS Private Credit platform.

The Investment Team is responsible for origination, due diligence, underwriting, structuring and monitoring each investment throughout its life cycle.

The Private Credit platform is supported by numerous professionals in legal, compliance, risk management, finance, accounting and tax who help support the platform by providing guidance on our operations.

Private Credit's primary areas of focus include:

• Middle-Market Lending.

Investments made primarily in first lien senior secured and second lien senior secured loans, mezzanine notes, unsecured debt, preferred stock, and common stock, issued by middle-market companies, typically with annual EBITDA of $15 million to $100 million.

The Adviser’s principal executive offices are located at 1585 Broadway, 39th Floor, New York, New York 10036.

The MS Private Credit platform is supported by numerous professionals in legal, compliance, risk management, finance, accounting and tax who help support the platform by providing guidance on our operations.

MS Private Credit’s primary areas of focus include:

• Direct Lending.

Investments made primarily in directly originated first lien senior secured and second lien senior secured loans, mezzanine notes, unsecured debt, preferred stock, and common stock issued by U.S.

middle-market companies owned by private equity firms, typically, although not always, with annual EBITDA of up to $100 million.

As of December 31, 2021, Direct Lending managed approximately $8.6 billion in investable capital.

Investable capital is calculated as total capital raised and actual or target leverage within each business line.

• Opportunistic Credit.

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Other potential investments included in this category may include purchasing public or private securities in the open market at deep discounts to their fundamental value.

• Growth Credit .

Investments for privately-held small to medium-sized companies in high-growth sectors.

Investments composed primarily of relatively short-dated maturity loans and securities, including convertible notes, substantially all of which include some form of an equity return component.

The Adviser’s principal executive offices are located at 1585 Broadway, 39th Floor, New York, NY 10036.

Investments are made primarily in first lien senior secured and second lien senior secured loans, mezzanine notes, unsecured debt, preferred stock and common stock issued by U.S.

middle-market companies, typically, although not always, with annual EBITDA of $10 million to $100+ million.

As of January 1, 2022, Opportunistic Credit managed approximately $2.6 billion in investable capital.

Morgan Stanley, the parent of our Adviser, is a global financial services firm whose predecessor companies date back to 1924 and, through its subsidiaries and affiliates, advises, originates, trades, manages and distributes capital for governments, institutions and individuals.

Morgan Stanley maintains a significant market position in each of its business divisions—Institutional Securities (“ISG”), Wealth Management (“WM”) and IM.

We are not a subsidiary of or consolidated with Morgan Stanley and Morgan Stanley does not guarantee any of our financial obligations.

As of December 31, 2021, IM managed approximately $1.6 trillion in assets under management across its business lines, which include equity, fixed income, liquidity, real assets and private investment funds.

The Administrator

MS Private Credit Administrative Services LLC (f/k/a MS BDC Administrative Services LLC), our Administrator and an indirect wholly owned subsidiary of Morgan Stanley, provides the administrative services necessary for us to operate.

Our Administrator, a wholly owned subsidiary of Morgan Stanley, provides the administrative services necessary for us to operate.

We do not currently have any employees.

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See “ Item 1.

Business — Administration Agreement ” below for a discussion of the expenses (subject to the review and approval of our independent directors) that we expect to reimburse to the Administrator.

Business — Administration Agreement ” below for a discussion of the expenses (subject to the review and approval of our independent directors) that we reimburse to the Administrator.

Coronavirus Developments

The effect on the U.S.

and global economy of the ongoing Coronavirus pandemic, uncertainty relating to more contagious strains of the Coronavirus that have emerged in the United States and globally, the vaccine rollout, the length of economic recovery, policies of the new presidential administration and tension with China are some of factors that have created stress on the market and could affect our portfolio companies.

Despite these factors, we believe we are very well positioned to manage the current environment.

Our portfolio was constructed almost entirely “post-COVID-19” market dislocation and we have a considerable amount of available capital that can be prudently invested in the current credit environment.

Capital preservation and principal protection are among the key tenets of what we seek to achieve with our investment strategy.

We will deploy capital as we find what we believe are compelling investment opportunities, and we intend to invest our capital at any time during our Initial Closing, through the third anniversary of the Initial Closing, subject to extension for up to an additional one-year period pursuant to the Adviser's recommendation with the approval of the Board of Directors (the “Investment Period”), providing our investors with vintage year diversification.

We cannot predict the full impact of the Coronavirus pandemic, including its duration in the United States and worldwide and the magnitude of the economic impact, including with respect to the travel restrictions, business closures and other quarantine measures that may be imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S.

governmental authorities, especially in light of the uncertainty surrounding more contagious strains of the virus that have emerged in the United States and globally and its impact on the vaccine rollout and the length of economic recovery.

As such, the extent to which Coronavirus and/or other health pandemics may negatively affect our and our portfolio companies’ operating results and financial condition, or the duration of any potential business or supply-chain disruption for us, our Investment Adviser and/or our portfolio companies, is uncertain.

Depending on the duration and extent of the disruption to the operations of our portfolio companies, certain portfolio companies may experience financial distress and possibly default on their financial obligations to us and their other capital providers.

Some of our portfolio companies may significantly curtail business operations, furlough or lay off employees and terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a permanent basis.

These developments would likely result in a decrease in the value of our investment in any such portfolio company.

We are also subject to financial risks, including changes in market interest rates, including as a result of the Coronavirus pandemic.

As of December 31, 2020, all of our first lien and second lien debt investments at fair value were at floating rates, representing approximately 99.5% of our portfolio, based on LIBOR, and many of which are subject to certain floors.

In addition, both the CIBC Subscription Facility and the BNP Funding Facility (as defined below) have floating rate interest provisions.

In connection with the Coronavirus pandemic, the U.S.

Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased.

A prolonged reduction in interest rates could reduce our expected gross investment income and could result in a decrease in our expected net investment income if decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses, including with respect to our income based incentive fee, or a decrease in the interest rate of any floating interest rate liabilities we may have that are tied to LIBOR.

See “Item 7A.

and Qualitative Disclosures About Market Risk—Interest Rate Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

We will continue to monitor the rapidly evolving situation relating to the Coronavirus pandemic and guidance from U.S.

and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations.

and global economy of the ongoing Coronavirus pandemic, uncertainty relating to new variants of the Coronavirus that have emerged in the United States and globally, vaccine hesitancy and efficacy, the length of economic recovery, government policies and actions taken or to be taken in response to the pandemic have created stress on the market and could affect our portfolio companies.

In addition, government spending and disruptions in supply chains in the United States and elsewhere in response to the Coronavirus pandemic and otherwise, in conjunction with other factors, including those described above, have led and could continue to lead to inflationary economic environments that could affect our portfolio companies, our financial condition and our results of operations.

We will continue to monitor the evolving situation relating to the Coronavirus pandemic and guidance from U.S.

and international authorities, including federal, state and local public health authorities.

In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation.

As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of Coronavirus on our financial condition, results of operations or cash flows in the future.

Despite these factors, we believe we and our portfolio are well positioned to manage the current environment, and we and our Adviser continue to be fully operational.

Investment Strategy

Our primary investment strategy is to make privately negotiated senior secured credit investments in U.S.

middle-market companies that have leading market positions, enjoy high barriers to entry, such as high start-up costs or other obstacles that prevent new competitors from easily entering the portfolio company's industry or area of business, generate strong and stable free cash flow and are led by a proven management team with strong financial sponsor backing.

middle-market companies that have leading market positions, enjoy high barriers to entry, such as high startup costs or other obstacles that prevent new competitors from easily entering the portfolio company’s industry or area of business, generate strong and stable free cash flow and are led by a proven management team with strong financial sponsor backing.

Our investment approach is focused on long-term credit performance, risk mitigation and preservation of capital.

Our Adviser employs a highly rigorous, fundamentals-driven and disciplined investment process developed and refined by the investment professionals of the Private Credit platform.

Our Adviser employs a highly rigorous, fundamentals-driven and disciplined investment process developed and refined by the investment professionals of the MS Private Credit platform.

The Investment Team works on a particular transaction from origination to close and continues to monitor each investment throughout its life cycle.

We seek to invest primarily in companies backed by leading private equity sponsors with strong track records.

We invest primarily in companies backed by leading private equity sponsors with strong track records.

We believe lending to sponsor-backed companies (versus non-sponsor-backed companies) has many distinct potential advantages including:

• Strong, predictable deal flow given significant private equity committed capital;

• Well-capitalized borrowers, including access to additional capital from sponsors, if needed;

• Well-capitalized borrowers, including potential access to additional capital from sponsors, if needed;

• Access to detailed financial, operational, industry data, and third-party legal and accounting due diligence reports conducted by the sponsor as part of their due diligence;

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• Supplemental diligence beyond the credit analysis of the borrower, given the ability to analyze track records of each private equity firm.

We intend to create and maintain a well-diversified, defensive portfolio of investments focusing on generally avoiding issuer or industry concentration in order to mitigate risk and achieve our investment objective.

We intend to primarily focus on U.S.

We have created what we believe is a defensive portfolio of investments focusing on generally avoiding issuer or industry concentration in order to mitigate risk and achieve our investment objective.

We focus primarily on U.S.

middle-market companies.

