MSC Income Fund, Inc.

Greetings and welcome to the MSC Income Fund Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughn. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us for MSC Income Fund's second quarter 2026 earnings conference call. Joining me today with prepared comments are Dwayne Hyzak, chief executive officer, Nick Meserve, managing director and head of the private credit investment group, David Magdol, president and chief investment officer, and Cory Gilbert, chief financial officer. MSC Income Fund issued a press release yesterday afternoon that details the fund's second quarter financial and operating results. This document is available on the investor relations section of the fund's website, at mscincomefund.com. The replay of today's call will be available beginning an hour after the completion of the call and will remain available until August 14th. Information on how to access the replay was included in yesterday's earnings release. We also advise you that this conference call is being broadcast live through the internet and can be accessed on the fund's homepage. Please note that information reported on this call speaks only as of today, August 7th, 2026, and therefore, you are advised that any time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading. Today's call may contain forward-looking statements. Any of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may, or similar expressions. These statements are based on management's estimates, assumptions, and projections as of the date of this call, and there are no guarantees of future performance. Actual results may differ materially from the results expressed or implied in these statements as a result of risks, uncertainties, and other factors, including, but not limited to, the factors set forth in the fund's filings with the Securities and Exchange Commission, which can be found on the fund's website or at sec.gov. The ISE Income Fund assumes no obligation to update any of these statements unless required by law. During today's call, management will discuss non-GAAP financial measures, including adjusted net investment income, or ANII, and ANII before taxes. ANII is net investment income, or NII, as determined in accordance with U.S. generally accepted accounting principles, or GAAP, excluding the impact of capital gains incentive fee. ANII before taxes is NII, as determined in accordance with GAAP, excluding the impact of the capital gains incentive fee and any tax expenses included in NII. Missy Income believes that presenting ANII and ANII before taxes and the related per share amounts is a useful and appropriate supplemental disclosure for analyzing the fund's financial performance since the calculation of the capital gains incentive fee is based on realized gains and losses and unrealized fair value appreciation and depreciation, none of which are included in NII, and tax expenses included in NII may include excise tax expense, which is not solely attributable to NII, and deferred taxes, which are not payable in the current period. Please refer to yesterday's press release for reconciliation of these non-GAAP measures to those directly comparable GAAP financial measures. Two additional key performance indicators that management will be discussing on this call are net asset value, or NAV, and return on equity, or ROE. NAV is defined as total assets minus total liabilities and is also reported on a per share basis. The Income Fund defines ROE as the net increase in net assets resulting from operations Please note that certain information discussed on this call, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. Now I'll turn the call over to MSC Income Fund CEO, Dwayne Hyzak.

