FS Investment Corporation II

FSIC II (closed)

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Investment objectives

Generate current income and, to a lesser extent, long-term capital appreciation

Overview

FSIC II is a business development company (BDC) designed to provide a high level of current income. The fund primarily invests in floating rate, senior secured loans of private U.S. middle market companies.

Adviser

FSIC II Advisor, LLC
An affiliate of FS Investments

Sub-adviser

GSO / Blackstone Debt Funds Management LLC
An affiliate of GSO Capital Partners LP


Pricing

Net asset value (as of 9/30/2016) $8.80
Annualized distribution rate 1 (based on net asset value) 8.57%
Annualized distribution amount 1 (as of 9/30/2016) $0.75
Distribution reinvestment price 2 (as of 11/30/2016) $8.85


View Pricing Disclosure For Footnotes 12
1The annualized distribution rate shown is expressed as a percentage equal to the projected annualized distribution amount per share (which is calculated by annualizing the regular monthly cash distribution per share as of the date indicated, without compounding), divided by FSIC II’s net asset value (NAV) per share as of the date indicated. The annualized distribution rate shown may be rounded. The payment of future distributions on FSIC II’s shares of common stock is subject to the discretion of FSIC II’s board of directors and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions. For the nine months ended September 30, 2016, approximately 97% of FSIC II’s distributions were funded through net investment income, on a tax basis, and approximately 3% of FSIC II's distributions were funded through long-term capital gains proceeds from the sale of assets. No portion of FSIC II’s distributions during the nine months ended September 30, 2016, was funded through expense reimbursements from FSIC II’s sponsor. The determination of the tax attributes of FSIC II’s distributions is made annually at the end of FSIC II’s fiscal year, and a determination made on an interim basis may not be representative of the actual tax attributes of FSIC II’s distributions for a full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV. FSIC II’s total expenses as a percentage of average net assets attributable to common stock was 8.59% for the year ended December 31, 2015.
2The distribution reinvestment price is subject to change. The price at which shares of FSIC II’s common stock are issued under its distribution reinvestment plan is determined by FSIC II’s board of directors, or a committee thereof, at a price per share that is (i) not less than the NAV per share immediately prior to the payment of the distribution and (ii) not more than 2.5% greater than the NAV per share as of such date.

Performance – returns


Stockholder returns 1
Without sales charge, compounded monthly
YTD
11.4%
1 year
6.2%
3 years
Annualized
6.2%
5 years
Annualized
––
Since inception
Annualized
8.0%
Cumulative total return
Since inception
40.2%
Cumulative total return 2
Since inception (with sales charge, compounded monthly)
26.1%
Cumulative cash distributions per share 3
Since inception
$3.28
Inception date
6/18/2012
As of 10/31/2016, unless otherwise noted. Numbers may be rounded.
Returns shown are historical only and are based on past performance. Past performance is not a guarantee of future results.
View Returns disclosure For Footnotes 123
1

Stockholder returns (without sales charge) are the total returns an investor received for the highlighted period taking into account all distributions paid during such period, compounded monthly. Except for the YTD and 1-year periods, the calculation assumes that the investor purchased shares at FSIC II’s public offering price, excluding selling commissions and dealer manager fees, at the beginning of the applicable period and reinvested all cash distributions pursuant to FSIC II’s distribution reinvestment plan (DRP). Since FSIC II closed its public offering in March 2014 and has since issued new shares only pursuant to its DRP, the calculation of FSIC II’s stockholder returns (without sales charge) for the YTD and 1-year periods assumes that the investor purchased shares at the beginning of the applicable period at FSIC II’s DRP price on such date. Valuation as of the end of each period is the repurchase price pursuant to FSIC II’s share repurchase program on such date. Stockholder returns (without sales charge) do not include selling commissions and dealer manager fees, which could total up to 10% of FSIC II’s public offering price. Had such selling commissions and dealer manager fees been included, performance would be lower. Upon liquidation or repurchase, market conditions may cause the actual values to be more or less than the values shown.

The stockholder returns reflect FSIC II’s expenses for each period shown. FSIC II’s total expenses as a percentage of average net assets attributable to common stock was 8.59% for the year ended December 31, 2015.

