Exhibit 99.1
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FS Investment Corporation
AN INTRODUCTION TO FSIC
FEBRUARY 19, 2014
PRESENTED BY:
Franklin Square Capital Partners is not affiliated with Franklin Resources/Franklin Templeton Investments or the Franklin Funds.
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Important Considerations
An investment in the common stock of FS Investment Corporation (FSIC, we or us) involves a high degree of risk and may be considered speculative. The following are some of the risks an investment in our common stock involves; however, you should carefully consider all of the information found in the section of our Forms 10-Q and 10-K filings entitled “Risk Factors” and in our other public filings before deciding
to invest in shares of our common stock.
An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.
Investing in middle-market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.
A lack of liquidity in certain of our investments may adversely affect our business.
We are subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on our investments.
We have borrowed funds to make investments, which increases the volatility of our investments and may increase the risks of investing in our securities.
We have limited operating history and are subject to the business risks and uncertainties associated with any new business.
Our distributions may be funded from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to us for investment.
This presentation is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities of FSIC. The tender offer will be made only pursuant to an offer to purchase, letter of transmittal and related materials (the Tender Materials) that FSIC intends to distribute to its stockholders and file with the Securities and Exchange Commission (SEC). The full details of the tender offer, including complete instructions on how to tender shares of common stock, will be included in the Tender Materials, which FSIC will distribute to stockholders and file with the SEC upon the commencement of the tender offer. Stockholders are urged to carefully read the Tender Materials when they become available because they will contain important information, including the terms and conditions of the tender offer. Stockholders may obtain free copies of the Tender Materials that FSIC files with the SEC at the SEC’s website at: www.sec.gov or by calling the information agent who will be identified in the
Tender Materials. In addition, stockholders may obtain free copies of FSIC’s filings with the SEC from FSIC’s website at: www.fsinvestmentcorp.com or by contacting FSIC at Cira Centre, 2929 Arch Street, Suite 675, Philadelphia, PA 19104 or by phone
at (877) 628-8575.
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Forward-Looking Statements
Some of the statements in this presentation constitute forward-looking statements because they relate to future events or the future performance or financial condition of FSIC. The forward-looking statements contained in this presentation may include statements as to: our future operating results; our business prospects and the prospects of our portfolio companies; the impact of the investments that we expect to make; the ability of our portfolio companies to achieve their objectives; our current and expected financings and investments; the adequacy of our cash resources, financing sources and working capital; the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies; our contractual arrangements and relationships with third parties; actual and potential co nflicts of interest with FB Income Advisor, LLC (FB Advisor), FS Investment Advisor, LLC, FS Energy and Power Fund, FSIC II Advisor, LLC, FS Investment Corporation II, GSO / Blackstone Debt Funds Management LLC or any of their respective affiliates; the dependence of our future success on the general economy and its effect on the industries in which we may invest; our use of financial leverage; the ability of FB Advisor to locate suitable investments for us and to monitor and administer our investments; the ability of FB Advisor or its affiliates to attract and retain highly talented professionals; our ability to maintain our qualification as a regulated investment company (RIC) and as a business development company (BDC); the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder; the effect of changes to tax legislation and our tax position; the tax status of the enterprises in which we invest; our ability to complete the listing of our shares of common stock on the New York Stock Exchange LLC (NYSE); our ability to complete the related tender offer; and the price at which shares of our common stock may trade on the NYSE, which may be higher or lower than the purchase price in the tender offer.
In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this presentation involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include: changes in the economy; risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and future changes in laws or regulations and conditions in our operating areas.
We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we have filed and may file in the future with the Securities and Exchange Commission (SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured.
Investors should not view the past performance of FSIC, or information about the market, as indicative of FSIC’s future results.
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FSIC Listing Details
COMPANY NAME
FS Investment Corporation
TICKER / EXCHANGE
FSIC / NYSE
ANTICIPATED TIMING1
April 2014
USE OF PROCEEDS
No new proceeds are being raised
LAST REPORTED NET ASSET
VALUE PER SHARE (NAV)2
$10.10
SHARES OUTSTANDING
257,190,300 – all shares will be listed
CURRENT MONTHLY
DISTRIBUTION AMOUNT3
$0.072 per share declared in February 2014; 8.55% annualized distribution yield based on last reported NAV
Adviser: FB Income Advisor, an affiliate of Franklin Square Capital Partners (Franklin Square)4
ADVISER / SUB-ADVISER
Sub-adviser: GSO / Blackstone Debt Funds Management (GSO / Blackstone), a subsidiary of GSO Capital Partners, the
credit platform of The Blackstone Group
POST-LISTING TENDER5
Up to $250 million tender at expected listing
2% management fee on assets
FEE STRUCTURE ON LISTING
20% incentive fee on capital gains, net of all unrealized and realized losses
20% incentive fee on income, subject to an 8% hurdle and a 3-year high water mark
Up to $125 million being considered:
POTENTIAL POST-TENDER SHARE
–
$100 million from Franklin Square Holdings
PURCHASES6
–
$25 million from FSIC and Franklin Square Holdings management
1 There can be no assurance FSIC will list in this timeframe or at all.
2 All numbers throughout this presentation are as of September 30, 2013, unless otherwise noted. GSO / Blackstone figures are as of December 31, 2013.