However, to the extent that we invest in foreign companies, we intend to do so in accordance with the limitations under the 1940 Act and only in jurisdictions with established legal frameworks and a history of respecting creditor rights, including the United Kingdom and countries that are members of the European Union, as well as Canada, Australia and Japan.

Our investment strategy is predicated on seeking to lend to companies in non-cyclical industry sectors (typically avoiding sectors such as retail, restaurants, energy, alcohol, tobacco, pork manufacturing, gaming and gambling, and pornography) with proven management teams.

However, to the extent that we invest in foreign companies, we intend to do so in accordance with the limitations under the 1940 Act and only in jurisdictions with established legal frameworks and a history of respecting creditor rights, including the United Kingdom (the “U.K.”) and countries that are members of the European Union, as well as Canada, Australia and Japan.

Our investment strategy is predicated on seeking to lend to companies with proven management teams in what we believe to be non-cyclical industry sectors and typically avoiding sectors such as retail, restaurants, energy, alcohol, tobacco, pork manufacturing, gaming and gambling, and pornography.

As of December 31, 2021, the Company’s exposure to these industries, and other businesses that the Adviser believes may be subject to business cycle volatility, was 5.9% of gross investment commitments.

Investment Criteria

In order to achieve our investment objectives, we expect our investment portfolio to consist primarily of directly originated floating-rate first lien senior secured term loans (including unitranche loans), and second lien senior secured term loans of U.S.

In order to achieve our investment objectives, we seek to build an investment portfolio that consists primarily of directly originated floating-rate first lien senior secured term loans (including unitranche loans), and second lien senior secured term loans of U.S.

middle-market companies.

The balance of the investments is expected to be in higher-yielding assets such as mezzanine debt, unsecured debt and equity investments in U.S.

The balance of our investments is expected to be in higher-yielding assets such as mezzanine debt, unsecured debt and equity investments in U.S.

middle-market companies, and other opportunistic asset purchases.

Our debt investments typically have maturities of five to eight years.

We intend to create a well-diversified portfolio of investments in order to mitigate risk and achieve our investment objective.

We expect our target portfolio companies to exhibit some, or all, of the following characteristics at the time of the initial investment:

We seek to create and have created what we believe is a defensive portfolio of investments in order to mitigate risk and achieve our investment objective.

We expect our target portfolio companies to exhibit some, or all, of the following characteristics at the time of the initial investment, although not all of our portfolio companies will meet these criteria:

• EBITDA of $15 - $100 million;

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• Experienced management teams with successful track records.

Once we are fully invested, our investments in a portfolio company are expected to generally comply with the following limits, measured as a percentage of the sum of our aggregate equity commitments and our use of leverage (expected to be 1.0x-1.3x as measured by debt-to-equity, subject to a cap of 2.0x), in each case, at the time the relevant investment is made:

We expect that over the long term and once we are fully invested, our investments will generally comply with the following limits, measured as a percentage of the sum of our aggregate equity commitments and our use of leverage (expected to be 1.0x-1.25x as measured by debt-to-equity, subject to a cap of 2.0x), in each case, at the time the relevant investment is made:

• Typical investment to represent between 1% and 3%;

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• Performing thorough fundamental business and industry due diligence;

• Conducting in-depth due diligence on management teams and sponsors to ensure we are investing in businesses led by experienced professionals;

• Structuring investments focused on providing us with security, covenant protection and current income while ensuring our borrowers have adequate liquidity and flexibility to operate;

• Conducting in-depth due diligence on management teams and sponsors to bolster our position that we are investing in businesses led by experienced professionals;

• Structuring investments focused on providing us with security, covenant protection and current income while seeking to provide our borrowers with adequate liquidity and flexibility to operate;

• Ongoing active management of our portfolio companies through consistent dialogue with management and/or the sponsor, review of financial reporting, monitoring of key performance indicators and evaluation of exit strategies.

Competitive Advantages

We believe we will be able to execute on our investment objective and achieve attractive risk-adjusted returns as a result of our competitive strengths.

Currently, we believe that the Company and SLIC are the only BDCs that, together, serve as the primary middle-market loan investment vehicle (1) within a global investment banking firm, which we believe represents a significant differentiating advantage for us.

The Firm has deep relationships with many middle-market private equity firms and middle-market companies that provide significant investment opportunity.

We, together with SLIC, are currently intended to be the primary direct investment pool of capital (1) across the Firm for senior secured middle-market loans.

We intend to capitalize on the significant number of lending opportunities with middle-market companies that the Firm has longstanding relationships with.

We believe the large volume of untapped potential lending opportunities and scale of the Morgan Stanley origination and due diligence platform will allow us to increase investment selectivity and potentially enhance risk-adjusted returns.

(1) Inclusive of the Affiliated Investment Accounts (as defined below) on the Private Credit platform together with SLIC and one or more future Morgan Stanley sponsored direct lending BDCs or funds or accounts with whom we co-invest in accordance with the conditions to the exemptive relief described under “ Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview ”.

We believe that we will be well positioned to manage the current economic environment.

We believe that the current market environment offers opportunities to seek compelling risk-adjusted returns.

In addition, we believe that capital to be raised can be prudently invested to take advantage of the favorable conditions and we expect will provide better risk adjusted returns than before the market dislocation caused by Coronavirus.

We believe we are able to execute on our investment objective and achieve attractive risk-adjusted returns as a result of our competitive strengths.

Currently, we believe that the MS BDCs, including the Company, are the only BDC platform to serve as the primary middle-market loan investment vehicle within a global investment banking firm, which we believe represents a significant differentiating advantage for us.

In addition to the Adviser’s relationships with middle-market private equity firms, the Firm has relationships with many middle-market private equity firms and middle-market companies which may provide significant investment opportunities.

MS Private Credit is the primary private credit investment management platform of the Firm.

The Adviser capitalizes on the significant number of lending opportunities with middle-market companies through relationships established by the Firm and otherwise.

We believe the large volume of potential lending opportunities and scale of the Morgan Stanley origination and due diligence platform allows us to increase investment selectivity and potentially enhance risk-adjusted returns.

Ability to Leverage Morgan Stanley’s Relationships and Network

Morgan Stanley has invested heavily in its people and in its infrastructure in order to develop a substantial network of close business relationships with thousands of individuals, companies, institutions and governments in the United States and around the world.

We believe that the Firm's market presence and network of relationships will be an important source of investment opportunities for us and constitutes a distinct and sustainable competitive advantage relative to other BDCs.

Additionally, we believe that we will be able to potentially assist our portfolio companies through our introductions and referrals to the investment banking and capital markets services of the Firm.

We utilize Morgan Stanley’s global resources throughout the life cycle of each investment.

The investment professionals of the Adviser consult with teams across IM, IS (and its business units, Investment Banking, Sales and Trading, Commodities and Equity and Fixed Income Research) and WM, subject in all cases to applicable regulations, information barriers, confidentiality provisions and policies and procedures, to assess potential investments and determine the investment opportunities to which we should devote substantial time and resources.

Upon the consummation of a transaction, our Adviser seeks to leverage Morgan Stanley’s capabilities to effectively monitor each portfolio company investment.

We believe the expertise, infrastructure, track record, relationships and institutional knowledge of Morgan Stanley provide a strong platform for successful private credit investing, including significant due diligence advantages.

In addition, our Adviser formed an advisory council (“Advisory Council”) to facilitate optimal coordination with the various business units of the Firm so as to seek to ensure all relevant resources are fully utilized in executing our investment strategy.

Subject in all cases to applicable regulations, information barriers, confidentiality provisions and policies and procedures, the Advisory Council is intended to provide us with insight into current market trends, relative valuation of different market segments, capital supply/demand dynamics, recent publicly available transactions, competitive landscape, macro-economic factors and outlook, political environment, credit markets developments, public equity market activity, and perspective of institutional investors.

The Advisory Council includes senior professionals representing the three divisions across the Morgan Stanley organization.

We believe the Advisory Council should provide us with invaluable insights beneficial to our investment origination, due diligence and monitoring processes and provide us with what we believe to be a competitive advantage.

Morgan Stanley has a substantial network of business relationships with individuals, companies, institutions and governments in the United States and around the world which we believe is a potential source of investment opportunities for us and differentiates us relative to other BDCs.

Additionally, we believe that this network may potentially assist our portfolio companies through our efforts to make introductions and referrals to the investment banking and capital markets services of the Firm.

Our Adviser utilizes Morgan Stanley’s global resources throughout the life cycle of each investment, subject to its internal policies and procedures and applicable law, rules and regulations.

The investment professionals of the Adviser consult with teams across IM, ISG (and its business units, Investment Banking, Sales and Trading, Commodities and Equity and Fixed Income Research) and WM, subject to, in all cases, applicable law, rules and regulations, information barriers, confidentiality provisions and policies and procedures, to assess potential investments and determine the investment opportunities to which we should devote substantial time and resources.

Upon the consummation of a transaction, our Adviser monitors each portfolio company investment.

We believe that we benefit, where appropriate, from the expertise, infrastructure, track record, relationships and institutional knowledge of Morgan Stanley.

Access to certain parts of Morgan Stanley may be limited in certain instances by a number of factors, including third-party confidentiality obligations and information barriers established by Morgan Stanley in order to manage compliance with applicable law and potential conflicts of interest and regulatory restrictions, including without limitation joint transaction restrictions pursuant to the 1940 Act and internal policies and procedures.

