UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to Rule 14a-12 | |
| FS ENERGY AND POWER FUND | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) | ||||
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201 Rouse Boulevard
Philadelphia, Pennsylvania 19112
April 28, 2017October 19, 2018
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of FS Energy and Power Fund (the "Company") to be held on June 12, 2017December 13, 2018 at 10:0030 a.m., Eastern Time, at the offices of the Company, located at 201 Rouse Boulevard, Philadelphia, Pennsylvania 19112 (the "Annual Meeting").
Your vote is very important! Your immediate response will help avoid potential delays and may save the Company significant additional expenses associated with soliciting shareholder votes.
The Notice of Annual Meeting of Shareholders and proxy statement accompanying this letter provide an outline of the business to be conducted at the meeting. At the meeting, you will be asked to:
(i) elect the teneight members of the board of trustees named in the enclosed proxy statement to serve as trustees of the Company until the 20182019 annual meeting of shareholders and until their successors are duly elected and qualified; and
(ii) ratify the appointment of RSM US LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2017.2018.
The Company's board of trustees unanimously recommends that you vote FOR each of the proposals to be considered and voted on at the Annual Meeting.
The Company has elected to provide access to its proxy materials to certain of its shareholders over the Internet under the U.S. Securities and Exchange Commission's "notice and access" rules. On or about April 28, 2017,October 26, 2018, the Company intends to mail to most of its shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy statement and annual report and how to submit proxies over the Internet. All other shareholders will receive a copy of the proxy statement and annual report by mail. The Notice of Internet Availability of Proxy Materials also contains instructions on how you can elect to receive a printed copy of the proxy statement and annual report. The Company believes that providing its proxy materials over the Internet will expedite shareholders' receipt of proxy materials, lower the costs associated with the Annual Meeting and conserve resources.
It is important that your common shares be represented at the Annual Meeting. If you are unable to attend the meeting in person, I urge you to complete, date and sign the enclosed proxy card and promptly return it in the envelope provided, or follow the instructions printed on the Notice of Internet Availability of Proxy Materials or the proxy card to authorize a proxy through the Internet or by telephone.
Your vote and participation in the governance of the Company are very important to us.
Sincerely yours, | ||
  | ||
| Michael C. Forman Chairman and Chief Executive Officer |
FS ENERGY AND POWER FUND
201 Rouse Boulevard
Philadelphia, Pennsylvania 19112
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 12, 2017December 13, 2018
To the Shareholders of FS Energy and Power Fund:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of FS Energy and Power Fund, a Delaware statutory trust (the "Company"), will be held at the offices of the Company, located at 201 Rouse Boulevard, Philadelphia, Pennsylvania 19112, on June 12, 2017December 13, 2018 at 10:0030 a.m., Eastern Time, (the "Annual Meeting"), for the following purposes:
The board of trustees has fixed the close of business on April 20, 2017October 17, 2018 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof.
Important notice regarding the availability of proxy materials for the Annual Meeting. The Company's proxy statement, the proxy card and the Company's annual report to shareholders for the year ended December 31, 20162017 (the "Annual Report") are available atwww.proxyvote.com.
If you plan on attending the Annual Meeting and voting your common shares in person, you will need to bring photo identification in order to be admitted to the Annual Meeting. To obtain directions to the Annual Meeting, please call the Company at (877) 628-8575.
By Order of the Board of Trustees, | ||
 | ||
| Stephen S. Sypherd |
April 28, 2017October 19, 2018
Shareholders are requested to promptly authorize a proxy over the Internet or by telephone, or execute and return the accompanying proxy card, which is being solicited by the board of trustees of the Company. You may authorize a proxy over the Internet or by telephone by following the instructions in the Notice of Internet Availability of Proxy Materials or the proxy card. You may execute the proxy card using the methods described in the proxy card. Authorizing a proxy is important to ensure a quorum at the Annual Meeting. Proxies may be revoked at any time before they are exercised by submitting a written notice of revocation or a subsequently executed proxy, or by attending the Annual Meeting and voting in person.
FS ENERGY AND POWER FUND
201 Rouse Boulevard
Philadelphia, Pennsylvania 19112
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 12, 2017December 13, 2018
This proxy statement is furnished in connection with the solicitation of proxies by the board of trustees (the "Board") of FS Energy and Power Fund, a Delaware statutory trust (the "Company"), for use at the Annual Meeting of Shareholders of the Company to be held at the offices of the Company, located at 201 Rouse Boulevard, Philadelphia, Pennsylvania 19112, on June 12, 2017December 13, 2018 at 10:0030 a.m., Eastern Time, and any adjournments or postponements thereof (the "Annual Meeting"). This proxy statement and the accompanying materials, or a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy statement and annual report and how to submit proxies over the Internet, are being mailed on or about April 28, 2017October 26, 2018 to shareholders of record described below and are available atwww.proxyvote.com.
All properly executed proxies representing common shares of beneficial interest, par value $0.001 per share, of the Company (the "Common Shares") received prior to the Annual Meeting will be voted in accordance with the instructions marked thereon.If no instructions are marked, the Common Shares will be voted FOR:
(i) the proposal to elect the teneight members of the board of trustees named in the enclosed proxy statement to serve as trustees of the Company until the 20182019 annual meeting of shareholders and until their successor is duly elected and qualified (the "Trustee Proposal"); and
(ii) the proposal to ratify the appointment of RSM US LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 20172018 (the "Accountant Proposal").
Any shareholder who has given a proxy has the right to revoke it at any time prior to its exercise. Any shareholder who executes a proxy may revoke it with respect to any proposal by attending the Annual Meeting and voting his or her Common Shares in person, or by submitting a letter of revocation or a later-dated proxy to the Company at the above address prior to the date of the Annual Meeting.
Quorum
Shareholders of the Company are entitled to one vote for each Common Share held. Under the Company's Amended and Restated Bylaws, one third of the number of Common Shares entitled to be cast, present in person or by proxy, constitutes a quorum for the transaction of business. Abstentions will be treated as Common Shares that are present for purposes of determining the presence of a quorum for transacting business at the Annual Meeting. Common Shares for which brokers have not received voting instructions from the beneficial owner of the Common Shares and do not have, or choose not to exercise, discretionary authority to vote the Common Shares on certain proposals (which are considered "broker non-votes" with respect to such proposals) also will be treated as Common Shares present for quorum purposes.
Adjournments
In the event that a quorum is not present at the Annual Meeting, the chairman of the Annual Meeting or the shareholders entitled to vote at the Annual Meeting, present in person or by proxy, shall have the power to adjourn the Annual Meeting from time to time to a date not more than 120 days after
the original record date without notice other than the announcement at the Annual Meeting to permit further solicitation of proxies. The persons named as proxies will vote those proxies for such adjournment, unless marked to be voted against any proposal for which an adjournment is sought. Any business that might have been transacted at the Annual Meeting as originally called may be transacted at any such adjourned session(s) at which a quorum is present.
If it appears that there are not enough votes to approve any proposal at the Annual Meeting, the chairman of the Annual Meeting may adjourn the Annual Meeting from time to time to a date not more than 120 days after the record date originally fixed for the Annual Meeting without notice other than announcement at the Annual Meeting to permit further solicitation of proxies. The persons named as proxies for the Company will vote proxies held by them for such adjournment, unless marked to be voted against any proposal for which an adjournment is sought, to permit the further solicitation of proxies.
If sufficient votes in favor of one or more proposals have been received by the time of the Annual Meeting, the proposals will be acted upon and such actions will be final, regardless of any subsequent adjournment to consider other proposals.
Record Date
The Board has fixed the close of business on April 20, 2017October 17, 2018 as the record date (the "Record Date") for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and all adjournments or postponements thereof. As of the Record Date, there were 439,394,896436,103,833 Common Shares outstanding.
Required Vote
Election of Trustee Nominees. Each trustee shall be elected by a plurality of all the votes cast at the Annual Meeting in person or by proxy, provided that a quorum is present. Plurality voting means that the trustee nominee with the most votes for a particular seat is elected for that seat. Because all of the trusteestrustee nominees are running unopposed, all ten trustees willeight trustee nominees are expected to be elected as trustees of the Company.Company, as all nominees who receive votes in favor will be elected. Each share may be voted for as many individuals as there are trustee nominees and for whose election the share is entitled to be voted. Abstentions will not be included in determining the number of votes cast and, as a result, will have no effect on the Trustee Proposal. Common Shares represented by broker non-votes are not considered votes cast and thus have no effect on the Trustee Proposal. Shareholders may not cumulate their votes.
Ratification of Independent Registered Public Accounting Firm. The affirmative vote of a majority of the votes cast at the Annual Meeting in person or by proxy, provided that a quorum is present, is required to ratify the appointment of RSM US LLP to serve as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2017.2018. Abstentions will not be included in determining the number of votes cast and, as a result, will not have any effect on the result of the vote with respect to the Accountant Proposal. Because brokers will have discretionary authority to vote for the ratification of the appointment of the Company's independent registered public accounting firm in the event that they do not receive voting instructions from the beneficial owner of the Common Shares, there will not be any broker non-votes with respect to the Accountant Proposal.
Householding
The Company combines mailings for multiple accounts going to a single household by delivering to that address, in a single envelope, a copy of the document (annual reports, prospectuses, proxy statements, etc.) or other communications for all accounts who have consented or are deemed to have consented to receiving such communications in such manner in accordance with the rules promulgated by the U.S. Securities and Exchange Commission (the "SEC"). If you do not want the Company to continue consolidating your mailings from the Company mailings and would prefer to receive separate mailings of Company
communications, please contact the Company's transfer agent, DST Systems, Inc. by telephone at (877) 628-8575 or by mail to FS Energy and Power Fund, c/o DST Systems, Inc., 430 W. 7th Street, Kansas City, Missouri 64105.
Voting
You may vote in person at the Annual Meeting or by proxy in accordance with the instructions provided below. You may also authorize a proxy by telephone or through the Internet using the toll-free telephone number or web address included in your Notice of Internet Availability of Proxy Materials or your proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your Notice of Internet Availability of Proxy Materials or your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link. Shareholders of the Company are entitled to one vote for each Common Share held.
When voting by proxy and mailing your proxy card, you are required to:
Important notice regarding the availability of proxy materials for the Annual Meeting. The Company's proxy statement, the proxy card and the Company's annual report to shareholders for the year ended December 31, 20162017 (the "Annual Report") are available atwww.proxyvote.com. The Notice of Internet Availability of Proxy Materials contains instructions on how you can elect to receive a printed copy of the proxy statement and annual report.Annual Report.
If you plan on attending the Annual Meeting and voting your Common Shares in person, you will need to bring photo identification in order to be admitted to the Annual Meeting. To obtain directions to the Annual Meeting, please call the Company at (877) 628-8575.
Other Information Regarding This Solicitation
The Company will bear the expense of the solicitation of proxies for the Annual Meeting, including the cost of preparing, printing and mailing this proxy statement, the accompanying Notice of Annual Meeting of Shareholders, the proxy card, the Annual Report and the Notice of Internet availability of Proxy Materials. The Company has requested that brokers, nominees, fiduciaries and other persons holding Common Shares in their names, or in the name of their nominees, which are beneficially owned by others, forward the proxy materials to, and obtain proxies from, such beneficial owners. The Company will reimburse such persons for their reasonable expenses in so doing.
In addition to the solicitation of proxies by mail, proxies may be solicited in person and by telephone or facsimile transmission by trustees, officers or regular employees of the Company and its affiliates (without special compensation therefor). The Company has also retained Broadridge Investor Communication Solutions, Inc. to assist in the solicitation of proxies for an estimated fee of approximately $10,000, plus out-of-pocket expenses. Any proxy given pursuant to this solicitation may be revoked by notice from the person giving the proxy at any time before it is exercised. Any such notice of revocation should be provided in writing and signed by the shareholder in the same manner as the proxy being revoked and delivered to the Company's proxy tabulator.
