PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

FS Investment Corporation II

Consolidated Balance Sheets
(in thousands, except share and per share amounts)

	September 30, 2018 (Unaudited)			December 31, 2017			March 31, 2019 (Unaudited)			December 31, 2018
Assets
Investments, at fair value
Non-controlled/unaffiliated investments (amortized cost—$4,243,543 and $4,397,304, respectively)		$	4,118,376		$	4,374,076
Non-controlled/affiliated investments (amortized cost—$242,088 and $206,404, respectively)			215,168			223,518
Total investments, at fair value (amortized cost—$4,485,631 and $4,603,708, respectively)			4,333,544			4,597,594
Non-controlled/unaffiliated investments (amortized cost—$4,546,541 and $4,312,105, respectively)								$	4,402,970		$	4,131,877
Non-controlled/affiliated investments (amortized cost—$253,344 and $248,500, respectively)									231,848			227,403
Total investments, at fair value (amortized cost—$4,799,885 and $4,560,605, respectively)									4,634,818			4,359,280
Cash			286,780			449,215			109,670			148,172
Foreign currency, at fair value (cost—$594 and $10,938, respectively)			594			11,194
Foreign currency, at fair value (cost—$1,318 and $2,264, respectively)									1,325			2,286
Collateral held at broker for open interest rate swap contracts									6,700			—
Receivable for investments sold and repaid			5,419			682			2,878			4,025
Interest receivable			42,978			45,247			43,314			34,221
Deferred financing costs			6,181			5,284			7,403			6,000
Receivable on interest rate swaps									2,474			173
Prepaid expenses and other assets			146			865			49			97
Total assets		$	4,675,642		$	5,110,081		$	4,808,631		$	4,554,254
Liabilities
Payable for investments purchased		$	36,492		$	3,688		$	54,759		$	42,236
Credit facilities payable (net of deferred financing costs of $3,447 and $5,125, respectively)(1)			1,889,947			2,179,354
Credit facilities payable (net of deferred financing costs of $2,628 and $3,122, respectively)(1)									2,108,336			1,887,132
Stockholder distributions payable			11,439			10,561			11,901			11,688
Management fees payable			17,567			22,595			17,864			17,256
Subordinated income incentive fees payable(2)			11,939			19,129			11,131			5,796
Administrative services expense payable			747			568			499			365
Interest payable			16,866			16,842			18,040			16,480
Directors’ fees payable			300			277			139			243
Interest rate swap income payable									2,406			174
Unrealized depreciation on interest rate swaps									5,739			1,743
Other accrued expenses and liabilities			2,219			4,046			1,600			3,732
Total liabilities			1,987,516			2,257,060			2,232,414			1,986,845
Commitments and contingencies(3)			—			—
Stockholders’ equity
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding			—			—			—			—
Common stock, $0.001 par value, 450,000,000 shares authorized, 326,478,291 and 326,748,337 shares issued and outstanding, respectively			326			327
Common stock, $0.001 par value, 450,000,000 shares authorized, 326,339,625 and 326,445,320 shares issued and outstanding, respectively									326			326
Capital in excess of par value			3,002,165			3,004,948			2,990,149			2,990,996
Accumulated earnings (loss)			(314,365)			(152,254)
Retained earnings (accumulated deficit)(4)									(414,258)			(423,913)
Total stockholders’ equity			2,688,126			2,853,021			2,576,217			2,567,409
Total liabilities and stockholders’ equity		$	4,675,642		$	5,110,081		$	4,808,631		$	4,554,254
Net asset value per share of common stock at period end		$	8.23		$	8.73		$	7.89		$	7.86

(1)

See Note 89 for a discussion of the Company’s financing arrangements.

(2)

See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.

(3)

See Note 910 for a discussion of the Company’s commitments and contingencies.

(4)

See Note 5 for a discussion of the sources of distributions paid by the Company.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Investment income
From non-controlled/unaffiliated investments:
Interest income		$	92,684		$	97,122		$	282,218		$	290,519		$	102,601		$	95,157
Paid-in-kind interest income			2,491			8,863			6,467			17,121			1,881			2,221
Fee income			14,181			5,874			22,641			44,974			7,044			3,951
Dividend income			468			—			7,962			11			71			7,494
From non-controlled/affiliated investments:
Interest income			4,697			7,301			15,699			18,448			5,267			4,999
Paid-in-kind interest income			2,865			393			7,080			3,067			3,075			2,757
Fee income			—			1,349			1,123			1,349			—			1,123
From controlled/affiliated investments:
Interest income			—			—			—			1,217
Total investment income			117,386			120,902			343,190			376,706			119,939			117,702
Operating expenses
Management fees(1)			17,567			25,769			61,739			77,005			17,864			25,234
Subordinated income incentive fees(2)			11,939			10,137			18,994			42,352			11,131			5,575
Administrative services expenses			799			799			2,371			2,530			907			782
Stock transfer agent fees			506			506			1,502			1,502			705			495
Accounting and administrative fees			395			434			1,227			1,303			433			421
Interest expense			26,924			22,786			77,958			62,971
Interest expense(3)															29,575			24,183
Directors’ fees			254			278			1,053			849			142			504
Other general and administrative expenses			1,217			1,102			3,539			2,978			1,068			1,271
Operating expenses			59,601			61,811			168,383			191,490			61,825			58,465
Management fee waiver(1)			—			(3,222)			(3,432)			(9,626)			—			(3,154)
Net expenses			59,601			58,589			164,951			181,864			61,825			55,311
Net investment income			57,785			62,313			178,239			194,842			58,114			62,391
Realized and unrealized gain/loss
Net realized gain (loss) on investments:
Non-controlled/unaffiliated investments			18,501			(13,262)			14,901			(56,519)			(18,665)			(19,294)
Non-controlled/affiliated investments			3			7,320			(25,706)			7,320			179			—
Net realized gain (loss) on foreign currency			446			122			(220)			439			3			(327)
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/unaffiliated investments			(42,337)			14,895			(101,939)			84,385			36,657			(83,890)
Non-controlled/affiliated investments			2,298			8,323			(44,034)			1,991			(399)			(4,722)
Controlled/affiliated investments			—			(18,217)			—			(29,646)
Net change in unrealized appreciation (depreciation) on secured borrowing(3)			—			10			—			(26)
Net change in unrealized appreciation (depreciation) on interest rate swaps															(3,996)			—
Net change in unrealized gain (loss) on foreign currency			(693)			(186)			84			(370)			(1,124)			410
Total net realized and unrealized gain (loss)			(21,782)			(995)			(156,914)			7,574
Total net realized and unrealized gain (loss) on investments															12,655			(107,823)
Net increase (decrease) in net assets resulting from operations		$	36,003		$	61,318		$	21,325		$	202,416		$	70,769		$	(45,432)
Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)		$	0.11		$	0.19		$	0.07		$	0.62		$	0.22		$	(0.14)
Weighted average shares outstanding			324,359,144			324,993,290			324,577,481			325,613,608			324,309,084			324,916,879

(1)

See Note 4 for a discussion of the waiver by FSIC II Advisor, LLC, the Company’s former investment adviser, of certain management fees to which it was otherwise entitled during the applicable period.

(2)

See Note 2 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.

(3)

See Note 89 for a discussion of the Company’s financing arrangements.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Statements of Cash Flows
(in thousands)

		Nine Months Ended September 30,						Three Months Ended March 31,
		2018			2017			2019			2018
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations			$	21,325		$	202,416		$	70,769		$	(45,432)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments				(1,331,866)			(1,490,626)			(453,599)			(199,941)
Paid-in-kind interest				(13,547)			(20,188)			(4,956)			(4,978)
Proceeds from sales and repayments of investments				1,458,900			1,409,656			203,103			301,070
Net realized (gain) loss on investments				10,805			49,199			18,486			19,294
Net change in unrealized (appreciation) depreciation on investments				145,973			(56,730)			(36,258)			88,612
Net change in unrealized (appreciation) depreciation on secured borrowing				—			26
Net change in unrealized (appreciation) depreciation on interest rate swaps										3,996			—
Accretion of discount				(6,215)			(19,542)			(2,314)			(1,703)
Amortization of deferred financing costs and discount				5,192			3,982			990			1,358
Unrealized (gain) loss on borrowings in foreign currency				186			1,114			1,108			219
(Increase) decrease in receivable for investments sold and repaid				(4,737)			71,635			1,147			(241)
(Increase) decrease in interest receivable				2,269			(11,628)			(9,093)			(315)
(Increase) decrease in receivable on interest rate swaps										(2,301)			—
(Increase) decrease in prepaid expenses and other assets				719			(176)			48			39
Increase (decrease) in payable for investments purchased				32,804			29,856			12,523			(3,162)
Increase (decrease) in management fees payable				(5,028)			937			608			(515)
Increase (decrease) in subordinated income incentive fees payable				(7,190)			(6,356)			5,335			(13,554)
Increase (decrease) in administrative services expense payable				179			170			134			235
Increase (decrease) in interest payable				24			2,348			1,560			977
Increase (decrease) in directors’ fees payable				23			16			(104)			222
Increase (decrease) in interest rate swap income payable										2,232			—
Increase (decrease) in other accrued expenses and liabilities				(1,827)			(2,181)			(2,132)			(2,390)
Net cash provided by (used in) operating activities				307,989			163,928			(188,718)			139,795
Cash flows from financing activities
Reinvestment of stockholder distributions				84,192			92,907
Repurchases of common stock				(86,976)			(92,570)			(26,541)			(29,993)
Stockholder distributions				(182,558)			(183,574)			(35,207)			(31,928)
Borrowings under credit facilities(1)				436,346			777,821			436,602			2,970
Repayments of credit facilities(1)				(727,617)			(172,967)			(217,000)			(4,730)
Repayments of repurchase agreement				—			(400,000)
Deferred financing costs paid				(4,411)			(2,804)			(1,899)			—
Net cash provided by financing activities				(481,024)			18,813			155,955			(63,681)
Total increase (decrease) in cash				(173,035)			182,741			(32,763)			76,114
Cash and foreign currency at beginning of period				460,409			347,076
Cash and foreign currency at end of period	��		$	287,374		$	529,817
Cash, restricted cash and foreign currency at beginning of period										150,458			460,409
Cash, restricted cash and foreign currency at end of period(2)									$	117,695		$	536,523
Supplemental disclosure
Distributions reinvested									$	25,694		$	28,959
Local and excise taxes paid			$	2,584		$	1,826		$	2,096		$	2,574

(1)

See Note 89 for a discussion of the Company’s financing arrangements. During the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the Company paid ~~$72,742~~$27,025 and ~~$56,294~~$21,848 respectively, in interest expense on the credit facilities. ~~During the nine months ended September 30, 2017, the Company paid $347 in interest expense on the secured borrowing.~~

(2)

As of March 31, 2019, balance includes cash of $110,995 and restricted cash of $6,700, respectively. As of March 31, 2018, balance includes cash of $536,523 and restricted cash of $0, respectively.

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Senior Secured Loans—First Lien—123.3%
5 Arch Income Fund 2, LLC (m)(q) Diversified Financials 9.0% 11/18/21 $ 28,555 $ 28,577 $ 28,555
5 Arch Income Fund 2, LLC (m)(n)(q) Diversified Financials 9.0% 11/18/21 45,445 45,445 45,445
Abaco Energy Technologies LLC (h)(i)(u) Energy L+950 1.0% 11/20/20 24,781 24,231 24,843
ABB/Con-Cise Optical Group LLC (u) Health Care Equipment & Services L+500 1.0% 6/15/23 2,776 2,786 2,791
Accuride Corporation (u) Automobiles & Components L+525 1.0% 11/17/23 165 167 167
Acosta, Inc. (h)(u) Media L+325 1.0% 9/26/21 6,661 5,397 5,025
Advanced Lighting Technologies, Inc. (h)(v) Materials L+750 1.0% 10/4/22 9,149 7,899 9,149
Advantage Sales & Marketing Inc. (i)(j)(u) Media L+325 1.0% 7/23/21 14,772 14,076 13,731
AG Group Merger Sub, Inc. (f)(g)(h)(i) Commercial & Professional Services L+750 1.0% 12/29/23 61,240 61,240 61,546
Aleris International, Inc. (h)(u) Materials L+475 2/27/23 1,370 1,357 1,397
All Systems Holding LLC (g)(h)(i) Commercial & Professional Services L+767 1.0% 10/31/23 111,623 111,623 112,739
Altus Power America, Inc. (i) Energy L+750 1.5% 9/30/21 3,110 3,110 3,016
Altus Power America, Inc. (n) Energy L+750 1.5% 9/30/21 213 213 207
American Tire Distributors, Inc. (u) Retailing L+425 1.0% 9/1/21 3,590 3,154 3,125
APX Group Inc. (i)(u) Consumer Services L+500 4/1/24 14,791 14,742 14,791
Aspect Software, Inc. Software & Services L+400, 6.5% PIK (6.5% Max PIK) 5/25/20 4,594 4,594 4,072
Aspect Software, Inc. (h) Software & Services L+1050 1.0% 5/25/20 3,621 3,621 3,209
Atlas Aerospace LLC (f)(h)(i) Capital Goods L+725 1.0% 12/29/22 86,857 86,857 88,594
ATX Networks Corp. (f)(m)(u) Technology Hardware & Equipment L+600, 1.0% PIK (1.0% Max PIK) 1.0% 6/11/21 1,867 1,853 1,774
ATX Networks Corp. (f)(i)(m)(u) Technology Hardware & Equipment L+600, 1.0% PIK (1.0% Max PIK) 1.0% 6/11/21 24,936 24,456 23,689
AVF Parent, LLC (f)(h)(i) Retailing L+725 1.3% 3/1/24 74,941 74,941 70,819
BCP Raptor, LLC (i)(u) Energy L+425 1.0% 6/24/24 5,121 4,957 5,055
Belk, Inc. (j)(u) Retailing L+475 1.0% 12/12/22 20,826 18,139 18,281
Borden Dairy Co. (g)(h) Food, Beverage & Tobacco L+819 1.0% 7/6/23 52,500 52,500 51,135
Cimarron Energy Inc. (k)(l) Energy L+1150 PIK (L+1150 Max PIK) 1.0% 12/15/19 25,491 24,841 13,606
ConnectiveRx, LLC (f)(h) Health Care Equipment & Services L+827 1.0% 11/25/21 56,025 55,980 56,098
CSafe Acquisition Co., Inc. (j) Capital Goods L+725 1.0% 11/1/21 626 626 626
CSafe Acquisition Co., Inc. (n) Capital Goods L+725 1.0% 11/1/21 5,635 5,635 5,635
CSafe Acquisition Co., Inc. (f)(g)(h) Capital Goods L+725 1.0% 10/31/23 53,734 53,733 53,733
CSafe Acquisition Co., Inc. (n) Capital Goods L+725 1.0% 10/31/23 22,620 22,620 22,620
CSM Bakery Solutions LLC (i)(u) Food, Beverage & Tobacco L+400 1.0% 7/3/20 4,968 4,813 4,820
Dade Paper & Bag, LLC (f)(g)(h) Capital Goods L+700 1.0% 6/10/24 17,356 17,356 16,987
Dade Paper & Bag, LLC (f)(g)(h) Capital Goods L+750 1.0% 6/10/24 136,078 136,078 136,078
Dayton Superior Corp. (i)(u) Materials L+800, 6.0% PIK (6.0% Max PIK) 1.0% 11/15/21 11,462 11,223 10,030
Diamond Resorts International, Inc. (i)(u) Consumer Services L+375 1.0% 9/2/23 14,121 13,959 13,815
Distribution International, Inc. (j)(u) Capital Goods L+500 1.0% 12/15/21 3,415 3,254 3,244
Eagle Family Foods Group LLC (n) Food, Beverage & Tobacco L+650 1.0% 6/14/23 4,126 4,082 3,684
Eagle Family Foods Group LLC (g)(h) Food, Beverage & Tobacco L+650 1.0% 6/14/24 27,437 27,140 27,073
Eastman Kodak Co. (f)(j)(u) Consumer Durables & Apparel L+625 1.0% 9/3/19 4,575 4,559 4,415

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—136.6%
5 Arch Income Fund 2, LLC	(m)(q)	Diversified Financials	9.0%			11/18/23		$	39,540		$	39,551		$	39,540
5 Arch Income Fund 2, LLC	(m)(n)(q)	Diversified Financials	9.0%			11/18/23			34,461			34,470			34,461
Abaco Energy Technologies LLC	(h)(i)(s)	Energy	L+700, 2.5% PIK (2.5% Max PIK)		1.0%	11/20/20			24,074			23,652			24,134
ABB CONCISE Optical Group LLC	(s)	Retailing	L+500		1.0%	6/15/23			2,762			2,771			2,637
Accuride Corp	(s)	Capital Goods	L+525		1.0%	11/17/23			539			519			453
Acosta Holdco Inc	(h)(s)	Commercial & Professional Services	L+325		1.0%	9/26/21			6,627			5,369			3,122
Addison Holdings	(f)(g)(h)(i)	Commercial & Professional Services	L+675		1.0%	12/29/23			84,953			84,953			85,803
Advanced Lighting Technologies Inc	(h)(t)	Materials	L+750		1.0%	10/4/22			9,102			7,968			9,102
Advantage Sales & Marketing Inc	(i)(s)	Commercial & Professional Services	L+325		1.0%	7/23/21			15,330			14,697			13,086
All Systems Holding LLC	(h)	Commercial & Professional Services	L+725		1.0%	10/31/23			10,557			10,557			10,662
All Systems Holding LLC	(g)(h)(i)	Commercial & Professional Services	L+767		1.0%	10/31/23			101,066			101,066			102,077
Altus Power America Inc		Energy	L+750		1.5%	9/30/21			683			683			656
Altus Power America Inc	(n)	Energy	L+750		1.5%	9/30/21			140			140			135
Altus Power America Inc	(i)	Energy	L+750		1.5%	10/8/21			2,500			2,500			2,400
American Tire Distributors Inc	(s)	Automobiles & Components	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	9/1/23			634			595			626
American Tire Distributors Inc	(s)	Automobiles & Components	L+750		1.0%	9/2/24			4,021			3,512			3,607
Ammeraal Beltech Holding BV	(m)(s)	Capital Goods	E+375			7/30/25		€	1,491			1,725			1,674
Apex Group Limited	(m)(n)	Diversified Financials	L+650			6/15/23		$	2,302			2,241			1,961
Apex Group Limited	(f)(g)(m)	Diversified Financials	L+650		1.0%	6/15/25			44,691			44,183			43,672
Apex Group Limited	(m)(n)	Diversified Financials	L+650		1.0%	6/15/25			5,833			5,809			5,700
Ascension Insurance Inc	(f)(g)(h)	Insurance	L+825		1.3%	6/5/19			91,635			91,579			91,635
Ascension Insurance Inc	(n)	Insurance	L+825		1.3%	6/5/19			13,800			13,800			13,800
Aspect Software Inc	(n)	Software & Services	L+500		1.0%	7/15/23			865			865			865
Aspect Software Inc	(h)	Software & Services	L+500			1/15/24			5,656			5,002			4,991
ATX Networks Corp	(f)(i)(m)(s)	Technology Hardware & Equipment	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	6/11/21			26,516			26,110			25,190
AVF Parent LLC	(h)(i)	Retailing	L+725		1.3%	3/1/24			73,980			73,980			64,178
Belk Inc	(s)	Retailing	L+475		1.0%	12/12/22			22,561			19,823			18,265
Borden Dairy Co	(g)(h)	Food, Beverage & Tobacco	L+750		1.0%	7/6/23			52,500			52,500			47,654
Caprock Midstream LLC	(s)	Energy	L+475			11/3/25			6,046			5,919			5,738
Cimarron Energy Inc		Energy	L+900		1.0%	6/30/21			7,500			7,500			7,500
Conservice LLC		Consumer Services	L+525			11/30/24			31,904			31,595			31,961
Conservice LLC	(n)	Consumer Services	L+525			11/30/24			5,955			5,919			5,820