Thanks, Zach. Good morning, everyone, and thank you for joining us. We appreciate your participation on this morning's call. We hope that everyone's doing well. In today's call, we will provide you with the fund's key quarterly updates, After which, we'll be happy to take your questions. Before we provide our normal quarterly updates, I want to start by congratulating Nick Meserve on the recent announcement of his planned transition to chief executive officer of the fund in the fourth quarter of this year. Nick is uniquely qualified to assume the role of the fund's CEO. He has led the fund's private loan investment strategy since the inception of the fund and has been part of Main Street's private loan investment strategy and activities since he joined the Main Street investment team in 2012. Nick has been a highly valuable member of our organization as we have grown the fund historically, taken it public in 2025, and focused its investment strategy on private loans. I look forward to continuing to work closely with Nick in my planned future role as the fund's executive chairman. Now turning to the fund's most recent operating results, we are pleased with the fund's performance in the second quarter, which resulted in an annualized return on equity of 15.9%. and a significant net fair value appreciation in the fund's investment portfolio. Based upon the quality of the fund's existing investment portfolio, together with the favorable liquidity position and the current investment pipeline, we remain excited about our future expectations for the fund. The fund generated adjusted net investment income, or ANII, of 33 cents per share on the quarter, or 36 cents per share on a before-taxes basis. These results, combined with our positive outlook for the future, resulted in the fund's most recent dividend announcements, which I will discuss in more detail later. The fund finished the quarter with an NAV per share of $16.51, a 4% increase from prior quarter, and we continue to be pleased with the performance of the fund's investment portfolio. Cory will discuss our financial results in more detail. The fund's private loan investment activity improved significantly in the second quarter, but the fund also experienced increased levels of repayments, resulting in a net increase in private loan investments of $10 million. The fund remains highly focused on executing new investment opportunities that are consistent with its historical private loan investments as we work to grow the fund's investment portfolio. The fund is also focused on maximizing the benefits from its legacy lower middle market investment portfolio and eventually recycling this capital into private loan investments as investments are exited or repaid. Reflecting on this priority, were pleased that the fund exited its investments in one high-performing lower middle market portfolio company, Center Technologies, in the second quarter at a realized gain of over $11 million and a meaningful premium to its March 31st fair value. The fund also continues to benefit from attractive follow-on investments in existing lower middle market portfolio companies, which we believe are beneficial to both current investment income and future value creation on those existing investments. Nick and David will cover the fund's investment activity in more detail. Based upon the fund's results for the second quarter, the fund's board of directors declared regular monthly dividends for the fourth quarter of $0.11 per share, payable in each of October, November, and December, and a supplemental dividend of $0.03 per share, payable in December, resulting in total dividends payable in the fourth quarter of $0.36 per share, consistent with the fund's total quarterly dividends for each quarter since the fund's listing in January 2025. Going forward, the fund expects to maintain a dividend policy that provides for its total quarterly dividends, which are expected to include regular monthly dividends and a supplemental dividend, to be set at a level generally consistent with the fund's ANII before taxes per share. Based upon the total dividends payable for the fourth quarter and the current stock price, the fund is providing shareholders a current dividend yield of over 12%. As we look forward to the fund's near-term investment activities, As of today, I would characterize the private loan investment pipeline as average. We're excited about the current pipeline of new investment opportunities and follow-on investment opportunities in existing portfolio companies, and we remain confident in our ability to generate attractive new private loan investment opportunities and grow the fund's investment portfolio over the next several quarters. Now turning to other opportunities intended to add value to the fund's shareholders, we're pleased to announce that the fund's board of directors recently authorized a new open market share repurchase plan under which the fund may repurchase up to $20 million of fund shares beginning in September 2026 and ending in February 2027 at times when the fund shares are trading at predetermined levels below the fund's NAV per share. As I noted earlier, we have a high level of comfort about the quality of the fund's investment portfolio and as a result believe that this repurchase plan can be used to create additional value for the fund shareholders. My last few comments are reminders of the continued support the fund has received from Main Street Capital Corporation. Since Main Street's wholly owned subsidiary was appointed the sole advisor to the fund in October 2020, Main Street has purchased over $30 million of the fund's common stock. In conjunction with the fund's new repurchase plan, Main Street also authorized a new share purchase plan to purchase up to $20 million of the fund's shares, with the terms of such plan being identical to the fund's new open market share repurchase plan. resulting in a total of $40 million of potential purchases between the fund and Main Street under such plans and with any open market share purchases being split by the fund and Main Street on a pro-rata basis. As an additional show of support for the fund, Main Street, through its wholly owned investment advisor, voluntarily agreed to permanently waive approximately $260,000 of incentive fees earned for the second quarter to support the funds resulting ANII before taxes per share resulting in total incentive fee waivers of $1.4 million over the last year. We believe these actions demonstrate Main Street's commitment to the future success of the fund and reinforce Main Street's confidence in the strength and quality of the fund's investment portfolio and investment strategy. With that, I will turn the call over to Nick.

Thanks, Dwayne, and good morning, everyone. We are pleased with the performance of the fund's private loan investment portfolio in the second quarter, which represents the largest portion of the fund's investment portfolio and, as a reminder, is the fund's sole focus with respect to new portfolio company investments. The overall operating performance for most of the fund's private loan portfolio companies continue to be positive, which contributed to the fund's second quarter financial results. The fund also benefited in the quarter from meaningful net fair value appreciation. Based upon the positive performance and outlook for certain private loan portfolio companies where the fund has an equity investment. Given the current economic uncertainty that exists across certain parts of the economy, We are diligently working to stay in front of the fund's portfolio companies to understand their exposures to changing environments. To date, based upon those ever-evolving discussions, we are comfortable with the future outlook for the portfolio. At quarter end, 93% of the private loan portfolio was comprised of secure debt investments, over 99% of which were first lien and 95% of which were floating rate loans. The portfolio had an attractive weighted average yield of 10.4%, relatively consistent with the prior quarter end. During the second quarter, the fund invested $62 million in the private loan portfolio, which after aggregate investment activity resulted in a net increase of $10 million. The fund ended with the second quarter with investments in 81 private loan portfolio companies, totaling $848 million of fair value, representing 61% of the fund's total investment portfolio at fair value. As Dwayne mentioned, our current private loan pipeline is average. Since the end of the second quarter, we have closed three new private loan portfolio companies, We expect M&A activity will be higher in the second half of the year and expect that activity to continue to grow our pipeline. With that, I will turn the call over to David.