3 Distributions are not guaranteed and are subject to the discretion of the board of directors of FSIC.
4 Franklin Square Holdings, L.P. does business as Franklin Square Capital Partners.
5 Terms of the FSIC tender offer, including size thereof, are subject to the discretion of FSIC’s board of directors.
6 Franklin Square Holdings and FSIC and Franklin Square Holdings management do not intend to participate in the tender offer. There can be no assurance that Franklin Square or any member of FSIC or Franklin Square Holdings
management will purchase any shares. Any such purchases may be conducted in open market transactions (which may include 10b5-1 plans), subject to restrictions under applicable law. 4
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FS Investment Corporation: A Proven BDC
• Franklin Square: Leading BDC manager with over $9.1 billion in AUM1
PROVEN • GSO: Leading alternative credit manager with $65 billion in AUM
MANAGEMENT
• Strong Partnership: Over five years of successful collaboration
• Global sourcing and execution capabilities across GSO / Blackstone’s entire platform
PROVEN • Focus on direct lending
STRATEGY
• Invest opportunistically in situations with potential for capital appreciation
• Fully invested, floating-rate focused, senior debt portfolio
PROVEN • Mature leverage profile with low-cost funding
PORTFOLIO
• Strong credit history
• Average annual GAAP return of 16.3% since inception2
PROVEN • 8.55% annualized distribution yield based on the last reported NAV3
PERFORMANCE
• Six distribution increases since inception, with two occurring in 2013
1Assets under management include FSIC, FS Investment Corporation II and FS Energy & Power Fund.
2Average annual GAAP returns since inception through the quarter ended September 30, 2013. These returns are calculated in accordance with GAAP and equal the NAV per share as of the end of the applicable period, plus cash distributions declared during the relevant period, divided by the NAV per share as of the beginning of the applicable period. These returns represent the return on the fund’s investment portfolio rather than an actual return to stockholders. Past performance is not indicative of future results.
3Distributions are not guaranteed and are subject to the discretion of FSIC’s board of directors.
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Proven Management
• Franklin Square: Leading BDC manager with over $9.1 billion in AUM
PROVEN • GSO: Leading alternative credit manager with $65 billion in AUM
MANAGEMENT
• Strong Partnership: Over five years of successful collaboration
PROVEN
STRATEGY
PROVEN
PORTFOLIO
PROVEN
PERFORMANCE
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Platform Provides a Competitive Advantage
INVESTMENT COMPETITIVE
SCALE BRAND
EXPERTISE ADVANTAGE
LARGEST MANAGER OF BDCs
60 BDC PROFESSIONALS
SCALE allows for one-stop financing solutions and low cost structure
259 PORTFOLIO COMPANIES across entire BDC platform
GSO / Blackstone figures as of December 31, 2013
LEADING MANAGER OF
ALTERNATIVE CREDIT focused on non-investment grade corporate debt
GLOBAL PRESENCE with over 250 employees
INVESTMENTS IN MORE THAN 1,100 corporate credits
$17.9 BILLION in directly originated transactions
LEADING MANAGER OF ALTERNATIVE INVESTMENTS
LEADING FRANCHISES in credit, private equity, real estate, hedge fund solutions and financial advisory
BRAND AND SCALE provides exceptional access
BLACKSTONE’S GROUP
PURCHASING ORGANIZATION available to FSIC portfolio companies
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Franklin Square and GSO:
Five Years of Successful Collaboration
The adviser The sub-adviser
Directs all fund activities DUAL LEVEL Identifies and originates investments
Establishes investment guidelines RISK MANAGEMENT Diligences and recommends
Reviews, approves and monitors SPECIALIZATION investments to the adviser
all investments IN AREAS Monitors and manages
Monitors the performance OF EXPERTISE credit aspects of investments
of the sub-adviser Provides trade execution, settlement
Reports directly to the FSIC board and back-office support
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Adviser/Sub-Adviser Structure Creates Accountability
FRANKLIN SQUARE’S ROLE
AS ADVISER:
Responsible for making all investment decisions based on recommendations from the sub-adviser
Directly accountable to the board of directors
Provides oversight and direction to the sub-adviser
Pipeline Reports
Watch Lists
Portfolio concentrations and diversification
Management reporting
Portfolio compliance testing (BDC and RIC)
Oversees and manages all aspects and activities of FSIC
SEC reporting
Valuation and NAV calculation