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Empire Today, LLC (f)(g)(h)(i) Retailing L+800 1.0% 11/17/22 $ 88,425 $ 88,425 $ 88,867
Evergreen AcqCo 1 LP (u) Retailing L+375 1.3% 7/9/19 1,543 1,530 1,503
Fairway Group Acquisition Co. (h) Food & Staples Retailing 12.0% PIK (12.0% Max PIK) 1/3/20 2,951 2,951 2,870
Fairway Group Acquisition Co. (u) Food & Staples Retailing 10.0% PIK (10.0% Max PIK) 1/3/20 1,915 1,749 211
Fairway Group Acquisition Co. (j) Food & Staples Retailing 4.0%, 11.0% PIK (11.0% Max PIK) 8/28/23 207 204 207
Fairway Group Acquisition Co. (n) Food & Staples Retailing 4.0%, 11.0% PIK (11.0% Max PIK) 8/28/23 455 455 455
Fairway Group Acquisition Co. (j) Food & Staples Retailing 4.0%, 11.0% PIK (11.0% Max PIK) 8/28/23 1,041 1,026 1,041
Foresight Energy LLC (h)(i)(j)(m)(u) Energy L+575 1.0% 3/28/22 10,591 10,574 10,608
Fox Head, Inc. (h)(i) Consumer Durables & Apparel L+850 1.0% 12/19/20 8,273 8,273 8,227
FullBeauty Brands Holdings Corp. (i) Retailing L+800 1.0% 10/14/20 55,000 55,000 55,000
FullBeauty Brands Holdings Corp. (i)(u) Retailing L+475 1.0% 10/14/22 4,923 4,586 1,504
GC Agile Intermediate Holdings Ltd. (m)(n) Commercial & Professional Services L+650 6/15/23 2,302 2,234 2,061
GC Agile Intermediate Holdings Ltd. (f)(g)(m) Commercial & Professional Services L+650 1.0% 6/15/25 15,604 15,301 15,440
GC Agile Intermediate Holdings Ltd. (m)(n) Commercial & Professional Services L+650 1.0% 6/15/25 7,509 7,365 7,430
GC Agile Intermediate Holdings Ltd. (m)(n) Commercial & Professional Services L+650 1.0% 6/15/25 6,257 6,150 6,191
Greystone Equity Member Corp. (j)(m) Diversified Financials L+725 3.8% 4/1/26 36,524 36,523 36,614
Greystone Equity Member Corp. (m)(n) Diversified Financials L+725 3.8% 4/1/26 8,476 8,476 8,498
Gulf Finance, LLC (i)(u) Energy L+525 1.0% 8/25/23 4,699 4,592 3,965
H.M. Dunn Co., Inc. (h)(k)(l)(v) Capital Goods L+875 PIK (L+875 Max PIK) 6/30/21 42,645 38,571 9,595
Harrison Gypsum, LLC (h) Materials L+700 1.0% 4/29/24 21,039 20,846 20,636
Harrison Gypsum, LLC (n) Materials L+700 1.0% 4/29/24 6,749 6,749 6,620
Hudson Technologies Co. (h)(i)(m) Commercial & Professional Services L+1025 1.0% 10/10/23 50,974 50,524 40,014
Hybrid Promotions, LLC (h)(i) Consumer Durables & Apparel L+850 1.0% 12/19/20 47,375 47,375 47,114
Icynene U.S. Acquisition Corp. (f)(h)(m) Materials L+700 1.0% 11/30/24 35,730 35,730 35,998
Industrial Group Intermediate Holdings, LLC (f)(g)(h)(i) Materials L+800 1.3% 5/31/20 118,840 118,840 118,989
Industry City TI Lessor, L.P. (h) Consumer Services 10.8%, 1.0% PIK (1.0% Max PIK) 6/30/26 11,731 11,731 12,229
J.C. Penney Corp., Inc. (m)(u) Retailing L+425 1.0% 6/23/23 1,213 1,154 1,118
JAKKS Pacific, Inc. (h) Consumer Durables & Apparel L+900 1.5% 6/14/21 2,793 2,773 2,770
JMC Acquisition Merger Corp. (f)(g)(h) Capital Goods L+750 1.0% 1/29/24 121,947 121,946 121,946
JMC Acquisition Merger Corp. (n) Capital Goods L+750 1.0% 1/29/24 35,269 35,269 35,269
Jo-Ann Stores, LLC (j)(u) Retailing L+500 1.0% 10/16/23 4,247 4,270 4,274
JSS Holdings, Inc. (f)(h)(i) Capital Goods L+800, 0.0% PIK (2.5% Max PIK) 1.0% 3/31/23 72,638 72,052 76,197
Kodiak BP, LLC (g)(h)(i) Capital Goods L+725 1.0% 12/1/24 110,282 110,282 109,041
Kodiak BP, LLC (n) Capital Goods L+725 1.0% 12/1/24 10,504 10,504 10,386
Latham Pool Products, Inc. (f)(h) Consumer Durables & Apparel L+775 1.0% 6/29/21 28,092 28,091 28,091
LD Intermediate Holdings, Inc. (i)(u) Software & Services L+588 1.0% 12/9/22 16,256 15,091 15,769
Logan’s Roadhouse, Inc. (v) Consumer Services L+1300 PIK (L+1300 Max PIK) 1.0% 5/5/19 5,899 5,899 5,899
Logan’s Roadhouse, Inc. (v) Consumer Services L+1300 PIK (L+1300 Max PIK) 1.0% 5/5/19 1,326 1,326 1,326

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor			Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Constellis Holdings LLC/Constellis Finance Corp	(h)	Capital Goods	L+575		1.0%		4/15/22		$	47,206		$	46,547		$	46,676
CSafe Global		Capital Goods	L+725		1.0%		11/1/21			2,296			2,296			2,296
CSafe Global	(n)	Capital Goods	L+725		1.0%		11/1/21			3,965			3,965			3,965
CSafe Global	(f)(g)(h)	Capital Goods	L+725		1.0%	��	10/31/23			53,485			53,485			54,019
CSM Bakery Products	(i)(s)	Food, Beverage & Tobacco	L+400		1.0%		7/3/20			5,217			5,091			5,004
Dade Paper and Bag Co Inc	(f)(g)(h)	Capital Goods	L+700		1.0%		6/10/24			17,269			17,269			16,600
Dade Paper and Bag Co Inc	(f)(g)(h)(i)	Capital Goods	L+750		1.0%		6/10/24			135,389			135,389			132,682
Dayton Superior Corp	(i)(s)	Materials	L+800, 6.0% PIK (6.0% Max PIK)		1.0%		11/15/21			11,934			11,746			10,054
Diamond Resorts International Inc	(i)(s)	Consumer Services	L+375		1.0%		9/2/23			14,050			13,773			13,558
Distribution International Inc	(s)	Retailing	L+500		1.0%		12/15/21			3,389			3,249			3,093
Eagle Family Foods Inc	(n)	Food, Beverage & Tobacco	L+650		1.0%		6/14/23			4,126			4,087			3,499
Eagle Family Foods Inc	(g)(h)	Food, Beverage & Tobacco	L+650		1.0%		6/14/24			27,299			27,024			26,438
Eagleclaw Midstream Ventures LLC	(i)(s)	Energy	L+425		1.0%		6/24/24			11,426			10,908			10,753
EIF Van Hook Holdings LLC	(i)(s)	Energy	L+525				9/5/24			7,285			7,148			6,975
Empire Today LLC	(f)(g)(h)(i)	Retailing	L+700		1.0%		11/17/22			87,975			87,975			87,202
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	10.0% PIK (10.0% Max PIK)				11/27/23			2,013			1,733			264
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)				8/28/23			218			217			218
Fairway Group Holdings Corp	(n)	Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)				8/28/23			455			453			455
Fairway Group Holdings Corp	(h)	Food & Staples Retailing	12.0% PIK (12.0% Max PIK)				11/27/23			3,165			3,165			3,074
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)				11/27/23			1,099			1,085			1,099
Foresight Energy LLC	(h)(m)(s)	Materials	L+575		1.0%		3/28/22			10,591			10,576			10,401
Fox Head Inc	(h)(i)	Consumer Durables & Apparel	L+850		1.0%		12/19/20			52,149			52,149			50,134
FullBeauty Brands Holdings Corp		Retailing	10.0%				6/30/19			188			189			184
FullBeauty Brands Holdings Corp		Retailing	L+900		1.0%		2/7/24			1,099			1,073			1,072
Gulf Finance LLC	(i)(s)	Energy	L+525		1.0%		8/25/23			4,675			4,578			3,745
HM Dunn Co Inc	(h)(k)(l)(t)	Capital Goods	L+875 PIK (L+875 Max PIK)				6/30/21			43,885			38,571			4,005
Hudson Technologies Co	(h)(i)(m)	Commercial & Professional Services	L+1025		1.0%		10/10/23			50,717			50,302			35,882
Icynene Group Ltd	(f)(h)(i)	Materials	L+700		1.0%		11/30/24			35,550			35,550			34,483
Industrial Group Intermediate Holdings LLC	(f)(g)(h)(i)	Materials	L+800		1.3%		5/31/20			118,840			118,840			119,732
Industry City TI Lessor LP	(h)	Consumer Services	10.8%, 1.0% PIK (1.0% Max PIK)				6/30/26			11,308			11,308			12,015
JAKKS Pacific Inc	(h)	Consumer Durables & Apparel	L+900		1.5%		6/14/21			2,793			2,777			2,812

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Logan’s Roadhouse, Inc. (n)(v) Consumer Services L+1300 PIK (L+1300 Max PIK) 1.0% 5/5/19 $ 818 $ 818 $ 818
MB Precision Holdings LLC (g)(h)(k)(l) Capital Goods L+725, 2.3% PIK (2.3% Max PIK) 1.3% 1/23/21 62,431 62,078 27,314
Mitel US Holdings, Inc. (i)(j)(u) Software & Services L+450 7/11/25 4,559 4,548 4,612
Moxie Patriot LLC (f)(g)(u) Energy L+650 1.0% 8/21/20 11,545 11,557 10,737
Murray Energy Corp. (h) Energy L+900 1.0% 2/12/21 10,891 10,817 10,804
naviHealth, Inc. (i)(u) Health Care Equipment & Services L+500 8/1/25 9,376 8,853 9,048
North Haven Cadence Buyer, Inc. (n) Consumer Services L+500 1.0% 9/2/21 2,625 2,625 2,625
North Haven Cadence Buyer, Inc. (h)(i) Consumer Services L+823 1.0% 9/2/22 61,884 61,884 61,807
Nova Wildcat Amerock, LLC (f)(h) Consumer Durables & Apparel L+750 1.3% 9/10/19 11,914 11,843 11,914
PHRC License, LLC (g)(h) Consumer Services L+850 1.5% 4/28/22 67,186 67,186 69,202
Power Distribution, Inc. (f)(i) Capital Goods L+725 1.3% 1/25/23 44,134 44,134 44,851
Production Resource Group, LLC (f)(g)(h)(i) Media L+700 1.0% 8/21/24 207,992 207,992 207,992
Propulsion Acquisition, LLC (f)(h)(i)(u) Capital Goods L+600 1.0% 7/13/21 58,417 56,757 57,833
Relation Insurance, Inc. (f)(g)(h) Insurance L+825 1.3% 3/5/19 77,818 77,682 77,818
Relation Insurance, Inc. (n) Insurance L+825 1.3% 3/5/19 27,800 27,800 27,800
Reliant Acquisitions Holdings, Inc. (h) Health Care Equipment & Services L+675 1.0% 8/30/24 55,153 54,610 54,932
Roadrunner Intermediate Acquisition Co., LLC (f) Health Care Equipment & Services L+675 1.0% 3/15/23 7,215 7,215 6,789
Rogue Wave Software, Inc. (h) Software & Services L+844 1.0% 9/25/21 24,413 24,413 24,413
Safariland, LLC (g)(h) Capital Goods L+778 1.1% 11/18/23 70,234 70,234 63,913
Schenectady International Group, Inc. (j)(u) Materials L+475 1.0% 8/17/25 1,356 1,302 1,365
Sequa Mezzanine Holdings L.L.C. (i)(j)(u) Capital Goods L+500 1.0% 11/28/21 18,184 17,913 17,919
Sequel Youth and Family Services,
LLC (f)(h)(i) Health Care Equipment & Services L+755 1.0% 9/1/22 82,260 82,260 83,330
Sequential Brands Group, Inc. (g)(h)(i) Consumer Durables & Apparel L+875 2/7/24 119,725 117,651 119,725
SGS Cayman, L.P. (h)(m)(u) Commercial & Professional Services L+538 1.0% 4/23/21 1,771 1,707 1,699
SIRVA Worldwide Inc (i)(u) Transportation L+550 7/31/25 2,776 2,736 2,787
Sorenson Communications, Inc. (f)(g)(h)(u) Telecommunication Services L+575 2.3% 4/30/20 97,675 97,526 98,203
SSC (Lux) Limited S.à r.l. (g)(h)(i)(m) Health Care Equipment & Services L+750 1.0% 9/10/24 104,545 104,545 107,290
Staples Canada, ULC (m)(t) Retailing CDOR+700 1.0% 9/12/24 C$ 50,792 50,956 51,402
Strike, LLC (i)(u) Energy L+800 1.0% 11/30/22 $ 4,344 4,244 4,409
SunGard Availability Services Capital,
Inc. (f)(u) Software & Services L+700 1.0% 9/30/21 10,534 10,457 9,797
SunGard Availability Services Capital,
Inc. (u) Software & Services L+1000 1.0% 10/1/22 980 934 965
Sutherland Global Services Inc. (h)(u) Commercial & Professional Services L+538 1.0% 4/23/21 7,608 7,332 7,300
Swift Worldwide Resources US Holdings Corp. (f)(g) Energy L+1000, 1.0% PIK (1.0% Max PIK) 1.0% 7/20/21 19,490 19,490 19,880
Trace3, LLC (f)(g)(h)(i) Software & Services L+675 1.0% 6/6/23 161,990 161,990 161,990
VP Parent Holdings, Inc. (h)(i) Software & Services L+650 1.0% 5/22/25 64,509 63,891 63,862

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Jazz Acquisition Inc		Capital Goods	L+550		1.0%	6/1/22		$	20,258		$	20,258		$	20,091
JC Penney Corp Inc	(m)(s)	Retailing	L+425		1.0%	6/23/23			1,196			1,144			1,066
JHC Acquisition LLC	(f)(g)	Capital Goods	L+750		1.0%	11/6/21			20,495			20,495			20,495
JHC Acquisition LLC	(f)(g)(h)	Capital Goods	L+750		1.0%	1/29/24			101,452			101,452			101,452
JHC Acquisition LLC	(n)	Capital Goods	L+750		1.0%	1/29/24			35,269			35,269			35,269
Jo-Ann Stores Inc	(i)(s)	Retailing	L+500		1.0%	10/20/23			4,903			4,894			4,891
Jostens Inc	(s)	Consumer Services	L+550			12/19/25			3,508			3,405			3,514
JSS Holdings Ltd	(f)(h)(i)	Capital Goods	L+800, 0.0% PIK (2.5% Max PIK)		1.0%	3/31/23			72,790			72,259			74,974
Kodiak BP LLC	(g)(h)(i)	Capital Goods	L+725		1.0%	12/1/24			110,425			110,425			108,079
Kodiak BP LLC	(n)	Capital Goods	L+725		1.0%	12/1/24			9,849			9,849			9,639
Lazard Global Compounders Fund	(m)	Diversified Financials	L+725		3.8%	4/1/26			37,786			37,786			37,219
Lazard Global Compounders Fund	(m)(n)	Diversified Financials	L+725		3.8%	4/1/26			7,214			7,214			7,106
LD Intermediate Holdings Inc	(i)(s)	Software & Services	L+588		1.0%	12/9/22			15,938			14,925			13,886
Lipari Foods LLC		Food & Staples Retailing	L+588		1.0%	1/4/25			121,935			120,971			120,859
Lipari Foods LLC	(n)	Food & Staples Retailing	L+588		1.0%	1/4/25			25,220			25,220			24,997
MB Precision Holdings LLC	(g)(h)(t)	Capital Goods	L+725, 2.3% PIK (2.3% Max PIK)		1.3%	1/23/21			21,369			20,733			21,369
Mitel US Holdings Inc	(i)(s)	Technology Hardware & Equipment	L+450			11/30/25			119			119			117
Monitronics International Inc	(m)(s)	Commercial & Professional Services	L+550		1.0%	9/30/22			3,829			3,698		��	3,220
Murray Energy Corp	(h)	Energy	L+900		1.0%	2/12/21			10,891			10,830			10,826
NaviHealth Inc.	(i)(s)	Health Care Equipment & Services	L+500			8/1/25			15,073			14,419			14,678
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+500		1.0%	9/2/21			2,625			2,625			2,625
North Haven Cadence Buyer Inc	(h)	Consumer Services	L+777		1.0%	9/2/22			10,656			10,656			10,523
North Haven Cadence Buyer Inc	(h)(i)	Consumer Services	L+798		1.0%	9/2/24			51,188			51,188			50,548
North Haven Cadence Buyer Inc		Consumer Services	L+650		1.0%	9/2/24			14,283			14,283			14,105
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+650		1.0%	9/2/24			292			292			288
P2 Energy Solutions, Inc.	(s)	Software & Services	L+400		1.0%	10/30/20			74			73			73
PAE Holding Corp	(s)	Capital Goods	L+550		1.0%	10/20/22			9			9			9
Peak 10 Holding Corp	(s)	Telecommunication Services	L+350			8/1/24			8,942			8,327			8,219
PF Chang’s China Bistro Inc	(s)	Consumer Services	L+650			3/1/26			5,817			5,760			5,751
PHRC License LLC	(g)(h)	Consumer Services	L+850, 0.3% PIK (0.3% Max PIK)		1.5%	4/28/22			66,646			66,646			67,563
Power Distribution Inc	(f)(i)	Capital Goods	L+725		1.3%	1/25/23			43,907			43,907			42,974
Production Resource Group LLC	(f)(g)(h)(i)	Media	L+700		1.0%	8/21/24			207,992			207,992			204,872

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Warren Resources, Inc. (h)(v) Energy L+1000 1.0% 5/22/20 $ 14,623 $ 14,623 $ 14,623
York Risk Services Holding Corp. (u) Insurance L+375 1.0% 10/1/21 982 977 954
Zeta Interactive Holdings Corp. (f)(h) Software & Services L+750 1.0% 7/29/22 37,112 37,112 37,853
Zeta Interactive Holdings Corp. (n) Software & Services L+750 1.0% 7/29/22 6,571 6,571 6,703
Total Senior Secured Loans—First Lien 3,593,534 3,506,870
Unfunded Loan Commitments (193,011) (193,011)
Net Senior Secured Loans—First Lien 3,400,523 3,313,859
Senior Secured Loans—Second Lien—10.4%
Access CIG LLC (u) Software & Services L+775 2/27/26 1,258 1,274 1,265
Access CIG LLC (n)(u) Software & Services L+775 2/27/26 68 68 68
Advantage Sales & Marketing Inc. (u) Media L+650 1.0% 7/25/22 2,291 2,027 1,951
American Bath Group, LLC (i)(u) Capital Goods L+975 1.0% 9/30/24 7,000 6,532 7,105
Ammeraal Beltech Holding BV (m) Capital Goods L+800 9/28/26 52,309 51,263 51,263
Arena Energy, LP (f)(h) Energy L+900, 4.0% PIK (4.0% Max PIK) 1.0% 1/24/21 25,605 25,605 25,605
Bellatrix Exploration Ltd. (m) Energy 8.5% 7/26/23 4,500 4,002 3,983
Bellatrix Exploration Ltd. (m) Energy 8.5% 7/26/23 936 936 938
Bellatrix Exploration Ltd. (m)(n) Energy 8.5% 7/26/23 1,560 1,560 1,564
Byrider Finance, LLC Automobiles & Components L+1000, 0.5% PIK (4.0% Max PIK) 1.3% 8/22/20 29,656 29,656 29,026
Checkout Holding Corp. (i)(k)(l)(u) Media L+675 1.0% 4/11/22 10,000 9,958 1,044
Chisholm Oil and Gas Operating, LLC (h) Energy L+800 1.0% 3/21/24 16,000 16,000 15,883
Crossmark Holdings, Inc. (i)(k)(l)(u) Media L+750 1.3% 12/21/20 7,778 7,786 752
Envigo Laboratories, Inc. (h)(u) Health Care Equipment & Services L+775 4/29/20 3,272 3,175 3,076
Fairway Group Acquisition Co. (u) Food & Staples Retailing 11.0% PIK (11.0% Max PIK) 10/3/21 1,697 1,536 187
Gruden Acquisition, Inc. (h)(u) Transportation L+850 1.0% 8/18/23 15,000 14,491 15,000
Inmar, Inc. (i)(u) Software & Services L+800 1.0% 5/1/25 2,615 2,582 2,628
Jazz Acquisition, Inc. (f)(u) Capital Goods L+675 1.0% 6/19/22 3,700 3,730 3,561
LBM Borrower, LLC (f)(i)(u) Capital Goods L+925 1.0% 8/20/23 23,332 23,221 23,507
Logan’s Roadhouse, Inc. (k)(l)(v) Consumer Services L+850 PIK (L+850 Max PIK) 1.0% 11/23/20 15,927 14,840 4,109
One Call Corp. (h) Health Care Equipment & Services L+375, 6.0% PIK (6.0% Max PIK) 4/11/24 12,281 12,167 12,115
P2 Upstream Acquisition Co. (i)(u) Energy L+800 1.0% 4/30/21 14,500 14,624 13,612
Peak 10 Holding Corp. (i)(j)(u) Software & Services L+725 1.0% 8/1/25 2,865 2,838 2,796
Sequa Mezzanine Holdings L.L.C. (i)(u) Capital Goods L+900 1.0% 4/28/22 7,462 7,413 7,359
SIRVA Worldwide Inc (i)(u) Transportation L+950 7/31/26 2,494 2,309 2,319
SMG US Midco 2, Inc. (u) Consumer Services L+700 1/23/26 831 841 840
Spencer Gifts LLC (i)(u) Retailing L+825 1.0% 6/29/22 20,000 20,067 15,050
Titan Energy Operating, LLC (h)(k)(l) Energy L+1300 PIK (L+1300 Max PIK) 1.0% 2/23/20 86,822 67,595 13,371
Ultimate Baked Goods Midco LLC (i) Food & Staples Retailing L+800 1.0% 8/9/26 17,990 17,814 17,779

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Propulsion Acquisition LLC	(f)(h)(i)(s)	Capital Goods	L+600		1.0%	7/13/21		$	52,322		$	51,121		$	51,798
PSKW LLC	(f)(h)	Health Care Equipment & Services	L+825		1.0%	10/1/21			26,000			26,000			26,000
PSKW LLC	(f)(h)	Health Care Equipment & Services	L+826		1.0%	11/25/21			30,025			29,986			30,025
Reliant Rehab Hospital Cincinnati LLC	(h)	Health Care Equipment & Services	L+675		1.0%	8/30/24			60,001			59,494			59,166
Roadrunner Intermediate Acquisition Co LLC	(f)	Health Care Equipment & Services	L+675		1.0%	9/22/21			7,115			7,115			6,565
Safariland LLC	(g)(h)	Capital Goods	L+765		1.1%	11/18/23			70,234			70,234			63,474
Savers Inc		Retailing	L+650, 0.8% PIK (0.8% Max PIK)		1.5%	3/28/24		C$	36,443			26,804			26,938
Savers Inc		Retailing	L+650, 0.8% PIK (0.8% Max PIK)		1.5%	3/28/24		$	26,242			25,915			25,914
Sequa Corp	(i)(s)	Materials	L+500		1.0%	11/28/21			18,420			18,184			18,075
Sequel Youth & Family Services LLC	(h)	Health Care Equipment & Services	L+700		1.0%	9/1/23			12,199			12,199			12,309
Sequel Youth & Family Services LLC	(f)(h)(i)	Health Care Equipment & Services	L+800			9/1/23			70,000			70,000			70,633
Sequential Brands Group Inc.	(g)(h)(i)	Consumer Durables & Apparel	L+875			2/7/24			118,132			116,207			117,099
SI Group Inc	(s)	Materials	L+475			10/15/25			2,915			2,810			2,919
SIRVA Worldwide Inc	(i)(s)	Commercial & Professional Services	L+550			8/2/25			2,759			2,721			2,697
Sorenson Communications LLC	(f)(g)(h)(s)	Telecommunication Services	L+575		2.3%	4/30/20			107,112			106,964			106,041
Sorenson Communications LLC	(j)(s)	Telecommunication Services	L+650			3/14/24			55,946			53,708			55,456
SSC (Lux) Limited S.a r.l.	(g)(h)(i)(m)	Health Care Equipment & Services	L+750		1.0%	9/10/24			104,545			104,545			105,359
Staples Canada	(m)	Retailing	L+700		1.0%	9/12/24		C$	55,460			42,914			42,111
Sungard Availability Services Capital Inc	(f)(k)(l)(s)	Software & Services	L+700		1.0%	9/30/21		$	9,606			9,471			6,556
Sungard Availability Services Capital Inc	(k)(l)(s)	Software & Services	L+1000		1.0%	10/1/22			894			845			771
Sutherland Global Services Inc	(h)(i)(m)(s)	Software & Services	L+538		1.0%	4/23/21			12,990			12,507			12,697
Swift Worldwide Resources Holdco Ltd	(f)(g)	Energy	L+1000, 1.0% PIK (1.0% Max PIK)		1.0%	7/20/21			19,492			19,492			19,492
Tangoe LLC		Software & Services	L+650		1.0%	11/28/25			51,894			51,395			51,243
Team Health Inc	(s)	Health Care Equipment & Services	L+275		1.0%	2/6/24			78			71			69
Trace3 Inc	(f)(g)(h)(i)	Software & Services	L+675		1.0%	8/5/24			161,180			161,180			161,180
Virgin Pulse Inc	(h)(i)	Software & Services	L+650		1.0%	5/22/25			79,691			79,108			78,663
Vivint Inc	(i)(s)	Commercial & Professional Services	L+500			4/1/24			18,536			18,491			18,131
Warren Resources Inc	(h)(j)(t)	Energy	L+1000, 1.0% PIK (1.0% Max PIK)		1.0%	5/22/20			14,697			14,697			14,697
York Risk Services Group Inc	(s)	Insurance	L+375		1.0%	10/1/21			977			973			920