The investment sources described above are not necessarily indicative of all sources that the Adviser may utilize in sourcing investments for us.

There can be no assurance that the Adviser will be able to source investments from any one or more parts of the Morgan Stanley network, implement our strategy, achieve our investment objectives, find investments that fit its investment criteria or avoid substantial losses.

Highly Differentiated Deal Sourcing Advantages

We believe the relationships that the Adviser’s investment professionals maintain with sponsors, commercial and investment banks, industry executives and financial intermediaries provides a strong pipeline of proprietary investment opportunities.

However, unlike many other competing alternative lending strategies, our Adviser operates within a global financial institution.

However, unlike many other competing alternative lending strategies, our Adviser operates within a global financial institution with multiple groups within the Firm.

We expect the broader Morgan Stanley platform to be a source of potential lending opportunities.

We believe this position within the Firm is a key factor that differentiates us and constitutes a distinct and sustainable competitive advantage relative to other private credit funds and BDCs.

this position within the Firm is a key factor that differentiates us and constitutes a meaningful competitive advantage relative to other private credit funds and BDCs.

Distinctive Approach to Credit Investing and Due Diligence

We believe that our Adviser utilizes an investment approach that is differentiated in the industry.

In addition to leveraging the Morgan Stanley resources described above, our Adviser employs a highly rigorous, fundamentals driven and disciplined investment process which has been developed at Morgan Stanley over its decades of investing experience.

Our Adviser employs a highly rigorous, fundamentals-driven and disciplined investment process which has been developed utilizing Morgan Stanley’s extensive investing experience.

The Adviser generally seeks to invest in companies that have leading, defensible market positions, generate strong and stable free cash flow, and have high barriers to entry, highly capable management teams and strong financial sponsor ownership.

We believe that our Adviser’s investment approach coupled with our portfolio construction strategy, flexible capital, and focus on financial covenant protection, differentiates us from our competitors.

(2) Access to certain parts of Morgan Stanley may be limited in certain instances by a number of factors, including third party confidentiality obligations and information barriers established by Morgan Stanley in order to manage potential conflicts of interest and regulatory restrictions, including without limitation joint transaction restrictions pursuant to the 1940 Act.

Investments may or may not be made for a variety of reasons, including, without limitation, application of Private Credit’s investment opportunity screening, investment committee approval, acquisition terms, diversification, portfolio construction considerations, timing, size, availability of financing, and nature of business plan.

Experienced and Accomplished Investment Team & Investment Committee

The Adviser's Investment Team is led by investment professionals with extensive experience in credit and principal investing, credit analysis, credit origination and structuring.

The Investment Team is led by investment professionals with extensive experience in credit and principal investing, credit analysis, credit origination and structuring.

Levin, our Chief Executive Officer and President, has principal management responsibility for the Company and serves as Chair of the Investment Committee.

Levin has more than 19 years of experience in direct lending, mezzanine lending, credit investing and leveraged finance, and has served as the Chief Executive Officer and President and a member of the Board of Directors of SLIC, a BDC advised by our Adviser, since September 2020.

Levin has more than 20 years of experience in direct lending, mezzanine lending, credit investing and leveraged finance, and he also currently serves as the Chief Executive Officer and President and a member of the board of directors of each of the MS BDCs.

Prior to that, through his tenure at The Carlyle Group as a Partner and President of TCG BDC Inc.

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Before working at The Carlyle Group, Mr.

Levin was a senior member of the Morgan Stanley Private Credit platform.

In addition, the investment professionals of the Private Credit platform have strong financial sponsor and intermediary relationships and a highly developed network within Morgan Stanley.

Levin was a senior member of the MS Private Credit platform.

In addition, the investment professionals of the MS Private Credit platform have strong financial sponsor and intermediary relationships and a highly developed network within Morgan Stanley.

Collectively, the investment professionals of the Adviser have substantial leveraged lending experience, and we believe the Investment Team is well positioned to generate attractive risk-adjusted returns.

The Adviser’s Investment Committee members servicing the Company have an average of 22+ years of relevant industry experience.

The Investment Committee members servicing the Company have an average of over 21 years of relevant industry experience.

The Investment Committee is comprised of senior members of IM and provides guidance to the Investment Team throughout the investment process.

Alignment of Interest with Stockholders

Morgan Stanley is committed to align its interests with those of our stockholders.

MS Credit Partners Holdings, Inc., a wholly owned subsidiary of Morgan Stanley and an affiliate of the Adviser (“MS Credit Partners Holdings”), invested seed capital of $35 thousand to the Company as of December 31, 2019.

Morgan Stanley Equity Investment

MS Credit Partners Holdings, Inc., a wholly owned subsidiary of Morgan Stanley and an affiliate of the Adviser (“MS Credit Partners Holdings”), invested seed capital of $35,000 in the Company as of December 31, 2019.

Pursuant to the terms of MS Credit Partners Holdings’ subscription agreement, MS Credit Partners Holdings has made an aggregate capital commitment of $200 million to the Company.

As of December 31, 2021 and December 31, 2020, MS Credit Partners Holdings’ total capital commitment represented approximately 13% and 14% of aggregate capital commitments received, respectively.

Morgan Stanley has no obligation, contractual or otherwise, to financially support us beyond the equity commitment entered into by MS Credit Partners Holdings to purchase our common stock described above.

Morgan Stanley has no history of financially supporting any of the MS BDCs, even during periods of financial distress..

Market Opportunity

Despite the ongoing effects of the Coronavirus pandemic, we believe the middle-market direct lending market environment continues to be attractive.

We believe that volatility and uncertainty remains as a result of the Coronavirus pandemic, including uncertainty relating to more contagious strains of the Coronavirus that have emerged in the United States and globally, and its impact on the vaccine rollout, the length of economic recovery, as well as uncertainty related to policies of the new presidential administration and tension with China.

We believe that these factors have created stress on many middle-market lending sources, and we believe that the private credit market will be more favorable for lenders than before the market dislocation, which could be reflected by lower leverage multiples, higher yields and stronger loan documentation and covenants.

We are well capitalized as of December 31, 2020, with over $1.5 billion of available capital (approximately $1.1 billion of available uncalled equity, approximately $66.2 million of available capacity under our revolving credit agreement, as amended, or, the CIBC Subscription Facility, with CIBC Bank USA, as administrative agent and arranger, entered into on December 31, 2019 and subsequently amended on February 3, 2020, and November 17, 2020), and $300.0 million of committed capacity under our revolving funding facility, as amended, or, the BNP Funding Facility, with BNP Paribas, as administrative agent and arranger, entered into on October 14, 2020, and subsequently amended on December 11, 2020).

As of December 31, 2020, we have called $297.4 million of the total committed equity capital of $1,445.8 million.

We believe our strong capital base positions us well to invest over the near term and throughout the Investment Period when we identify opportunities that we believe offer compelling value.

Conducting detailed due diligence is central to our investment strategy and we will continue to seek to build a highly diversified portfolio of predominantly first lien senior secured term loans, avoid the more cyclical industry sectors, and fully leverage the vast origination and due diligence resources of Morgan Stanley.

We believe the middle-market direct lending market environment continues to provide attractive risk adjusted returns due to several historical factors.

We believe that uncertainty remains as a result of the Coronavirus pandemic, including uncertainty relating to more contagious strains of the Coronavirus that have emerged in the United States and globally, vaccine hesitancy and efficacy, the length of economic recovery, and government policies and actions taken or to be taken in response to the pandemic that have created stress on the market and could affect our portfolio companies.

In addition, government spending and disruptions in supply chains in the United States and elsewhere in response to the Coronavirus pandemic and otherwise, in conjunction with other factors, including those described above, have led and could continue to lead to inflationary economic environments that will affect our portfolio companies and could affect our financial condition and results of operations.

Despite these factors and while we cannot predict the full impact of the Coronavirus pandemic, we believe we are very well positioned to manage the current environment.

We are well capitalized as of December 31, 2021, with over $1.2 billion of available capital (approximately $74.2 million of cash, which taken together with our approximately $89.7 million, $136.5 million and $499.0 million of availability under the CIBC Subscription Facility, the BNP Funding Facility and the Truist Credit Facility (each a “Credit Facility” as further defined below and subject to borrowing base availability), respectively, and our approximately $425.7 million of uncalled capital commitments to purchase shares of Common Stock, or capital commitments, we expect to be sufficient for our investing activities and to conduct our operations in the near term.

In addition, we believe the middle-market direct lending market environment continues to provide attractive risk adjusted returns due to several historical factors.

Advantageous Market Landscape

We believe that the middle-market senior secured loan asset class remains a highly attractive investment area due to its significant size, historically strong risk adjusted returns relative to liquid credit asset classes such as broadly syndicated loans and high yield bonds, and the continued supply-demand imbalance that favors non-bank lenders such as ourselves.

We believe that the middle-market senior secured loan asset class remains a highly attractive investment area due to its significant size and historically strong risk adjusted returns.

Bank participation in middle-market secured loans has continued to decrease, which we believe is primarily as a result of changes in banking regulation and deal structure, and the continued supply-demand imbalance that favors non-bank lenders such as ourselves.

