Morgan Stanley Direct Lending Fund

Previous wording

In this Quarterly Report on Form 10-Q, or this “Report”, except where context suggests otherwise, the terms “Company,” “we,” “our” or “us” refers to Morgan Stanley Direct Lending Fund and its consolidated subsidiaries. This Report, including the documents we incorporate by reference into this Report, contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and you should not place undue reliance on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and opinions and our assumptions. 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. Morgan Stanley has no history of financially supporting any business development company (“BDC”) on the MS Private Credit platform, even during periods of financial distress. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “potential,” “predicts,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

Current wording

In this Quarterly Report on Form 10-Q, or this “Report”, except where context suggests otherwise, the terms “Company,” “we,” “our” or “us” refers to Morgan Stanley Direct Lending Fund and its consolidated subsidiaries. This Report, including the documents we incorporate by reference into this Report, contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and you should not place undue reliance on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and opinions and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “potential,” “predicts,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

Previous wording

general economic, political and industry trends and other external factors, including uncertainty surrounding the financial and political stability of the United States and other countries;

Current wording

general economic, political and industry trends and other external factors, including government shutdowns and uncertainty surrounding the financial and political stability of the United States and other countries;

Previous wording

our ability to maintain our qualification as a BDC and as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”);

Current wording

our ability to maintain our qualification as a business development company (“BDC”) and as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”);

Previous wording

We are a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. We have elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. 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 classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. We are externally managed by our Adviser, an indirect, wholly owned subsidiary of Morgan Stanley. We are not a subsidiary of, or consolidated with, Morgan Stanley.

Current wording

We are a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. We have elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. 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 classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. We are externally managed by our Adviser, an indirect, wholly owned subsidiary of Morgan Stanley.

Previous wording

Pursuant to the exemptive relief granted by the SEC to us and our Adviser on June 3, 2025 (the “Order”), we are able to enter into certain negotiated co-investment transactions alongside certain Regulated Funds (as defined in the Order) and other accounts advised by our Adviser and its affiliates, which may include proprietary accounts of Morgan Stanley, in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with the Order. The Order contains certain conditions and requires the Board to maintain oversight of our participation in the co-investment program. The Order also requires a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors to make certain conclusions pursuant to Section 57(f) of the 1940 Act in connection with certain co-investment transactions, including co-investment transactions in which an affiliate of ours is an existing investor in the portfolio company, non-pro rata follow on investments and non-pro rata dispositions of investments.

Current wording

Pursuant to the exemptive relief granted by the SEC to us and our Adviser on June 3, 2025 (the “Order”), we are able to enter into certain negotiated co-investment transactions alongside certain Regulated Funds and Affiliated Entities (each as defined in the Order), in a manner consistent with our investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with the Order. The Order contains certain conditions and requires the Board to maintain oversight of our participation in the co-investment program. The Order also requires a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors to make certain conclusions pursuant to Section 57(f) of the 1940 Act in connection with certain co-investment transactions, including co-investment transactions in which an affiliate of ours is an existing investor in the portfolio company, non-pro rata follow on investments and non-pro rata dispositions of investments.

Previous wording

1 Calculated as a percentage of gross debt commitments (funded and unfunded). Weighted average EBITDA, net leverage through the tranche that the Company is a lender, weighted average interest coverage and weighted average loan to value exclude recurring revenue investments, which are investments in portfolio companies in which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA.

Current wording

(1)Calculated as a percentage of gross debt commitments (funded and unfunded). Weighted average EBITDA, net leverage through the tranche in which the Company is a lender, weighted average interest coverage and weighted average loan to value exclude recurring revenue investments, which are investments in portfolio companies to which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA.

Previous wording

5 Net leverage is calculated as the ratio of total debt minus cash divided by EBITDA and taking into account leverage through the tranche that the Company is a lender, excluding recurring revenue investments.

