UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☑☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~MARCH 31,~~SEPTEMBER 30, 2019

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 814-00926

FS Investment Corporation II

(Exact name of registrant as specified in its charter)

	Maryland			80-0741103
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
	201 Rouse Boulevard Philadelphia, Pennsylvania			19112
	(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (215) 495-1150

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Securities registered pursuant to Section 12(b) of the Act: None

	Title of each class			Trading Symbol(s)			Name of each exchange on which registered
	N/A			N/A			N/A

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The issuer had ~~324,182,415~~330,513,904 shares of common stock outstanding as of ~~May 10,~~November 8, 2019.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

FS Investment Corporation II

Consolidated Balance Sheets
(in thousands, except share and per share amounts)

	March 31, 2019 (Unaudited)			December 31, 2018			September 30, 2019 (Unaudited)			December 31, 2018
Assets
Investments, at fair value
Non-controlled/unaffiliated investments (amortized cost—$4,546,541 and $4,312,105, respectively)		$	4,402,970		$	4,131,877
Non-controlled/affiliated investments (amortized cost—$253,344 and $248,500, respectively)			231,848			227,403
Total investments, at fair value (amortized cost—$4,799,885 and $4,560,605, respectively)			4,634,818			4,359,280
Non-controlled/unaffiliated investments (amortized cost—$4,210,751 and $4,312,105, respectively)								$	3,992,671		$	4,131,877
Non-controlled/affiliated investments (amortized cost—$269,315 and $248,500, respectively)									262,609			227,403
Total investments, at fair value (amortized cost—$4,480,066 and $4,560,605, respectively)									4,255,280			4,359,280
Cash			109,670			148,172			107,095			148,172
Foreign currency, at fair value (cost—$1,318 and $2,264, respectively)			1,325			2,286
Foreign currency, at fair value (cost—$2,570 and $2,264, respectively)									2,567			2,286
Collateral held at broker for open interest rate swap contracts			6,700			—			17,390			—
Receivable for investments sold and repaid			2,878			4,025			12,178			4,025
Interest receivable			43,314			34,221			42,207			34,221
Deferred financing costs			7,403			6,000			6,769			6,000
Deferred merger costs									911			—
Receivable on interest rate swaps			2,474			173			1,151			173
Prepaid expenses and other assets			49			97			147			97
Total assets		$	4,808,631		$	4,554,254		$	4,445,695		$	4,554,254
Liabilities
Payable for investments purchased		$	54,759		$	42,236		$	53,688		$	42,236
Credit facilities payable (net of deferred financing costs of $2,628 and $3,122, respectively)(1)			2,108,336			1,887,132
Credit facilities payable (net of deferred financing costs of $1,687 and $3,122, respectively)(1)									1,826,687			1,887,132
Stockholder distributions payable			11,901			11,688			12,308			11,688
Management fees payable			17,864			17,256			16,735			17,256
Subordinated income incentive fees payable(2)			11,131			5,796			5,045			5,796
Administrative services expense payable			499			365			1,606			365
Interest payable			18,040			16,480			13,866			16,480
Directors’ fees payable			139			243			98			243
Interest rate swap income payable			2,406			174			1,304			174
Unrealized depreciation on interest rate swaps			5,739			1,743			13,947			1,743
Other accrued expenses and liabilities			1,600			3,732			1,656			3,732
Total liabilities			2,232,414			1,986,845			1,946,940			1,986,845
Commitments and contingencies(3)
Stockholders’ equity
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding			—			—			—			—
Common stock, $0.001 par value, 450,000,000 shares authorized, 326,339,625 and 326,445,320 shares issued and outstanding, respectively			326			326
Common stock, $0.001 par value, 450,000,000 shares authorized, 329,433,102 and 326,445,320 shares issued and outstanding, respectively									329			326
Capital in excess of par value			2,990,149			2,990,996			3,014,469			2,990,996
Retained earnings (accumulated deficit)(4)			(414,258)			(423,913)			(516,043)			(423,913)
Total stockholders’ equity			2,576,217			2,567,409			2,498,755			2,567,409
Total liabilities and stockholders’ equity		$	4,808,631		$	4,554,254		$	4,445,695		$	4,554,254
Net asset value per share of common stock at period end		$	7.89		$	7.86		$	7.59		$	7.86

(1)

See Note 9 for a discussion of the Company’s financing arrangements.

(2)

See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.

(3)

See Note 10 for a discussion of the Company’s commitments and contingencies.

(4)

See Note 5 for a discussion of the sources of distributions paid by the Company.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Investment income
From non-controlled/unaffiliated investments:
Interest income		$	102,601		$	95,157		$	89,398		$	92,684		$	287,970		$	282,218
Paid-in-kind interest income			1,881			2,221			4,590			2,491			8,803			6,467
Fee income			7,044			3,951			5,270			14,181			18,496			22,641
Dividend income			71			7,494			768			468			839			7,962
From non-controlled/affiliated investments:
Interest income			5,267			4,999			5,587			4,697			16,173			15,699
Paid-in-kind interest income			3,075			2,757			2,138			2,865			7,249			7,080
Fee income			—			1,123			—			—			43			1,123
Total investment income			119,939			117,702			107,751			117,386			339,573			343,190
Operating expenses
Management fees(1)			17,864			25,234			16,735			17,567			51,581			61,739
Subordinated income incentive fees(2)			11,131			5,575			5,045			11,939			24,912			18,994
Administrative services expenses			907			782			1,833			799			3,387			2,371
Stock transfer agent fees			705			495			471			506			1,677			1,502
Accounting and administrative fees			433			421			362			395			1,106			1,227
Interest expense(3)			29,575			24,183			23,969			26,924			79,047			77,958
Directors’ fees			142			504			84			254			301			1,053
Other general and administrative expenses			1,068			1,271			710			1,217			2,798			3,539
Operating expenses			61,825			58,465			49,209			59,601			164,809			168,383
Management fee waiver(1)			—			(3,154)			—			—			—			(3,432)
Net expenses			61,825			55,311			49,209			59,601			164,809			164,951
Net investment income			58,114			62,391			58,542			57,785			174,764			178,239
Realized and unrealized gain/loss
Net realized gain (loss) on investments:
Non-controlled/unaffiliated investments			(18,665)			(19,294)			(8,142)			18,501			(48,767)			14,901
Non-controlled/affiliated investments			179			—			3		��	3			185			(25,706)
Net realized gain (loss) on interest rate swaps									(290)			—			(290)			—
Net realized gain (loss) on foreign currency			3			(327)			944			446			1,059			(220)
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/unaffiliated investments			36,657			(83,890)			(80,367)			(42,337)			(37,852)			(101,939)
Non-controlled/affiliated investments			(399)			(4,722)			5,470			2,298			14,391			(44,034)
Net change in unrealized appreciation (depreciation) on interest rate swaps			(3,996)			—			(1,551)			—			(12,204)			—
Net change in unrealized gain (loss) on foreign currency			(1,124)			410			3,169			(693)			504			84
Total net realized and unrealized gain (loss) on investments			12,655			(107,823)			(80,764)			(21,782)			(82,974)			(156,914)
Net increase (decrease) in net assets resulting from operations		$	70,769		$	(45,432)		$	(22,222)		$	36,003		$	91,790		$	21,325
Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)		$	0.22		$	(0.14)		$	(0.07)		$	0.11		$	0.28		$	0.07
Weighted average shares outstanding			324,309,084			324,916,879			327,346,481			324,359,144			325,302,803			324,577,481

(1)

See Note 4 for a discussion of the waiver by FSIC II Advisor, LLC, the Company’s former investment adviser, of certain management fees to which it was otherwise entitled during the applicable period.

(2)

See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.

(3)

See Note 9 for a discussion of the Company’s financing arrangements.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Statements of Changes in Net Assets
(in thousands)

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Operations
Net investment income		$	58,114		$	62,391		$	58,542		$	57,785		$	174,764		$	178,239
Net realized gain (loss) on investments and foreign currency			(18,483)			(19,621)			(7,485)			18,950			(47,813)			(11,025)
Net change in unrealized appreciation (depreciation) on investments and interest rate swaps(1)			32,262			(88,612)			(76,448)			(40,039)			(35,665)			(145,973)
Net change in unrealized gain (loss) on foreign currency			(1,124)			410			3,169			(693)			504			84
Net increase (decrease) in net assets resulting from operations			70,769			(45,432)			(22,222)			36,003			91,790			21,325
Stockholder distributions(2)
Distributions to stockholders			(61,114)			(61,153)			(61,698)			(61,137)			(183,920)			(183,436)
Net decrease in net assets resulting from stockholder distributions			(61,114)			(61,153)			(61,698)			(61,137)			(183,920)			(183,436)
Capital share transactions(3)
Reinvestment of stockholder distributions			25,694			28,959			25,011			27,211			75,709			84,192
Repurchases of common stock			(26,541)			(29,993)			—			(28,023)			(52,233)			(86,976)
Net increase (decrease) in net assets resulting from capital share transactions			(847)			(1,034)			25,011			(812)			23,476			(2,784)
Total increase (decrease) in net assets			8,808			(107,619)			(58,909)			(25,946)			(68,654)			(164,895)
Net assets at beginning of period			2,567,409			2,853,021			2,557,664			2,714,072			2,567,409			2,853,021
Net assets at end of period		$	2,576,217		$	2,745,402		$	2,498,755		$	2,688,126		$	2,498,755		$	2,688,126

(1)

See Note 7 for a discussion of these financial instruments.

(2)

See Note 5 for a discussion of the sources of distributions paid by the Company.

(3)

See Note 3 for a discussion of the Company’s capital share transactions.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Three Months Ended March 31,						Nine Months Ended September 30,
	2019			2018			2019			2018
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations		$	70,769		$	(45,432)		$	91,790		$	21,325
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments			(453,599)			(199,941)			(1,157,274)			(1,063,874)
Paid-in-kind interest			(4,956)			(4,978)			(16,052)			(13,547)
Proceeds from sales and repayments of investments			203,103			301,070			1,213,529			1,190,908
Net realized (gain) loss on investments			18,486			19,294			48,582			10,805
Net change in unrealized (appreciation) depreciation on investments			(36,258)			88,612			23,461			145,973
Net change in unrealized (appreciation) depreciation on interest rate swaps			3,996			—			12,204			—
Accretion of discount			(2,314)			(1,703)			(8,246)			(6,215)
Amortization of deferred financing costs and discount			990			1,358			3,058			5,192
Unrealized (gain) loss on borrowings in foreign currency			1,108			219			(530)			186
(Increase) decrease in receivable for investments sold and repaid			1,147			(241)			(8,153)			(4,737)
(Increase) decrease in interest receivable			(9,093)			(315)			(7,986)			2,269
(Increase) decrease in receivable on interest rate swaps			(2,301)			—			(978)			—
(Increase) decrease in deferred merger costs									(911)			—
(Increase) decrease in prepaid expenses and other assets			48			39			(50)			719
Increase (decrease) in payable for investments purchased			12,523			(3,162)			11,452			32,804
Increase (decrease) in management fees payable			608			(515)			(521)			(5,028)
Increase (decrease) in subordinated income incentive fees payable			5,335			(13,554)			(751)			(7,190)
Increase (decrease) in administrative services expense payable			134			235			1,241			179
Increase (decrease) in interest payable			1,560			977			(2,614)			24
Increase (decrease) in directors’ fees payable			(104)			222			(145)			23
Increase (decrease) in interest rate swap income payable			2,232			—			1,130			—
Increase (decrease) in other accrued expenses and liabilities			(2,132)			(2,390)			(2,076)			(1,827)
Net cash provided by (used in) operating activities			(188,718)			139,795			200,160			307,989
Cash flows from financing activities
Repurchases of common stock			(26,541)			(29,993)			(52,233)			(86,976)
Stockholder distributions			(35,207)			(31,928)			(107,591)			(98,366)
Borrowings under credit facilities(1)			436,602			2,970			765,000			436,346
Repayments of credit facilities(1)			(217,000)			(4,730)			(826,350)			(727,617)
Deferred financing costs paid			(1,899)			—			(2,392)			(4,411)
Net cash provided by financing activities			155,955			(63,681)			(223,566)			(481,024)
Total increase (decrease) in cash			(32,763)			76,114			(23,406)			(173,035)
Cash, restricted cash and foreign currency at beginning of period			150,458			460,409			150,458			460,409
Cash, restricted cash and foreign currency at end of period(2)		$	117,695		$	536,523		$	127,052		$	287,374
Supplemental disclosure
Non-cash purchase of investments								$	(35,333)		$	(267,992)
Non-cash sale of investments								$	35,333		$	267,992
Distributions reinvested		$	25,694		$	28,959		$	75,709		$	84,192
Local and excise taxes paid		$	2,096		$	2,574		$	2,098		$	2,584

(1)

See Note 9 for a discussion of the Company’s financing arrangements. During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, the Company paid ~~$27,025~~$78,603 and ~~$21,848~~$72,742 respectively, in interest expense on the credit facilities.

(2)

As of ~~March 31,~~September 30, 2019, balance includes cash and foreign currency of ~~$110,995~~$109,662 and restricted cash and collateral of ~~$6,700, respectively. As of March 31, 2018, balance includes cash of $536,523 and restricted cash of $0, respectively.~~
$17,390.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—136.6%
Senior Secured Loans—First Lien—119.4%
5 Arch Income Fund 2, LLC	(m)(q)	Diversified Financials	9.0%			11/18/23		$	39,540		$	39,551		$	39,540	(m)(q)	Diversified Financials	10.5%			11/18/23		$	31,016		$	31,016		$	30,949
5 Arch Income Fund 2, LLC	(m)(n)(q)	Diversified Financials	9.0%			11/18/23			34,461			34,470			34,461	(m)(n)(q)	Diversified Financials	10.5%			11/18/23			42,984			42,984			42,892
Abaco Energy Technologies LLC	(h)(i)(s)	Energy	L+700, 2.5% PIK (2.5% Max PIK)		1.0%	11/20/20			24,074			23,652			24,134	(h)(i)	Energy	L+700, 2.5% PIK (2.5% Max PIK)		1.0%	11/20/20			23,366			23,070			23,133
ABB CONCISE Optical Group LLC	(s)	Retailing	L+500		1.0%	6/15/23			2,762			2,771			2,637	(s)	Retailing	L+500		1.0%	6/15/23			2,747			2,756			2,620
Accuride Corp	(s)	Capital Goods	L+525		1.0%	11/17/23			539			519			453	(j)(s)	Capital Goods	L+525		1.0%	11/17/23			4,072			3,500			3,443
Acosta Holdco Inc	(h)(s)	Commercial & Professional Services	L+325		1.0%	9/26/21			6,627			5,369			3,122	(h)(k)(l)(s)	Commercial & Professional Services	L+325		1.0%	9/26/21			6,592			5,281			2,068
Addison Holdings	(f)(g)(h)(i)	Commercial & Professional Services	L+675		1.0%	12/29/23			84,953			84,953			85,803
Advanced Lighting Technologies Inc	(h)(t)	Materials	L+750		1.0%	10/4/22			9,102			7,968			9,102	(t)	Materials	L+750		1.0%	10/4/22			9,056			8,044			8,128
Advantage Sales & Marketing Inc	(i)(s)	Commercial & Professional Services	L+325		1.0%	7/23/21			15,330			14,697			13,086	(i)(s)	Commercial & Professional Services	L+325		1.0%	7/23/21			15,250			14,734			14,280
All Systems Holding LLC	(h)	Commercial & Professional Services	L+725		1.0%	10/31/23			10,557			10,557			10,662	(g)(h)(i)	Commercial & Professional Services	L+625		1.0%	10/31/23			123,603			123,603			124,839
All Systems Holding LLC	(g)(h)(i)	Commercial & Professional Services	L+767		1.0%	10/31/23			101,066			101,066			102,077	(n)	Commercial & Professional Services	L+625		1.0%	10/31/23			214			214			216
Altus Power America Inc		Energy	L+750		1.5%	9/30/21			683			683			656
Altus Power America Inc	(n)	Energy	L+750		1.5%	9/30/21			140			140			135
Altus Power America Inc	(i)	Energy	L+750		1.5%	10/8/21			2,500			2,500			2,400	(i)	Energy	L+750		1.5%	9/30/21			3,750			3,750			3,642
American Tire Distributors Inc	(s)	Automobiles & Components	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	9/1/23			634			595			626	(s)	Automobiles & Components	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	9/1/23			634			599			630
American Tire Distributors Inc	(s)	Automobiles & Components	L+750		1.0%	9/2/24			4,021			3,512			3,607	(s)	Automobiles & Components	L+750		1.0%	9/2/24			4,001			3,494			3,536
Ammeraal Beltech Holding BV	(m)(s)	Capital Goods	E+375			7/30/25		€	1,491			1,725			1,674	(m)(s)	Capital Goods	E+375			7/30/25		€	1,491			1,725			1,575
Apex Group Limited	(m)(n)	Diversified Financials	L+650			6/15/23		$	2,302			2,241			1,961	(m)(n)	Diversified Financials	L+650		1.3%	6/15/23		$	2,302			2,248			2,300
Apex Group Limited	(f)(g)(m)	Diversified Financials	L+650		1.0%	6/15/25			44,691			44,183			43,672	(i)(m)	Diversified Financials	L+650		1.3%	6/15/25			7,471			7,346			7,464
Apex Group Limited	(m)(n)	Diversified Financials	L+650		1.0%	6/15/25			5,833			5,809			5,700	(i)(m)	Diversified Financials	L+700		1.0%	6/15/25			27,386			27,281			27,359
Ascension Insurance Inc	(f)(g)(h)	Insurance	L+825		1.3%	6/5/19			91,635			91,579			91,635
Ascension Insurance Inc	(n)	Insurance	L+825		1.3%	6/5/19			13,800			13,800			13,800
Apex Group Limited																(f)(g)(m)	Diversified Financials	L+700		1.3%	6/15/25			15,447			15,180			15,432
Apex Group Limited																(m)	Diversified Financials	L+700		1.5%	6/15/25		£	22,253			28,265			27,507
Arrotex Australia Group Pty Ltd																(m)	Pharmaceuticals, Biotechnology & Life Sciences	B+525		1.0%	7/10/24		A$	47,322			32,473			31,447
Aspect Software Inc	(n)	Software & Services	L+500		1.0%	7/15/23			865			865			865	(n)	Software & Services	L+500		1.0%	7/15/23		$	865			865			865
Aspect Software Inc	(h)	Software & Services	L+500			1/15/24			5,656			5,002			4,991	(h)	Software & Services	L+500		1.0%	1/15/24			5,628			5,031			5,086
ATX Networks Corp	(f)(i)(m)(s)	Technology Hardware & Equipment	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	6/11/21			26,516			26,110			25,190	(f)(m)(s)	Technology Hardware & Equipment	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	6/11/21			26,124			25,807			24,687
AVF Parent LLC	(h)(i)	Retailing	L+725		1.3%	3/1/24			73,980			73,980			64,178	(h)(i)(k)(l)	Retailing	L+725		1.3%	3/1/24			73,019			72,421			41,539
Belk Inc	(s)	Retailing	L+475		1.0%	12/12/22			22,561			19,823			18,265	(s)	Retailing	L+475		1.0%	12/12/22			22,403			19,982			16,479
Borden Dairy Co	(g)(h)	Food, Beverage & Tobacco	L+750		1.0%	7/6/23			52,500			52,500			47,654	(g)(h)	Food, Beverage & Tobacco	L+750		1.0%	7/6/23			52,500			52,500			45,732
Brand Energy & Infrastructure Services Inc																(j)(s)	Capital Goods	L+425		1.0%	6/21/24			2,336			2,296			2,289
Caprock Midstream LLC	(s)	Energy	L+475			11/3/25			6,046			5,919			5,738	(s)	Energy	L+475			11/3/25			6,118			5,992			5,526
CEPSA Holdco (Matador Bidco)																(j)(m)(s)	Energy	L+475			6/19/26			1,877			1,858			1,884
CHS/Community Health Systems, Inc.																(g)(m)(s)	Health Care Equipment & Services	8.0%			3/15/26			7,231			7,025			7,231
Cimarron Energy Inc		Energy	L+900		1.0%	6/30/21			7,500			7,500			7,500		Energy	L+1,000		1.0%	6/30/21			7,500			7,500			7,472
Conservice LLC		Consumer Services	L+525			11/30/24			31,904			31,595			31,961	(n)	Consumer Services	L+525			11/29/24			1,702			1,687			1,690
Conservice LLC	(n)	Consumer Services	L+525			11/30/24			5,955			5,919			5,820	(h)	Consumer Services	L+525			11/29/24			34,551			34,251			34,493

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor			Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)			Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Constellis Holdings LLC/Constellis Finance Corp	(h)	Capital Goods	L+575		1.0%		4/15/22		$	47,206		$	46,547		$	46,676
Conservice LLC																	(n)	Consumer Services	L+525				11/29/24		$	1,446		$	1,440		$	1,444
Constellis Holdings LLC																	(h)	Capital Goods	L+625		1.0%		4/15/22			46,970			46,401			39,779
CSafe Global																		Capital Goods	L+650		1.0%		11/1/21			2,504			2,504			2,492
CSafe Global		Capital Goods	L+725		1.0%		11/1/21			2,296			2,296			2,296	(n)	Capital Goods	L+650		1.0%		11/1/21			3,757			3,757			3,738
CSafe Global	(n)	Capital Goods	L+725		1.0%		11/1/21			3,965			3,965			3,965	(f)(g)(h)	Capital Goods	L+650		1.0%		10/31/23			59,456			59,456			59,159
CSafe Global	(f)(g)(h)	Capital Goods	L+725		1.0%	��	10/31/23			53,485			53,485			54,019	(n)	Capital Goods	L+650		1.0%		10/31/23			12,522			12,522			12,459
CSM Bakery Products	(i)(s)	Food, Beverage & Tobacco	L+400		1.0%		7/3/20			5,217			5,091			5,004	(i)(j)(s)	Food, Beverage & Tobacco	L+400		1.0%		7/3/20			5,545			5,444			5,185
Dade Paper and Bag Co Inc	(f)(g)(h)	Capital Goods	L+700		1.0%		6/10/24			17,269			17,269			16,600
Dade Paper and Bag Co Inc	(f)(g)(h)(i)	Capital Goods	L+750		1.0%		6/10/24			135,389			135,389			132,682
Dayton Superior Corp	(i)(s)	Materials	L+800, 6.0% PIK (6.0% Max PIK)		1.0%		11/15/21			11,934			11,746			10,054	(i)(s)	Materials	L+800, 6.0% PIK (6.0% Max PIK)		1.0%		11/15/21			3,560			3,523			1,869
Diamond Resorts International Inc	(i)(s)	Consumer Services	L+375		1.0%		9/2/23			14,050			13,773			13,558	(i)(s)	Consumer Services	L+375		1.0%		9/2/23			13,979			13,729			13,651
Distribution International Inc	(s)	Retailing	L+500		1.0%		12/15/21			3,389			3,249			3,093	(s)	Retailing	L+575		1.0%		12/15/23			3,381			3,252			3,178
Eagle Family Foods Inc	(n)	Food, Beverage & Tobacco	L+650		1.0%		6/14/23			4,126			4,087			3,499		Food, Beverage & Tobacco	L+650		1.0%		6/14/23			1,742			1,727			1,675
Eagle Family Foods Inc	(g)(h)	Food, Beverage & Tobacco	L+650		1.0%		6/14/24			27,299			27,024			26,438	(n)	Food, Beverage & Tobacco	L+650		1.0%		6/14/23			2,384			2,364			2,293
Eagle Family Foods Inc																	(g)(h)	Food, Beverage & Tobacco	L+675		1.0%		6/14/24			27,162			26,908			26,124
Eagleclaw Midstream Ventures LLC	(i)(s)	Energy	L+425		1.0%		6/24/24			11,426			10,908			10,753	(i)(s)	Energy	L+425		1.0%		6/24/24			11,368			10,891			10,479
EIF Van Hook Holdings LLC	(i)(s)	Energy	L+525				9/5/24			7,285			7,148			6,975	(i)(s)	Energy	L+525			��	9/5/24			7,099			6,976			6,913
Electronics For Imaging Inc																	(i)(s)	Technology Hardware & Equipment	L+500				7/23/26			15,483			14,723			14,477
Empire Today LLC	(f)(g)(h)(i)	Retailing	L+700		1.0%		11/17/22			87,975			87,975			87,202	(f)(g)(h)(i)	Retailing	L+650		1.0%		11/17/22			87,525			87,525			87,546
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	10.0% PIK (10.0% Max PIK)				11/27/23			2,013			1,733			264
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)				8/28/23			218			217			218
Entertainment Benefits Group LLC																		Media & Entertainment	L+575		1.0%		9/30/24			587			587			587
Entertainment Benefits Group LLC																	(n)	Media & Entertainment	L+575		1.0%		9/30/24			2,347			2,347			2,347
Entertainment Benefits Group LLC																	(g)	Media & Entertainment	L+575		1.0%		9/30/25			17,555			17,336			17,336
Fairway Group Holdings Corp	(n)	Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)				8/28/23			455			453			455		Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)				8/28/23			1,877			1,862			1,877
Fairway Group Holdings Corp	(h)	Food & Staples Retailing	12.0% PIK (12.0% Max PIK)				11/27/23			3,165			3,165			3,074		Food & Staples Retailing	12.0% PIK (12.0% Max PIK)		1.0%		11/27/23			3,364			3,364			3,086
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)				11/27/23			1,099			1,085			1,099	(k)(l)	Food & Staples Retailing	10.0% PIK (10.0% Max PIK)		1.0%		11/28/23			2,118			1,733			93
Foresight Energy LLC	(h)(m)(s)	Materials	L+575		1.0%		3/28/22			10,591			10,576			10,401	(h)(k)(l)(m)(s)	Materials	L+575		1.0%		3/28/22			10,319			10,308			5,684
Fox Head Inc	(h)(i)	Consumer Durables & Apparel	L+850		1.0%		12/19/20			52,149			52,149			50,134	(h)(i)	Consumer Durables & Apparel	L+850		1.0%		12/19/20			50,517			50,517			47,532
FullBeauty Brands Holdings Corp		Retailing	10.0%				6/30/19			188			189			184		Retailing	L+1,000		1.0%		2/7/22			188			188			183
FullBeauty Brands Holdings Corp		Retailing	L+900		1.0%		2/7/24			1,099			1,073			1,072	(s)	Retailing	L+900		1.0%		2/7/24			1,094			1,069			574
Gulf Finance LLC	(i)(s)	Energy	L+525		1.0%		8/25/23			4,675			4,578			3,745
HM Dunn Co Inc																	(h)(k)(l)(t)	Capital Goods	L+875 PIK (L+875 Max PIK)		1.0%		6/30/21			47,668			38,571			16,743
HM Dunn Co Inc																	(t)	Capital Goods	15.0% PIK (15.0% Max PIK)				6/30/21			2,775			2,775			2,775
HM Dunn Co Inc	(h)(k)(l)(t)	Capital Goods	L+875 PIK (L+875 Max PIK)				6/30/21			43,885			38,571			4,005	(n)(t)	Capital Goods	15.0% PIK (15.0% Max PIK)				6/30/21			1,644			1,644			1,644
Hudson Technologies Co	(h)(i)(m)	Commercial & Professional Services	L+1025		1.0%		10/10/23			50,717			50,302			35,882	(m)	Commercial & Professional Services	L+1,025		1.0%		10/10/23			49,946			49,572			27,845
Icynene Group Ltd	(f)(h)(i)	Materials	L+700		1.0%		11/30/24			35,550			35,550			34,483	(f)(h)(i)	Materials	L+700		1.0%		11/30/24			35,370			35,370			35,478
Industrial Group Intermediate Holdings LLC	(f)(g)(h)(i)	Materials	L+800		1.3%		5/31/20			118,840			118,840			119,732
Industry City TI Lessor LP	(h)	Consumer Services	10.8%, 1.0% PIK (1.0% Max PIK)				6/30/26			11,308			11,308			12,015
JAKKS Pacific Inc	(h)	Consumer Durables & Apparel	L+900		1.5%		6/14/21			2,793			2,777			2,812
Industria Chimica Emiliana Srl																	(m)	Pharmaceuticals, Biotechnology & Life Sciences	L+650				6/30/26		€	51,357			54,749			54,327
Industria Chimica Emiliana Srl																	(m)(n)	Pharmaceuticals, Biotechnology & Life Sciences	L+650				6/30/26			7,285			7,973			7,707

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Jazz Acquisition Inc		Capital Goods	L+550		1.0%	6/1/22		$	20,258		$	20,258		$	20,091
Industry City TI Lessor LP																(h)	Consumer Services	10.8%, 1.0% PIK (1.0% Max PIK)			6/30/26		$	10,863		$	10,863		$	11,949
J S Held LLC																	Insurance	L+600		1.0%	7/1/25			274			271			271
J S Held LLC																(n)	Insurance	L+600		1.0%	7/1/25			3,638			3,604			3,602
J S Held LLC																	Insurance	L+600		1.0%	7/1/25			34,109			33,791			33,767
J S Held LLC																(n)	Insurance	L+600		1.0%	7/1/25			8,372			8,372			8,289
JC Penney Corp Inc	(m)(s)	Retailing	L+425		1.0%	6/23/23			1,196			1,144			1,066	(m)(s)	Retailing	L+425		1.0%	6/23/23			1,180			1,134			1,032
JHC Acquisition LLC	(f)(g)	Capital Goods	L+750		1.0%	11/6/21			20,495			20,495			20,495
JHC Acquisition LLC	(f)(g)(h)	Capital Goods	L+750		1.0%	1/29/24			101,452			101,452			101,452
JHC Acquisition LLC	(n)	Capital Goods	L+750		1.0%	1/29/24			35,269			35,269			35,269
Jo-Ann Stores Inc	(i)(s)	Retailing	L+500		1.0%	10/20/23			4,903			4,894			4,891	(i)(s)	Retailing	L+500		1.0%	10/20/23			4,877			4,869			3,379
Jostens Inc	(s)	Consumer Services	L+550			12/19/25			3,508			3,405			3,514	(s)	Consumer Services	L+550			12/19/25			3,477			3,381			3,474
JSS Holdings Ltd	(f)(h)(i)	Capital Goods	L+800, 0.0% PIK (2.5% Max PIK)		1.0%	3/31/23			72,790			72,259			74,974	(f)(h)(i)	Capital Goods	L+800, 0.0% PIK (2.5% Max PIK)		1.0%	3/31/23			72,946			72,467			75,134
Kodiak BP LLC	(g)(h)(i)	Capital Goods	L+725		1.0%	12/1/24			110,425			110,425			108,079	(g)(h)(i)	Capital Goods	L+725		1.0%	12/1/24			114,695			114,696			113,548
Kodiak BP LLC	(n)	Capital Goods	L+725		1.0%	12/1/24			9,849			9,849			9,639	(n)	Capital Goods	L+725		1.0%	12/1/24			5,082			5,082			5,031
Lazard Global Compounders Fund	(m)	Diversified Financials	L+725		3.8%	4/1/26			37,786			37,786			37,219
Lazard Global Compounders Fund	(m)(n)	Diversified Financials	L+725		3.8%	4/1/26			7,214			7,214			7,106
Laird PLC																(j)(m)(s)	Technology Hardware & Equipment	L+450			7/9/25			402			369			370
Greystone Equity Member Corp																(m)	Diversified Financials	L+725		3.8%	4/1/26			41,393			41,393			41,031
Greystone Equity Member Corp																(m)(n)	Diversified Financials	L+725		3.8%	4/1/26			3,607			3,607			3,575
LD Intermediate Holdings Inc	(i)(s)	Software & Services	L+588		1.0%	12/9/22			15,938			14,925			13,886	(i)(s)	Software & Services	L+588		1.0%	12/9/22			15,513			14,655			15,422
Lipari Foods LLC		Food & Staples Retailing	L+588		1.0%	1/4/25			121,935			120,971			120,859	(h)(i)	Food & Staples Retailing	L+588		1.0%	1/6/25			121,573			120,672			121,435
Lipari Foods LLC	(n)	Food & Staples Retailing	L+588		1.0%	1/4/25			25,220			25,220			24,997	(n)	Food & Staples Retailing	L+588		1.0%	1/6/25			25,220			25,220			25,191
MB Precision Holdings LLC	(g)(h)(t)	Capital Goods	L+725, 2.3% PIK (2.3% Max PIK)		1.3%	1/23/21			21,369			20,733			21,369	(g)(t)	Capital Goods	L+725, 2.3% PIK (2.3% Max PIK)		1.3%	1/23/21			21,441			21,118			21,441
Mitel US Holdings Inc	(i)(s)	Technology Hardware & Equipment	L+450			11/30/25			119			119			117	(i)(s)	Technology Hardware & Equipment	L+450			11/30/25			119			118			111
Monitronics International Inc	(m)(s)	Commercial & Professional Services	L+550		1.0%	9/30/22			3,829			3,698		��	3,220	(j)(s)	Commercial & Professional Services	L+650		1.3%	3/29/24			15,184			14,658			14,030
Monitronics International Inc																(s)	Commercial & Professional Services	L+500		1.5%	7/3/24			5,166			5,166			5,179
Monitronics International Inc																(n)(s)	Commercial & Professional Services	L+500		1.5%	7/3/24			29,673			29,673			29,747
Monitronics International Inc																(s)	Commercial & Professional Services	L+500		1.5%	7/3/24			17,653			17,653			17,808
Multi-Color Corp																(m)(s)	Commercial & Professional Services	6.8%			7/15/26			4,012			4,012			4,180
Murray Energy Corp	(h)	Energy	L+900		1.0%	2/12/21			10,891			10,830			10,826	(h)	Energy	L+900		1.0%	2/12/21			10,891			10,844			10,909
NaviHealth Inc.	(i)(s)	Health Care Equipment & Services	L+500			8/1/25			15,073			14,419			14,678	(i)(s)	Health Care Equipment & Services	L+500			8/1/25			14,998			14,385			14,960
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+500		1.0%	9/2/21			2,625			2,625			2,625	(n)	Consumer Services	L+500		1.0%	9/2/21			2,625			2,625			2,625
North Haven Cadence Buyer Inc	(h)	Consumer Services	L+777		1.0%	9/2/22			10,656			10,656			10,523	(h)	Consumer Services	L+650		1.0%	9/2/22			24,832			24,832			24,739
North Haven Cadence Buyer Inc	(h)(i)	Consumer Services	L+798		1.0%	9/2/24			51,188			51,188			50,548	(n)	Consumer Services	L+650		1.0%	9/2/22			17,792			17,792			17,725
North Haven Cadence Buyer Inc		Consumer Services	L+650		1.0%	9/2/24			14,283			14,283			14,105	(h)(i)	Consumer Services	L+794		1.0%	9/2/22			51,188			51,188			50,995
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+650		1.0%	9/2/24			292			292			288
One Call Care Management Inc																(s)	Insurance	L+400		1.0%	11/27/20			252			225			222
One Call Care Management Inc																(s)	Insurance	L+525		1.0%	11/27/22			5,790			4,942			4,584
P2 Energy Solutions, Inc.	(s)	Software & Services	L+400		1.0%	10/30/20			74			73			73	(s)	Software & Services	L+400		1.0%	10/30/20			73			73			73
PAE Holding Corp	(s)	Capital Goods	L+550		1.0%	10/20/22			9			9			9	(s)	Capital Goods	L+550		1.0%	10/20/22			1,944			1,954			1,953
Peak 10 Holding Corp	(s)	Telecommunication Services	L+350			8/1/24			8,942			8,327			8,219
PF Chang’s China Bistro Inc	(s)	Consumer Services	L+650			3/1/26			5,817			5,760			5,751
PHRC License LLC	(g)(h)	Consumer Services	L+850, 0.3% PIK (0.3% Max PIK)		1.5%	4/28/22			66,646			66,646			67,563
Power Distribution Inc	(f)(i)	Capital Goods	L+725		1.3%	1/25/23			43,907			43,907			42,974
Production Resource Group LLC	(f)(g)(h)(i)	Media	L+700		1.0%	8/21/24			207,992			207,992			204,872

