FS Investment Corporation III

FSIC III (closed)

Investment objectives

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

Overview

FSIC III 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

FS/KKR Advisor, LLC


Pricing

Net asset value (as of 9/30/2019) $7.42
Annualized distribution rate 1 (based on net asset value) 9.43%
Annualized distribution amount 1 (as of 11/30/2019) $0.70
Distribution reinvestment price 2 (as of 11/30/2019) $7.50


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 III’s net asset value (NAV) per share as of the date indicated. The annualized distribution rate and amount shown may be rounded. The payment of future distributions on FSIC III’s shares of common stock is subject to the discretion of FSIC III’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 six months ended June 30, 2019, 100% of FSIC III’s distributions were funded through net investment income on a tax basis. No portion of FSIC III’s distributions for the six months ended June 30, 2019, was funded through expense reimbursements from FSIC III’s sponsor. The determination of the tax attributes of FSIC III’s distributions is made annually at the end of FSIC III’s fiscal year, and a determination made on an interim basis may not be representative of the actual tax attributes of FSIC III’s distributions for a full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.
2The distribution reinvestment price is subject to change. The price at which shares of FSIC III’s common stock are issued under its distribution reinvestment plan is determined by FSIC III’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 As of 11/30/2019 YTD 1 YR 3 YRS 5 YRS SINCE
INCEPTION
4/2/2014
CUMULATIVE
TOTAL RETURN
since inception*
CUMULATIVE
TOTAL RETURN
since inception*
(with sales charge) 2
CUMULATIVE CASH DISTRIBUTIONS PER SHARE since inception 3
FSIC III 5.2% 2.7% 4.3% 4.9% 5.2% 33.3% 20.0% $3.97
* Compounded monthly
Numbers may be rounded. Returns shown are historical only and are based on past performance. Past performance is not a guarantee of future results. Returns less than one year are cumulative; all others are annualized.
VIEW RETURNS DISCLOSURE Footnotes 123
1Stockholder 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, 1-year and 3-year periods, the calculation assumes that the investor purchased shares at FSIC III’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 III’s distribution reinvestment plan ("DRP"). Since FSIC III closed its public offering to new investors investing through independent broker-dealers (the “IBD Channel”) in February 2016, and has since issued new shares to investors who invested through the IBD Channel only pursuant to its DRP, the calculation of FSIC III’s Stockholder Returns (Without Sales Charge) for the YTD, 1-year and 3-year periods assumes that the investor purchased shares at the beginning of the applicable period at a price based upon FSIC III’s DRP on such date. Valuation as of the end of each period is FSIC III’s distribution reinvestment price on such date, which also equals the redemption price pursuant to FSIC III’s share repurchase program for such dates the share repurchase program was in effect. Stockholder Returns (Without Sales Charge) do not include selling commissions and dealer manager fees, which have totaled up to 10% of FSIC III’s public offering price. Had such selling commissions and dealer manager fees been included, performance would be lower. Upon liquidation or redemption, market conditions may cause the actual values to be more or less than the values shown.

FSIC III’s ratio of total operating expenses to average net assets was 7.38% for the twelve months ended December 31, 2018.
2Stockholder Returns (With Sales Charge) are the total returns an investor received for the highlighted period taking into account all distributions paid during such period, compounded monthly. The calculation assumes that the investor purchased shares at FSIC III’s public offering price, including the maximum selling commissions and dealer manager fees, at inception and reinvested all distributions pursuant to FSIC III’s DRP. Valuation as of the end of each period is FSIC III’s distribution reinvestment price on such date, which also equals the redemption price pursuant to FSIC III’s share repurchase program for such dates the share repurchase program was in effect. Upon liquidation or redemption, market conditions may cause the actual values to be more or less than the values shown.
3Cumulative cash distributions per share reflect the total regular cash distributions paid since inception on a per share basis as of the date indicated above. The payment of future distributions on FSIC III’s shares is subject to the sole discretion of FSIC III’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 Footnote 1
1

Asset: As of June 30, 2019. Calculated as a percentage of fair value. Fair value is determined by FSIC III’s board of directors. Includes investments held by FSIC III and the assets underlying FSIC III’s total return swap (TRS) financing arrangement with Citibank, N.A. Excluding investments held under the TRS, floating rate investments comprised 74% of FSIC III’s investment portfolio; investment allocations were 70% senior secured loans – 1st lien, 9% senior secured loans – 2nd lien, 3% other senior secured debt, 9% subordinated debt, 6% asset based finance and 3% equity/other.

Industry: As of June 30, 2019. Calculated as a percentage of fair value. Fair value is determined by FSIC III’s board of directors. Does not include assets underlying FSIC III's TRS financing arrangement with Citibank, N.A.

Top 10 holdings: As of June 30, 2019. Calculated as a percentage of fair value. Fair value is determined by FSIC III’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. Does not include assets underlying FSIC III’s TRS financing arrangement with Citibank, N.A.

Key facts*

Inception date 4/2/2014
Closed to new investors November 1, 2017
Total AUM $3.77 billion
Number of portfolio companies 155
Floating rate assets 1 75% of portfolio
Distribution frequency 2 Monthly
Liquidity 3 Quarterly tender offers
Tax reporting Form 1099-DIV
*As of 6/30/2019, unless otherwise noted.

Direct originations

Total Cost
$2,895,432
Total fair value
$ $2,797,486

% of total investments
76%
View key facts and core investment strategies disclosure for Footnotes 1234
1Calculated as a percentage of fair value. Fair value is determined by FSIC III’s board of directors. Includes investments held by FSIC III and the assets underlying FSIC III’s total return swap (TRS) financing arrangement with Citibank, N.A. Excluding investments held under the TRS, floating rate investments comprised 74% of FSIC III’s investment portfolio.
2The payment of future distributions on FSIC III’s shares of common stock is subject to the discretion of FSIC III’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.
3FSIC III historically repurchased a limited number of shares pursuant to its share repurchase program, which has currently been suspended. FSIC III may reinstate, 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.
4FSIC III defines direct originations as any investment where the Adviser or its affiliates negotiates the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These directly originated transactions include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions.
View risk factors disclosure

Investing in FSIC III may be considered speculative and involves a high level of risk, including the risk of a substantial loss of investment. The following are some of the risks an investment in FSIC III’s common stock involves; however, you should carefully consider all of the information found in the section of FSIC III’s prospectus entitled “Risk Factors” before deciding to invest in shares of FSIC III’s common stock.

  • Because there is no public trading market for shares of FSIC III’s common stock and FSIC III 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. If you are able to sell your shares before FSIC III completes a liquidity event, it is likely that you will receive less than you paid for them. FSIC III historically repurchased a limited number of shares pursuant to its share repurchase program, which has currently been suspended. FSIC III may reinstate, 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.
  • FSIC III invests in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be difficult to value and illiquid.
  • FSIC III’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 III 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 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 III’s operating results.
  • A lack of liquidity in certain of FSIC III’s investments may adversely affect its business.
  • FSIC III is subject to financial market risks, including changes in interest rates, which may have a substantial negative impact on its investments.
  • FSIC III has borrowed funds to make investments, which increases the volatility of its investments and may increase the risks of investing in its securities.
  • FSIC III has limited operating history and is subject to the business risks and uncertainties associated with any new business.
  • FSIC III is a long-term investment for persons of adequate financial means who have no need for liquidity in their investment.

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