FS Credit Income Fund
Notes to Unaudited Financial Statements (continued)
(in thousands, except share and per share amounts)
Note 4. Related Party Transactions (continued)
The following table describes the fees and expenses accrued under the Investment Advisory Agreement and the Administration Agreement during the six months ended April 30, 2018:
| Related Party | | | Source Agreement | | | Description | | | Amount | |
| FS Credit Income Advisor | | | Investment Advisory Agreement | | | Management Fee(1) | | | | $ | 214 | | |
| FS Credit Income Advisor | | | Administration Agreement | | | Administrative Services Expenses(2) | | | | $ | 191 | | |
(1)
During the six months ended April 30, 2018, $111 in base management fees were paid to FS Credit Income Advisor. As of April 30, 2018, $103 in base management fees were payable to FS Credit Income Advisor.
(2)
During the six months ended April 30, 2018, $164 of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Fund by FS Credit Income Advisor and the remainder related to other reimbursable expenses. The Fund paid $156 in administrative services expenses to FS Credit Income Advisor during the six months ended April 30, 2018.
Capital Contributions by FS Investments and GoldenTree
In June 2017, pursuant to a private placement, Michael C. Forman, the principal of FS Credit Income Advisor, contributed $100 to purchase approximately 8,000 Class I common shares at $12.50 per share (“Seed Investment”). Mr. Forman has agreed not to tender these common shares for repurchase as long as FS Credit Income Advisor remains the Fund’s investment adviser. FS Investments is controlled by the Fund’s chairman, president and chief executive officer, Michael C. Forman, and FS Investments’ co-founder, David J. Adelman.
In November 2017, FS Investments, GoldenTree and their affiliates collectively purchased $19,900 of Class I Shares. As of June 12, 2018, the Board, individuals and entities affiliated with FS Credit Income Advisor and GoldenTree held approximately $66 million of Class I Shares. FS Investments, GoldenTree, and their respective employees, partners, officers and affiliates therefore may own a significant percentage of the Fund’s outstanding shares for the foreseeable future. This ownership will fluctuate as other investors subscribe for shares in the Fund’s continuous public offering and any other offerings the Fund may determine to conduct in the future, and as the Fund repurchases shares pursuant to its quarterly repurchase offers. Depending on the size of this ownership at any given point in time, it is expected that these affiliates will, for the foreseeable future, either control the Fund or be in a position to exercise a significant influence on the outcome of any matter put to a vote of shareholders.
Expense Limitation Agreement
Pursuant to the expense limitation agreement (the “2017 Expense Limitation Agreement”), dated as of September 18, 2017, by and between FS Credit Income Advisor and the Fund, FS Credit Income Advisor agreed to pay or absorb, on a quarterly basis, the “ordinary operating expenses” (as defined below) of the Fund to the extent that such expenses exceed 0.00% per annum of the Fund’s average daily net assets attributable to the applicable class of shares for the twelve months beginning October 3, 2017, the date of effectiveness of the Fund’s initial registration statement on Form N-2. The 2017 Expense Limitation Agreement remained in effect until April 5, 2018. For the purpose of the 2017 Expense Limitation Agreement, “ordinary operating expenses” for a class of shares consist of all ordinary expenses of the Fund attributable to such class, including administration fees, transfer agent fees, organization and offering expenses, fees paid to the Fund’s trustees, administrative services expenses, and related costs associated with legal, regulatory compliance and investor relations, but excluding the following: (a) investment advisory fees, (b) portfolio transaction and other investment-related costs (including brokerage commissions, dealer and underwriter spreads, commitment fees on leverage facilities, prime broker fees and expenses, and dividend expenses related to short sales), (c) interest expense and other financing costs, (d) taxes, (e) distribution or shareholder servicing fees and (f) extraordinary expenses.