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Peak 10 Holding Corp																(g)(s)	Telecommunication Services	L+350			8/1/24		$	10,984		$	10,289		$	9,522
PF Chang’s China Bistro Inc																(s)	Consumer Services	L+625			3/1/26			5,788			5,734			4,949
PHRC License LLC																(g)(h)	Consumer Services	L+850, 0.3% PIK (4.3% Max PIK)		1.5%	4/28/22			66,372			66,372			66,787
Power Distribution Inc																(f)	Capital Goods	L+725		1.3%	1/25/23			41,950			41,950			37,702
Production Resource Group LLC																(f)(g)(h)(i)	Media & Entertainment	L+700		1.0%	8/21/24			207,992			207,993			183,293
Project Marron																(m)	Consumer Services	L+625			7/3/25		A$	18,162			11,850			12,253	��
Project Marron																(m)	Consumer Services	L+625			7/2/25		C$	14,265			10,874			10,772
Propulsion Acquisition LLC	(f)(h)(i)(s)	Capital Goods	L+600		1.0%	7/13/21		$	52,322		$	51,121		$	51,798	(f)(h)(i)(s)	Capital Goods	L+600		1.0%	7/13/21		$	52,322			51,339			51,798
PSKW LLC	(f)(h)	Health Care Equipment & Services	L+825		1.0%	10/1/21			26,000			26,000			26,000
PSKW LLC	(f)(h)	Health Care Equipment & Services	L+826		1.0%	11/25/21			30,025			29,986			30,025	(f)(h)	Health Care Equipment & Services	L+769		1.0%	11/25/21			56,025			55,992			56,025
Reliant Rehab Hospital Cincinnati LLC	(h)	Health Care Equipment & Services	L+675		1.0%	8/30/24			60,001			59,494			59,166	(h)	Health Care Equipment & Services	L+675		1.0%	9/2/24			59,724			59,254			58,712
Roadrunner Intermediate Acquisition Co LLC	(f)	Health Care Equipment & Services	L+675		1.0%	9/22/21			7,115			7,115			6,565	(f)	Health Care Equipment & Services	L+675		1.0%	3/15/23			6,874			6,874			6,689
Safariland LLC																	Capital Goods	L+725		1.1%	11/18/23			1,181			1,181			1,134
Safariland LLC	(g)(h)	Capital Goods	L+765		1.1%	11/18/23			70,234			70,234			63,474	(g)(h)	Capital Goods	L+775		1.1%	11/18/23			69,053			69,053			66,291
Savers Inc		Retailing	L+650, 0.8% PIK (0.8% Max PIK)		1.5%	3/28/24		C$	36,443			26,804			26,938		Retailing	L+650, 0.8% PIK (0.8% Max PIK)		1.5%	3/28/24			26,213			25,912			25,948
Savers Inc		Retailing	L+650, 0.8% PIK (0.8% Max PIK)		1.5%	3/28/24		$	26,242			25,915			25,914		Retailing	L+700, 0.8% PIK (0.8% Max PIK)		1.0%	3/28/24		C$	36,402			26,804			27,716
Sequa Corp	(i)(s)	Materials	L+500		1.0%	11/28/21			18,420			18,184			18,075	(i)(j)(s)	Materials	L+500		1.0%	11/28/21		$	20,958			20,740			20,814
Sequel Youth & Family Services LLC	(h)	Health Care Equipment & Services	L+700		1.0%	9/1/23			12,199			12,199			12,309	(h)	Health Care Equipment & Services	L+700		1.0%	9/1/23			12,137			12,137			12,258
Sequel Youth & Family Services LLC	(f)(h)(i)	Health Care Equipment & Services	L+800			9/1/23			70,000			70,000			70,633	(f)(h)(i)	Health Care Equipment & Services	L+800			9/1/23			70,000			70,000			70,700
Sequential Brands Group Inc.	(g)(h)(i)	Consumer Durables & Apparel	L+875			2/7/24			118,132			116,207			117,099	(g)	Consumer Durables & Apparel	L+875			2/7/24			117,336			115,562			116,309
SI Group Inc	(s)	Materials	L+475			10/15/25			2,915			2,810			2,919	(s)	Materials	L+475			10/15/25			1,219			1,179			1,187
SIRVA Worldwide Inc	(i)(s)	Commercial & Professional Services	L+550			8/2/25			2,759			2,721			2,697	(i)(s)	Commercial & Professional Services	L+550			8/4/25			2,724			2,689			2,643
Smart & Final Stores LLC																(i)(m)(s)	Food & Staples Retailing	L+675			6/20/25			17,744			16,016			16,251
Smart Foodservice																(m)(s)	Food & Staples Retailing	L+475			6/20/26			2,522			2,497			2,535
Sorenson Communications LLC	(f)(g)(h)(s)	Telecommunication Services	L+575		2.3%	4/30/20			107,112			106,964			106,041	(g)(i)(s)	Telecommunication Services	L+650			4/29/24			54,547			52,504			54,615
Sorenson Communications LLC	(j)(s)	Telecommunication Services	L+650			3/14/24			55,946			53,708			55,456
SSC (Lux) Limited S.a r.l.	(g)(h)(i)(m)	Health Care Equipment & Services	L+750		1.0%	9/10/24			104,545			104,545			105,359
Staples Canada	(m)	Retailing	L+700		1.0%	9/12/24		C$	55,460			42,914			42,111	(m)	Retailing	L+700		1.0%	9/12/24		C$	50,049			38,727			38,243
Sungard Availability Services Capital Inc	(f)(k)(l)(s)	Software & Services	L+700		1.0%	9/30/21		$	9,606			9,471			6,556		Software & Services	L+750		1.0%	2/3/22		$	634			615			656
Sungard Availability Services Capital Inc	(k)(l)(s)	Software & Services	L+1000		1.0%	10/1/22			894			845			771	(n)	Software & Services	L+750		1.0%	2/3/22			634			615			656
Sutherland Global Services Inc	(h)(i)(m)(s)	Software & Services	L+538		1.0%	4/23/21			12,990			12,507			12,697	(h)(i)(m)(s)	Software & Services	L+538		1.0%	4/23/21			12,922			12,538			12,829
Swift Worldwide Resources Holdco Ltd	(f)(g)	Energy	L+1000, 1.0% PIK (1.0% Max PIK)		1.0%	7/20/21			19,492			19,492			19,492	(f)(g)	Energy	L+1,000, 1.0% PIK (1.0% Max PIK)		1.0%	7/20/21			19,807			19,807			19,806
Tangoe LLC		Software & Services	L+650		1.0%	11/28/25			51,894			51,395			51,243	(h)	Software & Services	L+650		1.0%	11/28/25			51,439			50,970			51,500
Team Health Inc	(s)	Health Care Equipment & Services	L+275		1.0%	2/6/24			78			71			69	(s)	Health Care Equipment & Services	L+275		1.0%	2/6/24			77			71			64
Trace3 Inc	(f)(g)(h)(i)	Software & Services	L+675		1.0%	8/5/24			161,180			161,180			161,180
Virgin Pulse Inc	(h)(i)	Software & Services	L+650		1.0%	5/22/25			79,691			79,108			78,663
Vivint Inc	(i)(s)	Commercial & Professional Services	L+500			4/1/24			18,536			18,491			18,131
Warren Resources Inc	(h)(j)(t)	Energy	L+1000, 1.0% PIK (1.0% Max PIK)		1.0%	5/22/20			14,697			14,697			14,697
York Risk Services Group Inc	(s)	Insurance	L+375		1.0%	10/1/21			977			973			920
Torrid Inc																(g)	Retailing	L+675		1.0%	12/14/24			20,060			19,845			19,853
Total Safety US Inc																(s)	Capital Goods	L+600		1.0%	8/16/25			3,570			3,220			3,380

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Trace3 Inc																(f)(g)(h)(i)	Software & Services	L+675		1.0%	8/3/24		$	160,168		$	160,168		$	157,165
Vertiv Group Corp																(j)(s)	Technology Hardware & Equipment	L+400		1.0%	11/30/23			10,983			10,548			10,479
Virgin Pulse Inc																(h)(i)	Software & Services	L+650		1.0%	5/22/25			79,290			78,744			78,751
Vivint Inc																(i)(s)	Commercial & Professional Services	L+500			4/1/24			18,443			18,402			18,121
Warren Resources Inc																(t)	Energy	L+1,000, 1.0% PIK (1.0% Max PIK)		1.0%	5/22/20			14,772			14,772			14,772
Zeta Interactive Holdings Corp	(f)(h)	Software & Services	L+750		1.0%	7/29/22		$	37,112		$	37,112		$	37,483	(f)(h)	Software & Services	L+750		1.0%	7/29/22			42,041			42,041			42,461
Zeta Interactive Holdings Corp	(n)	Software & Services	L+750		1.0%	7/29/22			6,571			6,571			6,637	(n)	Software & Services	L+750		1.0%	7/29/22			4,929			4,929			4,978
Total Senior Secured Loans—First Lien												3,770,028			3,677,909												3,304,396			3,165,110
Unfunded Loan Commitments												(158,789)			(158,789)												(181,564)			(181,564)
Net Senior Secured Loans—First Lien												3,611,239			3,519,120												3,122,832			2,983,546
Senior Secured Loans—Second Lien—15.1%
Senior Secured Loans—Second Lien—17.6%
Access CIG LLC	(s)	Software & Services	L+775			2/27/26			1,326			1,342			1,317	(s)	Software & Services	L+775			2/27/26			1,326			1,341			1,326
Advantage Sales & Marketing Inc	(s)	Commercial & Professional Services	L+650		1.0%	7/25/22			2,291			2,052			1,693	(s)	Commercial & Professional Services	L+650		1.0%	7/25/22			2,291			2,080			1,992
American Bath Group LLC	(i)(s)	Capital Goods	L+975		1.0%	9/30/24			7,000			6,605			7,000	(i)(s)	Capital Goods	L+975		1.0%	9/30/24			7,000			6,640			7,000
Ammeraal Beltech Holding BV	(m)	Capital Goods	L+800			7/27/26			52,309			51,306			51,208	(h)(m)	Capital Goods	L+800			7/27/26			52,309			51,350			50,704
Arena Energy LP	(f)(h)	Energy	L+900, 4.0% PIK (4.0% Max PIK)		1.0%	1/24/21			26,125			26,125			26,125	(f)(h)	Energy	L+900, 4.0% PIK (4.0% Max PIK)		1.0%	1/24/21			26,665			26,665			26,536
athenahealth Inc	(h)	Health Care Equipment & Services	L+850		1.0%	2/11/27			65,229			64,590			65,554	(h)	Health Care Equipment & Services	L+850			2/11/27			65,229			64,621			65,800
BCA Marketplace PLC																(j)(m)	Retailing	L+825			9/4/27		€	30,091			36,654			36,654
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			6,372			5,966			5,792	(m)	Energy	8.5%			9/11/23		$	1,872			1,872			1,872
Bellatrix Exploration Ltd	(m)(n)	Energy	8.5%			7/26/23			624			624			618	(k)(l)(m)	Energy	8.5%			9/11/23			4,500			4,127			1,473
Byrider Finance LLC		Automobiles & Components	L+1000, 0.5% PIK (4.0% Max PIK)		1.3%	8/22/20			29,731			29,731			29,397		Automobiles & Components	L+1,000, 0.5% PIK (4.0% Max PIK)		1.3%	6/7/22			29,808			29,808			29,733
Catalina Marketing Corp	(i)(k)(l)(s)	Media	L+675		1.0%	4/11/22			10,000			9,958			200
Chisholm Oil & Gas Operating LLC	(h)	Energy	L+800		1.0%	3/21/24			16,000			16,000			15,705	(h)	Energy	L+800		1.0%	3/21/24			16,000			16,000			16,160
Crossmark Holdings Inc	(i)(k)(l)(s)	Media	L+750		1.3%	12/21/20			7,778			7,786			58
Envigo Laboratories Inc	(h)(s)	Health Care Equipment & Services	L+775			4/29/20			3,272			3,202			3,043
Electronics For Imaging Inc																(i)(s)	Technology Hardware & Equipment	L+900			7/23/27			3,871			3,680			3,581
Emerald Performance Materials LLC																(j)(s)	Materials	L+775		1.0%	8/1/22			4,457			4,434			4,401
Excelitas Technologies Corp																(s)	Technology Hardware & Equipment	L+750		1.0%	12/1/25			5,793			5,828			5,812
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	11.0% PIK (11.0% Max PIK)			2/24/24			1,793			1,520			—	(k)(l)	Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)		1.0%	2/24/24			1,895			1,520			—
Grocery Outlet Inc	(s)	Food & Staples Retailing	L+725			10/22/26			2,287			2,266			2,287
Gruden Acquisition Inc	(h)(s)	Transportation	L+850		1.0%	8/18/23			15,000			14,531			14,887	(h)(s)	Transportation	L+850		1.0%	8/18/23			15,000			14,573			14,919
Jazz Acquisition Inc	(f)(s)	Capital Goods	L+675		1.0%	6/19/22			3,700			3,727			3,478
LBM Borrower LLC	(f)(i)(s)	Capital Goods	L+925		1.0%	8/20/23			29,332			29,099			28,745	(f)(h)(i)(s)	Capital Goods	L+925		1.0%	8/20/23			29,332			29,118			28,874
Misys Ltd																(j)(m)(s)	Software & Services	L+725		1.0%	6/13/25			4,670			4,646			4,486
NEP Broadcasting LLC																(s)	Media & Entertainment	L+700			10/19/26			1,683			1,652			1,652
OEConnection LLC																	Software & Services	L+825			9/25/27			21,374			21,161			21,161
One Call Care Management Inc	(h)	Insurance	L+375, 6.0% PIK (6.0% Max PIK)		1.0%	4/11/24			12,666			12,560			11,554	(h)	Insurance	L+375, 6.0% PIK (6.0% Max PIK)		1.0%	4/11/24			13,003			12,904			10,616
OPE Inmar Acquisition Inc	(i)(s)	Software & Services	L+800		1.0%	5/1/25			2,615			2,584			2,596	(i)(s)	Software & Services	L+800		1.0%	5/1/25			2,615			2,586			2,456
P2 Energy Solutions, Inc.	(i)(s)	Software & Services	L+800		1.0%	4/30/21			14,500			14,603			14,011
Paradigm Acquisition Corp	(s)	Health Care Equipment & Services	L+750			10/26/26			1,599			1,595			1,591
Peak 10 Holding Corp	(i)(s)	Telecommunication Services	L+725		1.0%	8/1/25			5,814			5,635			5,146
Pure Fishing Inc	(i)	Consumer Durables & Apparel	L+838		1.0%	12/31/26			46,828			46,371			47,107
Rise Baking Company	(i)	Food, Beverage & Tobacco	L+800		1.0%	8/9/26			17,990			17,821			17,676

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
P2 Energy Solutions, Inc.																(i)(s)	Software & Services	L+800		1.0%	4/30/21		$	14,500		$	14,582		$	14,119
Paradigm Acquisition Corp																(s)	Health Care Equipment & Services	L+750			10/26/26			1,599			1,595			1,591
Peak 10 Holding Corp																(i)(s)	Telecommunication Services	L+725		1.0%	8/1/25			5,814			5,644			4,303
Pure Fishing Inc																(i)	Consumer Durables & Apparel	L+838		1.0%	12/31/26			46,828			46,390			40,826
Rise Baking Company																(i)	Food, Beverage & Tobacco	L+800		1.0%	8/9/26			17,990			17,828			17,685
Sequa Corp	(i)(s)	Materials	L+900		1.0%	4/28/22		$	7,462		$	7,419		$	7,322	(i)(s)	Materials	L+900		1.0%	4/28/22			7,462			7,424			7,364
SIRVA Worldwide Inc	(i)(s)	Commercial & Professional Services	L+950			8/2/26			2,494			2,315			2,195	(i)(s)	Commercial & Professional Services	L+950			8/3/26			2,494			2,322			2,170
SMG/PA	(s)	Consumer Services	L+700			1/23/26			3,641			3,671			3,691	(s)	Consumer Services	L+700			1/23/26			3,641			3,669			3,696
Spencer Gifts LLC	(i)(s)	Retailing	L+825		1.0%	6/29/22			8,736			8,761			8,342
Sorenson Communications LLC																(h)	Telecommunication Services	11.5% PIK (11.5% Max PIK)			4/30/25			5,364			5,196			5,364
Titan Energy LLC	(h)(k)(l)	Energy	L+1300 PIK (L+1300 Max PIK)		1.0%	2/3/20			91,946			67,595			6,743	(h)(k)(l)	Energy	L+1,300 PIK (L+1,300 Max PIK)		1.0%	2/23/20			91,946			67,595			913
WireCo WorldGroup Inc	(s)	Capital Goods	L+900		1.0%	9/30/24			5,115			5,176			5,102	(s)	Capital Goods	L+900		1.0%	9/30/24			5,115			5,172			5,064
Total Senior Secured Loans—Second Lien												472,536			390,183												520,677			440,303
Unfunded Loan Commitments												(624)			(624)
Net Senior Secured Loans—Second Lien												471,912			389,559
Other Senior Secured Debt—6.7%
Other Senior Secured Debt—8.1%
Advanced Lighting Technologies Inc	(k)(l)(t)	Materials	L+700, 10.0% PIK (10.0% Max PIK)		1.0%	10/4/23			12,493			10,663			344	(k)(l)(t)	Materials	L+1,700 PIK (L+1,700 Max PIK)		1.0%	10/4/23			13,773			10,663			—
Akzo Nobel Specialty Chemicals	(m)(s)	Materials	8.0%			10/1/26			2,019			2,020			2,037
Artesyn Embedded Technologies Inc	(s)	Technology Hardware & Equipment	9.8%			10/15/20			1,574			1,526			1,495	(s)	Technology Hardware & Equipment	9.8%			10/15/20			2,238			2,183			2,249
Black Swan Energy Ltd	(m)	Energy	9.0%			1/20/24			1,333			1,333			1,320	(m)	Energy	9.0%			1/20/24			1,333			1,333			1,326
Enterprise Development Authority																(s)	Consumer Services	12.0%			7/15/24			3,356			3,483			3,692
FourPoint Energy LLC	(h)(i)	Energy	9.0%			12/31/21			46,313			45,226			45,386	(h)(i)	Energy	9.0%			12/31/21			46,313			45,474			45,618
Frontier Communications Corp																(m)(s)	Telecommunication Services	8.5%			4/1/26			10,722			10,397			10,748
Genesys Telecommunications Laboratories Inc	(s)	Technology Hardware & Equipment	10.0%			11/30/24			144			158			158	(s)	Technology Hardware & Equipment	10.0%			11/30/24			144			157			156
JC Penney Corp Inc	(m)(s)	Retailing	5.7%			6/1/20			126			118			115	(m)(s)	Retailing	5.7%			6/1/20			126			118			119
JW Aluminum Co	(h)(s)(t)	Materials	10.3%			6/1/26			33,001			33,001			34,197	(h)(s)(t)	Materials	10.3%			6/1/26			33,001			33,001			34,899
Lycra	(m)(s)	Consumer Durables & Apparel	7.5%			5/1/25			3,659			3,686			3,613	(g)(m)(s)	Consumer Durables & Apparel	7.5%			5/1/25			6,732			6,732			6,076
Mood Media Corp	(h)(t)	Media	L+1400 PIK (L+1400 Max PIK)		1.0%	7/1/24			30,835			30,730			30,835	(h)(t)	Media & Entertainment	L+1,400 PIK (L+1,400 Max PIK)			12/31/23			40,563			39,448			39,813
Numericable-SFR	(m)(s)	Software & Services	8.1%			2/1/27			917			917			928
MultiPlan Inc																(s)	Health Care Equipment & Services	7.1%			6/1/24			6,952			7,001			6,439
PAREXEL International Corp																(s)	Pharmaceuticals, Biotechnology & Life Sciences	6.4%			9/1/25			72			70			67
Pattonair Holdings Ltd	(m)(s)	Capital Goods	9.0%			11/1/22			4,111			4,245			4,184	(m)(s)	Capital Goods	9.0%			11/1/22			6,767			6,946			7,122
Ply Gem Holdings Inc	(s)	Capital Goods	8.0%			4/15/26			7,807			7,463			7,015	(s)	Capital Goods	8.0%			4/15/26			7,807			7,481			7,709
Sorenson Communications LLC	(h)(s)	Telecommunication Services	9.0%, 0.0% PIK (9.0% Max PIK)			10/31/20			7,058			6,964			7,128
Sunnova Energy Corp		Energy	6.0%, 6.0% PIK (6.0% Max PIK)			7/31/19			1,140			1,140			1,136
Sungard Availability Services Capital Inc																(f)	Software & Services	L+400, 2.5% PIK (2.5% Max PIK)		1.0%	11/3/22			3,311			3,311			3,311
Velvet Energy Ltd	(i)(m)	Energy	9.0%			10/5/23			15,000			15,000			15,338	(i)(m)	Energy	9.0%			10/5/23			15,000			15,000			15,338
Vivint Inc	(h)(s)	Commercial & Professional Services	7.9%			12/1/22			11,307			11,089			11,334	(g)(h)(s)	Commercial & Professional Services	7.9%			12/1/22			11,307			11,115			11,335
Vivint Inc	(h)(s)	Commercial & Professional Services	7.6%			9/1/23			7,309			6,733			6,237	(h)(s)	Commercial & Professional Services	7.6%			9/1/23			7,309			6,786			6,542
Total Other Senior Secured Debt												182,012			172,800												210,699			202,559

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Subordinated Debt—8.6%
Subordinated Debt—9.6%
All Systems Holding LLC		Commercial & Professional Services	10.0% PIK (10.0% Max PIK)		10/31/22		$	206		$	206		$	206		Commercial & Professional Services	10.0% PIK (10.0% Max PIK)		10/31/22		$	206		$	206		$	206
Ascent Resources Utica Holdings LLC/ARU Finance Corp	(h)(i)(s)	Energy	10.0%		4/1/22			26,026			26,026			28,506
Ascent Resources Utica Holdings LLC / ARU Finance Corp															(h)(i)(s)	Energy	10.0%		4/1/22			26,026			26,026			26,148
athenahealth Inc		Health Care Equipment & Services	L+1125 PIK (L+1125 Max PIK)		11/30/25			32,614			32,614			32,988		Health Care Equipment & Services	L+1,125 PIK (L+1,125 Max PIK)		2/11/27			35,521			35,521			35,751
Avantor Inc	(i)(s)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%		10/1/25			20,000			20,000			21,675	(i)(s)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%		10/1/25			25,000			25,633			28,156
Byrider Finance LLC		Automobiles & Components	20.0% PIK (20.0% Max PIK)		3/31/22			1,604			1,604			1,604		Automobiles & Components	20.0% PIK (20.0% Max PIK)		3/31/22			1,765			1,765			1,765
CEC Entertainment Inc	(s)	Consumer Services	8.0%		2/15/22			11,479			11,374			10,622
ClubCorp Club Operations Inc	(h)(s)	Consumer Services	8.5%		9/15/25			10,733			10,373			9,803	(h)(s)	Consumer Services	8.5%		9/15/25			10,733			10,394			9,043
Craftworks Rest & Breweries Group Inc																Consumer Services			11/1/24			4,907			4,863			4,397
Diamond Resorts International Inc	(s)	Consumer Services	10.8%		9/1/24			3,048			3,187			2,890	(s)	Consumer Services	10.8%		9/1/24			3,048			3,177			3,155
Eclipse Resources Corp	(m)(s)	Energy	8.9%		7/15/23			9,175			9,053			8,756
GFL Environmental Inc															(m)(s)	Commercial & Professional Services	8.5%		5/1/27			8,827			9,070			9,809
Hub International Ltd	(s)	Insurance	7.0%		5/1/26			578			563			573	(s)	Insurance	7.0%		5/1/26			3,518			3,471			3,628
Intelsat Jackson Holdings SA	(m)(s)	Media	5.5%		8/1/23			5,752			5,204			5,112	(m)(s)	Media & Entertainment	5.5%		8/1/23			5,752			5,258			5,395
Ken Garff Automotive LLC	(s)	Retailing	7.5%		8/15/23			6,004			6,053			6,102	(s)	Retailing	7.5%		8/15/23			6,004			6,048			6,312
Kenan Advantage Group Inc															(s)	Transportation	7.9%		7/31/23			7,434			6,302			6,691
LifePoint Hospitals Inc	(s)	Health Care Equipment & Services	9.8%		12/1/26			7,656			7,572			7,953	(s)	Health Care Equipment & Services	9.8%		12/1/26			9,789			9,850			10,498
Logan’s Roadhouse Inc		Consumer Services			11/1/24			4,907			4,859			4,907
Montage Resources Corp															(m)(s)	Energy	8.9%		7/15/23			8,175			8,077			6,295
Nouryon (fka Akzo Nobel Specialty Chemicals)															(m)(s)	Materials	8.0%		10/1/26			6,305			6,284			6,321
Plastipak Holdings Inc															(s)	Materials	6.3%		10/15/25			974			913			816
Quorum Health Corp	(s)	Health Care Equipment & Services	11.6%		4/15/23			2,396			2,384			2,157	(s)	Health Care Equipment & Services	11.6%		4/15/23			2,396			2,385			2,162
Sorenson Communications LLC	(h)(s)	Telecommunication Services	13.9%, 0.0% PIK (13.9% Max PIK)		10/31/21			5,364			5,182			5,525
SRS Distribution Inc	(h)(s)	Capital Goods	8.3%		7/1/26			11,667			11,479			11,229	(h)(s)	Capital Goods	8.3%		7/1/26			11,667			11,489			11,930
Stars Group Holdings BV	(m)(s)	Consumer Services	7.0%		7/15/26			1,438			1,438			1,501	(m)(s)	Consumer Services	7.0%		7/15/26			1,438			1,438			1,535
Sungard Availability Services Capital Inc	(k)(l)(s)	Software & Services	8.8%		4/1/22			5,900			4,860			315
Team Health Inc	(s)	Health Care Equipment & Services	6.4%		2/1/25			6,901			5,987			5,620	(s)	Health Care Equipment & Services	6.4%		2/1/25			6,901			6,047			4,803
Vertiv Group Corp	(h)(s)	Technology Hardware & Equipment	9.3%		10/15/24			16,584			16,419			16,377	(h)(s)	Technology Hardware & Equipment	9.3%		10/15/24			16,559			16,405			16,042
Vivint Inc	(h)(s)	Commercial & Professional Services	8.8%		12/1/20			7,602			7,360			7,497	(h)(s)	Commercial & Professional Services	8.8%		12/1/20			9,300			9,026			9,149
York Risk Services Group Inc	(h)(i)(s)	Insurance	8.5%		10/1/22			38,070			35,840			30,932	(h)(i)(s)	Insurance	8.5%		10/1/22			28,876			27,374			29,490
Total Subordinated Debt											229,637			222,850											237,022			239,497

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/ Shares			Cost			Fair Value(d)
Asset Based Finance—4.9%
Abacus JV, Private Equity	(m)	Insurance						12,746,354		$	12,746		$	12,746
Altavair NewCo, Private Equity	(m)	Capital Goods						5,293,732			5,294			5,865
Altus Power America Inc, Preferred Stock	(r)	Energy	9.0%, 5.0% PIK (5.0% Max PIK)		10/3/23			1,107,723			1,108			1,108
Australis Maritime, Common Stock	(l)(m)	Transportation						5,448,630			5,449			5,449
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/30/25		$	1,102			1,041			1,086
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		4/30/25		$	7,007			6,618			6,902
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/3/25		$	1,448			1,368			1,426
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/29/25		$	1,363			1,288			1,343
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	8,229			7,773			8,106
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	1,832			1,731			1,805
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	189			179			186
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	1,456			1,376			1,434
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	705			665			694
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	157			148			155
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/2/26		$	2,608			2,463			2,568
Global Jet Capital LLC, Preferred Stock	(e)(l)	Commercial & Professional Services						7,806,703			7,807			586
Home Partners JV, Structured Mezzanine	(m)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		$	13,030			13,030			13,030
Home Partners JV, Structured Mezzanine	(m)(n)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		$	13,030			13,030			13,030
Home Partners JV, Common Stock	(l)(m)	Real Estate						6,514,831			6,515			6,733
Home Partners JV, Private Equity	(l)(m)(s)	Real Estate						351,531			352			25
Lenovo Group Ltd, Structured Mezzanine	(m)	Technology Hardware & Equipment	8.0%		6/22/22		€	4,618			5,251			5,036
Lenovo Group Ltd, Structured Mezzanine	(m)	Technology Hardware & Equipment	8.0%		6/22/22		$	9,705			9,705			9,705
Lenovo Group Ltd, Structured Mezzanine	(m)	Technology Hardware & Equipment	12.0%		6/22/22		€	2,939			3,342			3,205
Lenovo Group Ltd, Structured Mezzanine	(m)	Technology Hardware & Equipment	12.0%		6/22/22		$	6,176			6,176			6,176
NewStar Clarendon 2014-1A Class D	(l)(m)	Diversified Financials			1/25/27		$	12,140			7,180			5,564
Pretium Partners LLC P2, Structured Mezzanine	(m)	Real Estate	9.5%		5/29/25		$	14,115			14,115			14,248
Sofi Lending Corp, 2019-C R1	(m)	Diversified Financials			11/16/48		$	13,283			7,523			7,518
Toorak Capital Funding LLC, Membership Interest	(m)	Diversified Financials					$	339			339			339
Total Asset Based Finance											143,612			136,068
Unfunded Commitments											(13,030)			(13,030)
Net Asset Based Finance											130,582			123,038

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity		Number of Shares		Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/ Shares		Cost			Fair Value(d)
Equity/Other—11.1%
Equity/Other—10.7%
Abaco Energy Technologies LLC, Common Stock	(l)	Energy						3,055,556		$	3,056		$	1,413	(l)	Energy					3,055,556		$	3,056		$	1,163
Abaco Energy Technologies LLC, Preferred Stock	(l)	Energy						12,734,481			637			7,322	(l)	Energy					12,734,481			637			6,297
Advanced Lighting Technologies Inc, Common Stock	(l)(t)	Materials						265,747			7,471			—	(l)(t)	Materials					265,747			7,471			—
Advanced Lighting Technologies Inc, Warrant	(l)(t)	Materials				10/4/27		4,189			39			—	(l)(t)	Materials			10/4/27		4,189			39			—
All Systems Holding LLC, Common Stock		Commercial & Professional Services						1,240,204			1,201			1,692	(l)	Commercial & Professional Services					1,240,204			1,201			1,448
Altavair NewCo, Private Equity	(l)(m)	Capital Goods						3,429,458			3,429			3,519
Ascent Resources Utica Holdings LLC/ARU Finance Corp, Common Stock	(o)	Energy						13,556			12,900			4,365
Ascent Resources Utica Holdings LLC/ARU Finance Corp, Trade Claim	(o)	Energy						115,178,571			25,800			37,088
Ascent Resources Utica Holdings LLC / ARU Finance Corp, CommonStock															(l)(o)	Energy					13,556			12,900			3,104
Ascent Resources Utica Holdings LLC / ARU Finance Corp, Trade Claim															(o)	Energy					115,178,571			25,800			26,376
ASG Technologies, Common Stock	(l)(t)	Software & Services						625,178			13,475			36,667	(l)(t)	Software & Services					625,178			13,475			34,710
ASG Technologies, Warrants	(l)(t)	Software & Services				6/27/22		253,704			7,231			9,362
ASG Technologies, Warrant															(l)(t)	Software & Services			6/27/22		253,704			7,231			8,568
Aspect Software Inc, Common Stock	(h)(l)	Software & Services						304,599			494			494	(h)(l)	Software & Services					304,599			494			471
Aspect Software Inc, Warrant	(h)(l)	Software & Services				1/15/24		304,120			—			—	(h)(l)	Software & Services			1/15/24		304,120			—			—
ATX Networks Corp, Common Stock	(l)(m)	Technology Hardware & Equipment						72,635			116			94	(l)(m)	Technology Hardware & Equipment					72,635			116			67
Aurora Diagnostics Holdings LLC/Aurora Diagnostics Financing Inc, Warrant	(h)(l)	Health Care Equipment & Services				5/25/27		94,193			686			277
Australis Maritime, Private Equity	(l)(m)	Transportation						1,136,041			1,136			1,136
Bellatrix Exploration Ltd, Warrant															(l)(m)	Energy			9/11/23		127,489			—			—
Byrider Finance LLC, Common Stock	(l)	Automobiles & Components						1,389			—			—	(l)	Automobiles & Components					1,389			—			—
Catalina Marketing Corp, Common Stock															(l)	Media & Entertainment					6,522			—			—
Chisholm Oil & Gas Operating LLC, Series A Units	(l)(p)	Energy						75,000			75			34	(l)(p)	Energy					75,000			75			73
Cimarron Energy Inc, Common Stock	(l)	Energy						4,302,293			3,950			217	(l)	Energy					4,302,293			3,950			290
Cimarron Energy Inc, Participation Option	(l)	Energy						25,000,000			1,289			1,263	(l)	Energy					25,000,000			1,289			1,688
Crossmark Holdings Inc, Warrant															(i)(l)	Commercial & Professional Services					7,007			—			—
CSafe Global, Common Stock	(l)	Capital Goods						417,400			417			741	(l)	Capital Goods					417,400			417			768
Empire Today LLC, Common Stock	(l)	Retailing						411			1,227			1,350	(l)	Retailing					411			1,227			2,192
Envigo Laboratories Inc, Series A Warrant	(h)(l)(s)	Health Care Equipment & Services				4/29/24		10,924			—			—	(h)(l)	Health Care Equipment & Services			4/29/24		10,924			—			—
Envigo Laboratories Inc, Series B Warrant	(h)(l)(s)	Health Care Equipment & Services				4/29/24		17,515			—			—	(h)(l)	Health Care Equipment & Services			4/29/24		17,515			—			—
Fairway Group Holdings Corp, Common Stock	(l)	Food & Staples Retailing						31,626			1,016			—	(l)	Food & Staples Retailing					31,626			1,016			—
FourPoint Energy LLC, Common Stock, Class C - II - A Units	(l)(p)	Energy						13,000			13,000			2,896
FourPoint Energy LLC, Common Stock, Class C—II—A Units															(l)(p)	Energy					13,000			13,000			1,905
FourPoint Energy LLC, Common Stock, Class D Units	(l)(p)	Energy						2,437			1,610			549	(l)(p)	Energy					2,437			1,610			361
FourPoint Energy LLC, Common Stock, Class E - II Units	(l)(p)	Energy						29,730			7,432			6,622
FourPoint Energy LLC, Common Stock, Class E - III Units	(l)(p)	Energy						43,875			10,969			9,773
FourPoint Energy LLC, Common Stock, Class E—II Units															(l)(p)	Energy					29,730			7,432			4,355
FourPoint Energy LLC, Common Stock, Class E—III Units															(l)(p)	Energy					43,875			10,969			6,428
Fox Head Inc, Common Stock	(e)(l)	Consumer Durables & Apparel						8,857,143			8,857			3,569	(e)(l)	Consumer Durables & Apparel					8,857,143			8,857			1,038
FullBeauty Brands Holdings Corp, Common Stock	(l)	Retailing						5,583			26			26	(l)	Retailing					5,583			26			—
Harvey Industries Inc, Common Stock															(l)	Capital Goods					666,667			667			2,320
HM Dunn Co Inc, Preferred Stock, Series A															(h)(l)(t)	Capital Goods					12,857			—			—