Notice of Internet Availability of Proxy Materials
In accordance with SEC regulations, the Company has made this proxy statement, the Notice of Annual Meeting of Shareholders and the Annual Report available to shareholders on the Internet. Shareholders may (i) access and review the Company's proxy materials, (ii) authorize their proxies, as described in "Voting," and/or (iii) elect to receive future proxy materials by electronic delivery, via the Internet address provided below.
This proxy statement, the Notice of Annual Meeting and the Annual Report are available at www.proxyvote.com.
Electronic Delivery of Proxy Materials
Pursuant to the rules adopted by the SEC, the Company furnishes proxy materials by email to those shareholders who have elected to receive their proxy materials electronically. While the Company encourages shareholders to take advantage of electronic delivery of proxy materials, which helps to reduce the environmental impact of annual meetings and the cost associated with the physical printing and mailing of materials, shareholders who have elected to receive proxy materials electronically by email, as well as beneficial owners of Common Shares held by a broker or custodian, may request a printed set of proxy materials. The Notice of Internet Availability of Proxy Materials contains instructions on how you can elect to receive a printed copy of the proxy statement and annual report.Annual Report.
Security Ownership of Management and Certain Beneficial Owners
The following table sets forth, as of the Record Date, the beneficial ownership of the trustee nominees, for trustee, the Company's executive officers and trustees, each person known to the Company to beneficially own 5% or more of the outstanding Common Shares, and all of the Company's executive officers and trustees as a group.
Beneficial ownership is determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and includes voting or investment power with respect to the Common Shares. There are no Common Shares subject to options that are currently exercisable or exercisable within 60 days of April 20, 2017.October 17, 2018. Ownership information for those
persons who beneficially own 5% or more of the Common Shares is based upon information furnished by the Company's transfer agent and other information provided by such persons, if available.
| | Common Shares Beneficially Owned as of | ||||
|---|---|---|---|---|---|
Name and Address of Beneficial Owner(1) | Number of Common Shares | Percentage(2) | |||
Interested Trustees: | |||||
Michael C. Forman(3) | * | ||||
| |||||
| |||||
| * | ||||
Independent Trustees: | |||||
Sidney R. Brown | * | ||||
Gregory P. Chandler | |||||
Richard I. Goldstein | * | ||||
Charles P. Pizzi | * | ||||
Richard W. Vague | * | ||||
R. Richard Williams | * | ||||
Independent Trustee Nominees (other than current trustees): | |||||
Stephen T. Burdumy | — | * | |||
Pedro A. Ramos | — | * | |||
Executive Officers: | |||||
Sean Coleman | 7,993.61 | * | |||
Edward T. Gallivan, Jr. | * | ||||
Zachary Klehr | |||||
| * | ||||
Stephen S. Sypherd | * | ||||
James E. Volk | * | ||||
All Executive Officers and Trustees as a group | * | ||||
Dollar Range of Equity Securities Beneficially Owned by Trustees and Trustee Nominees
The table below shows the dollar range of equity securities of the Company and the aggregate dollar range of equity securities of the Fund Complex that were beneficially owned by each trustee as of the Record Date stated as one of the following dollar ranges: None; $1-$10,000; $10,001-$50,000; $50,001-$100,000; or over $100,000. For purposes of this proxy statement, the term "Fund Complex" is defined to include the Company, FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV, FS Global Credit Opportunities Fund, FS Global Credit Opportunities Fund—A, FS Global Credit Opportunities Fund—D, FS Global Credit Opportunities Fund—T, FS Global Credit Opportunities Fund—ADV and FS Energy Total Return Fund.
Name of Trustee | Dollar Range of Equity Securities Beneficially Owned in the Company(1)(2) | |||
|---|---|---|---|---|
Interested Trustees: | ||||
Michael C. Forman | Over $100,000 | |||
| ||||
| ||||
| Over $100,000 | |||
Independent Trustees: | ||||
Sidney R. Brown | Over $100,000 | |||
Gregory P. Chandler | Over $100,000 | |||
Richard I. Goldstein | Over $100,000 | |||
Charles P. Pizzi | Over $100,000 | |||
Richard W. Vague | Over $100,000 | |||
R. Richard Williams | Over $100,000 | |||
Independent Trustee Nominees (other than current trustees): | ||||
Stephen T. Burdumy | — | |||
Pedro A. Ramos | — |
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act, the Company's trustees and executive officers, and any persons holding more than 10% of its Common Shares, are required to report their beneficial ownership and any changes therein to the SEC and the Company. Specific due dates for those reports have been established, and the Company is required to report herein any failure to file such reports by those due dates. Based on the Company's review of Forms 3, 4 and 5 filed by such persons and information provided by the Company's trustees and officers, the Company believes that during the fiscal year ended December 31, 2016,2017, all Section 16(a) filing requirements applicable to such persons were timely filed.
PROPOSAL 1: ELECTION OF TRUSTEES
At the Annual Meeting, shareholders of the Company are being asked to consider the election of teneight trustees of the Company. Pursuant to the Company's Third Amended and Restated Declaration of Trust and Second Amended and Restated Bylaws, the number of trustees on the Board may not be fewer than either the minimum number required by the Delaware General Corporation Law or three, except for a period of up to 60 days after the death, removal or resignation of a trustee pending the election of such trustee's successor, or greater than twelve. Trustees of the Company are elected annually for a term of one year, and serve until the next annual meeting of shareholders and until their successors are duly elected and qualified. The Board is currently comprised of teneight trustees.
Each trustee named below has been nominated for election by the Board to serve a one-year term until the 20182019 annual meeting of shareholders and until theirhis successor is duly elected and qualified.qualified: (i) Michael C. Forman, (ii) William C. Sonneborn, (iii) Sidney R. Brown, (iv) Stephen T. Burdumy, (v) Gregory P. Chandler, (vi) Richard I. Goldstein, (vii) Charles P. Pizzi and (viii) Pedro A. Ramos.
Each trustee has agreed to serve as a trustee if elected and has consented to being named as a nominee. No person being nominated as a trustee is being proposed for election pursuant to any agreement or understanding between such person and the Company.
A shareholder can vote for, or withhold his or her vote from, any or all of the trustee nominees.In the absence of instructions to the contrary, it is the intention of the persons named as proxies to vote such proxy FOR the election of each of the trustee nominees named below. If any of the trustee nominees should decline or be unable to serve as a trustee, the persons named as proxies will vote for such other nominee as may be proposed by the Nominating and Corporate Governance Committee of the Company. The Board has no reason to believe that any of the persons named will be unable or unwilling to serve.
Information about the Board and Trustee Nominees
The role of the Board is to provide general oversight of the Company's business affairs and to exercise all of the Company's powers except those reserved for the shareholders. The responsibilities of the Board also include, among other things, the oversight of the Company's investment activities, the quarterly valuation of the Company's assets, the oversight of the Company's financing arrangements and corporate governance activities.
A majority of the members of the Board are not "interested persons," as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act"), of the Company or FS InvestmentFS/EIG Advisor, LLC, the Company's investment adviser ("FS Advisor"FS/EIGAdvisor") and are "independent" as defined in Rule 5605(a)(2) of The NASDAQ Stock Market LLC. These individuals are referred to as the Company's independent trustees (the "Independent Trustees"). Section 2(a)(19) of the 1940 Act defines an "interested person" to include, among other things, any person who has, or within the last two years had, a material business or professional relationship with the Company. The members of the Board who are not Independent Trustees are referred to as interested trustees (the "Interested Trustees").
The Board is currently comprised of teneight trustees, six of whom are Independent Trustees. Messrs. Vague and Williams have not been nominated for reelection at the Annual Meeting. The Board has determined that the following trustees and trustee nominees are, or if applicable will be, Independent Trustees: Messrs. Brown, Burdumy, Chandler, Goldstein, Pizzi, Ramos Vague and Williams. Based upon information requested from each trustee concerning their background, employment and affiliations, the Board has affirmatively determined that none of the Independent Trustees has, or within the last two years had, a material business or professional relationship with the Company, other than in their capacity as a member of the Board or any Board committee or as a shareholder. If each of the trustee nominees is elected, the Board will be comprised of eight trustees, six of whom will be Independent Trustees.
In considering each trustee and the composition of the Board as a whole, the Board seeks a diverse group of experiences, characteristics, attributes and skills, including diversity in gender, ethnicity and race, that the Board believes enables a trustee to make a significant contribution to the Board, the Company and its shareholders. These experiences, characteristics, attributes and skills, which are more fully described below, include, but are not limited to, management experience, independence, financial expertise and experience serving as directors or trustees of other entities. The Board may also consider such other experiences, characteristics, attributes and skills as it deems appropriate, given the then-current needs of the Board and the Company.
These experiences, characteristics, attributes and skills relate directly to the management and operations of the Company. Success in each of these categories is a key factor in the Company's overall operational success and creating shareholder value. The Board believes that trustees who possess these experiences, characteristics, attributes and skills are better able to provide oversight of the Company's management and the Company's long-term and strategic objectives.
The following table sets forth certain information regarding the Independent Trustee nominees, and Interested Trustee nominees and Independent Trustees who are not nominees, including a description of
the experience, characteristics, attributes and skills of each trustee nominee that led the Board to conclude that each such person should serve as a trustee.