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

WireCo WorldGroup, Inc. (j)(u) Materials L+900 1.0% 9/30/24 $ 2,014 $ 2,039 $ 2,034
Total Senior Secured Loans—Second Lien 367,949 279,790
Unfunded Loan Commitments (1,628) (1,628)
366,321 278,162
Senior Secured Bonds—6.6%
Advanced Lighting Technologies, Inc. (k)(l)(v) Materials L+700, 10.0% PIK (10.0% Max PIK) 1.0% 10/4/23 11,342 10,664 5,076
Altice France SA (m)(u) Telecommunication Services 8.1% 2/1/27 917 917 946
APX Group, Inc. (h)(u) Consumer Services 7.9% 12/1/22 3,931 3,903 4,015
Artesyn Embedded Technologies Inc. (u) Capital Goods 9.8% 10/15/20 1,052 1,011 1,010
Black Swan Energy Ltd. (m) Energy 9.0% 1/20/24 1,333 1,333 1,333
Boyne USA Inc. (u) Consumer Services 7.3% 5/1/25 44 46 47
DJO Finance LLC (u) Health Care Equipment & Services 8.1% 6/15/21 1,563 1,575 1,602
Eagle Intermediate Global Holding B.V. (m)(u) Consumer Durables & Apparel 7.5% 5/1/25 3,659 3,688 3,590
FourPoint Energy, LLC (h)(i) Energy 9.0% 12/31/21 46,313 44,990 46,776
Genesys Telecommunications Laboratories, Inc. (u) Software & Services 10.0% 11/30/24 144 160 160
Global A&T Electronics Ltd. (i)(m)(u) Semiconductors & Semiconductor Equipment 8.5% 1/12/23 15,949 16,081 15,511
J.C. Penney Corp., Inc. (j)(m)(u) Retailing 5.7% 6/1/20 126 118 112
JW Aluminum Co. (h)(u)(v) Materials 10.3% 6/1/26 33,001 33,001 33,042
Mood Media Corp. (h)(m)(v) Media L+1400 PIK (L+1400 Max PIK) 1.0% 6/28/24 28,478 28,377 28,478
Pattonair Holdings, Ltd. (m)(u) Capital Goods 9.0% 11/1/22 4,111 4,261 4,259
Pisces Midco Inc. (u) Capital Goods 8.0% 4/15/26 2,014 1,981 2,030
Sorenson Communications, Inc. (h)(u) Telecommunication Services 9.0%, 0.0% PIK (9.0% Max PIK) 10/31/20 7,058 6,939 6,987
Starfruit Finco B.V. (u) Materials 8.0% 10/1/26 2,019 2,019 2,052
Sunnova Energy Corp. Energy 6.0%, 6.0% PIK (6.0% Max PIK) 1/24/19 1,660 1,660 1,658
Talos Production LLC (h)(u) Energy 11.0% 4/3/22 4,500 4,715 4,832
Velvet Energy Ltd. (i)(m) Energy 9.0% 10/5/23 15,000 15,000 15,675
Total Senior Secured Bonds 182,439 179,191
Subordinated Debt—9.6%
APX Group, Inc. (h)(u) Consumer Services 8.8% 12/1/20 3,839 3,684 3,841
APX Group, Inc. (h)(u) Consumer Services 7.6% 9/1/23 5,712 5,179 5,272
Ascent Resources Utica Holdings, LLC (h)(i)(u) Energy 10.0% 4/1/22 40,000 40,000 45,075
Aurora Diagnostics, LLC (h)(u) Health Care Equipment & Services 12.3%, 1.5% PIK (1.5% Max PIK) 1/15/20 6,235 5,886 5,666
Avantor, Inc. (i)(u) Materials 9.0% 10/1/25 20,000 20,000 20,670
Byrider Holding Corp. Automobiles & Components 20.0% PIK (20.0% Max PIK) 4/1/22 1,458 1,458 1,458
CEC Entertainment, Inc. (u) Consumer Services 8.0% 2/15/22 18,715 18,594 17,148
ClubCorp Holdings, Inc. (h)(u) Consumer Services 8.5% 9/15/25 4,679 4,515 4,466

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Zeta Interactive Holdings Corp	(f)(h)	Software & Services	L+750		1.0%	7/29/22		$	37,112		$	37,112		$	37,483
Zeta Interactive Holdings Corp	(n)	Software & Services	L+750		1.0%	7/29/22			6,571			6,571			6,637
Total Senior Secured Loans—First Lien												3,770,028			3,677,909
Unfunded Loan Commitments												(158,789)			(158,789)
Net Senior Secured Loans—First Lien												3,611,239			3,519,120
Senior Secured Loans—Second Lien—15.1%
Access CIG LLC	(s)	Software & Services	L+775			2/27/26			1,326			1,342			1,317
Advantage Sales & Marketing Inc	(s)	Commercial & Professional Services	L+650		1.0%	7/25/22			2,291			2,052			1,693
American Bath Group LLC	(i)(s)	Capital Goods	L+975		1.0%	9/30/24			7,000			6,605			7,000
Ammeraal Beltech Holding BV	(m)	Capital Goods	L+800			7/27/26			52,309			51,306			51,208
Arena Energy LP	(f)(h)	Energy	L+900, 4.0% PIK (4.0% Max PIK)		1.0%	1/24/21			26,125			26,125			26,125
athenahealth Inc	(h)	Health Care Equipment & Services	L+850		1.0%	2/11/27			65,229			64,590			65,554
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			6,372			5,966			5,792
Bellatrix Exploration Ltd	(m)(n)	Energy	8.5%			7/26/23			624			624			618
Byrider Finance LLC		Automobiles & Components	L+1000, 0.5% PIK (4.0% Max PIK)		1.3%	8/22/20			29,731			29,731			29,397
Catalina Marketing Corp	(i)(k)(l)(s)	Media	L+675		1.0%	4/11/22			10,000			9,958			200
Chisholm Oil & Gas Operating LLC	(h)	Energy	L+800		1.0%	3/21/24			16,000			16,000			15,705
Crossmark Holdings Inc	(i)(k)(l)(s)	Media	L+750		1.3%	12/21/20			7,778			7,786			58
Envigo Laboratories Inc	(h)(s)	Health Care Equipment & Services	L+775			4/29/20			3,272			3,202			3,043
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	11.0% PIK (11.0% Max PIK)			2/24/24			1,793			1,520			—
Grocery Outlet Inc	(s)	Food & Staples Retailing	L+725			10/22/26			2,287			2,266			2,287
Gruden Acquisition Inc	(h)(s)	Transportation	L+850		1.0%	8/18/23			15,000			14,531			14,887
Jazz Acquisition Inc	(f)(s)	Capital Goods	L+675		1.0%	6/19/22			3,700			3,727			3,478
LBM Borrower LLC	(f)(i)(s)	Capital Goods	L+925		1.0%	8/20/23			29,332			29,099			28,745
One Call Care Management Inc	(h)	Insurance	L+375, 6.0% PIK (6.0% Max PIK)		1.0%	4/11/24			12,666			12,560			11,554
OPE Inmar Acquisition Inc	(i)(s)	Software & Services	L+800		1.0%	5/1/25			2,615			2,584			2,596
P2 Energy Solutions, Inc.	(i)(s)	Software & Services	L+800		1.0%	4/30/21			14,500			14,603			14,011
Paradigm Acquisition Corp	(s)	Health Care Equipment & Services	L+750			10/26/26			1,599			1,595			1,591
Peak 10 Holding Corp	(i)(s)	Telecommunication Services	L+725		1.0%	8/1/25			5,814			5,635			5,146
Pure Fishing Inc	(i)	Consumer Durables & Apparel	L+838		1.0%	12/31/26			46,828			46,371			47,107
Rise Baking Company	(i)	Food, Beverage & Tobacco	L+800		1.0%	8/9/26			17,990			17,821			17,676

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Diamond Resorts International, Inc. (u) Consumer Services 10.8% 9/1/24 $ 3,048 $ 3,197 $ 2,970
Eclipse Resources Corp. (u) Energy 8.9% 7/15/23 9,175 9,042 9,359
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 1/30/25 950 950 941
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 4/30/25 6,035 6,035 5,983
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 9/3/25 1,247 1,247 1,235
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 9/29/25 1,174 1,174 1,162
Global Jet Capital Inc. (e)(m) Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 12/4/25 8,667 8,667 8,569
Global Jet Capital Inc. (e)(m) Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 12/9/25 1,417 1,417 1,401
Global Jet Capital Inc. (e)(m) Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 1/29/26 742 742 734
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 12/2/26 2,246 2,246 2,218
Great Lakes Dredge & Dock Corp. (u) Capital Goods 8.0% 5/15/22 9,000 9,000 9,270
Greystone Mezzanine Equity Member Corp. (n) Diversified Financials L+650 4.5% 9/15/25 15,000 15,000 14,813
KGA Escrow LLC (u) Automobiles & Components 7.5% 8/15/23 6,004 6,057 6,254
P.F. Chang’s China Bistro, Inc. (h)(i)(u) Consumer Services 10.3% 6/30/20 29,790 29,036 28,863
Quorum Health Corp. (j)(u) Health Care Equipment & Services 11.6% 4/15/23 2,566 2,554 2,574
S1 Blocker Buyer Inc. Commercial & Professional Services 10.0% PIK (10.0% Max PIK) 10/31/22 240 240 240
Sorenson Communications, Inc. (h)(u) Telecommunication Services 13.9%, 0.0% PIK (13.9% Max PIK) 10/31/21 5,364 5,156 5,645
SRS Distribution Inc. (h)(j)(u) Capital Goods 8.3% 7/1/26 11,224 11,052 10,985
Stars Group Holdings B.V. (m)(u) Consumer Services 7.0% 7/15/26 1,438 1,438 1,485
SunGard Availability Services Capital, Inc. (u) Software & Services 8.8% 4/1/22 5,900 4,801 2,852
Team Health Holdings Inc (u) Health Care Equipment & Services 6.4% 2/1/25 893 783 785
Vertiv Group Corp. (h)(u) Capital Goods 9.3% 10/15/24 15,746 15,570 16,460
York Risk Services Holding Corp. (h)(i)(u) Insurance 8.5% 10/1/22 38,070 35,583 33,629
Total Subordinated Debt 270,303 272,023
Unfunded Debt Commitments (15,000) (15,000)
Net Subordinated Debt 255,303 257,023
Collateralized Securities—0.9%
CGMS CLO 2013-3A Class Subord. (m) Diversified Financials 22.3% 7/15/25 23,263 10,891 14,105
NewStar Clarendon 2014-1A Class D (m) Diversified Financials L+435 1/25/27 1,060 1,013 1,063
NewStar Clarendon 2014-1A Class Subord. B (m) Diversified Financials 9.7% 1/25/27 12,140 7,848 8,267
Total Collateralized Securities 19,752 23,435
Equity/Other—10.5%
5 Arches, LLC, Common Equity (m)(p) Diversified Financials 8,000 197 400
Abaco Energy Technologies LLC, Common Equity (l) Energy 3,055,556 3,056 1,337
Abaco Energy Technologies LLC, Preferred Equity (l) Energy 12,734,481 637 6,686
ACP FH Holdings GP, LLC, Common Equity (e)(l) Consumer Durables & Apparel 88,571 89 48
ACP FH Holdings, LP, Common Equity (e)(l) Consumer Durables & Apparel 8,768,572 8,768 4,757

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Sequa Corp	(i)(s)	Materials	L+900		1.0%	4/28/22		$	7,462		$	7,419		$	7,322
SIRVA Worldwide Inc	(i)(s)	Commercial & Professional Services	L+950			8/2/26			2,494			2,315			2,195
SMG/PA	(s)	Consumer Services	L+700			1/23/26			3,641			3,671			3,691
Spencer Gifts LLC	(i)(s)	Retailing	L+825		1.0%	6/29/22			8,736			8,761			8,342
Titan Energy LLC	(h)(k)(l)	Energy	L+1300 PIK (L+1300 Max PIK)		1.0%	2/3/20			91,946			67,595			6,743
WireCo WorldGroup Inc	(s)	Capital Goods	L+900		1.0%	9/30/24			5,115			5,176			5,102
Total Senior Secured Loans—Second Lien												472,536			390,183
Unfunded Loan Commitments												(624)			(624)
Net Senior Secured Loans—Second Lien												471,912			389,559
Other Senior Secured Debt—6.7%
Advanced Lighting Technologies Inc	(k)(l)(t)	Materials	L+700, 10.0% PIK (10.0% Max PIK)		1.0%	10/4/23			12,493			10,663			344
Akzo Nobel Specialty Chemicals	(m)(s)	Materials	8.0%			10/1/26			2,019			2,020			2,037
Artesyn Embedded Technologies Inc	(s)	Technology Hardware & Equipment	9.8%			10/15/20			1,574			1,526			1,495
Black Swan Energy Ltd	(m)	Energy	9.0%			1/20/24			1,333			1,333			1,320
FourPoint Energy LLC	(h)(i)	Energy	9.0%			12/31/21			46,313			45,226			45,386
Genesys Telecommunications Laboratories Inc	(s)	Technology Hardware & Equipment	10.0%			11/30/24			144			158			158
JC Penney Corp Inc	(m)(s)	Retailing	5.7%			6/1/20			126			118			115
JW Aluminum Co	(h)(s)(t)	Materials	10.3%			6/1/26			33,001			33,001			34,197
Lycra	(m)(s)	Consumer Durables & Apparel	7.5%			5/1/25			3,659			3,686			3,613
Mood Media Corp	(h)(t)	Media	L+1400 PIK (L+1400 Max PIK)		1.0%	7/1/24			30,835			30,730			30,835
Numericable-SFR	(m)(s)	Software & Services	8.1%			2/1/27			917			917			928
Pattonair Holdings Ltd	(m)(s)	Capital Goods	9.0%			11/1/22			4,111			4,245			4,184
Ply Gem Holdings Inc	(s)	Capital Goods	8.0%			4/15/26			7,807			7,463			7,015
Sorenson Communications LLC	(h)(s)	Telecommunication Services	9.0%, 0.0% PIK (9.0% Max PIK)			10/31/20			7,058			6,964			7,128
Sunnova Energy Corp		Energy	6.0%, 6.0% PIK (6.0% Max PIK)			7/31/19			1,140			1,140			1,136
Velvet Energy Ltd	(i)(m)	Energy	9.0%			10/5/23			15,000			15,000			15,338
Vivint Inc	(h)(s)	Commercial & Professional Services	7.9%			12/1/22			11,307			11,089			11,334
Vivint Inc	(h)(s)	Commercial & Professional Services	7.6%			9/1/23			7,309			6,733			6,237
Total Other Senior Secured Debt												182,012			172,800

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Advanced Lighting Technologies, Inc., Common Equity (l)(v) Materials $ 265,747 $ 7,471 $ —
Advanced Lighting Technologies, Warrants (l)(v) Materials 10/4/27 4,189 39 —
Altus Power America Holdings, LLC, Common
Equity (l) Energy 462,008 462 69
Altus Power America Holdings, LLC, Preferred
Equity (r) Energy 9.0%, 5.0% PIK 10/3/23 1,036,585 1,037 1,000
Ascent Resources Utica Holdings, LLC, Common Equity (l)(o) Energy 128,734,129 38,700 41,195
ASG Everglades Holdings, Inc., Common Equity (l)(v) Software & Services 625,178 13,475 32,666
ASG Everglades Holdings, Inc., Warrants (l)(v) Software & Services 6/27/22 253,704 7,231 7,738
Aspect Software Parent, Inc., Common Equity (l) Software & Services 403,955 9,932 —
ATX Holdings, LLC, Common Equity (l)(m) Technology Hardware & Equipment 72,635 116 69
Aurora Diagnostics Holdings, LLC, Warrants (h)(l) Health Care Equipment & Services 5/25/27 94,193 686 975
Byrider Holding Corp., Common Equity (l) Automobiles & Components 1,389 — —
Chisholm Oil and Gas, LLC, Series A Units (l)(p) Energy 75,000 75 70
Cimarron Energy Holdco Inc., Common Equity (l) Energy 3,675 3,323 —
Cimarron Energy Holdco Inc., Preferred Equity (l) Energy 626,806 627 172
CSF Group Holdings, Inc., Common Equity (l) Capital Goods 417,400 417 459
Eastman Kodak Co., Common Equity (l)(u) Consumer Durables & Apparel 1,846 36 6
Envigo Laboratories, Inc., Series A Warrants (h)(l)(u) Health Care Equipment & Services 4/29/24 10,924 — —
Envigo Laboratories, Inc., Series B Warrants (h)(l)(u) Health Care Equipment & Services 4/29/24 17,515 — —
Escape Velocity Holdings, Inc., Common Equity (l) Software & Services 33,216 332 1,277
Fairway Group Holdings Corp., Common Equity (l) Food & Staples Retailing 31,626 1,016 —
FourPoint Energy, LLC, Common Equity, Class C-II-A Units (l)(p) Energy 13,000 13,000 3,672
FourPoint Energy, LLC, Common Equity, Class D Units (l)(p) Energy 2,437 1,610 695
FourPoint Energy, LLC, Common Equity, Class E-II Units (l)(p) Energy 29,730 7,432 8,361
FourPoint Energy, LLC, Common Equity, Class E-III
Units (l)(p) Energy 43,875 10,969 12,395
Global Jet Capital Holdings, LP, Preferred Equity (e)(l) Commercial & Professional Services 6,228,866 6,229 2,273
H.I.G. Empire Holdco, Inc., Common Equity (l) Retailing 411 1,227 1,268
Harvest Oil & Gas Corp., Common Equity (e)(l)(u) Energy 7,166 158 143
Harvey Holdings, LLC, Common Equity (l) Capital Goods 666,667 667 1,717
HM Dunn Aerosystems, Inc., Preferred Equity, Series A (h)(l)(v) Capital Goods 12,857 — —
HM Dunn Aerosystems, Inc., Preferred Equity,
Series B (h)(l)(v) Capital Goods 12,857 — —
Industrial Group Intermediate Holdings, LLC, Common Equity (l)(p) Materials 2,678,947 2,679 2,411

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Subordinated Debt—8.6%
All Systems Holding LLC		Commercial & Professional Services	10.0% PIK (10.0% Max PIK)		10/31/22		$	206		$	206		$	206
Ascent Resources Utica Holdings LLC/ARU Finance Corp	(h)(i)(s)	Energy	10.0%		4/1/22			26,026			26,026			28,506
athenahealth Inc		Health Care Equipment & Services	L+1125 PIK (L+1125 Max PIK)		11/30/25			32,614			32,614			32,988
Avantor Inc	(i)(s)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%		10/1/25			20,000			20,000			21,675
Byrider Finance LLC		Automobiles & Components	20.0% PIK (20.0% Max PIK)		3/31/22			1,604			1,604			1,604
CEC Entertainment Inc	(s)	Consumer Services	8.0%		2/15/22			11,479			11,374			10,622
ClubCorp Club Operations Inc	(h)(s)	Consumer Services	8.5%		9/15/25			10,733			10,373			9,803
Diamond Resorts International Inc	(s)	Consumer Services	10.8%		9/1/24			3,048			3,187			2,890
Eclipse Resources Corp	(m)(s)	Energy	8.9%		7/15/23			9,175			9,053			8,756
Hub International Ltd	(s)	Insurance	7.0%		5/1/26			578			563			573
Intelsat Jackson Holdings SA	(m)(s)	Media	5.5%		8/1/23			5,752			5,204			5,112
Ken Garff Automotive LLC	(s)	Retailing	7.5%		8/15/23			6,004			6,053			6,102
LifePoint Hospitals Inc	(s)	Health Care Equipment & Services	9.8%		12/1/26			7,656			7,572			7,953
Logan’s Roadhouse Inc		Consumer Services			11/1/24			4,907			4,859			4,907
Quorum Health Corp	(s)	Health Care Equipment & Services	11.6%		4/15/23			2,396			2,384			2,157
Sorenson Communications LLC	(h)(s)	Telecommunication Services	13.9%, 0.0% PIK (13.9% Max PIK)		10/31/21			5,364			5,182			5,525
SRS Distribution Inc	(h)(s)	Capital Goods	8.3%		7/1/26			11,667			11,479			11,229
Stars Group Holdings BV	(m)(s)	Consumer Services	7.0%		7/15/26			1,438			1,438			1,501
Sungard Availability Services Capital Inc	(k)(l)(s)	Software & Services	8.8%		4/1/22			5,900			4,860			315
Team Health Inc	(s)	Health Care Equipment & Services	6.4%		2/1/25			6,901			5,987			5,620
Vertiv Group Corp	(h)(s)	Technology Hardware & Equipment	9.3%		10/15/24			16,584			16,419			16,377
Vivint Inc	(h)(s)	Commercial & Professional Services	8.8%		12/1/20			7,602			7,360			7,497
York Risk Services Group Inc	(h)(i)(s)	Insurance	8.5%		10/1/22			38,070			35,840			30,932
Total Subordinated Debt											229,637			222,850