Budgeting and cash management
Compliance
Transfer agent
Financial reporting and controls
SYSTEM OF CHECKS AND BALANCES FOR OPTIMAL EXECUTION OF INVESTMENT STRATEGY AND GOVERNANCE
Board of Directors
Approves the investment advisory and sub-advisory agreements annually
Franklin Square GSO / Blackstone
Registered investment adviser Registered investment adviser
Manages all aspects of the fund Identifies and originates
investments
Monitors sub-adviser to meet Monitors and manages credit
investment objectives aspects of investments
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Adviser/Sub-Adviser Structure
Creates Dual Levels of Risk Management
INVESTMENT APPROVAL PROCESS
Franklin Square and GSO / Blackstone separately review and approve investments at each stage of the underwriting process
Typically, an investment is rejected in Stage 1 or Stage 2 as most issues are generally surfaced early in the process
The process for broadly syndicated investments is usually abbreviated, depending on the situation and risk profile
Stage 1: Sourcing
Stage 2: Diligence
GSO / Blackstone sources opportunities and conducts preliminary due diligence
GSO / Blackstone provides Franklin Square an investment overview and recommendation to dedicate additional resources for due diligence
GSO / Blackstone continues due diligence and prepares a “Head’s Up” memo
Members of Franklin Square investment, finance and legal teams work with GSO / Blackstone to determine the optimal structure
Stage 3: Final Approval
GSO / Blackstone’s Investment Committee reviews the investment. If unanimously approved, GSO / Blackstone sends its recommendation and a credit approval memo to Franklin Square
Franklin Square’s Investment Committee reviews all materials and makes a final investment decision
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Franklin Square: An Overview
MANAGER OF THREE OF THE LARGEST BDCs1
• Leading manager of business development companies
• Commitment to transparency and best practices
Over $9 billion • Investor-friendly incentive fee structure for FSIC
IN ASSETS UNDER MANAGEMENT • Meaningful and ongoing sponsor commitment to all managed
funds
Largest BDC manager
IN THE WORLD1
Over 170 employees
60 BDC PROFESSIONALS
Over 125,000
INVESTORS
1 Based on total balance sheet assets. Total balance sheet assets include the assets of FSIC, FS Investment Corporation II and FS Energy & Power Fund.
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GSO Capital Partners: An Overview
$65 BILLION IN ASSETS, MANAGED PRIMARILY ON BEHALF OF
INSTITUTIONAL INVESTORS, WITH A FOCUS ON BELOW INVESTMENT
GRADE CREDIT
Credit platform of The
Blackstone Group
ONE OF THE LARGEST ALTERNATIVE
ASSET MANAGERS IN THE WORLD
Over 250 employees Alternative Investment Funds Customized Credit
Strategies – Long Only
LOCATED IN NEW YORK, HOUSTON,
LONDON AND DUBLIN
Over 100 investment
professionals
60+ FOCUSED ON ORIGINATIONS
25+ DEDICATED FULL TIME TO BDCs FRANKLIN Rescue Mezzanine Event Driven CLOs Listed and
SQUARE Lending Fund Credit Commingled
(LARGEST FUND TEAM AT GSO / BDCs Funds, SMAs
BLACKSTONE)
Over 1,100 investments
IN CORPORATE CREDITS
GSO / Blackstone figures as of December 31, 2013.
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Proven Strategy
PROVEN
MANAGEMENT
• Global sourcing and execution capabilities across GSO / Blackstone’s entire platform
PROVEN • Focus on direct lending
STRATEGY
• Invest opportunistically in situations with potential for capital appreciation
PROVEN
PORTFOLIO
PROVEN
PERFORMANCE
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GSO and Blackstone Resources Available to Help
Maximize Returns for FSIC Investors
PLATFORM PEOPLE INVESTMENT EXPERTISE PERFORMANCE
Direct Originations
250+ GSO employees Global Leveraged Finance
100+ investment professionals Event Driven Credit 16.3% average annual
GAAP return since
FSIC’s inception1
Investments in over 1,100 60+ professionals focused on Rescue Lending
corporate credits originations
Access to Blackstone’s 40+ industry specialists Mezzanine
intellectual libraries
Access to Blackstone’s Group 6 traders Structured Credit (CLO)
Purchasing Organization
1Average annual GAAP return since FSIC’s inception through the quarter ended September 30, 2013. These returns are calculated in accordance with GAAP and equal the NAV per share as of the end of the applicable period, plus cash distributions declared during the relevant period, divided by the NAV per share as of the beginning of the applicable period. These returns represent the return on the fund’s investment portfolio rather than an actual return
to stockholders. Past performance is not indicative of future results.