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity		Number of Shares		Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/ Shares		Cost			Fair Value(d)
Global Jet Capital LLC, Preferred Stock	(e)(l)(m)	Commercial & Professional Services						6,228,866		$	6,229		$	467
Harvest Oil & Gas Corp, Common Stock	(e)(l)(s)	Energy						7,161			158			120
Harvey Industries Inc, Common Stock	(l)	Capital Goods						666,667			667			1,350
HM Dunn Co Inc, Preferred Stock, Series A	(h)(l)(t)	Capital Goods						12,857			—			—
HM Dunn Co Inc, Preferred Stock, Series B	(h)(l)(t)	Capital Goods						12,857			—			—	(h)(l)(t)	Capital Goods					12,857		$	—		$	—
Industrial Group Intermediate Holdings LLC, Common Stock	(l)(p)	Materials						2,678,947			2,679			3,416
JHC Acquisition LLC, Common Stock	(l)	Capital Goods						1,449			1,449			1,880	(l)	Capital Goods					1,449			1,449			1,739
JSS Holdings Ltd, Net Profits Interest	(l)	Capital Goods						27			—			469	(l)	Capital Goods					27			—			781
JW Aluminum Co, Common Stock	(e)(i)(l)(t)	Materials						548			—			—	(e)(i)(l)(t)	Materials					548			—			—
JW Aluminum Co, Preferred Stock	(e)(i)(t)	Materials	12.5% PIK			11/17/25		4,869			33,914			49,830	(e)(i)(t)	Materials	12.5% PIK		2/15/28		62,275,520			37,856			67,741
MB Precision Holdings LLC, Class A - 2 Units	(g)(h)(l)(p)(t)	Capital Goods						6,655,178			2,288			—
MB Precision Holdings LLC, Class A—2 Units															(g)(h)(l)(p)(t)	Capital Goods					6,655,178			2,288			—
MB Precision Holdings LLC, Preferred Stock	(g)(h)(l)(t)	Capital Goods						41,778,909			8,774			3,539	(g)(l)(t)	Capital Goods					41,778,909			8,774			5,138
Mood Media Corp, Common Stock	(l)(t)	Media						17,400,835			12,644			10,906	(l)(t)	Media & Entertainment					17,400,835			12,644			1,810
North Haven Cadence Buyer Inc, Common Stock	(l)	Consumer Services						2,916,667			2,917			4,958	(l)	Consumer Services					2,916,667			2,917			6,781
Power Distribution Inc, Common Stock	(l)	Capital Goods						2,076,923			2,077			467	(l)	Capital Goods					2,912,147			2,495			291
Professional Plumbing Group Inc, Common Stock	(e)(l)	Materials						3,000,000			3,000			8,250	(e)(l)	Materials					3,000,000			3,000			6,465
Ridgeback Resources Inc, Common Stock	(e)(l)(m)	Energy						817,308			5,022			3,885	(e)(l)(m)	Energy					817,308			5,022			4,135
Sequential Brands Group Inc., Common Stock	(e)(l)(s)	Consumer Durables & Apparel						408,685			5,517			523	(e)(l)(s)	Consumer Durables & Apparel					408,685			5,517			91
Sorenson Communications LLC, Common Stock	(e)(l)	Telecommunication Services						43,796			—			33,620	(e)(l)	Telecommunication Services					43,796			—			33,201
SSC (Lux) Limited S.a r.l., Common Stock	(l)(m)	Health Care Equipment & Services						261,364			5,227			6,403	(l)(m)	Health Care Equipment & Services					261,364			5,227			7,465
Sunnova Energy Corp, Common Stock	(l)	Energy						384,746			1,444			477
Sunnova Energy Corp, Preferred Stock	(l)	Energy						70,229			374			413
Sungard Availability Services Capital Inc, Common Stock															(f)(l)	Software & Services					57,588			4,025			3,674
Sunnova Energy International Inc, Common Stock															(l)(s)	Energy					195,017			2,194			2,096
Swift Worldwide Resources Holdco Ltd, Common Stock	(l)	Energy						1,250,000			2,009			438	(l)	Energy					1,250,000			2,010			481
Templar Energy LLC, Common Stock	(e)(l)(p)(s)	Energy						717,718			6,101			404	(e)(l)(p)(s)	Energy					717,718			6,101			449
Templar Energy LLC, Preferred Stock	(e)(l)(s)	Energy						475,758			4,751			1,189	(e)(l)(s)	Energy					475,758			4,751			—
Titan Energy LLC, Common Stock	(e)(l)(s)	Energy						200,039			6,321			20	(e)(l)(s)	Energy					200,039			6,322			6
Trace3 Inc, Common Stock	(l)	Software & Services						33,216			332			1,513	(l)	Software & Services					33,216			332			892
Warren Resources Inc, Common Stock	(l)(t)	Energy						2,371,337			11,145			6,995	(l)(t)	Energy					2,371,337			11,145			6,071
White Star Petroleum LLC, Common Stock	(l)(p)	Energy						1,613,753			1,372			363	(l)(p)	Energy					1,613,753			1,372			—
Zeta Interactive Holdings Corp, Preferred Stock, Series E - 1	(l)	Software & Services						620,025			4,929			6,649
Zeta Interactive Holdings Corp, Preferred Stock, Series E—1															(l)	Software & Services					620,025			4,929			6,922
Zeta Interactive Holdings Corp, Preferred Stock, Series F	(l)	Software & Services						563,932			4,929			5,961	(l)	Software & Services					563,932			4,929			6,268
Zeta Interactive Holdings Corp, Warrant	(l)	Software & Services				4/20/27		84,590			—			247	(l)	Software & Services			4/20/27		84,590			—			218
Total Equity/Other											263,808			285,221										258,254			266,337
TOTAL INVESTMENTS—179.9%										$	4,799,885			4,634,818
LIABILITIES IN EXCESS OF OTHER ASSETS—(79.9%)														(2,058,601)
TOTAL INVESTMENTS—170.3%																							$	4,480,066			4,255,280
LIABILITIES IN EXCESS OF OTHER ASSETS—(70.3%)																											(1,756,525)
NET ASSETS—100.0%													$	2,576,217												$	2,498,755

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

A summary of outstanding financial instruments as of ~~March 31,~~September 30, 2019 is as follows:

Interest rate swaps

Counterparty	Notional Amount	Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date		Premiums Paid/ (Received)			Value			Unrealized Depreciation			Notional Amount			Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)			Value			Unrealized Depreciation
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.78%		12/18/2023		$	—		$	(2,029)		$	(2,029)		$	80,000	3-Month LIBOR		2.78%	12/18/2023		$	—		$	(4,427)		$	(4,427)
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.81%		12/18/2021			—			(1,154)			(1,154)		$	80,000	3-Month LIBOR		2.81%	12/18/2021			—			(2,206)			(2,206)
ING Capital Markets	$100,000	3-Month LIBOR		2.59%		1/14/2024			—			(1,654)			(1,654)		$	100,000	3-Month LIBOR		2.59%	1/14/2024			—			(4,860)			(4,860)
ING Capital Markets	$100,000	3-Month LIBOR		2.62%		1/14/2022			—			(902)			(902)		$	100,000	3-Month LIBOR		2.62%	1/14/2022			—			(2,454)			(2,454)
								$	—		$	(5,739)		$	(5,739)									$	—		$	(13,947)		$	(13,947)

(a)

Security may be an obligation of one or more entities affiliated with the named company.

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of ~~March 31,~~September 30, 2019, the three-month London Interbank Offered Rate, or LIBOR, or “L”, was ~~2.60%~~2.09%, the Euro Interbank Offered Rate, or EURIBOR, or “E”, was ~~(0.31)~~(0.42)%, ~~Candian~~Canadian Dollar Offer Rate, or CDOR, or “C”, was ~~2.02%~~1.97%, Australian Bank BIll Swap Bid Rate, or BBSY, or “B”, was 0.95% and the U.S. Prime Lending Rate, or Prime, or “P”, was ~~5.50%~~5.00%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment. Variable rate securities with no floor rate use the respective benchmark rate in all cases.

(c)

Denominated in U.S. dollars unless otherwise noted.

(d)

Fair value determined by the Company’s board of directors (see Note 8).

(e)

Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 9).

(f)

Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 9).

(g)

Security or portion thereof held within Darby Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 9).

(h)

Security or portion thereof held within Juniata River LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, N.A. (see Note 9).

(i)

Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with Goldman Sachs Bank USA (see Note 9).

(j)

Position or portion thereof unsettled as of ~~March 31,~~September 30, 2019.

(k)

Security was on non-accrual status as of ~~March 31,~~September 30, 2019.

(l)

Security is non-income producing.

(m)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of ~~March 31,~~September 30, 2019, ~~89.5%~~84.4% of the Company’s total assets represented qualifying assets.

(n)

Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(o)

Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.

(p)

Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.

(q)

Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.

(r)

Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.

(s)

Security is classified as Level 1 or Level 2 in the Company’s fair value hierarchy (see Note 8).

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~March 31,~~September 30, 2019
(in thousands, except share amounts)

(t)

Under the Investment Company Act of 1940, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of ~~March 31,~~September 30, 2019, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the ~~three~~nine months ended ~~March 31,~~September 30, 2019:

Portfolio Company Fair Value at
December 31,
2018
Gross
Additions(1)

Gross
Reductions(2)
Net
Realized
Gain (Loss) Net Change in
Unrealized
Appreciation
(Depreciation) Fair Value at
March 31, 2019
Interest
Income(3)

PIK
Income(3)

Fee
Income(3)

Senior Secured Loans—First Lien
Advanced Lighting Technologies, Inc. $ 9,125 $ 56 $ (24) $ 3 $ (58) $ 9,102 $ 234 $ — $ —
H.M. Dunn Co., Inc. 7,022 — — — (3,017) 4,005 — — —
MB Precision Holdings LLC 21,339 690 (497) 176 (339) 21,369 644 117 —
Warren Resources, Inc. 14,652 45 — — — 14,697 441 45 —
Senior Secured Loans—Second Lien
JW Aluminum Co. — — — — — — — — —
Other Senior Secured Debt
Advanced Lighting Technologies, Inc. 3,630 — — — (3,286) 344 — — —
JW Aluminum Co. 32,919 — — — 1,278 34,197 846 — —
Mood Media Corp. 28,478 2,347 — — 10 30,835 1,300 1,139 —
Equity/Other
Advanced Lighting Technologies, Inc., Common Equity — — — — — — — — —
Advanced Lighting Technologies, Warrants, 10/4/2027 — — — — — — — — —
ASG Everglades Holdings, Inc., Common Equity 31,743 — — — 4,924 36,667 — — —
ASG Everglades Holdings, Inc., 6/27/2022, Warrants 7,364 — — — 1,998 9,362 — — —
HM Dunn Aerosystems, Inc., Preferred Equity, Series A — — — — — — — — —
HM Dunn Aerosystems, Inc., Preferred Equity, Series B — — — — — — — — —
JW Aluminum Co., Common Equity — — — — — — — — —
JW Aluminum Co., Preferred Equity 43,890 1,874 — — 4,066 49,830 1,802 1,774 —
MB Precision Holdings LLC, Class A-2 Units — — — — — — — — —
MB Precision Holdings LLC, Preferred Stock 5,826 174 — — (2,461) 3,539 — — —
Mood Media Corp. 15,842 — — — (4,936) 10,906 — — —
Warren Resources, Inc., Common Equity 5,573 — — — 1,422 6,995 — — —
Total $ 227,403 $ 5,186 $ (521) $ 179 $ (399) $ 231,848 $ 5,267 $ 3,075 $ —

Portfolio Company	Fair Value at December 31, 2018			Gross Additions(1)			Gross Reductions(2)			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at September 30, 2019			Interest Income(3)			PIK Income(3)			Fee Income(3)
Senior Secured Loans—First Lien
Advanced Lighting Technologies Inc		$	9,125		$	172		$	(69)		$	8		$	(1,108)		$	8,128		$	695		$	—		$	—
HM Dunn Co Inc			7,022			—			—			—			9,721			16,743			—			—			—
HM Dunn Co Inc (4)			—			2,775			—			—			—			2,775			87			133			43
MB Precision Holdings LLC			21,339			1,248			(671)			177			(652)			21,441			1,938			365			—
Warren Resources Inc			14,652			120			—			—			—			14,772			1,299			120			—
Other Senior Secured Debt																					—
Advanced Lighting Technologies Inc			3,630			—			—			—			(3,630)			—			—			—			—
JW Aluminum Co			32,919			—			—			—			1,980			34,899			2,537			—			—
Mood Media Corp			28,478			47,387			(36,322)			—			270			39,813			4,042			1,139			—
Equity/Other
Advanced Lighting Technologies Inc, Common Equity			—			—			—			—			—			—			—			—			—
Advanced Lighting Technologies Inc, Warrant			—			—			—			—			—			—			—			—			—
ASG Technologies, Common Equity			31,743			—			—			—			2,967			34,710			—			—			—
ASG Technologies, Warrants			7,364			—			—			—			1,204			8,568			—			—			—
HM Dunn Co Inc, Preferred Stock, Series A			—			—			—			—			—			—			—			—			—
HM Dunn Co Inc, Preferred Stock, Series B			—			—			—			—			—			—			—			—			—
JW Aluminum Co, Common Stock			—			—			—			—			—			—			—			—			—
JW Aluminum Co, Preferred Stock			43,890			5,816			—			—			18,035			67,741			5,575			5,492			—
MB Precision Holdings LLC, Class A-2 Units			—			—			—			—			—			—			—			—			—
MB Precision Holdings LLC, Preferred Stock			5,826			174			—			—			(862)			5,138			—			—			—
Mood Media Corp, Common Stock			15,842			—			—			—			(14,032)			1,810			—			—			—
Warren Resources Inc, Common Stock			5,573			—			—			—			498			6,071			—			—			—
Total		$	227,403		$	57,692		$	(37,062)		$	185		$	14,391		$	262,609		$	16,173		$	7,249		$	43

(1)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities of one or more new securities and the movement of an existing portfolio company into this category from a different category.

(2)

Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

(3)

Interest, PIK and fee income presented for the ~~three~~nine months ended ~~March 31,~~September 30, 2019.

(4)

Security includes a partially unfunded commitment as of September 30, 2019 with an amortized cost of $1,644 and a fair value of $1,644.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes		Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—128.3%
5 Arch Income Fund 2, LLC	(m)(q)	Diversified Financials	9.0%			11/18/23		$	39,540		$	39,561		$	39,540	(m)(q)		Diversified Financials	9.0%			11/18/23		$	39,540		$	39,561		$	39,540
5 Arch Income Fund 2, LLC	(m)(n)(q)	Diversified Financials	9.0%			11/18/23			34,461			34,461			34,461	(m)(n)(q)		Diversified Financials	9.0%			11/18/23			34,461			34,461			34,461
Abaco Energy Technologies LLC	(h)(i)(t)	Energy	L+700, 2.5% PIK(2.5% Max PIK)		1.0%	11/20/20			24,428			23,941			24,153	(h)(i)(t)		Energy	L+700, 2.5% PIK (2.5% Max PIK)		1.0%	11/20/20			24,428			23,941			24,153
ABB CONCISE Optical Group LLC	(t)	Retailing	L+500		1.0%	6/15/23			2,769			2,779			2,658	(t)		Retailing	L+500		1.0%	6/15/23			2,769			2,779			2,658
Accuride Corp	(j)(t)	Capital Goods	L+525		1.0%	11/17/23			540			520			518	(j)(t)		Capital Goods	L+525		1.0%	11/17/23			540			520			518
Acosta Holdco Inc	(h)(t)	Commercial & Professional Services	L+325		1.0%	9/26/21			6,644			5,383			4,081	(h)(t)		Commercial & Professional Services	L+325		1.0%	9/26/21			6,644			5,383			4,081
Addison Holdings	(f)(g)(h)(i)	Commercial & Professional Services	L+675		1.0%	12/29/23			83,832			83,832			83,974	(f)(g)(h)(i)		Commercial & Professional Services	L+675		1.0%	12/29/23			83,832			83,832			83,974
Advanced Lighting Technologies Inc	(h)(u)	Materials	L+750		1.0%	10/4/22			9,125			7,933			9,125	(h)(u)		Materials	L+750		1.0%	10/4/22			9,125			7,933			9,125
Advantage Sales & Marketing Inc	(i)(t)	Commercial & Professional Services	L+325		1.0%	7/23/21			15,370			14,681			13,654	(i)(t)		Commercial & Professional Services	L+325		1.0%	7/23/21			15,370			14,681			13,654
Aleris International Inc	(h)(t)	Materials	L+475			2/27/23			1,367			1,354			1,358	(h)(t)		Materials	L+475			2/27/23			1,367			1,354			1,358
All Systems Holding LLC	(g)(h)(i)	Commercial & Professional Services	L+767		1.0%	10/31/23			111,623			111,623			112,739	(g)(h)(i)		Commercial & Professional Services	L+767		1.0%	10/31/23			111,623			111,623			112,739
Altus Power America Inc	(i)	Energy	L+750		1.5%	9/30/21			3,183			3,183			3,087	(i)		Energy	L+750		1.5%	9/30/21			3,183			3,183			3,087
Altus Power America Inc	(n)	Energy	L+750		1.5%	9/30/21			140			140			136	(n)		Energy	L+750		1.5%	9/30/21			140			140			136
American Tire Distributors Inc	(t)	Automobiles & Components	L+750		1.0%	8/30/24			4,031			3,521			3,319	(t)		Automobiles & Components	L+750		1.0%	8/30/24			4,031			3,521			3,319
American Tire Distributors Inc	(t)	Automobiles & Components	L+650, 1.0% PIK(1.0% Max PIK)		1.0%	9/1/23			634			593			593	(t)		Automobiles & Components	L+650, 1.0% PIK (1.0% Max PIK)		1.0%	9/1/23			634			593			593
Ammeraal Beltech Holding BV	(m)(t)	Capital Goods	E+375			7/30/25		€	1,491			1,725			1,701	(m)(t)		Capital Goods	E+375			7/30/25		€	1,491			1,725			1,701
Apex Group Limited	(m)(n)	Diversified Financials	L+650			6/15/23		$	2,302			2,238			1,970	(m)(n)		Diversified Financials	L+650			6/15/23		$	2,302			2,238			1,970
Apex Group Limited	(f)(g)(m)	Diversified Financials	L+650		1.0%	6/15/25			15,565			15,271			14,948	(f)(g)(m)	��	Diversified Financials	L+650		1.0%	6/15/25			15,565			15,271			14,948
Apex Group Limited	(m)(n)	Diversified Financials	L+650		1.0%	6/15/25			7,509			7,370			7,211	(m)(n)		Diversified Financials	L+650		1.0%	6/15/25			7,509			7,370			7,211
Apex Group Limited	(m)	Diversified Financials	L+650		1.0%	6/15/25			2,503			2,466			2,404	(m)		Diversified Financials	L+650		1.0%	6/15/25			2,503			2,466			2,404
Apex Group Limited	(m)(n)	Diversified Financials	L+650		1.0%	6/15/25			3,754			3,699			3,606	(m)(n)		Diversified Financials	L+650		1.0%	6/15/25			3,754			3,699			3,606
Ascension Insurance Inc	(f)(g)(h)	Insurance	L+825		1.3%	3/5/19			77,635			77,567			77,635	(f)(g)(h)		Insurance	L+825		1.3%	3/5/19			77,635			77,567			77,635
Ascension Insurance Inc	(n)	Insurance	L+825		1.3%	3/5/19			27,800			27,800			27,800	(n)		Insurance	L+825		1.3%	3/5/19			27,800			27,800			27,800
Aspect Software Inc	(k)(l)	Software & Services	L+400, 6.5% PIK(6.5% Max PIK)			5/25/20			4,671			4,657			3,480	(k)(l)		Software & Services	L+400, 6.5% PIK (6.5% Max PIK)			5/25/20			4,671			4,657			3,480
Aspect Software Inc	(h)(k)(l)	Software & Services	L+1100		1.0%	5/25/20			3,598			3,556			2,680	(h)(k)(l)		Software & Services	L+1100		1.0%	5/25/20			3,598			3,556			2,680
ATX Networks Corp	(f)(m)(t)	Technology Hardware & Equipment	L+600, 1.0% PIK(1.0% Max PIK)		1.0%	6/11/21			1,852			1,839			1,759	(f)(m)(t)		Technology Hardware & Equipment	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	6/11/21			1,852			1,839			1,759
ATX Networks Corp	(f)(i)(m)(t)	Technology Hardware & Equipment	L+600, 1.0% PIK(1.0% Max PIK)		1.0%	6/11/21			24,804			24,368			23,564	(f)(i)(m)(t)		Technology Hardware & Equipment	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	6/11/21			24,804			24,368			23,564
AVF Parent LLC	(h)(i)	Retailing	L+725		1.3%	3/1/24			74,461			74,461			69,605	(h)(i)		Retailing	L+725		1.3%	3/1/24			74,461			74,461			69,605
Belk Inc	(t)	Retailing	L+475		1.0%	12/12/22			22,635			19,743			18,366	(t)		Retailing	L+475		1.0%	12/12/22			22,635			19,743			18,366
Borden Dairy Co	(g)(h)	Food, Beverage & Tobacco	L+808		1.0%	7/6/23			52,500			52,500			47,738	(g)(h)		Food, Beverage & Tobacco	L+808		1.0%	7/6/23			52,500			52,500			47,738
Caprock Midstream LLC	(t)	Energy	L+475			11/3/25			6,046			5,916			5,638	(t)		Energy	L+475			11/3/25			6,046			5,916			5,638
Cimarron Energy Inc		Energy	L+900		1.0%	6/30/21			7,500			7,500			7,500			Energy	L+900		1.0%	6/30/21			7,500			7,500			7,500
Constellis Holdings LLC/Constellis Finance Corp		Capital Goods	L+575		1.0%	4/1/22			47,325			46,621			46,615
CSafe Global		Capital Goods	L+725		1.0%	11/1/21			626			626			632
CSafe Global	(n)	Capital Goods	L+725		1.0%	11/1/21			5,635			5,635			5,691
CSafe Global	(f)(g)(h)	Capital Goods	L+725		1.0%	10/31/23			53,605			53,605			54,141

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Constellis Holdings LLC / Constellis Finance Corp																	Capital Goods	L+575		1.0%	4/1/22		$	47,325		$	46,621		$	46,615
CSafe Global																	Capital Goods	L+725		1.0%	11/1/21			626			626			632
CSafe Global																(n)	Capital Goods	L+725		1.0%	11/1/21			5,635			5,635			5,691
CSafe Global																(f)(g)(h)	Capital Goods	L+725		1.0%	10/31/23			53,605			53,605			54,141
CSM Bakery Products	(i)(t)	Food, Beverage & Tobacco	L+400		1.0%	7/3/20		$	5,217		$	5,071		$	4,845	(i)(t)	Food, Beverage & Tobacco	L+400		1.0%	7/3/20			5,217			5,071			4,845
Dade Paper and Bag Co Inc	(f)(g)(h)(i)	Capital Goods	L+750		1.0%	6/10/24			135,734			135,734			133,019	(f)(g)(h)(i)	Capital Goods	L+750		1.0%	6/10/24			135,734			135,734			133,019
Dade Paper and Bag Co Inc	(f)(g)(h)	Capital Goods	L+700		1.0%	6/10/24			17,312			17,312			16,620	(f)(g)(h)	Capital Goods	L+700		1.0%	6/10/24			17,312			17,312			16,620
Dayton Superior Corp	(i)(t)	Materials	L+800, 6.0% PIK(6.0% Max PIK)		1.0%	11/15/21			11,790			11,585			9,874	(i)(t)	Materials	L+800, 6.0% PIK (6.0% Max PIK)		1.0%	11/15/21			11,790			11,585			9,874
Diamond Resorts International Inc	(i)(t)	Consumer Services	L+375		1.0%	9/2/23			14,085			13,795			13,170	(i)(t)	Consumer Services	L+375		1.0%	9/2/23			14,085			13,795			13,170
Distribution International Inc	(t)	Retailing	L+500		1.0%	12/15/21			3,398			3,247			3,024	(t)	Retailing	L+500		1.0%	12/15/21			3,398			3,247			3,024
Eagle Family Foods Inc	(n)	Food, Beverage & Tobacco	L+650		1.0%	6/14/23			4,126			4,084			3,516	(n)	Food, Beverage & Tobacco	L+650		1.0%	6/14/23			4,126			4,084			3,516
Eagle Family Foods Inc	(g)(h)	Food, Beverage & Tobacco	L+650		1.0%	6/14/24			27,368			27,082			26,950	(g)(h)	Food, Beverage & Tobacco	L+650		1.0%	6/14/24			27,368			27,082			26,950
Eagleclaw Midstream Ventures LLC	(i)(j)(t)	Energy	L+425		1.0%	6/24/24			11,455			10,917			10,747	(i)(j)(t)	Energy	L+425		1.0%	6/24/24			11,455			10,917			10,747
EIF Van Hook Holdings LLC	(i)(t)	Energy	L+525			9/5/24			7,378			7,234			7,184	(i)(t)	Energy	L+525			9/5/24			7,378			7,234			7,184
Empire Today LLC	(f)(g)(h)(i)	Retailing	L+700		1.0%	11/17/22			88,200			88,200			88,361	(f)(g)(h)(i)	Retailing	L+700		1.0%	11/17/22			88,200			88,200			88,361
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	10.0% PIK(10.0% Max PIK)			11/27/23			1,964			1,733			258	(k)(l)	Food & Staples Retailing	10.0% PIK (10.0% Max PIK)			11/27/23			1,964			1,733			258
Fairway Group Holdings Corp	(h)	Food & Staples Retailing	12.0% PIK(12.0% Max PIK)			11/27/23			3,072			3,072			2,984	(h)	Food & Staples Retailing	12.0% PIK (12.0% Max PIK)			11/27/23			3,072			3,072			2,984
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK(11.0% Max PIK)			8/28/23			212			210			212		Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)			8/28/23			212			210			212
Fairway Group Holdings Corp	(n)	Food & Staples Retailing	4.0%, 11.0% PIK(11.0% Max PIK)			8/28/23			455			455			455	(n)	Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)			8/28/23			455			455			455
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK(11.0% Max PIK)			8/28/23			1,070			1,055			1,070		Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)			8/28/23			1,070			1,055			1,070
Foresight Energy LLC	(h)(m)(t)	Materials	L+575		1.0%	3/28/22			10,591			10,575			10,423	(h)(m)(t)	Materials	L+575		1.0%	3/28/22			10,591			10,575			10,423
Fox Head Inc	(h)(i)	Consumer Durables & Apparel	L+850		1.0%	12/19/20			5,051			5,051			4,989	(h)(i)	Consumer Durables & Apparel	L+850		1.0%	12/19/20			5,051			5,051			4,989
Fox Head Inc	(h)(i)	Consumer Durables & Apparel	L+850		1.0%	12/19/20			47,253			47,253			46,671	(h)(i)	Consumer Durables & Apparel	L+850		1.0%	12/19/20			47,253			47,253			46,671
FullBeauty Brands Holdings Corp	(k)(l)(t)	Retailing	L+475		1.0%	10/14/22			4,910			4,574			1,495	(k)(l)(t)	Retailing	L+475		1.0%	10/14/22			4,910			4,574			1,495
Gulf Finance LLC	(i)(t)	Energy	L+525		1.0%	8/25/23			4,687			4,585			3,615	(i)(t)	Energy	L+525		1.0%	8/25/23			4,687			4,585			3,615
HM Dunn Co Inc	(h)(k)(l)(u)	Capital Goods	L+875 PIK(L+875 Max PIK)			6/30/21			43,885			38,571			7,022	(h)(k)(l)(u)	Capital Goods	L+875 PIK (L+875 Max PIK)			6/30/21			43,885			38,571			7,022
Hudson Technologies Co	(h)(i)(m)	Commercial & Professional Services	L+1025		1.0%	10/10/23			50,717			50,286			36,262	(h)(i)(m)	Commercial & Professional Services	L+1025		1.0%	10/10/23			50,717			50,286			36,262
Icynene Group Ltd	(f)(h)(i)	Materials	L+700		1.0%	11/30/24			35,640			35,640			34,656	(f)(h)(i)	Materials	L+700		1.0%	11/30/24			35,640			35,640			34,656
Industrial Group Intermediate Holdings LLC	(f)(g)(h)(i)	Materials	L+800		1.3%	5/31/20			118,840			118,840			118,098	(f)(g)(h)(i)	Materials	L+800		1.3%	5/31/20			118,840			118,840			118,098
Industry City TI Lessor LP	(h)	Consumer Services	10.8%, 1.0% PIK(1.0% Max PIK)			6/30/26			11,522			11,522			11,522	(h)	Consumer Services	10.8%, 1.0% PIK (1.0% Max PIK)			6/30/26			11,522			11,522			11,522
JAKKS Pacific Inc	(h)	Consumer Durables & Apparel	L+900		1.5%	6/14/21			2,793			2,775			2,803	(h)	Consumer Durables & Apparel	L+900		1.5%	6/14/21			2,793			2,775			2,803
JC Penney Corp Inc	(m)(t)	Retailing	L+425		1.0%	6/23/23			1,205			1,149			1,034	(m)(t)	Retailing	L+425		1.0%	6/23/23			1,205			1,149			1,034
JHC Acquisition LLC	(f)(g)(h)	Capital Goods	L+750		1.0%	1/29/24			121,947			121,947			121,947
JHC Acquisition LLC	(n)	Capital Goods	L+750		1.0%	1/29/24			35,269			35,268			35,269
Jo-Ann Stores Inc	(i)(t)	Retailing	L+500		1.0%	10/20/23			5,013			5,004			4,794
Jostens Inc	(j)(t)	Consumer Services	L+550			12/19/25			3,663			3,552			3,574
JSS Holdings Ltd	(f)(h)(i)	Capital Goods	L+800, 0.0% PIK(2.5% Max PIK)		1.0%	3/31/23			72,696			72,140			74,877
Kodiak BP LLC	(g)(h)(i)	Capital Goods	L+725		1.0%	12/1/24			110,681			110,681			108,329
Kodiak BP LLC	(n)	Capital Goods	L+725		1.0%	12/1/24			9,849			9,849			9,639
Lazard Global Compounders Fund	(m)	Diversified Financials	L+725		3.8%	4/1/26			38,356			38,356			38,644
Lazard Global Compounders Fund	(m)(n)	Diversified Financials	L+725		3.8%	4/1/26			6,644			6,644			6,694

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
JHC Acquisition LLC																(f)(g)(h)	Capital Goods	L+750		1.0%	1/29/24		$	121,947		$	121,947		$	121,947
JHC Acquisition LLC																(n)	Capital Goods	L+750		1.0%	1/29/24			35,269			35,268			35,269
Jo-Ann Stores Inc																(i)(t)	Retailing	L+500		1.0%	10/20/23			5,013			5,004			4,794
Jostens Inc																(j)(t)	Consumer Services	L+550			12/19/25			3,663			3,552			3,574
JSS Holdings Ltd																(f)(h)(i)	Capital Goods	L+800, 0.0% PIK (2.5% Max PIK)		1.0%	3/31/23			72,696			72,140			74,877
Kodiak BP LLC																(g)(h)(i)	Capital Goods	L+725		1.0%	12/1/24			110,681			110,681			108,329
Kodiak BP LLC																(n)	Capital Goods	L+725		1.0%	12/1/24			9,849			9,849			9,639
Lazard Global Compounders Fund																(m)	Diversified Financials	L+725		3.8%	4/1/26			38,356			38,356			38,644
Lazard Global Compounders Fund																(m)(n)	Diversified Financials	L+725		3.8%	4/1/26			6,644			6,644			6,694
LD Intermediate Holdings Inc	(i)(t)	Software & Services	L+588		1.0%	12/9/22		$	16,150		$	15,058		$	14,656	(i)(t)	Software & Services	L+588		1.0%	12/9/22			16,150			15,058			14,656
MB Precision Holdings LLC	(g)(h)(k)(l)(u)	Capital Goods	L+725, 2.3% PIK(2.3% Max PIK)		1.3%	1/23/21			21,339			20,364			21,339	(g)(h)(k)(l)(u)	Capital Goods	L+725, 2.3% PIK (2.3% Max PIK)		1.3%	1/23/21			21,339			20,364			21,339
Mitel US Holdings Inc	(i)(t)	Technology Hardware & Equipment	L+450			11/30/25			4,559			4,548			4,431	(i)(t)	Technology Hardware & Equipment	L+450			11/30/25			4,559			4,548			4,431
Monitronics International Inc	(j)(m)(t)	Commercial & Professional Services	L+550		1.0%	9/30/22			3,838			3,702			3,442	(j)(m)(t)	Commercial & Professional Services	L+550		1.0%	9/30/22			3,838			3,702			3,442
Murray Energy Corp	(h)	Energy	L+900		1.0%	2/12/21			10,891			10,824			10,842	(h)	Energy	L+900		1.0%	2/12/21			10,891			10,824			10,842
NaviHealth Inc.	(i)(j)(t)	Health Care Equipment & Services	L+500			8/1/25			15,111			14,437			14,318	(i)(j)(t)	Health Care Equipment & Services	L+500			8/1/25			15,111			14,437			14,318
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+500		1.0%	9/2/21			2,625			2,625			2,625	(n)	Consumer Services	L+500		1.0%	9/2/21			2,625			2,625			2,625
North Haven Cadence Buyer Inc	(h)	Consumer Services	L+777		1.0%	9/2/24			14,762			14,762			14,614	(h)	Consumer Services	L+777		1.0%	9/2/24			14,762			14,762			14,614
North Haven Cadence Buyer Inc	(h)(i)	Consumer Services	L+798		1.0%	9/2/24			51,187			51,187			50,676	(h)(i)	Consumer Services	L+798		1.0%	9/2/24			51,187			51,187			50,676
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+650		1.0%	9/2/24			10,500			10,500			10,395	(n)	Consumer Services	L+650		1.0%	9/2/24			10,500			10,500			10,395
P2 Energy Solutions, Inc.	(t)	Energy	L+400		1.3%	10/30/20			74			73			71	(t)	Energy	L+400		1.3%	10/30/20			74			73			71
PAE Holding Corp	(j)(t)	Capital Goods	L+550		1.0%	10/20/22			9			9			9	(j)(t)	Capital Goods	L+550		1.0%	10/20/22			9			9			9
Panda Liberty LLC	(f)(g)(t)	Energy	L+650		1.0%	8/21/20			11,515			11,525			10,383	(f)(g)(t)	Energy	L+650		1.0%	8/21/20			11,515			11,525			10,383
Peak 10 Holding Corp	(j)(t)	Telecommunication Services	L+325		1.0%	8/1/24			8,965			8,329			8,181	(j)(t)	Telecommunication Services	L+325		1.0%	8/1/24			8,965			8,329			8,181
PHRC License LLC	(g)(h)	Consumer Services	L+850, 0.3% PIK(0.3% Max PIK)		1.5%	4/28/22			66,842			66,842			68,262	(g)(h)	Consumer Services	L+850, 0.3% PIK (0.3% Max PIK)		1.5%	4/28/22			66,842			66,842			68,262
Power Distribution Inc	(f)(i)	Capital Goods	L+725		1.3%	1/25/23			44,021			44,021			44,021	(f)(i)	Capital Goods	L+725		1.3%	1/25/23			44,021			44,021			44,021
Production Resource Group LLC	(f)(g)(h)(i)	Media	L+700		1.0%	8/21/24			207,992			207,992			204,352	(f)(g)(h)(i)	Media	L+700		1.0%	8/21/24			207,992			207,992			204,352
Propulsion Acquisition LLC	(f)(h)(i)(t)	Capital Goods	L+600		1.0%	7/13/21			58,267			56,734			57,684	(f)(h)(i)(t)	Capital Goods	L+600		1.0%	7/13/21			58,267			56,734			57,684
PSKW LLC	(f)(h)	Health Care Equipment & Services	L+850		1.0%	11/25/21			56,025			55,983			56,166	(f)(h)	Health Care Equipment & Services	L+850		1.0%	11/25/21			56,025			55,983			56,166
Reliant Rehab Hospital Cincinnati LLC	(h)	Health Care Equipment & Services	L+675		1.0%	8/30/24			55,015			54,490			54,850	(h)	Health Care Equipment & Services	L+675		1.0%	8/30/24			55,015			54,490			54,850
Roadrunner Intermediate Acquisition Co LLC	(f)	Health Care Equipment & Services	L+675		1.0%	3/15/23			7,165			7,165			6,673	(f)	Health Care Equipment & Services	L+675		1.0%	3/15/23			7,165			7,165			6,673
Rogue Wave Software Inc	(h)	Software & Services	L+843		1.0%	9/25/21			72,434			72,434			72,343	(h)	Software & Services	L+843		1.0%	9/25/21			72,434			72,434			72,343
Safariland LLC	(g)(h)	Capital Goods	L+765		1.1%	11/18/23			70,234			70,234			62,947	(g)(h)	Capital Goods	L+765		1.1%	11/18/23			70,234			70,234			62,947
Savers Inc	(t)	Retailing	L+375		1.3%	7/9/19			1,539			1,529			1,473
Sequa Corp	(i)(j)(t)	Materials	L+500		1.0%	11/28/21			18,467			18,212			17,705
Sequel Youth & Family Services LLC	(h)	Health Care Equipment & Services	L+700		1.0%	9/1/23			12,229			12,229			12,448
Sequel Youth & Family Services LLC	(f)(h)(i)	Health Care Equipment & Services	L+800			9/1/23			70,000			70,000			71,247
Sequential Brands Group Inc.	(g)(h)(i)	Consumer Durables & Apparel	L+875			2/7/24			118,929			116,976			118,929
SI Group Inc	(j)(t)	Materials	L+475			10/15/25			2,922			2,814			2,820
SIRVA Worldwide Inc	(i)(t)	Commercial & Professional Services	L+550			8/2/25			2,776			2,737			2,728
Sorenson Communications LLC	(f)(g)(h)(j)(t)	Telecommunication Services	L+575		2.3%	4/30/20			107,393			107,217			106,991
SSC (Lux) Limited S.a r.l.	(g)(h)(i)(m)	Health Care Equipment & Services	L+750		1.0%	9/10/24			104,545			104,545			105,591
Staples Canada	(m)	Retailing	L+700		1.0%	9/12/24		C$	56,874			44,009			42,101
Strike LLC	(i)(t)	Energy	L+800		1.0%	11/30/22		$	4,285			4,191			4,290
Sungard Availability Services Capital Inc	(f)(t)	Software & Services	L+700		1.0%	9/30/21			10,336			10,266			8,827