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

JMC Acquisition Holdings, LLC, Common
Equity (l) Capital Goods $ 1,449 $ 1,449 $ 1,681
JSS Holdco, LLC, Net Profits Interest (l) Capital Goods — — 720
JW Aluminum Co., Common Equity (e)(i)(l)(v) Materials 548 — 2,452
JW Aluminum Co., Preferred Equity (e)(i)(v) Materials 12.5% PIK 11/17/25 4,869 30,226 33,063
MB Precision Investment Holdings LLC, Class A-2 Units (l)(p) Capital Goods 2,287,659 2,288 —
Mood Media Corp., Common Equity (l)(m)(v) Media 17,400,835 12,644 18,941
North Haven Cadence TopCo, LLC, Common
Equity (l) Consumer Services 2,916,667 2,917 4,594
PDI Parent LLC, Common Equity (l) Capital Goods 2,076,923 2,077 1,713
Professional Plumbing Group, Inc., Common
Equity (e)(l) Capital Goods 3,000,000 3,000 9,150
Ridgeback Resources Inc., Common Equity (e)(l)(m)(t) Energy 817,308 5,022 5,644
Roadhouse Holding Inc., Common Equity (l)(v) Consumer Services 4,481,763 4,657 —
S1 Blocker Buyer Inc., Common Equity Commercial & Professional Services 124 1,201 1,941
Sequential Brands Group, Inc., Common Equity (e)(l)(u) Consumer Durables & Apparel 408,685 5,517 683
Sorenson Communications, Inc., Common Equity (e)(l) Telecommunication Services 43,796 — 36,101
SSC Holdco Limited, Common Equity (l)(m) Health Care Equipment & Services 261,364 5,227 6,142
Sunnova Energy Corp., Common Equity (l) Energy 384,746 1,444 —
Sunnova Energy Corp., Preferred Equity (l) Energy 70,229 374 406
Swift Worldwide Resources Holdco Limited, Common
Equity (l)(m) Energy 1,250,000 2,010 875
TE Holdings, LLC, Common Equity (e)(l)(p)(u) Energy 717,718 6,101 718
TE Holdings, LLC, Preferred Equity (e)(l)(u) Energy 475,758 4,751 3,092
Titan Energy, LLC, Common Equity (e)(l)(u) Energy 200,040 6,322 82
Warren Resources, Inc., Common Equity (l)(v) Energy 2,371,337 11,145 9,011
White Star Petroleum Holdings, LLC, Common
Equity (l)(p) Energy 1,613,753 1,372 686
Zeta Interactive Holdings Corp., Preferred Equity, Series E-1 (l) Software & Services 620,025 4,928 6,388
Zeta Interactive Holdings Corp., Preferred Equity, Series F (l) Software & Services 563,932 4,928 5,671
Zeta Interactive Holdings Corp., Warrants (l) Software & Services 4/20/27 84,590 — 261
Total Equity/Other 261,293 281,874
TOTAL INVESTMENTS—161.2% $ 4,485,631 4,333,544
LIABILITIES IN EXCESS OF OTHER ASSETS—(61.2%)
(1,645,418)

NET ASSETS—100.0% $ 2,688,126

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity	Principal Amount(c)/ Shares			Cost			Fair Value(d)
Asset Based Finance—1.8%
Altus Power America Inc, Preferred Stock	(r)	Energy	9.0%, 5.0% PIK		10/3/23			1,107,723		$	1,108		$	1,106
CGMS CLO 2013-3A Class Subord., 7/15/2025	(m)	Commercial & Professional Services	26.1%		7/15/25		$	23,263			9,069			12,251
Global Jet Capital LLC, Structured Mezzanine	(j)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/30/25		$	1,023			994			1,006
Global Jet Capital LLC, Structured Mezzanine	(j)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		4/30/25		$	6,502			6,315			6,396
Global Jet Capital LLC, Structured Mezzanine	(j)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/3/25		$	1,344			1,305			1,322
Global Jet Capital LLC, Structured Mezzanine	(j)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/29/25		$	1,265			1,229			1,244
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	7,636			7,417			7,512
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	1,700			1,651			1,673
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	176			171			173
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	1,351			1,312			1,329
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	654			635			643
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	146			142			144
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/2/26		$	2,420			2,350			2,380
NewStar Clarendon 2014-1A Class D	(m)	Diversified Financials	20.3%		1/25/27		$	12,140			7,579			8,089
Total Asset Based Finance											41,277			45,268

~~(a)~~

~~Security may be an obligation of one or more entities affiliated with the named company.~~

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of ~~September 30, 2018~~March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity		Number of Shares		Cost			Fair Value(d)
Equity/Other—11.1%
Abaco Energy Technologies LLC, Common Stock	(l)	Energy						3,055,556		$	3,056		$	1,413
Abaco Energy Technologies LLC, Preferred Stock	(l)	Energy						12,734,481			637			7,322
Advanced Lighting Technologies Inc, Common Stock	(l)(t)	Materials						265,747			7,471			—
Advanced Lighting Technologies Inc, Warrant	(l)(t)	Materials				10/4/27		4,189			39			—
All Systems Holding LLC, Common Stock		Commercial & Professional Services						1,240,204			1,201			1,692
Altavair NewCo, Private Equity	(l)(m)	Capital Goods						3,429,458			3,429			3,519
Ascent Resources Utica Holdings LLC/ARU Finance Corp, Common Stock	(o)	Energy						13,556			12,900			4,365
Ascent Resources Utica Holdings LLC/ARU Finance Corp, Trade Claim	(o)	Energy						115,178,571			25,800			37,088
ASG Technologies, Common Stock	(l)(t)	Software & Services						625,178			13,475			36,667
ASG Technologies, Warrants	(l)(t)	Software & Services				6/27/22		253,704			7,231			9,362
Aspect Software Inc, Common Stock	(h)(l)	Software & Services						304,599			494			494
Aspect Software Inc, Warrant	(h)(l)	Software & Services				1/15/24		304,120			—			—
ATX Networks Corp, Common Stock	(l)(m)	Technology Hardware & Equipment						72,635			116			94
Aurora Diagnostics Holdings LLC/Aurora Diagnostics Financing Inc, Warrant	(h)(l)	Health Care Equipment & Services				5/25/27		94,193			686			277
Australis Maritime, Private Equity	(l)(m)	Transportation						1,136,041			1,136			1,136
Byrider Finance LLC, Common Stock	(l)	Automobiles & Components						1,389			—			—
Chisholm Oil & Gas Operating LLC, Series A Units	(l)(p)	Energy						75,000			75			34
Cimarron Energy Inc, Common Stock	(l)	Energy						4,302,293			3,950			217
Cimarron Energy Inc, Participation Option	(l)	Energy						25,000,000			1,289			1,263
CSafe Global, Common Stock	(l)	Capital Goods						417,400			417			741
Empire Today LLC, Common Stock	(l)	Retailing						411			1,227			1,350
Envigo Laboratories Inc, Series A Warrant	(h)(l)(s)	Health Care Equipment & Services				4/29/24		10,924			—			—
Envigo Laboratories Inc, Series B Warrant	(h)(l)(s)	Health Care Equipment & Services				4/29/24		17,515			—			—
Fairway Group Holdings Corp, Common Stock	(l)	Food & Staples Retailing						31,626			1,016			—
FourPoint Energy LLC, Common Stock, Class C - II - A Units	(l)(p)	Energy						13,000			13,000			2,896
FourPoint Energy LLC, Common Stock, Class D Units	(l)(p)	Energy						2,437			1,610			549
FourPoint Energy LLC, Common Stock, Class E - II Units	(l)(p)	Energy						29,730			7,432			6,622
FourPoint Energy LLC, Common Stock, Class E - III Units	(l)(p)	Energy						43,875			10,969			9,773
Fox Head Inc, Common Stock	(e)(l)	Consumer Durables & Apparel						8,857,143			8,857			3,569
FullBeauty Brands Holdings Corp, Common Stock	(l)	Retailing						5,583			26			26

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity		Number of Shares		Cost			Fair Value(d)
Global Jet Capital LLC, Preferred Stock	(e)(l)(m)	Commercial & Professional Services						6,228,866		$	6,229		$	467
Harvest Oil & Gas Corp, Common Stock	(e)(l)(s)	Energy						7,161			158			120
Harvey Industries Inc, Common Stock	(l)	Capital Goods						666,667			667			1,350
HM Dunn Co Inc, Preferred Stock, Series A	(h)(l)(t)	Capital Goods						12,857			—			—
HM Dunn Co Inc, Preferred Stock, Series B	(h)(l)(t)	Capital Goods						12,857			—			—
Industrial Group Intermediate Holdings LLC, Common Stock	(l)(p)	Materials						2,678,947			2,679			3,416
JHC Acquisition LLC, Common Stock	(l)	Capital Goods						1,449			1,449			1,880
JSS Holdings Ltd, Net Profits Interest	(l)	Capital Goods						27			—			469
JW Aluminum Co, Common Stock	(e)(i)(l)(t)	Materials						548			—			—
JW Aluminum Co, Preferred Stock	(e)(i)(t)	Materials	12.5% PIK			11/17/25		4,869			33,914			49,830
MB Precision Holdings LLC, Class A - 2 Units	(g)(h)(l)(p)(t)	Capital Goods						6,655,178			2,288			—
MB Precision Holdings LLC, Preferred Stock	(g)(h)(l)(t)	Capital Goods						41,778,909			8,774			3,539
Mood Media Corp, Common Stock	(l)(t)	Media						17,400,835			12,644			10,906
North Haven Cadence Buyer Inc, Common Stock	(l)	Consumer Services						2,916,667			2,917			4,958
Power Distribution Inc, Common Stock	(l)	Capital Goods						2,076,923			2,077			467
Professional Plumbing Group Inc, Common Stock	(e)(l)	Materials						3,000,000			3,000			8,250
Ridgeback Resources Inc, Common Stock	(e)(l)(m)	Energy						817,308			5,022			3,885
Sequential Brands Group Inc., Common Stock	(e)(l)(s)	Consumer Durables & Apparel						408,685			5,517			523
Sorenson Communications LLC, Common Stock	(e)(l)	Telecommunication Services						43,796			—			33,620
SSC (Lux) Limited S.a r.l., Common Stock	(l)(m)	Health Care Equipment & Services						261,364			5,227			6,403
Sunnova Energy Corp, Common Stock	(l)	Energy						384,746			1,444			477
Sunnova Energy Corp, Preferred Stock	(l)	Energy						70,229			374			413
Swift Worldwide Resources Holdco Ltd, Common Stock	(l)	Energy						1,250,000			2,009			438
Templar Energy LLC, Common Stock	(e)(l)(p)(s)	Energy						717,718			6,101			404
Templar Energy LLC, Preferred Stock	(e)(l)(s)	Energy						475,758			4,751			1,189
Titan Energy LLC, Common Stock	(e)(l)(s)	Energy						200,039			6,321			20
Trace3 Inc, Common Stock	(l)	Software & Services						33,216			332			1,513
Warren Resources Inc, Common Stock	(l)(t)	Energy						2,371,337			11,145			6,995
White Star Petroleum LLC, Common Stock	(l)(p)	Energy						1,613,753			1,372			363
Zeta Interactive Holdings Corp, Preferred Stock, Series E - 1	(l)	Software & Services						620,025			4,929			6,649
Zeta Interactive Holdings Corp, Preferred Stock, Series F	(l)	Software & Services						563,932			4,929			5,961
Zeta Interactive Holdings Corp, Warrant	(l)	Software & Services				4/20/27		84,590			—			247
Total Equity/Other											263,808			285,221
TOTAL INVESTMENTS—179.9%										$	4,799,885			4,634,818
LIABILITIES IN EXCESS OF OTHER ASSETS—(79.9%)														(2,058,601)
NET ASSETS—100.0%													$	2,576,217

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)
As of March 31, 2019
(in thousands, except share amounts)

A summary of outstanding financial instruments as of March 31, 2019 is as follows:

Interest rate swaps

Counterparty	Notional Amount	Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date		Premiums Paid/ (Received)			Value			Unrealized Depreciation
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.78%		12/18/2023		$	—		$	(2,029)		$	(2,029)
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.81%		12/18/2021			—			(1,154)			(1,154)
ING Capital Markets	$100,000	3-Month LIBOR		2.59%		1/14/2024			—			(1,654)			(1,654)
ING Capital Markets	$100,000	3-Month LIBOR		2.62%		1/14/2022			—			(902)			(902)
								$	—		$	(5,739)		$	(5,739)

(a)

Security may be an obligation of one or more entities affiliated with the named company.

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of ~~September 30, 2018,~~March 31, 2019, the three-month London Interbank Offered Rate, or LIBOR or L,“L”, was ~~2.40%~~2.60%, the Euro Interbank Offered Rate, or EURIBOR, was (0.31)%, Candian Dollar Offer Rate, or CDOR was 2.02%, and the U.S. Prime Lending Rate, or Prime, was ~~5.25%~~5.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

(c)

Denominated in U.S. dollars unless otherwise noted.

(d)

Fair value determined by the Company’s board of directors (see Note 7)8).

(e)

Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 8)9).

(f)

Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8)9).

(g)

Security or portion thereof held within Darby Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8)9).

(h)

Security or portion thereof held within Juniata River LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, N.A. (see Note 8)9).

(i)

Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with Goldman Sachs Bank USA (see Note 8)9).

(j)

Position or portion thereof unsettled as of ~~September 30, 2018.~~March 31, 2019.

(k)

Security was on non-accrual status as of ~~September 30, 2018.~~March 31, 2019.

(l)

Security is non-income producing.

(m)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of ~~September 30, 2018, 86.9%~~March 31, 2019, 89.5% of the Company’s total assets represented qualifying assets.

(n)

Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(o)

Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.

(p)

Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.

(q)

Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.

(r)

Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.

~~(t)~~

~~Investment denominated in Canadian dollars. Cost and fair value are converted into U.S. dollars at an exchange rate of CAD $1.00 to $0.77 as of September 30, 2018.~~

~~(u)~~(s)

Security is classified as Level 1 or Level 2 in the Company’s fair value hierarchy (see Note 7)8).

~~(v)~~

See notes to unaudited consolidated financial statements.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Unaudited Consolidated Schedule of Investments~~
~~As of September 30, 2018~~
~~(in thousands, except share amounts)~~

Portfolio Company	Fair Value at December 31, 2017			Transfers In or Out			Purchases and Paid- in-Kind Interest			Sales and Repayments			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at September 30, 2018			Interest Income(1)			PIK Income(1)			Fee Income(1)				Fair Value at December 31, 2018				Gross Additions(1)				Gross Reductions(2)				Net Realized Gain (Loss)				Net Change in Unrealized Appreciation (Depreciation)				Fair Value at March 31, 2019				Interest Income(3)				PIK Income(3)				Fee Income(3)
Senior Secured Loans—First Lien
Advanced Lighting Technologies, Inc.		$	9,218		$	—		$	—		$	(69)		$	169		$	10		$	(179)		$	9,149		$	834		$	—		$	—			$	9,125			$	56			$	(24)			$	3			$	(58)			$	9,102			$	234			$	—			$	—
H.M. Dunn Co., Inc.~~(2)~~			—			64,286			—			—			—			(25,715)			(28,976)			9,595			1,656			—			—				7,022				—				—				—				(3,017)				4,005				—				—				—
Logan’s Roadhouse, Inc.			4,669			—			2,139			(909)			—			(8)			8			5,899			—			625			—
Logan’s Roadhouse, Inc.(3)			—			—			1,326			—			—			—			—			1,326			529			508			—
MB Precision Holdings LLC																																		21,339				690				(497)				176				(339)				21,369				644				117				—
Warren Resources, Inc.			43,613			—			141			(28,068)			—			—			(1,063)			14,623			1,652			141			1,123				14,652				45				—				—				—				14,697				441				45				—
Senior Secured Loans—Second Lien
JW Aluminum Co.			34,382			—			—			(33,874)			1			7			(516)			—			1,492			—			—				—				—				—				—				—				—				—				—				—
Logan’s Roadhouse, Inc.			6,771			—			194			—			6			—			(2,862)			4,109			188			194			—
Senior Secured Bonds
Other Senior Secured Debt
Advanced Lighting Technologies, Inc.			10,278			—			647			(261)			—			—			(5,588)			5,076			1,182			646			—				3,630				—				—				—				(3,286)				344				—				—				—
JW Aluminum Co.			—			—			33,001			—			—			—			41			33,042			1,128			—			—				32,919				—				—				—				1,278				34,197				846				—				—
Mood Media Corp.			23,219			—			5,273			—			—			—			(14)			28,478			3,247			1,901			—				28,478				2,347				—				—				10				30,835				1,300				1,139				—
Equity/Other
Advanced Lighting Technologies, Inc., Common Equity			5,900			—			—			—			—			—			(5,900)			—			—			—			—				—				—				—				—				—				—				—				—				—
Advanced Lighting Technologies, Warrants, 10/4/2027			26			—			—			—			—			—			(26)			—			—			—			—				—				—				—				—				—				—				—				—				—
ASG Everglades Holdings, Inc., Common Equity			30,727			—			—			—			—			—			1,939			32,666			—			—			—				31,743				—				—				—				4,924				36,667				—				—				—
ASG Everglades Holdings, Inc., 6/27/2022, Warrants			6,951			—			—			—			—			—			787			7,738			—			—			—				7,364				—				—				—				1,998				9,362				—				—				—
HM Dunn Aerosystems, Inc., Preferred Equity, Series A(2)			—			—			—			—			—			—			—			—			—			—			—
HM Dunn Aerosystems, Inc., Preferred Equity, Series B(2)			—			—			—			—			—			—			—			—			—			—			—
HM Dunn Aerosystems, Inc., Preferred Equity, Series A																																		—				—				—				—				—				—				—				—				—
HM Dunn Aerosystems, Inc., Preferred Equity, Series B																																		—				—				—				—				—				—				—				—				—
JW Aluminum Co., Common Equity			—			—			—			—			—			—			2,452			2,452			—			—			—				—				—				—				—				—				—				—				—				—
JW Aluminum Co., Preferred Equity			15,074			—			17,271			—			117			—			601			33,063			3,791			3,065			—				43,890				1,874				—				—				4,066				49,830				1,802				1,774				—
MB Precision Holdings LLC, Class A-2 Units																																		—				—				—				—				—				—				—				—				—
MB Precision Holdings LLC, Preferred Stock																																		5,826				174				—				—				(2,461)				3,539				—				—				—
Mood Media Corp.			28,659			—			—			—			—			—			(9,718)			18,941			—			—			—				15,842				—				—				—				(4,936)				10,906				—				—				—
Roadhouse Holding Inc., Common Equity			—			—			—			—			—			—			—			—			—			—			—
Warren Resources, Inc., Common Equity			4,031			—			—			—			—			—			4,980			9,011			—			—			—				5,573				—				—				—				1,422				6,995				—				—				—
Total		$	223,518		$	64,286		$	59,992		$	(63,181)		$	293		$	(25,706)		$	(44,034)		$	215,168		$	15,699		$	7,080		$	1,123			$	227,403			$	5,186			$	(521)			$	179			$	(399)			$	231,848			$	5,267			$	3,075			$	—

(1)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities of one or more new securities and the movement of an existing portfolio company into this category from a different category.

(2)

Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

(3)

Interest, PIK and fee income presented for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019.

~~(2)~~

The Company held this investment as of December 31, 2017 but it was not deemed to be an “affiliated person” of the portfolio company or deemed to “control” the portfolio company as of December 31, 2017. Transfers in or out have been presented at amortized cost.

~~(3)~~

~~Security includes a partially unfunded commitment with an amortized cost of $818 and a fair value of $818.~~

~~See notes to unaudited consolidated financial statements.~~

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Consolidated Schedule of Investments~~
~~As of December 31, 2017~~
~~(in thousands, except share amounts)~~

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Senior Secured Loans—First Lien—119.9%
5 Arch Income Fund 2, LLC (o)(s) Diversified Financials 10.5% 11/18/21 $ 14,912 $ 14,935 $ 14,912
5 Arch Income Fund 2, LLC (o)(p)(s) Diversified Financials 10.5% 11/18/21 4,088 4,088 4,088
Abaco Energy Technologies LLC (j) Energy L+700, 2.5% PIK (2.5% Max PIK) 1.0% 11/20/20 25,842 25,079 25,390
Actian Corp. (f)(j)(g) Software & Services L+806 1.0% 6/30/22 45,714 45,714 46,286
Advanced Lighting Technologies, Inc. (j)(x) Materials L+750 1.0% 10/4/22 9,218 7,789 9,218
AG Group Merger Sub, Inc. (f)(h)(k)(j) Commercial & Professional Services L+750 1.0% 12/29/23 62,418 62,418 63,510
All Systems Holding LLC (h)(k)(j) Commercial & Professional Services L+767 1.0% 10/31/23 103,557 103,557 105,110
Altus Power America, Inc. (k) Energy L+750 1.5% 9/30/21 2,866 2,866 2,809
Altus Power America, Inc. (p) Energy L+750 1.5% 9/30/21 884 884 866
Ascension Insurance, Inc. (f)(h)(j)(g) Insurance L+825 1.3% 3/5/19 78,342 78,020 79,419
Ascension Insurance, Inc. (p) Insurance L+825 1.3% 3/5/19 27,800 27,800 28,182
Aspect Software, Inc. Software & Services L+1050 1.0% 5/25/18 1,804 1,804 1,804
Aspect Software, Inc. (p) Software & Services L+1050 1.0% 5/25/18 46 46 46
Aspect Software, Inc. (j) Software & Services L+1050 1.0% 5/25/20 3,620 3,620 3,349
Aspect Software, Inc. (p) Software & Services L+1200 1.0% 5/25/18 657 657 —
Atlas Aerospace LLC (f)(k)(j) Capital Goods L+802 1.0% 12/29/22 86,857 86,857 86,857
ATX Networks Corp. (f)(g)(o) Technology Hardware & Equipment L+600, 1.0% PIK (1.0% Max PIK) 1.0% 6/11/21 1,911 1,894 1,899
ATX Networks Corp. (f)(k)(o) Technology Hardware & Equipment L+600, 1.0% PIK (1.0% Max PIK) 1.0% 6/11/21 25,569 24,974 25,410
Avaya Inc. (i)(g) Technology Hardware & Equipment L+475 1.0% 12/15/24 17,000 16,830 16,761
AVF Parent, LLC (f)(j)(k) Retailing L+725 1.3% 3/1/24 76,382 76,382 77,963
Borden Dairy Co. (g)(h)(j) Food, Beverage & Tobacco L+804 1.0% 7/6/23 52,500 52,500 52,484
Cactus Wellhead, LLC (f)(g) Energy L+600 1.0% 7/31/20 16,211 15,596 16,238
CEVA Group Plc (o)(p) Transportation L+500 3/19/19 20,000 20,000 18,750
Cimarron Energy Inc. (k) Energy L+1150 PIK (L+1150 Max PIK) 1.0% 12/15/19 25,470 25,470 10,379
ConnectiveRx, LLC (f)(g)(j) Health Care Equipment & Services L+828 1.0% 11/25/21 51,032 51,032 51,053
Crestwood Holdings LLC (f) Energy L+800 1.0% 6/19/19 4,185 4,180 4,207
CSafe Acquisition Co., Inc. Capital Goods L+725 1.0% 11/1/21 3,548 3,548 3,517
CSafe Acquisition Co., Inc. (p) Capital Goods L+725 1.0% 11/1/21 2,713 2,713 2,689
CSafe Acquisition Co., Inc. (f)(g)(h)(j) Capital Goods L+725 1.0% 10/31/23 49,935 49,935 49,498
CSafe Acquisition Co., Inc. (p) Capital Goods L+725 1.0% 10/31/23 26,797 26,797 26,562
Dade Paper & Bag, LLC (f)(g)(h)(j) Capital Goods L+750 1.0% 6/10/24 137,112 137,112 141,911
Dayton Superior Corp. (k) Materials L+800 1.0% 11/15/21 11,550 11,263 9,992
Diamond Resorts International, Inc. (g) Consumer Services L+600 1.0% 9/2/23 6,853 6,713 6,919
Eastman Kodak Co. (f) Consumer Durables & Apparel L+625 1.0% 9/3/19 6,836 6,797 5,931
Empire Today, LLC (f)(g)(h)(j)(k) Retailing L+800 1.0% 11/17/22 89,100 89,100 89,991
Fairway Group Acquisition Co. (j) Food & Staples Retailing 12.0% PIK (12.0% Max PIK) 1/3/20 2,725 2,725 2,725
Fairway Group Acquisition Co. (m)(n) Food & Staples Retailing 10.0% PIK (10.0% Max PIK) 1/3/20 1,777 1,733 400
Fox Head, Inc. (g)(j)(k) Consumer Durables & Apparel L+850 1.0% 12/19/20 13,020 13,020 13,009
FR Dixie Acquisition Corp. (f) Energy L+475 1.0% 12/18/20 4,042 4,032 2,386