Thanks, Nick. Good morning, everyone. In addition to the private loan portfolio that Nick covered, the fund also maintains a portfolio of legacy lower middle market investments. As a reminder, these are combined debt and equity investments in smaller privately held companies whereby the fund partnered directly with the company's existing business owners and management team Through co-investments with Main Street Capital Corporation, utilizing the customized one-stop debt and equity financing solutions provided by Main Street's lower middle market investment strategy. After the listing of the fund shares on the New York Stock Exchange in January of 2025, the fund no longer makes investments in new lower middle market portfolio companies, but continues to participate in follow-on investments in its existing lower middle market portfolio companies. Please report that the overall operating performance for most of the fund's lower middle market portfolio companies continues to be positive, which contributed to the fund's second quarter results. Despite the continued heightened level of uncertainty in the overall economy, we remain confident in the ability of these lower middle market portfolio companies to continue to successfully navigate the current environment. During the second quarter, the fund completed $13 million in total lower middle market portfolio follow-on investments, which after aggregate investment activity resulted in a decrease in the lower middle market portfolio of $2 million. Quarter-end, the lower middle market portfolio had investments in 55 portfolio companies totaling $504 million of fair value and representing 36% of the fund's total investment portfolio. The lower middle market portfolio at fair value is comprised of 54% debt investments and 46% equity investments. 99% of these debt investments were first lien loans, and they had an attractive weighted average yield of 12.7%. The fund had equity ownership positions in all of its lower middle market portfolio companies, representing an 8% average ownership position. We expect that these investments will continue to provide significant benefits in the future, including the opportunity for continued dividend income, fair value appreciation, and eventually meaningful realized gains upon the future exit of these lower middle market investments. Great recent example of the benefits these portfolio companies can provide is the recent exit of the fund's investments in center technologies in the second quarter, which resulted in a realized gain of $11.6 million. Finally, and as Dwayne mentioned, we continue to see interest from potential buyers in some of the fund's lower middle market portfolio companies, which we expect will lead to favorable outcomes over the next few quarters. During the fund's total investment portfolio as of June 30th, the fund continues to maintain a highly diversified portfolio with investments in 144 portfolio companies spanning across numerous industries and end markets. The fund's largest portfolio companies represented less than 4% of the total investment portfolio fair value of quarter end and less than 4% of the total investment income for the trailing 12-month period, with most portfolio investments representing less than 1% of the fund's income and assets.