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)			Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Savers Inc																(t)	Retailing	L+375		1.3%	7/9/19		$	1,539		$	1,529		$	1,473
Sequa Corp																(i)(j)(t)	Materials	L+500		1.0%	11/28/21			18,467			18,212			17,705
Sequel Youth & Family Services LLC																(h)	Health Care Equipment & Services	L+700		1.0%	9/1/23			12,229			12,229			12,448
Sequel Youth & Family Services LLC																(f)(h)(i)	Health Care Equipment & Services	L+800			9/1/23			70,000			70,000			71,247
Sequential Brands Group Inc.																(g)(h)(i)	Consumer Durables & Apparel	L+875			2/7/24			118,929			116,976			118,929
SI Group Inc																(j)(t)	Materials	L+475			10/15/25			2,922			2,814			2,820
SIRVA Worldwide Inc																(i)(t)	Commercial & Professional Services	L+550			8/2/25			2,776			2,737			2,728
Sorenson Communications LLC																(f)(g)(h)(j)(t)	Telecommunication Services	L+575		2.3%	4/30/20			107,393			107,217			106,991
SSC (Lux) Limited S.a r.l.																(g)(h)(i)(m)	Health Care Equipment & Services	L+750		1.0%	9/10/24			104,545			104,545			105,591
Staples Canada																(m)	Retailing	L+700		1.0%	9/12/24		C$	56,874			44,009			42,101
Strike LLC																(i)(t)	Energy	L+800		1.0%	11/30/22		$	4,285			4,191			4,290
Sungard Availability Services Capital Inc																(f)(t)	Software & Services	L+700		1.0%	9/30/21			10,336			10,266			8,827
Sungard Availability Services Capital Inc	(t)	Software & Services	L+1000		1.0%	10/1/22		$	962		$	918		$	933	(t)	Software & Services	L+1000		1.0%	10/1/22			962			918			933
Sutherland Global Services Inc	(h)(i)(j)(m)(t)	Software & Services	L+538		1.0%	4/23/21			10,564			10,143			9,974	(h)(i)(j)(m)(t)	Software & Services	L+538		1.0%	4/23/21			10,564			10,143			9,974
Sutherland Global Services Inc	(h)(i)(j)(m)(t)	Software & Services	L+538		1.0%	4/23/21			2,459			2,361			2,322	(h)(i)(j)(m)(t)	Software & Services	L+538		1.0%	4/23/21			2,459			2,361			2,322
Swift Worldwide Resources Holdco Ltd	(f)(g)	Energy	L+1000, 1.0% PIK(1.0% Max PIK)		1.0%	7/20/21			19,492			19,492			19,492	(f)(g)	Energy	L+1000, 1.0% PIK (1.0% Max PIK)		1.0%	7/20/21			19,492			19,492			19,492
Tangoe LLC		Software & Services	L+650		1.0%	11/28/25			52,024			51,511			51,504		Software & Services	L+650		1.0%	11/28/25			52,024			51,511			51,504
Team Health Inc	(j)(t)	Health Care Equipment & Services	L+275		1.0%	2/6/24			78			71			70	(j)(t)	Health Care Equipment & Services	L+275		1.0%	2/6/24			78			71			70
Trace3 Inc	(f)(g)(h)(i)	Diversified Financials	L+675		1.0%	8/5/24			161,585			161,585			159,970	(f)(g)(h)(i)	Diversified Financials	L+675		1.0%	8/5/24			161,585			161,585			159,970
Virgin Pulse Inc	(h)(i)	Software & Services	L+650		1.0%	5/22/25			79,891			79,290			77,407	(h)(i)	Software & Services	L+650		1.0%	5/22/25			79,891			79,290			77,407
Vivint Inc	(i)(t)	Commercial & Professional Services	L+500			4/1/24			18,583			18,537			18,111	(i)(t)	Commercial & Professional Services	L+500			4/1/24			18,583			18,537			18,111
Warren Resources Inc	(h)(u)	Energy	L+1000, 1.0% PIK(1.0% Max PIK)		1.0%	5/22/20			14,652			14,652			14,652	(h)(u)	Energy	L+1000, 1.0% PIK (1.0% Max PIK)		1.0%	5/22/20			14,652			14,652			14,652
York Risk Services Group Inc	(t)	Insurance	L+375		1.0%	10/1/21			980			975			919	(t)	Insurance	L+375		1.0%	10/1/21			980			975			919
Zeta Interactive Holdings Corp	(f)(h)	Software & Services	L+750		1.0%	7/29/22			37,112			37,112			37,483	(f)(h)	Software & Services	L+750		1.0%	7/29/22			37,112			37,112			37,483
Zeta Interactive Holdings Corp	(n)	Software & Services	L+750		1.0%	7/29/22			6,571			6,571			6,637	(n)	Software & Services	L+750		1.0%	7/29/22			6,571			6,571			6,637
Total Senior Secured Loans—First Lien												3,539,497			3,450,630												3,539,497			3,450,630
Unfunded Loan Commitments												(157,339)			(157,339)												(157,339)			(157,339)
Net Senior Secured Loans—First Lien												3,382,158			3,293,291												3,382,158			3,293,291
Senior Secured Loans—Second Lien—13.0%
Access CIG LLC	(t)	Software & Services	L+775			2/27/26			1,326			1,342			1,314	(t)	Software & Services	L+775			2/27/26			1,326			1,342			1,314
Advantage Sales & Marketing Inc	(t)	Commercial & Professional Services	L+650		1.0%	7/25/22			2,291			2,039			1,815	(t)	Commercial & Professional Services	L+650		1.0%	7/25/22			2,291			2,039			1,815
American Bath Group LLC	(i)(t)	Capital Goods	L+975		1.0%	9/30/24			7,000			6,588			6,965	(i)(t)	Capital Goods	L+975		1.0%	9/30/24			7,000			6,588			6,965
Ammeraal Beltech Holding BV	(m)	Capital Goods	L+800			7/27/26			52,309			51,285			51,183
Arena Energy LP	(f)(h)	Energy	L+900, 4.0% PIK(4.0% Max PIK)		1.0%	1/24/21			25,872			25,872			25,872
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			4,500			4,076			3,979
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			1,872			1,872			1,866
Bellatrix Exploration Ltd	(m)(n)	Energy	8.5%			7/26/23			624			624			622
Byrider Finance LLC		Automobiles & Components	L+1000, 0.5% PIK(4.0% Max PIK)		1.3%	8/22/20			29,695			29,695			29,138
Catalina Marketing Corp	(i)(k)(l)(t)	Media	L+675		1.0%	4/11/22			10,000			9,958			237
Chisholm Oil & Gas Operating LLC	(h)	Energy	L+800		1.0%	3/21/24			16,000			16,000			15,811
Crossmark Holdings Inc	(i)(k)(l)(t)	Media	L+750		1.3%	12/21/20			7,778			7,786			311
Envigo Laboratories Inc	(h)(t)	Health Care Equipment & Services	L+775			4/29/20			3,272			3,189			3,051
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	11.0% PIK(11.0% Max PIK)			2/24/24			1,744			1,520			—
Grocery Outlet Inc	(t)	Food & Staples Retailing	L+725			10/22/26			2,287			2,265			2,273
Gruden Acquisition Inc	(h)(t)	Transportation	L+850		1.0%	8/18/23			15,000			14,511			15,038
Jazz Acquisition Inc	(f)(t)	Capital Goods	L+675		1.0%	6/19/22			3,700			3,729			3,460
LBM Borrower LLC	(f)(i)(j)(t)	Capital Goods	L+925		1.0%	8/20/23			29,332			29,090			28,746
One Call Care Management Inc	(h)	Insurance	L+375, 6.0% PIK(6.0% Max PIK)			4/11/24			12,472			12,362			11,946

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

OPE Inmar Acquisition Inc (i)(t) Software & Services L+800 1.0% 5/1/25 $ 2,615 $ 2,583 $ 2,589
P2 Energy Solutions, Inc. (i)(t) Energy L+800 1.0% 4/30/21 14,500 14,614 13,920
Paradigm Acquisition Corp (t) Health Care Equipment & Services L+750 10/26/26 1,599 1,595 1,607
Peak 10 Holding Corp (i)(j)(t) Telecommunication Services L+725 1.0% 8/1/25 5,814 5,630 5,247
Pure Fishing Inc Consumer Durables & Apparel L+838 1.0% 12/31/26 46,828 46,362 46,359
Rise Baking Company (i) Food, Beverage & Tobacco L+800 1.0% 8/9/26 17,990 17,817 17,822
Sequa Corp (i)(t) Materials L+900 1.0% 4/28/22 7,462 7,416 7,089
SIRVA Worldwide Inc (i)(t) Commercial & Professional Services L+950 8/2/26 2,494 2,312 2,207
SMG/PA (j)(t) Consumer Services L+700 1/23/26 3,641 3,671 3,599
Spencer Gifts LLC (i)(t) Retailing L+825 1.0% 6/29/22 20,000 20,063 17,100
Titan Energy LLC (h)(k)(l) Energy L+1300 PIK(L+1300 Max PIK) 1.0% 2/23/20 89,408 67,595 8,316
WireCo WorldGroup Inc (t) Capital Goods L+900 1.0% 9/30/24 5,115 5,178 5,128
Total Senior Secured Loans—Second Lien 418,639 334,610
Unfunded Loan Commitments (624) (624)
Net Senior Secured Loans—Second Lien 418,015 333,986
Other Senior Secured Debt—7.7%
Advanced Lighting Technologies Inc (k)(l)(u) Materials L+700, 10.0% PIK(10.0% Max PIK) 1.0% 10/4/23 11,342 10,663 3,630
Akzo Nobel Specialty Chemicals (m)(t) Materials 8.0% 10/1/26 2,019 2,019 1,890
Artesyn Embedded Technologies Inc (t) Technology Hardware & Equipment 9.8% 10/15/20 1,574 1,518 1,456
Black Swan Energy Ltd (m) Energy 9.0% 1/20/24 1,333 1,333 1,286
Boyne USA Inc (t) Consumer Services 7.3% 5/1/25 44 46 46
DJO Finance LLC/DJO Finance Corp (t) Health Care Equipment & Services 8.1% 6/15/21 6,838 6,886 7,060
FourPoint Energy LLC (h)(i) Energy 9.0% 12/31/21 46,313 45,107 45,502
Genesys Telecommunications
Laboratories Inc (t) Technology Hardware & Equipment 10.0% 11/30/24 144 159 152
Global A&T Electronics Ltd (i)(m)(t) Semiconductors & Semiconductor
Equipment 8.5% 1/12/23 15,949 16,079 14,155
JC Penney Corp Inc (j)(m)(t) Retailing 5.7% 6/1/20 126 117 101
JW Aluminum Co (h)(t)(u) Materials 10.3% 6/1/26 33,001 33,001 32,919
Lycra (m)(t) Consumer Durables & Apparel 7.5% 5/1/25 3,659 3,687 3,444
Mood Media Corp (h)(u) Media L+1400 PIK(L+1400 Max PIK) 1.0% 6/28/24 28,478 28,383 28,478
Numericable-SFR (m)(t) Software & Services 8.1% 2/1/27 917 917 869
Pattonair Holdings Ltd (m)(t) Capital Goods 9.0% 11/1/22 4,111 4,252 4,153
Ply Gem Holdings Inc (t) Capital Goods 8.0% 4/15/26 7,807 7,453 7,182
Sorenson Communications LLC (h)(t) Telecommunication Services 9.0%, 0.0% PIK(9.0% Max PIK) 10/31/20 7,058 6,952 6,987
Sunnova Energy Corp Energy 6.0%, 6.0% PIK(6.0% Max PIK) 7/31/19 1,123 1,123 1,116
Talos Production LLC (h)(t) Energy 11.0% 4/3/22 4,500 4,701 4,376

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Ammeraal Beltech Holding BV	(m)	Capital Goods	L+800			7/27/26		$	52,309		$	51,285		$	51,183
Arena Energy LP	(f)(h)	Energy	L+900, 4.0% PIK (4.0% Max PIK)		1.0%	1/24/21			25,872			25,872			25,872
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			4,500			4,076			3,979
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			1,872			1,872			1,866
Bellatrix Exploration Ltd	(m)(n)	Energy	8.5%			7/26/23			624			624			622
Byrider Finance LLC		Automobiles & Components	L+1000, 0.5% PIK (4.0% Max PIK)		1.3%	8/22/20			29,695			29,695			29,138
Catalina Marketing Corp	(i)(k)(l)(t)	Media	L+675		1.0%	4/11/22			10,000			9,958			237
Chisholm Oil & Gas Operating LLC	(h)	Energy	L+800		1.0%	3/21/24			16,000			16,000			15,811
Crossmark Holdings Inc	(i)(k)(l)(t)	Media	L+750		1.3%	12/21/20			7,778			7,786			311
Envigo Laboratories Inc	(h)(t)	Health Care Equipment & Services	L+775			4/29/20			3,272			3,189			3,051
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	11.0% PIK (11.0% Max PIK)			2/24/24			1,744			1,520			—
Grocery Outlet Inc	(t)	Food & Staples Retailing	L+725			10/22/26			2,287			2,265			2,273
Gruden Acquisition Inc	(h)(t)	Transportation	L+850		1.0%	8/18/23			15,000			14,511			15,038
Jazz Acquisition Inc	(f)(t)	Capital Goods	L+675		1.0%	6/19/22			3,700			3,729			3,460
LBM Borrower LLC	(f)(i)(j)(t)	Capital Goods	L+925		1.0%	8/20/23			29,332			29,090			28,746
One Call Care Management Inc	(h)	Insurance	L+375, 6.0% PIK (6.0% Max PIK)			4/11/24			12,472			12,362			11,946
OPE Inmar Acquisition Inc	(i)(t)	Software & Services	L+800		1.0%	5/1/25			2,615			2,583			2,589
P2 Energy Solutions, Inc.	(i)(t)	Energy	L+800		1.0%	4/30/21			14,500			14,614			13,920
Paradigm Acquisition Corp	(t)	Health Care Equipment & Services	L+750			10/26/26			1,599			1,595			1,607
Peak 10 Holding Corp	(i)(j)(t)	Telecommunication Services	L+725		1.0%	8/1/25			5,814			5,630			5,247
Pure Fishing Inc		Consumer Durables & Apparel	L+838		1.0%	12/31/26			46,828			46,362			46,359
Rise Baking Company	(i)	Food, Beverage & Tobacco	L+800		1.0%	8/9/26			17,990			17,817			17,822
Sequa Corp	(i)(t)	Materials	L+900		1.0%	4/28/22			7,462			7,416			7,089
SIRVA Worldwide Inc	(i)(t)	Commercial & Professional Services	L+950			8/2/26			2,494			2,312			2,207
SMG/PA	(j)(t)	Consumer Services	L+700			1/23/26			3,641			3,671			3,599
Spencer Gifts LLC	(i)(t)	Retailing	L+825		1.0%	6/29/22			20,000			20,063			17,100
Titan Energy LLC	(h)(k)(l)	Energy	L+1300 PIK (L+1300 Max PIK)		1.0%	2/23/20			89,408			67,595			8,316
WireCo WorldGroup Inc	(t)	Capital Goods	L+900		1.0%	9/30/24			5,115			5,178			5,128
Total Senior Secured Loans—Second Lien												418,639			334,610
Unfunded Loan Commitments												(624)			(624)
Net Senior Secured Loans—Second Lien												418,015			333,986

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Velvet Energy Ltd (i)(m) Energy 9.0% 10/5/23 $ 15,000 $ 15,000 $ 15,120
Vivint Inc (h)(t) Commercial & Professional Services 7.6% 9/1/23 7,309 6,707 5,981
Vivint Inc (h)(t) Commercial & Professional Services 7.9% 12/1/22 11,307 11,078 10,713
Total Other Senior Secured Debt 207,181 196,616
Subordinated Debt—8.6%
All Systems Holding LLC Commercial & Professional Services 10.0% PIK(10.0% Max PIK) 10/31/22 206 206 206
Ascent Resources Utica Holdings
LLC/ARU Finance Corp (h)(i)(t) Energy 10.0% 4/1/22 26,026 26,026 26,635
Aurora Diagnostics Holdings LLC/Aurora
Diagnostics Financing Inc (h)(t) Health Care Equipment & Services 12.3%, 1.5% PIK(1.5% Max PIK) 1/15/20 6,235 5,951 6,235
Avantor Inc (i)(t) Pharmaceuticals, Biotechnology &
Life Sciences 9.0% 10/1/25 20,000 20,000 20,012
Byrider Finance LLC Automobiles & Components 20.0% PIK(20.0% Max PIK) 3/31/22 1,458 1,458 1,458
CEC Entertainment Inc (t) Consumer Services 8.0% 2/15/22 18,510 18,397 16,659
ClubCorp Club Operations Inc (h)(t) Consumer Services 8.5% 9/15/25 10,733 10,361 9,660
Diamond Resorts International Inc (t) Consumer Services 10.8% 9/1/24 3,048 3,191 2,751
Eclipse Resources Corp (m)(t) Energy 8.9% 7/15/23 9,175 9,049 7,879
Great Lakes Dredge & Dock Corp (m)(t) Capital Goods 8.0% 5/15/22 5,276 5,276 5,364
Intelsat Jackson Holdings SA (m)(t) Media 5.5% 8/1/23 5,752 5,178 5,058
Ken Garff Automotive LLC (t) Retailing 7.5% 8/15/23 6,004 6,055 5,959
Lazard Global Compounders Fund (m)(n) Diversified Financials L+650 4.5% 9/15/25 15,000 15,000 14,682
LifePoint Hospitals Inc (t) Health Care Equipment & Services 9.8% 12/1/26 7,656 7,571 7,295
Logan’s Roadhouse Inc (l) Consumer Services 11/1/24 4,907 4,857 4,855
PF Chang’s China Bistro Inc (h)(i)(t) Consumer Services 10.3% 6/30/20 28,977 28,320 26,460
Quorum Health Corp (t) Health Care Equipment & Services 11.6% 4/15/23 2,566 2,554 2,446
Sorenson Communications LLC (h)(t) Telecommunication Services 13.9%, 0.0% PIK(13.9% Max PIK) 10/31/21 5,364 5,170 5,498
SRS Distribution Inc (h)(t) Capital Goods 8.3% 7/1/26 11,667 11,476 10,734
Stars Group Holdings BV (m)(t) Consumer Services 7.0% 7/15/26 1,438 1,438 1,398
Sungard Availability Services Capital
Inc (t) Software & Services 8.8% 4/1/22 5,900 4,860 1,322
Team Health Inc (t) Health Care Equipment & Services 6.4% 2/1/25 6,901 5,958 5,633
Vertiv Group Corp (h)(t) Technology Hardware & Equipment 9.3% 10/15/24 16,584 16,411 14,760
Vivint Inc (h)(t) Commercial & Professional Services 8.8% 12/1/20 7,602 7,328 7,250
York Risk Services Group Inc (h)(i)(t) Insurance 8.5% 10/1/22 38,070 35,701 26,649
Total Subordinated Debt 257,792 236,858
Unfunded Debt Commitments (15,000) (15,000)
Net Subordinated Debt 242,792 221,858

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Other Senior Secured Debt—7.6%
Advanced Lighting Technologies Inc	(k)(l)(u)	Materials	L+700, 10.0% PIK (10.0% Max PIK)		1.0%	10/4/23		$	11,342		$	10,663		$	3,630
Artesyn Embedded Technologies Inc	(t)	Technology Hardware & Equipment	9.8%			10/15/20			1,574			1,518			1,456
Black Swan Energy Ltd	(m)	Energy	9.0%			1/20/24			1,333			1,333			1,286
Boyne USA Inc	(t)	Consumer Services	7.3%			5/1/25			44			46			46
DJO Finance LLC / DJO Finance Corp	(t)	Health Care Equipment & Services	8.1%			6/15/21			6,838			6,886			7,060
FourPoint Energy LLC	(h)(i)	Energy	9.0%			12/31/21			46,313			45,107			45,502
Genesys Telecommunications Laboratories Inc	(t)	Technology Hardware & Equipment	10.0%			11/30/24			144			159			152
Global A&T Electronics Ltd	(i)(m)(t)	Semiconductors & Semiconductor Equipment	8.5%			1/12/23			15,949			16,079			14,155
JC Penney Corp Inc	(j)(m)(t)	Retailing	5.7%			6/1/20			126			117			101
JW Aluminum Co	(h)(t)(u)	Materials	10.3%			6/1/26			33,001			33,001			32,919
Lycra	(m)(t)	Consumer Durables & Apparel	7.5%			5/1/25			3,659			3,687			3,444
Mood Media Corp	(h)(u)	Media	L+1400 PIK (L+1400 Max PIK)		1.0%	6/28/24			28,478			28,383			28,478
Numericable-SFR	(m)(t)	Software & Services	8.1%			2/1/27			917			917			869
Pattonair Holdings Ltd	(m)(t)	Capital Goods	9.0%			11/1/22			4,111			4,252			4,153
Ply Gem Holdings Inc	(t)	Capital Goods	8.0%			4/15/26			7,807			7,453			7,182
Sorenson Communications LLC	(h)(t)	Telecommunication Services	9.0%, 0.0% PIK (9.0% Max PIK)			10/31/20			7,058			6,952			6,987
Sunnova Energy Corp		Energy	6.0%, 6.0% PIK (6.0% Max PIK)			7/31/19			1,123			1,123			1,116
Talos Production LLC	(h)(t)	Energy	11.0%			4/3/22			4,500			4,701			4,376
Velvet Energy Ltd	(i)(m)	Energy	9.0%			10/5/23			15,000			15,000			15,120
Vivint Inc	(h)(t)	Commercial & Professional Services	7.6%			9/1/23			7,309			6,707			5,981
Vivint Inc	(h)(t)	Commercial & Professional Services	7.9%			12/1/22			11,307			11,078			10,713
Total Other Senior Secured Debt												205,162			194,726
Subordinated Debt—8.7%
Akzo Nobel Specialty Chemicals	(m)(t)	Materials	8.0%			10/1/26			2,019			2,019			1,890
All Systems Holding LLC		Commercial & Professional Services	10.0% PIK (10.0% Max PIK)			10/31/22			206			206			206
Ascent Resources Utica Holdings LLC / ARU Finance Corp	(h)(i)(t)	Energy	10.0%			4/1/22			26,026			26,026			26,635
Aurora Diagnostics Holdings LLC / Aurora Diagnostics Financing Inc	(h)(t)	Health Care Equipment & Services	12.3%, 1.5% PIK (1.5% Max PIK)			1/15/20			6,235			5,951			6,235
Avantor Inc	(i)(t)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%			10/1/25			20,000			20,000			20,012

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)/
Shares
Cost
Fair
Value(d)

Asset Based Finance—1.8%
Altus Power America Inc, Preferred Stock (r) Energy 9.0%, 5.0% PIK 10/3/23 1,060,975 $ 1,061 $ 1,045
CGMS CLO 2013-3A Class Subord., 7/15/2025 (m) Diversified Financials 27.8% 7/15/25 $ 23,263 9,222 12,050
Global Jet Capital LLC, Structured Mezzanine Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 1/30/25 $ 986 971 986
Global Jet Capital LLC, Structured Mezzanine Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 4/30/25 $ 6,267 6,174 6,267
Global Jet Capital LLC, Structured Mezzanine Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 9/3/25 $ 1,295 1,276 1,295
Global Jet Capital LLC, Structured Mezzanine Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 9/29/25 $ 1,219 1,201 1,219
Global Jet Capital LLC, Structured Mezzanine (e) Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 12/4/25 $ 7,287 7,179 7,287
Global Jet Capital LLC, Structured Mezzanine (e)(m) Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 12/4/25 $ 1,712 1,687 1,712
Global Jet Capital LLC, Structured Mezzanine (e) Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 12/9/25 $ 219 216 219
Global Jet Capital LLC, Structured Mezzanine (e)(m) Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 12/9/25 $ 1,253 1,234 1,253
Global Jet Capital LLC, Structured Mezzanine (e) Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 1/29/26 $ 625 616 625
Global Jet Capital LLC, Structured Mezzanine (e)(m) Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 1/29/26 $ 146 143 146
Global Jet Capital LLC, Structured Mezzanine Commercial & Professional Services 15.0% PIK(15.0% Max PIK) 12/2/26 $ 2,332 2,298 2,332
NewStar Clarendon 2014-1A Class Subord. B (m) Diversified Financials L+435 1/25/27 $ 1,060 1,014 1,055
NewStar Clarendon 2014-1A Class D (m) Diversified Financials 13.2% 1/25/27 $ 12,140 7,758 8,661
Total Asset Based Finance 42,050 46,152
Equity/Other—10.4%
5 Arch Income Fund 2, LLC, Common Stock (m)(p) Diversified Financials 8,000 197 400
Abaco Energy Technologies LLC, Common
Equity (l) Energy 3,055,556 3,056 1,299
Abaco Energy Technologies LLC, Preferred
Equity (l) Energy 12,734,481 637 6,686
Advanced Lighting Technologies Inc, Common Stock (l)(u) Materials 265,747 7,471 —
Advanced Lighting Technologies Inc,
Warrant (l)(u) Materials 10/4/27 4,189 39 —
All Systems Holding LLC, Common Stock Commercial & Professional Services 124 1,201 1,384
Altus Power America Inc, Common Stock (l) Energy 462,008 462 81
Ascent Resources Utica Holdings LLC/ARU Finance Corp, Common Stock (o) Energy 13,555,557 12,900 3,768
Ascent Resources Utica Holdings
LLC/ARU Finance Corp, Trade Claim (o) Energy 115,178,572 25,800 32,020
ASG Technologies, Common Stock (l)(u) Software & Services 625,178 13,475 31,743
ASG Technologies, Warrants (l)(u) Software & Services 6/27/22 253,704 7,231 7,364
Aspect Software Inc, Common Stock (l) Software & Services 38,574 9,932 —

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Byrider Finance LLC		Automobiles & Components	20.0% PIK (20.0% Max PIK)			3/31/22		$	1,458		$	1,458		$	1,458
CEC Entertainment Inc	(t)	Consumer Services	8.0%			2/15/22			18,510			18,397			16,659
ClubCorp Club Operations Inc	(h)(t)	Consumer Services	8.5%			9/15/25			10,733			10,361			9,660
Diamond Resorts International Inc	(t)	Consumer Services	10.8%			9/1/24			3,048			3,191			2,751
Eclipse Resources Corp	(m)(t)	Energy	8.9%			7/15/23			9,175			9,049			7,879
Great Lakes Dredge & Dock Corp	(m)(t)	Capital Goods	8.0%			5/15/22			5,276			5,276			5,364
Intelsat Jackson Holdings SA	(m)(t)	Media	5.5%			8/1/23			5,752			5,178			5,058
Ken Garff Automotive LLC	(t)	Retailing	7.5%			8/15/23			6,004			6,055			5,959
Lazard Global Compounders Fund	(m)(n)	Diversified Financials	L+650		4.5%	9/15/25			15,000			15,000			14,682
LifePoint Hospitals Inc	(t)	Health Care Equipment & Services	9.8%			12/1/26			7,656			7,571			7,295
Logan’s Roadhouse Inc	(l)	Consumer Services				11/1/24			4,907			4,857			4,855
PF Chang’s China Bistro Inc	(h)(i)(t)	Consumer Services	10.3%			6/30/20			28,977			28,320			26,460
Quorum Health Corp	(t)	Health Care Equipment & Services	11.6%			4/15/23			2,566			2,554			2,446
Sorenson Communications LLC	(h)(t)	Telecommunication Services	13.9%, 0.0% PIK (13.9% Max PIK)			10/31/21			5,364			5,170			5,498
SRS Distribution Inc	(h)(t)	Capital Goods	8.3%			7/1/26			11,667			11,476			10,734
Stars Group Holdings BV	(m)(t)	Consumer Services	7.0%			7/15/26			1,438			1,438			1,398
Sungard Availability Services Capital Inc	(t)	Software & Services	8.8%			4/1/22			5,900			4,860			1,322
Team Health Inc	(t)	Health Care Equipment & Services	6.4%			2/1/25			6,901			5,958			5,633
Vertiv Group Corp	(h)(t)	Technology Hardware & Equipment	9.3%			10/15/24			16,584			16,411			14,760
Vivint Inc	(h)(t)	Commercial & Professional Services	8.8%			12/1/20			7,602			7,328			7,250
York Risk Services Group Inc	(h)(i)(t)	Insurance	8.5%			10/1/22			38,070			35,701			26,649
Total Subordinated Debt												259,811			238,748
Unfunded Debt Commitments												(15,000)			(15,000)
Net Subordinated Debt												244,811			223,748

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)/
Shares
Cost
Fair
Value(d)

ATX Networks Corp, Common Stock (l)(m) Technology Hardware & Equipment 72,635 $ 116 $ 56
Aurora Diagnostics Holdings LLC/Aurora Diagnostics Financing Inc, Warrant (h)(l) Health Care Equipment & Services 5/25/27 94,193 686 135
Australis Maritime, Private Equity (l)(m) Transportation — 1,136 1,136
Byrider Finance LLC, Common Stock (l) Automobiles & Components 1,389 — —
Chisholm Oil & Gas Operating LLC, Series A
Units (l)(p) Energy 75,000 75 32
Cimarron Energy Inc, Common Stock (l) Energy 4,302,293 3,950 194
Cimarron Energy Inc, Participation Option (l) Energy 25,000,000 1,289 1,125
CSafe Global, Common Stock (l) Capital Goods 417,400 417 584
Eastman Kodak Co, Common Stock (l)(t) Consumer Durables & Apparel 354 7 1
Empire Today LLC, Common Stock (l) Retailing 411 1,227 1,189
Envigo Laboratories Inc, Warrant (h)(l)(t) Health Care Equipment & Services 4/29/24 10,924 — —
Envigo Laboratories Inc, Warrant (h)(l)(t) Health Care Equipment & Services 4/29/24 17,515 — —
Fairway Group Holdings Corp, Common Stock (l) Food & Staples Retailing 31,626 1,016 —
FourPoint Energy LLC, Common Stock,
Class C - II - A Units (l)(p) Energy 13,000 13,000 2,909
FourPoint Energy LLC, Common Stock,
Class D Units (l)(p) Energy 2,437 1,610 551
FourPoint Energy LLC, Common Stock,
Class E - II Units (l)(p) Energy 29,730 7,432 6,652
FourPoint Energy LLC, Common Stock,
Class E - III Units (l)(p) Energy 43,875 10,969 9,817
Fox Head Inc, Common Stock (e)(l) Consumer Durables & Apparel 8,857,143 8,857 3,947
Global Jet Capital LLC, Preferred
Stock (e)(l) Commercial & Professional Services 5,385,440 5,386 754
Global Jet Capital LLC, Preferred
Stock (e)(l)(m) Commercial & Professional Services 843,426 843 118
Harvest Oil & Gas Corp, Common
Stock (e)(l)(t) Energy 7,161 158 129
Harvey Industries Inc, Common Stock (l) Capital Goods 666,667 667 1,350
HM Dunn Co Inc, Preferred Stock, Series A (h)(l)(u) Capital Goods 12,857 — —
HM Dunn Co Inc, Preferred Stock, Series B (h)(l)(u) Capital Goods 12,857 — —
Industrial Group Intermediate Holdings LLC, Common Stock (l)(p) Materials 2,678,947 2,679 1,607
JHC Acquisition LLC, Common Stock (l) Capital Goods 1,449 1,449 1,946
JSS Holdings Ltd, Net Profits Interest (l) Capital Goods — — 471
JW Aluminum Co, Common Stock (e)(i)(l)(u) Materials 548 — —

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity	Principal Amount(c)/ Shares			Cost			Fair Value(d)
Asset Based Finance—1.9%
Altus Power America Inc, Preferred Stock	(r)	Energy	9.0%, 5.0% PIK		10/3/23			1,060,975		$	1,061		$	1,045
Australis Maritime, Private Equity	(l)(m)	Transportation						—			1,136			1,136
CGMS CLO 2013-3A Class Subord., 7/15/2025	(m)	Diversified Financials	27.8%		7/15/25		$	23,263			9,222			12,050
Global Jet Capital LLC, Preferred Stock	(e)(l)	Commercial & Professional Services						5,385,440			5,386			754
Global Jet Capital LLC, Preferred Stock	(e)(l)(m)	Commercial & Professional Services						843,426			843			118
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/30/25		$	986			971			986
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		4/30/25		$	6,267			6,174			6,267
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/3/25		$	1,295			1,276			1,295
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/29/25		$	1,219			1,201			1,219
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	7,287			7,179			7,287
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	1,712			1,687			1,712
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	219			216			219
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	1,253			1,234			1,253
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	625			616			625
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	146			143			146
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/2/26		$	2,332			2,298			2,332
NewStar Clarendon 2014-1A Class Subord. B	(m)	Diversified Financials	L+435		1/25/27		$	1,060			1,014			1,055
NewStar Clarendon 2014-1A Class D	(m)	Diversified Financials	13.2%		1/25/27		$	12,140			7,758			8,661
Total Asset Based Finance											49,415			48,160

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)/
Shares
Cost
Fair
Value(d)

JW Aluminum Co, Preferred Stock (e)(i)(u) Materials 12.5% PIK 11/17/25 4,869 $ 32,040 $ 43,890
MB Precision Holdings LLC,
Class A-2 Units (g)(h)(l)(u) Capital Goods 6,655,178 2,288 —
MB Precision Holdings LLC, Preferred Stock (g)(h)(l)(p)(u) Capital Goods 41,778,909 8,600 5,826
Mood Media Corp, Common Stock �� (l)(u) Media 17,400,835 12,644 15,842
North Haven Cadence Buyer Inc, Common
Equity (l) Consumer Services 2,916,667 2,917 4,448
Power Distribution Inc, Common
Stock (l) Capital Goods 2,076,923 2,077 1,090
Professional Plumbing Group Inc, Common
Stock (e)(l) Capital Goods 3,000,000 3,000 7,800
Ridgeback Resources Inc, Common Stock (e)(l)(m)(s) Energy 817,308 5,022 4,043
Sequential Brands Group Inc., Common Stock (e)(l)(t) Consumer Durables & Apparel 408,685 5,517 327
Sorenson Communications LLC, Common
Stock (e)(l) Telecommunication Services 43,796 — 36,026
SSC (Lux) Limited S.a r.l., Common Stock (l)(m) Health Care Equipment & Services 261,364 5,227 6,403
Sunnova Energy Corp, Common Stock (l) Energy 384,746 1,444 —
Sunnova Energy Corp, Preferred Stock (l) Energy 70,229 374 385
Swift Worldwide Resources Holdco Ltd, Common
Stock (l) Energy 1,250,000 2,009 625
Templar Energy LLC, Common Stock (e)(l)(p)(t) Energy 717,718 6,101 449
Templar Energy LLC, Preferred Stock (e)(l)(t) Energy 475,758 4,751 1,427
Titan Energy LLC, Common Stock (e)(l)(t) Energy 200,040 6,321 60
Trace3 Inc, Common Stock Diversified Financials 33,216 332 616
Warren Resources Inc, Common Stock (l)(u) Energy 2,371,337 11,145 5,573
White Star Petroleum LLC (l)(p) Energy 1,613,753 1,372 524
Zeta Interactive Holdings Corp, Preferred Stock, Series E - 1 (l) Software & Services 620,025 4,929 6,519
Zeta Interactive Holdings Corp, Preferred Stock, Series F (l) Software & Services 563,932 4,929 5,816
Zeta Interactive Holdings Corp, Warrant (l) Software & Services 4/20/27 84,590 — 240
Total Equity/Other 268,409 267,377
TOTAL INVESTMENTS—169.8% $ 4,560,605 4,359,280
LIABILITIES IN EXCESS OF ASSETS—(69.8%) (1,791,871)
NET ASSETS—100.0% $ 2,567,409