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FSIC Investment Portfolio by Strategy
77% CORE INVESTMENT STRATEGIES
DIRECTLY ORIGINATED
Average originated loan commitment1: $56 million
Average EBITDA of portfolio companies2: $38 million
Average net leverage through tranche2: 3.9x
Annualized yield3: 10.7%
Examples: $2.7 BILLION OF CAPITAL DEPLOYED
– Safariland ACROSS 44 PORTFOLIO COMPANIES4
– American Energy
– CoSentry
– Klune
ANCHOR / OPPORTUNISTIC / EVENT DRIVEN
Anchor orders typically provide enhanced economics or other benefits not available to the broader market
Opportunistic/event driven investments
provide potential for capital appreciation
Annualized yield3:
- Anchor: 10.4%
- Opportunistic: 11.3%
- Event: 16.9%
COLLATERALIZED SECURITIES
Annualized yield3: 14.8%
Examples:
Eastman Kodak
Sorenson
Communications
ERC Ireland
Audio Visual Services
23% BROADLY SYNDICATED
Source of liquidity to be used to fund future core investments
Potential source for direct origination deal flow
Annualized yield3: 9.1%
1 Average new originated commitment amount for the quarter ended September 30, 2013.
2 Average annual EBITDA and average net leverage through tranche of all directly originated portfolio companies as of September 30, 2013.
3 Gross portfolio yield prior to leverage (based on amortized cost) – excluding non-income producing assets.
4 Capital deployed in directly originated portfolio companies from inception to September 30, 2013.
Examples:
Stadium Management
Corp.
Smile Brands
Totes Isotoner
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Portfolio Transition Has Delivered Higher Investment
Yields and Higher Distributions to Investors
2010
2011
2012
SEPT. 30, 2013
CORE INVESTMENT 12% 42% 58% 77%
STRATEGIES AS % OF
PORTFOLIO1
FSIC unlevered portfolio yield2 8.5% 10.4% 10.4% 10.4%
Credit Suisse Leveraged 6.6% 7.3% 5.9% 5.5%
Loan Index Yield, 3-year life
FSIC Spread Over 190 bps 310 bps 450 bps 490 bps
Syndicated Index2
Monthly Distribution $0.064312 $0.067188 $0.0675 $0.072
Amount per share3
Annualized Increase +4.47% +0.46% +6.67%
in Distributions4
% Senior Secured 89.4% 83.2% 80.7% 82.0%
of Total Portfolio5
1 Core investment strategies include investments classified as Originated/Direct Lending, Anchor Order, Event Driven, Opportunistic and Collateralized Securities as of December 31, 2010, 2011, 2012 and September 30, 2013, respectively.
2 Yield spread is the difference between FSIC’s gross annualized portfolio yield prior to leverage as disclosed in the company’s quarterly SEC filings and the Credit Suisse Leveraged Loan Index yield to a 3-year life. FSIC yield spread based on fair value as of December 31, 2010, 2011, 2012 and September 30, 2013, respectively. The data regarding the Credit Suisse Leveraged Loan Index is for illustrative purposes only and is not indicative of any investment. An investment cannot be made directly in an index.
3 FSIC increased its monthly distribution effective November 30, 2013 from $0.06975 per share to $0.072 per share.
4 Percentage increase in per share regular cash distributions during respective calendar year. 16
5 Based on fair value as of the relevant period end.
GSO / Blackstone Has Long-Standing Relationships with Private Equity Sponsors and Corporate Clients
GSO / BLACKSTONE’S SELECT NETWORK OF CLIENTS PROVIDES SIGNIFICANT SOURCING OPPORTUNITIES
AEA Investors
Access Capital Advisors
AIG Highstar
Altamont
Amaya Gaming Group
American Capital
Apex
Ares
Areva
Audax Group
Avista
Axa Private Equity
Bain Capital
Beecken Petty O’Keefe
Behrman Capital
Blackstone
Bruckman, Rosser, Sherrill
Carlyle
CD&R
Cerberus
Charlesbank Capital Partners
Chesapeake
CHS Capital
CIVC and Management
Clarion
Clayton Dubilier & Rice
Clearlake Capital
Crestview Partners
CVC Capital Partners
Cypress Group
Diamond Castle
DLJ Merchant Banking
Dunes Point
EIG
First Atlantic
Genstar
Golden Gate Capital
Goldman Sachs
Goldner Hawn Johnson Morrison
Gordon Brothers
Gores Capital
Graham Partners
Harvest Partners
Hellman & Friedman
Insight Equity
Investcorp
Jeff Gural
JLL Partners
Jupiter Partners
Kanders
Kolhberg Kravis Roberts
Leonard Green & Partners
Lincolnshire
Lion Capital
LS Power
Mid Europa Partners
Monitor Clipper Partners
Morgan Stanley
NANA Regional Corp.