| | INDEPENDENT | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Sidney Brown Age: 61 Trustee | Since 2011 | Mr. Brown has served as the chief executive officer of NFI, Inc. ("NFI"), a premier integrated supply chain solutions company, since the late 1990s. NFI, founded in 1932 as National Hauling, has evolved from a trucking company in a regulated environment into one of the largest privately-held third-party logistics companies in the United States. NFI in North America now consists of logistics, warehousing and distribution, transportation, intermodal, real estate, transportation brokerage, contract packaging, solar, global freight forwarding and NFI Canada. From 1990 to 2017, Mr. Brown served in various capacities with Sun National Bank, including chairman, acting president, and chief executive officer. In addition, Mr. Brown is a general partner of various real estate companies having extensive holdings with an emphasis on development and management of commercial and industrial real estate. He began his career working for Morgan Stanley in New York City as a financial analyst in the corporate finance department of the investment bank. Mr. Brown has served as a director of J & J Snack Foods Corp. since 2004, and currently serves on the board of trustees of Cooper Health System. Mr. Brown also served as a director of Sun National Bank from 1990 to 2016, and as chairman from 2013 to 2016. Mr. Brown received a B.S.B.A. in Finance from Georgetown University and an MBA from Harvard University. Mr. Brown has served as a member of various boards for publicly-traded companies. In addition, his service as chief executive officer of NFI has provided him, in the opinion of the Board, with experience and insight which is beneficial to the Company. | One | Sun National Bank; J & J Snack Foods Corp.; Cooper Health System | ||||||||||||||||
| | INDEPENDENT TRUSTEE NOMINEESS | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Stephen T. Burdumy Age: 61 Trustee | N/A | Stephen T. Burdumy is the executive vice president, chief operating officer and chief financial officer of Transformative Pharmaceutical Solutions, and has also served as of counsel at the law firm of Drinker Biddle & Reath LLP ("Drinker Biddle") since April 2016. From 2002 to April 2016, Mr. Burdumy served as a partner at Drinker Biddle. Prior to joining Drinker Biddle, Mr. Burdumy was an attorney at Klehr Harrison Harvey Branzburg LLP ("Klehr Harrison") from 1982 to 2002, including as a partner from 1988 to 2002. Mr. Burdumy was a member of the board of directors of the Philadelphia Alliance for Capital and Technologies from June 2010 to July 2012. Mr. Burdumy received a B.S.F.S. in International Economics with a concentration in International Finance and Commerce, cum laude, from Georgetown University, and a J.D. from the University of San Francisco Law School. Mr. Burdumy has served as a member of the board and as an executive of various companies. In addition, his legal knowledge and background has provided him, in the opinion of the Board, with experience and insight which is beneficial to the Company.(1) | One | FS Investment Corporation II | ||||||||||||||||
| Gregory P. Chandler Age: 51 Trustee | Since 2010 | Mr. Chandler has been chief financial officer of Emtec, Inc. ("Emtec"), a global information technology services provider, since May 2009. Mr. Chandler has also been a member of Emtec's board of directors since 2005 where he served as chairman of the audit committee from 2005 through 2009. He also has been a member of the board of directors of FS Investment Corporation since April 2008, and has served as chairman of FS Investment Corporation's audit committee and as a member of FS Investment Corporation's valuation committee since May 2008 and March 2010, respectively. | ||||||||||||||||||
| | INDEPENDENT TRUSTEE NOMINEESS | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Mr. Chandler presently serves as a director and chairman of the audit committee of the RBB Funds. Mr. Chandler has also served as a trustee of the Wilmington Funds since August 2017 and presently serves as the chairman of the audit committee of those funds. Previously, he served as managing director, Investment Banking, at Janney Montgomery Scott LLC from 1999 to April 2009, and on the board of the Enterprise Center, a non-profit organization. From 1995 to 1999, he was with PricewaterhouseCoopers LLP ("PwC"), and its predecessor Coopers and Lybrand where he assisted companies in the "Office of the CFO Practice" and also worked as a certified public accountant. During his tenure at PwC, he spent the majority of his time in the Investment Company practice. Mr. Chandler served as a logistics officer with the United States Army for four years. Mr. Chandler's degrees include a B.S. in Engineering from the United States Military Academy at West Point and an M.B.A. from Harvard Business School. He is also a Certified Public Accountant (inactive). Mr. Chandler has extensive experience in valuations and in negotiating debt, equity and mergers and acquisitions transactions in a variety of industries with both public and private companies. In addition, Mr. Chandler has experience managing the audits of mutual funds, hedge funds and venture capital funds. This experience has provided Mr. Chandler, in the opinion of the Board, with experience and insight which is beneficial to the Company. | One | Emtec, Inc.; RBB Funds overseeing thirty portfolios; Wilmington Funds overseeing twelve portfolios; FS Investment Corporation | ||||||||||||||||||
| | INDEPENDENT TRUSTEE NOMINEESS | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Richard I. Goldstein Age: 57 Trustee and Lead Independent Trustee | Trustee since 2011 Lead Independent Trustee since March 2015 | Mr. Goldstein has served as the Company's lead independent trustee since March 2015. Mr. Goldstein also serves as a member of the board of directors of FS Investment Corporation II, and has presided in such role since April 2015. He also has served as a managing director of Liberty Associated Partners, LP ("LAP"), since 2000 and Associated Partners, LP, or AP, since 2006, both investment funds that make private and public market investments in communications, media, internet and energy companies. Prior to joining LAP and AP, Mr. Goldstein was vice president of The Associated Group, Inc. ("AGI"), a multi-billion dollar publicly-traded owner and operator of communications-related businesses and assets. While at AGI, he assisted in establishing Teligent, Inc., of which he was a director, and was responsible for operating AGI's cellular telephone operations. Mr. Goldstein has also served as a director of Ubiquia since 2017. He also served as a member of the board of trustees of The Shipley School from 2009 through 2014 and has counseled many early stage companies. Mr. Goldstein received a B.S. in Business and Economics from Carnegie Mellon University and received training at the Massachusetts Institute of Technology in Management Information Systems. Mr. Goldstein has extensive experience as a senior executive and in negotiating investment transactions in a variety of industries, including in the energy industry. This experience has provided Mr. Goldstein, in the opinion of the Board, with experience and insight which is beneficial to the Company. | One | FS Investment Corporation III | ||||||||||||||||
| Charles P. Pizzi Age: 68 Trustee | Since 2012 | Mr. Pizzi is the retired president, director and chief executive officer of Tasty Baking Company, manufacturer of Tastykake branded snack cakes. He served in these positions from 2002 to May 2011. Prior to leading Tasty Baking Company, Mr. Pizzi served as president and chief executive officer of the Greater Philadelphia Chamber of Commerce, vice-chairman of the American Chamber of Commerce Executives and chairman of the Metro Council of Presidents. | One | Brandywine Realty Trust; PHH Corporation; Pennsylvania Real Estate Investment Trust | ||||||||||||||||
| | INDEPENDENT TRUSTEE NOMINEESS | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Mr. Pizzi also serves on the boards of trustees of FS Global Credit Opportunities Fund, FS Global Credit Opportunities Fund—A, FS Global Credit Opportunities Fund—D, FS Global Credit Opportunities Fund—T, FS Global Credit Opportunities Fund—ADV and FS Global Credit Opportunities Fund—T2, and has served in such role since each fund's inception. Mr. Pizzi is a member of FS Global Credit Opportunities Fund's valuation and audit committees and has presided in such roles since June 2013. His career also includes work with the transition teams for the former Pennsylvania Governor Tom Ridge and the former Philadelphia Mayor Ed Rendell. Mr. Pizzi has also served as commerce director for the City of Philadelphia. He has been a trustee of Brandywine Realty Trust since 1996, serving on the audit committee and as a chair of the compensation committee, a director of PHH Corporation since January 2012, serving on the human capital and compensation committee, the vice chairman of the board of directors of Independence Blue Cross since 1991, serving on the compensation committee, a trustee of Pennsylvania Real Estate Investment Trust since May 2013 and a director of Drexel University since 1991. He was a director of the Federal Reserve Bank of Philadelphia from 2006 to December 2011, serving as chairman from January 2010 to December 2011. He also previously served as a director of the Philadelphia Stock Exchange from 1998 until it was acquired by NASDAQ in July 2008, on the board of governors of NASDAQ OMX PHLX, Inc. from August 2008 to March 2009 and as a director of Allied Security Holdings LLC from 2011 to 2016. Mr. Pizzi holds a bachelor's degree from LaSalle University and a master's degree from the University of Pennsylvania. Mr. Pizzi has significant experience as an executive and director at various companies and governmental organizations. This experience has provided Mr. Pizzi, in the opinion of the Board, with experience and insight which is beneficial to the Company. | ||||||||||||||||||||
| | INDEPENDENT TRUSTEE NOMINEESS | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Pedro Ramos Age: 53 Trustee | N/A | Pedro A. Ramos has served as the president and chief executive officer of The Philadelphia Foundation, or TPS, since August 2015, a charitable foundation that builds, manages and distributes philanthropic resources to improve lives in the five-county Philadelphia region. Prior to joining TPS, he was a partner with the law firm of Schnader, Harrison, Segal & Lewis LLP ("Schnader") where he advised clients in the business, nonprofit and government sectors, focusing on transactions, financings, compliance, risk management and investigations. From June 2009 until the firm's attorneys joined Schnader in August 2013, Mr. Ramos was a partner with the law firm of Trujillo, Rodriguez & Richards, LLC and led the firm's government, education and social sector practice. From June 2007 to June 2009, Mr. Ramos was a partner with the law firm of Blank Rome LLP in its employment, benefits and labor group and its government relations practice. Mr. Ramos previously served as Managing Director of the City of Philadelphia from April 2005 to June 2007 and as City Solicitor from March 2004 to April 2005. Before working for the City of Philadelphia, Mr. Ramos served as vice president and chief of staff to the president of the University of Pennsylvania from January 2002 to March 2004. From September 1992 to January 2002, Mr. Ramos served as an attorney with the law firm of Ballard Spahr Andrews & Ingersoll, LLP in its employee benefits group. From November 2011 to October 2013, Mr. Ramos served as the chairman of the School Reform Commission, which oversees the School District of Philadelphia. Mr. Ramos served on the Board of the School District of Philadelphia from December 1995 through December 2001, with his last two years as president of that board. Mr. Ramos has served as manager and director of TPF Properties, LLC since October 2017, and as a member of the executive committee and a director of the Greater Philadelphia Chamber of Commerce since October 2017. Mr. Ramos' extensive service in the private and public sectors has provided him, in the opinion of the Board, with experience and insight which is beneficial to the Company. | One | FS Investment Corporation | ||||||||||||||||
| | INTERESTED TRUSTEE | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
Age: | Since | Mr. | One | FS Investment Corporation; FS Investment Corporation II; FS Investment Corporation III; FS Investment Corporation IV; Corporate Capital Trust, Inc.; | ||||||||||||||||
Mr. Forman has extensive experience in corporate and securities law and has founded and served in a leadership role of various companies, including FS/EIG Advisor. The Board believes Mr. Forman's experience and his positions as the Company and FS/EIG Advisor's chief executive officer make him a significant asset to the Company. | ||||||||||||||||||||
| | INTERESTED TRUSTEE | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| William C. Sonneborn | Since 2018 | Mr. Sonneborn is the president of the Company and FS/EIG Advisor and has served in such capacity since April 2018. Mr. Sonneborn is also the president of EIG Global Energy Partners ("EIG Partners") and a member of its investment and executive committees. Prior to joining EIG Partners, he was a partner of Kohlberg Kravis Roberts & | ||||||||||||||||||
| | INDEPENDENT TRUSTEES OTHER THAN TRUSTEE NOMINEES | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Richard W. Vague Age: 63 Trustee | Since 2011 | Mr. Vague is a private investor currently involved as a managing partner of Gabriel Investments, an early stage investment fund. Previously, Mr. Vague was the co-founder of Energy Plus Company, or Energy Plus, an electricity and natural gas supply company operating in states throughout the United States that was sold to NRG Energy in September 2011, and served as chairman and chief executive officer of Energy Plus from May 2007 until the time of such sale. Mr. Vague was also co-founder of two credit card companies—First USA Bank, which grew to be the largest Visa issuer in the industry and which was sold to Bank One Corporation in 1997, and Juniper Financial Corporation, which was sold to Barclays PLC in 2004. Mr. Vague served on the corporate board of Heartland Payment Systems, Inc. from 2007 to 2016. He is currently the chairman of Horizon Solar Power, Inc, and a member of the board of trustees of FS Credit Real Estate Income Trust, Inc. He is also president of the Philadelphia Live Arts and Fringe Festival and on the boards of the University of Pennsylvania Press, the Franklin Institute and the Pennsylvania Academy of Fine Arts. | One | Heartland Payment Systems, Inc.; FS Credit Real Estate Income Trust | ||||||||||||||||
Mr. Vague has founded and served in a senior executive capacity at various companies, as well as a member of various boards. His extensive service at various companies has provided him, in the opinion of the Board, with experience and insight which is beneficial to the Company. | ||||||||||||||||||||
| R. Richard Williams Age: 73 Trustee | Since 2011 | From 1977 to 2000, Mr. Williams was founder and CEO of Valquip Corporation, a major supplier of large automated control valves for the power and process industries. He retired from this position after Valquip Corporation was acquired by Tyco International in 1999. He spent his early career in sales and management with Jamesbury Corporation, a major supplier of valves and controls. Mr. Williams has extensive audit and finance experience, having served on the board of HC Capital Trust (formerly Hirtle Callaghan Trust) since 2000 and on its audit committee since 2001. | One | HC Capital Trust | ||||||||||||||||
| | INDEPENDENT TRUSTEES OTHER THAN TRUSTEE NOMINEES | | ||||||||||||||||||
Name, Address, Age and Position(s) with Company(1) | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past Five Years | Number of Companies in Fund Complex Overseen by Trustee | Other Public Directorships Held by Trustee During the Past Five Years† | ||||||||||||||||
| Mr. | ||||||||||||||||||||
Mr. Williams has extensive experience as founder and chief executive officer of Valquip Corporation, as well as a member of various boards. His experience has provided him, in the opinion of the Board, with experience and insight which is beneficial to the Company. | ||||||||||||||||||||
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Risk Oversight and Board Structure
Board's Role in Risk Oversight
Through its direct oversight role, and indirectly through its committees, the Board performs a risk oversight function for the Company consisting of, among other things, the following activities: (1) at regular and special Board meetings, and on an ad hoc basis as needed, receiving and reviewing reports related to the performance and operations of the Company; (2) reviewing and approving, as applicable, the compliance policies and procedures of the Company; (3) reviewing investment strategies, techniques and the processes used to manage related risks; (4) overseeing the Company's investment valuation process through the Company's Valuation Committee that operates pursuant to authority assigned to it by the Board; (5) overseeing the Company's cyber security risk management program through the Company's Audit Committee; (6) meeting with representatives of, or reviewing reports prepared by or with respect to, key service providers, including the investment adviser, investment sub-adviser, administrator, distributor, transfer agent, custodian and independent registered public accounting firm of the Company, to review and discuss the activities of the Company and to provide direction with respect thereto; (7) reviewing periodically, and at least annually, the Company's fidelity bond, trustees and officers, and errors and omissions insurance policies and such other insurance policies as may be appropriate; and (8) overseeing the Company's accounting and financial reporting processes, including supervision of the Company's independent registered public accounting firm to ensure that they provide timely analyses of significant financial reporting and internal control issues.