~~See notes to unaudited consolidated financial statements.~~

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Consolidated Schedule of Investments (continued)~~
~~As of December 31, 2017~~
~~(in thousands, except share amounts)~~

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

FullBeauty Brands Holdings Corp. (k) Consumer Durables & Apparel L+475 1.0% 10/14/22 $ 4,949 $ 4,561 $ 2,929
FullBeauty Brands Holdings Corp. (k) Consumer Durables & Apparel L+800 1.0% 10/14/20 55,000 55,000 54,313
Greystone Equity Member Corp. (e)(o) Diversified Financials L+1050 3/31/21 13,582 13,596 13,599
Greystone Equity Member Corp. (e)(o) Diversified Financials L+1100 3/31/21 21,048 21,048 21,258
Greystone Equity Member Corp. (o)(p) Diversified Financials L+1100 3/31/21 5,370 5,370 5,424
Gulf Finance, LLC (g) Energy L+525 1.0% 8/25/23 4,864 4,745 4,392
H.M. Dunn Co., Inc. (j)(k) Capital Goods L+946 1.0% 3/26/21 64,286 64,286 61,393
Hudson Technologies Co. (j)(k)(o) Commercial & Professional Services L+725 1.0% 10/10/23 51,359 51,359 52,065
Hudson Technologies Co. (o)(p) Commercial & Professional Services L+725 1.0% 10/10/23 12,228 12,228 12,396
Hybrid Promotions, LLC (g)(j)(k) Consumer Durables & Apparel L+850 1.0% 12/19/20 47,740 47,740 47,699
Icynene U.S. Acquisition Corp. (f)(g)(j) Materials L+700 1.0% 11/30/24 36,000 36,000 36,007
Industrial Group Intermediate Holdings, LLC (f)(g)(h)(j)(k) Materials L+800 1.3% 5/31/20 130,488 130,488 132,445
Industry City TI Lessor, L.P. (j) Consumer Services 10.8%, 1.0% PIK (1.0% Max PIK) 6/30/26 12,324 12,324 12,478
JMC Acquisition Merger Corp. (f)(g)(h) Capital Goods L+854 1.0% 11/6/21 20,495 20,495 20,828
JSS Holdings, Inc. (f)(g)(j)(k) Capital Goods L+800, 0.0% PIK (2.5% Max PIK) 1.0% 3/31/23 72,715 72,056 73,842
JSS Holdings, Inc. (p) Capital Goods L+800, 0.0% PIK (2.5% Max PIK) 1.0% 3/31/23 13,273 13,273 13,478
Kodiak BP, LLC (g)(h)(j)(k) Capital Goods L+725 1.0% 12/1/24 84,121 84,121 84,332
Kodiak BP, LLC (p) Capital Goods L+725 1.0% 12/1/24 24,242 24,242 24,303
Latham Pool Products, Inc. (f)(g)(j) Commercial & Professional Services L+775 1.0% 6/29/21 28,092 28,092 28,408
LD Intermediate Holdings, Inc. (k) Software & Services L+588 1.0% 12/9/22 16,575 15,186 14,891
Logan’s Roadhouse, Inc. (x) Consumer Services L+1100 1.0% 5/5/19 4,677 4,677 4,677
Logan’s Roadhouse, Inc. (p)(x) Consumer Services L+1100 1.0% 5/5/19 752 760 752
MB Precision Holdings LLC (g)(h)(j) Capital Goods L+725, 2.3% PIK (2.3% Max PIK) 1.3% 1/23/21 64,367 64,367 58,976
MORSCO, Inc. (e)(f) Capital Goods L+700 1.0% 10/31/23 3,581 3,460 3,652
Moxie Liberty LLC (f)(h) Energy L+650 1.0% 8/21/20 11,634 11,651 10,751
Moxie Patriot LLC (h) Energy L+575 1.0% 12/19/20 5,383 5,360 5,303
Nobel Learning Communities, Inc. Consumer Services L+450 1.0% 5/5/21 3,075 3,075 3,075
Nobel Learning Communities, Inc. (p) Consumer Services L+450 1.0% 5/5/21 8,106 8,106 8,106
Nobel Learning Communities, Inc. (f)(j)(k) Consumer Services L+436 4.5% 5/5/23 84,472 84,472 84,045
Nobel Learning Communities, Inc. (p) Consumer Services L+375 4.5% 5/5/23 49,689 49,689 49,439
North Haven Cadence Buyer, Inc. (p) Consumer Services L+500 1.0% 9/2/21 2,625 2,625 2,625
North Haven Cadence Buyer, Inc. (f)(h)(j)(k) Consumer Services L+810 1.0% 9/2/22 77,522 77,522 78,976
North Haven Cadence Buyer, Inc. (p) Consumer Services L+750 1.0% 9/2/22 9,917 9,917 10,103
Nova Wildcat Amerock, LLC (f)(g)(j) Consumer Durables & Apparel L+800 1.3% 9/10/19 64,921 64,921 65,245
PHRC License, LLC (e)(g)(h) Consumer Services L+850 1.5% 4/28/22 67,500 67,500 69,187
Polymer Additives, Inc. (g)(h)(k) Materials L+888 1.0% 12/19/22 63,068 63,068 65,276
Polymer Additives, Inc. (h)(k) Materials L+834 1.0% 12/19/22 29,005 29,005 29,585
Power Distribution, Inc. (f)(g)(k) Capital Goods L+725 1.3% 1/25/23 44,893 44,893 45,566
Production Resource Group, LLC (g)(j)(k) Media L+750 1.0% 1/14/19 137,162 137,162 145,049

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments ~~(continued)~~
As of December 31, ~~2017~~2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Propulsion Acquisition, LLC (f)(g)(j)(k) Commercial & Professional Services L+600 1.0% 7/13/21 $ 58,874 $ 56,828 $ 58,285
Quest Software US Holdings Inc. (f)(h)(i) Software & Services L+550 1.0% 10/31/22 18,333 18,244 18,659
Roadrunner Intermediate Acquisition Co., LLC (f) Health Care Equipment & Services L+725 1.0% 3/15/23 7,550 7,550 7,614
Rogue Wave Software, Inc. (j) Software & Services L+858 1.0% 9/25/21 24,413 24,413 24,413
Safariland, LLC (h)(j) Capital Goods L+768 1.1% 11/18/23 70,234 70,234 71,200
Safariland, LLC (p)(h)(j) Capital Goods L+725 1.1% 11/18/23 13,867 13,867 14,057
Sequel Youth and Family Services, LLC (f)(k)(j) Health Care Equipment & Services L+778 1.0% 9/1/22 82,353 82,353 83,111
Sequel Youth and Family Services, LLC (p) Health Care Equipment & Services L+700 1.0% 9/1/22 4,118 4,118 4,156
Sequential Brands Group, Inc. (h)(j)(k) Consumer Durables & Apparel L+900 7/1/22 156,102 156,102 154,541
Sorenson Communications, Inc. (f)(g)(h)(j) Telecommunication Services L+575 2.3% 4/30/20 98,440 98,219 99,240
SSC (Lux) Limited S.à r.l. (g)(h)(j)(o) Health Care Equipment & Services L+750 1.0% 9/10/24 104,545 104,545 106,636
Staples Canada, ULC (o)(v) Retailing L+700 1.0% 9/12/23 C$ 3,229 2,667 2,602
Strike, LLC Energy L+800 1.0% 5/30/19 $ 2,800 2,766 2,814
Strike, LLC (k) Energy L+800 1.0% 11/30/22 4,523 4,408 4,591
SunGard Availability Services Capital, Inc. (f)(i) Software & Services L+700 1.0% 9/30/21 10,749 10,653 9,970
SunGard Availability Services Capital, Inc. (i)(l) Software & Services L+1000 1.0% 10/1/22 1,000 950 962
Swift Worldwide Resources US Holdings Corp. (f)(h) Energy L+1000, 1.0% PIK (1.0% Max PIK) 1.0% 7/20/21 19,489 19,489 19,879
ThermaSys Corp. (f) Capital Goods L+400 1.3% 5/3/19 4,522 4,523 4,267
Trace3, LLC (f)(g)(j) Software & Services L+775 1.0% 6/6/23 53,481 53,481 54,751
U.S. Xpress Enterprises, Inc. (g)(h)(j) Transportation L+1075, 0.0% PIK (1.8% Max PIK) 1.5% 5/30/20 66,734 66,734 66,901
USI Senior Holdings, Inc. (h)(j) Capital Goods L+779 1.0% 1/5/22 41,150 41,150 41,383
USI Senior Holdings, Inc. (p) Capital Goods L+725 1.0% 1/5/22 8,373 8,373 8,421
UTEX Industries, Inc. (k) Energy L+400 1.0% 5/21/21 22,057 20,083 21,680
Warren Resources, Inc. (e)(j)(x) Energy L+900, 1.0% PIK (1.0% Max PIK) 1.0% 5/22/20 42,550 42,550 43,613
Waste Pro USA, Inc. (g)(h)(j)(k) Commercial & Professional Services L+750 1.0% 10/15/20 121,116 121,116 123,387
Westbridge Technologies, Inc. (i) Software & Services L+850 1.0% 4/28/23 14,813 14,541 14,701
York Risk Services Holding Corp. Insurance L+375 1.0% 10/1/21 990 983 971
Zeta Interactive Holdings Corp. (f)(g)(j) Software & Services L+750 1.0% 7/29/22 33,826 33,826 34,334
Zeta Interactive Holdings Corp. (p) Software & Services L+750 1.0% 7/29/22 6,424 6,424 6,520
Total Senior Secured Loans—First Lien 3,650,110 3,663,047
Unfunded Loan Commitments (241,977) (241,977)
Net Senior Secured Loans—First Lien 3,408,133 3,421,070
Senior Secured Loans—Second Lien—11.5%
American Bath Group, LLC (k) Capital Goods L+975 1.0% 9/30/24 7,000 6,494 7,018
Arena Energy, LP (f)(j) Energy L+900, 4.0% PIK (4.0% Max PIK) 1.0% 1/24/21 24,844 24,844 23,621
BPA Laboratories Inc. (j) Pharmaceuticals, Biotechnology &
Life Sciences L+250 4/29/20 3,272 3,134 3,239
Byrider Finance, LLC (e) Automobiles & Components L+1000, 0.5% PIK (4.0% Max PIK) 1.3% 8/22/20 22,608 22,608 21,280
Checkout Holding Corp. (k) Media L+675 1.0% 4/11/22 10,000 9,953 4,356

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—128.3%
5 Arch Income Fund 2, LLC	(m)(q)	Diversified Financials	9.0%			11/18/23		$	39,540		$	39,561		$	39,540
5 Arch Income Fund 2, LLC	(m)(n)(q)	Diversified Financials	9.0%			11/18/23			34,461			34,461			34,461
Abaco Energy Technologies LLC	(h)(i)(t)	Energy	L+700, 2.5% PIK(2.5% Max PIK)		1.0%	11/20/20			24,428			23,941			24,153
ABB CONCISE Optical Group LLC	(t)	Retailing	L+500		1.0%	6/15/23			2,769			2,779			2,658
Accuride Corp	(j)(t)	Capital Goods	L+525		1.0%	11/17/23			540			520			518
Acosta Holdco Inc	(h)(t)	Commercial & Professional Services	L+325		1.0%	9/26/21			6,644			5,383			4,081
Addison Holdings	(f)(g)(h)(i)	Commercial & Professional Services	L+675		1.0%	12/29/23			83,832			83,832			83,974
Advanced Lighting Technologies Inc	(h)(u)	Materials	L+750		1.0%	10/4/22			9,125			7,933			9,125
Advantage Sales & Marketing Inc	(i)(t)	Commercial & Professional Services	L+325		1.0%	7/23/21			15,370			14,681			13,654
Aleris International Inc	(h)(t)	Materials	L+475			2/27/23			1,367			1,354			1,358
All Systems Holding LLC	(g)(h)(i)	Commercial & Professional Services	L+767		1.0%	10/31/23			111,623			111,623			112,739
Altus Power America Inc	(i)	Energy	L+750		1.5%	9/30/21			3,183			3,183			3,087
Altus Power America Inc	(n)	Energy	L+750		1.5%	9/30/21			140			140			136
American Tire Distributors Inc	(t)	Automobiles & Components	L+750		1.0%	8/30/24			4,031			3,521			3,319
American Tire Distributors Inc	(t)	Automobiles & Components	L+650, 1.0% PIK(1.0% Max PIK)		1.0%	9/1/23			634			593			593
Ammeraal Beltech Holding BV	(m)(t)	Capital Goods	E+375			7/30/25		€	1,491			1,725			1,701
Apex Group Limited	(m)(n)	Diversified Financials	L+650			6/15/23		$	2,302			2,238			1,970
Apex Group Limited	(f)(g)(m)	Diversified Financials	L+650		1.0%	6/15/25			15,565			15,271			14,948
Apex Group Limited	(m)(n)	Diversified Financials	L+650		1.0%	6/15/25			7,509			7,370			7,211
Apex Group Limited	(m)	Diversified Financials	L+650		1.0%	6/15/25			2,503			2,466			2,404
Apex Group Limited	(m)(n)	Diversified Financials	L+650		1.0%	6/15/25			3,754			3,699			3,606
Ascension Insurance Inc	(f)(g)(h)	Insurance	L+825		1.3%	3/5/19			77,635			77,567			77,635
Ascension Insurance Inc	(n)	Insurance	L+825		1.3%	3/5/19			27,800			27,800			27,800
Aspect Software Inc	(k)(l)	Software & Services	L+400, 6.5% PIK(6.5% Max PIK)			5/25/20			4,671			4,657			3,480
Aspect Software Inc	(h)(k)(l)	Software & Services	L+1100		1.0%	5/25/20			3,598			3,556			2,680
ATX Networks Corp	(f)(m)(t)	Technology Hardware & Equipment	L+600, 1.0% PIK(1.0% Max PIK)		1.0%	6/11/21			1,852			1,839			1,759
ATX Networks Corp	(f)(i)(m)(t)	Technology Hardware & Equipment	L+600, 1.0% PIK(1.0% Max PIK)		1.0%	6/11/21			24,804			24,368			23,564
AVF Parent LLC	(h)(i)	Retailing	L+725		1.3%	3/1/24			74,461			74,461			69,605
Belk Inc	(t)	Retailing	L+475		1.0%	12/12/22			22,635			19,743			18,366
Borden Dairy Co	(g)(h)	Food, Beverage & Tobacco	L+808		1.0%	7/6/23			52,500			52,500			47,738
Caprock Midstream LLC	(t)	Energy	L+475			11/3/25			6,046			5,916			5,638
Cimarron Energy Inc		Energy	L+900		1.0%	6/30/21			7,500			7,500			7,500
Constellis Holdings LLC/Constellis Finance Corp		Capital Goods	L+575		1.0%	4/1/22			47,325			46,621			46,615
CSafe Global		Capital Goods	L+725		1.0%	11/1/21			626			626			632
CSafe Global	(n)	Capital Goods	L+725		1.0%	11/1/21			5,635			5,635			5,691
CSafe Global	(f)(g)(h)	Capital Goods	L+725		1.0%	10/31/23			53,605			53,605			54,141

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, ~~2017~~2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Chisholm Oil and Gas Operating, LLC (j) Energy L+800 1.0% 3/21/24 $ 16,000 $ 16,000 $ 15,998
Compuware Corp. (j) Software & Services L+825 1.0% 12/15/22 1,841 1,666 1,850
Crossmark Holdings, Inc. (k) Media L+750 1.3% 12/21/20 7,778 7,788 879
Fairway Group Acquisition Co. (m)(n) Food & Staples Retailing 11.0% PIK (11.0% Max PIK) 10/3/21 1,563 1,520 352
Fieldwood Energy LLC (e)(k)(m)(n) Energy L+713 1.3% 9/30/20 1,947 1,602 652
Gruden Acquisition, Inc. (j) Transportation L+850 1.0% 8/18/23 15,000 14,435 14,981
Inmar, Inc. (k) Software & Services L+800 1.0% 5/1/25 2,615 2,579 2,630
Jazz Acquisition, Inc. (f) Capital Goods L+675 1.0% 6/19/22 3,700 3,736 3,500
JW Aluminum Co. (e)(j)(k)(x) Materials L+850 0.8% 11/17/20 33,874 33,866 34,382
Logan’s Roadhouse, Inc. (x) Consumer Services L+850 PIK (L+850 Max PIK) 1.0% 11/23/20 14,728 14,640 6,771
LTI Holdings, Inc. (j) Materials L+875 1.0% 5/16/25 9,259 9,087 9,421
P2 Upstream Acquisition Co. (k) Energy L+800 1.0% 4/30/21 14,500 14,652 13,413
Peak 10 Holding Corp. (k) Software & Services L+725 1.0% 8/1/25 2,786 2,759 2,810
Production Resource Group, LLC (f)(g)(h) Media L+850 1.0% 7/23/19 95,599 95,599 96,256
Spencer Gifts LLC (k) Retailing L+825 1.0% 6/29/22 20,000 20,078 10,800
Talos Production LLC Energy 11.0% 4/3/22 4,500 4,213 4,466
Titan Energy Operating, LLC (g)(j) Energy 2.0%, L+1100 PIK (L+1100 Max PIK) 1.0% 2/23/20 78,366 67,595 41,557
WP CPP Holdings, LLC (j) Capital Goods L+775 1.0% 4/30/21 6,932 6,913 6,903
Total Senior Secured Loans—Second Lien 385,761 327,135
Senior Secured Bonds—4.4%
Advanced Lighting Technologies, Inc. (x) Materials L+700, 10.0% PIK (10.0% Max PIK) 1.0% 10/4/23 10,278 10,278 10,278
Black Swan Energy Ltd. (o) Energy 9.0% 1/20/24 1,333 1,333 1,343
FourPoint Energy, LLC (e)(j)(k) Energy 9.0% 12/31/21 46,313 44,869 47,065
Global A&T Electronics Ltd. (e)(k)(m)(n)(o) Semiconductors &
Semiconductor Equipment 10.0% 2/1/19 19,490 19,114 18,069
Mood Media Corp. (e)(j)(o)(x) Media L+600, 8.0% PIK (8.0% Max PIK) 1.0% 6/28/24 23,104 23,104 23,219
Ridgeback Resources Inc. (e)(o)(w) Energy 12.0% 12/29/20 331 326 331
Sorenson Communications, Inc. (j) Telecommunication Services 9.0%, 0.0% PIK (9.0% Max PIK) 10/31/20 7,058 6,904 7,058
Sunnova Energy Corp. Energy 6.0%, 6.0% PIK (6.0% Max PIK) 10/24/18 2,117 2,117 2,117
Velvet Energy Ltd. (o) Energy 9.0% 10/5/23 15,000 15,000 15,193
Total Senior Secured Bonds 123,045 124,673
Subordinated Debt—12.8%
Ascent Resources Utica Holdings, LLC (i) Energy 10.0% 4/1/22 40,000 40,000 43,226
Aurora Diagnostics, LLC (j) Health Care Equipment & Services 10.8%, 1.5% PIK (1.5% Max PIK) 1/15/20 6,143 5,628 5,713
Avantor, Inc. (k) Materials 9.0% 10/1/25 20,000 20,000 19,888
Bellatrix Exploration Ltd. (o) Energy 8.5% 5/15/20 5,000 4,947 4,775
Brooklyn Basketball Holdings, LLC (h)(j) Consumer Services L+725 10/25/19 39,746 39,746 40,342
CEC Entertainment, Inc. (i) Consumer Services 8.0% 2/15/22 18,715 18,572 17,709