We believe that focusing on lending to private equity owned middle-market businesses provides for an attractive risk adjusted return, with demonstrated stability of leverage multiples and attractive loan to value ratios due to significant equity contributions from the private equity owners.

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middle-market companies represent a large and growing opportunity set and will likely require significant capital if these companies continue their growth.

Recent data from Refinitiv LPC, a premier global provider of information on the syndicated loan and high yield bond markets, indicates that there are over $553 billion of middle-market loans with maturities between 2021 and 2027 that will likely require a refinancing event.

In addition, data from Preqin, Ltd., a provider of financial data and information on the alternative assets market, shows that as of the fourth quarter of 2020, there was over $525 billion of raised, but not yet invested, capital by U.S.

private equity firms.

Recent data from Refinitiv LPC, a premier global provider of information on the syndicated loan and high yield bond markets, indicates that there are over $595 billion of middle-market loans with maturities between the fourth quarter of 2021 and the third quarter of 2028 that will likely require a refinancing event.

In addition, data from Preqin, Ltd., a provider of financial data and information on the alternative assets market, shows that as of December 31, 2021, there was approximately $530 billion of raised, but not yet invested, capital by North American private equity firms.

We expect that these two important dynamics will provide for significant financing opportunities for lenders like us who have longstanding and deep relationships with middle-market private equity firms.

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We believe middle-market loans generally tend to be illiquid in exchange for many other benefits, including more attractive economics in the form of upfront fees, spreads, and prepayment penalties.

Senior secured middle-market loans typically have strong defensive characteristics.

These loans have priority in payment among a portfolio company's security holders and they carry the least risk among investments in the capital structure.

We believe, senior secured middle-market loans typically have strong defensive characteristics, including priority in payment among a portfolio company’s security holders which generally means they carry the least risk among investments in the capital structure.

Senior secured middle-market loans that are secured by the portfolio company’s assets typically contain carefully structured covenant packages that allow lenders to take early action in situations where obligors underperform.

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The Adviser’s investment process has five stages:

Origination, Preliminary Screen, Due Diligence & Structuring, Investment Committee Approval & Closing and Portfolio Management;

and it employs the same rigorous and disciplined investment process to all types of investments.

Origination, Preliminary Screen, Due Diligence & Structuring, Investment Committee Approval & Closing and Portfolio Management, and it employs the same rigorous and disciplined investment process to all types of investments.

The Investment Team works on a particular transaction from origination to close and continues to monitor each investment throughout its life cycle.

We believe we benefit from the Adviser’s highly differentiated direct origination platform.

The origination platform includes opportunities sourced by the existing Morgan Stanley divisions and businesses.

The origination platform is complemented by opportunities sourced by the existing Morgan Stanley divisions and businesses.

The Firm has deep relationships with many middle-market private equity firms and middle-market companies that provide significant investment opportunities.

We, together with SLIC, are currently intended to be the primary direct investment pool of capital (1) across the Firm for senior secured middle-market loans.

MS Private Credit is the primary private credit investment management platform across the Firm.

We seek to capitalize on a significant number of lending opportunities with middle-market companies that the Firm has longstanding relationships with.

We believe the large volume of untapped potential lending opportunities already sourced by the Firm and the scale of the Morgan Stanley origination platform should allow us to increase investment selectivity and potentially enhance risk-adjusted returns.

We believe the large volume of untapped potential lending opportunities sourced by the Firm and the scale of the Morgan Stanley origination platform should allow us to increase investment selectivity and potentially enhance risk-adjusted returns.

Preliminary Screen

An initial review of each investment opportunity is conducted by the Investment Team to determine whether it is consistent with our investment objectives and credit standards.

If the opportunity fits our investment objective and 1940 Act requirements, the attractiveness of the opportunity is further evaluated by the Investment Team.

The Investment Team utilizes the extensive industry expertise resident in IM and IS (subject in all cases to applicable regulations, confidentiality provisions, information barriers and policies and procedures) to assist in this preliminary evaluation.

If the opportunity fits our investment objective and 1940 Act requirements, the opportunity is further evaluated by the Investment Team.

The Investment Team utilizes the extensive industry expertise resident in IM and ISG (subject in all cases to applicable regulations, confidentiality provisions, information barriers and policies and procedures) to assist in this preliminary evaluation.

Access to these resources allows the Investment Team to assess each opportunity quickly and effectively and enables it to focus only on compelling opportunities.

If the members of the Investment Team conducting the initial review conclude that the investment opportunity meets our objectives, the Investment Team creates a screening memo which is discussed with the Investment Committee and includes an overview of the business, proposed capital structure, proposed terms (if applicable at this stage), key investment highlights and risks, and preliminary financial analysis.

At the meeting, the Investment Team presents the credit risks and relative attractiveness of the investment opportunity.

Feedback from the Investment Committee is processed and disseminated in an outcome email that documents the takeaways from the meeting, including preferred financing structure as well as terms, key diligence items and next steps.

Opportunities that are approved by the screening team assigned to such opportunity, which screening team consists of a sub-set of the Investment Committee, advance to the Due Diligence & Structuring phase.

If the members of the Investment Team conducting the initial review conclude that the investment opportunity meets our objectives, the Investment Team prepares a screening memo which is discussed with a subset of the Investment Committee at a Preliminary Screen meeting.

At a Preliminary Screen meeting, the Investment Team presents an overview of the business, proposed capital structure, proposed terms (if applicable at this stage), key investment highlights and risks, and preliminary financial analysis.

Opportunities that are approved at the Preliminary Screen meeting advance to the Due Diligence & Structuring phase.

Due Diligence & Structuring

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Diligence typically involves meeting with company management and the financial sponsor to achieve a comprehensive understanding of the portfolio company’s competitive positioning, competitive advantage, company strategy and risks and mitigants associated with the proposed investment.

Additionally, the Investment Team conducts supplemental diligence including:

Additionally, the Investment Team, to the extent applicable, conducts supplemental diligence including:

• Financial analysis;

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• Covenant analysis;

• Review of third-party reports (financial, industry, legal, technology, insurance and/or environmental);

• Review of third-party due diligence reports (financial, industry, legal, technology, insurance and/or environmental);

• Industry research;

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• Management background checks;

• Technology review (if applicable);

• Environmental, social and governance review;

• Consideration of environmental, social and governance (“ESG”) issues;

• Negotiation of legal documentation.

(1) Inclusive of the Affiliated Investment Accounts (as defined below) on the Private Credit platform together with SLIC and one or more future Morgan Stanley sponsored direct lending BDCs with whom we co-invest in accordance with the conditions to the exemptive relief described under “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview”.

The Investment Team reviews ESG considerations as part of its due diligence process.

As a part of ESG due diligence, the Investment Team evaluates each potential borrower utilizing a standard ESG template to determine an ESG score for each potential borrower.

Borrowers who score beneath an internally set threshold require additional discussion and consideration by the Investment Committee.

The identification of a material ESG risk will not necessarily be determinative in our Adviser’s decision to lend to a potential borrower.

In addition, material ESG issues are reported and discussed as part of the Adviser’s ongoing portfolio management processes on a quarterly basis.

Investment Committee Approval & Closing

The Investment Committee is engaged throughout the investment process to provide guidance on best practices, industry expertise and related deal experience drawn from their average 22+ years of relevant experience.

The Investment Committee is engaged throughout the investment process to provide guidance on best practices, industry expertise and related deal experience drawn from their relevant experience.

Based on the findings in the Due Diligence & Structuring phase, the Investment Team prepares a detailed memo that is presented to the Investment Committee.

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Our Adviser holds quarterly portfolio reviews.

In conjunction with the quarterly portfolio reviews, the Adviser also compiles a quarterly risk report that examines, among other things, migration in portfolio and loan level investment mix, industry diversification, internal risk ratings, revenue, EBITDA and leverage.

In conjunction with the quarterly portfolio reviews, the Adviser also compiles a quarterly risk report that examines, among other things, migration in portfolio and loan level investment mix, industry diversification, ESG review, internal risk ratings, revenue, EBITDA and leverage.

Frequency of review of individual loans is determined on a case-by-case basis, based on Internal Risk Rating, total exposure and other criteria set forth by the Investment Committee.

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In addition, the Adviser holds monthly “watchlist” meetings which include a discussion of all transactions that have been downgraded, or are at risk for downgrade, under our Adviser’s Internal Risk Rating system.

As part of the monitoring process, our Adviser has developed risk policies pursuant to which it regularly assesses the risk profile of each of our debt investments.

Our Adviser has developed a classification system to group investments into four categories.

The investments are evaluated regularly and assigned a category based on certain credit metrics.

Our Adviser’s ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

Please see below for a description of the four categories of the Adviser’s Internal Risk Rating system:

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Our Adviser rates the investments in our portfolio at least quarterly, and it is possible that the rating of a portfolio investment may be reduced or increased over time.

For investments rated 3 or 4, our Adviser enhances its level of scrutiny over the monitoring of such portfolio company.

For investments rated 3 or 4, our Adviser enhances its level of scrutiny over the monitoring of such portfolio company by conducting a formal review of the portfolio company on a monthly basis and taking any actions deemed appropriate from the results of such review.

Refer to “ Item 7.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations—Portfolio, Investment Activity and Results of Operations.

” for the portfolio distribution of Internal Risk Rating as of December 31, 2020.