Current wording

(5) Net leverage is calculated as the ratio of total debt minus cash divided by EBITDA and taking into account leverage through the tranche in which the Company is a lender, excluding recurring revenue investments.

Previous wording

6 Interest coverage for a particular portfolio company is calculated by taking credit agreement EBITDA and dividing by annualized latest reported interest expense. Total interest coverage is calculated on a weighted average basis based on total gross debt commitments (funded and unfunded). Calculation excludes recurring revenue deals which are investments in portfolio companies in which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA. Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.

Current wording

(6)Interest coverage for a particular portfolio company is calculated by taking credit agreement EBITDA and dividing by annualized latest reported interest expense. Total interest coverage is calculated on a weighted average basis based on total gross debt commitments (funded and unfunded). Calculation excludes recurring revenue deals which are investments in portfolio companies to which the Company lends based on a multiple of recurring revenue generated by the portfolio company and not based on a multiple of EBITDA. Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.

Previous wording

7 Calculated using total outstanding debt through the tranche that the Company is a lender divided by total enterprise value from the private equity sponsor or market comparables.

Current wording

(7)Calculated using total outstanding debt through the tranche in which the Company is a lender divided by total enterprise value from the private equity sponsor or market comparables.

Previous wording

Represents dollar amount of other investments funded.

Current wording

Represents dollar amount of equity investments funded in Capstone Lending.

Previous wording

4 Computed as (a) the annual stated spread, plus reference rate, as applicable, plus the annual accretion of discounts, as applicable on all investments of the Company divided by (b) total investments (at fair value or cost, as applicable) included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented herein.

Current wording

(1) Computed as (a) the annual stated spread, plus reference rate, as applicable, plus the annual accretion of discounts, as applicable on all investments of Capstone Lending divided by (b) total investments (at fair value or cost, as applicable) included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented herein.

Previous wording

Risk Rating 1 — In the opinion of our Investment Adviser, investments in Risk Rating 1 involve the least amount of risk relative to our initial cost basis at the time of origination or acquisition. Risk Rating 1 investments performance is above our initial underwriting expectations and the business trends and risk factors are generally favorable, which trends or factors may include the performance of the portfolio company, or the likelihood of a potential exit.

Current wording

Risk Rating 1 — In the opinion of our Investment Adviser, investments in Risk Rating 1 involve the least amount of risk relative to our initial cost basis at the time of origination or acquisition. Risk Rating 1 investment performance is above our initial underwriting expectations and the business trends and risk factors are generally favorable, which trends or factors may include the performance of the portfolio company, or the likelihood of a potential exit.

Previous wording

In the table above, total investment income decreased from $109,752 for the three months ended September 30, 2024 to $99,722 for the three months ended September 30, 2025 and from $313,041 for the nine months ended September 30, 2024 to $300,690 for the nine months ended September 30, 2025. The decrease was primarily driven by declining base rates and repricing on our existing portfolio which impacted our weighted average yield. Our weighted average yield at cost decreased to 9.7% as of September 30, 2025 from 11.0% as of September 30, 2024.

Current wording

In the table above, total investment income decreased from $101,458 for the three months ended March 31, 2025 to $89,064 for the three months ended March 31, 2026. The decrease was primarily driven by declining base rates and repricings on our existing portfolio, which impacted our weighted average yield. Our weighted average yield at cost decreased to 9.3% as of March 31, 2026 from 10.2% as of March 31, 2025. For three months ended March 31, 2026 and March 31, 2025, 4.6% and 4.1% of our total investment income was comprised of PIK interest.

Previous wording

Additionally, for the three and nine months ended September 30, 2025, we recorded $1,560 and $5,009, respectively, of non-recurring interest income (e.g., prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.) as compared to $2,104 and $4,555, respectively, for the same periods in the prior year, primarily as a result of prepayments.

Current wording

Additionally, for the three months ended March 31, 2026, we recorded $1,297 of non-recurring interest income (e.g., prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.) as compared to $1,667 for the same period in the prior year, primarily as a result of prepayments.