Thank you, David, and thank you to everyone who has joined us today. This month's total investment income for the second quarter was $35.7 million, consistent with Q2 2025 and an increase of $1.6 million, or 4.7%, from the first quarter. Interest income for the second quarter increased by $0.7 million from a year ago and from the first quarter. The increase in interest income from the prior year was principally attributable to higher average levels of income-producing investment portfolio debt investments partially offset by a decrease in interest rates primarily resulting from decreases in benchmark index rates on floating rate debt investments and the negative impact from debt investments on non-approval status. The increase in interest income from the first quarter was principally attributable to higher average levels of income-producing investment portfolio debt investments partially offset by the negative impact from debt investments on non-accrual status. Fee income for the second quarter increased by $0.5 million from a year ago and by $0.7 million from the first quarter. The increase in fee income from both the prior year and the first quarter was primarily due to an increase in fees related to increased investment activity. Dividend income for the second quarter decreased by $1.1 million from a year ago and increased by $0.3 million from the first quarter. The decrease in dividend income from the prior year was primarily due to a decrease in dividends from lower middle market and private loan equity investments. The increase in dividend income From the first quarter was primarily due to an increase in dividends from lower middle market equity investments. In the second quarter of 2026, dividend included $0.5 million of non-reoccurring items. As we've previously discussed, dividend income will fluctuate quarter to quarter based on the underlying performance, cash flows, and capital allocation activities of the fund's portfolio companies and certain non-recurring items. The second quarter included income considered less consistent or non-recurring in nature of $2.2 million. As we previously discussed, these non-recurring items vary quarter to quarter and can include dividend income from equity investments and interest and fee income from accelerated prepayment, repricing and other activity related to debt investments. These items were $1.4 million higher than the second quarter of 2025 and $1.6 million higher than the first quarter and $1 million higher than the average of the prior four quarters. The fund's expenses net of waivers for the second quarter increased by $4 million from the second quarter of 2025 and increased by $5.5 million from the first quarter. The increase from the prior year was principally attributable to a $2.9 million increase in the capital gains incentive fee accrual, a $1.2 million increase in interest expense, and a $0.4 million increase in base management fees, partially offset by a $0.6 million decrease in incentive fee on income net of waivers. The capital gains in Cinefee accrual increased by $2.9 million in the second quarter compared to no accrual a year ago due to the net fair value appreciation of the fund's investments in the second quarter of 2026. The increase in interest expense from a year ago was largely driven by an increase in average borrowings outstanding used to fund a portion of the growth of the fund's investment portfolio and an increase weighted average interest rate on the fund's unsecured debt obligations driven by the issuance of the May 2029 notes in the first quarter of 2026, partially offset by a decreased weighted average interest rate on the credit facilities due to decreases in benchmark index rates. The increase in base management fees from a year ago is the result of the fund's increased Average Total Assets The $0.6 million decrease in the incentive fee on income net of waivers is the result of a decrease in the gross calculated incentive fee on income of $0.3 million and a $0.3 million voluntary permanent waiver of incentive fee on income by the fund's investment advisor. Decrease in the gross calculated incentive fee on income is a result of a decrease in pre-incentive fee, NII. The $5.5 million increase from the first quarter in the fund's expenses net of waivers was primarily driven by increases of $3.6 million in the capital gains incentive fee accrual, $0.9 million in interest expense, and $0.7 million in incentive fee on income net of waivers. The $3.6 million increase in the capital gains incentive fee accrual from the first quarter reflects the $2.9 million increase to the accrual recorded in the second quarter of 2026 compared to the $0.6 million reduction in the first quarter. The accrual increase was the result of the net fair value appreciation of the fund's investments in the second quarter. The increase in interest expense was primarily driven by an increase in weighted average balance of debt outstanding and an increase in effective interest rates on existing debt outstanding. The increase in the net incentive fee on income was primarily due to the $0.7 million decrease in the voluntary waiver of incentive fee on income. The fund's expense ratio, calculated as the ratio of total non-interest operating expenses, excluding incentives, net of waivers, as a percentage of the fund's average total assets, was 1.9% on an annualized basis for the second quarter, consistent with the prior year and an increase from 1.8% in the first quarter. The funds adjusted NII before taxes in the second quarter was $16.3 million, or 36 cents per share, decreasing from $17.3 million, or 37 cents per share, from the prior year. During the quarter, the fund recorded a net increase in the fair value of its investments of $19 million, representing the impact of $9.9 million of net realized gains and $9.1 million of net unrealized depreciation. The net fair value increase was primarily attributable to an increase of $10.7 million in the private loan portfolio and $10 million in the lower middle market portfolio, partially offset by a decrease of $1.6 million in the residual middle market portfolio. Overall, the fund's operating results for the second quarter resulted in a net increase in net assets of $29.3 million, or $0.65 per share, The fund's NAV per share was $16.51, a 64-cent increase from the first quarter and 98 cents above the fund's public offering price per share in its public offering and listing on the New York Stock Exchange in January 2025. As of quarter end, the fund had investments on non-accrual status comprising 1.9 percent of the total investment portfolio at fair value, and 5.8% at cost. As of quarter end, the fund's regulatory asset coverage ratio was 2.13 and its net debt to NAV ratio was 0.85. As we look ahead, our $150 million of October 2026 notes mature on October 30th and we are actively evaluating our options for addressing that maturity ahead of the October date. We're confident in our ability to manage this maturity in a way that continues to support the fund's growth and reflects our conservative approach to the fund's capital structure. With that, I will now turn the call back over to the operator so we can take any questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Kenneth Lee with RBC Capital Markets. Please proceed with your question.

Hey, good morning, and thanks for taking my question. One around leverage. I'm wondering if you could just give any updated outlook in terms of timeframes as you continue to ramp up to the targeted leverage ranges. Thanks.