” for the portfolio distribution of Internal Risk Rating as of December 31, 2021 and December 31, 2020.

Beyond the policies and protocols detailed above, our Adviser’s Investment Team servicing the Company performs analysis and projections in response to market conditions to assess potential exposure to our portfolio.

Sample analysis includes evaluation of the impact from fall in energy prices, volatility in foreign currency exchange rates, market impacts of responses to the COVID-19 pandemic, global recession and interest rate sensitivity.

Sample analysis includes evaluation of the impact from rise in energy prices, volatility in foreign currency exchange rates, market impacts of responses to the COVID-19 pandemic, inflation expectation and interest rate sensitivity.

The Internal Risk Ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

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As a diversified global financial services firm, Morgan Stanley engages in a broad spectrum of activities.

In the ordinary course of its business, Morgan Stanley is a full-service investment banking and financial services firm and therefore engages in activities where Morgan Stanley’s interests or the interests of its clients may conflict with the interests of the investors in the Company.

Morgan Stanley has advised and may advise clients with a wide variety of investment objectives that in some instances may overlap or conflict with the investment objectives of the Company and present conflicts of interest.

Certain members of the Investment Team and the Investment Committee will make investment decisions on behalf of both Morgan Stanley and other entities, including those with investment objectives that overlap with those of the Company.

For instance, the Adviser sponsors SLIC whose investment objectives overlap with those of the Company.

These activities create potential conflicts in allocating investment opportunities among the Company and other investment funds, accounts and similar arrangements sponsored and/or advised by the Adviser and its affiliates.

As a BDC regulated under the 1940 Act, the Company is subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely will, in certain circumstances, limit the Company's ability to make investments or enter into other transactions alongside the Adviser and other investment funds, accounts and similar arrangements sponsored and/or advised by the Adviser and its affiliates.

Although the Adviser has implemented allocation policies and procedures, there can be no assurance that such regulatory restrictions will not adversely affect the Company's ability to capitalize on attractive investment opportunities.

Morgan Stanley has advised and may advise clients with a wide variety of investment objectives that in some instances may overlap or conflict with our investment objectives and present conflicts of interest.

For instance, the Adviser serves as the investment adviser to the other MS BDCs, whose investment objectives overlap with our investment objectives.

For the avoidance of doubt, we are not a subsidiary of or consolidated with Morgan Stanley.

Furthermore, Morgan Stanley has no obligation, contractual or otherwise, to financially support us beyond the equity commitment to purchase our common stock pursuant to a subscription agreement entered into by MS Credit Partners Holdings described above.

Morgan Stanley has no history of financially supporting any of the MS BDCs, even during periods of financial distress

These activities create potential conflicts in allocating investment opportunities among us and other investment funds, accounts and similar arrangements sponsored and/or advised by the Adviser and its affiliates.

As a BDC regulated under the 1940 Act, we are subject to certain limitations relating to co-investments and joint transactions with affiliates, which likely will, in certain circumstances, limit our ability to make investments or enter into other transactions alongside the Adviser and other investment funds,

accounts and similar arrangements sponsored and/or advised by the Adviser and its affiliates.

Although the Adviser has implemented allocation policies and procedures, there can be no assurance that such regulatory restrictions will not adversely affect our ability to capitalize on attractive investment opportunities.

We may, however, invest alongside our Adviser’s and/or its affiliates’ other clients, in certain circumstances where doing so is consistent with our Adviser’s allocation policies and procedures, applicable law and SEC staff interpretations, guidance and exemptive relief orders.

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Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors makes certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

For a description of the potential conflicts of interest of the Company as well as the allocation of investments among entities advised by the Adviser and its affiliates, see “Item 13 — Certain Relationships and Related Transactions, and Director Independence” and in particular, the section titled “Investments by Morgan Stanley and Its Affiliated Investment Accounts.”

As of December 31, 2021, the fair value of our investments was approximately $2,387.4 million in 98 portfolio companies.

As of December 31, 2019, the Company did not hold any investments.

During the year ended December 31, 2020, we made new

investment commitments (prior to any sale/repayments) of approximately $948.7 million and new investment fundings of

approximately $714.7 million.

Approximately $89.0 million of investments were sold/repaid, of which $33.5 million of investments

were sold and realized gains of $2.2 million.

As of December 31, 2020, the fair value of our investments was approximately $637.0 million in 36 portfolio companies.

During the year ended December 31, 2021, we made new investment commitments (prior to any sale/repayments) of approximately $2,486.6 million and new investment fundings of approximately $2,113.5 million.

Approximately $384.7 million of investments were sold or repaid, of which $103.7 million of investments were sold and realized net gains of $1.9 million.

During the year ended December 31, 2020, we made new investment commitments (prior to any sale/repayments) of approximately $948.7 million and new investment fundings of approximately $714.7 million.

Approximately $89.0 million of investments were sold or repaid, of which $33.5 million of investments were sold and realized net gains of $2.2 million.

As of December 31, 2021, 75% of our investments, calculated as a percentage of gross commitments (funded and unfunded), were loans in support of LBOs and acquisitions of portfolio companies by private equity sponsors.

In addition, our portfolio displayed the following characteristics, in each case as of the closing date of each of our investments 1 :

• Weighted average yield on debt investments of 7.2% 2 ;

• Weighted average last 12-month EBITDA of approximately $100 million of our portfolio companies;

• Weighted average of 6.0x net leverage through tranche of our portfolio companies 3 ;

• Approximately 5.9% of the portfolio is in loans that the Adviser believes may be subject to business cycle volatility.

The composition of our investment portfolio at cost and fair value is as follows (dollar amounts in thousands):

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Total $ 2,373,435 $ 2,387,374 100.0 %

The industry composition of our investments at fair value is as follows:

1 Excludes recurring revenue investments, which are investments in portfolio companies in which the Company lends on a multiple of recurring revenue generated by the portfolio company as opposed to on a multiple of EBITDA of the portfolio company.

Calculated as a percentage of gross commitments (funded and unfunded).

2 Weighted average yield includes the effect of accretion of discounts and amortization of premiums and are based on interest rates as of December 31, 2021.

3 Net leverage is the ratio of total debt minus cash divided by EBITDA and taking into account leverage through the tranche that we are a lender to.

December 31, 2020

Cost Fair Value % of Total Investments at Fair Value

First Lien Debt $ 575,009 $ 580,867 91.2 %

Second Lien Debt 53,505 53,155 8.3

Other Securities 2,959 2,959 0.5

Total $ 631,473 $ 636,981 100.0 %

The industry composition of our investments at fair value is as follows:

December 31, 2021 December 31, 2020 (1)

Aerospace and Defense 1.7 % — %

Air Freight and Logistics 0.5 —

Auto Components 3.3 4.6

Automobiles 7.4 (0.1)

Biotechnology 0.6 —

Commercial Services & Supplies 13.0 10.0

Construction and Engineering 1.5 —

Containers & Packaging 1.6 2.0

Distributors 1.2 —

Diversified Consumer Services 1.5 1.5

Diversified Financial Services 0.1 2.7

Electronic Equipment, Instruments & Components 0.7 0.0

Energy Equipment & Services 0.6 2.3

Food Products 3.1 11.2

Health Care Equipment & Supplies 0.4 —

Health Care Providers & Services 2.9 1.3

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Leisure Products 2.4 3.8

Machinery 2.0 —

Multi-Utilities 0.4 0.1

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Real Estate Management & Development 5.2 5.3

Software 11.5 6.8

Total 100.0 % 100.0 %

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The geographic composition of our investments at cost and fair value is as follows (dollar amounts in thousands):

December 31, 2020

December 31, 2021 December 31, 2020

Cost Fair Value % of Total

Investments at

Fair Value Cost Fair Value % of Total

Investments at

Canada $ 81,935 $ 81,386 3.4 % $ — $ — — %

United Kingdom 17,804 18,200 0.8 — — —

United States 2,273,696 2,287,789 95.8 631,473 636,981 100.0

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As of December 31, 2021, our asset coverage ratio was 195.1%.

As of December 31, 2019, we did not have any borrowings outstanding.

As of December 31, 2020, our asset coverage ratio was 190.3%.

While any indebtedness and senior securities remain outstanding, we must take provisions to prohibit any distribution to our stockholders (which may cause us to fail to distribute amounts necessary to avoid entity-level taxation under the Code), or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase.

In addition, we must also comply with positive and negative covenants customary for these types of facilities.

Our contractual obligations consisted of the following as of December 31, 2020 (dollar amounts in thousands).

We did not have any borrowings outstanding as of December 31, 2019:

Payments Due by Period

1 year 1-3 years 3-5

years After 5

CIBC Subscription Facility $ 333,850 $ — $ 333,850 $ — $ —

BNP Funding Facility $ — $ — $ — $ — $ —

Total Contractual Obligations $ 333,850 $ — $ 333,850 $ — $ —

See “ Item 7.

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We have entered into an investment advisory agreement, dated November 25, 2019 (the “Investment Advisory Agreement”), with our Adviser.

Pursuant to the Investment Advisory Agreement with our Adviser, we will pay our Adviser a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee.

Pursuant to the Investment Advisory Agreement with our Adviser, we pay our Adviser a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee.