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
CSM Bakery Products	(i)(t)	Food, Beverage & Tobacco	L+400		1.0%	7/3/20		$	5,217		$	5,071		$	4,845
Dade Paper and Bag Co Inc	(f)(g)(h)(i)	Capital Goods	L+750		1.0%	6/10/24			135,734			135,734			133,019
Dade Paper and Bag Co Inc	(f)(g)(h)	Capital Goods	L+700		1.0%	6/10/24			17,312			17,312			16,620
Dayton Superior Corp	(i)(t)	Materials	L+800, 6.0% PIK(6.0% Max PIK)		1.0%	11/15/21			11,790			11,585			9,874
Diamond Resorts International Inc	(i)(t)	Consumer Services	L+375		1.0%	9/2/23			14,085			13,795			13,170
Distribution International Inc	(t)	Retailing	L+500		1.0%	12/15/21			3,398			3,247			3,024
Eagle Family Foods Inc	(n)	Food, Beverage & Tobacco	L+650		1.0%	6/14/23			4,126			4,084			3,516
Eagle Family Foods Inc	(g)(h)	Food, Beverage & Tobacco	L+650		1.0%	6/14/24			27,368			27,082			26,950
Eagleclaw Midstream Ventures LLC	(i)(j)(t)	Energy	L+425		1.0%	6/24/24			11,455			10,917			10,747
EIF Van Hook Holdings LLC	(i)(t)	Energy	L+525			9/5/24			7,378			7,234			7,184
Empire Today LLC	(f)(g)(h)(i)	Retailing	L+700		1.0%	11/17/22			88,200			88,200			88,361
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	10.0% PIK(10.0% Max PIK)			11/27/23			1,964			1,733			258
Fairway Group Holdings Corp	(h)	Food & Staples Retailing	12.0% PIK(12.0% Max PIK)			11/27/23			3,072			3,072			2,984
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK(11.0% Max PIK)			8/28/23			212			210			212
Fairway Group Holdings Corp	(n)	Food & Staples Retailing	4.0%, 11.0% PIK(11.0% Max PIK)			8/28/23			455			455			455
Fairway Group Holdings Corp		Food & Staples Retailing	4.0%, 11.0% PIK(11.0% Max PIK)			8/28/23			1,070			1,055			1,070
Foresight Energy LLC	(h)(m)(t)	Materials	L+575		1.0%	3/28/22			10,591			10,575			10,423
Fox Head Inc	(h)(i)	Consumer Durables & Apparel	L+850		1.0%	12/19/20			5,051			5,051			4,989
Fox Head Inc	(h)(i)	Consumer Durables & Apparel	L+850		1.0%	12/19/20			47,253			47,253			46,671
FullBeauty Brands Holdings Corp	(k)(l)(t)	Retailing	L+475		1.0%	10/14/22			4,910			4,574			1,495
Gulf Finance LLC	(i)(t)	Energy	L+525		1.0%	8/25/23			4,687			4,585			3,615
HM Dunn Co Inc	(h)(k)(l)(u)	Capital Goods	L+875 PIK(L+875 Max PIK)			6/30/21			43,885			38,571			7,022
Hudson Technologies Co	(h)(i)(m)	Commercial & Professional Services	L+1025		1.0%	10/10/23			50,717			50,286			36,262
Icynene Group Ltd	(f)(h)(i)	Materials	L+700		1.0%	11/30/24			35,640			35,640			34,656
Industrial Group Intermediate Holdings LLC	(f)(g)(h)(i)	Materials	L+800		1.3%	5/31/20			118,840			118,840			118,098
Industry City TI Lessor LP	(h)	Consumer Services	10.8%, 1.0% PIK(1.0% Max PIK)			6/30/26			11,522			11,522			11,522
JAKKS Pacific Inc	(h)	Consumer Durables & Apparel	L+900		1.5%	6/14/21			2,793			2,775			2,803
JC Penney Corp Inc	(m)(t)	Retailing	L+425		1.0%	6/23/23			1,205			1,149			1,034
JHC Acquisition LLC	(f)(g)(h)	Capital Goods	L+750		1.0%	1/29/24			121,947			121,947			121,947
JHC Acquisition LLC	(n)	Capital Goods	L+750		1.0%	1/29/24			35,269			35,268			35,269
Jo-Ann Stores Inc	(i)(t)	Retailing	L+500		1.0%	10/20/23			5,013			5,004			4,794
Jostens Inc	(j)(t)	Consumer Services	L+550			12/19/25			3,663			3,552			3,574
JSS Holdings Ltd	(f)(h)(i)	Capital Goods	L+800, 0.0% PIK(2.5% Max PIK)		1.0%	3/31/23			72,696			72,140			74,877
Kodiak BP LLC	(g)(h)(i)	Capital Goods	L+725		1.0%	12/1/24			110,681			110,681			108,329
Kodiak BP LLC	(n)	Capital Goods	L+725		1.0%	12/1/24			9,849			9,849			9,639
Lazard Global Compounders Fund	(m)	Diversified Financials	L+725		3.8%	4/1/26			38,356			38,356			38,644
Lazard Global Compounders Fund	(m)(n)	Diversified Financials	L+725		3.8%	4/1/26			6,644			6,644			6,694

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, ~~2017~~2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry
Rate(b)
Floor Maturity
Principal
Amount(c)
Amortized
Cost
Fair
Value(d)

Ceridian HCM Holding, Inc. (i)(k) Commercial & Professional Services 11.0% 3/15/21 $ 40,657 $ 40,304 $ 42,534
Coveris Holdings S.A. (i)(k)(o) Materials 7.9% 11/1/19 42,534 42,270 42,454
Eclipse Resources Corp. (i)(o) Energy 8.9% 7/15/23 9,175 9,028 9,439
EV Energy Partners, L.P. (e)(m) Energy 8.0% 4/15/19 259 246 132
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 1/30/25 849 849 864
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 4/30/25 5,398 5,398 5,492
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 9/3/25 1,115 1,115 1,135
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 9/29/25 1,050 1,050 1,068
Global Jet Capital Inc. (e)(o) Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 12/4/25 7,751 7,751 7,887
Global Jet Capital Inc. (e)(o) Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 12/9/25 1,268 1,268 1,290
Global Jet Capital Inc. (e)(o) Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 1/29/26 664 664 675
Global Jet Capital Inc. Commercial & Professional Services 15.0% PIK (15.0% Max PIK) 12/2/26 2,009 2,009 2,044
Great Lakes Dredge & Dock Corp. (i)(o) Capital Goods 8.0% 5/15/22 9,000 9,000 9,453
Greystone Mezzanine Equity Member Corp. (o) Diversified Financials L+650 4.5% 9/15/25 1,011 1,011 1,011
Greystone Mezzanine Equity Member Corp. (o)(p) Diversified Financials L+650 4.5% 9/15/25 18,989 18,989 18,989
Jupiter Resources Inc. (h)(k)(o) Energy 8.5% 10/1/22 28,800 27,037 17,784
P.F. Chang’s China Bistro, Inc. (i)(k)(j) Consumer Services 10.3% 6/30/20 44,078 43,300 40,395
S1 Blocker Buyer Inc. Commercial & Professional Services 10.0% PIK (10.0% Max PIK) 10/31/22 295 295 330
Sorenson Communications, Inc. (e)(j) Telecommunication Services 13.9%, 0.0% PIK (13.9% Max PIK) 10/31/21 5,364 5,119 5,565
SunGard Availability Services Capital, Inc. (i) Software & Services 8.8% 4/1/22 5,900 4,632 3,680
TI Group Automotive Systems, LLC (i)(o) Automobiles & Components 8.8% 7/15/23 3,408 3,408 3,664
York Risk Services Holding Corp. (i)(j)(k) Insurance 8.5% 10/1/22 38,070 35,217 37,499
Total Subordinated Debt 388,853 385,037
Unfunded Loan Commitments (18,989) (18,989)
Net Subordinated Debt 369,864 366,048
Collateralized Securities—0.9%
CGMS CLO 2013-3A Class Subord. (o) Diversified Financials 10.5% 7/15/25 23,263 10,658 14,722
NewStar Clarendon 2014-1A Class D (o) Diversified Financials L+435 1/25/27 1,060 1,009 1,062
NewStar Clarendon 2014-1A Class Subord. B (o) Diversified Financials 15.8% 1/25/27 12,140 8,768 9,979
Total Collateralized Securities 20,435 25,763

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
LD Intermediate Holdings Inc	(i)(t)	Software & Services	L+588		1.0%	12/9/22		$	16,150		$	15,058		$	14,656
MB Precision Holdings LLC	(g)(h)(k)(l)(u)	Capital Goods	L+725, 2.3% PIK(2.3% Max PIK)		1.3%	1/23/21			21,339			20,364			21,339
Mitel US Holdings Inc	(i)(t)	Technology Hardware & Equipment	L+450			11/30/25			4,559			4,548			4,431
Monitronics International Inc	(j)(m)(t)	Commercial & Professional Services	L+550		1.0%	9/30/22			3,838			3,702			3,442
Murray Energy Corp	(h)	Energy	L+900		1.0%	2/12/21			10,891			10,824			10,842
NaviHealth Inc.	(i)(j)(t)	Health Care Equipment & Services	L+500			8/1/25			15,111			14,437			14,318
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+500		1.0%	9/2/21			2,625			2,625			2,625
North Haven Cadence Buyer Inc	(h)	Consumer Services	L+777		1.0%	9/2/24			14,762			14,762			14,614
North Haven Cadence Buyer Inc	(h)(i)	Consumer Services	L+798		1.0%	9/2/24			51,187			51,187			50,676
North Haven Cadence Buyer Inc	(n)	Consumer Services	L+650		1.0%	9/2/24			10,500			10,500			10,395
P2 Energy Solutions, Inc.	(t)	Energy	L+400		1.3%	10/30/20			74			73			71
PAE Holding Corp	(j)(t)	Capital Goods	L+550		1.0%	10/20/22			9			9			9
Panda Liberty LLC	(f)(g)(t)	Energy	L+650		1.0%	8/21/20			11,515			11,525			10,383
Peak 10 Holding Corp	(j)(t)	Telecommunication Services	L+325		1.0%	8/1/24			8,965			8,329			8,181
PHRC License LLC	(g)(h)	Consumer Services	L+850, 0.3% PIK(0.3% Max PIK)		1.5%	4/28/22			66,842			66,842			68,262
Power Distribution Inc	(f)(i)	Capital Goods	L+725		1.3%	1/25/23			44,021			44,021			44,021
Production Resource Group LLC	(f)(g)(h)(i)	Media	L+700		1.0%	8/21/24			207,992			207,992			204,352
Propulsion Acquisition LLC	(f)(h)(i)(t)	Capital Goods	L+600		1.0%	7/13/21			58,267			56,734			57,684
PSKW LLC	(f)(h)	Health Care Equipment & Services	L+850		1.0%	11/25/21			56,025			55,983			56,166
Reliant Rehab Hospital Cincinnati LLC	(h)	Health Care Equipment & Services	L+675		1.0%	8/30/24			55,015			54,490			54,850
Roadrunner Intermediate Acquisition Co LLC	(f)	Health Care Equipment & Services	L+675		1.0%	3/15/23			7,165			7,165			6,673
Rogue Wave Software Inc	(h)	Software & Services	L+843		1.0%	9/25/21			72,434			72,434			72,343
Safariland LLC	(g)(h)	Capital Goods	L+765		1.1%	11/18/23			70,234			70,234			62,947
Savers Inc	(t)	Retailing	L+375		1.3%	7/9/19			1,539			1,529			1,473
Sequa Corp	(i)(j)(t)	Materials	L+500		1.0%	11/28/21			18,467			18,212			17,705
Sequel Youth & Family Services LLC	(h)	Health Care Equipment & Services	L+700		1.0%	9/1/23			12,229			12,229			12,448
Sequel Youth & Family Services LLC	(f)(h)(i)	Health Care Equipment & Services	L+800			9/1/23			70,000			70,000			71,247
Sequential Brands Group Inc.	(g)(h)(i)	Consumer Durables & Apparel	L+875			2/7/24			118,929			116,976			118,929
SI Group Inc	(j)(t)	Materials	L+475			10/15/25			2,922			2,814			2,820
SIRVA Worldwide Inc	(i)(t)	Commercial & Professional Services	L+550			8/2/25			2,776			2,737			2,728
Sorenson Communications LLC	(f)(g)(h)(j)(t)	Telecommunication Services	L+575		2.3%	4/30/20			107,393			107,217			106,991
SSC (Lux) Limited S.a r.l.	(g)(h)(i)(m)	Health Care Equipment & Services	L+750		1.0%	9/10/24			104,545			104,545			105,591
Staples Canada	(m)	Retailing	L+700		1.0%	9/12/24		C$	56,874			44,009			42,101
Strike LLC	(i)(t)	Energy	L+800		1.0%	11/30/22		$	4,285			4,191			4,290
Sungard Availability Services Capital Inc	(f)(t)	Software & Services	L+700		1.0%	9/30/21			10,336			10,266			8,827

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, ~~2017~~2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry Number of
Shares Cost
Fair Value(d)

Equity/Other—11.7%
5 Arches, LLC, Common Equity (o)(r) Diversified Financials 10,000 $ 250 $ 250
Abaco Energy Technologies LLC, Common Equity (n) Energy 3,055,556 3,056 458
Abaco Energy Technologies LLC, Preferred Equity (n) Energy 12,734,481 637 2,229
ACP FH Holdings GP, LLC, Common Equity (e)(n) Consumer Durables & Apparel 88,571 89 67
ACP FH Holdings, LP, Common Equity (e)(n) Consumer Durables & Apparel 8,768,572 8,769 6,668
Advanced Lighting Technologies, Inc., Common Equity (n)(x) Materials 265,747 7,471 5,900
Advanced Lighting Technologies, Warrants, 10/4/2027 (n)(x) Materials 4,189 39 26
Altus Power America Holdings, LLC, Common Equity (n) Energy 462,008 462 69
Altus Power America Holdings, LLC, Preferred Equity (t) Energy 955,284 955 955
AP Exhaust Holdings, LLC, Class A1 Common Units (n)(r) Automobiles & Components 84 — —
AP Exhaust Holdings, LLC, Class A1 Preferred Units (n)(r) Automobiles & Components 8,295 9,248 8,378
Ascent Resources Utica Holdings, LLC, Common Equity (n)(q) Energy 128,734,129 38,700 32,184
ASG Everglades Holdings, Inc., Common Equity (n)(x) Software & Services 625,178 13,475 30,727
ASG Everglades Holdings, Inc. Warrants, 6/27/2022 (n)(x) Software & Services 253,704 7,231 6,951
Aspect Software Parent, Inc., Common Equity (n) Software & Services 403,955 19,021 —
ATX Holdings, LLC, Common Equity (n)(o) Technology Hardware & Equipment 72,635 116 84
Aurora Diagnostics Holdings, LLC, Warrants, 5/25/2027 (j)(n) Health Care Equipment & Services 94,193 686 673
BPA Laboratories, Inc., Series A Warrants, 4/29/2024 (j)(n) Pharmaceuticals, Biotechnology & Life Sciences 10,924 — —
BPA Laboratories, Inc., Series B Warrants, 4/29/2024 (j)(n) Pharmaceuticals, Biotechnology & Life Sciences 17,515 — —
Burleigh Point, Ltd., Warrants, 7/16/2020 (n)(o) Retailing 3,451,216 1,898 49
Chisholm Oil and Gas Operating, LLC, Series A Units (n)(r) Energy 70,947 71 70
Cimarron Energy Holdco Inc., Common Equity (n) Energy 3,675,487 3,323 —
Cimarron Energy Holdco Inc., Preferred Equity (n) Energy 626,806 627 —
CSF Group Holdings, Inc., Common Equity (n) Capital Goods 417,400 417 292
Eastman Kodak Co., Common Equity (n)(w) Consumer Durables & Apparel 1,846 36 6
Escape Velocity Holdings, Inc., Common Equity (n) Software & Services 33,216 332 784
Fairway Group Holdings Corp., Common Equity (n) Food & Staples Retailing 31,626 1,016 —
FourPoint Energy, LLC, Common Equity, Class C-II-A Units (n)(r) Energy 13,000 13,000 3,770
FourPoint Energy, LLC, Common Equity, Class D Units (n)(r) Energy 2,437 1,610 713
FourPoint Energy, LLC, Common Equity, Class E-II Units (n)(r) Energy 29,730 7,432 8,547
FourPoint Energy, LLC, Common Equity, Class E-III Units (n)(r) Energy 43,875 10,969 12,724
Global Jet Capital Holdings, LP, Preferred Equity (e)(n) Commercial & Professional Services 62,289 6,229 5,606
H.I.G. Empire Holdco, Inc., Common Equity (n) Retailing 411 1,227 1,226
Harvey Holdings, LLC, Common Equity (n) Capital Goods 666,667 667 1,700
Industrial Group Intermediate Holdings, LLC, Common Equity (n)(r) Materials 2,678,947 2,679 4,018

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Sungard Availability Services Capital Inc	(t)	Software & Services	L+1000		1.0%	10/1/22		$	962		$	918		$	933
Sutherland Global Services Inc	(h)(i)(j)(m)(t)	Software & Services	L+538		1.0%	4/23/21			10,564			10,143			9,974
Sutherland Global Services Inc	(h)(i)(j)(m)(t)	Software & Services	L+538		1.0%	4/23/21			2,459			2,361			2,322
Swift Worldwide Resources Holdco Ltd	(f)(g)	Energy	L+1000, 1.0% PIK(1.0% Max PIK)		1.0%	7/20/21			19,492			19,492			19,492
Tangoe LLC		Software & Services	L+650		1.0%	11/28/25			52,024			51,511			51,504
Team Health Inc	(j)(t)	Health Care Equipment & Services	L+275		1.0%	2/6/24			78			71			70
Trace3 Inc	(f)(g)(h)(i)	Diversified Financials	L+675		1.0%	8/5/24			161,585			161,585			159,970
Virgin Pulse Inc	(h)(i)	Software & Services	L+650		1.0%	5/22/25			79,891			79,290			77,407
Vivint Inc	(i)(t)	Commercial & Professional Services	L+500			4/1/24			18,583			18,537			18,111
Warren Resources Inc	(h)(u)	Energy	L+1000, 1.0% PIK(1.0% Max PIK)		1.0%	5/22/20			14,652			14,652			14,652
York Risk Services Group Inc	(t)	Insurance	L+375		1.0%	10/1/21			980			975			919
Zeta Interactive Holdings Corp	(f)(h)	Software & Services	L+750		1.0%	7/29/22			37,112			37,112			37,483
Zeta Interactive Holdings Corp	(n)	Software & Services	L+750		1.0%	7/29/22			6,571			6,571			6,637
Total Senior Secured Loans—First Lien												3,539,497			3,450,630
Unfunded Loan Commitments												(157,339)			(157,339)
Net Senior Secured Loans—First Lien												3,382,158			3,293,291
Senior Secured Loans—Second Lien—13.0%
Access CIG LLC	(t)	Software & Services	L+775			2/27/26			1,326			1,342			1,314
Advantage Sales & Marketing Inc	(t)	Commercial & Professional Services	L+650		1.0%	7/25/22			2,291			2,039			1,815
American Bath Group LLC	(i)(t)	Capital Goods	L+975		1.0%	9/30/24			7,000			6,588			6,965
Ammeraal Beltech Holding BV	(m)	Capital Goods	L+800			7/27/26			52,309			51,285			51,183
Arena Energy LP	(f)(h)	Energy	L+900, 4.0% PIK(4.0% Max PIK)		1.0%	1/24/21			25,872			25,872			25,872
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			4,500			4,076			3,979
Bellatrix Exploration Ltd	(m)	Energy	8.5%			7/26/23			1,872			1,872			1,866
Bellatrix Exploration Ltd	(m)(n)	Energy	8.5%			7/26/23			624			624			622
Byrider Finance LLC		Automobiles & Components	L+1000, 0.5% PIK(4.0% Max PIK)		1.3%	8/22/20			29,695			29,695			29,138
Catalina Marketing Corp	(i)(k)(l)(t)	Media	L+675		1.0%	4/11/22			10,000			9,958			237
Chisholm Oil & Gas Operating LLC	(h)	Energy	L+800		1.0%	3/21/24			16,000			16,000			15,811
Crossmark Holdings Inc	(i)(k)(l)(t)	Media	L+750		1.3%	12/21/20			7,778			7,786			311
Envigo Laboratories Inc	(h)(t)	Health Care Equipment & Services	L+775			4/29/20			3,272			3,189			3,051
Fairway Group Holdings Corp	(k)(l)	Food & Staples Retailing	11.0% PIK(11.0% Max PIK)			2/24/24			1,744			1,520			—
Grocery Outlet Inc	(t)	Food & Staples Retailing	L+725			10/22/26			2,287			2,265			2,273
Gruden Acquisition Inc	(h)(t)	Transportation	L+850		1.0%	8/18/23			15,000			14,511			15,038
Jazz Acquisition Inc	(f)(t)	Capital Goods	L+675		1.0%	6/19/22			3,700			3,729			3,460
LBM Borrower LLC	(f)(i)(j)(t)	Capital Goods	L+925		1.0%	8/20/23			29,332			29,090			28,746
One Call Care Management Inc	(h)	Insurance	L+375, 6.0% PIK(6.0% Max PIK)			4/11/24			12,472			12,362			11,946

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, ~~2017~~2018
(in thousands, except share amounts)

Portfolio Company(a)
Footnotes Industry Number of
Shares Cost
Fair Value(d)

JMC Acquisition Holdings, LLC, Common Equity (n) Capital Goods 1,449 $ 1,449 $ 1,964
JSS Holdco, LLC, Net Profits Interest (n) Capital Goods 27 — 500
JW Aluminum Co., Common Equity (e)(k)(n)(x) Materials 256 — —
JW Aluminum Co., Preferred Equity (e)(k)(x) Materials 1,184 12,838 15,074
MB Precision Investment Holdings LLC, Class A-2 Units (n)(r) Capital Goods 2,287,659 2,288 —
Mood Media Corp., Common Equity (n)(o)(x) Media 17,400,835 12,644 28,659
North Haven Cadence TopCo, LLC, Common Equity (n) Consumer Services 2,916,667 2,917 4,521
PDI Parent LLC, Common Equity (n) Capital Goods 2,076,923 2,077 2,181
Professional Plumbing Group, Inc., Common Equity (e)(n) Capital Goods 3,000,000 3,000 6,900
PSAV Holdings LLC, Common Equity (n) Technology Hardware & Equipment 10,000 10,000 34,000
Ridgeback Resources Inc., Common Equity (e)(n)(o)(v) Energy 817,308 5,022 4,962
Roadhouse Holding Inc., Common Equity (n)(x) Consumer Services 4,481,763 4,657 —
S1 Blocker Buyer Inc., Common Equity Commercial & Professional Services 124 1,240 1,887
SandRidge Energy, Inc., Common Equity (n)(o)(w) Energy 253,009 5,647 5,331
Sequential Brands Group, Inc., Common Equity (e)(n)(w) Consumer Durables & Apparel 408,685 5,517 727
Sorenson Communications, Inc., Common Equity (e)(n) Telecommunication Services 43,796 — 35,917
SSC Holdco Limited, Common Equity (n)(o) Health Care Equipment & Services 261,364 5,227 6,247
Sunnova Energy Corp., Common Equity (n) Energy 384,746 1,444 —
Sunnova Energy Corp., Preferred Equity (n) Energy 70,229 374 283
Swift Worldwide Resources Holdco Limited, Common Equity (n)(o)(u) Energy 1,250,000 2,010 687
TE Holdings, LLC, Common Equity (e)(n)(r) Energy 717,718 6,101 1,166
TE Holdings, LLC, Preferred Equity (e)(n) Energy 475,758 4,751 4,520
The Stars Group Inc., Warrants, 5/15/2024 (n)(o) Consumer Services 2,000,000 16,832 25,140
Titan Energy, LLC, Common Equity (e)(n)(w) Energy 200,040 6,322 304
Warren Resources, Inc., Common Equity (n)(x) Energy 2,371,337 11,145 4,031
White Star Petroleum Holdings, LLC, Common Equity (n)(r) Energy 1,613,753 1,372 1,210
Zeta Interactive Holdings Corp., Preferred Equity, Series E-1 (n) Software & Services 620,025 4,929 6,015
Zeta Interactive Holdings Corp., Preferred Equity, Series F (n) Software & Services 563,932 4,929 5,261
Zeta Interactive Holdings Corp., Warrants, 4/20/2027 (n) Software & Services 84,590 — 294
Total Equity/Other 296,470 332,905
TOTAL INVESTMENTS—161.2% $ 4,603,708 4,597,594
LIABILITIES IN EXCESS OF OTHER ASSETS—(61.2%) (1,744,573)
NET ASSETS—100.0% $ 2,853,021