Portfolio Company(a)	Footnotes	Industry	Rate(b)		Floor	Maturity	Principal Amount(c)/ Shares		Cost			Fair Value(d)
Equity/Other—10.3%
5 Arch Income Fund 2, LLC, Common Stock	(m)(p)	Diversified Financials						8,000		$	197		$	400
Abaco Energy Technologies LLC, Common Equity	(l)	Energy						3,055,556			3,056			1,299
Abaco Energy Technologies LLC, Preferred Equity	(l)	Energy						12,734,481			637			6,686
Advanced Lighting Technologies Inc, Common Stock	(l)(u)	Materials						265,747			7,471			—
Advanced Lighting Technologies Inc, Warrant	(l)(u)	Materials				10/4/27		4,189			39			—
All Systems Holding LLC, Common Stock		Commercial & Professional Services						124			1,201			1,384
Altus Power America Inc, Common Stock	(l)	Energy						462,008			462			81
Ascent Resources Utica Holdings LLC / ARU Finance Corp, Common Stock	(o)	Energy						13,555,557			12,900			3,768
Ascent Resources Utica Holdings LLC / ARU Finance Corp, Trade Claim	(o)	Energy						115,178,572			25,800			32,020
ASG Technologies, Common Stock	(l)(u)	Software & Services						625,178			13,475			31,743
ASG Technologies, Warrants	(l)(u)	Software & Services				6/27/22		253,704			7,231			7,364
Aspect Software Inc, Common Stock	(l)	Software & Services						38,574			9,932			—
ATX Networks Corp, Common Stock	(l)(m)	Technology Hardware & Equipment						72,635			116			56
Aurora Diagnostics Holdings LLC / Aurora Diagnostics Financing Inc, Warrant	(h)(l)	Health Care Equipment & Services				5/25/27		94,193			686			135
Byrider Finance LLC, Common Stock	(l)	Automobiles & Components						1,389			—			—
Chisholm Oil & Gas Operating LLC, Series A Units	(l)(p)	Energy						75,000			75			32
Cimarron Energy Inc, Common Stock	(l)	Energy						4,302,293			3,950			194
Cimarron Energy Inc, Participation Option	(l)	Energy						25,000,000			1,289			1,125
CSafe Global, Common Stock	(l)	Capital Goods						417,400			417			584
Eastman Kodak Co, Common Stock	(l)(t)	Consumer Durables & Apparel						354			7			1
Empire Today LLC, Common Stock	(l)	Retailing						411			1,227			1,189
Envigo Laboratories Inc, Warrant	(h)(l)(t)	Health Care Equipment & Services				4/29/24		10,924			—			—
Envigo Laboratories Inc, Warrant	(h)(l)(t)	Health Care Equipment & Services				4/29/24		17,515			—			—
Fairway Group Holdings Corp, Common Stock	(l)	Food & Staples Retailing						31,626			1,016			—
FourPoint Energy LLC, Common Stock, Class C—II—A Units	(l)(p)	Energy						13,000			13,000			2,909
FourPoint Energy LLC, Common Stock, Class D Units	(l)(p)	Energy						2,437			1,610			551
FourPoint Energy LLC, Common Stock, Class E—II Units	(l)(p)	Energy						29,730			7,432			6,652
FourPoint Energy LLC, Common Stock, Class E—III Units	(l)(p)	Energy		��				43,875			10,969			9,817
Fox Head Inc, Common Stock	(e)(l)	Consumer Durables & Apparel						8,857,143			8,857			3,947
Harvest Oil & Gas Corp, Common Stock	(e)(l)(t)	Energy						7,161			158			129
Harvey Industries Inc, Common Stock	(l)	Capital Goods						666,667			667			1,350
HM Dunn Co Inc, Preferred Stock, Series A	(h)(l)(u)	Capital Goods						12,857			—			—

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity	Principal Amount(c)/ Shares		Cost			Fair Value(d)
HM Dunn Co Inc, Preferred Stock, Series B	(h)(l)(u)	Capital Goods					12,857			—			—
Industrial Group Intermediate Holdings LLC, Common Stock	(l)(p)	Materials					2,678,947			2,679			1,607
JHC Acquisition LLC, Common Stock	(l)	Capital Goods					1,449			1,449			1,946
JSS Holdings Ltd, Net Profits Interest	(l)	Capital Goods					—			—			471
JW Aluminum Co, Common Stock	(e)(i)(l)(u)	Materials					548			—			—
JW Aluminum Co, Preferred Stock	(e)(i)(u)	Materials	12.5% PIK		11/17/25		4,869			32,040			43,890
MB Precision Holdings LLC, Class A—2 Units	(g)(h)(l)(u)	Capital Goods					6,655,178			2,288			—
MB Precision Holdings LLC, Preferred Stock	(g)(h)(l)(p)(u)	Capital Goods					41,778,909			8,600			5,826
Mood Media Corp, Common Stock	(l)(u)	Media					17,400,835			12,644			15,842
North Haven Cadence Buyer Inc, Common Equity	(l)	Consumer Services					2,916,667			2,917			4,448
Power Distribution Inc, Common Stock	(l)	Capital Goods					2,076,923			2,077			1,090
Professional Plumbing Group Inc, Common Stock	(e)(l)	Capital Goods					3,000,000			3,000			7,800
Ridgeback Resources Inc, Common Stock	(e)(l)(m)(s)	Energy					817,308			5,022			4,043
Sequential Brands Group Inc., Common Stock	(e)(l)(t)	Consumer Durables & Apparel					408,685			5,517			327
Sorenson Communications LLC, Common Stock	(e)(l)	Telecommunication Services					43,796			—			36,026
SSC (Lux) Limited S.a r.l., Common Stock	(l)(m)	Health Care Equipment & Services					261,364			5,227			6,403
Sunnova Energy Corp, Common Stock	(l)	Energy					384,746			1,444			—
Sunnova Energy Corp, Preferred Stock	(l)	Energy					70,229			374			385
Swift Worldwide Resources Holdco Ltd, Common Stock	(l)	Energy					1,250,000			2,009			625
Templar Energy LLC, Common Stock	(e)(l)(p)(t)	Energy					717,718			6,101			449
Templar Energy LLC, Preferred Stock	(e)(l)(t)	Energy					475,758			4,751			1,427
Titan Energy LLC, Common Stock	(e)(l)(t)	Energy					200,040			6,321			60
Trace3 Inc, Common Stock		Diversified Financials					33,216			332			616
Warren Resources Inc, Common Stock	(l)(u)	Energy					2,371,337			11,145			5,573
White Star Petroleum LLC	(l)(p)	Energy					1,613,753			1,372			524
Zeta Interactive Holdings Corp, Preferred Stock, Series E—1	(l)	Software & Services					620,025			4,929			6,519
Zeta Interactive Holdings Corp, Preferred Stock, Series F	(l)	Software & Services					563,932			4,929			5,816
Zeta Interactive Holdings Corp, Warrant	(l)	Software & Services			4/20/27		84,590			—			240
Total Equity/Other										261,044			265,369
TOTAL INVESTMENTS—169.8%									$	4,560,605			4,359,280
LIABILITIES IN EXCESS OF ASSETS—(69.8%)													(1,791,871)
NET ASSETS—100.0%												$	2,567,409

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

A summary of outstanding financial instruments as of December 31, 2018 is as follows:

Interest rate swaps

Counterparty	Notional Amount	Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date		Premiums Paid/ (Received)			Value			Unrealized Depreciation			Notional Amount			Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)			Value			Unrealized Depreciation
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.78%		12/18/2023		$	—		$	(1,090)		$	(1,090)		$	80,000	3-Month LIBOR		2.78%	12/18/2023		$	—		$	(1,090)		$	(1,090)
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.81%		12/18/2021			—			(653)			(653)		$	80,000	3-Month LIBOR		2.81%	12/18/2021			—			(653)			(653)
								$	—		$	(1,743)		$	(1,743)									$	—		$	(1,743)		$	(1,743)

(a)

Security may be an obligation of one or more entities affiliated with the named company.

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2018, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 2.81%, and the U.S. Prime Lending Rate, or Prime, was 5.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of underlying investment.

(c)

Denominated in U.S. dollars unless otherwise noted.

(d)

Fair value determined by the Company’s board of directors (see Note 8).

(e)

Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 9).

(f)

Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 9).

(g)

(h)

(i)

Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with Goldman Sachs Bank USA (see Note 9).

(j)

Position or portion thereof unsettled as of December 31, 2018.

(k)

Security was on non-accrual status as of December 31, 2018.

(l)

Security is non-income producing.

(m)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2018, 88.2% of the Company’s total assets represented qualifying assets.

(n)

Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(o)

Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.

(p)

Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.

(q)

Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.

(r)

Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.

(s)

Investment denominated in Canadian dollars. Cost and fair value are converted into U.S. dollars at an exchange rate of CAD $1.00 to $0.73 as of December 31, 2018.

(t)

Security is classified as Level 1 or Level 2 in the Company’s fair value hierarchy (see Note 8).

See notes to unaudited consolidated financial statements.

2627

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

(u)

Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2018, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain financial information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the year ended December 31, 2018:

Portfolio Company	Fair Value at December 31, 2017			Transfers In or Out			Purchases and Paid-in-Kind Interest			Sales and Repayments			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2018			Interest Income(1)			PIK Income(1)			Fee Income(1)			Fair Value at December 31, 2017			Transfers In or Out			Purchases and Paid-in-Kind Interest			Sales and Repayments			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2018			Interest Income(1)			PIK Income(1)			Fee Income(1)
Senior Secured Loans—First Lien
Advanced Lighting Technologies, Inc.		$	9,218		$	—		$	—		$	(92)		$	223		$	13		$	(237)		$	9,125		$	1,119		$	—		$	—		$	9,218		$	—		$	—		$	(92)		$	223		$	13		$	(237)		$	9,125		$	1,119		$	—		$	—
H.M. Dunn Co., Inc.(2)			—			64,286			—			—			—			(25,715)			(31,549)			7,022			1,656			—			—			—			64,286			—			—			—			(25,715)			(31,549)			7,022			1,656			—			—
Logan’s Roadhouse, Inc.(3)			4,669			—			2,223			(6,875)			—			(25)			8			—			17			710			—			4,669			—			2,223			(6,875)			—			(25)			8			—			17			710			—
Logan’s Roadhouse, Inc.			—			—			1,347			(1,333)			—			(14)			—			—			529			529			—			—			—			1,347			(1,333)			—			(14)			—			—			529			529			—
MB Precision Holdings LLC(2)			—			64,367			710			(12,581)			—			(32,132)			975			21,339			3,507			—			—			—			64,367			710			(12,581)			—			(32,132)			975			21,339			3,507			—			—
Warren Resources, Inc.			43,613			—			170			(28,068)			—			—			(1,063)			14,652			1,939			170			1,123			43,613			—			170			(28,068)			—			—			(1,063)			14,652			1,939			170			1,123
Senior Secured Loans—Second Lien
JW Aluminum Co.			34,382			—			—			(33,874)			1			7			(516)			—			1,492			—			—			34,382			—			—			(33,874)			1			7			(516)			—			1,492			—			—
Logan’s Roadhouse, Inc.			6,771			—			194			(1,839)			6			(13,001)			7,869			—			188			194			—			6,771			—			194			(1,839)			6			(13,001)			7,869			—			188			194			—
Other Senior Secured Debt
Advanced Lighting Technologies, Inc.			10,278			—			646			(261)			—			—			(7,033)			3,630			1,182			646			—			10,278			—			646			(261)			—			—			(7,033)			3,630			1,182			646			—
JW Aluminum Co.			—			—			33,001			—			—			—			(82)			32,919			1,983			—			—			—			—			33,001			—			—			—			(82)			32,919			1,983			—			—
Mood Media Corp.			23,219			—			5,274			—			5			—			(20)			28,478			4,429			1,901			—			23,219			—			5,274			—			5			—			(20)			28,478			4,429			1,901			—
Equity/Other
Advanced Lighting Technologies, Inc., Common Equity			5,900			—			—			—			—			—			(5,900)			—			—			—			—			5,900			—			—			—			—			—			(5,900)			—			—			—			—
Advanced Lighting Technologies, Warrants, 10/4/2027			26			—			—			—			—			—			(26)			—			—			—			—			26			—			—			—			—			—			(26)			—			—			—			—
ASG Everglades Holdings, Inc., Common Equity			30,727			—			—			—			—			—			1,016			31,743			—			—			—			30,727			—			—			—			—			—			1,016			31,743			—			—			—
ASG Everglades Holdings, Inc., 6/27/2022, Warrants			6,951			—			—			—			—			—			413			7,364			—			—			—			6,951			—			—			—			—			—			413			7,364			—			—			—
HM Dunn Aerosystems, Inc., Preferred Equity, Series A(2)			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
HM Dunn Aerosystems, Inc., Preferred Equity, Series B(2)			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
JW Aluminum Co., Common Equity			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
JW Aluminum Co., Preferred Equity			15,074			—			18,992			—			210			—			9,614			43,890			5,632			4,785			—			15,074			—			18,992			—			210			—			9,614			43,890			5,632			4,785			—
MB Precision Holdings LLC, Class A-2 Units(2)			—			2,288			—			—			—			—			(2,288)			—			—			—			—
MB Precision Holdings LLC, Preferred Stock			—			—			8,600			—			—			—			(2,774)			5,826			—			—			—
Mood Media Corp.			28,659			—			—			—			—			—			(12,817)			15,842			—			—			—
Roadhouse Holding Inc., Common Equity			—			—			—			—			—			(4,657)			4,657			—			—			—			—
Warren Resources, Inc., Common Equity			4,031			—			—			—			—			—			1,542			5,573			—			—			—
Total		$	223,518		$	130,941		$	71,157		$	(84,923)		$	445		$	(75,524)		$	(38,211)		$	227,403		$	23,673		$	8,935		$	1,123

See notes to unaudited consolidated financial statements.

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FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company	Fair Value at December 31, 2017			Transfers In or Out			Purchases and Paid-in-Kind Interest			Sales and Repayments			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2018			Interest Income(1)			PIK Income(1)			Fee Income(1)
MB Precision Holdings LLC, Class A-2 Units(2)		$	—		$	2,288		$	—		$	—		$	—		$	—		$	(2,288)		$	—		$	—		$	—		$	—
MB Precision Holdings LLC, Preferred Stock			—			—			8,600			—			—			—			(2,774)			5,826			—			—			—
Mood Media Corp.			28,659			—			—			—			—			—			(12,817)			15,842			—			—			—
Roadhouse Holding Inc., Common Equity			—			—			—			—			—			(4,657)			4,657			—			—			—			—
Warren Resources, Inc., Common Equity			4,031			—			—			—			—			—			1,542			5,573			—			—			—
Total		$	223,518		$	130,941		$	71,157		$	(84,923)		$	445		$	(75,524)		$	(38,211)		$	227,403		$	23,673		$	8,935		$	1,123

(1)

Interest, PIK and fee income presented for the year ended December 31, 2018.

(2)

The Company held this investment as of December 31, 2017 but it was not deemed to be an “affiliated person” of the portfolio company or deemed to “control” the portfolio company as of December 31, 2017. Transfers in or out have been presented at amortized cost.

(3)

Security includes a partially unfunded commitment as of December 31, 2017 with an amortized cost of $760 and a fair value of $752.

See notes to unaudited consolidated financial statements.

2729

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization

FS Investment Corporation II, or the Company, was incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of ~~March 31,~~September 30, 2019, the Company had various wholly-owned subsidiaries, including special purpose financing subsidiaries and subsidiaries through which it holds interests in portfolio companies. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of ~~March 31,~~September 30, 2019. All significant intercompany transactions have been eliminated in consolidation. Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes.

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. The Company’s portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle-market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. In addition, a portion of the Company’s portfolio may be comprised of equity and equity-related securities, corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps.

The Company is externally managed by FS/KKR Advisor, LLC, or the Advisor, pursuant to an investment advisory and administrative services agreement, dated as of April 9, 2018, or the investment advisory and administrative services agreement. On April 9, 2018, GSO/Blackstone Debt Funds Management LLC, or GDFM, resigned as the investment sub-adviser to the Company and terminated the investment sub-advisory agreement, or the investment sub-advisory agreement, between FSIC II Advisor, LLC, or FSIC II Advisor, and GDFM, effective April 9, 2018. In connection with GDFM’s resignation as the investment sub-adviser to the Company, on April 9, 2018, the Company entered into the investment advisory and administrative services agreement, which replaced an investment advisory and administrative services agreement, dated February 8, 2012, or the FSIC II Advisor investment advisory and administrative services agreement, by and between the Company and FSIC II Advisor.

On May 31, 2019, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with Corporate Capital Trust II, a Delaware statutory trust, or CCT II, FS Investment Corporation IV, a Maryland corporation, or FSIC IV, FS Investment Corporation III, a Maryland corporation, or FSIC III and, collectively with the Company, FSIC IV and CCT II, the Funds, NT Acquisition 1, Inc., a Maryland corporation and wholly-owned subsidiary of the Company or Merger Sub 1, NT Acquisition 2, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, or Merger Sub 2, NT Acquisition 3, Inc., a Maryland corporation and wholly-owned subsidiary of the Company, or Merger Sub 3, and the Advisor. The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, (i) Merger Sub 1 will merge with and into FSIC III, with FSIC III continuing as the surviving company and as a wholly-owned subsidiary of the Company, or Merger 1A, and, immediately thereafter, FSIC III will merge with and into the Company, with the Company continuing as the surviving company or, together with Merger 1A, Merger 1, (ii) Merger Sub 2 will merge with and into CCT II, with CCT II continuing as the surviving company and as a wholly-owned subsidiary of the Company, or Merger 2A, and, immediately thereafter, CCT II will merge with and into the Company, with the Company continuing as the surviving company or, together with Merger 2A, Merger 2, and (iii) Merger Sub 3 will merge with and into FSIC IV, with FSIC IV continuing as the surviving

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization (continued)

company and as a wholly-owned subsidiary of the Company, or Merger 3A, and, immediately thereafter, FSIC IV will merge with and into the Company, with the Company continuing as the surviving company or, collectively with the Merger 3A, Merger 3 and, together with Merger 1 and Merger 2, the Mergers. See Note 12 for additional information.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of and for the year ended December 31, 2018 included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. Operating results for the three and nine months ended ~~March 31,~~September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The December 31, 2018 consolidated balance sheet and consolidated schedule of investments are derived from the Company’s audited consolidated financial statements as of and for the year ended December 31, 2018. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Accounting Standards Codification, or ASC, Topic 946, Financial Services—Investment Companies.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 2. Summary of Significant Accounting Policies (continued)~~

Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Capital Gains Incentive Fee: Pursuant to the terms of the investment advisory and administrative services agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory and administrative services agreement). This fee equals 20.0% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any capital gain incentive fees previously paid by the Company. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fees as if it were due and payable as of the end of such period.

The Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to the Advisor if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

Subordinated Income Incentive Fee: Pursuant to the terms of the investment advisory and administrative services agreement, the Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the investment advisory and administrative services agreement, which is calculated and payable quarterly in arrears, equals 20.0% of the Company’s ~~“pre-incentive~~

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

“pre-incentive fee net investment income” for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital equal to 1.75% per quarter (1.875% under the FSIC II Advisor investment advisory and administrative services agreement), or an annualized hurdle rate of 7.0% (7.5% under the FSIC II Advisor investment advisory and administrative services agreement). For purposes of this fee, “adjusted capital” means cumulative gross proceeds generated from sales of the Company’s common stock (including proceeds from its distribution reinvestment plan) reduced for distributions paid to stockholders from proceeds of non-liquidating dispositions of the Company’s investments and amounts paid for share repurchases pursuant to the Company’s share repurchase program. As a result, the Advisor will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.75% (1.875% under the FSIC II Advisor investment advisory and administrative services agreement). Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, the Advisor will be entitled to a “catch-up” fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals 2.1875%, or 8.75% annually (2.34375%, or 9.375% annually under the FSIC II Advisor investment advisory and administrative services agreement), of the Company’s adjusted capital. Thereafter, the Advisor will be entitled to receive 20.0% of the pre-incentive fee net investment income.

Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three and nine months ended ~~March 31,~~September 30, 2018 and the audited consolidated financial statements as of and for the year ended December 31, 2018 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three and nine months ended ~~March 31,~~September 30, 2019.

Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. Distributions received from limited liability company

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 2. Summary of Significant Accounting Policies (continued)~~

(“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. The Company’s policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that the Company will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on the Company’s judgment.

Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, the Company recognized ~~$6,105~~$8,609 in structuring fee revenue. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

Derivative Instruments: The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

designated as hedging instruments, and as a result, the Company presents changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the consolidated statements of operations. As of ~~March 31,~~September 30, 2019, the Company’s derivative instruments included interest rate swaps.

Recent Accounting Pronouncements: In August 2018, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2018-13, Fair Value Measurement—Disclosures Framework—Changes to Disclosure Requirements for Fair Value Measurement (Topic 820), or ASU 2018-13. ASU 2018-13 introduces new fair value disclosure requirements and eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of ASU 2018-13 on its financial statements.

Note 3. Share Transactions

Below is a summary of transactions with respect to shares of the Company’s common stock during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018:

Three Months Ended March 31,
2019 2018
Shares Amount Shares Amount
Reinvestment of Distributions 3,191,361 $ 25,694 3,316,098 $ 28,959
Share Repurchase Program (3,297,056) (26,541) (3,408,305) (29,993)
Net Proceeds from Share Transactions (105,695) $ (847) (92,207) $ (1,034)

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 3. Share Transactions (continued)~~

	Nine Months Ended September 30,
	2019					2018
	Shares		Amount			Shares		Amount
Reinvestment of Distributions		9,476,410		$	75,709		9,802,626		$	84,192
Share Repurchase Program		(6,488,628)			(52,233)		(10,072,672)			(86,976)
Net Proceeds from Share Transactions		2,987,782		$	23,476		(270,046)		$	(2,784)

During the period from ~~April~~October 1, 2019 to ~~May 10,~~November 8, 2019, the Company issued ~~1,034,362~~1,080,802 shares of common stock pursuant to its distribution reinvestment plan, or DRP, for gross proceeds of ~~$8,326,614~~$8,322,175 at an average price per share of ~~$8.05.~~$7.70. For additional information regarding the terms of the DRP, see Note 5.

Share Repurchase Program

~~The~~Historically, the Company ~~intends to continue to conduct~~has conducted quarterly tender offers pursuant to its share repurchase program. The Company’s board of directors ~~will consider~~considers the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase shares of common stock and under what terms:

•

the effect of such repurchases on the Company’s qualification as a RIC (including the consequences of any necessary asset sales);

•

the liquidity of the Company’s assets (including fees and costs associated with disposing of assets);

•

the Company’s investment plans and working capital requirements;

•

the relative economies of scale with respect to the Company’s size;

•

the Company’s history in repurchasing shares of common stock or portions thereof; and

•

the condition of the securities markets.

Historically, the Company limited the number of shares of common stock to be repurchased during any calendar year to the lesser of (i) the number of shares of common stock that the Company could repurchase with the proceeds it received from the issuance of shares of common stock under the DRP and

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 3. Share Transactions (continued)

(ii) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. On May 8, 2017, the board of directors of the Company amended the share repurchase program. As amended, the Company limits the maximum number of shares of common stock to be repurchased for any repurchase offer to the greater of (A) the number of shares of common stock that the Company can repurchase with the proceeds it has received from the sale of shares of common stock under the DRP during the twelve-month period ending on the date the applicable repurchase offer expires (less the amount of proceeds used to repurchase shares of common stock on each previous repurchase date for repurchase offers conducted during such twelve-month period) (the Company refers to this limitation as the twelve-month repurchase limitation) and (B) the number of shares of common stock that the Company can repurchase with the proceeds it received from the sale of shares of common stock under the DRP during the three-month period ending on the date the applicable repurchase offer expires (the Company refers to this limitation as the three-month repurchase limitation). In addition to this limitation, the maximum number of shares of common stock to be repurchased for any repurchase offer will also be limited to 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. As a result, the maximum number of shares of common stock to be repurchased for any repurchase offer will not exceed the lesser of (i) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter, and (ii) whichever is greater of the twelve-month repurchase limitation described in clause (A) above and the three-month repurchase limitation described in clause (B) above. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock. The actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above. The Company’s board of directors may amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice.

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 3. Share Transactions (continued)

The following table provides information concerning the Company’s repurchases of shares of common stock pursuant to its share repurchase program during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018:

For the Three Months Ended	Repurchase Date	Shares Repurchased		Percentage of Shares Tendered That Were Repurchased		Percentage of Outstanding Shares Repurchased as of the Repurchase Date		Repurchase Price Per Share			Aggregate Consideration for Repurchased Shares			Repurchase Date	Shares Repurchased		Percentage of Shares Tendered That Were Repurchased		Percentage of Outstanding Shares Repurchased as of the Repurchase Date		Repurchase Price Per Share			Aggregate Consideration for Repurchased Shares
Fiscal 2018
December 31, 2017	January 12, 2018		3,408,305		28.0%		1.04%		$	8.800		$	29,993	January 12, 2018		3,408,305		28.0%		1.04%		$	8.800		$	29,993
March 31, 2018														April 2, 2018		3,367,488		21.0%		1.03%		$	8.600			28,960
June 30, 2018														July 3, 2018		3,296,879		20.0%		1.01%		$	8.500			28,023
Total			3,408,305									$	29,993			10,072,672									$	86,976
Fiscal 2019
December 31, 2018	January 2, 2019		3,297,056		16.7%		1.01%		$	8.050		$	26,541	January 2, 2019		3,297,056		16.7%		1.01%		$	8.050		$	26,541
March 31, 2019														April 1, 2019		3,191,572		14.2%		0.98%		$	8.050			25,692
June 30, 2019(1)														—		—		—		—			—			—
Total			3,297,056									$	26,541			6,488,628									$	52,233

~~On April 1, 2019, the~~

(1)

The Company ~~repurchased 3,191,572 shares of common stock (representing 14.2% of the shares of common stock tendered for~~suspended its share repurchase ~~and 0.98% of the shares outstanding as of such date) at $8.05 per share for aggregate consideration totaling $25,692.~~program on May 31, 2019.

Note 4. Related Party Transactions

Compensation of the Investment Adviser

Pursuant to the investment advisory and administrative services agreement, the Advisor is entitled to a base management fee calculated at an annual rate of 1.50% of the average weekly value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. The base management fee is payable quarterly in arrears. All or any part of the base management fee not taken as to any quarter will be deferred without interest and may be taken in such other quarter as the Advisor determines. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that the Advisor may be entitled to under the investment advisory and administrative services agreement.

Pursuant to the FSIC II Advisor investment advisory and administrative services agreement, which was in effect until April 9, 2018, FSIC II Advisor was entitled to an annual base management fee equal to 2.0% of the average value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. Effective March 5, 2015, FSIC II Advisor had agreed to permanently waive 0.25% of its base management fee to which it was entitled under the FSIC II Advisor investment advisory and administrative services agreement, so that the fee received equaled 1.75% of the average value of the Company’s gross assets. Pursuant to the investment sub-advisory agreement, GDFM was entitled to receive 50% of all management and incentive fees payable to FSIC II Advisor under the FSIC II Advisor investment advisory and administrative services agreement with respect to each year.

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

administrative services. The Advisor also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s stockholders and reports filed with the U.S. Securities and Exchange Commission, or the SEC. In addition, the Advisor assists the Company in calculating its net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others.

Pursuant to the investment advisory and administrative services agreement, the Company reimburses the Advisor for expenses necessary to perform services related to its administration and operations, including the Advisor’s allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P. (which does business as FS Investments), and KKR Credit Advisors (US), LLC, or KKR Credit, for providing administrative services to the Company on behalf of the Advisor. The Company reimburses the Advisor no less than monthly for expenses necessary to perform services related to the Company’s administration and operations. The amount of this reimbursement is set at the lesser of (1) the Advisor’s actual costs incurred in providing such services and (2) the amount that the Company estimates it would be required to pay alternative service providers for comparable services in the same geographic location. The Advisor allocates the cost of such services to the Company based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Company’s board of directors reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of administrative expenses among the Company and certain affiliates of the Advisor. The Company’s board of directors then assesses the reasonableness of such reimbursements for expenses allocated to it based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party service providers known to be available. In addition, the Company’s board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company’s board of directors compares the total amount paid to the Advisor for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs. The administrative services provisions of the FSIC II Advisor investment advisory and administrative services agreement were substantially similar to the administrative services provisions of the investment advisory and administrative services agreement.

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

The following table describes the fees and expenses accrued under the investment advisory and administrative services agreement and the FSIC II Advisor investment advisory and administrative services agreement, as applicable, during the three and nine months ended ~~March 31,~~September 30, 2019 and 2018:

Related Party	Source Agreement	Description	Three Months Ended March 31,
											Three Months Ended September 30,						Nine Months Ended September 30,
Related Party	Source Agreement	Description	2019			2018			Source Agreement	Description	2019			2018			2019			2018
				$	17,864		$	22,080	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Base Management Fee(1)		$	16,735		$	17,567		$	51,581		$	58,307
The Advisor and FSIC II Advisor	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Subordinated Incentive Fee on Income(2)		$	11,131		$	5,575	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Subordinated Incentive Fee on Income(2)		$	5,045		$	11,939		$	24,912		$	18,994
The Advisor and FSIC II Advisor	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Administrative Services Expenses(3)		$	907		$	782	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Administrative Services Expenses(3)		$	1,833		$	799		$	3,387		$	2,371

(1)

FSIC II Advisor agreed, effective March 5, 2015, to permanently waive a portion of the base management fee to which it was entitled under the FSIC II Advisor investment advisory and administrative services agreement so that the fee received equaled 1.75% of the average value of the Company’s gross assets. As a result, the amount shown for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 is net of waivers ~~of $3,154.~~$3,432. During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, ~~$17,256~~$52,102 and ~~$22,595,~~$63,335, respectively, in base management fees were paid to FSIC II Advisor and the Advisor. As of ~~March 31,~~September 30, 2019, ~~$17,864~~$16,735 in base management fees were payable to the Advisor.

(2)

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, ~~$5,796~~$25,663 and ~~$19,129,~~$26,185, respectively, of subordinated incentive fees on income were paid to the Advisor and FSIC II Advisor. As of ~~March 31,~~September 30, 2019, a subordinated incentive fee on income of ~~$11,131~~$5,045 was payable to the Advisor.

(3)

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, ~~$534~~$2,385 and ~~$588,~~$1,992, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by the Advisor and FSIC II Advisor and the remainder related to other reimbursable expenses, including reimbursement of fees related to transactional expenses for prospective investments, such as fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. Broken deal costs were ~~$77~~$284 and $164 for the ~~three~~nine months ended ~~March 31, 2019.~~September 30, 2019 and 2018, respectively. The Company paid ~~$773~~$2,146 and ~~$547~~$2,192 in administrative services expenses to the Advisor and FSIC II Advisor during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively.

Potential Conflicts of Interest

The members of the senior management and investment teams of the Advisor serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. For example, the Advisor is the investment adviser to FS KKR Capital Corp., FS Investment Corporation III, FS Investment Corporation IV, and Corporate Capital Trust II, and the officers, managers and other personnel of the Advisor may serve in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or KKR Credit. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best interests or in the best interest of the Company’s stockholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For additional information regarding potential conflicts of interest, see the Company’s annual report on Form 10-K for the year ended December 31, 2018.

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term.

In an order dated June 4, 2013, or the FS Order, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FSIC II Advisor, including FS Energy and Power Fund, FS KKR Capital Corp., FS Investment Corporation III, FS Investment Corporation IV and any future BDCs that are advised by FSIC II Advisor or its affiliated investment advisers. However, in connection with the investment advisory relationship with the Advisor, and in an effort to mitigate potential future conflicts of interest, the Company’s board of directors authorized and directed that the Company (i) withdraw from the FS Order, except with respect to any transaction in which the Company participated in reliance on the FS Order prior to April 9, 2018, and (ii) rely on an exemptive relief order, dated April 3, 2018, that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Advisor or KKR Credit, with certain affiliates of the Advisor.

Note 5. Distributions

The following table reflects the cash distributions per share that the Company declared and paid on its common stock during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018:

	Distribution						Distribution
For the Three Months Ended	Per Share			Amount			Per Share			Amount
Fiscal 2018
March 31, 2018		$	0.1885		$	61,153		$	0.1885		$	61,153
June 30, 2018									0.1885			61,146
September 30, 2018									0.1885			61,137
Total		$	0.1885		$	61,153		$	0.5655		$	183,436
Fiscal 2019
March 31, 2019		$	0.1885		$	61,114		$	0.1885		$	61,114
June 30, 2019									0.1885			61,108
September 30, 2019									0.1885			61,698
Total		$	0.1885		$	61,114		$	0.5655		$	183,920

The Company intends to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. On ~~February 19, 2019 and April 30,~~October 11, 2019, the Company’s board of directors declared a regular monthly cash ~~distributions~~distribution for ~~April~~October 2019 ~~through June 2019 and July 2019 through September 2019, respectively, each~~ in the amount of $0.06283 per share. These distributions have been or will be paid monthly to stockholders of record as of monthly record dates previously determined by the Company’s board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of directors.

The Company has adopted an “opt in” distribution reinvestment plan for its stockholders. As a result, if the Company makes a cash distribution, its stockholders will receive the distribution in cash unless they specifically “opt in” to the DRP so as to have their cash distributions reinvested in additional shares of the Company’s common stock. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a stockholder’s ability to participate in the DRP.

Under the Company’s DRP, cash distributions to participating stockholders will be reinvested in additional shares of the Company’s common stock at a purchase price determined by the Company’s board ~~of directors, or a committee thereof, in its sole discretion, that is (i) not less than the net asset value per~~

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Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 5. Distributions (continued)

of directors, or a committee thereof, in its sole discretion, that is (i) not less than the net asset value per share of the Company’s common stock as determined in good faith by the Company’s board of directors or a committee thereof, in its sole discretion, immediately prior to the payment of the distribution and (ii) not more than 2.5% greater than the net asset value per share of the Company’s common stock as of such date. Although distributions paid in the form of additional shares of common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions, stockholders who elect to participate in the Company’s DRP will not receive any corresponding cash distributions with which to pay any such applicable taxes. Stockholders receiving distributions in the form of additional shares of common stock will be treated as receiving a distribution in the amount of the fair market value of the Company’s shares of common stock.

The Company has suspended the DRP with respect to any distributions with a record date between December 1, 2019 and the closing of the Mergers.

The Company may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from the sale of the Company’s common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, gains from interest rate swaps, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a nontaxable distribution) will be mailed to the Company’s stockholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all.

The following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common stock during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018:

	Three Months Ended March 31,										Nine Months Ended September 30,
	2019					2018					2019					2018
Source of Distribution	Distribution Amount			Percentage		Distribution Amount			Percentage		Distribution Amount			Percentage		Distribution Amount			Percentage
Offering proceeds		$	—		—		$	—		—		$	—		—		$	—		—
Borrowings			—		—			—		—			—		—			—		—
Net investment income(1)			61,114		100%			61,153		100%			183,920		100%			183,436		100%
Short-term capital gains proceeds from the sale of assets			—		—			—		—			—		—			—		—
Long-term capital gains proceeds from the sale of assets			—		—			—		—			—		—			—		—
Non-capital gains proceeds from the sale of assets			—		—			—		—			—		—			—		—
Distributions on account of preferred and common equity			—		—			—		—			—		—			—		—
Total		$	61,114		100%		$	61,153		100%		$	183,920		100%		$	183,436		100%

(1)

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, ~~94.0%~~93.3% and ~~94.7%~~94.4%, respectively, of the Company’s gross investment income was attributable to cash income earned, ~~1.9%~~2.0% and ~~1.1%~~1.6%, respectively, was attributable to non-cash accretion of discount and ~~4.1%~~4.7% and ~~4.2%~~4.0%, respectively, was attributable to paid-in-kind, or PIK, interest.

The Company’s net investment income on a tax basis for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 was ~~$59,367~~$173,209 and ~~$59,524,~~$168,957, respectively. As of ~~March 31,~~September 30, 2019 and December 31, 2018, the Company had ~~$56,281~~$42,556 and ~~$58,028,~~$53,267, respectively, of undistributed net investment income and ~~$214,125~~$235,873 and ~~$194,360,~~$191,708, respectively, of accumulated capital losses on a tax basis.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 5. Distributions (continued)~~

or deferred to future periods for tax purposes, the impact of consolidating certain subsidiaries for purposes of computing GAAP-basis net investment income but not for purposes of computing tax-basis net investment income and income recognized for tax purposes on certain transactions but not recognized for GAAP purposes.