As a part of the Investment Advisory Agreement, we agreed to reimburse the Adviser for certain expenses it incurs on our behalf.

The Adviser agreed to waive any reimbursement by us of offering and organizational expenses the Adviser incurs on the Company’s behalf in excess of the greater of (i) one million dollars ($1,000,000), and (ii) one-tenth of one percent (0.10%) of the aggregate capital commitments raised in the initial and subsequent closings of our initial private offering during the three-year period commencing on the date of the Initial Closing.

The Investment Advisory Agreement had an initial term of two years and continues thereafter from year to year if approved annually by the Board of Directors or our stockholders, including, in each case, a majority of including a majority of the directors who are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act (the “Independent Directors”).

The Investment Advisory Agreement was most recently renewed in November 2021.

Base Management Fee

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The first part is determined and paid quarterly based on our pre-incentive fee net investment income and the second part is determined and payable in arrears based on net capital gains as of the end of each calendar year or upon termination of the Investment Advisory Agreement.

Pre-incentive fee net investment income is defined as interest income, dividend income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including the base management fee, expenses payable under the Administration Agreement, any interest expense and distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee.

the incentive fee.

Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

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Under the Investment Advisory Agreement, we pay the Adviser an incentive fee on capital gains calculated and payable in arrears in cash as of the end of each calendar year or upon the termination of the Investment Advisory Agreement in an amount equal to 17.5% of our realized capital gains, if any, on a cumulative basis from the date of our election to be regulated as a business development company through the end of a given calendar year or upon the termination of the Investment Advisory Agreement, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees (the “Cumulative Capital Gains”).

For the purpose of computing the incentive fee on capital gains, the calculation methodology will look through derivative financial instruments or swaps as if we owned the reference assets directly.

Our board of directors (our “Board of Directors”) monitors the mix and performance of our investments over time and seeks to satisfy itself that the Adviser is acting in our interests and that our fee structure appropriately incentivizes the Adviser to do so.

For the purpose of computing the incentive fee on capital gains, the calculation methodology looks through derivative financial instruments or swaps as if we owned the reference assets directly.

Our Board of Directors monitors the mix and performance of our investments over time and seeks to satisfy itself that the Adviser is acting in our interests and that our fee structure appropriately incentivizes the Adviser to do so.

Examples of Quarterly Incentive Fee Calculation

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Alternative 2

$20 million investment made in Company A ("Investment A"), $30 million investment made in Company B ("Investment B") and $25 million investment made in Company C ("Investment C")

Investment A, Investment B and $25 million investment made in Company C (“Investment C”)

Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million

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In addition, our Administrator assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, our internal control assessment under the Sarbanes-Oxley Act and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

The Administration Agreement had an initial term of two years and continues thereafter from year to year if approved annually by our Board of Directors, which most recently approved the renewal of the Administration Agreement in November 2021.

Payments under the Administration Agreement are equal to an amount that reimburses our Administrator for its costs and expenses and our allocable portion of certain expenses incurred by our Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the compensation paid to our Chief Compliance Officer and Chief Financial Officer.

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Our Administrator reserves the right to waive all or part of any reimbursements due from the Company at its sole discretion.

The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, our Administrator and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it will be entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of our Administrator's services under the Administration Agreement or otherwise as an administrator for us, subject to the provisions of the 1940 Act.

settlement) arising from the rendering of our Administrator’s services under the Administration Agreement or otherwise as an administrator for us, subject to the provisions of the 1940 Act.

In addition, our Administrator has, pursuant to a sub-administration agreement, engaged State Street Bank and Trust Company (“State Street”), to act on behalf of our Administrator in the performance of certain other administrative services for us.

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Risks Relating to Our Business and Structure

• We have a limited operating history.

• Operating as a BDC imposes numerous constraints on us and significantly reduces our operating flexibility.

• We are subject to risks associated with the current interest rate environment and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.

• Changes in LIBOR, or its discontinuation, may adversely affect our business and results of operations.

• The discontinuation of LIBOR may adversely affect our business and results of operations.

• We depend upon our Adviser and Administrator for our success and upon their access to the investment professionals and partners of Morgan Stanley and its affiliates.

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• We are dependent on the Adviser’s key personnel in seeking to achieve our investment objectives.

• We may not replicate the historical results achieved by other entities managed or sponsored by members of the Adviser’s Investment Committee, or by the Adviser or its affiliates.

• We may not replicate the historical results achieved by other entities managed or sponsored by members of the Investment Committee, or by the Adviser or its affiliates.

• Our financial condition and results of operation depend on our ability to manage future growth effectively.

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• There are significant potential conflicts of interest that could affect our investment returns.

• Our management fee and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.

• Our ability to enter into transactions with our affiliates is restricted.

• Our management and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.

• Shares of our Common Stock are illiquid investments for which there is not a secondary market.

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• We will be subject to corporate-level income tax if we are unable to qualify as a RIC.

• We will need to raise additional capital to grow because we must distribute most of our income.

• Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital.

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• We intend to finance our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.

• We are subject to risks associated with the CIBC Subscription Facility, the BNP Funding Facility and any other Credit Facility.

• We are subject to risks associated with our Credit Facilities.

• Investors in shares of our Common Stock may fail to fund their capital commitments when due.

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• The majority of our portfolio investments are recorded at fair value as determined in good faith by our Board of Directors and, as a result, there may be uncertainty as to the value of our portfolio investments.

• Our activities may be limited as a result of potentially being deemed to be controlled by a bank holding company (“BHC”).

• New or modified laws or regulations governing our operations may adversely affect our business.

• Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, and we may temporarily deviate from our regular investment strategy.

• The Adviser and Administrator can each resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time.

• We are highly dependent on information systems, and systems failures could significantly disrupt our business.

• Terrorist attacks, acts of war, natural disasters, outbreaks or pandemics, such as the Coronavirus pandemic, may impact our portfolio companies and our Adviser and harm our business, operating results and financial condition.

• Uncertainties resulting from the United Kingdom’s decision to leave the European Union could adversely affect our business.

• We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.

• The liability of each of the Adviser and the Administrator is limited.

• Risks relating to compliance with the AIFMD.

Risks Relating to Our Investments

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• Defaults by our portfolio companies will harm our operating results.

• Our investments, including our investments in private and middle-market portfolio companies may be risky as we may invest in distressed or highly leveraged companies and hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings and we could lose all or part of our investments.

• We may invest in distressed or highly leveraged companies, which could cause you to lose all or part of your investment.

• Our investments in private and middle-market portfolio companies are risky, and you could lose all or part of your investment.

• Subordinated liens on collateral securing debt investments that we will make to our portfolio companies may be subject to control by senior creditors with first priority liens.

• Covenant-lite loans may expose us to different risks, including with respect to liquidity, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.

• The lack of liquidity in our investments may adversely affect our business.

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• We can offer no assurance that portfolio company management will be able to operate their companies in accordance with our expectations.

• Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies and such portfolio companies may not generate sufficient cash flow to service their debt obligations to us.

• We may not realize gains from our equity investments.

Risks Relating to Our Common Stock

• There is no public market for shares of our Common Stock.

• There is no public market for shares of our Common Stock, and there is no assurance that a public market of shares of our Common Stock will develop.

• There are restrictions on holders of our Common Stock.

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• Investing in our Common Stock may involve an above average degree of risk.

• We have not established any limit on the amount of funds we may use from available sources to fund dividends (which may reduce the amount of capital we ultimately invest in assets).

• The net asset value of our Common Stock may fluctuate significantly.

• Our stockholders may experience dilution in their ownership percentage.

• Our stockholders may receive shares of our Common Stock as dividends, which could result in adverse tax consequences to them.

Risks Relating to the Notes

• The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we may incur.

Additionally, the Notes are not guaranteed by Morgan Stanley.

• The Notes are subordinated structurally to the indebtedness and other liabilities of our subsidiaries.

• A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly.

• An increase in market interest rates could result in a decrease in the market value of the Notes.

General Risk Factors

• We are operating in a period of capital markets disruption and economic uncertainty.

• New or modified laws or regulations governing our or Morgan Stanley’s operations may adversely affect our business.

• We are highly dependent on information systems, and systems failures could significantly disrupt our business.

• Economic recessions or downturns could impair our portfolio companies and defaults by our portfolio companies will harm our operating results.

• Risks relating to compliance with the AIFMD.

Regulation as a Business Development Company

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A BDC is a specialized investment vehicle that elects to be regulated under the 1940 Act as an investment company, but is generally subject to less onerous requirements than other registered investment companies under a regime designed to encourage lending to U.S.-based small and mid-sized businesses.

Unlike many similar types of investment vehicles that are restricted to being private entities, the stock of a BDC is permitted to trade in the public equity markets (although at least initially, we do not currently intend to list shares of our Common Stock to allow for such trading).

Unlike many similar types of investment vehicles that are restricted to being private entities, the stock of a BDC is permitted to trade in the public equity markets.

Shares of our Common Stock are not currently listed on a national securities exchange;

however, we may pursue a Liquidity Event, including an Exchange Listing, in the future.

BDCs are also eligible to elect to be treated as a RIC under Subchapter M of the Code.

A RIC typically does not incur significant entity-level income taxes, because it is generally entitled to deduct distributions made to its stockholders.

We have elected to be treated, and intend to qualify annually, as a RIC, beginning with our taxable year ended December 31, 2020.