2The cumulative total return (with sales charge) is the total return an investor received since inception taking into account all distributions paid during such period, compounded monthly. The calculation assumes that the investor purchased shares at FSIC II’s public offering price, including the maximum selling commissions and dealer manager fees, at inception and reinvested all cash distributions pursuant to FSIC II’s DRP. Valuation as of the end of the period is the redemption price pursuant to FSIC II’s share repurchase program on such date. Upon liquidation or repurchase, market conditions may cause the actual value to be more or less than the value shown.
3Cumulative cash distributions per share reflect the total regular cash distributions paid since inception on a per share basis as of October 31, 2016. The payment of future distributions on FSIC II’s shares of common stock is subject to the discretion of FSIC II’s board of directors and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions.

Portfolio composition1

View Portfolio disclosure For Footnotes 1
1As of June 30, 2016. Calculated as percentage of fair value. Fair value is determined by FSIC II’s board of directors. Securities may be an obligation of one or more entities affiliated with the named company. Percentages shown are net of unfunded commitment amounts.

Key facts*

Inception date June 18, 2012
Closed to new investors March 1, 2014
Total AUM (as of 6/30/2016) $4.95 billion
Number of portfolio companies 148
Sponsor commitment 1 $33.10 million
Floating rate assets 2 78% of portfolio
Distribution frequency 3 Monthly
Liquidity 4 Quarterly tender offers
Tax reporting Form 1099-DIV
*As of 6/30/2016, unless otherwise noted.

Core investment strategies 5

Direct originations
79%
Opportunistic
14%

Total
93%
View key facts and core investment strategies disclosure For Footnotes 12345
1Sponsor commitment means proceeds from investors affiliated with FSIC II Advisor, LLC and GSO / Blackstone Debt Funds Management LLC, including members of FSIC II’s board of directors.
2Calculated as a percentage of fair value. Fair value is determined by FSIC II’s board of directors.
3The payment of future distributions on FSIC II’s shares of common stock is subject to the discretion of FSIC II’s board of directors and applicable legal restrictions and, therefore, there can be no assurance as to the amount or timing of any such future distributions.
4FSIC II intends to repurchase a limited number of shares pursuant to its share repurchase program. FSIC II may amend, suspend or terminate its share repurchase program at any time. In addition, any such repurchases will be at the distribution reinvestment price on the date of repurchase.
5Calculated as a percentage of fair value. Fair value is determined by FSIC II’s board of directors. FSIC II defines core investment strategies as any investment that is a direct origination or an opportunistic investment. Broadly syndicated/other investments comprised 7% of FSIC II’s portfolio as of June 30, 2016.
View risk factors disclosure

An investment in the common stock of FSIC II involves a high degree of risk and may be considered speculative. The following are some of the risks an investment in FSIC II’s common stock involves; however, you should carefully consider all of the information found in FSIC II’s annual report on Form 10-K and other periodic reports filed with the SEC before deciding to invest in shares of FSIC II’s common stock.

  • Because there is no public trading market for shares of FSIC II’s common stock and FSIC II is not obligated to effectuate a liquidity event by a specified date, if at all, it is unlikely that you will be able to sell your shares. While FSIC II intends to conduct quarterly tender offers for its shares, only a limited number of shares will be eligible for repurchase and FSIC II may amend, suspend or terminate the share repurchase program at any time.
  • FSIC II’s 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 FSIC II for investment. Any capital returned to stockholders through distributions will be distributed after payment of fees and expenses.
  • 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 FSIC II’s operating results.
  • A lack of liquidity in certain of FSIC II’s investments may adversely affect its business.
  • FSIC II is subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on FSIC II’s investments.
  • FSIC II has borrowed funds to make investments, which increases the volatility of FSIC II’s investments and may increase the risks of investing in our securities.
  • FSIC II is a long-term investment for persons of adequate financial means who have no need for liquidity in their investment.
  • FSIC II’s previous distributions to stockholders were funded in significant part from the reimbursement of certain expenses, including through the waiver of certain investment advisory fees that were subject to repayment to its affiliate, FS Investments. Significant portions of these distributions were not based on FSIC II’s investment performance, and such waivers and reimbursements by FS Investments may not continue in the future. If FS Investments had not agreed to reimburse certain of FSIC II’s expenses, including through the waiver of certain of its advisory fees, significant portions of these distributions would have come from offering proceeds or borrowings. The repayment of amounts owed to FS Investments will reduce the future distributions to which you would otherwise be entitled.

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