The Board also performs its risk oversight responsibilities with the assistance of the Company's Chief Compliance Officer.chief compliance officer. The Board receives a quarterly report from the Chief Compliance Officer,chief compliance officer, who reports on, among other things, the Company's compliance with applicable securities laws and its internal compliance policies and procedures. In addition, the Company's Chief Compliance Officerchief compliance officer prepares a written report annually evaluating, among other things, the adequacy and effectiveness of the compliance policies and procedures of the Company and certain of its service providers. The Chief Compliance Officer'schief compliance officer's report, which is reviewed by the Board, addresses at a minimum: (1) the operation and effectiveness of the compliance policies and procedures of the Company and certain of its service providers since the last report; (2) any material changes to such policies and procedures since the last report; (3) any recommendations for material changes to such policies and procedures as a result of the Chief Compliance Officer'schief compliance officer's annual review; and (4) any material compliance matters that have occurred since the date of the last report about which the Board would reasonably need to know to oversee the Company's compliance activities and risks. The Chief Compliance Officerchief compliance officer also meets separately in executive session with the Independent Trustees at least once each year. In addition to compliance reports from the Company's Chief Compliance Officer,chief compliance officer, the Board also receives reports from legal counsel to the Company regarding regulatory compliance and governance matters.
Board Composition and Leadership Structure
Mr. Forman, who is an "interested person" of the Company as(as defined in Section 2(a)(19) of the 1940 Act,Act), serves as both the president and chief executive officer of the Company and Chairmanchairman of the Board. The Board believes that Mr. Forman, as co-founder and chief executive officer of the Company, is the trustee with the most knowledge of the Company's business strategy and is best situated to serve as Chairmanchairman of the Board. The Company's Third Amended and Restated Declaration of Trust, as well as regulations governing business development companies ("BDCs") generally, requires that a majority of the Board be persons other than "interested persons" of the Company, as defined in Section 2(a)(19) of the 1940 Act.
While the Company currently does not have a policy mandating a lead Independent Trustee, the Board believes that having an Independent Trustee fill the lead trustee role is appropriate. On March 9, 2015, the Board appointed Mr. Goldstein as lead Independent Trustee. The lead Independent Trustee,
among other things, works with the Chairman of the Board in the preparation of the agenda for each
Board meeting and in determining the need for special meetings of the Board, chairs any meeting of the Independent Trustees in executive session, facilitates communications between other members of the Board and the Chairmanchairman of the Board and/or the Chief Executive Officerchief executive officer and otherwise consults with the Chairmanchairman of the Boardboard and/or the Chief Executive Officerchief executive officer on matters relating to corporate governance and Board performance.
The Board, after considering various factors, has concluded that its structure is appropriate given the current size and complexity of the Company.
Board Meetings and Attendance
The Board met 1816 times during the fiscal year ended December 31, 2016,2017, including four regular quarterly meetings. Each trustee attended at least 75% of the aggregate of all meetings of the Board to which they were invited during the fiscal year ended December 31, 2016,2017, with the exception of Messrs. Brown, Gravina, Heller and Vague.Mr. Brown. The Company does not have a formal policy regarding trustee attendance at an annual meeting of shareholders. None of the trustees attended the Company's annual meeting held on June 23, 2016.12, 2017.
Committees of the Board
The Board has established three standing committees of the Board, which consist of an Audit Committee, a Valuation Committee and a Nominating and Corporate Governance Committee.
The Board has not established a standing compensation committee because the executive officers of the Company do not receive any direct compensation from the Company. The Board, as a whole, participates in the consideration of trustee compensation and decisions on trustee compensation are based on, among other things, a review of data of comparable BDCs.
Audit Committee
The Board has established an Audit Committee that operates pursuant to a charter and consists of three members, including a Chairman of the Audit Committee. The Audit Committee members are currently Messrs. Chandler (Chairman), Vague and Williams, each an Independent Trustee. The Board has determined that Mr. Chandler is an "audit committee financial expert" as defined by Item 407(d)(5)(ii) of Regulation S-K promulgated under the Exchange Act. The primary function of the Audit Committee is to oversee the integrity of the Company's accounting policies, financial reporting process and system of internal controls regarding finance and accounting policies. The Audit Committee is responsible for selecting, engaging and discharging the Company's independent accountants, reviewing the plans, scope and results of the audit engagement with the Company's independent accountants, approving professional services provided by the Company's independent accountants (including compensation therefor), reviewing the independence of the Company's independent accountants and reviewing the adequacy of the Company's internal control over financial reporting. The Audit Committee held sevensix meetings during the fiscal year ended December 31, 2016.2017. Each member of the Audit Committee who served on such committee during the 20162017 fiscal year attended over 75% of the aggregate of all the meetings held during 2016,2017, with the exception of Mr. Vague. The Audit Committee charter is available on the Company's website atwww.fsinvestments.com.
Valuation Committee
The Board has established a Valuation Committee that operates pursuant to a charter and consists of four members, including a Chairman of the Valuation Committee. The Valuation Committee members are currently Messrs. Brown, Chandler and Goldstein (Chairman) and Heller.. The primary function of the Valuation Committee is to establish guidelines and make recommendations to the Board on matters relating to the
valuation of the Company's investments. The Valuation Committee held four meetings during the fiscal
year ended December 31, 2016.2017. Each member of the Valuation Committee who served on such committee during the 20162017 fiscal year attended over 75% of the aggregate of all the meetings held during 2016.2017.
Nominating and Corporate Governance Committee
The Board has established a Nominating and Corporate Governance Committee that operates pursuant to a charter and consists of three members, including a Chairman of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee members are currently Messrs. Gravina (Chairman), Pizzi and Williams. The primary function of the Nominating and Corporate Governance Committee is to consider and make recommendations to the Board regarding certain governance matters, including selection of trustees for election by shareholders, selection of trustee nominees to fill vacancies on the Board or a committee thereof, development and revision, as appropriate, of applicable corporate governance documentation and practices and oversight of the evaluation of the Board. The Nominating and Corporate Governance Committee held three meetings during the fiscal year ended December 31, 2016.2017. Each member of the Nominating and Corporate Governance Committee who served on such committee during the 20162017 fiscal year attended over 75% of the aggregate of all the meetings held during 2016, with the exception of Mr. Williams.2017.
With respect to nominating trustee candidates, the Nominating and Corporate Governance Committee takes into consideration such factors as it deems appropriate. Among the qualifications considered in the selection of candidates, the Nominating and Corporate Governance Committee considers the following attributes and criteria of candidates: experience, including experience with investment companies and other organizations of comparable purpose, skills, expertise, diversity, including diversity of gender, race and national origin, personal and professional integrity, time availability in light of other commitments, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee considers appropriate in the context of the needs of the Board, including, when applicable, to enhance the ability of the Board or committees of the Board to fulfill their duties and/or to satisfy any independence or other applicable requirements imposed by law, rule, regulation or listing standard including, but not limited to, the 1940 Act and rules promulgated by the SEC. Each of the trustee nominees was approved by the members of the Nominating and Corporate Governance Committee and the entire Board.
The Nominating and Corporate Governance Committee considers candidates suggested by its members and other Board members, as well as the Company's management and shareholders. A shareholder who wishes to recommend a prospective nominee for the Board must provide notice to the Secretary of the Company in accordance with the requirements set forth in the Company's Amended and Restated Bylaws, which are described in greater detail under the heading "Submission of Shareholder Proposals." Nominees for trustee who are recommended by shareholders will be evaluated in the same manner as any other nominee for trustee. The Nominating and Corporate Governance Committee charter is available on the Company's website atwww.fsinvestments.com.
Communications Between Shareholders and the Board
The Board welcomes communications from the Company's shareholders. Shareholders may send communications to the Board or to any particular trustee to the following address: c/o FS Energy and Power Fund, 201 Rouse Boulevard, Philadelphia, Pennsylvania 19112. Shareholders should indicate clearly the trustee or trustees to whom the communication is being sent so that each communication may be forwarded directly to the appropriate trustee(s).
Information about Executive Officers Who Are Not Trustees
The following table sets forth certain information regarding the executive officers of the Company who are not trustees of the Company. Each executive officer holds their office until their successor is chosen and qualifies, or until their earlier resignation or removal.
| Name, Address, | ||||||||||||
| Age and | Length of | |||||||||||
| Position(s) with | Time | |||||||||||
| Company(1) | Served | Principal Occupation(s) During Past Five Years | ||||||||||
| Sean Coleman Age: 48 Chief Investment Officer | Since 2018 | Sean Coleman has served as the Company's chief investment officer and as chief investment officer of FS/EIG Advisor since April 2018. Mr. Coleman also currently serves as managing director and is the chief credit officer of FS Investments. Mr. Coleman served on the investment committees of FS/EIG Advisor and certain other advisors which manage funds sponsored by FS Investments. Mr. Coleman previously worked at Golub Capital, where he served in various capacities, including as Managing Director in the direct lending group and as chief financial officer and treasurer of its BDC. Before he joined Golub Capital in 2005, Mr. Coleman worked in merchant and investment banking at Goldman, Sachs & Co. and Wasserstein Perella & Co. Mr. Coleman earned a BA in History from Princeton University and an MBA with Distinction from Harvard Business School, where he received the Loeb Award for academic excellence in finance. | ||||||||||
| | | | | | | | | | | | | |
| Edward T. Gallivan, Jr. Age: Chief Financial Officer | Since 2012 | Mr. Gallivan has served as the Company's chief financial officer since November 2012. | ||||||||||
| | | | | | | | | | | | | |
| Name, Address, | ||||||||||||
| Age and | Length of | |||||||||||
| Position(s) with | Time | |||||||||||
| Company(1) | Served | Principal Occupation(s) During Past Five Years | ||||||||||
| Zachary Klehr Age: 40 Executive Vice President | Since 2013 | Mr. Klehr has served as the Company's executive vice president since January 2013. Mr. Klehr also currently serves as executive vice president of certain of the other funds sponsored by FS Investments. Mr. Klehr has also served in various senior officer capacities for FS Investments and its affiliated investment advisers. In this role, he focuses on fund administration, portfolio management, fund operations, technology and client relations. Prior to joining FS Investments, Mr. Klehr served as a vice president at Versa Capital Management, or Versa, a private equity firm with approximately $1 billion in assets under management, from 2007 to February 2011. At Versa, he sourced, underwrote, negotiated, structured and managed investments in middle-market distressed companies, special situations and distressed debt. Prior to Versa, Mr. Klehr spent five years at Goldman, Sachs & Co., starting as an analyst in the Investment Banking Division, then in the executive office working on firm-wide strategy covering hedge funds and other complex multi-faceted clients of the firm. Later, he joined the Financial Sponsors Group as an associate where he focused on leveraged buyouts, acquisitions and equity and debt financings for private equity clients. Mr. Klehr received his M.B.A., with honors, from the Wharton School of the University of Pennsylvania and his B.A., cum laude, also from the University of Pennsylvania. He is active in his community and served on the board of trustees of The Philadelphia School where he was a member of the executive, governance, advancement, finance and investment committees. | ||||||||||
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Age: | Since | Mr. | ||||||||||
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| Name, Address, | ||||||||||||
| Age and | Length of | |||||||||||
| Position(s) with | Time | |||||||||||
| Company(1) | Served | Principal Occupation(s) During Past Five Years | ||||||||||
| James F. Volk Age: Chief Compliance Officer | Since April 2015 | Mr. Volk has served as the Company's chief compliance officer since April 2015. Mr. Volk also serves as the chief compliance officer of the other funds sponsored by FS | ||||||||||
| | | | | | | | | | | | | |
Code of Business Conduct and Ethics
The Company has adopted a code of business conduct and ethics (as amended and restated to date, the "Code of Business Conduct and Ethics") pursuant to Rule 17j-1 promulgated under the 1940 Act, which applies to, among others, its officers, including its Chief Executive Officer and its Chief Financial Officer, as well as the members of the Board. The Company's Code of Business Conduct and Ethics can be accessed via the Company's website atwww.fsinvestments.com. In addition, the Code of Business Conduct and Ethics is available on the EDGAR Database on the SEC's Internet site at www.sec.gov. Shareholders may also obtain a copy of the Code of Business Conduct and Ethics, after paying a duplicatingduplication fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section at 100 F Street, N.E., Washington, D.C. 20549. The Company intends to disclose any amendments to or waivers of required provisions of the Code of Business Conduct and Ethics on Form 8-K, as required by the Exchange Act and the rules and regulations promulgated thereunder.