The following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018:

	Three Months Ended March 31,						Nine Months Ended September 30,
	2019			2018			2019			2018
GAAP-basis net investment income		$	58,114		$	62,391		$	174,764		$	178,239
Income subject to tax not recorded for GAAP (income recorded for GAAP not subject to tax)			(166)			1,035			(321)			2,538
GAAP versus tax-basis impact of consolidation of certain subsidiaries			1,711			1,897			4,708			5,192
Reclassification of unamortized original issue discount, prepayment fees and other income			(278)			(5,469)			(6,601)			(16,781)
Other miscellaneous differences			(14)			(330)			659			(231)
Tax-basis net investment income		$	59,367		$	59,524		$	173,209		$	168,957

The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the components of accumulated earnings on a tax basis were as follows:

	March 31, 2019 (Unaudited)			December 31, 2018			September 30, 2019 (Unaudited)			December 31, 2018
Distributable ordinary income		$	56,281		$	58,028		$	42,556		$	53,267
Distributable realized gains			—			—			—			—
Capital loss carryover(1)			(214,125)			(194,360)			(235,873)			(191,708)
Other temporary differences			(129)			(139)			(122)			(139)
Net unrealized appreciation (depreciation) on investments and secured borrowing and gain (loss) on foreign currency(2)			(254,484)			(287,442)
Net unrealized appreciation (depreciation) on investments and interest rate swaps and gain (loss) on foreign currency(2)									(317,909)			(285,333)
Total		$	(412,457)		$	(423,913)		$	(511,348)		$	(423,913)

(1)

Net capital losses recognized may be carried forward indefinitely, and their character is retained as short-term or long-term losses. As of ~~March 31,~~September 30, 2019, the Company had short-term and long-term capital loss carryforwards available to offset future realized capital gains of ~~$541~~$0 and ~~$213,584,~~$235,873, respectively.

(2)

As of ~~March 31,~~September 30, 2019 and December 31, 2018, the gross unrealized appreciation on the Company’s investments and interest rate swaps and gain on foreign currency was ~~$158,062~~$165,919 and ~~$135,578,~~$131,142, respectively. As of ~~March 31,~~September 30, 2019 and December 31, 2018, the gross unrealized depreciation on the Company’s investments and interest rate swaps and loss on foreign currency was ~~$(412,546)~~$483,828 and ~~$423,020,~~$416,475, respectively.

The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled ~~$4,884,591~~$4,561,895 and ~~$4,647,131~~$4,645,022 as of ~~March 31,~~September 30, 2019 and December 31, 2018, respectively. The aggregate net ~~unrealized appreciation (depreciation) on investments on a tax basis was $(249,772) and $(287,851) as of March 31, 2019 and December 31, 2018, respectively.~~

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Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 5. Distributions (continued)

unrealized appreciation (depreciation) on a tax basis was $(317,909) and $(285,333) as of September 30, 2019 and December 31, 2018, respectively.

As of ~~March 31,~~September 30, 2019, the Company had a deferred tax liability of ~~$9,092~~$3,261 resulting from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries and a deferred tax asset of ~~$21,051~~$21,489 resulting from net operating losses ~~and other tax attributes~~ of the Company’s wholly-owned taxable subsidiaries. As of ~~March 31,~~September 30, 2019, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully utilize their generated net operating losses, therefore the deferred tax asset was offset by a valuation allowance of ~~$11,959.~~$18,228. For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiaries.

Note 6. Investment Portfolio

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of ~~March 31,~~September 30, 2019 and December 31, 2018:

	March 31, 2019 (Unaudited)								December 31, 2018								September 30, 2019 (Unaudited)								December 31, 2018
	Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio
Senior Secured Loans—First Lien		$	3,611,239		$	3,519,120		76%		$	3,382,158		$	3,293,291		75%		$	3,122,832		$	2,983,546		70%		$	3,382,158		$	3,293,291		76%
Senior Secured Loans—Second Lien			471,912			389,559		8%			418,015			333,986		8%			520,677			440,303		10%			418,015			333,986		8%
Other Senior Secured Debt			182,012			172,800		4%			207,181			196,616		5%			210,699			202,559		5%			205,162			194,726		4%
Subordinated Debt			229,637			222,850		5%			242,792			221,858		5%			237,022			239,497		6%			244,811			223,748		5%
Asset Based Finance			41,277			45,268		1%			42,050			46,152		1%			130,582			123,038		3%			49,415			48,160		1%
Equity/Other			263,808			285,221		6%			268,409			267,377		6%			258,254			266,337		6%			261,044			265,369		6%
Total		$	4,799,885		$	4,634,818		100%		$	4,560,605		$	4,359,280		100%		$	4,480,066		$	4,255,280		100%		$	4,560,605		$	4,359,280		100%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities.

As of ~~March 31,~~September 30, 2019, the Company did not “control” any of its portfolio companies. As of ~~March 31,~~September 30, 2019, the Company held investments in seven portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnote (t) to the unaudited consolidated schedule of investments as of ~~March 31,~~September 30, 2019 in this quarterly report on Form 10-Q.

As of December 31, 2018, the Company did not “control” any of its portfolio companies. As of December 31, 2018, the Company held investments in seven portfolio companies of which it was deemed to be an “affiliated person” but was not deemed to “control.” For additional information with respect to such portfolio companies, see footnote (u) to the consolidated schedule of investments as of December 31, 2018 in this quarterly report on Form 10-Q.

The Company’s investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of ~~March 31,~~September 30, 2019, the Company had unfunded debt investments with aggregate unfunded commitments of ~~$159,413~~$194,594 and ~~an unfunded commitment to purchase up to $47 in shares of preferred stock of Altus Power America Holdings, LLC.~~

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Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 6. Investment Portfolio (continued)

unfunded equity/other commitments of $150,447. As of December 31, 2018, the Company had unfunded debt investments with aggregate unfunded commitments of $172,963 and an unfunded commitment to purchase up to $47 in shares of preferred stock of Altus Power America Holdings, LLC. The Company maintains sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise. For additional details regarding the Company’s unfunded debt investments, see the Company’s unaudited consolidated schedule of investments as of ~~March 31,~~September 30, 2019 and audited consolidated schedule of investments as of December 31, 2018.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of ~~March 31,~~September 30, 2019 and December 31, 2018:

	March 31, 2019 (Unaudited)					December 31, 2018					September 30, 2019 (Unaudited)					December 31, 2018
Industry Classification	Fair Value			Percentage of Portfolio		Fair Value			Percentage of Portfolio		FairValue			Percentage of Portfolio		FairValue			Percentage of Portfolio
Automobiles & Components		$	35,234		1%		$	34,508		1%		$	35,664		1%		$	34,508		1%
Capital Goods			892,836		19%			893,250		21%			635,808		15%			893,250		21%
Commercial & Professional Services			342,074		7%			328,760		8%			300,011		7%			328,760		8%
Consumer Durables & Apparel			224,857		5%			227,470		5%			211,872		5%			227,470		5%
Consumer Services			247,807		5%			231,589		5%			266,301		6%			231,589		5%
Diversified Financials			128,014		3%			277,500		6%			163,091		4%			277,500		6%
Energy			348,664		8%			372,720		9%			312,601		7%			372,720		9%
Food & Staples Retailing			127,580		3%			6,797		0%			145,248		3%			6,797		0%
Food, Beverage & Tobacco			96,184		2%			96,787		2%			96,330		2%			96,787		2%
Health Care Equipment & Services			450,390		10%			361,228		8%			361,148		9%			361,228		8%
Insurance			135,614		3%			117,149		3%			95,239		2%			117,149		3%
Materials			310,162		7%			295,084		7%			201,167		5%			295,084		7%
Media			251,983		5%			254,278		6%
Media & Entertainment													249,886		6%			254,278		6%
Pharmaceuticals, Biotechnology & Life Sciences			21,675		0%			20,012		0%			113,731		3%			20,012		0%
Real Estate													34,036		1%			—		—
Retailing			293,486		6%			257,260		6%			313,567		7%			257,260		6%
Semiconductors & Semiconductor Equipment			—		—			14,155		0%			—		—			14,155		0%
Software & Services			447,669		10%			339,451		8%			472,615		11%			339,451		8%
Technology Hardware & Equipment			43,431		1%			46,178		1%			102,153		2%			46,178		1%
Telecommunication Services			221,135		5%			168,930		4%			117,753		3%			168,930		4%
Transportation			16,023		0%			16,174		0%			27,059		1%			16,174		0%
Total		$	4,634,818		100%		$	4,359,280		100%		$	4,255,280		100%		$	4,359,280		100%

Credit Opportunities Partners, LLC

On September 30, 2019, Credit Opportunities Partners, LLC, or COP, a joint venture between the Company and South Carolina Retirement Systems Group Trust, or SCRS, was formed pursuant to the terms of a limited liability company agreement between the Company and SCRS, or the COP Agreement. The COP Agreement requires the Company and SCRS to provide capital to COP of up to $600,000 in the aggregate where the Company and SCRS would provide 87.5% and 12.5%, respectively, of the committed

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TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 6. Investment Portfolio (continued)

capital. Pursuant to the terms of the COP Agreement, the Company and SCRS each have 50% voting control of COP and are required to agree on all investment decisions as well as certain other significant actions for COP. COP was formed to invest its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. As administrative agent of COP, the Company performs certain day-to-day management responsibilities on behalf of COP and is entitled to a fee of 0.25% of COP’s assets under administration, calculated and payable quarterly in arrears. As of September 30, 2019, the Company and SCRS have funded $0 to COP.

Note 7. Financial Instruments

The following is a summary of the fair value and location of the Company’s derivative instruments in the consolidated balance sheets held as of ~~March 31,~~September 30, 2019 and December 31, 2018:

Derivative Instrument	Statement Location	Fair Value						Statement Location	Fair Value
		March 31, 2019 (Unaudited)			December 31, 2018				September 30, 2019 (Unaudited)			December 31, 2018
Interest rate swaps	Unrealized depreciation on interest rate swaps		$	(5,739)		$	(1,743)	Unrealized appreciation on interest rate swaps		$	—		$	—
Interest rate swaps								Unrealized depreciation on interest rate swaps			(13,947)			(1,743)
Total			$	(5,739)		$	(1,743)			$	(13,947)		$	(1,743)

Net realized and unrealized gains and losses on derivative instruments recorded by the Company for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 are in the following locations in the consolidated statements of operations:

Derivative Instrument Statement Location Net Realized Gains (Losses)
Three Months Ended March 31,
2019 2018
Interest Rate Swaps Net realized gains (losses) on interest rate swaps $ — $ —
Total $ — $ —

Derivative Instrument Statement Location Net Unrealized Gains (Losses)
Three Months Ended March 31,
2019 2018
Interest Rate Swaps Net change in unrealized appreciation (depreciation)
on interest rate swaps $ (3,996) $ —
Total $ (3,996) $ —

		Net Realized Gains (Losses)						Net Realized Gains (Losses)
		Three Months Ended September 30,						Nine Months Ended September 30,
Derivative Instrument	Statement Location	2019			2018			2019			2018
Interest Rate Swaps	Net realized gains (losses) on interest rate swaps		$	(290)		$	—		$	(290)		$	—
Total			$	(290)		$	—		$	(290)		$	—

		Net Unrealized Gains (Losses)						Net Unrealized Gains (Losses)
		Three Months Ended September 30,						Nine Months Ended September 30,
Derivative Instrument	Statement Location	2019			2018			2019			2018
Interest Rate Swaps	Net change in unrealized appreciation (depreciation) on interest rate swaps		$	(1,551)		$	—		$	(12,204)		$	—
Total			$	(1,551)		$	—		$	(12,204)		$	—

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 7. Financial Instruments (continued)

Offsetting of Derivative Instruments

The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation and depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the ~~condensed~~ consolidated ~~statements of assets and liabilities.~~balance sheets. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of ~~March 31,~~September 30, 2019 and December 31, 2018:

~~As of March 31, 2019 (Unaudited)~~

~~Counterparty~~

~~Derivative Assets~~
~~Subject to Master~~
~~Netting Agreement~~

~~Derivatives~~
~~Available for Offset~~

~~Non-cash~~
~~Collateral~~
~~Received(1)~~

~~Cash~~
~~Collateral~~
~~Received(1)~~

~~Net Amount~~
~~of Derivative~~
~~Assets(2)~~

~~JP Morgan Chase Bank~~

—

~~ING Capital Markets~~

—

~~Total~~

—

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 7. Financial Instruments (continued)~~

Counterparty Derivative Liabilities
Subject to Master
Netting Agreement Derivatives
Available for Offset
Non-cash
Collateral
Received(1)

Cash
Collateral
Pledged1)

Net Amount
of Derivative
Liabilities(3)

JP Morgan Chase Bank $ 3,183 $ — $ — $ 3,183 $ —
ING Capital Markets 2,556 — — 2,556 —
Total $ 5,739 $ — $ — $ 5,739 $ —

~~As of December 31, 2018~~

~~Counterparty~~

~~Derivative Assets~~
~~Subject to Master~~
~~Netting Agreement~~

~~Derivatives~~
~~Available for Offset~~

~~Non-cash~~
~~Collateral~~
~~Received(1)~~

~~Cash~~
~~Collateral~~
~~Received(1)~~

~~Net Amount~~
~~of Derivative~~
~~Assets(2)~~

~~JP Morgan Chase Bank~~

—

Counterparty Derivative Liabilities
Subject to Master
Netting Agreement Derivatives
Available for Offset
Non-cash
Collateral
Received(1)

Cash
Collateral
Pledged(1)

Net Amount
of Derivative
Liabilities(3)

JP Morgan Chase Bank $ 1,743 $ — $ — $ — $ 1,743
$ 1,743 $ — $ — $ — $ 1,743

As of September 30, 2019 (Unaudited)
Counterparty	Derivative Liabilities Subject to Master Netting Agreement			Derivatives Available for Offset			Non-cash Collateral Received(1)			Cash Collateral Pledged(1)			Net Amount of Derivative Liabilities(3)
JP Morgan Chase Bank		$	6,633		$	—		$	—		$	6,633		$	—
ING Capital Markets			7,314			—			—			7,314			—
Total		$	13,947		$	—		$	—		$	13,947		$	—

As of December 31, 2018
Counterparty	Derivative Liabilities Subject to Master Netting Agreement			Derivatives Available for Offset			Non-cash Collateral Received(1)			Cash Collateral Pledged(1)			Net Amount of Derivative Liabilities(3)
JP Morgan Chase Bank		$	1,743		$	—		$	—		$	—		$	1,743
Total		$	1,743		$	—		$	—		$	—		$	1,743

(1)

In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.

(2)

Net amount of derivative assets represents the net amount due from the counterparty to the Company.

(3)

Net amount of derivative liabilities represents the net amount due from the Company to the counterparty.

Interest Rate Swaps

Interest rate swap contracts are privately negotiated agreements between the Company and a counterparty. Pursuant to interest rate swap agreements, the Company makes fixed-rate payments to a counterparty in exchange for payments on a floating benchmark interest rate. Payments received or made are recorded as realized gains or losses. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains or losses. The value of the swap is determined by changes in the relationship between two rates of interest. The Company is exposed to credit loss in the event of non-performance by the swap counterparty. Risk may also arise from movements in interest rates. The Company attempts to limit counterparty risk by dealing only with well-known counterparties.

The Company utilizes interest rate swaps ~~open at the end~~from time to time in order to hedge a portion of ~~the period are generally indicative of the volume of activity~~its fixed-rate portfolio investments.

The average notional balance for interest rate swaps during the ~~period.~~nine months ended September 30, 2019 was $353,407.

As of September 30, 2019 and December 31, 2018, the Company’s open interest rate swaps were as follows:

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 7. Financial Instruments (continued)

~~As of March 31, 2019 and December 31, 2018, the Company’s open interest rate swaps were as follows:~~

As of March 31, 2019 (Unaudited)
Counterparty Notional
Amount Company
Receives
Floating Rate Company
Pays Fixed
Rate Termination
Date Premiums
Paid/
(Received) Value Unrealized
Appreciation
(Depreciation)
JP Morgan Chase Bank $ 80,000 3-Month LIBOR 2.78% 12/18/2023 $ — $ (2,029) $ (2,029)
JP Morgan Chase Bank $ 80,000 3-Month LIBOR 2.81% 12/18/2021 — (1,154) (1,154)
ING Capital Markets $ 100,000 3-Month LIBOR 2.59% 1/14/2024 — (1,654) (1,654)
ING Capital Markets $ 100,000 3-Month LIBOR 2.62% 1/14/2022 — (902) (902)
$ — $ (5,739) $ (5,739)

As of December 31, 2018
Counterparty Notional
Amount Company
Receives
Floating Rate Company
Pays Fixed
Rate Termination
Date Premiums
Paid/
(Received) Value Unrealized
Appreciation
(Depreciation)
JP Morgan Chase Bank $ 80,000 3-Month LIBOR 2.78% 12/18/2023 $ — $ (1,090) $ (1,090)
JP Morgan Chase Bank $ 80,000 3-Month LIBOR 2.81% 12/18/2021 — (653) (653)
$ — $ (1,743) $ (1,743)

As of September 30, 2019 (Unaudited)
Counterparty	Notional Amount			Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)			Value			Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.78%	12/18/2023		$	—		$	(4,427)		$	(4,427)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.81%	12/18/2021			—			(2,206)			(2,206)
ING Capital Markets		$	100,000	3-Month LIBOR		2.59%	1/14/2024			—			(4,860)			(4,860)
ING Capital Markets		$	100,000	3-Month LIBOR		2.62%	1/14/2022			—			(2,454)			(2,454)
									$	—		$	(13,947)		$	(13,947)

As of December 31, 2018
Counterparty	Notional Amount			Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)			Value			Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.78%	12/18/2023		$	—		$	(1,090)		$	(1,090)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.81%	12/18/2021			—			(653)			(653)
									$	—		$	(1,743)		$	(1,743)

Note 8. Fair Value of Financial Instruments

Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.

Level 3: Inputs that are unobservable for an asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of September 30, 2019 and December 31, 2018, the Company’s investments were categorized as follows in the fair value hierarchy:

Valuation Inputs	September 30, 2019 (Unaudited)			December 31, 2018
Level 1—Price quotations in active markets		$	2,193		$	517
Level 2—Significant other observable inputs			854,107			906,192
Level 3—Significant unobservable inputs			3,398,980			3,452,571
Total		$	4,255,280		$	4,359,280

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

As of ~~March 31, 2019 and December 31, 2018, the Company’s investments were categorized as follows in the fair value hierarchy:~~

Valuation Inputs March 31, 2019
(Unaudited) December 31, 2018
Level 1—Price quotations in active markets $ 663 $ 517
Level 2—Significant other observable inputs 869,552 906,192
Level 3—Significant unobservable inputs 3,764,603 3,452,571
Total $ 4,634,818 $ 4,359,280

~~As of March 31,~~September 30, 2019 and December 31, 2018, the Company’s interest rate swaps were categorized as follows in the fair value hierarchy:

	March 31, 2019 (Unaudited)						December 31, 2018						September 30, 2019 (Unaudited)						December 31, 2018
Valuation Inputs	Assets			Liability			Asset			Liability			Assets			Liability			Asset			Liability
Level 1—Price quotations in active markets		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Level 2—Significant other observable inputs			—			(5,739)			—			(1,743)			—			(13,947)			—			(1,743)
Level 3—Significant unobservable inputs			—			—			—			—			—			—			—			—
Total		$	—		$	(5,739)		$	—		$	(1,743)		$	—		$	(13,947)		$	—		$	(1,743)

The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated repayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Company’s board of directors determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Company typically values its other investments and interest rate swaps by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent third-party pricing services and screened for validity by such services and are typically classified as Level 2 within the fair value hierarchy.

The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. The valuation committee and the board of directors reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation policy.

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

The following is a reconciliation for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:

For the Three Months Ended March 31, 2019
Senior Secured
Loans—
First Lien Senior Secured
Loans—
Second Lien Other Senior
Secured
Debt Subordinated
Debt Asset
Based
Finance Equity/
Other Total
Fair value at beginning of period $ 2,827,812 $ 212,290 $ 95,132 $ 6,201 $ 46,152 $ 264,984 $ 3,452,571
Accretion of discount (amortization of premium) 837 68 119 2 1 100 1,127
Net realized gain (loss) (1,521) — — — 114 (10,299) (11,706)
Net change in unrealized appreciation (depreciation) (8,812) (564) (3,257) 742 (111) 22,575 10,573
Purchases 291,045 64,577 1,209 32,614 — 4,123 393,568
Paid-in-kind interest 651 484 1,156 146 525 1,774 4,736
Sales and repayments (86,294) — — — (1,413) (292) (87,999)
Net transfers in or out of Level 3 1,733 — — — — — 1,733
Fair value at end of period $ 3,025,451 $ 276,855 $ 94,359 $ 39,705 $ 45,268 $ 282,965 $ 3,764,603
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date $ (29) $ 14,613 $ (3,257) $ (9,231) $ (1,303) $ 51 $ 844

For the Three Months Ended March 31, 2018
Senior Secured
Loans—
First Lien Senior Secured
Loans—
Second Lien Other Senior
Secured
Debt Subordinated
Debt Asset
Based
Finance Equity/
Other Total
Fair value at beginning of period $ 3,421,070 $ 327,135 $ 124,673 $ 345,593 $ 47,173 $ 325,582 $ 4,591,226
Accretion of discount (amortization of premium) 839 235 190 438 1 — 1,703
Net realized gain (loss) (1,395) (1,329) (1,852) (13,058) 99 (1,759) (19,294)
Net change in unrealized appreciation (depreciation) (50,585) (28,219) 902 (1,879) (2,659) (6,533) (88,973)
Purchases 164,136 6,944 17,900 3,784 658 6,519 199,941
Paid-in-kind interest 1,731 464 1,509 48 754 472 4,978
Sales and repayments (249,782) (2,189) (18,099) (14,095) (66) (11,192) (295,423)
Net transfers in or out of Level 3 (365,903) (80,281) (25,062) (275,743) — (4,465) (751,454)
Fair value at end of period $ 2,920,111 $ 222,760 $ 100,161 $ 45,088 $ 45,960 $ 308,624 $ 3,642,704
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date $ (48,621) $ (28,923) $ (252) $ (324) $ (2,661) $ (6,121) $ (86,902)

	For the Nine Months Ended September 30, 2019
	Senior Secured Loans— First Lien			Senior Secured Loans— Second Lien			Other Senior Secured Debt			Subordinated Debt			Asset Based Finance			Equity/ Other			Total
Fair value at beginning of period		$	2,827,812		$	212,290		$	95,132		$	6,201		$	48,160		$	262,976		$	3,452,571
Accretion of discount (amortization of premium)			2,354			218			395			6			6			1,128			4,107
Net realized gain (loss)			(1,677)			—			2			—			964			(10,609)			(11,320)
Net change in unrealized appreciation (depreciation)			(52,682)			(16,028)			(3,347)			84			(5,962)			5,539			(72,396)
Purchases			551,815			133,559			14,372			32,615			90,122			5,138			827,621
Paid-in-kind interest			2,620			1,437			1,208			3,213			1,654			5,492			15,624
Sales and repayments			(816,666)			(5,979)			(2,356)			—			(11,931)			(5,969)			(842,901)
Net transfers in or out of Level 3			25,674			—			—			—			—			—			25,674
Fair value at end of period		$	2,539,250		$	325,497		$	105,406		$	42,119		$	123,013		$	263,695		$	3,398,980
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date		$	(56,012)		$	(16,133)		$	373		$	(235)		$	(3,090)		$	(1,895)		$	(76,992)

4447

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

	For the Nine Months Ended September 30, 2018
	Senior Secured Loans— First Lien			Senior Secured Loans— Second Lien			Other Senior Secured Debt			Subordinated Debt			Asset Based Finance			Equity/ Other			Total
Fair value at beginning of period		$	3,436,962		$	311,243		$	125,003		$	345,263		$	52,779		$	319,976		$	4,591,226
Accretion of discount (amortization of premium)			2,272			57			414			—			4			117			2,864
Net realized gain (loss)			(25,716)			611			(1,846)			—			—			32,186			5,235
Net change in unrealized appreciation (depreciation)			(97,582)			(30,940)			(4,537)			(783)			(5,601)			(10,643)			(150,086)
Purchases			826,657			92,816			3,370			18,783			1,135			31,042			973,803
Paid-in-kind interest			3,773			1,355			2,636			69			2,375			3,065			13,273
Sales and repayments			(841,856)			(134,310)			(18,746)			(58,151)			(1,741)			(96,180)			(1,150,984)
Net transfers in or out of Level 3			(392,341)			(82,452)			(7,058)			(303,910)			—			(5,686)			(791,447)
Fair value at end of period		$	2,912,169		$	158,380		$	99,236		$	1,271		$	48,951		$	273,877		$	3,493,884
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date		$	(85,545)		$	(30,579)		$	(5,579)		$	(188)		$	(5,601)		$	18,927		$	(108,565)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of ~~March 31,~~September 30, 2019 and December 31, 2018 were as follows:

Type of Investment

Fair Value at
March 31, 2019
(Unaudited)(1)

Valuation
Technique(2)

Unobservable Input

Range(3)

Impact to
Valuation from
an Increase in
Input(4)

Fair Value at
September 30,
2019
(Unaudited)(1)

Valuation
Technique(2)

Unobservable Input

Range(3)

Impact to
Valuation from
an Increase in
Input(4)

Senior Debt

3,024,159

Discounted Cash Flow

Discount Rate

8.06% – 16.73% (9.62%)

Decrease

2,617,572

Discounted Cash Flow

Discount Rate

6.5% – 16.7% (9.6)%

Decrease

166,669

Waterfall

EBITDA Multiple

0.13x – 8.25x (4.81x)

Increase

173,465

Waterfall

EBITDA Multiple

0.1x – 8.8x (5.1x)

Increase

105,878

Other(5)

132,574

Cost

99,959

Cost

46,542

Other(5)

Subordinated Debt

39,499

Discounted Cash Flow

Discount Rate

11.58% – 19.75% (12.11%)

Decrease

41,913

Discounted Cash Flow

Discount Rate

13.2% – 18.0% (13.8)%

Decrease

206

Waterfall

EBITDA Multiple

10.64x – 10.64x (10.64x)

Increase

206

Waterfall

EBITDA Multiple

9.9x – 9.9x (9.9x)

Increase

Asset Based Finance

24,928

Waterfall

EBITDA Multiple

1.03x – 12.00x (1.51x)

Increase

51,753

Discounted Cash Flow

Discount Rate

7.8% – 12.9% (9.8)%

Decrease

20,340

Indicative Dealer Quotes

52.63% – 99.71% (71.35%)

Increase

27,184

Waterfall

EBITDA Multiple

1.0x – 13.5x (1.3x)

Increase

20,317

Other(5)

18,195

Cost

5,564

Indicative Dealer Quotes

63.0% – 63.0% (63.0)%

Increase

Equity/Other

254,466

Waterfall

EBITDA Multiple

0.73x – 14.50x (5.29x)

Increase

217,771

Waterfall

EBITDA Multiple

0.6x – 14.3x (7.1x)

Increase

23,375

Other(5)

45,143

Other(5)

4,655

Cost

781

Option Pricing Model

Equity Illiquidity Discount

15.0% – 15.0% (15.0)%

Decrease

469

Option Pricing Model

Equity Illiquidity Discount

15.00% – 15.00% (15.00%)

Decrease

Total

3,764,603

3,398,980

(1)

Certain investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 8. Fair Value of Financial Instruments (continued)~~

Type of Investment

Fair Value at
December 31, 2018

Valuation
Technique(1)

Unobservable Input

Range

Weighted
Average

Fair Value at
December 31, 2018

Valuation
Technique(1)

Unobservable Input

Range

Weighted
Average

Senior Secured
Loans—First Lien

2,668,002

Market Comparables

Market Yield (%)

5.5% – 16.8%

10.5%

Senior Secured Loans—
First Lien

2,668,002

Market Comparables

Market Yield (%)

5.5% – 16.8%

10.5%

EBITDA Multiples (x)

5.3x – 9.5x

6.9x

EBITDA Multiples (x)

5.3x – 9.5x

6.9x

Revenue Multiples (x)

0.1x – 0.1x

0.1x

Revenue Multiples (x)

0.1x – 0.1x

0.1x

61,692

Other(2)

Other

N/A

61,692

Other(2)

Other

N/A

98,118

Cost

99.0% – 100.0%

99.5%

98,118

Cost

99.0% – 100.0%

99.5%

Senior Secured
Loans—Second Lien

157,615

Market Comparables

Market Yield (%)

8.9% – 15.0%

12.6%

Senior Secured Loans—
Second Lien

157,615

Market Comparables

Market Yield (%)

8.9% – 15.0%

12.6%

8,316

Other(2)

Other

N/A

8,316

Other(2)

Other

N/A

46,359

Cost

98.5% – 98.5%

98.5%

46,359

Cost

98.5% – 98.5%

98.5%

Other Senior Secured
Debt

95,132

Market Comparables

Market Yield (%)

8.2% – 13.6%

9.7%

95,132

Market Comparables

Market Yield (%)

8.2% – 13.6%

9.7%

EBITDA Multiples (x)

7.0x – 8.5x

7.5x

EBITDA Multiples (x)

7.0x – 8.5x

7.5x

Subordinated Debt

6,201

Market Comparables

Market Yield (%)

12.0% – 20.0%

14.3%

6,201

Market Comparables

Market Yield (%)

12.0% – 20.0%

14.3%

EBITDA Multiples (x)

9.6x – 10.1x

9.9x

EBITDA Multiples (x)

9.6x – 10.1x

9.9x

Asset Based Finance

24,385

Market Comparables

Market Yield (%)

17.7% – 19.0%

18.4%

24,385

Market Comparables

Market Yield (%)

17.7% – 19.0%

18.4%

Net Aircraft Book Value
Multiple (x)

1.0x – 1.0x

1.0x

Net Aircraft Book Value Multiple (x)

1.0x – 1.0x

1.0x

21,767

Market Quotes

Indicative Dealer Quotes

51.8% – 99.6%

61.9%

21,767

Market Quotes

Indicative Dealer Quotes

51.8% – 99.6%

61.9%

Equity/Other

223,197

Market Comparables

Capacity Multiple ($/kW)

$1,875.0 – $2,125.0

$2,000.0

223,197

Market Comparables

Capacity Multiple $(/kW)

$1,875.0 – $2,125.0

$2,000.0

EBITDA Multiples (x)

4.0x – 14.3x

7.6x

EBITDA Multiples (x)

4.0x – 14.3x

7.6x

Net Aircraft Book Value
Multiple (x)

1.0x – 1.0x

1.0x

Net Aircraft Book Value Multiple (x)

1.0x – 1.0x

1.0x

Price to Book Multiple (x)

1.0x – 1.0x

1.0x

Price to Book Multiple (x)

1.0x – 1.0x

1.0x

Production Multiples
(Mboe/d)

$25,000.0 – $38,750.0

$28,034.2

Production Multiples (Mboe/d)

$25,000.0 – $38,750.0

$28,034.2

Production Multiples
(MMcfe/d)

$4,708.0 – $5,167.0

$4,937.5

Production Multiples (MMcfe/d)

$4,708.0 – $5,167.0

$4,937.5

Proved Reserves Multiples
(Bcfe)

$1.2 – $1.3

$1.2

Proved Reserves Multiples (Bcfe)

$1.2 – $1.3

$1.2

Proved Reserves Multiples
(Mmboe)

$3.5 – $13.8

$5.4

Proved Reserves Multiples (Mmboe)

$3.5 – $13.8

$5.4

PV-10 Multiples (x)

0.8x – 2.3x

1.7x

PV-10 Multiples (x)

0.8x – 2.3x

1.7x

19,929

Discounted Cash Flow

Discount Rate (%)

11.8% – 13.8%

12.8%

19,929

Discounted Cash
Flow

Discount Rate (%)

11.8% – 13.8%

12.8%

471

Option Valuation Model

Volatility (%)

30.0% – 30.0%

30.0%

471

Option Valuation
Model

Volatility (%)

30.0% – 30.0%

30.0%

20,251

Other(2)

Other

N/A

20,251

Other(2)

Other

N/A

1,136

Cost

100.0% – 100.0%

100.0%

1,136

Cost

100.0% – 100.0%

100.0%

Total

3,452,571

(1)

Investments using a market quotes valuation technique were primarily valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. Investments valued using an EBITDA multiple or a revenue multiple pursuant to the market comparables valuation technique may be conducted using an enterprise valuation waterfall analysis. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

Note 9. Financing Arrangements

The following tables present summary information with respect to the Company’s outstanding financing arrangements as of ~~March 31,~~September 30, 2019 and December 31, 2018. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual report on Form 10-K for the year ended December 31, 2018. Any significant changes to the Company’s financing arrangements during the three months ended ~~March 31,~~September 30, 2019 are discussed below.

As of March 31, 2019
(Unaudited)
Arrangement(1)
Type of Arrangement Rate Amount
Outstanding Amount
Available Maturity Date
Green Creek Credit Facility Term Loan Credit Facility L+2.50% $ 500,000 $ — December 15, 2019
Cooper River Credit Facility Revolving Credit Facility L+2.25% 115,000 85,000 March 31, 2021
Darby Creek Credit Facility Revolving Credit Facility L+1.95% 185,000 65,000 February 26, 2024
Juniata River Credit Facility Revolving Credit Facility L+2.68% 850,000 — October 11, 2020
Senior Secured Revolving Credit Facility Revolving Credit Facility
L+2.00% – 2.25%(2)
460,964(3) 189,036 August 9, 2023
Total $ 2,110,964 $ 339,036
As of December 31, 2018
Arrangement(1)
Type of Arrangement Rate Amount
Outstanding Amount
Available Maturity Date
Green Creek Credit Facility Term Loan Credit Facility L+2.50% $ 500,000 $ — December 15, 2019
Cooper River Credit Facility Revolving Credit Facility L+2.25% 107,000 93,000 May 29, 2020
Darby Creek Credit Facility Revolving Credit Facility L+2.50% 135,000 115,000 August 19, 2020
Juniata River Credit Facility Term Loan Credit Facility L+2.68% 850,000 — October 11, 2020
Senior Secured Revolving Credit Facility Revolving Credit Facility
L+2.00% – 2.25%(2)
298,254(4) 351,746 August 9, 2023
Total $ 1,890,254 $ 559,746

As of September 30, 2019
(Unaudited)

Arrangement(1)

Type of Arrangement

Rate

Amount
Outstanding

Amount
Available

Maturity
Date

Green Creek Credit Facility

Term Loan Credit Facility

L+2.50%

500,000

—

December 15, 2019

Cooper River Credit Facility

Revolving Credit Facility

L+2.75%

44,500

155,500

March 31, 2021

Darby Creek Credit Facility

Revolving Credit Facility

L+1.95%

185,000

65,000

February 26, 2024

Juniata River Credit Facility

Revolving Credit Facility

L+2.68%

680,000

170,000

October 11, 2020

Senior Secured Revolving Credit Facility

Revolving Credit Facility

L+2.00% –
2.25%(2)

418,874(3)

306,126

August 9, 2023

Total

1,828,374

696,626

As of December 31, 2018

Arrangement(1)

Type of Arrangement

Rate

Amount
Outstanding

Amount
Available

Maturity
Date

Green Creek Credit Facility

Term Loan Credit Facility

L+2.50%

500,000

—

December 15, 2019

Cooper River Credit Facility

Revolving Credit Facility

L+2.25%

107,000

93,000

May 29, 2020

Darby Creek Credit Facility

Revolving Credit Facility

L+2.50%

135,000

115,000

August 19, 2020

Juniata River Credit Facility

Term Loan Credit Facility

L+2.68%

850,000

—

October 11, 2020

Senior Secured Revolving Credit Facility

Revolving Credit Facility

L+2.00% –
2.25%(2)

298,254(4)

351,746

August 9, 2023

Total

1,890,254

559,746

(1)

The carrying amount outstanding under the facility approximates its fair value.

(2)

The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company.