We have elected to be treated, and intend to qualify annually as a RIC.

See “ Item 1.

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Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents.

We intend to primarily make investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act.

We primarily make investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act.

From time to time, including at or near the end of each fiscal quarter, we may consider using various temporary investment strategies for our business, including taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act.

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As a result of the stockholder approval, effective December 17, 2019, the asset coverage ratio under the 1940 Act applicable to us decreased to 150% from 200%, so long as we meet certain disclosure requirements.

As defined in the 1940 Act, asset coverage of 150% means that for every $100 of net assets we hold, we may raise $200 from borrowing and issuing senior securities as compared to $100 from borrowing and issuing

senior securities for every $100 of net assets under 200% asset coverage.

In addition, while any senior securities remain outstanding, we will be required to make provisions to prohibit any dividend distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase.

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A summary of the Proxy Voting Policies and Procedures of our Adviser are set forth below.

These policies and procedures will be reviewed periodically by our Adviser and, subsequent to our election to be regulated as a BDC, our non-interested directors, and, accordingly, are subject to change.

These policies and procedures are reviewed periodically by our Adviser and our Independent Directors, and, accordingly, are subject to change.

For purposes of these Proxy Voting Policies and Procedures described below, “we” “our” and “us” refers to our Adviser”.

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These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

We will vote proxies relating to our portfolio securities in what we believe to be the best interest of our stockholders.

To ensure that our vote is not the product of a conflict of interest, we will require that:

We vote proxies relating to our portfolio securities in what we believe to be the best interest of our stockholders.

To ensure that our vote is not the product of a conflict of interest, we require that:

(1) anyone involved in the decision making process disclose to our chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote;

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Bank Holding Company Act

As a BHC that has elected Financial Holding Company (“FHC”) status under the Bank Holding Company Act of 1956, as amended (the “BHCA”), Morgan Stanley and its affiliates are subject to comprehensive, consolidated supervision and regulation by the U.S.

As a bank holding company (“BHC”) that has elected Financial Holding Company (“FHC”) status under the Bank Holding Company Act of 1956, as amended (the “BHCA”), Morgan Stanley and its affiliates are subject to comprehensive, consolidated supervision and regulation by the U.S.

Board of Governors of the Federal Reserve System (the “Federal Reserve”).

Since the Adviser is a subsidiary of Morgan Stanley, the Federal Reserve will treat the Adviser as an affiliate of Morgan Stanley and controlled by Morgan Stanley.

As a result, the Adviser is subject to the BHCA and the Federal Reserve’s implementing regulations and interpretations.

These regulations are subject to change, including with respect to possible limitations on the Adviser’s day-to-day control over the activities of portfolio companies.

Such limitations may affect the Adviser's decision to make investments and manage our investments.

In addition, there may be limitations on the ability of the Adviser and companies in which the Adviser invests to engage in borrowing and other credit and similar transactions with depository institution affiliates of Morgan Stanley.

We believe these limitations will not materially adversely affect the investment program or operations of the Adviser.

Because a Morgan Stanley affiliate is acting as our Adviser and Morgan Stanley has a 5% or greater voting investment in us, we are subject to the certain federal banking and financial requirements, including the BHCA, regulations of the Federal Reserve, and certain provisions of the Dodd-Frank Act.

Because we are controlled by Morgan Stanley for purposes of the BHCA, we must generally comply with the investment and activity restrictions applicable to Morgan Stanley under the BHCA.

Such restrictions may place certain limitations on our ability to engage in activities or make investments in companies.

For instance, the BHCA permits a bank holding company, or BHC, as well as any non-bank affiliate of such BHC, to make investment representing less than 5% of any class of voting shares of another company so long as that investment is otherwise non-controlling under the BHCA.

The BHCA also permits well-capitalized, well-managed BHCs that have elected to be treated as an FHC to engage in expanded “financial in nature” activities without prior approval of the Federal Reserve.

Such financial in nature activities include bona fide merchant banking activities, so long as (i) the FHC holds its merchant banking investments only for a period of time sufficient to enable the sale or disposition thereof on a reasonable basis (generally no more than 10 years) and (ii) the FHC does not routinely manage or operate the companies in which it invests except as necessary or required to obtain a reasonable return on its investment.

The BHCA does not, however, require Morgan Stanley to financially support us.

The BHCA generally prohibits BHCs, such as Morgan Stanley, and its subsidiaries from acquiring more than de minimis equity interests in non-financial companies unless certain exemptions apply.

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These Banks must remain well capitalized and well managed if Morgan Stanley is to maintain its FHC status and continue to engage in the widest range of permissible financial activities.

In addition, the general exercise by the Federal Reserve of its regulatory, supervisory and enforcement authority with respect to Morgan Stanley and certain provisions of Dodd-Frank could result in the need for Morgan Stanley to change its business practices or the scope of its current lines of business, including certain limited divestitures.

divestitures.

Although such changes could have an impact on and consequences for Morgan Stanley and the Adviser, any limited divestiture should not directly involve the Adviser.

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Section 619 of Dodd-Frank, commonly known as the “Volcker Rule,” and regulations to implement the Volcker Rule issued by the U.S.

federal financial regulators in December 2013 ("Implementing Regulations"), prohibit “banking entities” from sponsoring and investing in “covered funds”, except as permitted pursuant to certain available exemptions.

Morgan Stanley and its affiliates, including the Adviser, are banking entities for purposes of the Volcker Rule and the Implementing Regulations.

federal financial regulators in December 2013 (Implementing Regulations), generally restrict any “banking entity” (which includes Morgan Stanley and most affiliates of Morgan Stanley) from engaging in “proprietary trading” as well as from acquiring or retaining any “ownership interest” in a “covered fund”, in each case unless the investment or activity is conducted in accordance with an exclusion or exemption.

The Volcker Rule also generally prohibits certain transactions between a banking entity and any of its affiliates, on the one hand, and a covered fund for which the banking entity or any of its affiliates serves, directly or indirectly, as the investment manager, investment adviser, or that the banking entity or any of its affiliates sponsors in connection with organizing and offering that fund (or with any other covered fund that is controlled by such fund, on the other hand.

The term “covered fund” includes, among others, hedge funds and private-equity funds that are privately offered in the United States and that rely on Sections 3(c)(1) or 3(c)(7) of the 1940 Act to avoid being treated as “investment companies” under the 1940 Act.

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As a BDC, we are not considered to be a covered fund.

As a result, Morgan Stanley and its affiliates’ investments in us would not be subject to the Volcker Rule restrictions on investments in covered funds, but we would during that time be considered a banking entity subject to restrictions on proprietary trading to the extent we are “controlled” by Morgan Stanley or its affiliates.

As a result, Morgan Stanley and its subsidiaries investments in us would not be subject to the Volcker Rule restrictions on investments in covered funds, but we would during that time be considered a banking entity subject to restrictions on proprietary trading to the extent we are “controlled” by Morgan Stanley or its affiliates.

Generally, we will be deemed to be controlled for these purposes for so long as entities affiliated with Morgan Stanley own 5% or more of our outstanding voting securities.

However, for a limited seeding period following the Initial Closing, which may be three years or more, we will not be deemed to be a “banking entity” solely because of the ownership of our voting securities by Morgan Stanley and its affiliates.

We can offer no assurances that, at the conclusion of this seeding period, Morgan Stanley and its affiliates will not be deemed to control us for purposes of the Volcker Rule.

To the extent that we are deemed a banking entity under

the Volcker Rule and the Implementing Regulations, our operations may be restricted, although, given the anticipated nature of the investments we intend to make, we do not anticipate that these restrictions, if they were to apply, would impose material limitations on our operations, but can provide no assurances that they would not.

However, for a limited seeding period following the Initial Closing, which pursuant to the Volcker Rule and the Implementing Regulations, may be three years or more, we will not be deemed to be a “banking entity” solely because of the ownership of our voting securities by Morgan Stanley and its affiliates.

We can offer no assurances that, at the conclusion of this seeding period, Morgan Stanley and its subsidiaries would not be deemed to control us for purposes of the Volcker Rule as a result of their investment in us.

To the extent that we are deemed a banking entity under the Volcker Rule and the Implementing Regulations, our operations may be restricted, although, given the anticipated nature of the investments we make and intend to make, we do not anticipate that these restrictions, if they were to apply, would impose material limitations on our operations, but can provide no assurances that they would not.

Furthermore, we can offer no assurances that the rules and regulations enacted under the Volcker Rule, the BHCA and other statutes will not change in a future in a manner that would limit our operations and investments.

It is not certain how all aspects of the Volcker Rule will be interpreted and applied, or what the impact of the Volcker Rule will have on us.

In addition, the restrictions and limitation on Morgan Stanley and us may change in the future as the Federal Reserve and other agencies consider whether and how to revise and apply the Volcker Rule.

We believe that we may perform our activities and services without violation of applicable U.S.

banking laws and regulations.

However, it is possible that future changes or clarifications in the BHCA and Volcker Rule, as well as judicial or administrative decisions or interpretations of present of future laws or regulations, could restrict (or possibly prevent) our ability to continue to conduct our operations as currently contemplated.