Compensation Discussion and Analysis
The Company's executive officers do not receive any direct compensation from the Company. The Company does not currently have any employees and does not expect to have any employees. As an externally managed BDC, services necessary for the Company's business are provided by individuals who are employees of FSFS/EIG Advisor or its affiliates or by individuals who were contracted by FSFS/EIG Advisor, the Company or their respective affiliates to work on behalf of the Company. Each of the Company's executive officers is an employee of FSFS/EIG Advisor or its affiliates, and the day-to-day investment operations and administration of the Company's portfolio are managed by FSFS/EIG Advisor. In addition, the Company reimburses FSFS/EIG Advisor for expenses necessary to perform services related to the Company's administration and operations, including FSFS/EIG Advisor's allocable portion of the compensation and related expenses of certain personnel of FS Investments providing administrative services to the Company on behalf of FSFS/EIG Advisor in performing its obligations under the investment advisory and administrative services agreement between the Company and FSFS/EIG Advisor (the "investment advisory"FS/EIG Investment Advisory and administrative services agreement"Administrative Services Agreement").
Under the investment advisory and administrative services agreement, the Company, either directly or through reimbursement to FS Advisor or its affiliates, was responsible for its organization and offering costs in an amount up to 1.5% of gross proceeds raised in the Company's continuous public offering. Organization and offering costs primarily included legal, accounting, printing and other expenses relating to the Company's continuous public offering, including costs associated with technology integration between the Company's systems and those of its selected broker-dealers, marketing expenses, salaries and direct expenses of FS Advisor's personnel, employees of its affiliates and others while engaged in registering and marketing the Company's common shares, which included the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.
Prior to satisfaction of the minimum offering requirement and for a period of time thereafter, FS Investments funded certain of the Company's organization and offering costs. Following this period, the Company paid certain of its organization and offering costs directly and reimbursed FS Advisor for offering costs incurred by FS Advisor on the Company's behalf, including marketing expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering and marketing the Company's common shares. Organization and offering costs funded directly by FS Investments were recorded by the Company as a contribution to capital. The offering costs were offset against capital in excess of par value on the consolidated financial statements and the organization costs were charged to expense as incurred by the Company. All other offering costs, including costs incurred directly by the Company, amounts reimbursed to FS Advisor for ongoing offering costs and any reimbursements paid to FS Investments for organization and offering costs previously funded, were recorded as a reduction of capital. Commencing January 1, 2016, offering costs incurred by the Company
were deferred and amortized as an expense over twelve months. Following the closing of the Company's continuous public offering to new investors in November 2016, all deferred offering costs were expensed.
Trustee Compensation
The Company does not pay compensation to its trustees who also serve in an executive officer capacity for the Company or FSFS/EIG Advisor.
Trustees who do not also serve in an executive officer capacity for the Company or FSFS/EIG Advisor are entitled to receive annual cash retainer fees, fees for participating in in-person Board and Board committee meetings and annual fees for serving as a committee chairperson. These trustees are Messrs. Brown, Chandler, Goldstein, Gravina, Heller, Pizzi, Vague and Williams. Mr. Goldstein also receives an annual retainer for his service as the lead Independent Trustee.
Amounts payable under the trustee fee arrangement wereare determined and paid quarterly in arrears as follows:
| Fee | | Amount | | |
|---|---|---|---|---|
Annual Board Retainer | | $ | 100,000 | |
Board Meeting Fees | | $ | 2,500 | |
Annual Committee Chair Retainers: | | | ||
Audit and Valuation Committees | | $ | 20,000 | |
Nominating and Governance Committee | | $ | 15,000 | |
Other Committees | | $ | 10,000 | |
Committee Meeting Fees | | $ | 1,000 | |
Annual Lead Independent Trustee Retainer | | $ | 25,000 | |
The Company will also reimburse each of the above trustees for all reasonable and authorized business expenses in accordance with its policies as in effect from time to time, including reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each Board meeting and each committee meeting not held concurrently with a Board meeting.
The table below sets forth the compensation received by each trustee from (i) the Company and (ii) all of the companies in the Fund Complex, including the Company, in the aggregate, in each case,Company's trustees for service during the fiscal year ended December 31, 2016:2017:
Name of Trustee | | Fees Earned or Paid in Cash by the Company | | Total Compensation from the Company | | Total Compensation from the Fund Complex(1) | | | Fees Earned or Paid in Cash by the Company | | Total Compensation from the Company | | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David J. Adelman | | | — | | | — | | | — | | | | | — | | | — | | | ||||||||
Sidney R. Brown | | | $ | 110,500 | | | $ | 110,500 | | | $ | 110,500 | | | | | $ | 110,500 | | | $ | 110,500 | | | |||
Gregory P. Chandler | | | $ | 143,247 | | | $ | 143,247 | | | $ | 286,495 | | | | | $ | 139,000 | | | $ | 139,000 | | | |||
Michael C. Forman | | | — | | | — | | | — | | | | | — | | | — | | | ||||||||
Richard Goldstein | | | $ | 159,000 | | | $ | 159,000 | | | $ | 275,500 | | | |||||||||||||
Thomas J. Gravina | | | $ | 130,500 | | | $ | 130,500 | | | $ | 381,125 | | | |||||||||||||
Michael J. Heller | | | $ | 116,500 | | | $ | 116,500 | | | $ | 481,500 | | | |||||||||||||
Richard I. Goldstein | | | $ | 69,000 | | | $ | 159,000 | | | |||||||||||||||||
Michael J. Heller(1) | | | $ | — | | | $ | 114,000 | | | |||||||||||||||||
Charles P. Pizzi | | | $ | 115,500 | | | $ | 115,500 | | | $ | 227,500 | | | | | $ | 113,000 | | | $ | 113,000 | | | |||
William C. Sonneborn(2) | | | — | | | — | | | |||||||||||||||||||
Richard W. Vague | | | $ | 110,500 | | | $ | 110,500 | | | $ | 110,500 | | | | | $ | 110,500 | | | $ | 110,500 | | | |||
Thomas J. Gravina(1) | | | $ | 128,000 | | | $ | 128,000 | | | |||||||||||||||||
R. Richard Williams | | | $ | 119,500 | | | $ | 119,500 | | | $ | 119,500 | | | | | $ | 118,000 | | | $ | 118,000 | | | |||
board of directors of FS Investment Corporation III. Messrs. Adelman, Forman, Gravina and Pizzi serve on the boards of trustees of FS Global Credit Opportunities Fund, FS Global Credit Opportunities Fund—A, FS Global Credit Opportunities Fund—D, FS Global Credit Opportunities Fund—T and FS Global Credit Opportunities Fund—ADV. Messrs. Adelman, Forman and Gravina serve on the board of directors of FS Investment Corporation IV. Messrs. Adelman and Forman serve on the board of trustees of FS Energy Total Return Fund. The Company, FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV, FS Global Credit Opportunities Fund, FS Global Credit Opportunities Fund—A, FS Global Credit Opportunities Fund—D, FS Global Credit Opportunities Fund—T, FS Global Credit Opportunities Fund—ADV and FS Energy Total Return Fund are part of the Fund Complex.
Certain Relationships and Related Party Transactions
The Company has procedures in place for the review, approval and monitoring of transactions involving the Company and certain persons related to the Company. For example, the Company's Code of
Business Conduct and Ethics generally prohibits any employee, officer or trustee from engaging in any transaction where there is a conflict between such individual's personal interest and the interests of the Company. Waivers to the Code of Business Conduct and Ethics for any executive officer or member of the Board must be approved by the Board and are publicly disclosed as required by applicable law and regulations. In addition, the Audit Committee is required to review and approve all transactions with related persons (as defined in Item 404 of Regulation S-K promulgated under the Exchange Act). Prior to the occurrence of a liquidity event (which we define as (1) a listing of the Company's Common Shares on a national securities exchange, (2) the sale of all or substantially all of the Company's assets either on a complete portfolio basis or individually followed by a liquidation or (3) a merger or another transaction approved by the Board in which the Company's shareholders likely will receive cash or shares of a publicly traded company), all future transactions with affiliates of the Company will be on terms no less favorable than could be obtained from an unaffiliated third party and must be approved by a majority of the Board, including a majority of the Independent Trustees.
Compensation of the Investment Adviser and Dealer Manager
PursuantHistorically, the Company received investment advisory and administrative services from FS Investment Advisor, LLC ("FS Advisor") pursuant to thean investment advisory and administrative services agreement, dated as of August 10, 2012 (the "FSIA Investment Advisory and Administrative Services Agreement"). The FSIA Investment Advisory and Administrative Services Agreement was replaced by the FS/EIG Investment Advisory and Administrative Services Agreement with FS/EIG Advisor, which is a newly-formed entity that is jointly owned by FS Advisor and EIG Global Energy Partners. FS Advisor previously engaged GSO Capital Partners, L.P. ("GSO") to act as the Company's investment sub-adviser pursuant to the investment sub-advisory agreement between FS Advisor and GSO, dated April 28, 2011 (the "GSO Investment Sub-Advisory Agreement"). GSO resigned as the Company's investment sub-adviser and terminated the GSO Investment Sub-Advisory Agreement effective April 9, 2018.