~~(a)~~

~~Security may be an obligation of one or more entities affiliated with the named company.~~

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
OPE Inmar Acquisition Inc	(i)(t)	Software & Services	L+800		1.0%	5/1/25		$	2,615		$	2,583		$	2,589
P2 Energy Solutions, Inc.	(i)(t)	Energy	L+800		1.0%	4/30/21			14,500			14,614			13,920
Paradigm Acquisition Corp	(t)	Health Care Equipment & Services	L+750			10/26/26			1,599			1,595			1,607
Peak 10 Holding Corp	(i)(j)(t)	Telecommunication Services	L+725		1.0%	8/1/25			5,814			5,630			5,247
Pure Fishing Inc		Consumer Durables & Apparel	L+838		1.0%	12/31/26			46,828			46,362			46,359
Rise Baking Company	(i)	Food, Beverage & Tobacco	L+800		1.0%	8/9/26			17,990			17,817			17,822
Sequa Corp	(i)(t)	Materials	L+900		1.0%	4/28/22			7,462			7,416			7,089
SIRVA Worldwide Inc	(i)(t)	Commercial & Professional Services	L+950			8/2/26			2,494			2,312			2,207
SMG/PA	(j)(t)	Consumer Services	L+700			1/23/26			3,641			3,671			3,599
Spencer Gifts LLC	(i)(t)	Retailing	L+825		1.0%	6/29/22			20,000			20,063			17,100
Titan Energy LLC	(h)(k)(l)	Energy	L+1300 PIK(L+1300 Max PIK)		1.0%	2/23/20			89,408			67,595			8,316
WireCo WorldGroup Inc	(t)	Capital Goods	L+900		1.0%	9/30/24			5,115			5,178			5,128
Total Senior Secured Loans—Second Lien												418,639			334,610
Unfunded Loan Commitments												(624)			(624)
Net Senior Secured Loans—Second Lien												418,015			333,986
Other Senior Secured Debt—7.7%
Advanced Lighting Technologies Inc	(k)(l)(u)	Materials	L+700, 10.0% PIK(10.0% Max PIK)		1.0%	10/4/23			11,342			10,663			3,630
Akzo Nobel Specialty Chemicals	(m)(t)	Materials	8.0%			10/1/26			2,019			2,019			1,890
Artesyn Embedded Technologies Inc	(t)	Technology Hardware & Equipment	9.8%			10/15/20			1,574			1,518			1,456
Black Swan Energy Ltd	(m)	Energy	9.0%			1/20/24			1,333			1,333			1,286
Boyne USA Inc	(t)	Consumer Services	7.3%			5/1/25			44			46			46
DJO Finance LLC/DJO Finance Corp	(t)	Health Care Equipment & Services	8.1%			6/15/21			6,838			6,886			7,060
FourPoint Energy LLC	(h)(i)	Energy	9.0%			12/31/21			46,313			45,107			45,502
Genesys Telecommunications Laboratories Inc	(t)	Technology Hardware & Equipment	10.0%			11/30/24			144			159			152
Global A&T Electronics Ltd	(i)(m)(t)	Semiconductors & Semiconductor Equipment	8.5%			1/12/23			15,949			16,079			14,155
JC Penney Corp Inc	(j)(m)(t)	Retailing	5.7%			6/1/20			126			117			101
JW Aluminum Co	(h)(t)(u)	Materials	10.3%			6/1/26			33,001			33,001			32,919
Lycra	(m)(t)	Consumer Durables & Apparel	7.5%			5/1/25			3,659			3,687			3,444
Mood Media Corp	(h)(u)	Media	L+1400 PIK(L+1400 Max PIK)		1.0%	6/28/24			28,478			28,383			28,478
Numericable-SFR	(m)(t)	Software & Services	8.1%			2/1/27			917			917			869
Pattonair Holdings Ltd	(m)(t)	Capital Goods	9.0%			11/1/22			4,111			4,252			4,153
Ply Gem Holdings Inc	(t)	Capital Goods	8.0%			4/15/26			7,807			7,453			7,182
Sorenson Communications LLC	(h)(t)	Telecommunication Services	9.0%, 0.0% PIK(9.0% Max PIK)			10/31/20			7,058			6,952			6,987
Sunnova Energy Corp		Energy	6.0%, 6.0% PIK(6.0% Max PIK)			7/31/19			1,123			1,123			1,116
Talos Production LLC	(h)(t)	Energy	11.0%			4/3/22			4,500			4,701			4,376

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, ~~2017~~2018
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Velvet Energy Ltd	(i)(m)	Energy	9.0%			10/5/23		$	15,000		$	15,000		$	15,120
Vivint Inc	(h)(t)	Commercial & Professional Services	7.6%			9/1/23			7,309			6,707			5,981
Vivint Inc	(h)(t)	Commercial & Professional Services	7.9%			12/1/22			11,307			11,078			10,713
Total Other Senior Secured Debt												207,181			196,616
Subordinated Debt—8.6%
All Systems Holding LLC		Commercial & Professional Services	10.0% PIK(10.0% Max PIK)			10/31/22			206			206			206
Ascent Resources Utica Holdings LLC/ARU Finance Corp	(h)(i)(t)	Energy	10.0%			4/1/22			26,026			26,026			26,635
Aurora Diagnostics Holdings LLC/Aurora Diagnostics Financing Inc	(h)(t)	Health Care Equipment & Services	12.3%, 1.5% PIK(1.5% Max PIK)			1/15/20			6,235			5,951			6,235
Avantor Inc	(i)(t)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%			10/1/25			20,000			20,000			20,012
Byrider Finance LLC		Automobiles & Components	20.0% PIK(20.0% Max PIK)			3/31/22			1,458			1,458			1,458
CEC Entertainment Inc	(t)	Consumer Services	8.0%			2/15/22			18,510			18,397			16,659
ClubCorp Club Operations Inc	(h)(t)	Consumer Services	8.5%			9/15/25			10,733			10,361			9,660
Diamond Resorts International Inc	(t)	Consumer Services	10.8%			9/1/24			3,048			3,191			2,751
Eclipse Resources Corp	(m)(t)	Energy	8.9%			7/15/23			9,175			9,049			7,879
Great Lakes Dredge & Dock Corp	(m)(t)	Capital Goods	8.0%			5/15/22			5,276			5,276			5,364
Intelsat Jackson Holdings SA	(m)(t)	Media	5.5%			8/1/23			5,752			5,178			5,058
Ken Garff Automotive LLC	(t)	Retailing	7.5%			8/15/23			6,004			6,055			5,959
Lazard Global Compounders Fund	(m)(n)	Diversified Financials	L+650		4.5%	9/15/25			15,000			15,000			14,682
LifePoint Hospitals Inc	(t)	Health Care Equipment & Services	9.8%			12/1/26			7,656			7,571			7,295
Logan’s Roadhouse Inc	(l)	Consumer Services				11/1/24			4,907			4,857			4,855
PF Chang’s China Bistro Inc	(h)(i)(t)	Consumer Services	10.3%			6/30/20			28,977			28,320			26,460
Quorum Health Corp	(t)	Health Care Equipment & Services	11.6%			4/15/23			2,566			2,554			2,446
Sorenson Communications LLC	(h)(t)	Telecommunication Services	13.9%, 0.0% PIK(13.9% Max PIK)			10/31/21			5,364			5,170			5,498
SRS Distribution Inc	(h)(t)	Capital Goods	8.3%			7/1/26			11,667			11,476			10,734
Stars Group Holdings BV	(m)(t)	Consumer Services	7.0%			7/15/26			1,438			1,438			1,398
Sungard Availability Services Capital Inc	(t)	Software & Services	8.8%			4/1/22			5,900			4,860			1,322
Team Health Inc	(t)	Health Care Equipment & Services	6.4%			2/1/25			6,901			5,958			5,633
Vertiv Group Corp	(h)(t)	Technology Hardware & Equipment	9.3%			10/15/24			16,584			16,411			14,760
Vivint Inc	(h)(t)	Commercial & Professional Services	8.8%			12/1/20			7,602			7,328			7,250
York Risk Services Group Inc	(h)(i)(t)	Insurance	8.5%			10/1/22			38,070			35,701			26,649
Total Subordinated Debt												257,792			236,858
Unfunded Debt Commitments												(15,000)			(15,000)
Net Subordinated Debt												242,792			221,858

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity	Principal Amount(c)/ Shares			Cost			Fair Value(d)
Asset Based Finance—1.8%
Altus Power America Inc, Preferred Stock	(r)	Energy	9.0%, 5.0% PIK		10/3/23			1,060,975		$	1,061		$	1,045
CGMS CLO 2013-3A Class Subord., 7/15/2025	(m)	Diversified Financials	27.8%		7/15/25		$	23,263			9,222			12,050
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		1/30/25		$	986			971			986
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		4/30/25		$	6,267			6,174			6,267
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		9/3/25		$	1,295			1,276			1,295
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		9/29/25		$	1,219			1,201			1,219
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		12/4/25		$	7,287			7,179			7,287
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		12/4/25		$	1,712			1,687			1,712
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		12/9/25		$	219			216			219
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		12/9/25		$	1,253			1,234			1,253
Global Jet Capital LLC, Structured Mezzanine	(e)	Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		1/29/26		$	625			616			625
Global Jet Capital LLC, Structured Mezzanine	(e)(m)	Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		1/29/26		$	146			143			146
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK(15.0% Max PIK)		12/2/26		$	2,332			2,298			2,332
NewStar Clarendon 2014-1A Class Subord. B	(m)	Diversified Financials	L+435		1/25/27		$	1,060			1,014			1,055
NewStar Clarendon 2014-1A Class D	(m)	Diversified Financials	13.2%		1/25/27		$	12,140			7,758			8,661
Total Asset Based Finance											42,050			46,152
Equity/Other—10.4%
5 Arch Income Fund 2, LLC, Common Stock	(m)(p)	Diversified Financials						8,000			197			400
Abaco Energy Technologies LLC, Common Equity	(l)	Energy						3,055,556			3,056			1,299
Abaco Energy Technologies LLC, Preferred Equity	(l)	Energy						12,734,481			637			6,686
Advanced Lighting Technologies Inc, Common Stock	(l)(u)	Materials						265,747			7,471			—
Advanced Lighting Technologies Inc, Warrant	(l)(u)	Materials			10/4/27			4,189			39			—
All Systems Holding LLC, Common Stock		Commercial & Professional Services						124			1,201			1,384
Altus Power America Inc, Common Stock	(l)	Energy						462,008			462			81
Ascent Resources Utica Holdings LLC/ARU Finance Corp, Common Stock	(o)	Energy						13,555,557			12,900			3,768
Ascent Resources Utica Holdings LLC/ARU Finance Corp, Trade Claim	(o)	Energy						115,178,572			25,800			32,020
ASG Technologies, Common Stock	(l)(u)	Software & Services						625,178			13,475			31,743
ASG Technologies, Warrants	(l)(u)	Software & Services			6/27/22			253,704			7,231			7,364
Aspect Software Inc, Common Stock	(l)	Software & Services						38,574			9,932			—

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Consolidated Schedule of Investments (continued)
As of December 31, 2018
(in thousands, except share amounts)

A summary of outstanding financial instruments as of December 31, 2018 is as follows:

Interest rate swaps

Counterparty	Notional Amount	Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date		Premiums Paid/ (Received)			Value			Unrealized Depreciation
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.78%		12/18/2023		$	—		$	(1,090)		$	(1,090)
JP Morgan Chase Bank	$80,000	3-Month LIBOR		2.81%		12/18/2021			—			(653)			(653)
								$	—		$	(1,743)		$	(1,743)

(a)

Security may be an obligation of one or more entities affiliated with the named company.

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, ~~2017,~~2018, the three-month London Interbank Offered Rate, or LIBOR or “L”, was ~~1.69%~~2.81%, and the U.S. Prime Lending Rate, or Prime, was ~~4.50%~~5.50%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of underlying investment.

(c)

Denominated in U.S. dollars unless otherwise noted.

(d)

Fair value determined by the Company’s board of directors (see Note 7)8).

(e)

Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the ~~obligations of Cobbs Creek LLC~~amounts outstanding under the ~~repurchase transaction~~revolving credit facility with ~~JPMorgan Chase Bank, N.A., London Branch~~ING Capital LLC (see Note 8)9).

(f)

Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8)9).

(g)

Security or portion thereof held within Wissahickon Creek LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Wells Fargo Bank, National Association (see Note 8).

~~(h)~~

~~(i)~~

Security or portion thereof held within Dunning Creek LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).

~~(j)~~(h)

~~(k)~~(i)

Security or portion thereof held within Green Creek LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with Goldman Sachs Bank USA (see Note 8)9).

~~(l)~~(j)

Position or portion thereof unsettled as of December 31, ~~2017.~~2018.

~~(m)~~(k)

Security was on non-accrual status as of December 31, ~~2017.~~2018.

~~(n)~~(l)

Security is non-income producing.

~~(o)~~(m)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, ~~2017, 90.2%~~2018, 88.2% of the Company’s total assets represented qualifying assets.

~~(p)~~(n)

Security is an unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

~~(q)~~(o)

Security held within IC II American Energy Investments, Inc., a wholly-owned subsidiary of the Company.

~~(r)~~(p)

Security held within FSIC II Investments, Inc., a wholly-owned subsidiary of the Company.

~~(s)~~(q)

Security held within IC II Arches Investments, LLC, a wholly-owned subsidiary of the Company.

~~(t)~~(r)

Security held within IC II Altus Investments, LLC, a wholly-owned subsidiary of the Company.

~~(u)~~

~~Investment denominated in British pounds. Cost and fair value are converted into U.S. dollars at an exchange rate of £1.00 to $1.35 as of December 31, 2017.~~

~~See notes to unaudited consolidated financial statements.~~

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Consolidated Schedule of Investments~~
~~As of December 31, 2017~~
~~(in thousands, except share amounts)~~

Portfolio Company	Fair Value at December 31, 2016			Transfers In or Out			Purchases and Paid- in-Kind Interest			Sales and Repayments			Accretion of Discount			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2017			Interest Income(3)			PIK Income(3)			Fee Income(3)				Fair Value at December 31, 2017				Transfers In or Out				Purchases and Paid-in-Kind Interest				Sales and Repayments				Accretion of Discount				Net Realized Gain (Loss)				Net Change in Unrealized Appreciation (Depreciation)				Fair Value at December 31, 2018				Interest Income(1)				PIK Income(1)				Fee Income(1)
Senior Secured Loans—First Lien
Advanced Lighting Technologies, Inc.		$	—		$	—		$	9,055		$	(1,333)		$	63		$	4		$	1,429		$	9,218		$	265		$	—		$	403			$	9,218			$	—			$	—			$	(92)			$	223			$	13			$	(237)			$	9,125			$	1,119			$	—			$	—
A.T. Cross Co.(1)			28,081			(31,027)			—			—			(682)			—			3,628			—			(682)			—			—
ASG Everglades Holdings, Inc.			80,505			—			12,509			(91,824)			24			148			(1,362)			—			4,540			508			—
Logan’s Roadhouse, Inc.(2)			—			—			5,437			(760)			—			—			(8)			4,669			—			544			—
H.M. Dunn Co., Inc.(2)																																		—				64,286				—				—				—				(25,715)				(31,549)				7,022				1,656				—				—
Logan’s Roadhouse, Inc.(3)																																		4,669				—				2,223				(6,875)				—				(25)				8				—				17				710				—
Logan’s Roadhouse, Inc.																																		—				—				1,347				(1,333)				—				(14)				—				—				529				529				—
MB Precision Holdings LLC(2)																																		—				64,367				710				(12,581)				—				(32,132)				975				21,339				3,507				—				—
Warren Resources, Inc.			42,122			—			428			—			—			—			1,063			43,613			4,379			428			(180)				43,613				—				170				(28,068)				—				—				(1,063)				14,652				1,939				170				1,123
Senior Secured Loans—Second Lien
ASG Everglades Holdings, Inc.			26,179			—			—			(26,989)			408			6,392			(5,990)			—			2,312			—			1,349
JW Aluminum Co.			34,410			—			132			(76)			2			—			(86)			34,382			3,198			132			—				34,382				—				—				(33,874)				1				7				(516)				—				1,492				—				—
Logan’s Roadhouse, Inc.			10,355			—			3,794			—			22			—			(7,400)			6,771			22			743			—				6,771				—				194				(1,839)				6				(13,001)				7,869				—				188				194				—
Senior Secured Bonds
Other Senior Secured Debt
Advanced Lighting Technologies, Inc.			—			—			10,278			—			—			—			—			10,278			152			—			—				10,278				—				646				(261)				—				—				(7,033)				3,630				1,182				646				—
Mood Media Corp.			—			23,104			—			—			—			—			115			23,219			3,746			—			—
Subordinated Debt
JW Aluminum Co.																																		—				—				33,001				—				—				—				(82)				32,919				1,983				—				—
Mood Media Corp.			—			6,103			—			(6,930)			47			780			—			—			463			—			—				23,219				—				5,274				—				5				—				(20)				28,478				4,429				1,901				—
Equity/Other
Advanced Lighting Technologies, Inc., Common Equity			—			—			7,471			—			—			—			(1,571)			5,900			—			—			—				5,900				—				—				—				—				—				(5,900)				—				—				—				—
Advanced Lighting Technologies, Warrants, 10/4/2027			—			—			39			—			—			—			(13)			26			—			—			—				26				—				—				—				—				—				(26)				—				—				—				—
A.T. Cross Co., Common Equity, Class A Units(1)			—			(1,000)			—			—			—			—			1,000			—			—			—			—
A.T. Cross Co., Preferred Equity, Class A-1 Units(1)			—			(243)			—			—			—			—			243			—			—			—			—
A.T. Cross Co., GSO Special Unit(1)			—			—			—			—			—			—			—			—			—			—			—
ASG Everglades Holdings, Inc., Common Equity			29,477			—			—			—			—			—			1,250			30,727			—			—			—				30,727				—				—				—				—				—				1,016				31,743				—				—				—
ASG Everglades Holdings, Inc., 6/27/2022, Warrants			6,444			—			—			—			—			—			507			6,951			—			—			—				6,951				—				—				—				—				—				413				7,364				—				—				—
HM Dunn Aerosystems, Inc., Preferred Equity, Series A(2)																																		—				—				—				—				—				—				—				—				—				—				—
HM Dunn Aerosystems, Inc., Preferred Equity, Series B(2)																																		—				—				—				—				—				—				—				—				—				—				—
JW Aluminum Co., Common Equity			—			—			—			—			—			—			—			—			—			—			—				—				—				—				—				—				—				—				—				—				—				—
JW Aluminum Co., Preferred Equity			11,854			—			1,559			—			—			—			1,661			15,074			222			1,559			—				15,074				—				18,992				—				210				—				9,614				43,890				5,632				4,785				—
MB Precision Holdings LLC, Class A-2 Units(2)																																		—				2,288				—				—				—				—				(2,288)				—				—				—				—
MB Precision Holdings LLC, Preferred Stock																																		—				—				8,600				—				—				—				(2,774)				5,826				—				—				—
Mood Media Corp.			—			7,136			5,508			—			—			—			16,015			28,659			—			—			—				28,659				—				—				—				—				—				(12,817)				15,842				—				—				—
Roadhouse Holding Inc., Common Equity			5,472			—			—			—			—			—			(5,472)			—			—			—			—				—				—				—				—				—				(4,657)				4,657				—				—				—				—
Warren Resources, Inc., Common Equity			10,197			—			—			—			—			—			(6,166)			4,031			—			—			—				4,031				—				—				—				—				—				1,542				5,573				—				—				—
Total		$	285,096		$	4,073		$	56,210		$	(127,912)		$	(116)		$	7,324		$	(1,157)		$	223,518		$	18,617		$	3,914		$	1,572			$	223,518			$	130,941			$	71,157			$	(84,923)			$	445			$	(75,524)			$	(38,211)			$	227,403			$	23,673			$	8,935			$	1,123

(1)

~~During~~Interest, PIK and fee income presented for the year ended December 31, 2018.

(2)

The Company held this investment as of December 31, 2017 ~~the Company’s ownership increased~~but it was not deemed to ~~over 25%~~be an “affiliated person” of the portfolio ~~company’s voting securities and as a result the Company was~~company or deemed to “control” the portfolio company ~~prior to disposition~~as of ~~the investment.~~December 31, 2017. Transfers in or out have been presented at amortized cost.

~~(2)~~(3)

Security includes a partially unfunded commitment as of December 31, 2017 with an amortized cost of $760 and a fair value of ~~$752~~$752.

~~(3)~~

~~Interest, PIK, and fee income presented for the year ended December 31, 2017.~~

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization

FS Investment Corporation II, or the Company, was incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of ~~September 30, 2018,~~March 31, 2019, the Company had ~~seven~~various wholly-owned subsidiaries, including special purpose financing subsidiaries ~~four wholly-owned~~and subsidiaries through which it holds ~~interests in portfolio companies and one wholly-owned subsidiary through which it expects to hold~~ interests in portfolio companies. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of ~~September 30, 2018.~~March 31, 2019. All significant intercompany transactions have been eliminated in consolidation. Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes.