Previous wording

Interest and other financing expenses, including unused commitment fees, amortization of debt issuance costs, net change in unrealized (appreciation) depreciation on effective interest rate swaps and hedged items and deferred financing costs, increased to $33,903 for the three months ended September 30, 2025 from $33,153 for the three months ended September 30, 2024 and to $102,788 for the nine months ended September 30, 2025 from $89,715 for the nine months ended September 30, 2024. The increase was primarily due to higher average borrowings outstanding for the three and nine months ended September 30, 2025. For the three months ended September 30, 2025 and September 30, 2024, average borrowings outstanding were $2,021,437 and $1,799,879, respectively, which were offset by the reduction of our average interest rate which decreased from 6.45% to 5.85%, for the three months ended September 30, 2024 and September 30, 2025, respectively. For the nine months ended September 30, 2025 and September 30, 2024, average borrowings outstanding were $2,032,797 and $1,614,402, respectively, which was offset by the reduction of our average interest rate which decreased from 6.56% to 5.96%, for the nine months ended September 30, 2024 and September 30, 2025, respectively.

Current wording

Interest and other financing expenses, including unused commitment fees, amortization of debt issuance costs, net change in unrealized (appreciation) depreciation on effective interest rate swaps and hedged items and deferred financing costs, decreased to $30,665 for the three months ended March 31, 2026 from $34,179 for the three months ended March 31, 2025. The decrease was primarily due to the reduction of our average interest rate which decreased from 6.11% to 5.48%, respectively, mainly driven by declining base rates and a shift in our funding mix toward lower costing debt.

Previous wording

Base management fees, net of waiver, were $9,628 and $28,229 for the three and nine months ended September 30, 2025 and $6,825 and $18,437 for the three and nine months ended September 30, 2024, respectively. The increase was primarily due to an increase in average gross assets. In addition, the management fee waiver expired on January 24, 2025.

Current wording

Base management fees, net of waiver, were $9,430 for the three months ended March 31, 2026 and $8,977 for the three months ended March 31, 2025, respectively. The increase was due to the management fee waiver which expired on January 24, 2025.

Previous wording

The incentive fee consists of two components: (1) income based incentive fee and (2) capital gains incentive fee. The income based incentive fees, net of waiver, were $9,281 and $28,029 for the three and nine months ended September 30, 2025 and $8,448 and $28,476 for the three and nine months ended September 30, 2024, respectively. In addition, the incentive fee waiver expired on January 24, 2025.

Current wording

The incentive fee consists of two components: (1) income based incentive fee and (2) capital gains incentive fee. The income based incentive fees, net of waiver, were $5,800 for the three months ended March 31, 2026 and $9,468 for the three months ended March 31, 2025, respectively. The decrease was primarily a result of the incentive fee cap, which limits the amount of incentive fees payable to the adviser due to net realized losses. For the three months ended March 31, 2026, net realized losses were primarily driven by the restructuring of our first lien debt investments in 48Forty Solutions, LLC.

Previous wording

Net Realized Gain (Loss) and Unrealized Gain (Loss) on Investments

Current wording

Net Realized Gain (Loss) and Net Change in Unrealized Gain (Loss) on Investments

Previous wording

For the three months and nine months ended September 30, 2025, net change in unrealized depreciation on our investments of $16,131 and $40,990, respectively, was primarily the result of the changes in spreads in the secondary markets as well as financial performance in certain portfolio companies. For the three and nine months ended September 30, 2024, net change in unrealized appreciation on our investments of $5,442 and $10,916 was primarily driven by changes in spreads in the primary and secondary markets.

Current wording

For the three months ended March 31, 2026, net change in unrealized depreciation on our investments of $31,838 was primarily the result of the changes in spreads in the secondary markets as well as financial performance in certain portfolio companies. For the three months ended March 31, 2025, net change in unrealized depreciation on our investments of $17,106 was primarily driven by changes in spreads in the primary and secondary markets.