Natural Gas Partners
Nautic Partners
NBC
Nova Capital Management
Oak Hill
Odyssey Investment Partners
Parthenon Capital
Permira
Plain Exploration
Platinum Equity
Quicksilver Resources
Ripplewood
Riverstone
Rockland Capital
Sequel Holdings
Siris Capital
Snow, Phipps Group
Sony / ATV
Southfield Capital
SPC Partners
Starwood Capital
Stephens Capital Partners
Summit Partners
TA Associates
Tailwind Capital
Tenaska Power Fund
Thomas Lee
TPG
Triangle Management
Vance Street
Vector
Vestar Capital
Victor Homes
Warburg Pincus
Wellspring
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Proven Portfolio
PROVEN
MANAGEMENT
PROVEN
STRATEGY
• Fully invested, floating-rate focused, senior debt portfolio
PROVEN • Mature leverage profile with low-cost funding
PORTFOLIO
• Strong credit history
PROVEN
PERFORMANCE
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FSIC’s Size Makes It an Immediately Relevant BDC
TOTAL ASSETS AND BOOK EQUITY OF SELECT BDCs1
$9,000 Total Assets (in millions)2
Total Book Equity (in millions)
$8,000
$7,000 7,754 3rd largest
$
$6,000 EXTERNALLY MANAGED BDC
$5,000
5,194 34
$4,000 2 $ 4,6
4,39 $
$
$3,000 3,231 3,380
$
$2,000 $
2,598 5 ,454 1,256 6 ,255 ,194 ,077 ,022
$ 2 0 $ 98 1 1 1 1
$1,000 1,92 $
$ $ 66 $ $ 719 $ 696 $ 642 $ 528
$ 1,370 1,265 $ $ $
$ $
$0
ARCC PSEC FSIC AINV FSC GBDC SLRC PNNT BKCC NMFC TICC
1 Total assets and book equity of the ten largest externally managed BDCs by total assets. ARCC: Ares Capital Corporation; PSEC: Prospect Capital Corporation; FSIC: FS Investment Corporation; AINV: Apollo
Investment Corporation; FSC: Fifth Street Finance Corp.; GBDC: Golub Capital BDC, Inc.; SLRC: Solar Capital Ltd.; PNNT: PennantPark Investment Corporation; BKCC: BlackRock Kelso Corp.; NMFC: New Mountain
Finance Corporation; TICC: TICC Capital Corp.
2 Total assets and book equity shown in millions as of the quarter ended September 30, 2013 for ARCC, FSIC, SLRC, BKCC, NMFC and TICC. Total assets and book equity shown in millions as of the quarter ended
December 31, 2013 for PSEC, AINV, FSC, GBDC and PNNT. 19
Floating-Rate, Senior Debt Focused Portfolio
FULLY-RAMPED PORTFOLIO DIVERSIFIED ACROSS 21 INDUSTRIES HISTORY OF DOWNSIDE PROTECTION
TOP 5 INDUSTRIES, BASED ON FAIR VALUE
Capital Goods 20%
182 Energy 12% 0%
Software & Services 9%
POSITIONS Commercial & Professional Services 8% OF INVESTMENTS ON
Consumer Durables & Apparel 8% NON-ACCRUAL
82% $178 million
OF INVESTMENTS IN
SECURED DEBT1 INVESTMENT PORTFOLIO OF CUMULATIVE GAINS IN EXCESS
OF CUMULATIVE LOSSES2
ASSET CLASS 9/30/2013 12/31/2012
70% Senior Secured Loans — 92%
First Lien 51% 50%
OF INVESTMENTS PAY OF INVESTMENTS PERFORMING
Senior Secured Loans —
FLOATING INTEREST RATES Second Lien 22% 19% BETTER OR ACCORDING TO PLAN3
Senior Secured Bonds 9% 12%
Subordinated Debt 11% 13%
Collateralized Securities 3% 3%
Equity/Other 4% 3%
1 Secured debt consists of senior secured loans – first lien, senior secured loans – second lien, senior secured bonds. Based on fair value.
2 Cumulative realized and unrealized gains less cumulative realized and unrealized losses, excluding gains and losses associated with a total return swap and foreign exchange transactions, since inception through September 30, 2013.
3 Based on FB Income Advisor’s investment rating system. As of September 30, 2013, 7% of investments at fair value were exceeding expectations, 85% of investments were performing according to plan, 7% of investments required closer monitoring, 1% of investments were underperforming with some loss of interest or dividend possible and 0% of investments were underperforming with expected loss of interest and some principal. For more information on FB Income Advisor’s investment rating system, please refer to FSIC’s SEC filings.