Pursuant to the FS/EIG Investment Advisory and Administrative Services Agreement, FS/EIG Advisor is entitled to an annual base management fee of 2.0% ofbased on the average weekly value of the Company's gross assets (equal to the total assets set forth on the Company's consolidated financial statements) and an incentive fee based on the Company's performance. The Company commenced accruing fees underbase management fee is calculated at an annual rate of 1.75% of the investment advisory and administrative services agreement on July 18, 2011, upon commencementaverage weekly value of the Company's investment operations. Basegross assets. The base management fees are paidfee is payable quarterly in arrears and is calculated based on a quarterly basis in arrears.
the average weekly value of the Company's gross assets during the most recently completed calendar quarter. The incentive fee consists of two parts. The first part of the incentive fee, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears, equals 20.0% of ourthe Company's "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 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FSFS/EIG Advisor doeswill not earn this incentive fee for any quarter until ourthe Company's pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.625%. For purposes of thisthe subordinated incentive fee on income, "adjusted capital" means cumulative gross proceeds generated from sales of our common sharesthe Company's Common Shares (including proceeds from ourthe Company's distribution reinvestment plan) reduced for distributions from non-liquidating dispositions of ourthe Company's investments paid to shareholders and amounts paid for share repurchases pursuant to ourthe Company's share repurchase program. Once ourthe Company's pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FSFS/EIG Advisor iswill be entitled to a "catch-up" fee equal to the amount of the Company's pre-incentive fee net investment income in excess of the hurdle rate, until ourthe Company's pre-incentive fee net investment income for such quarter equals 2.031%, or 8.125% annually, of adjusted capital. Thereafter, FSFS/EIG Advisor iswill be entitled to receive 20.0% of the Company's pre-incentive fee net investment income.
The second part of the incentive fee, which is referred to as the incentive fee on capital gains payable under the FS/EIG Investment Advisory Agreement is determined and payable in arrears as of the end of each calendar year (or upon termination of such agreement). Such fee equals 20.0% of our incentivethe Company's "incentive fee capital gains, (i.e., our" which are the Company's realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis),basis, less the aggregate amount of any previously paid incentive fees on capital gains incentive fees. On a quarterly basis, wegains. The Company will accrue for the incentive fee on capital gains, which, if earned, will be paid annually. The Company will accrue the incentive fee by calculatingon capital gains based on net realized and unrealized gains; however, the fee payable to FS/EIG Advisor will be based on realized gains and no such fee as if it were due and payable as of the end of such period.
While the investment advisory and administrative services agreement with FS Advisor neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of an American Institute of Certified Public Accountants Technical Practice Aid for investment companies, we include 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 wouldwill be payable to FS Advisor as if our entire portfolio was liquidated at its fair value as of the balance sheet date even though FS Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized. The terms of the incentive fee on capital gains were substantially similar under the FSIA Investment Advisory and Administrative Services Agreement.
TheEffective April 9, 2018, FS/EIG Advisor agreed to waive incentive fees on income for a period of twelve months ending December 31, 2018.
Pursuant to the FS/EIG Investment Advisory and Administrative Services Agreement, FS/EIG 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. FS/EIG 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 shareholders and reports filed with the SEC. Pursuant to the FS/EIG Investment Advisory and Administrative Services Agreement, the Company reimburses FSFS/EIG Advisor no less than monthly for expenses necessary to perform services related to the Company's administration and operations, including FS Advisor's allocable portion of the compensation and related expenses of certain personnel of FS Investments providing administrative services to the Company on behalf of FS Advisor.operations. The amount of thethis reimbursement payable to FS Advisor is set at the lesser of (1) FSFS/EIG 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. FSFS/EIG Advisor is required to allocateallocates the cost of such services to the Company based on factors such as assets, revenues, time allocations and/or other reasonable metrics. The Board reviews the methodology employed in determining how the expenses are allocatedmetrics consistent with past practice (but solely to the Company andextent such past practice is not inconsistent with the proposed allocationpolicies of the administrative expenses among the Company and certain affiliates of FS Advisor. The Board then assesses the reasonableness of such reimbursements for expenses allocated to the Company 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 providers known to be available. In addition, the Board considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Board, among other things, compares the total amount paid to FS Advisor for such services as a percentage of the Company's net assets to the same ratio as reported by other comparable BDCs.FS/EIG Advisor). The Company willdoes not reimburse FSFS/EIG Advisor for any services for which it receives a separate fee, or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of FSFS/EIG Advisor.
UnderHistorically, pursuant to the investment advisoryFSIA Investment Advisory and Administrative Services Agreement, FS Advisor was entitled to an annual base management fee of 2.0% of the average weekly value of the Company's gross assets and an incentive fee based on the Company's performance. Pursuant to the GSO Sub-Advisory Agreement, GSO received 50% of all management and incentive fees payable to FS Advisor under the FSIA Investment Advisory and Administrative Services Agreement with respect to each year. Effective January 1, 2018 FS Advisor contractually agreed to permanently waive 0.25% of its base management fee to which it was entitled under the FSIA Investment Advisory and Administrative Services Agreement, so that the fee received equaled 1.75% of the average weekly value of the Company's gross assets.
The Company also reimbursed FS Advisor for expenses necessary to perform services related to the Company's administration and operations, including FS Advisor's allocable portion of the compensation and related expenses of certain personnel of FS Investments, the Company's sponsor and an affiliate of FS Advisor, providing administrative services agreement,to the Company on behalf of FS Advisor. The amount of this reimbursement for FS Advisor was set at the lesser of (1) FS Advisor's actual costs incurred in providing such services and (2) the amount that the Company estimated it would be required to pay alternative service providers for comparable services in the same geographic location. FS Advisor allocated the cost of such services to the Company based on factors such as assets, revenues, time allocations and/or other reasonable metrics.
Also, under the FSIA Investment Advisory and Administrative Services Agreement, the Company, either directly or through reimbursement to FS Advisor or its affiliates, was responsible for its organization and offering costs in an amount up to 1.5% of gross proceeds raised in the Company's continuous public offering. Organization and offering costs primarily included legal, accounting, printing and other expenses relating to the Company's continuous public offering, including costs associated with technology integration between the Company's systems and those of its selected broker-dealers, marketing expenses, salaries and direct expenses of FS Advisor's personnel, employees of its affiliates and others while engaged in registering and marketing the Company's common shares,Common Shares, which included the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.
Prior to satisfaction of the minimum offering requirement and for a period of time thereafter, FS Investments funded certain of the Company's organization and offering costs. Following this period, the Company has paid certain of its organization and offering costs directly and reimbursed FS Advisor for offering costs incurred by FS Advisor on the Company's behalf, including marketing expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering
and marketing the Company's common shares.Common Shares. Organization and offering costs funded directly by FS Investments were recorded by the Company as a contribution to capital. The offering costs were offset against capital in excess of par value on the consolidated financial statements and the organization costs were charged to expense as incurred by the Company. All other offering costs, including costs incurred directly by the Company, amounts reimbursed to FS Advisor for ongoing offering costs and any reimbursements paid to FS Investments for organization and offering costs previously funded, wereare recorded as a reduction of capital. Commencing January 1, 2016, offering costs incurred by the Company were deferred and amortized as anto expense over twelve months. Following the closing of the Company's continuous public offering to new investors in November 2016, all deferred offering costs were expensed.
During the year ended December 31, 2017, FS Investments did not fund any of the Company's organization and offering costs. As of December 31, 2017, no amounts remain reimbursable to FS Advisor and its affiliates under this arrangement.
The dealer manager for the Company's continuous public offering was FS Investment Solutions, LLC (formerly FS2 Capital Partners, LLC), or ("FS Investment Solutions,Solutions"), which is one of the Company's affiliates. Under the dealer manager agreement among the Company, FS Advisor and FS Investment Solutions or the dealer manager agreement,(the "Dealer Manager Agreement"), FS Investment Solutions was entitled to receive sales commissions and dealer manager fees in connection with the sale of common sharesthe Common Shares in the Company's continuous public offering, all or a portion of which were re-allowed to selected broker-dealers and financial representatives. The dealer manager agreementDealer Manager Agreement terminated in connection with the closing of the Company's continuous public offering in November 2016.
The following table describes the fees and expenses accrued under the investment advisoryFS/EIG Investment Advisory and administrative services agreementAdministrative Services Agreement, the FSIA Investment Advisory and Administrative Services Agreement and the dealer manager agreement during the yearsix months ended June 30, 2018 and
2017 and the years ended December 31, 2017 and 2016 (dollar amounts in the table below and the related notes are presented in thousands).
Related Party | | Source Agreement | | Description | | Year Ended December 31, 2016 | | | Source Agreement | | Description | | Six Months Ended June 30, 2018 | | Six Months Ended June 30, 2017 | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FS Advisor and FS/EIG Advisor | | FSIA Investment Advisory and Administrative Services Agreement and FS/EIG Investment Advisory and Administrative Services Agreement | | Base Management Fee(1) | | | $ | 35,416 | | | $ | 45,073 | | | $ | 88,938 | | | $ | 76,580 | | | |||||||||||||
| FS Advisor | | Investment Advisory and Administrative Services Agreement | | Base Management Fee(1) | | | $ | 76,580 | | | | FSIA Investment Advisory and Administrative Services Agreement | | Subordinated Incentive Fee on Income(2) | | | — | | | | $ | 10,499 | | | | $ | 10,499 | | | | $ | 5,774 | | | |
FS Advisor | | Investment Advisory and Administrative Services Agreement | | Capital Gains Incentive Fee(2) | | | — | | | ||||||||||||||||||||||||||
FS Advisor | | Investment Advisory and Administrative Services Agreement | | Subordinated Incentive Fee on Income(3) | | | $ | 5,774 | | | |||||||||||||||||||||||||
FS Advisor | | Investment Advisory and Administrative Services Agreement | | Administrative Services Expenses(4) | | | $ | 3,870 | | | |||||||||||||||||||||||||
FS Advisor and FS/EIG Advisor | | FSIA Investment Advisory and Administrative Services Agreement and FS/EIG Investment Advisory and Administrative Services Agreement | | Administrative Services Expenses(3) | | | $ | 1,595 | | | | $ | 1,607 | | | | $ | 2,829 | | | | $ | 3,870 | | | ||||||||||
FS Advisor | | Investment Advisory and Administrative Services Agreement | | Offering Costs(5) | | | $ | 3,548 | | | | Expense Support and Conditional Reimbursement Agreement | | Expense Recoupment(4) | | | — | | | | $ | 2,858 | | | | $ | 2,858 | | | — | | | |||
FS Investment Solutions | | Dealer Manager Agreement | | Dealer Manager Fee(6) | | | $ | 6,545 | | | | Dealer Manager Agreement | | Dealer Manager Fee(5) | | | — | | | | — | | | | — | | | | $ | 6,545 | | | |||
respectively, in administrative services expenses to FS Advisor during the yearyears ended December 31, 2017 and 2016.
The investment advisory and administrative services agreement provides that FS Advisor and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with it are not entitled to indemnification (including reasonable attorneys' fees and amounts reasonably paid in settlement) for any liability or loss suffered by FS Advisor, nor will FS Advisor or such other person be held harmless for any loss or liability suffered by the Company, unless (i) FS Advisor or such other person has determined, in good faith, that the course of conduct which caused the loss or liability was in the Company's best interests, (ii) FS Advisor or such other person was acting on behalf of or performing services for the Company, (iii) the liability or loss suffered was not the result of negligence or misconduct by FS Advisor or such other person and (iv) the indemnification or agreement to hold FS Advisor or such other person harmless for any loss or liability suffered byExemptive 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 recoverable outnegotiated term. In an order dated June 4, 2013 (the "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 FS Advisor, including FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, and FS Investment Corporation IV. Effective April 9, 2018 (the "JV Effective Date"), and in connection with the transition of advisory services to a joint advisory relationship with EIG, the Company's board of trustees has authorized and directed that the Company (i) withdraw from the Order, except with respect to any transaction in which the Company participated in reliance on the Order prior to the JV Effective Date, and (ii) rely on an exemptive relief order dated April 10, 2018, granted to certain other funds and accounts managed or previously managed by EIG or its affiliates which would permit the Company to participate in co-investment transactions with certain other EIG advised funds or accounts (the "EIG Order"). The Company believes that the ability to participate in co-investment transactions with other funds managed by EIG may permit it to allocate a higher percentage of the Company's net assetsportfolio to secured, directly negotiated investments that span the upstream, midstream, power/renewables, and not from the Company's shareholders.infrastructure sectors.