Previous wording

We generate cash from the net proceeds of offerings of our Common Stock, net borrowings from our credit facilities, net proceeds of our unsecured debt issuances and debt securitizations and through cash flows from operations, including investment sales and repayments as well as income earned on investments. Details of our credit facilities, unsecured debt issuances and debt securitizations are described in “—Debt” below. We may, from time to time enter into new credit facilities, increase the size of existing credit facilities or issue additional debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.

Current wording

We generate cash from the net proceeds of offerings of our Common Stock, net borrowings from our credit facilities, net proceeds of our unsecured debt issuances and debt securitization and through cash flows from operations, including investment sales and repayments as well as income earned on investments. Details of our credit facilities, unsecured debt issuances and debt securitizations are described in “—Debt” below. We may from time to time enter into new credit facilities, increase the size of existing credit facilities or issue additional debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.

Previous wording

As of September 30, 2025, we had approximately $71,703 of unrestricted cash, cash equivalents, and short term investments (including investments in money market funds), which taken together with our approximately $249,000 and $1,147,105 of availability under the BNP Funding Facility and the Truist Credit Facility (subject to borrowing base availability) (each as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements), respectively, we expect to be sufficient for our investing activities and sufficient to conduct our operations in the near term. As of September 30, 2025, we believed we had adequate financial resources to satisfy unfunded portfolio company commitments of $519,349.

Current wording

As of March 31, 2026, we had approximately $96,693 of unrestricted cash, cash equivalents, and short term investments (including investments in money market funds), which taken together with our approximately $249,000 and $1,160,215 of availability under the BNP Funding Facility and the Truist Credit Facility (subject to borrowing base availability) (each as defined in Note 6. “Debt” in the notes to the accompanying consolidated financial statements), respectively, we expect to be sufficient for our investing activities and sufficient to conduct our operations in the near term. As of March 31, 2026, we believed we had adequate financial resources to satisfy unfunded portfolio company commitments of $448,993.

Previous wording

For the three and nine months ended September 30, 2025 and September 30, 2024, there were no shares issued through ATM offerings.

Current wording

For the three months ended March 31, 2026 and March 31, 2025, there were no shares issued through ATM offerings.

Previous wording

We adopted an “opt out” DRIP effective as of January 26, 2024, which was later amended effective as of December 7, 2024. As a result, our stockholders who have not “opted out” of the DRIP will have their cash dividends or distributions automatically reinvested in additional shares of Common Stock, rather than receiving cash. Stockholders who receive distributions in the form of shares of Common Stock will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, those stockholders will not receive cash with which to pay any applicable taxes.

Current wording

We adopted an “opt out” DRIP effective as of January 26, 2024, which was later amended effective as of December 7, 2024. As a result, our stockholders who have not “opted out” of the DRIP will have their cash dividends or distributions (net of applicable withholding tax) automatically reinvested in additional shares of Common Stock rather than received in cash. Stockholders who receive distributions in the form of shares of Common Stock will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, those stockholders will not receive cash with which to pay any applicable taxes.

Previous wording

The following table summarizes our distributions declared and payable for the nine months ended September 30, 2025 and September 30, 2024, respectively:

Current wording

The following table summarizes our distributions declared and payable for the three months ended March 31, 2026 and March 31, 2025, respectively:

Previous wording

The following table summarizes the shares repurchased under our Original Company 10b5-1 Plan during the nine months ended September 30, 2024:

Current wording

The following table summarizes the shares repurchased under our share repurchase program during the three months ended March 31, 2026:

Previous wording

The following table summarizes the shares repurchased under our Original Company 10b5-1 Plan and Amended and Restated Company 10b5-1 Plan during the nine months ended September 30, 2025:

Current wording

The following table summarizes the shares repurchased under our share repurchase program during the three months ended March 31, 2025:

Previous wording

As of September 30, 2025 and December 31, 2024, a letter of credit of $9,775 and $1,828, respectively, was outstanding, which reduced the unused availability under the Truist Credit Facility by the same amount. Under the Truist Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of September 30, 2025 and December 31, 2024, the Company had borrowings denominated in Euros (EUR) of 3,298 and 3,298, respectively, Canadian dollars (CAD) of 3,300 and 300, respectively and Pound Sterling (GBP) of 1,020 and 1,020, respectively.