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Low Cost of Leverage Allows for Focus on Senior Debt
TYPE OF FACILITY MATURITY
FACILITIES AS OF SEPTEMBER 30, 2013 RATE
FACILITY AMOUNT DATE
(in thousands)
Citibank Credit Facility Revolving L + 1.75% $550,000 August 29, 2015
Deutsche Bank Credit Facility1 Revolving L + 1.50% $125,000 December 20, 2014
J.P. Morgan Facility Repurchase 3.25% $950,000 April 15, 2017
Wells Fargo Credit Facility Revolving L + 1.50% to 2.75% $250,000 May 17, 2017
Total debt outstanding under debt facilities $1,892,504
Debt/equity ratio 72.9%
% of debt outstanding at fixed interest rates 47.9%
% of debt outstanding at variable interest rates 52.1%
Gross annualized portfolio yield prior to leverage 10.4%
Weighted average cost of debt 2.7%
Net interest margin 770 bps
1 On December 20, 2013, the maturity of the Deutsche Bank Credit Facility was extended to December 20, 2014 and the maximum commitment amount was reduced from $240 million to $125 million.
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PROVEN
MANAGEMENT
PROVEN
STRATEGY
PROVEN
PORTFOLIO
FS Investment Corporation: A Proven BDC
Average annual GAAP return of 16.3% since inception1
PROVEN
8.55% annualized distribution yield based on the last reported NAV2
PERFORMANCE
Six distribution increases since inception, with two occurring in 2013
1Average annual GAAP returns since inception through the quarter ended September 30, 2013. These returns are calculated in accordance with GAAP and equal the NAV per share as of the end of the applicable period, plus cash distributions declared during the relevant period, divided by the NAV per share as of the beginning of the applicable period. These returns represent the return on the fund’s investment portfolio rather than an actual return to stockholders.
2Distributions are not guaranteed and are subject to the discretion of FSIC’s board of directors.
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FSIC’S Performance Compares Favorably to Its Peers
TOTAL RETURN COMPARISON OF FSIC TO PUBLIC BDC PEERS
FSIC has generated a 16.3% average annual GAAP return since inception 1
FSIC has been able to achieve market leading returns while maintaining a focus on senior debt (82% of investments) by consistently generating realized gains in the portfolio (cumulative gains exceed cumulative losses since inception by $178 million)
TOTAL RETURN% OF SECURED
SINCE 2009 DEBT2
ARES CAPITAL CORPORATION 19.9% 86%3
FS INVESTMENT CORPORATION 16.3% 82%
BLACKROCK KELSO CAPITAL CORPORATION 11.8% 67%
PENNANTPARK INVESTMENT CORPORATION4 11.0% 60%
APOLLO INVESTMENT CORPORATION4 7.4% 51%
FIFTH STREET FINANCE CORP.4 7.3% 81%
PROSPECT CAPITAL CORPORATION4 6.7% 75%
AVERAGE OF COMPETITORS (EXCLUDES FSIC) 10.7% 70%
1 Returns shown are GAAP returns, which are calculated by adding NAV per share as of the applicable period end plus cash distributions declared during such period and dividing the total by NAV per share as of the beginning of the applicable period. The total return represents the total return on an investment portfolio during the applicable period and does not represent an actual return to stockholders. GAAP returns shown are from FSIC inception on January 2, 2009 through September 30, 2013. Based on public filings. Past performance is not indicative of future results.
2 Secured debt based on fair value as of September 30, 2013, and consists of first lien senior secured loans, second lien senior secured loans and senior secured bonds. Secured debt for PennantPark Investment Corporation, Apollo Investment Corporation, Fifth Street Finance Corp. and Prospect Capital Corporation are based on fair value as of December 31, 2013. Based on public filings.
3 Ares Capital Corporation secured debt percentage includes subordinated certificates of the Senior Secured Loan Fund LLC (“SSLP”). Excluding SSLP subordinated certificates, Ares’s secured debt percentage based on fair value is
64%.
4 As of February 2, 2014, PennantPark Investment Corporation, Apollo Investment Corporation, Fifth Street Finance Corp. and Prospect Capital Corporation had filed 10-Q reports with the SEC for the quarter ended December 31, 2013. The GAAP return for the December 31, 2013 quarter for these BDCs is not reflected in the table above. 23
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Consistent Distributions with a
History of Distribution Growth
FSIC DISTRIBUTION HISTORY1
Since inception, FSIC investors have received:
9 special cash distributions2
8 special stock distributions
6 regular cash distribution increases
All distributions have been paid from net investment income and/or capital gains
FSIC last declared a monthly distribution of $0.072 per share in January 2014; 8.55% annualized distribution yield based on last reported NAV
FSIC has approximately $0.48 per share of undistributed net investment income and realized capital gains on a tax basis
$0.14
05
.
07 07 0
$0.12 0 . 0 . $
$ $
05
$0.10 Regular cash distributions per share 0 . . 02 015
$ 0 .
01 $ 0
Special cash distributions per share . $
0
$0.08 $
$0.06
$0.04
$0.02 $4.14 CUMULATIVE CASH DISTRIBUTIONS PER SHARE SINCE INCEPTION3
$0.00
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14
1 Distributions are not guaranteed and are subject to the discretion of FSIC’s board of directors.
2 The months of April 2010 and October 2011 each included two declared special cash distributions.
3 Cumulative distributions per share since FSIC inception through January 2, 2014. Assumes an investor participated in the distribution reinvestment plan and includes all regular cash distributions, special cash distributions and is 24
adjusted for special stock distributions.