(3)

Amount includes borrowings in U.S. dollars, Euros, Canadian dollars, Australian dollars, and ~~Canadian Dollars.~~pounds sterling. Euro balance outstanding of ~~€1,500~~€60,350 has been converted to U.S. dollars at an exchange rate of €1.00 to ~~$1.12~~$1.09 as of ~~March 31,~~September 30, 2019 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD ~~$98,700~~$104,750 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to ~~$0.75~~$0.76 as of ~~March 31,~~September 30, 2019 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD $64,300 has been converted to U.S. dollars at an exchange rate of AUD $1.00 to $0.67 as of September 30, 2019 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £22,500 has been converted to U.S. dollars at an exchange rate of £1.00 to $1.23 as of September 30, 2019 to reflect total amount outstanding in U.S. dollars.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 9. Financing Arrangements (continued)~~

For the three months ended ~~March 31,~~September 30, 2019 and 2018, the components of total interest expense for the Company’s financing arrangements were as follows:

	Three Months Ended March 31,																			Three Months Ended September 30,
	2019									2018										2019									2018
Arrangement(1)	Direct Interest Expense(2)			Amortization of Deferred Financing Costs			Total Interest Expense			Direct Interest Expense(2)			Amortization of Deferred Financing Costs				Total Interest Expense			Direct Interest Expense(2)			Amortization of Deferred Financing Costs			Total Interest Expense			Direct Interest Expense(2)			Amortization of Deferred Financing Costs			Total Interest Expense
Green Creek Credit Facility		$	6,437		$	133		$	6,570		$	4,961		$	267			$	5,228		$	6,069		$	136		$	6,205		$	6,187		$	315		$	6,502
Cooper River Credit Facility			1,695			125			1,820			1,697			114	��			1,811			958			128			1,086			1,901			117			2,018
Wissahickon Creek Credit Facility			—			—			—			2,612			262				2,874			—			—			—			1,118			1,816			2,934
Darby Creek Credit Facility			2,473			130			2,603			2,786			250				3,036			2,204			134			2,338			2,243			139			2,382
Dunning Creek Credit Facility			—			—			—			1,365			92				1,457			—			—			—			268			—			268
Juniata River Credit Facility			11,692			361			12,053			9,242			361				9,603			9,347			384			9,731			10,907			370			11,277
FSIC II Revolving Credit Facility			—			—			—			162			12				174			—			—			—			11			4			15
Senior Secured Revolving Credit Facility			6,288			241			6,529			—			—				—			4,342			267			4,609			1,395			133			1,528
Total		$	28,585		$	990		$	29,575		$	22,825		$	1,358			$	24,183		$	22,920		$	1,049		$	23,969		$	24,030		$	2,894		$	26,924

(1)

Borrowings of each of the Company’s wholly owned, special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.

(2)

Direct interest expense includes the effect of non-usage fees.

	Nine Months Ended September 30,
	2019									2018
Arrangement(1)	Direct Interest Expense(2)			Amortization of Deferred Financing Costs			Total Interest Expense			Direct Interest Expense(2)			Amortization of Deferred Financing Costs			Total Interest Expense
Green Creek Credit Facility		$	19,058		$	404		$	19,462		$	17,225		$	583		$	17,808
Cooper River Credit Facility			3,867			381			4,248			5,876			347			6,223
Wissahickon Creek Credit Facility			—			—			—			6,342			2,342			8,684
Darby Creek Credit Facility			6,913			394			7,307			7,759			527			8,286
Dunning Creek Credit Facility			—			—			—			2,914			136			3,050
Juniata River Credit Facility			30,849			1,117			31,966			30,767			1,095			31,862
FSIC II Revolving Credit Facility			—			—			—			488			29			517
Senior Secured Revolving Credit Facility			15,302			762			16,064			1,395			133			1,528
Total		$	75,989		$	3,058		$	79,047		$	72,766		$	5,192		$	77,958

(1)

(2)

Direct interest expense includes the effect of non-usage fees.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 were ~~$2,154,253~~$1,946,403 and ~~5.31%~~5.15%, respectively. As of ~~March 31,~~September 30, 2019, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was ~~5.29%~~4.78%.

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 9. Financing Arrangements (continued)

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 were ~~$2,183,146~~$2,051,616 and ~~4.18%~~4.68%, respectively. As of ~~March 31,~~September 30, 2018, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was ~~4.24%~~5.03%.

Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of ~~March 31,~~September 30, 2019 and December 31, 2018.

~~Darby Creek Credit Facility~~

On February 20, 2019, Darby Creek LLC, the Company’s wholly-owned special purpose financing subsidiary, entered into an amendment to the revolving credit facility originally entered into on February 20, 2014 with Deutsche Bank AG, New York Branch, as administrative agent, each of the lenders from time to time party thereto, the other agents party thereto and Wells Fargo Bank, National Association, as collateral agent and collateral custodian. The amendment, among other things, extended the end of the revolving period to February 26, 2022, extended the maturity date to February 26, 2024, decrease the interest rate to, during the revolving period, 1.95% per annum, and after the revolving period, 2.05% per annum, in each case, plus 3-month LIBOR (or the relevant reference rate for any foreign currency borrowings), and decreased the non-usage fee from 0.50% to 0.375%.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 9. Financing Arrangements (continued)~~

Juniata River Credit Facility

On ~~March 13,~~October 11, 2019, Juniata River LLC, a wholly owned subsidiary of the ~~Company’s wholly-owned special purpose financing subsidiary, or Juniata River, amended and restated the revolving credit facility originally~~Company, entered into ~~on November 14, 2015~~the first amendment to the Amended and Restated Loan Agreement with JPMorgan Chase Bank, N.A., or JPMorgan, as lender and administrative agent, ~~and the financial institutions and other lenders from time to time party thereto, Citibank, N.A.,~~Wells Fargo Bank, or ~~Citibank,~~Wells Fargo, as collateral agent, ~~and Virtus Group, LP, or Virtus, as~~ collateral administrator to, among other things, (i) permit borrowings in certain foreign currencies up to a specified sublimit, (ii) provide for a reinvestment period during which Juniata River is permitted to borrow, repay and re-borrow advances through October 11, 2019, (iii) provide for an unfunded fee in an amount equal to the product of the interest rate applicable to U.S. Dollar borrowings on any day multiplied by the unborrowed amount, if any, below 80% of the committed facility amount, or the Minimum Funding Amount, as of such day, (iv) provide for an unused fee of 0.75% per annum on the average daily unborrowed portion of the committed facility amount above the Minimum Funding Amount, and (v) replace both Citibank, in its role as collateral agent and securities intermediary and ~~Virtus, in its role~~the Company, as ~~collateral administrator, with Wells Fargo Bank, National Association.~~

~~Cooper River Credit Facility~~

~~On March 29, 2019, Cooper River LLC,~~investment manager, which, among other matters, (i) extended the ~~Company’s wholly-owned special purpose financing subsidiary, entered into an amendment~~maturity date of the facility to the revolving credit facility originally entered into May 29, 2015 with Citibank, N.A., as administrative agent, and the financial institutions and other lenders from time to time party thereto, whichOctober 11, 2021, (ii) extended the reinvestment period of the facility to ~~June 30, 2019~~October 12, 2020 and ~~set~~will require mandatory repayment of any advances outstanding in excess of $550,000 on that date, (iii) decreased the ~~final maturity date at March 31, 2021.~~margin payable on borrowings to 2.45% over three-month LIBOR, (iv) increased the maximum advance rate to sixty percent (60%), and (v) reduced the required minimum utilization of the facility to $440,000.

Note 10. Commitments and Contingencies

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Advisor has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of operations.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 10. Commitments and Contingencies (continued)~~

Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s ~~condensed~~ consolidated ~~statements of assets and liabilities.~~balance sheets. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company has sufficient liquidity to fund these commitments. As of ~~March 31,~~September 30, 2019, the Company’s unfunded commitments consisted of the following:

Category/Company(1)
Commitment
Amount
Senior Secured Loans—First Lien
5 Arch Income Fund 2, LLC $ 34,470
Altus Power America Inc 140
Apex Group Limited 2,241
Apex Group Limited 5,809
Ascension Insurance Inc 13,800
Aspect Software Inc 865
Conservice LLC 5,919
CSafe Global 3,965
Eagle Family Foods Inc 4,087
Fairway Group Holdings Corp 453
JHC Acquisition LLC 35,269
Kodiak BP LLC 9,849
Lazard Global Compounders Fund 7,214
Lipari Foods LLC 25,220
North Haven Cadence Buyer Inc 2,625
North Haven Cadence Buyer Inc 292
Zeta Interactive Holdings Corp 6,571
Senior Secured Loans—Second Lien
Bellatrix Exploration Ltd 624
Total unfunded loans $ 159,413
Unfunded equity commitments $ 47

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies (continued)

Category/Company (1)	Commitment Amount
Senior Secured Loans—First Lien
5 Arch Income Fund 2, LLC		$	42,984
All Systems Holding LLC			214
Apex Group Limited			2,248
Aspect Software Inc			865
Conservice LLC			1,687
Conservice LLC			1,440
CSafe Global			3,757
CSafe Global			12,522
Eagle Family Foods Inc			2,364
Entertainment Benefits Group LLC			2,347
HM Dunn Co Inc			1,644
Industria Chimica Emiliana Srl			7,973
J S Held LLC			3,604
J S Held LLC			8,372
Kodiak BP LLC			5,082
Greystone Equity Member Corp			3,607
Lipari Foods LLC			25,220
Monitronics International Inc			29,673
North Haven Cadence Buyer Inc			2,625
North Haven Cadence Buyer Inc			17,792
Sungard Availability Services Capital Inc			615
Zeta Interactive Holdings Corp			4,929
Asset Based Finance
Home Partners JV, Structured Mezzanine			13,030
Total		$	194,594
Unfunded equity/other commitments		$	150,447

(1)

May be commitments to one or more entities affiliated with the named company.

As of ~~March 31,~~September 30, 2019, the Company’s unfunded debt commitments have a fair value representing unrealized appreciation ~~(deprecation)~~(depreciation) of ~~$(1,573)~~$(550). The Company funds its equity investments as it receives funding notices from the portfolio companies. As of ~~March 31,~~September 30, 2019, the Company’s unfunded ~~equity~~equity/other commitments have a fair value of zero.

5053

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 11. Financial Highlights

The following is a schedule of financial highlights of the Company for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and the year ended December 31, 2018:

	Three Months Ended March 31, 2019 (Unaudited)			Year Ended December 31, 2018			Nine Months Ended September 30, 2019 (Unaudited)			Year Ended December 31, 2018
Per Share Data:(1)
Net asset value, beginning of period		$	7.86		$	8.73		$	7.86		$	8.73
Results of operations(2)
Net investment income			0.18			0.73			0.54			0.73
Net realized gain (loss) and unrealized appreciation (depreciation)			0.04			(0.85)			(0.24)			(0.85)
Net increase (decrease) in net assets resulting from operations			0.22			(0.12)			0.30			(0.12)
Stockholder distributions(3)
Distributions from net investment income			(0.19)			(0.75)			(0.57)			(0.75)
Net decrease in net assets resulting from stockholder distributions			(0.19)			(0.75)			(0.57)			(0.75)
Capital share transactions
Issuance of common stock(4)			—			—			—			—
Repurchases of common stock(5)			—			—			—			—
Net increase (decrease) in net assets resulting from capital share transactions			—			—			—			—
Net asset value, end of period		$	7.89		$	7.86		$	7.59		$	7.86
Shares outstanding, end of period			326,339,625			326,445,320			329,433,102			326,445,320
Total return(6)			2.75%			(1.64)%			3.62%			(1.64)%
Total return (without assuming reinvestment of distributions)(6)			2.80%			(1.37)%			3.82%			(1.37)%
Ratio/Supplemental Data:
Net assets, end of period		$	2,576,217		$	2,567,409		$	2,498,755		$	2,567,409
Ratio of net investment income to average net assets(7)			9.07%			8.68%			9.12%			8.68%
Ratio of operating expenses and excise taxes to average net assets(7)			9.65%			8.12%			8.60%			8.12%
Ratio of net operating expenses and excise taxes to average net assets(7)			9.65%			7.99%			8.60%			7.99%
Portfolio turnover(8)			4.44%			43.12%			26.76%			43.12%
Total amount of senior securities outstanding, exclusive of treasury securities		$	2,110,964		$	1,890,254		$	1,828,374		$	1,890,254
Asset coverage per unit(9)			2.22			2.36			2.37			2.36

(1)

Per share data may be rounded in order to recompute the ending net asset value per share.

(2)

The per share data was derived by using the weighted average shares outstanding during the applicable period.

(3)

The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.

(4)

The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock pursuant to the Company’s distribution reinvestment plan. The issuance of common stock at a price that is greater than the net asset value per share results in an increase in net asset value per share.

(5)

The per share impact of the Company’s distribution reinvestment plan is a reduction to net asset value of less than $0.01 per share during the period.

(6)

The total return based on net asset value for each period presented was calculated by taking the net asset value per share as of the end of the applicable period, adding the cash distributions per share that were declared during the applicable period and dividing the total by the net asset value per share at the beginning of the applicable period. Total return based on net asset value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The historical calculation of total return based on net asset value in the table should not be considered a representation of the Company’s future total return based on net asset value, which may be greater or less than the return shown in the table due to a number of factors, including the Company’s ability or inability to make investments in

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~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 11. Financial Highlights (continued)~~

which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total return on the Company’s investment portfolio during the applicable period and do not represent an actual return to stockholders.

(7)

Weighted average net assets during the applicable period are used for this calculation. Ratios for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 are annualized. Annualized ratios for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 are not necessarily indicative of the ratios that may be expected for the year ending December 31, 2019. The following is a schedule of supplemental ratios for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and the year ended December 31, 2018:

	Three Months Ended March 31, 2019 (Unaudited)		Year Ended December 31, 2018		Nine Months Ended September 30, 2019 (Unaudited)		Year Ended December 31, 2018
Ratio of subordinated income incentive fees to average net assets		1.74%		0.91%		1.30%		0.91%
Ratio of interest expense to average net assets		4.62%		3.78%		4.13%		3.78%
Ratio of excise taxes to average net assets		—		0.09%		—		0.09%

(8)

Portfolio turnover for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 is not annualized.

(9)

Asset coverage per unit is the ratio of the carrying value of the Company’s total consolidated assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.

Note 12. Fund Mergers

Pending Mergers with FSIC III, FSIC IV and CCT II

On May 31, 2019, the Funds entered into the Merger Agreement with Merger Sub 1, Merger Sub 2, Merger Sub 3 and the Advisor. The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, (i) Merger Sub 1 will merge with and into FSIC III, with FSIC III continuing as the surviving company and as a wholly-owned subsidiary of the Company, and, immediately thereafter, FSIC III will merge with and into the Company, with the Company continuing as the surviving company, (ii) Merger Sub 2 will merge with and into CCT II, with CCT II continuing as the surviving company and as a wholly-owned subsidiary of the Company, and, immediately thereafter, CCT II will merge with and into the Company, with the Company continuing as the surviving company and (iii) Merger Sub 3 will merge with and into FSIC IV, with FSIC IV continuing as the surviving company and as a wholly-owned subsidiary of the Company, and, immediately thereafter, FSIC IV will merge with and into the Company, with the Company continuing as the surviving company. The parties to the Merger Agreement intend the Mergers to be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

In the Mergers, each share of FSIC III common stock, CCT II common stock and FSIC IV common stock issued and outstanding immediately prior to the effective time of Merger 1A, Merger 2A and Merger 3A, respectively, will be converted into the right to receive a number of shares of the Company’s common stock equal to an exchange ratio with respect to the applicable Merger, to be determined in connection with the closing of such Merger, or each, the applicable Exchange Ratio. The Exchange Ratio for each of Merger 1A, Merger 2A and Merger 3A will equal the net asset value per share of FSIC III common stock, CCT II common stock and FSIC IV common stock, respectively (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger), divided by the net asset value per share of the Company’s common stock (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger).

Consummation of the Mergers, which is currently anticipated to occur during the fourth quarter of 2019, is subject to certain closing conditions, including (1) requisite approvals of the applicable Funds’ stockholders, (2) certain required charter amendments for each of the Funds, (3) the absence of certain

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 12. Fund Mergers (continued)

legal impediments to the consummation of the Mergers, (4) effectiveness of the registration statement on Form N-14, which includes a joint proxy statement of the Funds and a prospectus of the Company, and (5) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement. Merger 1A (involving a wholly-owned subsidiary of the Company and FSIC III) is a condition precedent to each of the Mergers. Therefore, Merger 2A (including a wholly-owned subsidiary of the Company and CCT II) and Merger 3A (including a wholly-owned subsidiary of the Company and FSIC IV) will not occur unless Merger 1A also occurs. No other Merger is a condition precedent to any other Merger.

The Merger Agreement also contains certain termination rights in favor of each Fund including if the Mergers are not completed on or before May 31, 2020 or if the requisite approvals of the applicable Fund’s stockholders are not obtained.

The Mergers are expected to be accounted for as asset acquisitions in accordance with the asset acquisition method of accounting as detailed in ASC 805-50, Business Combinations—Related Issues. Generally, under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. The cost of the group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair values of net identifiable assets acquired other than certain “non-qualifying” assets (for example cash) and does not give rise to goodwill. The final allocation of the purchase price will be determined after the Mergers are completed and after completion of a final analysis to determine the estimated relative fair values of CCT II’s, FSIC III’s and FSIC IV’s assets and liabilities.

In connection with the Mergers, the Company is seeking approval of an amendment to the investment advisory and administrative services agreement, to (a) reduce the annual base management fee from 1.5% to 1.0% on all assets financed using leverage over 1.0x debt to equity and exclude cash and cash equivalents from the gross assets on which the annual base management fee is calculated, (b) amend the hurdle rate applicable to the Company’s payment of a subordinated incentive fee on income to be based on net assets rather than adjusted capital, (c) revise the definition of pre-incentive net investment income to exclude interest expense and dividends paid on certain shares of preferred stock, (d) introduce a cap on subordinated incentive fees, (e) incorporate in the calculation of the incentive fee on capital gains the historical net realized losses and unrealized depreciation of FSIC III, CCT II and FSIC IV in addition to the Company and (f) implement certain other revisions to bring the investment advisory agreement of the Company in line with those of other listed business development companies.

Following the closing of the Mergers and subject to approval of the board of directors of the combined company, the Company currently intends to issue perpetual preferred stock of the Company with an aggregate liquidation preference representing approximately 20% of the combined company’s net asset value to holders of the Company’s common stock following the Mergers, or the Recapitalization Transaction. In addition, the Company currently intends to pursue a listing of the Company’s common stock on a national securities exchange, or the Listing, following the Mergers and the Recapitalization Transaction, subject to final board approval and market conditions. No assurance can be made regarding the timing of the Recapitalization Transaction or the Listing, or that the Listing or the Recapitalization Transaction will occur at all.

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 12. Fund Mergers (continued)

November 22, 2019 with respect to certain other proposals, including proposals necessary to consummate the Mergers and the Recapitalization Transaction. The stockholders of CCT II approved all proposals necessary to consummate the Mergers and the Recapitalization Transaction.

Note 13. Subsequent Events

On November 4, 2019, Cooper River LLC, a wholly owned financing subsidiary of the Company, repaid and terminated its revolving credit facility originally entered into May 29, 2015 with Citibank, N.A., as administrative agent and a lender, and the financial institutions and other lenders from time to time party thereto.

On November 7, 2019, the Company entered into an amended and restated senior secured revolving credit facility, or the Amended and Restated Senior Secured Revolving Credit Facility, with FS KKR Capital Corp., or FSK, and FSIC III, as borrowers, JPMorgan Chase Bank, N.A., or JPMorgan, as administrative agent, ING Capital LLC, or ING, as collateral agent, and the lenders party thereto, which amended and restated the senior secured revolving credit facility originally entered into on August 9, 2018, among the Company, FSK (as successor by merger to FS Investment Corporation and Corporate Capital Trust, Inc.) and FSIC III, as borrowers, JPMorgan, as administrative agent, ING, as collateral agent, and the lenders party thereto. The Amended and Restated Senior Secured Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $3,890,000 with an option for the Company to request, at one or more times, that existing and/or new lenders, at their election, provide up to $1,945,000 of additional commitments. The Amended and Restated Senior Secured Revolving Credit Facility initially provides for a sublimit available for the Company to borrow up to $837,500 of the total facility amount, subject to increase or reduction from time to time pursuant to the terms of the Amended and Restated Senior Secured Revolving Credit Facility and the oversight and approval of the Company’s board of directors. A sublimit of the total facility amount also is available to each of FSK and FSIC III, as additional borrowers, and the obligations of the other borrowers under the Amended and Restated Senior Secured Revolving Credit Facility are several (and not joint) in all respects. The Amended and Restated Senior Secured Revolving Credit Facility provides for the issuance of letters of credit in an initial aggregate face amount of up to $400,000, with a sublimit available for the Company to request the issuance of letters of credit in an aggregate face amount of up to $37,677, subject to increase or reduction from time to time pursuant to the terms of the Amended and Restated Senior Secured Revolving Credit Facility.

Availability under the Amended and Restated Senior Secured Revolving Credit Facility will terminate on November 7, 2023, or the Revolver Termination Date, and the outstanding loans under the Amended and Restated Senior Secured Revolving Credit Facility will mature on November 7, 2024. The Amended and Restated Senior Secured Revolving Credit Facility also requires mandatory prepayment of interest and principal upon certain events during the term-out period commencing on the Revolver Termination Date and at certain other times when the Company’s adjusted asset coverage ratio is less than 185%.

Borrowings under the Amended and Restated Senior Secured Revolving Credit Facility are subject to compliance with a borrowing base test. Interest under the Amended and Restated Senior Secured Revolving Credit Facility for (i) loans for which the Company elects the base rate option, (A) (1) so long as the Company remains unlisted, 0.25%, plus (2) if the value of the borrowing base is equal to or greater than 1.85 times the aggregate amount of certain outstanding indebtedness of the Company, or the Combined Debt Amount, is payable at an “alternate base rate” (which is the greatest of (a) the prime rate as publicly announced by JPMorgan, (b) the sum of (x) the greater of (I) the federal funds effective rate and (II) the overnight bank funding rate plus (y) 0.5%, and (c) the one month LIBOR plus 1% per annum) plus 0.75% and, (B) (1) so long as the Company remains unlisted, 0.25%, plus (2) if the value of the borrowing base is

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 13. Subsequent Events (continued)

less than 1.85 times the Combined Debt Amount, the alternate base rate plus 1.00%; and (ii) loans for which the Company elects the Eurocurrency option (A) (1) so long as the Company remains unlisted, 0.25%, plus (2) if the value of the borrowing base is equal to or greater than 1.85 times the Combined Debt Amount, is payable at a rate equal to LIBOR plus 1.75% and (B) (1) so long as the Company remains unlisted, 0.25%, plus (2) if the value of the borrowing base is less than 1.85 times the Combined Debt Amount, is payable at a rate equal to LIBOR plus 2.00%. The Company will pay a commitment fee of at least 0.375% and up to 0.50% per annum (based on the immediately preceding quarter’s average usage) on the unused portion of its sublimit under the Amended and Restated Senior Secured Revolving Credit Facility during the revolving period. The Company also will be required to pay letter of credit participation fees and a fronting fee on the average daily amount of any lender’s exposure with respect to any letters of credit issued at the request of the Company under the Amended and Restated Senior Secured Revolving Credit Facility.

In connection with the Amended and Restated Senior Secured Revolving Credit Facility, the Company has made certain representations and warranties and must comply with various covenants and reporting requirements customary for facilities of this type. In addition, the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 150% asset coverage ratio (or, if greater, the statutory requirement then applicable to the Company).

The Amended and Restated Senior Secured Revolving Credit Facility contains events of default customary for facilities of this type. Upon the occurrence of an event of default, JPMorgan, at the instruction of the lenders, may terminate the commitments and declare the outstanding advances and all other obligations under the Amended and Restated Senior Secured Revolving Credit Facility immediately due and payable.

The Company’s obligations under the Amended and Restated Senior Secured Revolving Credit Facility are guaranteed by certain of the Company’s subsidiaries. The Company’s obligations under the Amended and Restated Senior Secured Revolving Credit Facility are secured by a first priority security interest in substantially all of the assets of the Company and certain of the Company’s subsidiaries.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands, except share and per share amounts)

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:

•

our future operating results;

•

our business prospects and the prospects of the companies in which we may invest;

•

the impact of the investments that we expect to make;

•

the ability of our portfolio companies to achieve their objectives;

•

our current and expected financings and investments;

•

changes in the general interest rate environment;

•

the adequacy of our cash resources, financing sources and working capital;

•

the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;

•

our contractual arrangements and relationships with third parties;

•

actual and potential conflicts of interest with the other funds advised by the Advisor, their respective current or future investment advisers or any of their affiliates.

•

the dependence of our future success on the general economy and its effect on the industries in which we may invest;

•

our use of financial leverage;

•

the ability of the Advisor to locate suitable investments for us and to monitor and administer our investments;

•

the ability of the Advisor or its affiliates to attract and retain highly talented professionals;

•

our ability to maintain our qualification as a RIC and as a BDC;

•

the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, and the rules and regulations issued thereunder;

•

the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position; ~~and~~

•

the tax status of the enterprises in which we may invest; and

•

the Mergers, the likelihood the Mergers are completed and the anticipated timing of their completion.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include:

•

changes in the economy;

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We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Overview

We were incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. In March 2014, we closed our continuous public offering of shares of common stock to new investors.

We are externally managed by the Advisor pursuant to the investment advisory and administrative services agreement and supervised by our board of directors, a majority of whom are independent. On April 9, 2018, GSO/Blackstone Debt Funds Management LLC, or GDFM, resigned as our investment sub-adviser and terminated its investment sub-advisory agreement effective April 9, 2018. In connection with GDFM’s resignation as our investment sub-adviser, on April 9, 2018, we entered into the investment advisory and administrative services agreement with the Advisor, which replaced an investment advisory and administrative services agreement, or the FSIC II Advisor investment advisory and administrative services agreement with our former investment adviser, FSIC II Advisor, LLC, or FSIC II Advisor.

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We pursue our investment objective by investing primarily in the debt of middle market U.S. companies with a focus on originated transactions sourced through the network of the Advisor and its affiliates. We define direct originations as any investment where the Advisor or its affiliates negotiates the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These directly originated transactions include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions.

Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in our target companies, generally in conjunction with one of our debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of our portfolio may be comprised of corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps. The Advisor will seek to tailor our

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the markets, a misunderstanding by the market of a particular company or an industry being out of favor with the broader investment community and may include event driven investments, anchor orders and structured products. The senior secured loans, second lien secured loans and senior secured bonds in which we invest generally have stated terms of three to seven years and subordinated debt investments that we make generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and seven years. However, there is no limit on the maturity or duration of any security in our portfolio. Our debt investments may be rated by a NRSRO and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s, or lower than “BBB-” by S&P). We also invest in non-rated debt securities.

Revenues

The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net unrealized appreciation or depreciation on investments, and net unrealized appreciation or depreciation on foreign currency. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations.

We principally generate revenues in the form of interest income on the debt investments we hold. In addition, we generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we hold.

Expenses

Our primary operating expenses include the payment of management and incentive fees and other expenses under the investment advisory and administrative services agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

The Advisor oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Advisor also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our stockholders and reports filed with the SEC. In addition, the Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

Pursuant to the investment advisory and administrative services agreement, we reimburse the Advisor for expenses necessary to perform services related to our administration and operations, including the Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of the Advisor. We

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allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directors reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Advisor. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to the Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.

We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:

•

corporate and organization expenses relating to offerings of our securities, subject to limitations included in the investment advisory and administrative services agreement;

•

the cost of calculating our net asset value, including the cost of any third-party pricing or valuation services;

•

the cost of effecting sales and repurchases of shares of our common stock and other securities;

•

investment advisory fees;

•

fees payable to third parties relating to, or associated with, making investments and valuing investments, including fees and expenses associated with performing due diligence reviews of prospective investments;

•

interest payments on our debt or related obligations;

•

transfer agent and custodial fees;

•

research and market data (including news and quotation equipment and services, and any computer hardware and connectivity hardware (e.g., telephone and fiber optic lines) incorporated into the cost of obtaining such research and market data);

•

fees and expenses associated with marketing efforts;

•

federal and state registration fees;

•

federal, state and local taxes;

•

fees and expenses of directors not also serving in an executive officer capacity for us or the Advisor;

•

costs of proxy statements, stockholders’ reports, notices and other filings;

•

fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums;

•

direct costs such as printing, mailing, long distance telephone and staff;

•

fees and expenses associated with accounting, corporate governance, government and regulatory affairs activities, independent audits and outside legal costs;

•

costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws, including compliance with the Sarbanes-Oxley Act;

•

brokerage commissions for our investments;

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In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by the Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.

Pending Mergers with FSIC III, FSIC IV and CCT II

On May 31, 2019, the Funds, Merger Sub 1, Merger Sub 2, Merger Sub 3, and the Advisor entered into the Merger Agreement. The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, (i) Merger Sub 1 will merge with and into FSIC III, with FSIC III continuing as the surviving company and as a wholly-owned subsidiary of the Company, or Merger 1A, and, immediately thereafter, FSIC III will merge with and into the Company, with the Company continuing as the surviving company, or Merger 1, (ii) Merger Sub 2 will merge with and into CCT II, with CCT II continuing as the surviving company and as a wholly-owned subsidiary of the Company, or Merger 2A, and, immediately thereafter, CCT II will merge with and into the Company, with the Company continuing as the surviving company, or Merger 2, and (iii) Merger Sub 3 will merge with and into FSIC IV, with FSIC IV continuing as the surviving company and as a wholly-owned subsidiary of the Company, or Merger 3A, and, immediately thereafter, FSIC IV will merge with and into the Company, with the Company continuing as the surviving company. See Note 12 for additional information. The parties to the Merger Agreement intend the Mergers to be treated as a “reorganization” within the meaning of Section 368(a) of the Code.

In the Mergers, each share of FSIC III common stock, CCT II common stock and FSIC IV common stock issued and outstanding immediately prior to the effective time of Merger 1A, Merger 2A and Merger 3A, respectively, will be converted into the right to receive a number of shares of the Company’s common stock equal to the applicable Exchange Ratio. The Exchange Ratio for each of Merger 1A, Merger 2A and Merger 3A will equal the net asset value per share of FSIC III common stock, CCT II common stock and FSIC IV common stock, respectively (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger), divided by the net asset value per share of the Company’s common stock (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger).

The Merger Agreement contains representations, warranties and covenants, including, among others, covenants relating to the operation of each of the Funds’ and the Advisor’s businesses during the period prior to the closing of the Mergers. The Funds have agreed to convene and hold meetings of their respective stockholders for the purpose of obtaining the required approvals of the Funds’ stockholders, respectively, and have agreed to recommend that their stockholders approve their respective proposals.

The Merger Agreement provides that the board of directors or trustees of each Fund may not solicit proposals relating to alternative transactions, or, subject to certain exceptions, enter into discussions or negotiations or provide information in connection with any proposal for an alternative transaction. However, each of the Funds may, subject to certain conditions, change its recommendation to its respective stockholders, terminate the Merger Agreement and enter into an agreement with respect to a superior alternative proposal if the board of directors or trustees of such Fund determines in its reasonable good faith judgment, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to breach its standard of conduct under applicable law (taking into account any changes to the Merger Agreement proposed by the other Funds).

Consummation of the Mergers, which is currently anticipated to occur during the fourth quarter of 2019, is subject to certain closing conditions, including (1) requisite approvals of the Funds’ stockholders, (2) certain required charter amendments for each of the Funds, (3) the absence of certain legal impediments to the consummation of the Mergers, (4) effectiveness of the registration statement on Form N-14, which

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includes a joint proxy statement of the Company, FSIC III, CCT II, and FSIC IV and a prospectus of the Company, and (5) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement. Merger 1A (involving a wholly-owned subsidiary of the Company and FSIC III) is a condition precedent to each of the Mergers. Therefore, Merger 2A (including a wholly-owned subsidiary of the Company and CCT II) and Merger 3A (including a wholly-owned subsidiary of the Company and FSIC IV) will not occur unless Merger 1A also occurs. No other Merger is a condition precedent to any other Merger.

Following the closing of the Mergers and subject to approval of the board of directors of the combined company, the Company currently intends to issue perpetual preferred stock of the Company with an aggregate liquidation preference representing approximately 20% of the combined company’s net asset value to holders of the Company’s common stock following the Mergers. In addition, the Company currently intends to pursue a listing of the Company’s common stock on a national securities exchange following the Mergers and the Recapitalization Transaction, subject to final board approval and market conditions. No assurance can be made regarding the timing of the Recapitalization Transaction or the Listing, or that the Listing or the Recapitalization Transaction will occur at all.

On November 6, 2019, each of the Funds held its annual stockholder meeting at which stockholders voted on the applicable Mergers, the Recapitalization Transactions and certain other proposals. The stockholders of each of the Funds approved the applicable Mergers and the Recapitalization Transaction, but each of the Company, FSIC III and FSIC IV adjourned its respective annual stockholder meeting until November 22, 2019 with respect to certain other proposals, including proposals necessary to consummate the Mergers and the Recapitalization Transaction. The stockholders of CCT II approved all proposals necessary to consummate the Mergers and the Recapitalization Transaction.

Portfolio Investment Activity for the Three and Nine Months Ended ~~March 31,~~September 30, 2019 and for the Year Ended December 31, 2018

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three and nine months ended ~~March 31,~~September 30, 2019 and the year ended December 31, 2018:

Net Investment Activity For the Three Months Ended
March 31, 2019 For the Year Ended
December 31, 2018
Purchases $ 453,599 $ 1,895,833
Sales and Repayments (203,103) (1,885,140)
Net Portfolio Activity $ 250,496 $ 10,693

For the Three Months Ended
March 31, 2019 For the Year Ended
December 31, 2018
New Investment Activity by Asset Class Purchases Percentage Purchases Percentage
Senior Secured Loans—First Lien $ 350,512 78% $ 1,448,861 76%
Senior Secured Loans—Second Lien 64,577 14% 197,852 11%
Other Senior Secured Debt 1,209 0% 103,808 6%
Subordinated Debt 33,178 7% 102,391 5%
Asset Based Finance — — 694 0%
Equity/Other 4,123 1% 42,227 2%
Total $ 453,599 100% $ 1,895,833 100%

Net Investment Activity	For the Three Months Ended September 30, 2019			For the Nine Months Ended September 30, 2019
Purchases		$	427,864		$	1,157,274
Sales and Repayments			(140,873)			(1,213,529)
Net Portfolio Activity		$	286,991		$	(56,255)

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	For the Three Months Ended September 30, 2019					For the Nine Months Ended September 30, 2019
New Investment Activity by Asset Class	Purchases			Percentage		Purchases			Percentage
Senior Secured Loans—First Lien		$	295,868		69%		$	816,567		71%
Senior Secured Loans—Second Lien			74,701		17%			142,962		12%
Other Senior Secured Debt			—		—			37,247		3%
Subordinated Debt			15,822		4%			69,084		6%
Asset Based Finance			41,473		10%			90,474		8%
Equity/Other			—		—			940		0%
Total		$	427,864		100%		$	1,157,274		100%

The following table summarizes the composition of our investment portfolio at cost and fair value as of ~~March 31,~~September 30, 2019 and December 31, 2018:

	March 31, 2019 (Unaudited)								December 31, 2018								September 30, 2019 (Unaudited)								December 31, 2018
	Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio
Senior Secured Loans—First Lien		$	3,611,239		$	3,519,120		76%		$	3,382,158		$	3,293,291		75%		$	3,122,832		$	2,983,546		70%		$	3,382,158		$	3,293,291		76%
Senior Secured Loans—Second Lien			471,912			389,559		8%			418,015			333,986		8%			520,677			440,303		10%			418,015			333,986		8%
Other Senior Secured Debt			182,012			172,800		4%			207,181			196,616		5%			210,699			202,559		5%			205,162			194,726		4%
Subordinated Debt			229,637			222,850		5%			242,792			221,858		5%			237,022			239,497		6%			244,811			223,748		5%
Asset Based Finance			41,277			45,268		1%			42,050			46,152		1%			130,582			123,038		3%			49,415			48,160		1%
Equity/Other			263,808			285,221		6%			268,409			267,377		6%			258,254			266,337		6%			261,044			265,369		6%
Total		$	4,799,885		$	4,634,818		100%		$	4,560,605		$	4,359,280		100%		$	4,480,066		$	4,255,280		100%		$	4,560,605		$	4,359,280		100%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

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The following table presents certain selected information regarding the composition of our investment portfolio as of ~~March 31,~~September 30, 2019 and December 31, 2018:

	March 31, 2019	December 31, 2018	September 30, 2019	December 31, 2018
Number of Portfolio Companies	154	160	174	160
% Variable Rate Debt Investments (based on fair value)(1)(2)	84.0%	81.4%	79.1%	81.4%
% Fixed Rate Debt Investments (based on fair value)(1)(2)	10.4%	12.2%	13.5%	12.2%
% Other Income Producing Investments (based on fair value)(3)	1.0%	0.1%	1.3%	0.1%
% Non-Income Producing Investments (based on fair value)(2)	4.2%	5.2%	4.5%	5.2%
% of Investments on Non-Accrual (based on fair value)	0.4%	1.1%	1.6%	1.1%
Weighted Average Annual Yield on Accruing Debt Investments(2)(4)	10.4%	10.5%	9.9%	10.5%
Weighted Average Annual Yield on All Debt Investments(5)			9.2%	10.1%

(1)

“Debt Investments” means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return.

(2)

Does not include investments on non-accrual status.

(3)

“Other Income Producing Investments” means investments that pay or are expected to pay interest, dividends or other income to the Company on an ongoing basis but do not have a stated interest rate, stated dividend rate or other similar stated return.