Expense Reimbursement
Pursuant to an expense support and conditional reimbursement agreement, amended and restated as of May 16, 2013, or the expense reimbursement agreement,Expense Reimbursement Agreement, FS Investments has agreed to reimburse the Company for expenses in an amount that is sufficient to ensure that no portion of the Company's distributions to shareholders will be paid from its offering proceeds or borrowings. However, because certain investments the Company may make, including preferred and common equity investments, may generate dividends and other distributions to the Company that are treated for tax purposes as a return of capital, a portion of the Company's distributions to shareholders may also be deemed to constitute a return of capital for tax purposes to the extent that the Company may use such dividends or other distribution proceeds to fund its distributions to shareholders. Under those circumstances, FS Investments will not reimburse the Company for the portion of such distributions to shareholders that represent a return of capital for tax purposes, as the purpose of the expense reimbursement arrangement is not to prevent tax-advantaged distributions to shareholders.
Under the expense reimbursement agreement,Expense Reimbursement Agreement, FS Investments willagreed to reimburse the Company quarterly for expenses in an amount equal to the difference between the Company's cumulative distributions paid to its shareholders in each quarter, less the sum of the Company's net investment company taxable income, net capital gains and dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent such amounts are not included in net investment company taxable income or net capital gains) in each quarter.
Pursuant to the expense reimbursement agreement,Expense Reimbursement Agreement, the Company has a conditional obligation to reimburse FS Investments for any amounts funded by FS Investments under such agreement if (and only to the extent that), during any fiscal quarter occurring within three years of the date on which FS Investments funded such amount, the sum of the Company's net investment company taxable income, net capital gains and the amount of any dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent not included in net investment company taxable income or net capital gains) exceeds the distributions paid by the Company to its shareholders; provided, however, that (i) the Company will only reimburse FS Investments for expense support payments made by FS Investments with respect to any calendar quarter beginning on or after July 1, 2013 to the extent that the payment of such reimbursement (together with any other reimbursement paid during such fiscal year) does not cause "other operating expenses" (as defined below) (on an annualized basis and net of any expense support payments received by the Company during such fiscal year) to exceed the lesser of (A) 1.75% of the Company's average net assets attributable to its common shares for the fiscal year-to-date period after taking such payments into account and (B) the percentage of the Company's average net assets attributable to its common shares represented by "other operating expenses" during the fiscal year in which such expense support payment from FS Investments was made (provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from FS Investments made during the same fiscal year) and (ii) the Company will not reimburse FS Investments for expense support payments made by FS Investments if the aggregate amount of distributions per share declared by the Company in such calendar quarter is less than the aggregate amount of distributions per share declared by the Company in the calendar quarter in which FS Investments made the expense support payment to which such reimbursement relates. The Company is not obligated to pay interest on the payments it receives from FS Investments. "Other operating expenses" means the Company's total "operating expenses" (as defined below), excluding base management fees, incentive fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. "Operating expenses" means all operating costs and expenses incurred, as determined in accordance with generally accepted accounting principles ("GAAP") for investment companies.
The Company or FS Investments may terminateExpense Reimbursement Agreement was terminated on the expense reimbursement agreement at any time.JV Effective Date. The specific amount of expenses reimbursed by FS Investments, if any, will be determined at the end of each quarter. Upon termination of the expense reimbursement agreement by FS Investments, FS Investments will be required to fund any amounts accrued thereunder as of the date of termination. Similarly, the Company's conditional obligation to reimburse FS Investments pursuant to the terms of the expense reimbursement agreement shall surviveExpense Reimbursement Agreement survived the termination of suchthe agreement. As of the JV Effective Date, the Company has entered into a new expense support and conditional reimbursement agreement by either party.
FS Investments is controlled by the Company's chairman, president and chief executive officer, Michael C. Forman, and the Company's vice-chairman, David J. Adelman.with FS/EIG Advisor (the "FS/EIG Expense Reimbursement Agreement"), on substantially similar terms. There can be no assurance that the expense reimbursement agreementFS/EIG Expense Reimbursement Agreement will remain in effect or that FS InvestmentsFS/EIG Advisor will reimburse any portion of the Company's expenses in future quarters.
Exemptive Relief FS/EIG Advisor may terminate the FS/EIG Expense Reimbursement Agreement at any time.
As a BDC,During 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 point. In an order datedsix months ended June 4, 2013, 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 FS Advisor, including FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV and any future BDCs that are advised by FS Advisor or its affiliated investment advisers, or collectively the Company's co-investment affiliates. The
Company believes this relief has and may continue to enhance its ability to further its investment objectives and strategy. The Company believes this relief may also increase favorable investment opportunities for the Company, in part, by allowing it to participate in larger investments, together with the Company's co-investment affiliates, than would be available to it if such relief had not been obtained. Because30, 2018, the Company did not seek exemptive reliefaccrue any expense reimbursements from FS Investments or FS/EIG Advisor. During the six months ended June 30, 2017, the Company accrued $18,220 (expressed in thousands) for expense reimbursements that FS Investments agreed to engageoffset against management fees and subordinated income incentive fees payable by the Company to FS Advisor. As of June 30, 2018, the Company had no reimbursements due from FS Investments or FS/EIG Advisor.
As discussed above, under the Expense Reimbursement Agreement, amounts reimbursed to the Company by FS Investments may become subject to repayment by the Company in co-investment transactions with its investment sub-adviser, GSO Capital Partners, L.P. ("GSO")the future. During the six months ended June 30, 2018, the Company did not pay any amounts in expense recoupments to FS Investments. As of June 30, 2018, $28,104 (expressed in thousands) of reimbursements may become subject to repayment by the Company to FS Investments in the future.
The following table reflects the expense reimbursement payments from FS Investments to the Company as of June 30, 2018 that may become subject to repayment by the Company to FS Investments (expressed in thousands in the table below and the notes that follow):
For the Three Months Ended | Amount of Expense Reimbursement Payment | Annualized "Other Operating Expenses" Ratio as of the Date of Expense Reimbursement | Annualized Rate of Distributions Per Share(1) | Reimbursement Eligibility Expiration | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2017 | $ | 15,362 | (2) | 0.40 | % | 9.14 | % | March 31, 2020 | |||
September 30, 2017 | 7,095 | 0.36 | % | 9.91 | % | September 30, 2020 | |||||
December 31, 2017 | 5,647 | 0.36 | % | 10.57 | % | December 31, 2020 | |||||
| | | | | | | | | | | | |
Total | $ | 28,104 | |||||||||
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Potential Conflicts of Interest
FS Advisor'sThe members of the senior management team is comprisedand investment teams of substantiallyFS/EIG 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, as the senior management teams of the investment advisers to certain other BDCs and closed-end management investment companies in the Fund Complex. As a result, such personnel provide investment advisory services to certain others funds in the Fund Complex and such personnel may serveincluding in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or EIG Global Energy Partners. 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 Fund Complex. While noneCompany's best interests or in the best interest of the Company's shareholders. The Company's investment advisersobjectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For example, the Company relies on FS/EIG Advisor to manage its day-to-day activities and to implement its investment strategy. FS/EIG Advisor, FS Investments, EIG Global Energy Partners and certain of their affiliates are currently making private corporate debt investments for clients other than the fundspresently, and plan in the Fund Complex, any,future to continue to be, involved with activities which are unrelated to the Company. As a result of these activities, FS/EIG Advisor, FS Investments, EIG Global Energy Partners, their employees and certain of their affiliates will have conflicts of interest in allocating their time between the Company and other activities in which they are or all, may do so inbecome involved, including the future. In the event that FS Advisor undertakes to providemanagement of other investment vehicles.
FS/EIG Advisor's affiliates and its personnel are simultaneously providing investment advisory services to other clientsaffiliated entities. FS/EIG Advisor may determine that it is appropriate for the Company and one or more other investment accounts managed by FS/EIG Advisor's affiliates to participate in an investment opportunity. To the future, it intendsextent the Company is able to allocatemake co-investments with investment accounts managed by FS/EIG Advisor or its affiliates, these co-investment opportunities may give rise to conflicts of interest or perceived conflicts of interest among the Company and the other participating accounts. In addition, conflicts of interest or perceived conflicts of interest may also arise in determining which investment opportunities inshould be presented to the Company and other participating accounts. To
mitigate these conflicts, FS/EIG Advisor will seek to execute such transactions on a fair and equitable manner consistentbasis and in accordance with its allocation policies, taking into account various factors, which may include: the Company'ssource of origination of the investment opportunity; investment objectives and strategies, if necessary, so thatstrategies; tax considerations; risk, diversification or investment concentration parameters; characteristics of the Company will notsecurity; size of available investment; available liquidity and liquidity requirements; regulatory restrictions; and/or such other factors as may be disadvantaged in relationrelevant to any other clienta particular transaction. As affiliates of FS Advisor or its management team. In addition, even inInvestments and EIG Global Energy Partners currently serve as the absence of FS Advisor retaining additional clients,investment adviser to other entities and accounts, it is possible that some investment opportunities maywill be provided to such other funds in the Fund Complexentities and accounts rather than to the Company.
FS Benefit Trust
On May 30, 2013, FS Benefit Trust was formed as a Delaware statutory trust for the purpose of awarding equity incentive compensation to employees of FS Investments and its affiliates. During the years ended December 31, 2016, 2015 and 2014, FS Benefit Trust purchased $142,000, $104,000 and $49,000, respectively, of the Company's common shares at a purchase price equal to 90% of the offering price in effect on the applicable purchase date.
Required Vote
Each trustee shall be elected by a plurality of all the votes cast at the Annual Meeting in person or by proxy, provided that a quorum is present. Plurality voting means that the trustee nominee with the most votes for a particular seat is elected for that seat. Because all of the trusteestrustee nominees are running unopposed, all ten trustees willeight trustee nominees are expected to be elected as trustees of the Company.Company, as all nominees who receive votes in favor will be elected. Each share may be voted for as many individuals as there are trustee nominees and for whose election the share is entitled to be voted. Abstentions will not be included in determining the number of votes cast and, as a result, will have no effect on the Trustee Proposal. Common Shares represented by broker non-votes are not considered votes cast and thus have no effect on the Trustee Proposal. Shareholders may not cumulate their votes.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE
TRUSTEE NOMINEES.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
RSM US LLP, 751 Arbor Way,518 Township Line Road, Suite 200,300, Blue Bell, Pennsylvania 19422, has been appointed by the Board to serve as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2017.2018. RSM US LLP (formerly McGladrey LLP through October 25, 2015) acted as the Company's independent registered public accounting firm for the fiscal years ended December 31, 2011 through 2016.2017. The Company knows of no direct financial or material indirect financial interest of RSM US LLP in the Company. A representative of RSM US LLP will be available by telephone to answer questions during the Annual Meeting and will have an opportunity to make a statement if he or she desires to do so.
Although action by the shareholders on this matter is not required, the Audit Committee and the Board believe it is appropriate to seek shareholder ratification of this selection in light of the role played by the independent registered public accounting firm in reporting on the Company's consolidated financial statements. If a quorum is present at the Annual Meeting and the appointment of RSM US LLP as independent registered public accounting firm for the fiscal year ending December 31, 20172018 is not ratified by the shareholders, the adverse vote will be considered by the Audit Committee in determining whether to appoint RSM US LLP as the Company's independent registered public accounting firm for the succeeding fiscal year.