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Opportunities for Future Growth
STRONG DISTRIBUTION COVERAGE
Currently distribute $0.216 per share per quarter versus Q3 2013 adjusted NII1 per share of $0.26
If FSIC distributed 100% of adjusted NII, the annualized yield as of
September 30, 2013, would increase from 8.55% to 10.30% based on last reported NAV
FSIC has accumulated $0.48 per share of undistributed NII and realized capital gains on a tax basis
ACCESS TO GSO’S GLOBAL PLATFORM
GSO / Blackstone’s investment expertise, people and platform bring unique investment opportunities to FSIC
Access to Blackstone’s Group Purchasing Organization program is a competitive advantage in winning new business
Opportunistic / Event Driven investments ($314 million at fair value) have potential for meaningful capital appreciation (average amortized cost at 88.3% of par as of September 30, 2013)
Equity co-investment opportunities ($155 million at fair value) can lead to further NAV appreciation
CONTINUED MIGRATION INTO CORE STRATEGIES
Future core investments are expected to be funded from the monetization of syndicated investments (23% at fair value)
Transition to core strategies expected to allow portfolio yield to grow without need for additional debt or new equity
OPTIMIZE USE OF NON-QUALIFIED ASSETS
19% of FSIC’s investments are classified as non-qualified assets, well below the regulatory limit (30%)
Excess capacity gives flexibility to pursue quality growth investment opportunities across the entire investment universe, not simply those that are qualified BDC assets
1 Adjusted net investment income is the net per share increase (decrease) in net investment income excluding the capital gains incentive fee attributable to unrealized gains. 25
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Appendix
MANAGEMENT TEAM BIOGRAPHIES
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Franklin Square Capital Partners Executives
MICHAEL C. FORMAN
CHAIRMAN & CEO
Michael Forman is the Chairman, CEO and co-founding partner of Franklin Square Capital Partners and FS Investment Corporation and Chairs the Investment Committee of the Adviser for FS Investment Corporation.
Prior to founding Franklin Square, Mr. Forman built a number of other successful businesses in the private equity and debt, financial services and investment management industries. He was previously a senior partner in the Corporate and Securities Department at the Philadelphia-based law firm of Klehr, Harrison, Harvey, Branzburg & Ellers LLP, where he practiced for over 15 years. Mr. Forman is also a member of a number of civic and charitable boards in the Philadelphia community.
Mr. Forman received a B.A. from the University of Rhode Island, where he graduated summa cum laude and was elected Phi Beta Kappa, and received a J.D. from Rutgers University.
GERALD F. STAHLECKER
PRESIDENT, FS INVESTMENT CORPORATION
Gerald F. Stahlecker is the President and serves on the Investment Committee of the Adviser for FS Investment Corporation.
Prior to joining Franklin Square, Mr. Stahlecker was a founding partner, Managing Director, Chief Operating Officer and Co-Chair of the Investment Committee of Radcliffe Capital Management, an investment advisory firm that manages hedge funds and separately managed accounts for institutional investors. Prior to Radcliffe, Mr. Stahlecker practiced corporate and securities law as an attorney at Klehr, Harrison, Harvey, Branzburg & Ellers LLP representing institutional investors pursuing structured equity and debt investments in public and private companies.
Mr. Stahlecker received a B.S. from the Tepper School of Business at Carnegie Mellon University and a J.D. from Villanova University Law School.
ZACHARY KLEHR
EXECUTIVE VICE PRESIDENT
Zachary Klehr is an Executive Vice President and serves on the Investment Committee of the Adviser for FS Investment Corporation.
Prior to joining Franklin Square, Mr. Klehr was a Vice President at Versa Capital Management, a private equity firm with approximately $1 billion in assets under management. 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. where he worked on leveraged buyouts, acquisitions and equity and debt financings for Goldman Sachs’ private equity clients.
Mr. Klehr received an M.B.A. with honors from the Wharton School of the University of Pennsylvania and a B.A. (cum laude), also from the University of Pennsylvania.
SEAN COLEMAN
MANAGING DIRECTOR, FS INVESTMENT CORPORATION
Sean Coleman is a Managing Director and serves on the Investment Committee of the Adviser for FS Investment Corporation.
Before joining Franklin Square, Mr. Coleman worked at Golub Capital for eight years, where he served in various capacities, including as a managing director in the direct lending group and as chief financial officer and treasurer of Golub Capital BDC. Before he joined Golub Capital in 2005, Mr. Coleman worked in merchant banking and investment banking, including at Goldman, Sachs & Co. and Wasserstein Perella & Co.