In such event, we, the Adviser and/or Morgan Stanley may agree to make certain amendments or changes to the extent necessary to permit the Adviser to continue to provide services to us, while enabling us to continue to achieve our purposes and objectives.

Each prospective investor should consult its own legal counsel to determine how it could be impacted by the Volcker Rule, the Implementing Regulations and other aspects of Dodd-Frank.

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Anti-Money Laundering, U.S.

Department of the Treasury’s Office of Foreign Assets Control, and Foreign Corrupt Practices Act Requirements.

Department of the Treasury’s Office of Foreign Assets Control, and Foreign Corrupt Practices Act and Related Requirements.

The Adviser and the Company comply with policies and procedures consistent with the requirements of Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (including the implementing regulations thereunder, the “USA PATRIOT Act”), and may become subject to the requirements of the USA PATRIOT Act.

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Requests for documentation and additional information may be made at any time during which a stockholder holds shares in the Company.

Economic sanction laws in the United States and other jurisdictions may prohibit Morgan Stanley, the Adviser, their affiliates and the Company from transacting with certain countries, individuals and companies.

Sanctions Laws may prohibit Morgan Stanley, its affiliates and the Company from transacting with or in certain countries and with certain individuals and companies.

In the United States, the U.S.

Department of the Treasury’s Office of Foreign Assets Control administers and enforces laws, Executive Orders and regulations establishing U.S.

Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) administers and enforces laws, Executive Orders and regulations establishing U.S.

economic and trade sanctions, which prohibit, among other things, transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals.

These types of sanctions may significantly restrict or completely prohibit investment activities in certain jurisdictions.

Morgan Stanley, the Adviser, their affiliates, and the Company are subject to various anti-corruption and anti-boycott laws, rules and regulations, such as the U.S.

Foreign Corrupt Practices Act, in the jurisdictions in which they operate.

Violations of these laws, rules and regulations may result in significant legal, regulatory, and monetary penalties, as well as reputational harm.

Authorities including the U.S.

Department of Justice and the SEC enforce the anti-corruption and anti-boycott laws, and there is risk that Morgan Stanley, the Adviser, their affiliates, or the Company could become the subject of such actual or threatened enforcement, as well as other claims or proceedings.

These entities and individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.

The lists of OFAC prohibited countries, territories, persons and entities, including the List of Specially Designated Nationals and Blocked Persons, as such list may be amended from time to time, can be found on the OFAC website at http://www.treas.gov/ofac.

In addition, certain programs administered by OFAC prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on the lists maintained by OFAC.

Sanctions Laws may significantly restrict or completely prohibit certain investment activities of both the Company and its portfolio entities.

If the Company or any of its portfolio entities were to violate any such laws or regulations, it may face significant legal and monetary penalties.

The Company will require investors to represent that (i) neither they nor their underlying beneficial owners are natural persons or entities acting, directly or indirectly, in contravention of any applicable money laundering regulations or conventions of the United States or other international jurisdictions, or on behalf of terrorists, terrorist organizations or narcotics traffickers, including those persons or entities that are included on any relevant lists maintained by the United Nations, the European Union, OFAC, U.S.

Federal Bureau of Investigation or other similar or successor entities, in each case as may be amended from time to time;

or on behalf of a foreign shell bank or a U.S.

financial institution that has established, maintains, administers or manages an account in the United States for, or on behalf of, a foreign shell bank and (ii) neither the subscriber nor any underlying beneficial owner of such subscriber is the subject of any sanctions, including by being included on the List of Specially Designated Nationals and Blocked Persons (see http://www.treas.gov/ofac), any U.S.

Executive Order administered by OFAC, or any United Nations, European Union (including, for the avoidance of doubt, the U.K., Norway or Switzerland sanctions lists, as amended from time to time or located, organized or resident in a country or territory that is the subject of comprehensive Sanctions Laws.

Where the foregoing representations becomes

untrue, the Company may be required to cease any further dealings with the investor’s interest in the Company, until such sanctions are lifted or a license is sought under applicable law to continue dealings.

In some countries, there is a greater acceptance than in the United States of government involvement in commercial activities, and of corruption.

Morgan Stanley, Morgan Stanley professionals and the Company are committed to complying with the U.S.

Foreign Corrupt Practices Act (“FCPA”), the U.K.

Bribery Act of 2010 (the “U.K.

Bribery Act”) and other anti-corruption laws, anti-bribery laws and regulations, as well as anti-boycott regulations, to which they are subject.

As a result, the Company may be adversely affected because of its unwillingness to participate in transactions that violate such laws or regulations.

Such laws and regulations may make it difficult in certain circumstances for the Company to act successfully on investment opportunities and for investments to obtain or retain business.

The FCPA and other anti-corruption laws and regulations, as well as anti-boycott regulations, may also apply to and restrict the activities of the Company’s portfolio entities.

If a portfolio entity were to violate any such laws or regulations, it may face significant legal and monetary penalties.

government has indicated that it is particularly focused on FCPA enforcement, which may increase the risk that the Company’s portfolio entities become the subject of such actual or threatened enforcement.

In addition, certain commentators have suggested that asset management firms in general and the funds that they manage, such as the Company, may face increased scrutiny and/or liability with respect to the activities of their underlying portfolio entities.

As such, a violation of the FCPA or other applicable regulations by a portfolio entity could have a material adverse effect on the Company.

In recent years, the U.S.

Department of Justice and the SEC have devoted greater resources to enforcement of the FCPA.

In addition, the U.K.

has recently significantly expanded the reach of its anti-bribery laws with the U.K.

Bribery Act, which in some ways is broader in scope than the FCPA and applies to private and public sector corruption and holds companies liable for failure to prevent bribery unless they have adequate procedures in place to prevent bribery.

While Morgan Stanley has developed and implemented a stringent compliance program designed to ensure compliance by Morgan Stanley and its personnel with the FCPA and the U.K.

Bribery Act, even reasonable compliance programs may not be effective in all instances to prevent violations.

In addition, affiliates of portfolio entities, particularly in cases where the Company or another alternative investment fund, investment program, account or business advised by Morgan do not control such portfolio entity, third-party consultants, managers and advisors may engage in activities that could result in FCPA or U.K.

Bribery Act violations.

Any determination that Morgan Stanley has violated the FCPA, the U.K.

Bribery Act or other applicable anti-corruption laws or anti-bribery laws could subject Morgan Stanley to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect Morgan Stanley’s business prospects and/or financial position, as well as the Company’s ability to achieve its investment objective and/or conduct its operations.

“Sanctions Laws” means any trade, economic or financial sanctions, laws, regulations, embargoes or restrictive measures imposed, administered or enforced, from time to time, by OFAC, the U.S.

State Department, any other agency of the U.S.

government, the United Nations, the European Union, her Majesty’s Treasure, or other relevant sanctions authority.

Federal Income Tax Considerations

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Election to Be Taxed as a RIC

We intend to elect to be treated as a RIC under Subchapter M of the Code.

We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs.

As a RIC, we generally will not have to pay corporate-level U.S.

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To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below).

In addition, we must distribute to our stockholders, for each taxable year, dividends of an amount at least equal to

90% of our investment company taxable income (“ICTI”), as defined by the code, which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for dividends paid (the “Annual Distribution Requirement”).

In addition, we must distribute to our stockholders, for each taxable year, dividends of an amount at least equal to 90% of our investment company taxable income (“ICTI”), as defined by the code, which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for dividends paid (the “Annual Distribution Requirement”).

Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute to our stockholders in respect of each calendar year dividends of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of the excess (if any) of our realized capital gains over our realized capital losses, or capital gain net income (adjusted for certain ordinary losses), generally for the one-year period ending on October 31 of the calendar year and (3) the sum of any net ordinary income plus capital gains net income for preceding years that were not distributed during such years and on which we paid no federal income tax (the “Excise Tax Avoidance Requirement”).

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In addition, deductible expenses can be used only to offset ICTI, not net capital gain.

A RIC may not use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its ICTI, but may carry forward such net capital losses, and use them to

offset future capital gains, indefinitely.

Due to these limits on deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several taxable years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during those taxable years.

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See “ Item 1.

Business—Regulation as a Business Development Company—Senior Securities .” Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including certain diversification tests in order to qualify as a RIC for U.S.

Business—Regulation

as a Business Development Company—Senior Securities .” Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including certain diversification tests in order to qualify as a RIC for U.S.

federal income tax purposes (the “Diversification Tests”).

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Any such transaction could also result in our receiving assets that give rise to income that is not qualifying income for purposes of the 90% Income Test.

Our investment in non-U.S.

securities may be subject to non-U.S.

income, withholding and other taxes.

In that case, our yield on those securities would be decreased.

stockholders generally will not be entitled to claim a U.S.

foreign tax credit or deduction with respect to non-U.S.

taxes paid by the Company.

There may be uncertainty as to the appropriate treatment of certain of our investments for U.S.

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federal income tax purposes, rather than as ordinary dividend income, and would reduce each stockholder’s basis in Shares.

Certain distributions reported by us as section 163(j) interest dividends may be treated as interest income by stockholders for purposes of the tax rules applicable to interest expense limitations under Code section 163(j).

Such treatment by the stockholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis.

The amount that we are eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of our business interest income over the sum of our (i) business interest expense and (ii) other deductions properly allocable to our business interest income.

Failure to Qualify as a RIC

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business