Morgan Stanley Direct Lending Fund Q4 FY2025 earnings call

• Earnings highlights: Solid Q4 performance, net investment income 49 cents per share. • Industry obstacles: Direct lending industry faced obstacles, but some pressures may ease; asset yields contraction decelerating, borrowers resilient, deal environment showing rebound in PE sponsor activity. • Deployment: Jeff Day discussed deployment in portfolio, origination activity benefited from differentiated sourcing model, committed $146 million to new investments in Q4. • Portfolio construction: Portfolio relatively insulated from tariff exposure/cycle volatility, software investments resilient, overweight in professional services, underweight in certain verticals. • Financial results: Total investment income $96.6 million in Q4 (down from $99.7 million prior quarter), total expenses $54.2 million (down from $56 million prior quarter), net investment income $42.4 million or 49 cents per share, ended NAV per share $20.26 in Q4. • Balance sheet: Made strides in Q4, refinanced legacy unsecured debt, executed inaugural CLO, repriced asset-based facility, closed JV.

Operating results: Earned net investment income of 49 cents per share in Q4, compared with 50 cents per share in prior quarter. Portfolio: Totaled $3.8 billion at fair value at quarter end, 96% first lien debt, 2% second lien debt, remainder in equity/other. Weighted average yield on debt/income-producing investments 9.3% at cost, 9.5% at fair value (down ~40 bps QoQ). Non-accrual rate 160 bps at cost. New investments: Committed $146 million in Q4, fundings ~$164 million, repayments ~$163 million. JV: Closed one week ago, already ~50% ramped, committed $200 million, ~$373 million invested across 51 portfolio companies, goal to scale to ~$700 million in assets.

• Distribution: Board declared 45 cents per share for Q1 2026, 5-cent reduction from prior quarter, aligns with normalization of short-term rates, implies ~9% yield on NAV. • JV: Projected to take 4-6 quarters to get JV north of $700 million in funded assets. • Dividend: Confident about size of distribution over medium term based on earnings model and variables known today; board can evaluate potential annual special if excess income at year end.

• Market conditions: Forward-looking statements subject to uncertainties, including market conditions, interest rates, economic conditions. • Credit stress: Investors looking for cues of credit stress across industry, though borrowers have been resilient in MSDL's book. • AI disruption: AI is disruptive, but MSDL's underwriting process has explicitly taken AI risk into account for years, utilizing proprietary AI scorecard.

Q: When weighing investment opportunities and potential returns, and use of leverage in balance sheet?

A: Multiple capital allocations, balance between deal deployment and leverage, find compelling opportunities in marketplace, buyback plan prudent with $100 million renewal.

Q: Pace/trajectory of ramping JV and earnings contribution?

A: JV committed $200 million, nearly called half, goal to get to ~$700 million in funded assets in 4-6 quarters, investment strategy same as MSDL.

Q: Concern about non-accruals in dental space/healthcare industry?

A: Portfolio in good health, non-accruals idiosyncratic, limited exposure to underperforming industry themes.

Q: Allocation to JV and share repurchase program restrictions?

A: JV 200 max equity commitment equates to 5% allocation relative to total portfolio, share repurchase program programmatic with parameters.

Q: Confidence in NII/dividend level through rate cycle?

A: NII impacted by Fed cuts, joint venture can provide incremental ROE/NAI, dividend decision takes into account variables, feel good about distribution over medium term.

Q: Supplemental/special dividend and AI areas?

A: Board can evaluate annual special if excess income at year end, industry allocations ebb and flow based on conscious decisions, underwriting process considers AI impact across industries