Sure, Ken. Good morning. Thanks for the question. I'd say the timing of that's hard to predict or difficult to predict. It's really going to come down to the pipeline and pace of investment activity on the private loan side. As you know, the fund's sole investment Strategy today for new companies is focused on private loans. It's going to be concentrated in that pipeline and those activities. I think we feel good about it today, but it's really hard to predict how long it will take us to ramp. If you were to kind of use a best guess, I'd say the next three or four quarters. I think we expect to have fairly significant investment activity and growth of the portfolio. You could also continue to have some accelerated repayments, so that'll be another governor that we just have to manage or navigate. But, Nick, if you have any other call you want to add on the pipeline?

I think that would be the goal of the next three or four quarters to get back to the target leverage.

Okay, great. And one follow-up, if I may, just in terms of the private loans pipeline that you're seeing there. Any particular attractive segments or opportunities that you're seeing within the pipeline? And maybe you could just also talk about some of the terms – Pricing that you've been seeing on some of the more recent transactions. Thanks.

Yeah, I'd say from the target side of it, I'd say the industries fit our existing portfolio. So not focused on any one industry or any one space. But I think deals in portfolio companies that we've seen the portfolio in the past are what we're targeting and what we're seeing in our pipeline. Second question there on the terms. I'd say we're probably around the same spot we've been for the last quarter or so. Spreads have come wider since January. But I think we're probably in the same spot we were last time we talked about it last call.

Gotcha. Very helpful there. Thanks again. Thanks, Ken.

Thank you. Our next question comes from the line of Aaron Singanovich, which was curious. Please proceed with your question.

Thanks. What are you seeing from competitive environment today? The pipeline's kind of average, sometimes a little bit more of a competitive environment if it's not a ton of supply.

Yeah, I do think that, you know, we talked about the last few quarters and really the last few years is the overall M&A activity in the space has been lower, especially on the private equity side. And so that has, I'd say, kept competition pretty strong. I think if we see that volume pick up, I think the overall competition level and potentially spreads and terms go a little wider as there's less capacity for the overall deals. But to date, in the last few years, we've really just seen a kind of muted M&A market. So if that does pick up, I'd see competition getting less going forward if that's the case.

And non-accruals ticked up a little bit this quarter. It does bounce around a decent amount from quarter to quarter today. Where do you see your more of an average level of non-accruals on a cost basis for your segment of the market? It seems just to be a tad higher than maybe in the upper middle.

I think what you said there, Aaron, is correct. I think when we look at the non-accruals at the end of the quarter, they are a little elevated above where we've been Historically, obviously, you'd like that number to be as low as possible. It's never going to be zero, just given the nature of what we do. But I think you're probably looking at something that's 2% on a cost basis, kind of 2% higher than where kind of more of a long-term average would be. So it's slightly elevated versus where it was on a longer-term historical average.

But Nick, if you have a different view? I think that's about where we'd like to target it at. I do think some of the times, if you look through our cost basis, we've got some names that have been on there for a long period of time. On the smaller end, sometimes it makes more sense to leave. As we're working through restructuring or recovery on a deal, it makes sense to keep the debt outstanding, and we'll recover that over multiple years, especially in a liquidation scenario. And so some of those deals have been on there for a long period of time, and we'll be out there as we collect cash flow on an annual basis on it.

Thanks, Aaron. Thank you. Our next question comes from the line of Heli Sheth with Raymond James. Please proceed with your question.

Good morning. Thanks for the question. In terms of leverage, being that you're ramping up over the next few quarters, how are you weighing redeploying cash into new investments versus just taking advantage of current market discounts in order to repurchase stock?

I think we're taking what we think is a balanced approach. I think we're actively looking at taking both steps to create value. As you should have seen in the earnings release and as we talked about in our prepared comments, we are putting in place a share repurchase plan to take advantage of the discount that the stock has been trading at. We think that's a good use of capital. We think it's a productive way to create value for the shareholder, but we also want to continue to deploy Capital, we think it continues to be an attractive market on the private loan side for new investments. And on the lower middle market side, as we have following opportunities, we view those opportunities to be very attractive. So we'll continue to deploy capital in those opportunities as well. But I'd say we're trying to take a balanced approach between continuing to deploy, grow the portfolio, diversify it, but also look at opportunities to redeem shares if the stock continues to trade at a significant discount.