Current wording

As of March 31, 2026 and December 31, 2025, a letter of credit of $10,775 and $9,775, respectively, was outstanding, which reduced the unused availability under the Truist Credit Facility by the same amount. Under the Truist Credit Facility, the Company may borrow in U.S. dollars or certain other permitted currencies. As of March 31, 2026 and December 31, 2025, the Company had borrowings denominated in Euros (EUR) of 3,298 and 3,298, respectively, Canadian dollars (CAD) of 3,300 and 3,300, respectively and Pound Sterling (GBP) of 1,020 and 1,020, respectively.

Previous wording

As of September 30, 2025 and December 31, 2024, the carrying value of the CLO 2025-1 Issued Debt was presented net of unamortized debt issuance costs of $2,804 and $0, respectively.

Current wording

As of March 31, 2026 and December 31, 2025, the carrying value of the CLO 2025-1 Issued Debt was presented net of unamortized debt issuance costs of $2,897 and $2,869, respectively.

Previous wording

As of September 30, 2025, the carrying value of the Company’s 2027 Notes, 2025 Notes, 2029 Notes and 2030 Notes were presented net of unamortized debt issuance costs of $1,537, $0, $2,823 and $4,016 and unamortized original issuance discount of $292, $0, $2,817 and $3,475, respectively. As of December 31, 2024, the carrying value of the Company’s 2027 Notes, 2025 Notes, 2029 Notes and 2030 Notes were presented net of unamortized debt issuance costs of $2,374, $856, $3,297 and $0 and unamortized original issuance discount of $452, $0, $3,398 and $0, respectively.

Current wording

As of March 31, 2026, the carrying value of the Company’s 2027 Notes, 2029 Notes and 2030 Notes were presented net of unamortized debt issuance costs of $1,024, $2,433 and $3,756 and unamortized original issuance discount of $185, $2,430 and $3,101, respectively. As of December 31, 2025, the carrying value of the Company’s 2027 Notes, 2029 Notes and 2030 Notes were presented net of unamortized debt issuance costs of $1,252, $2,626 and $3,798 and unamortized original issuance discount of $238, $2,621 and $3,286, respectively.

Previous wording

On November 4, 2025, the Board declared a distribution of $0.50 per share, which is payable on or around January 23, 2026 to shareholders of record as of December 31, 2025.

Current wording

On May 5, 2026, our Board declared a distribution of $0.45 per share, which is payable on or around July 24, 2026 to shareholders of record as of June 30, 2026.

Previous wording

We consider the most significant accounting policies to be those related to our Investments, Revenue Recognition, Deferred Financing Costs and Debt Issuance Costs and Income Taxes. The valuation of investments is our most significant critical estimate. The most significant input is the discount rate used in yield analysis that is based on comparable market yields. Significant increases in the discount rates in isolation would result in a significantly lower fair value measurement. For further discussion and disclosure of key inputs and considerations related to this estimate, refer to Note 5 "Fair Value Measurements" included in the notes to the consolidated financial statements included in Part I, Item I of this Report.

Current wording

We consider the most significant accounting policies to be those related to our Investments, Revenue Recognition, Deferred Financing Costs and Debt Issuance Costs and Income Taxes. The valuation of investments is our most significant critical estimate. The most significant input is the discount rate used in yield analysis that is based on comparable market yields. Significant increases in the discount rates in isolation would result in a significantly lower fair value measurement. For a further discussion and disclosure of key inputs and considerations related to this estimate, refer to Note 5 "Fair Value Measurements" included in the notes to the consolidated financial statements included in Part I, Item I of this Report.