(4)

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applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period.

(5)

The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each ~~accruing~~ Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period.

Based on our regular monthly cash distribution amount of $0.06283 per share as of ~~March 31,~~September 30, 2019 and our distribution reinvestment price of ~~$8.05~~$7.75 per share, the annualized distribution rate to stockholders as of ~~March 31,~~September 30, 2019 was ~~9.37%~~9.73%. The annualized distribution rate to stockholders is expressed as a percentage equal to the projected annualized distribution amount per share divided by our distribution reinvestment price per share. Our annualized distribution rate to stockholders may include income, realized capital gains and a return of investors’ capital. During the ~~three~~nine months ended ~~March 31,~~September 30, 2019, our total return was ~~2.75%~~3.62% and our total return without assuming reinvestment of distributions was ~~2.80%~~3.82%.

Based on our regular monthly cash distribution amount of $0.06283 per share as of December 31, 2018 and our distribution reinvestment price of $8.05 per share, the annualized distribution rate to stockholders as of December 31, 2018 was 9.37%. During the year ended December 31, 2018, our total return was (1.64)% and our total return without assuming reinvestment of distributions was (1.37)%.

Our weighted average annual yield on accruing debt investments may be higher than a stockholder’s yield on an investment in shares of our common stock. Our weighted average annual yield on accruing debt investments does not reflect operating expenses that may be incurred by us, nor does it include all of our investments. In addition, our weighted average annual yield on accruing debt investments and total return figures disclosed above do not consider the effect of any sales commissions or charges that may have been incurred in connection with the sale of shares of our common stock. Our weighted average annual yield on accruing debt investments, total return and annualized distribution rate to stockholders do not represent actual investment returns to stockholders, are subject to change and, in the future, may be greater or less than the rates set forth above. See the section entitled “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements. See footnote 6 to the financial highlights table included in Note 11 to our unaudited consolidated financial statements included herein for information regarding the calculations of our total return.

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Direct Originations

The following table presents certain selected information regarding our direct originations as of ~~March 31,~~September 30, 2019 and December 31, 2018:

Characteristics of All Direct Originations Held in Portfolio	March 31, 2019	December 31, 2018	September 30, 2019	December 31, 2018
Number of Portfolio Companies	74	74	84	74
% of Investments on Non-Accrual (based on fair value)	2.4%	3.6%	1.8%	1.2%
Total Cost of Direct Originations	$3,928,473	$3,615,151	$3,475,838	$3,615,151
Total Fair Value of Direct Originations	$3,803,151	$3,497,141	$3,264,357	$3,497,141
% of Total Investments, at Fair Value	82.1%	80.2%	76.7%	80.2%
Weighted Average Annual Yield on Accruing Debt Investments(1)	10.5%	10.5%	9.7%	10.5%
Weighted Average Annual Yield on All Debt Investments(2)			9.0%	10.1%

(1)

The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Does not include Debt Investments on non-accrual status.

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(2)

The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period.

Portfolio Composition by Industry Classification

See Note 6 to our unaudited consolidated financial statements included herein for additional information regarding the composition of our investment portfolio by industry classification.

Portfolio Asset Quality

In addition to various risk management and monitoring tools, the Advisor uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. The Advisor uses an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating:

Investment Rating			Summary Description
1			Performing ~~Investment—generally~~Investment-generally executing in accordance with plan and there are no concerns about the portfolio company’s performance or ability to meet covenant requirements.
2			Performing ~~investment—no~~investment-no concern about repayment of both interest and our cost basis but company’s recent performance or trends in the industry require closer monitoring.
3			Underperforming ~~investment—some~~investment-some loss of interest or dividend possible, but still expecting a positive return on investment.
4			Underperforming ~~investment—concerns~~investment-concerns about the recoverability of principal or interest.

The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of ~~March 31,~~September 30, 2019 and December 31, 2018:

	March 31, 2019					December 31, 2018					September 30, 2019					December 31, 2018
Investment Rating	Fair Value			Percentage of Portfolio		Fair Value			Percentage of Portfolio		FairValue			Percentage of Portfolio		FairValue			Percentage of Portfolio
1		$	3,062,579		66%		$	2,817,253		65%		$	2,645,332		62%		$	2,817,253		65%
2			1,353,997		29%			1,377,931		32%			1,372,019		32%			1,377,931		32%
3			125,052		3%			95,013		2%			112,155		3%			95,013		2%
4			93,190		2%			69,083		1%			125,774		3%			69,083		1%
Total		$	4,634,818		100%		$	4,359,280		100%		$	4,255,280		100%		$	4,359,280		100%

The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values.

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Results of Operations

Comparison of the Three and Nine Months Ended ~~March 31,~~September 30, 2019 and 2018

Revenues

Our investment income for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 was as follows:

	Three Months Ended March 31,										Three Months Ended September 30,										Nine Months Ended September 30,
	2019					2018					2019					2018					2019					2018
	Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income
Interest income		$	107,868		90%		$	100,156		85%		$	94,985		88%		$	97,381		83%		$	304,143		90%		$	297,917		87%
Paid-in-kind interest income			4,956		4%			4,978		4%			6,728		6%			5,356		5%			16,052		5%			13,547		4%
Fee income			7,044		6%			5,074		4%			5,270		5%			14,181		12%			18,539		5%			23,764		7%
Dividend income			71		0%			7,494		7%			768		1%			468		0%			839		0%			7,962		2%
Total investment income(1)		$	119,939		100%		$	117,702		100%		$	107,751		100%		$	117,386		100%		$	339,573		100%		$	343,190		100%

(1)

For the three months ended ~~March 31,~~September 30, 2019 and 2018, such revenues represent ~~$112,669~~$98,751 and ~~$111,382,~~$108,833, respectively, of cash income earned as well as ~~$7,270~~$9,000 and ~~$6,320,~~$8,553, respectively, in non-cash portions relating to accretion of discount and PIK interest. For the nine months ended September 30, 2019 and 2018, such revenues represent $316,891 and $324,041, respectively, of cash income earned as well as $22,682 and $19,149, respectively, in non-cash portions relating to accretion of discount and PIK interest. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.

The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. Fee income is transaction based and typically consists of prepayment fees and structuring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.

The increase in interest income during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was primarily due to the higher average invested balance. The decrease in interest income during the three months ended ~~March 31,~~September 30, 2019 compared to the three months ended ~~March 31,~~September 30, 2018 was primarily due to the prepayment of certain higher ~~invested balance~~yielding assets and the reduced LIBOR rate occurring during the ~~quarter~~quarter.

The decrease in fee income during the three and nine months ended ~~March 31,~~September 30, 2019 compared to the ~~quarter~~three and nine months ended ~~March 31, 2018.~~September 30, 2018 was primarily due to the decrease in prepayment and origination activity.

The decrease in dividend income during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2018 was primarily due to a one-time dividend paid in respect of one of our investments during the ~~three~~nine months ended ~~March 31,~~September 30, 2018.

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Expenses

Our operating expenses for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 were as follows:

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Management fees		$	17,864		$	25,234		$	16,735		$	17,567		$	51,581		$	61,739
Subordinated income incentive fees			11,131			5,575			5,045			11,939			24,912			18,994
Administrative services expenses			907			782			1,833			799			3,387			2,371
Stock transfer agent fees			705			495			471			506			1,677			1,502
Accounting and administrative fees			433			421			362			395			1,106			1,227
Interest expense			29,575			24,183			23,969			26,924			79,047			77,958
Directors’ fees			142			504			84			254			301			1,053
Expenses associated with our independent audit and related fees			73			126			139			74			338			275
Legal fees			113			34			194			308			582			632
Printing fees			343			53			(62)			137			486			330
Other			539			1,058			439			698			1,392			2,302
Total operating expenses		$	61,825		$	58,465		$	49,209		$	59,601		$	164,809		$	168,383
Management fee waiver			—			(3,154)			—			—			—			(3,432)
Net operating expenses		$	61,825		$	55,311		$	49,209		$	59,601		$	164,809		$	164,951

The following table reflects selected expense ratios as a percent of average net assets for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018:

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2019		2018
Ratio of operating expenses to average net assets		2.41%		2.06%		1.93%		2.21%		6.45%		6.12%
Ratio of management fee waiver to average net assets		—		(0.11)%		—		—		—		(0.12)%
Ratio of net operating expenses to average net assets		2.41%		1.95%		1.93%		2.21%		6.45%		6.00%
Ratio of incentive fees and interest expense to average net assets(1)		1.59%		1.05%		1.14%		1.44%		4.07%		3.52%
Ratio of net operating expenses, excluding certain expenses, to average net assets		0.82%		0.90%		0.79%		0.77%		2.38%		2.48%

(1)

Ratio data may be rounded in order to recompute the ending ratio of net operating expenses, excluding certain expenses, to average net assets.

Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in amounts outstanding under our financing arrangements and benchmark interest rates such as LIBOR, among other factors.

Net Investment Income

Our net investment income totaled ~~$58,114~~$58,542 ($0.18 per share) and ~~$62,391~~$57,785 ($~~0.19~~0.18 per share) for the three months ended ~~March 31,~~September 30, 2019 and 2018, respectively.

Our net investment income totaled $174,764 ($0.54 per share) and $178,239 ($0.55 per share) for the nine months ended September 30, 2019 and 2018, respectively. The decrease in net investment income for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 can be attributed to the ~~increase~~decrease in interest income as discussed above, ~~offset by~~in addition to higher incentive fees and interest expense.

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Net Realized Gains or Losses

Our net realized gains (losses) on investments and foreign currency for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 were as follows:

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Net realized gain (loss) on investments(1)		$	(18,486)		$	(19,294)		$	(8,139)		$	18,504		$	(48,582)		$	(10,805)
Net realized gain (loss) on interest rate swaps									(290)			—			(290)			—
Net realized gain (loss) on foreign currency			3			(327)			944			446			1,059			(220)
Total net realized gain (loss)		$	(18,483)		$	(19,621)		$	(7,485)		$	18,950		$	(47,813)		$	(11,025)

(1)

We sold investments and received principal repayments, respectively, of ~~$114,730~~$112,988 and ~~$88,373~~$27,885 during the three months ended ~~March 31,~~September 30, 2019 and ~~$55,669~~$169,872 and ~~$245,401~~$287,365 during the three months ended ~~March 31,~~September 30, 2018. We sold investments and received principal repayments, respectively, of $258,249 and $955,280 during the nine months ended September 30, 2019 and $385,404 and $805,504 during the nine months ended September 30, 2018.

Net Change in Unrealized Appreciation (Depreciation)

Our net change in unrealized appreciation (depreciation) on investments and interest rate swaps and unrealized gain (loss) on foreign currency for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 were as follows:

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Net change in unrealized appreciation (depreciation) on investments		$	36,258		$	(88,612)		$	(74,897)		$	(40,039)		$	(23,461)		$	(145,973)
Net change in unrealized appreciation (depreciation) on interest rate swaps			(3,996)			—			(1,551)			—			(12,204)			—
Net change in unrealized gain (loss) on foreign currency			(1,124)			410			3,169			(693)			504			84
Total net change in unrealized appreciation (depreciation)		$	31,138		$	(88,202)		$	(73,279)		$	(40,732)		$	(35,161)		$	(145,889)

During the three months ended ~~March 31,~~September 30, 2019, the net change in unrealized appreciation (depreciation) on investments was driven by mark to market declines in certain debt investments. During the nine months ended September 30, 2019, the net change in unrealized appreciation (depreciation) was driven ~~primarily~~ by ~~increased~~mark to market declines in certain debt investments mitigated by higher valuations ~~in a several of our equity investments.~~from Level 2 categorized assets during the six months ended June 30, 2019.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended ~~March 31,~~September 30, 2019, ~~and 2018,~~the net decrease in net assets resulting from operations was $(22,222) ($(0.07) per share) compared to a net increase in net assets resulting from operations of $36,003 ($0.11 per share) during the three months ended September 30, 2018.

For the nine months ended September 30, 2019, the net increase in net assets resulting from operations was ~~$70,769~~$91,790 ($~~0.22~~0.28 per share) ~~and $(45,432)~~compared to a net decrease in net assets resulting from operations of $21,325 ($~~(0.14)~~0.07 per share)~~, respectively.~~ during the nine months ended September 30, 2018.

Financial Condition, Liquidity and Capital Resources

Overview

As of ~~March 31,~~September 30, 2019, we had ~~$110,995~~$109,662 in cash and foreign currency, which we and our wholly-owned financing subsidiaries held in custodial accounts, and ~~$339,036~~$696,626 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of ~~March 31,~~September 30, 2019, we

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also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of ~~March 31,~~September 30, 2019, we had unfunded debt investments with aggregate unfunded commitments of ~~$159,413~~$194,594 and an unfunded ~~commitment to purchase up to $47 shares~~equity/other commitments of ~~preferred stock.~~$150,447. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.

We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments as well as from the issuance of shares under the DRP, and principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of the Advisor, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See “—Financing Arrangements.”

Prior to investing in securities of portfolio companies, we invest the cash received from fees, interest and dividends earned from our investments and from the issuance of shares under the distribution reinvestment plan, as well as principal repayments and proceeds from sales of our investments primarily in

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cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.

Financing Arrangements

The following table presents summary information with respect to our outstanding financing arrangements as of ~~March 31,~~September 30, 2019:

Arrangement(1)	Type of Arrangement	Rate	Amount Outstanding			Amount Available			Maturity Date	Type of Arrangement	Rate	Amount Outstanding			Amount Available			Maturity Date
Green Creek Credit Facility	Term Loan Credit Facility	L+2.50%		$	500,000		$	—	December 15, 2019	Term Loan Credit Facility	L+2.50%		$	500,000		$	—	December 15, 2019
Cooper River Credit Facility	Revolving Credit Facility	L+2.25%			115,000			85,000	March 31, 2021	Revolving Credit Facility	L+2.75%			44,500			155,500	March 31, 2021
Darby Creek Credit Facility	Revolving Credit Facility	L+1.95%			185,000			65,000	February 26, 2024	Revolving Credit Facility	L+1.95%			185,000			65,000	February 26, 2024
Juniata River Credit Facility	Revolving Credit Facility	L+2.68%			850,000			—	October 11, 2020	Revolving Credit Facility	L+2.68%			680,000			170,000	October 11, 2020
Senior Secured Revolving Credit Facility	Revolving Credit Facility	L+2.00% – 2.25%(2)			460,964(3)			189,036	August 9, 2023	Revolving Credit Facility	L+2.00% – 2.25%(2)			418,874(3)			306,126	August 9, 2023
Total				$	2,110,964		$	339,036					$	1,828,374		$	696,626

(1)

The carrying amount outstanding under the facility approximates its fair value.

(2)

The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company.

(3)

Amount includes ~~borrowing~~borrowings in U.S. dollars, Euros, Canadian dollars, Australian dollars, and ~~Canadian Dollars.~~pounds sterling. Euro balance outstanding of ~~€1,500~~€60,350 has been converted to U.S. dollars at an exchange rate of €1.00 to ~~$1.12~~$1.09 as of ~~March 31,~~September 30, 2019 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD ~~$98,700~~$104,750 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to ~~$0.75~~$0.76 as of ~~March 31,~~September 30, 2019 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD $64,300 has been converted to U.S. dollars at an exchange rate of AUD $1.00 to $0.67 as of September 30, 2019 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £22,500 has been converted to U.S. dollars at an exchange rate of £1.00 to $1.23 as of September 30, 2019 to reflect total amount outstanding in U.S. dollars.

For additional information regarding our financing arrangements, see Note 9 to our unaudited consolidated financial statements included herein.

RIC Status and Distributions

We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the ninth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior

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tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our stockholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our stockholders generally 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 our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.

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Subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.

During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our stockholders. No portion of the distributions paid during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 represented a return of capital.

We intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, except for those stockholders who receive their distributions in the form of shares of our common stock under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder.

The following table reflects the cash distributions per share that we have declared and paid on our common stock during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018:

	Distribution						Distribution
For the Three Months Ended	Per Share			Amount			Per Share				Amount
Fiscal 2018
March 31, 2018		$	0.1885		$	61,153		$	0.1885			$	61,153
June 30, 2018									0.1885	��			61,146
September 30, 2018									0.1885				61,137
Total		$	0.1885		$	61,153		$	0.5655			$	183,436
Fiscal 2019
March 31, 2019		$	0.1885		$	61,114		$	0.1885			$	61,114
June 30, 2019									0.1885				61,108
September 30, 2019									0.1885				61,698
Total		$	0.1885		$	61,114		$	0.5655			$	183,920

See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions, including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018.

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Critical Accounting Policies

Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.

Valuation of Portfolio Investments

We determine the fair value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of directors. In connection with that determination, the Advisor provides our board of directors with portfolio company valuations which are based on relevant inputs,

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including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the FASB, clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:

•

our quarterly fair valuation process begins with the Advisor reviewing and documenting valuations of each portfolio company or investment, which valuations are obtained from an independent third-party valuation service, and provide a valuation range;

•

the Advisor then provides the valuation committee of our board of directors, or the valuation committee, with its valuation recommendation for each portfolio company or investment, along with supporting materials;

•

preliminary valuations are then discussed with the valuation committee;

•

our valuation committee reviews the preliminary valuations and the Advisor, together with our independent third-party valuation services, if applicable, supplement the preliminary valuations to reflect any comments provided by the valuation committee;

•

following its review, the valuation committee will recommend that our board of directors approve our fair valuations; and

•

our board of directors discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of the Advisor, the valuation committee and any independent third-party valuation services, if applicable.

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Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of directors may use any approved independent third-party pricing or valuation services. However, our board of directors is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from the Advisor or any approved independent third-party valuation or pricing service that our board of directors deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Advisor, any approved independent third party valuation services and our board of directors may consider when determining the fair value of our investments.

Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments.

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For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.

Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of directors, in its determination of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.

The Advisor, any approved independent third-party valuation services and our board of directors may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. The Advisor, any approved independent third-party valuation services and our board of directors may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as our board of directors, in consultation with the Advisor and any approved independent third party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.

When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of directors subsequently values these warrants or other equity securities received at their fair value.

The fair values of our investments are determined in good faith by our board of directors. Our board of directors is responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of directors has delegated day-to-day responsibility for implementing our valuation policy to the Advisor, and has authorized the Advisor to utilize independent third-party valuation and pricing services that have been approved by our board of directors. The valuation committee is responsible for overseeing the Advisor’s implementation of the valuation process.

See Note 8 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.

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Revenue Recognition

Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect such amounts. We record dividend income on the ex-dividend date. Distributions received from limited liability company (“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to doubt our ability to collect such income. Our policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. We consider many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that we will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on our judgment.

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Loan origination fees, original issue discount and market discount are capitalized and we amortize such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, we recognized ~~$6,105~~$8,609 in structuring fee revenue. We record prepayment premiums on loans and securities as fee income when we ~~earn~~receive such amounts.

Net Realized Gains or Losses, Net Change in Unrealized Appreciation or Depreciation and Net Change in Unrealized Gains or Losses on Foreign Currency

Gains or losses on the sale of investments are calculated by using the specific identification method. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized fees. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gains or losses when gains or losses are realized. Net change in unrealized gains or losses on foreign currency reflects the change in the value of receivables or accruals during the reporting period due to the impact of foreign currency fluctuations.

Uncertainty in Income Taxes

We evaluate our tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in our consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, we did not incur any interest or penalties.

Derivative Instruments

Our derivative instruments include foreign currency forward contracts and cross currency swaps. We recognize all derivative instruments as assets or liabilities at fair value in our consolidated financial statements. Derivative contracts entered into by us are not designated as hedging instruments, and as a result, we present changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the consolidated statements of operations.

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A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at ~~March 31,~~September 30, 2019 is as follows:

	Payments Due By Period																Payments Due By Period
	Maturity Date(1)	Total			Less than 1 year			1 – 3 years			3 – 5 years			More than 5 years		Maturity Date(1)	Total			Less than 1 year			1 – 3 years			3 – 5 years			More than 5years
Green Creek Credit Facility(2)	December 15, 2019		$	500,000		$	500,000			—			—		—	December 15, 2019		$	500,000		$	500,000			—			—		—
Cooper River Credit Facility(3)	March 31, 2021		$	115,000			—		$	115,000			—		—	March 31, 2021		$	44,500			—		$	44,500			—		—
Darby Creek Credit Facility(4)	February 26, 2024		$	185,000			—			—		$	185,000		—	February 26, 2024		$	185,000			—			—		$	185,000		—
Juniata River Credit Facility~~(2)~~(5)	October 11, 2020		$	850,000			—		$	850,000			—		—	October 11, 2020		$	680,000			—		$	680,000			—		—
Senior Secured Revolving Credit Facility~~(5)~~(6)	August 9, 2023		$	460,964			—			—		$	460,964		—	August 9, 2023		$	418,874			—			—		$	418,874		—

(1)

Amounts outstanding under the financing arrangements will mature, and all accrued and unpaid interest thereunder will be due and payable, on the maturity date.

(2)

At ~~March 31,~~September 30, 2019, no amounts remained unused under the financing arrangement.

(3)

At ~~March 31,~~September 30, 2019, ~~$85,000~~$155,500 remained unused under the Cooper River credit facility.

(4)

At ~~March 31,~~September 30, 2019, $65,000 remained unused under the Darby Creek credit facility.

(5)

At ~~March 31,~~September 30, 2019, ~~$189,036~~$170,000 remained unused under the Juniata River credit facility.

(6)

At September 30, 2019, $306,126 remained unused under the Senior Secured Revolving Credit Facility. Amount includes borrowing in U.S. dollars, Euros, and Canadian Dollars. Euro balance outstanding of €1,500 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.12 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD $98,700 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.75 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Recently Issued Accounting Standards

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement—Disclosures Framework—Changes to Disclosure Requirements for Fair Value Measurement (Topic 820), or ASU 2018-13. ASU 2018-13 introduces new fair value disclosure requirements and eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently evaluating the impact of ASU 2018-13 on our financial statements.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are subject to financial market risks, including changes in interest rates. As of ~~March 31,~~September 30, 2019, ~~84.0%~~79.1% of our portfolio investments (based on fair value) were debt investments paying variable interest rates and ~~10.4%~~13.5% were debt investments paying fixed interest rates, while ~~1.0%~~1.3% were other income producing

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exceed the hurdle rate applicable to the subordinated incentive fee on income, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to the Advisor with respect to our increased pre-incentive fee net investment income.

Subject to the requirements of the 1940 Act, we may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. Although hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates. As of ~~March 31,~~September 30, 2019, we have four pay-fixed, receive-floating interest rate swaps which we pay an annual fixed rate of 2.59% to 2.81% and receive three-month LIBOR on an aggregate notional amount of $360 million. The interest rate swaps have quarterly settlement payments.

Pursuant to the terms of all of our financing arrangements, borrowings are at a floating rate based on LIBOR. To the extent that any present or future credit facilities, total return swap agreements or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of ~~March 31,~~September 30, 2019 (dollar amounts are presented in thousands):

Basis Point Change in Interest Rates	Increase (Decrease) in Interest Income(1)			Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income			Percentage Change in Net Interest Income		Increase (Decrease) in Interest Income(1)			Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income			Percentage Change in Net Interest Income
Down 100 basis points		$	(38,660)		$	(21,110)		$	(17,550)		(5.0)%		$	(32,916)		$	(18,462)		$	(14,454)		(4.7)%
No change			—			—			—		—			—			—			—		—
Up 100 basis points		$	39,372		$	21,110		$	18,262		5.2%		$	34,155		$	18,462		$	15,693		5.1%
Up 300 basis points		$	118,827		$	63,329		$	55,498		15.9%		$	103,565		$	55,386		$	48,179		15.6%
Up 500 basis points		$	198,337		$	105,548		$	92,789		26.6%		$	173,249		$	92,310		$	80,939		26.2%

(1)

Assumes no defaults or prepayments by portfolio companies over the next twelve months.

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.

In addition, we may have risk regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments.”

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~March 31,~~September 30, 2019.

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PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material adverse effect upon our financial condition or results of operations.

Item 1A.

Risk Factors.

~~There have been no material changes from~~You should carefully consider the risk factors set forth in our annual report on Form 10-K for the year ended December 31, 2018, as supplemented by our ~~quarterly report on Form 10-Q~~definitive proxy statement for the ~~quarter ended March 31, 2019.~~Mergers (filed on August 13, 2019).

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

~~The table below provides information concerning our repurchases of shares of our common stock during the three months ended March 31, 2019, pursuant to our share repurchase program.~~

Period Total Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs Maximum Number of
Shares that May Yet
Be Purchased
Under the
Plans or Programs
January 1, 2019 through January 31, 2019 3,297,056 $ 8.05 3,297,056
(1)

February 1, 2018 through February 28, 2019 — — — —
March 1, 2019 through March 31, 2019 — — — —
Total 3,297,056 $ 8.50 3,297,056
(1)

~~(1)~~

The maximum number of shares available for repurchase on January 2, 2019 was 3,297,056. A description of the calculation of the maximum number of shares of our common stock that may be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements included herein.

~~See Note 3 to our unaudited consolidated financial statements included herein for a more detailed discussion of the terms of our share repurchase program.~~Not applicable.

Item 3.

Defaults upon Senior Securities.

Not applicable.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

Not applicable.

Item 6.

Exhibits.

Exhibit Index

	Page
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of ~~March 31,~~September 30, 2019 (Unaudited) and December 31, 2018		1
Unaudited Consolidated Statements of Operations for the three and ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018		2
Unaudited Consolidated Statements of Changes in Net Assets for the three and nine months ended ~~March 31,~~ September 30, 2019 and 2018		3
Unaudited Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~ September 30, 2019 and 2018		4
Consolidated Schedules of Investments as of ~~March 31,~~September 30, 2019 (Unaudited) and December 31, 2018		5
Notes to Unaudited Consolidated Financial Statements		2830
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		5359
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		6876
ITEM 4. CONTROLS AND PROCEDURES		6977
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		7179
ITEM 1A. RISK FACTORS		7179
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		7179
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		7179
ITEM 4. MINE SAFETY DISCLOSURES		7179
ITEM 5. OTHER INFORMATION		7179
ITEM 6. EXHIBITS		7179
SIGNATURES		7583

Counterparty	Derivative Liabilities Subject to Master Netting Agreement			Derivatives Available for Offset			Non-cash Collateral Received(1)			Cash Collateral Pledged1)			Net Amount of Derivative Liabilities(3)
JP Morgan Chase Bank		$	3,183		$	—		$	—		$	3,183		$	—
ING Capital Markets			2,556			—			—			2,556			—
Total		$	5,739		$	—		$	—		$	5,739		$	—

As of March 31, 2019 (Unaudited)
Counterparty	Notional Amount			Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)			Value			Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.78%	12/18/2023		$	—		$	(2,029)		$	(2,029)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.81%	12/18/2021			—			(1,154)			(1,154)
ING Capital Markets		$	100,000	3-Month LIBOR		2.59%	1/14/2024			—			(1,654)			(1,654)
ING Capital Markets		$	100,000	3-Month LIBOR		2.62%	1/14/2022			—			(902)			(902)
									$	—		$	(5,739)		$	(5,739)

	For the Three Months Ended March 31, 2019
	Senior Secured Loans— First Lien			Senior Secured Loans— Second Lien			Other Senior Secured Debt			Subordinated Debt			Asset Based Finance			Equity/ Other			Total
Fair value at beginning of period		$	2,827,812		$	212,290		$	95,132		$	6,201		$	46,152		$	264,984		$	3,452,571
Accretion of discount (amortization of premium)			837			68			119			2			1			100			1,127
Net realized gain (loss)			(1,521)			—			—			—			114			(10,299)			(11,706)
Net change in unrealized appreciation (depreciation)			(8,812)			(564)			(3,257)			742			(111)			22,575			10,573
Purchases			291,045			64,577			1,209			32,614			—			4,123			393,568
Paid-in-kind interest			651			484			1,156			146			525			1,774			4,736
Sales and repayments			(86,294)			—			—			—			(1,413)			(292)			(87,999)
Net transfers in or out of Level 3			1,733			—			—			—			—			—			1,733
Fair value at end of period		$	3,025,451		$	276,855		$	94,359		$	39,705		$	45,268		$	282,965		$	3,764,603
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date		$	(29)		$	14,613		$	(3,257)		$	(9,231)		$	(1,303)		$	51		$	844

Category/Company(1)	Commitment Amount
Senior Secured Loans—First Lien
5 Arch Income Fund 2, LLC		$	34,470
Altus Power America Inc			140
Apex Group Limited			2,241
Apex Group Limited			5,809
Ascension Insurance Inc			13,800
Aspect Software Inc			865
Conservice LLC			5,919
CSafe Global			3,965
Eagle Family Foods Inc			4,087
Fairway Group Holdings Corp			453
JHC Acquisition LLC			35,269
Kodiak BP LLC			9,849
Lazard Global Compounders Fund			7,214
Lipari Foods LLC			25,220
North Haven Cadence Buyer Inc			2,625
North Haven Cadence Buyer Inc			292
Zeta Interactive Holdings Corp			6,571
Senior Secured Loans—Second Lien
Bellatrix Exploration Ltd			624
Total unfunded loans		$	159,413
Unfunded equity commitments		$	47

Net Investment Activity	For the Three Months Ended March 31, 2019			For the Year Ended December 31, 2018
Purchases		$	453,599		$	1,895,833
Sales and Repayments			(203,103)			(1,885,140)
Net Portfolio Activity		$	250,496		$	10,693

Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2019 through January 31, 2019		3,297,056		$	8.05		3,297,056		(1)
February 1, 2018 through February 28, 2019		—			—		—		—
March 1, 2019 through March 31, 2019		—			—		—		—
Total		3,297,056		$	8.50		3,297,056		(1)

		2.1				Agreement and Plan of Merger, dated as of May 31, 2019, by and among FS Investment Corporation II, Corporate Capital Trust II, FS Investment Corporation III, FS Investment Corporation IV, NT Acquisition 1, Inc., NT Acquisition 2, Inc., NT Acquisition 3, Inc. and FS/KKR Advisor, LLC. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 3, 2019.)
		3.1				Articles of Amendment and Restatement of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 14, 2012.)
		3.2				Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 1, 2017.)

		3.3				Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 13, 2017.)
		3.4				Third Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 13, 2017.)
		3.5				Amendment No.1 to the Third Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 3, 2019.)
		4.1				Amended and Restated Distribution Reinvestment Plan of the Company, effective as of March 26, 2014. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 24, 2014.)

	10.1			Investment Advisory and Administrative Services Agreement, dated as of April 9, 2018, by and between FS Investment Corporation II and FS/KKR Advisor, LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 9, 2018.)
	10.2		Investment Advisory and Administrative Services Agreement, dated as of February 8, 2012, by and between the Company and FSIC II Advisor, LLC. (Incorporated by reference to Exhibit (g)(1) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)
~~10.3~~		Investment Sub-Advisory Agreement, dated as of February 8, 2012, by and between FSIC II Advisor, LLC and GSO / Blackstone Debt Funds Management LLC. (Incorporated by reference to Exhibit (g)(2) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)
~~10.4~~		Custodian Agreement, dated as of February 8, 2012, by and between the Company and State Street Bank and Trust Company. (Incorporated by reference to Exhibit (j) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)
~~10.5~~	10.3			Amended and Restated Credit Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 4, 2015.)
~~10.6~~	10.4			Second Amendment, dated as of June 1, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.12 to the ~~Company’s~~Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 filed on August 14, 2018.)
~~10.7~~	10.5			Third Amendment, dated as of July 30, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.7 to the ~~Company’s~~Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 filed on November 14, 2018.)
~~10.8~~	10.6			Fourth Amendment, dated as of September 10, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.8 to the ~~Company’s~~Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 filed on November 14, 2018.)
~~10.9~~	10.7			Fifth Amendment, dated as of November 30, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.9 to the ~~Company’s~~Company's Quarterly Report on Form 10-K filed on March 19, 2019.)

~~10.11~~	10.8	Omnibus Sixth Amendment to Amended and Restated Credit and Security Agreement ~~andLender~~and Lender Fee Letter, dated as of March 29, 2019, between Cooper River LLC, as borrower, Citibank N.A., as administrative agent, the lenders party thereto, Citibank, N.A., acting through its agency & trust division, as collateral custodian and collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Current Report on Form 8-K filed on April 3, 2019.)
~~10.10~~	10.9	Loan Financing and Servicing Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 25, 2014.)
~~10.11~~	10.10	Amendment No. 1 to Loan Financing and Servicing Agreement, dated as of January 12, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.27 to the ~~Company’s~~Company's Annual Report on Form 10-K filed on March 25, 2016.)

~~10.12~~	10.11	Amendment No. 2 to Loan Financing and Servicing Agreement, dated as of February 3, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.28 to the ~~Company’s~~Company's Annual Report on Form 10-K filed on March 25, 2016.)
~~10.13~~	10.12	Amendment No. 3 to Loan Financing and Servicing Agreement, dated as of May 7, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.29 to the ~~Company’s~~Company's Annual Report on Form 10-K filed on March 25, 2016.)
~~10.14~~	10.13	Amendment No. 4 to Loan Financing and Servicing Agreement, dated as of October 8, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.30 to the ~~Company’s~~Company's Annual Report on Form 10-K filed on March 25, 2016.)
~~10.15~~	10.14	Amendment No. 6 to Loan Financing and Servicing Agreement, dated as of August 19, 2016, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Current Report on Form 8-K filed on August 22, 2016.)
~~10.16~~	10.15	Amendment No. 7 to Loan Financing and Servicing Agreement, dated as of February 15, 2019, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.16 to the ~~Company’s~~Company's Quarterly Report on Form 10-K filed on March 19, 2019.)
~~10.17~~	10.16	Omnibus Amendment, dated as of February 20, 2019, between Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as facility agent, each lender party thereto, each agent party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian. (Incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company's Current Report on Form 8-K filed on February 25, 2019.)

~~10.18~~		Loan Agreement, dated as of November 14, 2014, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.)10.17
~~10.19~~		Amendment No. 1 to Loan Agreement, dated as of October 11, 2016, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2016.)
~~10.20~~		Amended and Restated Loan and Security Agreement, dated as of March 13, 2019, by and between Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, the lenders party thereto, and Wells Fargo Bank, National Association, as collateral administrator, collateral agent and securities intermediary. (Incorporated by reference to Exhibit 10.20 to the ~~Company’s~~Company's Quarterly Report on Form 10-K filed on March 19, 2019.)
~~10.21~~	10.18		First Amendment to Amended and Restated Loan Agreement, dated as of October 11, 2019, among Juniata River LLC, JPMorgan Chase Bank, National Association, as lender and Administrative Agent, Wells Fargo Bank, National Association, as Collateral Agent, Collateral Administrator and Securities Intermediary, and FS Investment Corporation II, as Investment Manager. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 15, 2019.)
	10.19		Credit Agreement, dated as of May 15, 2017, among Green Creek LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 16, 2017.)

~~10.22~~	10.20			Amended and Restated Senior Secured Revolving Credit Agreement, dated as of ~~August 9, 2018,~~November 7, 2019, by and among ~~Corporate~~FS KKR Capital ~~Trust, Inc.~~Corp., FS Investment Corporation ~~FS Investment Corporation~~ II, and FS Investment Corporation III, ~~each other person designated~~ as ~~a “borrower” thereunder pursuant to section 9.19 thereof, the lenders party thereto,~~borrowers, JPMorgan Chase Bank, N.A., as administrative agent, ~~and~~ ING Capital LLC, as collateral ~~agent.~~agent, and the lenders, documentation agents, joint bookrunners, and joint lead arrangers party thereto. (Incorporated by reference to Exhibit ~~10.56~~10.1 to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the quarterly period ended June 30, 2018~~8-K filed on ~~August 14, 2018.)~~
~~10.23~~		~~Commitment Increase Agreement, dated as of~~ November 8, 2018, among BNP Paribas, Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, JPMorgan Chase Bank, N.A., Bank of Montreal, Suntrust Bank, and ING Capital LLC. (Incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-K filed on March 19,13, 2019.)
~~10.24~~		Commitment Increase Agreement, dated as of November 8, 2018, among U.S. Bank National Association, Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, JPMorgan Chase Bank, N.A., Bank of Montreal, Suntrust Bank, and ING Capital LLC. (Incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-K filed on March 19, 2019.)
31.1*			Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
	31.2*			Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
	32.1*			Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

				FS INVESTMENT CORPORATION II
				By:			/s/ Michael C. Forman Michael C. Forman Chief Executive Officer (Principal Executive Officer)
				By:			/s/ William Goebel William Goebel Chief Financial Officer (Principal Financial and Accounting Officer)