Got it. That's helpful. And then switching gears a little bit to software, we've kind of seen pricing on software, pricing and spreads rise over the past quarter based on what your peers are saying. And I think we've also noticed that a lot of other BDCs are sort of shifting the sectors they're investing in in order to reduce their software exposure. Being that MSF is sort of relatively underexposed to software, are you seeing any opportunities there?

Yeah, I think software's never been a focus area for us. That's why our exposure there has been and continues to be very small or minor compared to most of the space. The types of companies we've always preferred are more basic, mature businesses, so nothing's changed there. And the fact that Spreads may get a little bit wider there. I still don't think that's an area that we would expect to be active in.

Got it. Thank you for the caller.

Thank you.

Thank you. And as a reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the queue. Our next question comes from the line of Melissa Ouedo with UBS. Please proceed with your question.

Great. Thanks for taking my questions today. I have one more follow-up on the share repurchase authorization that you described in your press release. I'm curious, given how much capacity you have to increase leverage within the portfolio, how do you come to the size of that particular authorization at 20 million directly in the fund and the timing of it through February 27? It seems like sometimes when BDCs will put these into place, They can be perhaps larger, not necessarily fully used, and usually extend for a full year. Just like to understand that. Thanks.

Sure, Melissa. Thanks for joining us and thanks for the question. I'd say we don't have a super scientific analysis we went through. I think we sized the $20 million at a level that for six months we thought was a reasonable amount. We also took into consideration the continued support that Main Street Capital Corporation The owner of the advisor, the fact that they were also going to participate in a purchase plan alongside the fund for $20 million. So we really look at the sizing of the plan at $40 million. And given the market cap of the fund and the fact that it's a six-month time period, we just thought that was an adequate amount. But I wouldn't say it was super scientific. We took a number of different factors or data points into consideration and got to a number that we thought and the board thought was a reasonable amount to to have as our repurchase activities.

Okay, thanks for that. And then a follow-up, just trying to get behind the NAV growth quarter over quarter. I mean, obviously you called out the $11 million plus realized gain from exiting Center of Technologies. Does that imply that you realized an exit value that was substantially above the prior quarter end mark? Just want to understand that. Thanks.

Yeah, so in the case of Center specifically, as you said, it was an attractive realized gain. Off the top of my head, it was an $11 million realized gain, and that realized gain was at a premium. I want to say it was a million and a half or two million. It was a million and a half higher than the fair value at 331. So it was meaningful, but it's not the sole driver of the increase in NAV. We had a number of other companies, both lower middle market and Private Credit that contributed to our fair value appreciation in the quarter. Just as a reminder for everyone, while the equity investment strategy for private loans is a small piece of the strategy, we do seek to make equity investments alongside our debt investments in a number of our private loans. Sometimes the private equity sponsor doesn't give us that opportunity because they want to keep all the equity, but certain situations they will allow us to be a A small equity co-investor, and we've had a couple of those companies where the company has performed exceptionally well, and we're seeing the benefits of that performance come through in our fair value appreciation for the private loan portfolio. So it'd be a combination of those two on the fair value appreciation.

Okay, I appreciate that. And apologies, I'm going to sneak in one more follow-up. Following along that line, when you see appreciation in some of the equity pieces like that, does that Portend any, you know, increase in deal activity? Is that a potentially attractive transaction for your private FBA partners?

Thanks. It could be. I'd say the movement in fair value will primarily be driven, and this is both, you know, lower motor market and private loan. Primarily, it's going to be driven by fundamental performance of the company. You know, EBITDA is growing. They're using free cash flow to de-lever, and typically it's a combination of both of those two. That's initially going to be the Thank you for joining us. Over the life of the investments, you would have seen both of those for the first 75% of our investment period would have been driven by fundamental EBITDA growth, deleveraging, had an acquisition plan that was very accretive and executed at a very high level by our management team partners there. So you saw that drive fair value. And then probably nine or 12 months prior to exit, as they started getting a lot of inbound interest, then you started seeing the valuation multiple increase as you started getting your data points pointing to a higher valuation multiple than what we had it marked at, which once you start seeing that and it's credible, you can't ignore it as part of our valuation process.

Okay, great. Thanks for that context.

Thank you, and thanks for the questions.

Thank you. And we have reached the end of the question and answer session, and therefore I'd like to turn and call back over to management for closing remarks.

We just want to say thank you again to everyone for joining us this morning. We appreciate the continued support of the fund shareholders, and we look forward to our next call in early November after we release our results for the third quarter.

Thank you, and this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.