Fees
Set forth in the table below are audit fees, audit related fees, tax fees and all other fees billed to the Company by RSM US LLP (formerly McGladrey LLP through October 25, 2015) for professional services performed for the Company's fiscal years ended December 31, 20162017 and 2015:2016:
| Fiscal Year | | Audit Fees | | Audit-Related Fees(1) | | Tax Fees | | All Other Fees(2) | | Audit Fees | Audit-Related Fees(1) | Tax Fees | All Other Fees(2) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | $400,000 | — | — | $54,600 | |||||||||||||||||||
| 2016 | | $392,500 | | $46,900 | | | — | | | $ | 74,720 | | | $392,500 | $46,900 | — | $74,720 | ||||||
| 2015 | | $372,500 | | $98,775 | | | — | | | $ | 74,750 | | | ||||||||||
Pre-Approval Policies and Procedures
The Company's Audit Committee reviews, negotiates and approves in advance the scope of work, any related engagement letter and the fees to be charged by the Company's independent registered public accounting firm for audit services and permitted non-audit services for the Company and for permitted non-audit services for FSFS/EIG Advisor and any affiliates thereof that provide services to the Company if such non-audit services have a direct impact on the operations or financial reporting of the Company. Any requests for audit, audit-related, tax and other services that have not received general pre-approval must be submitted to the Audit Committee for specific pre-approval in accordance with its pre-approval policy, irrespective of the amount, and cannot commence until such approval has been granted. Normally, pre-approval is considered at regularly scheduled meetings of the Audit Committee. However, the Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated must report any pre-approval decisions to the Audit Committee at its
next scheduled meeting. The Audit Committee does not delegate its responsibilities to pre-approve
services performed by RSM US LLP to management. All of the audit and non-audit services described above for which RSM US LLP billedinvoiced the Company for the fiscal years ended December 31, 20162017 and 20152016 were pre-approved by the Audit Committee.
Audit Committee Report
As part of its oversight of the Company's financial statements, the Audit Committee reviewed and discussed with both management and RSM US LLP, the Company's independent registered public accounting firm, the Company's consolidated financial statements filed with the SEC for the fiscal year ended December 31, 2016.2017. Management advised the Audit Committee that all financial statements were prepared in accordance with U.S. GAAP, and reviewed significant accounting issues with the Audit Committee. The Audit Committee also discussed with RSM US LLP the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16,Communication with Audit Committees, as amended, and by the Auditing Standards Board of the American Institute of Certified Public Accountants.
The Audit Committee has established a pre-approval policy that describes the permitted audit, audit-related, tax and other services to be provided by the Company's independent registered public accounting firm. Pursuant to the policy, the Audit Committee pre-approves the audit and non-audit services performed by RSM US LLP in order to assure that the provision of such service does not impair the firm's independence.
Any request for audit, audit-related, tax and other services that have not received general pre-approval must be submitted to the Audit Committee for specific pre-approval in accordance with its pre-approval policy, irrespective of the amount of fees associated with such services, and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings of the Audit Committee. However, the Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate its responsibilities to pre-approve services performed by RSM US LLP to management.
The Audit Committee received and reviewed the written disclosures and the letter from RSM US LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding RSM US LLP's communications with the Audit Committee concerning independence, and has discussed with RSM US LLP its independence. The Audit Committee has reviewed the audit fees paid by the Company to RSM US LLP. It has also reviewed non-audit services and fees to assure compliance with the Company's and the Audit Committee's policies restricting RSM US LLP from performing services that might impair its independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements of the Company as of and for the year ended December 31, 20162017 be included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 20162017 for filing with the SEC. The Audit Committee also recommended the appointment of RSM US LLP to serve as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2017.2018.
| Audit Committee Members: | ||
| Gregory P. Chandler, Chairman Richard Vague R. Richard Williams |
The material in this Audit Committee report is not "soliciting material," is not deemed "filed" with the SEC, and is not to be incorporated by reference into any filing of the Company under the
Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Required Vote
The affirmative vote of a majority of the votes cast at the Annual Meeting in person or by proxy, provided a quorum is present, is required to ratify the appointment of RSM US LLP to serve as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2017.2018. Abstentions will not be included in determining the number of votes cast and, as a result, will not have any effect on the result of the vote with respect to the Accountant Proposal. Because brokers will have discretionary authority to vote for the ratification of the appointment of the Company's independent registered public accounting firm in the event that they do not receive voting instructions from the beneficial owner of the Common Shares, there will not be any broker non-votes with respect to the Accountant Proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF RSM US LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2017.2018.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Company's Second Amended and Restated Bylaws require the Company to hold an annual meeting of the shareholders for the election of trustees and the transaction of any business within the powers of the Company on a date and at a time set by the Board. In addition, the Company will hold special meetings as required or deemed desirable, or upon the request of holders of at least 10% of the Company's outstanding Common Shares entitled to vote. Any shareholder that wishes to submit a proposal for consideration at a subsequent meeting of the shareholders should mail the proposal promptly to the Secretary of the Company. Any proposal to be considered for submission to shareholders must comply with Rule 14a-8 promulgated under the Exchange Act and must be received by the Company in accordance with the Company's Second Amended and Restated Bylaws and any other applicable law, rule or regulation regarding trustee nominations. When submitting a nomination to the Company for consideration, a shareholder must provide certain information that would be required under applicable SEC rules, including the following minimum information for each trustee nominee: full name, age and address; class, series and number of Common Shares beneficially owned by the nominee, if any; the date such Common Shares were acquired and the investment intent of such acquisition; whether such shareholder believes the individual is an "interested person" of the Company, as defined in the 1940 Act; and all other information required to be disclosed in solicitations of proxies for election of trustees in an election contest or is otherwise required. To date, the Company has not received any recommendations from shareholders requesting consideration of a candidate for inclusion among the slate of nominees in the Company's proxy statement.
Pursuant to the Company's Second Amended and Restated Bylaws, for a trustee nomination or other business to be considered for the next annual meeting of shareholders, notice must be provided in writing and delivered to the Secretary of the Company at the Company's principal executive office before January 31, 2018July 28, 2019, but not before December 31, 2017.June 28, 2019, which such dates are the 90th day and 120th day, respectively, prior to the first anniversary of the date of mailing of the notice for the 2018 meeting of shareholders. In the event that the date of mailing of the notice for the Company's 2019 annual meeting of shareholders is advanced or delayed by more than 30 days from the first anniversary of the date of mailing of the notice for 2018 annual meeting of shareholders, which is expected to mailed on or about October 26, 2018, a notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to the date of mailing of the notice for the 2019 annual meeting of shareholders and not later than close of business on the later of the 90th day prior to the date of mailing of the notice for the 2019 annual meeting of shareholders or the tenth day following the day on which public announcement of the date of mailing of the notice for the 2019 annual meeting of shareholders is first made. The timely submission of a proposal does not guarantee its inclusion.
Any shareholder proposals submitted pursuant to the Rule 14a-8 promulgated under the Exchange Act for inclusion in the Company's proxy statement and form of proxy for the 20182019 annual meeting of shareholders must be received by the Company on or before December 31, 2017.June 28, 2019 (or if the 2019 annual meeting of shareholders is held more than 30 days before or after the first anniversary of the 2018 annual meeting of shareholders, the Company must receive such proposal within a reasonable time prior to the Company beginning to print and distribute proxy materials for such meeting). Such proposals must also comply with the requirements as to form and substance established by the SEC if such proposals are to be included in the proxy statement and form of proxy. Any such proposal should be mailed to: FS Energy and Power Fund, 201 Rouse Boulevard, Philadelphia, Pennsylvania 19112, Attention: Secretary.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board is not aware of any matters that will be presented for action at the Annual Meeting other than the matters set forth herein. Should any other matters requiring a vote of shareholders arise, it is intended that the proxies that do not contain specific instructions to the contrary will be voted in accordance with the judgment of the persons named in the enclosed form of proxy.
INVESTMENT ADVISER AND ADMINISTRATOR INVESTMENT SUB-ADVISER, DEALER MANAGER AND SUB-ADMINISTRATOR
Set forth below are the names and addresses of the Company's investment adviser and administrator investment sub-adviser, dealer manager and sub-administrator:
| INVESTMENT ADVISER AND ADMINISTRATOR | SUB-ADMINISTRATOR | |||
| State Street Bank and Trust | ||||
| 201 Rouse Boulevard | Company | |||
| Philadelphia, PA 19112 | One Lincoln Street | |||
| Mailstop SUM 0703 | ||||
| Boston, MA 02111 |
PLEASE VOTE PROMPTLY BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ACCOMPANYING POSTAGE PAID RETURN ENVELOPE OR BY FOLLOWING THE INSTRUCTIONS PRINTED ON THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS OR PROXY CARD, WHICH PROVIDE INSTRUCTIONS FOR AUTHORIZING A PROXY THROUGH THE INTERNET OR BY TELEPHONE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
VIEW MATERIALS & VOTE w SCAN TO FS ENERGY AND POWER FUND 201 ROUSE BLVD. PHILADELPHIA, PA 19112 VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. GENERAL QUESTIONS 1-855-486-7904 VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E27817-P93230-Z70049E52040-P14169 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. FS ENERGY AND POWER FUND The Board of Trustees recommends you vote FOR the following: For Withhold AllAll For All ExceptAllAllExcept To withhold authority to vote for any individual nominee(s), mark “For"For All Except”Except" and write the number(s) of the nominee(s) on the line below. ! ! !!! 1. Election of Trustees Nominees: 01. 02. 03. 04. 05. David J. Adelman Sidney R. Brown 02. Stephen T. Burdumy 03. Gregory P. Chandler 04. Michael C. Forman 05. Richard I. Goldstein 06. 07. 08. 09. 10. Thomas J. Gravina Michael Heller Charles P. Pizzi Richard W. Vague R. Richard Williams07. Pedro A. Ramos 08. William C. Sonneborn The Board of Trustees recommends you vote FOR the following proposal: For Against Abstain ! ! ! 2. To ratify the appointment of RSM US LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2017.2018. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date V.1.1
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and Shareholder Letter are available at www.proxyvote.com. E27818-P93230-Z70049E52041-P14169 FS ENERGY AND POWER FUND Annual Meeting of Shareholders June 12, 2017December 13, 2018 This proxy is solicited by the Board of Trustees The undersigned hereby appoints Michael C. Forman and Stephen S. Sypherd, and each of them, as proxies of the undersigned with full power of substitution in each of them, to attend the 20172018 Annual Meeting of Shareholders of FS Energy and Power Fund, a Delaware statutory trust (the "Company"), to be held at 10:0030 a.m., Easter n T ime,Eastern Time, on June 12, 2017,December 13, 2018, at the offices of the Company located at 201 Rouse Boulevard, Philadelphia, Pennsylvania 19112, and any adjournments or postponements thereof (the "Annual Meeting"), and vote as designated on the reverse side of this proxy card all of the common shares of beneficial interest, par value $0.001 per share, of the Company ("Common Shares") held of record by the undersigned. The proxy statement and the accompanying materials or a Notice of Internet Availability of Proxy Materials are being mailed on or about April 28, 2017October 26, 2018 to shareholders of record as of April 20, 2017October 17, 2018 and are available at www.proxyvote.com. All properly executed proxies representing Common Shares received prior to the Annual Meeting will be voted in accordance with the instructions marked thereon. If no instructions are marked, the Common Shares will be voted FOR the proposal to elect each of the trustee nominees listed in Proposal 1 and FOR the proposal to ratify the appointment of RSM US LLP as the Company's independent registered public accounting firm. If any other business is presented at the Annual Meeting, this proxy will be voted by the proxies in their best judgment, including any motion to adjourn or postpone the Annual Meeting to another time and/or place for the purpose of soliciting additional proxies. At the present time, the board of trustees of the Company knows of no other business to be presented at the Annual Meeting. Any shareholder who has given a proxy has the right to revoke it at any time prior to its exercise. Shareholders who execute proxies may revoke them with respect to a proposal by attending the Annual Meeting and voting his or her Common Shares in person or by submitting a letter of revocation or a later-dated proxy to the Company at the above address prior to the date of the Annual Meeting. Continued and to be signed on reverse side V.1.1