Mr. Coleman earned a B.A. in History from Princeton University and an M.B.A. with Distinction from Harvard Business School.
WILLIAM GOEBEL
CHIEF FINANCIAL OFFICER, FS INVESTMENT CORPORATION
William Goebel joined Franklin Square in February 2011 where he serves as Chief Financial Officer of FS Investment Corporation. Mr. Goebel brings over 13 years of accounting and auditing experience with areas of focus in fair valuation, SEC reporting and new fund offerings.
Prior to joining the company, Mr. Goebel held a senior manager audit position with Ernst & Young LLP in the firm’s asset management practice and was responsible for the audits of RICs, private investment partnerships, investment advisers and broker dealers. Mr. Goebel began his career as an auditor at Tait, Weller and Baker.
Mr. Goebel received a B.S. in Economics from the Wharton School of the University of Pennsylvania. He is a CFA Charterholder and a certified public accountant.
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BENNETT J. GOODMAN
SENIOR MANAGING DIRECTOR AND CO-FOUNDER, GSO / BLACKSTONE
Bennett Goodman is a Senior Managing Director of The Blackstone Group, and current member of the Blackstone Management Committee.
Before co-founding GSO Capital Partners in 2005, Mr. Goodman was a Founder and Managing Partner of the Alternative Capital Division of Credit Suisse (CSFB) where he was responsible for overseeing $33 billion of assets under management in private equity and credit oriented strategies. He joined CSFB in November 2000 when CSFB acquired DLJ, where he joined in 1988 as the founder of the High Yield Capital Markets Group and Served as Global Head of Leveraged Finance.
Mr. Goodman graduated from Lafayette College and the Harvard
Business School.
GSO Capital Partners Executives Focused on FSIC
DOUGLAS I. OSTROVER
SENIOR MANAGING DIRECTOR AND CO-FOUNDER, GSO / BLACKSTONE
Before co-founding GSO Capital Partners in 2005, Mr. Ostrover was a Managing Director and Chairman of the Leveraged Finance Group of CSFB where he was responsible for all of CSFB’s origination, distribution and trading activities relating to high yield securities, leveraged loans, high yield credit derivatives and distressed securities. Mr. Ostrover joined CSFB in November 2000 when CSFB acquired DLJ, where he was a Managing Director in charge of High Yield and Distressed Sales, Trading and Research.
Mr. Ostrover received a B.A. in Economics from the University of Pennsylvania and an M.B.A. from the Stern School of Business of New York University.
TRIPP SMITH
SENIOR MANAGING DIRECTOR AND CO-FOUNDER, GSO / BLACKSTONE
Before co-founding GSO Capital Partners in 2005, Mr. Smith was Global Head of the Capital Markets Group within the Alternative Capital Division of CSFB. Mr. Smith joined CSFB in November 2000 when it acquired DLJ, where he was Global Head of High Yield Capital Markets. Mr. Smith had been a member of DLJ’s high yield team since he joined the firm in 1993. Prior to that, Mr. Smith worked for Smith Barney and Drexel Burnham Lambert.
Mr. Smith received a B.B.A. in Accounting from the University of Notre Dame.
DANIEL H. SMITH
SENIOR MANAGING DIRECTOR, GSO / BLACKSTONE
Mr. Smith is the Group Head of GSO / Blackstone Debt Funds Management and is a member of its Investment Committee.
Before joining GSO Capital in 2005, Mr. Smith was Managing Partner and
Co-head of RBC Capital Market’s
Alternative Investments Unit at Royal Bank of Canada in New York. Mr. Smith joined RBC in 2001 from Indosuez Capital, a division of Crédit Agricole Indosuez, where he was a Co-Head and Managing Director overseeing the firm’s debt investments business and merchant banking activities. He began his career in investment management in 1987 at Van Kampen American Capital where he focused on below investment grade corporate debt.
Mr. Smith received a B.S. in Petroleum Engineering from the University of Southern California and a Masters in Management from the J.L. Kellogg Graduate School of Management at Northwestern University.
BRAD MARSHALL
MANAGING DIRECTOR AND PORTFOLIO MANAGER FOR FS INVESTMENT CORPORATION
Mr. Marshall serves as a Senior Portfolio Manager for FS Investment Corporation and is a member of GSO / Blackstone Debt
Funds Management’s Investment
Committee.
Before joining GSO Capital Partners in 2005, Mr. Marshall worked in various roles at RBC
Capital Market’s Alternative
Investments Unit at Royal Bank of Canada, including fixed income high yield research and business development within RBC’s private equity funds effort. Prior to RBC, Mr. Marshall helped develop a private equity funds business for TAL Global, a Canadian asset management division of CIBC, and prior to that, he co-founded a microchip verification software company where he served as chief financial officer.
Mr. Marshall received an M.B.A. from McGill University in Montreal and a B.A. with honors in Economics from Queen’s University in Kingston, Canada.
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