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital ~~appreciation by investing~~appreciation. The Company’s portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle-market U.S. ~~companies. The Company seeks~~companies and, to ~~generate superior risk-adjusted returns by focusing on debt investments in~~ a ~~broad array~~lesser extent, subordinated loans of private U.S. companies, including middle market companies, which the Company defines as companies with annual revenues of $50 million to $2.5 billion at the time of investment. The Company may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from the Company’s target companies as primary market or directly originated investments. In connection with the Company’s debt investments, the Company may on occasion receive equity interests such as warrants or options as additional consideration. The Company may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in the Company’s target companies, generally in conjunction with one of the Company’s debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm.companies. In addition, a portion of the Company’s portfolio may be comprised of equity and equity-related securities, corporate bonds, ~~collateralized loan obligations, or CLOs,~~structured products, other debt securities and derivatives, including total return swaps and credit default swaps.

The ~~Company’s~~Company is externally managed by FS/KKR Advisor, LLC, or the Advisor, pursuant to an investment ~~adviser will seek to tailor~~advisory and administrative services agreement, dated as of April 9, 2018, or the ~~Company’s~~ investment focus as market conditions evolve. Depending on market conditions, the Company may increase or decrease its exposure to less senior portions of the capital structure or otherwise make opportunistic investments.

~~As the Company previously announced on~~advisory and administrative services agreement. On April 9, 2018, GSO/Blackstone Debt Funds Management LLC, or GDFM, resigned as the investment sub-adviser to the Company and terminated the investment sub-advisory agreement, or the investment sub-advisory agreement, between FSIC II Advisor, LLC, or FSIC II Advisor, and GDFM, effective April 9, 2018. In connection with GDFM’s resignation as the investment sub-adviser to the Company, on April 9, 2018, the Company entered into anthe investment advisory and administrative services agreement, ~~or the FS/KKR Advisor investment advisory and administrative services agreement, with FS/KKR Advisor, LLC, or FS/KKR Advisor, a newly-formed investment adviser jointly operated by~~which replaced an affiliate of Franklin Square Holdings, L.P. (which does business as FS Investments) and by KKR Credit Advisors (US), LLC, or KKR Credit, pursuant to which FS/KKR Advisor acts as investment adviser to the Company. The FS/KKR Advisor investment advisory and administrative services agreement replaced the investment advisory and administrative services agreement, dated February 8, 2012, or the FSIC II Advisor investment advisory and administrative services agreement, by and between the Company and FSIC II Advisor.

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 2. Summary of ~~subsequent events through the date the consolidated financial statements were issued and filed with the U.S. Securities and Exchange Commission, or the SEC.~~Significant Accounting Policies (continued)

Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ~~Many of the amounts have been rounded and all amounts are in thousands, except share and per share amounts.~~

Capital Gains Incentive Fee: Pursuant to the terms of the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement). This fee equals 20.0% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of ~~the applicable period,~~each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any capital gain incentive fees previously paid ~~capital gains incentive fees. The~~by the Company. On a quarterly basis, the Company accrues for the capital gains incentive fee ~~which,~~by calculating such fees as if ~~earned, is paid annually.~~ it were due and payable as of the end of such period.

The Company ~~accrues~~includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive ~~fee on capital gains based on net realized and unrealized gains; however, the fee~~fees that would be payable to ~~FS/KKR~~the Advisor if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Advisor is ~~based on realized gains and no such~~not entitled to an incentive fee ~~is payable~~ 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 FSIC II Advisor investment advisory and administrative services agreement.~~

Subordinated Income Incentive Fee: Pursuant to the terms of the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, ~~FS/KKR~~the Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, which is calculated and payable quarterly in arrears, ~~and~~ equals 20.0% of the 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 1.75% per quarter (1.875% under the FSIC II Advisor investment advisory and administrative services agreement), or an annualized hurdle rate of 7.0% (7.5% under the FSIC II Advisor investment advisory and administrative services agreement). For purposes of this fee, “adjusted capital” means cumulative gross proceeds generated from sales of the Company’s common stock (including proceeds from its distribution reinvestment plan) reduced for distributions paid to stockholders from proceeds of non-liquidating dispositions of the Company’s

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 2. Summary of Significant Accounting Policies (continued)~~

investments and amounts paid for share repurchases pursuant to the Company’s share repurchase program. As a result, ~~FS/KKR~~the Advisor will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.75% (1.875% under the FSIC II Advisor investment advisory and administrative services agreement). Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, ~~FS/KKR~~the Advisor will 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 the Company’s pre-incentive fee net investment income for such quarter equals 2.1875%, or 8.75% annually (2.34375%, or 9.375% annually under the FSIC II Advisor investment advisory and administrative services agreement), of the Company’s adjusted capital. Thereafter, ~~FS/KKR~~the Advisor will be entitled to receive 20.0% of the ~~Company’s~~ pre-incentive fee net investment income.

~~Partial Loan Sales:~~ ~~The Company follows the guidance in ASC Topic 860,~~ ~~Transfers and Servicing~~, or ASC Topic 860, when accounting for loan participations and other partial loan sales. This guidance requires a participation or other partial loan sale to meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on the Company’s consolidated balance sheets and the proceeds are recorded as a secured borrowing until the participation or other partial loan sale meets the definition. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value. See Note 8 for additional information regarding the Company’s secured borrowing.

Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018 and the audited consolidated financial statements as of and for the year ended December 31, ~~2017~~2018 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three ~~and nine~~ months ended ~~September 30, 2018. These reclassifications had no material impact on the Company’s consolidated financial position, results of operations or cash flows as previously reported.~~March 31, 2019.

Revenue Recognition:Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. Distributions received from limited liability company

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

(“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. The Company’s policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that the Company will receive any previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on the Company’s judgment.

Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. For the three months ended March 31, 2019, the Company recognized $6,105 in structuring fee revenue. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

Derivative Instruments: The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the consolidated statements of operations. As of March 31, 2019, the Company’s derivative instruments included interest rate swaps.

Recent Accounting Pronouncements: In August 2018, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2018-13, Fair Value Measurement—Disclosures Framework—Changes to Disclosure Requirements for Fair Value Measurement (Topic 820), or ASU 2018-13. ASU 2018-13 introduces new fair value disclosure requirements and eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of ASU 2018-13 on its financial statements.

Note 3. Share Transactions

Below is a summary of transactions with respect to shares of the Company’s common stock during the three months ended March 31, 2019 and 2018:

	Three Months Ended March 31,
	2019					2018
	Shares		Amount			Shares		Amount
Reinvestment of Distributions		3,191,361		$	25,694		3,316,098		$	28,959
Share Repurchase Program		(3,297,056)			(26,541)		(3,408,305)			(29,993)
Net Proceeds from Share Transactions		(105,695)		$	(847)		(92,207)		$	(1,034)

2830

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note ~~2. Summary of Significant Accounting Policies~~3. Share Transactions (continued)

Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, using the cumulative effect method applied to in-scope contracts with customers that have not been completed as of the date of adoption. The Company did not identify any in-scope contracts that had not been completed as of the date of adoption and, as a result, the Company did not recognize a cumulative effect on stockholders’ equity in connection with the adoption of the new revenue recognition guidance.

The new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other things, financial instruments as well as certain other contractual rights and obligations. Under the new revenue recognition guidance, which the Company has applied to all new in-scope contracts as of the date of adoption, structuring and other upfront fees are recognized as revenue based on the transaction price as the performance obligation is fulfilled. The related performance obligation consists of structuring activities and is satisfied over time as such activities are performed. Consideration is variable and is constrained from being included in the transaction price until the uncertainty associated with the variable consideration is resolved, typically as of the trade date of the related transaction. Payment is typically due on the settlement date of the related transaction.

For the nine months ended September 30, 2018, the Company recognized $7,168 in structuring fee revenue under the new revenue recognition guidance and included such revenue in the fee income line item on its consolidated statement of operations. Comparative periods are presented in accordance with revenue recognition guidance effective prior to January 1, 2018, under which the Company recorded structuring and other non-recurring upfront fees as income when earned. The Company has determined that the adoption of the new revenue recognition guidance did not have a material impact on the amount of revenue recognized for the nine months ended September 30, 2018.

~~Note 3. Share Transactions~~

~~Below is a summary of transactions with respect to shares of the Company’s common stock during the nine months ended September 30, 2018 and 2017:~~

Nine Months Ended September 30,
2018 2017
Shares Amount Shares Amount
Reinvestment of Distributions 9,802,626 $ 84,192 10,255,691 $ 92,207
Share Repurchase Program (10,072,672) (86,976) (10,211,257) (92,570)
Net Proceeds from Share Transactions (270,046) $ (2,784) 44,434 $ 337

During the period from ~~October~~April 1, ~~2018~~2019 to ~~November 9, 2018,~~May 10, 2019, the Company issued ~~1,054,704~~1,034,362 shares of common stock pursuant to its distribution reinvestment plan, or DRP, for gross proceeds of ~~$8,806,779~~$8,326,614 at an average price per share of ~~$8.35.~~$8.05. For additional information regarding the terms of the DRP, see Note 5.

Share Repurchase Program

The Company intends to continue to conduct quarterly tender offers pursuant to its share repurchase program. The Company’s board of directors will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase shares of common stock and under what terms:

•

the effect of such repurchases on the Company’s qualification as a RIC (including the consequences of any necessary asset sales);

•

the liquidity of the Company’s assets (including fees and costs associated with disposing of assets);

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 3. Share Transactions (continued)~~

•

the Company’s investment plans and working capital requirements;

•

the relative economies of scale with respect to the Company’s size;

•

the Company’s history in repurchasing shares of common stock or portions thereof; and

•

the condition of the securities markets.

Historically, the Company limited the number of shares of common stock to be repurchased during any calendar year to the lesser of (i) the number of shares of common stock that the Company could repurchase with the proceeds it received from the issuance of shares of common stock under the DRP and (ii) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. On May 8, 2017, the board of directors of the Company amended the share repurchase program. As amended, the Company limits the maximum number of shares of common stock to be repurchased for any repurchase offer to the greater of (A) the number of shares of common stock that the Company can repurchase with the proceeds it has received from the sale of shares of common stock under the DRP during the twelve-month period ending on the date the applicable repurchase offer expires (less the amount of proceeds used to repurchase shares of common stock on each previous repurchase date for repurchase offers conducted during such twelve-month period) (the Company refers to this limitation as the twelve-month repurchase limitation) and (B) the number of shares of common stock that the Company can repurchase with the proceeds it received from the sale of shares of common stock under the DRP during the three-month period ending on the date the applicable repurchase offer expires (the Company refers to this limitation as the three-month repurchase limitation). In addition to this limitation, the maximum number of shares of common stock to be repurchased for any repurchase offer will also be limited to 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. As a result, the maximum number of shares of common stock to be repurchased for any repurchase offer will not exceed the lesser of (i) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter, and (ii) whichever is greater of the twelve-month repurchase limitation described in clause (A) above and the three-month repurchase limitation described in clause (B) above. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock. The actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above. The Company’s board of directors may amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 3. Share Transactions (continued)~~

The following table provides information concerning the Company’s repurchases of shares of common stock pursuant to its share repurchase program during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:

For the Three Months Ended	Repurchase Date	Shares Repurchased		Percentage of Shares Tendered That Were Repurchased		Percentage of Outstanding Shares Repurchased as of the Repurchase Date		Repurchase Price Per Share			Aggregate Consideration for Repurchased Shares			Repurchase Date	Shares Repurchased		Percentage of Shares Tendered That Were Repurchased		Percentage of Outstanding Shares Repurchased as of the Repurchase Date		Repurchase Price Per Share			Aggregate Consideration for Repurchased Shares
Fiscal 2017
December 31, 2016	January 3, 2017		2,344,810		100%		0.72%		$	8.950		$	20,986
March 31, 2017	April 3, 2017		3,353,328		100%		1.02%		$	9.100			30,515
June 30, 2017	July 3, 2017		4,513,119		100%		1.38%		$	9.100			41,069
Total			10,211,257									$	92,570
Fiscal 2018
December 31, 2017	January 12, 2018		3,408,305		28%		1.04%		$	8.800		$	29,993	January 12, 2018		3,408,305		28.0%		1.04%		$	8.800		$	29,993
March 31, 2018	April 2, 2018		3,367,488		21%		1.03%		$	8.600			28,960
June 30, 2018	July 3, 2018		3,296,879		20%		1.01%		$	8.500			28,023
Total																3,408,305									$	29,993
Fiscal 2019
December 31, 2018														January 2, 2019		3,297,056		16.7%		1.01%		$	8.050		$	26,541
Total			10,072,672									$	86,976			3,297,056									$	26,541

On ~~October 5, 2018,~~April 1, 2019, the Company repurchased ~~3,237,783~~3,191,572 shares of common stock (representing ~~17%~~14.2% of the shares of common stock tendered for repurchase and ~~0.99%~~0.98% of the shares outstanding as of such date) at ~~$8.40~~$8.05 per share for aggregate consideration totaling ~~$27,197.~~$25,692.

Note 4. Related Party Transactions

Compensation of the Investment Adviser

Pursuant to the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, ~~FS/KKR~~the Advisor is entitled to ~~an annual~~a base management fee ~~based on~~calculated at an annual rate of 1.50% of the average weekly value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. The base management fee is payable quarterly in ~~arrears, and is calculated at an annual rate of 1.50%~~arrears. All or any part of the ~~average weekly value of~~base management fee not taken as to any quarter will be deferred without interest and may be taken in such other quarter as the ~~Company’s gross assets.~~Advisor determines. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that ~~FS/KKR~~the Advisor may be entitled to under the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement.

Pursuant to the FSIC II Advisor investment advisory and administrative services agreement, which was in effect until April 9, 2018, FSIC II Advisor was entitled to an annual base management fee equal to 2.0% of the average value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. Effective March 5, 2015, FSIC II Advisor had agreed to permanently waive 0.25% of its base management fee to which it was entitled under the FSIC II Advisor investment advisory and administrative services agreement, so that the fee received equaled 1.75% of the average value of the Company’s gross assets. Pursuant to the investment sub-advisory agreement, GDFM was entitled to receive 50% of all management and incentive fees payable to FSIC II Advisor under the FSIC II Advisor investment advisory and administrative services agreement with respect to each year.

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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

Pursuant to the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, ~~FS/KKR~~the Advisor ~~also~~ oversees the Company’s 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/KKR~~The Advisor also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s stockholders and reports filed with the U.S. Securities and Exchange Commission, or the SEC. In addition, ~~FS/KKR~~the Advisor assists the Company in calculating its net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others.

Pursuant to the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, the Company reimburses ~~FS/KKR~~the Advisor for expenses necessary to perform services related to its administration and operations, including ~~FS/KKR~~the Advisor’s allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P. (which does business as FS ~~Investments~~Investments), and KKR Credit Advisors (US), LLC, or KKR Credit, for providing administrative services to the Company on behalf of ~~FS/KKR~~the Advisor. The Company reimburses ~~FS/KKR~~the Advisor no less than monthly for expenses necessary to perform services related to the Company’s administration and operations. The amount of this reimbursement is set at the lesser of (1) ~~FS/KKR~~the 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. ~~FS/KKR~~The Advisor allocates the cost of such services to the Company based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Company’s board of directors reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of administrative expenses among the Company and certain affiliates of ~~FS/KKR~~the Advisor. The Company’s board of directors then assesses the reasonableness of such reimbursements for expenses allocated to it 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 service providers known to be available. In addition, the Company’s board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company’s board of directors compares the total amount paid to ~~FS/KKR~~the Advisor for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs. The administrative services provisions of the FSIC II Advisor investment advisory and administrative services agreement were substantially similar to the administrative services provisions of the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement.

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FS Investment Corporation II

Notes to Unaudited Consolidated 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 ~~the Company~~ accrued under the investment advisory and administrative services agreement and the FSIC II Advisor investment advisory and administrative services agreement, ~~and the FS/KKR Advisor investment advisory and administrative agreement,~~ as applicable, during the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:

Three Months Ended
September 30, Nine Months Ended
September 30,
Related Party Source Agreement Description 2018 2017 2018 2017
FSIC II Advisor
and FS/KKR Advisor
FSIC II Advisor Investment
Advisory and Administrative
Services Agreement and
FS/KKR Advisor Investment
Advisory and Administrative
Services Agreement
Base Management Fee(1)
$
17,567
$
22,547
$
58,307
$
67,379
FSIC II Advisor
and FS/KKR Advisor
FSIC II Advisor Investment
Advisory and Administrative
Services Agreement and
FS/KKR Advisor Investment
Advisory and Administrative
Services Agreement
Subordinated
Incentive Fee on
Income(2)
$
11,939
$
10,137
$
18,994
$
42,352
FSIC II Advisor
and FS/KKR Advisor
FSIC II Advisor Investment
Advisory and Administrative
Services Agreement and
FS/KKR Advisor Investment
Advisory and Administrative
Services Agreement
Administrative Services Expenses(3)
$
799
$
799
$
2,371
$
2,530

Related Party	Source Agreement	Description	Three Months Ended March 31,
Related Party	Source Agreement	Description	2019			2018
The Advisor and FSIC II Advisor	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Base Management Fee(1)		$	17,864		$	22,080
The Advisor and FSIC II Advisor	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Subordinated Incentive Fee on Income(2)		$	11,131		$	5,575
The Advisor and FSIC II Advisor	FS/KKR Advisor Investment Advisory and Administrative Services Agreement and FSIC II Advisor Investment Advisory and Administrative Services Agreement	Administrative Services Expenses(3)		$	907		$	782

(1)

FSIC II Advisor agreed, effective March 5, 2015, to permanently waive ~~0.25%~~a portion of ~~its~~the base management fee to which it iswas entitled under the FSIC II Advisor investment advisory and administrative services agreement so that the fee received ~~equals~~equaled 1.75% of the average value of the Company’s gross assets. As a result, the amount shown for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 is net of ~~a waiver~~waivers of ~~$3,432, and the amounts shown for~~$3,154. During the three ~~and nine~~ months ended ~~September 30, 2017 are net of waivers of $3,222~~March 31, 2019 and ~~$9,626, respectively. During the nine months ended September 30,~~ 2018, $17,256 and ~~2017, $63,335 and $66,442,~~$22,595, respectively, in base management fees were paid to FSIC II Advisor and ~~FS/KKR~~the Advisor. As of ~~September 30, 2018, $17,567~~March 31, 2019, $17,864 in base management fees were payable to ~~FS/KKR~~the Advisor.

(2)

During the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, $5,796 and ~~2017, $26,185 and $48,708,~~$19,129, respectively, of subordinated incentive fees on income were paid to ~~FSIC II~~the Advisor and ~~FS/KKR~~FSIC II Advisor. As of ~~September 30, 2018,~~March 31, 2019, a subordinated incentive fee on income of ~~$11,939~~$11,131 was payable to ~~FS/KKR~~the Advisor.

(3)

During the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, $534 and ~~2017, $1,992 and $2,412,~~$588, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by ~~FSIC II~~the Advisor and ~~FS/KKR~~FSIC II Advisor and the remainder related to other reimbursable ~~expenses.~~expenses, including reimbursement of fees related to transactional expenses for prospective investments, such as fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. Broken deal costs were $77 for the three months ended March 31, 2019. The Company paid ~~$2,192~~$773 and ~~$2,360~~$547 in administrative services expenses to the Advisor and FSIC II Advisor ~~and FS/KKR Advisor~~ during the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively.

Potential Conflicts of Interest

The members of the senior management and investment teams of ~~FS/KKR~~the 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. For example, ~~FS/KKR~~the Advisor

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 5. Distributions (continued)~~

	Three Months Ended March 31,
	2019			2018
GAAP-basis net investment income		$	58,114		$	62,391
Income subject to tax not recorded for GAAP (income recorded for GAAP not subject to tax)			(166)			1,035
GAAP versus tax-basis impact of consolidation of certain subsidiaries			1,711			1,897
Reclassification of unamortized original issue discount, prepayment fees and other income			(278)			(5,469)
Other miscellaneous differences			(14)			(330)
Tax-basis net investment income		$	59,367		$	59,524

The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the components of accumulated earnings on a tax basis were as follows:

	September 30, 2018 (Unaudited)			December 31, 2017			March 31, 2019 (Unaudited)			December 31, 2018
Distributable ordinary income		$	56,005		$	70,483		$	56,281		$	58,028
Distributable realized gains									—			—
Capital loss carryover(1)			(160,845)			(202,496)			(214,125)			(194,360)
Other temporary differences			(136)			(168)			(129)			(139)
Net unrealized appreciation (depreciation) on investments and secured borrowing and gain (loss) on foreign currency(2)			(203,351)			(20,073)			(254,484)			(287,442)
Total		$	(308,327)		$	(152,254)		$	(412,457)		$	(423,913)

(1)

Net capital losses recognized may be carried forward indefinitely, and their character is retained as short-term or long-term losses. As of ~~September 30, 2018,~~March 31, 2019, the Company had no short-term ~~capital loss carryforwards~~ and ~~had~~ long-term capital loss carryforwards available to offset future realized capital gains of ~~$160,845.~~$541 and $213,584, respectively.

(2)

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the gross unrealized appreciation on the Company’s investments and gain on foreign currency was ~~$150,865~~$158,062 and ~~$208,211,~~$135,578, respectively. As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the gross unrealized depreciation on the Company’s investments and loss on foreign currency was ~~$354,216~~$(412,546) and ~~$228,284,~~$423,020, respectively.

The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled ~~$4,536,384~~$4,884,591 and ~~$4,617,073~~$4,647,131 as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The aggregate net unrealized appreciation (depreciation) on investments on a tax basis was ~~$(202,840)~~$(249,772) and ~~$(19,479)~~$(287,851) as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

As of September 30, 2018, the Company had a deferred tax liability of $7,295 resulting from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries and a deferred tax asset of $20,103 resulting from net operating losses of the Company’s wholly-owned taxable subsidiaries. As of September 30, 2018, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully utilize their generated net operating losses, therefore the deferred tax asset was offset by a valuation allowance of $12,808. For the nine months ended September 30, 2018, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiaries.

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 5. Distributions (continued)

As of March 31, 2019, the Company had a deferred tax liability of $9,092 resulting from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries and a deferred tax asset of $21,051 resulting from net operating losses and other tax attributes of the Company’s wholly-owned taxable subsidiaries. As of March 31, 2019, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully utilize their generated net operating losses, therefore the deferred tax asset was offset by a valuation allowance of $11,959. For the three months ended March 31, 2019, the Company did not record a provision for taxes related to its wholly-owned taxable subsidiaries.

Note 6. Investment Portfolio

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

	September 30, 2018 (Unaudited)								December 31, 2017								March 31, 2019 (Unaudited)								December 31, 2018
	Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio
Senior Secured Loans—First Lien		$	3,400,523		$	3,313,859		77%		$	3,408,133		$	3,421,070		74%		$	3,611,239		$	3,519,120		76%		$	3,382,158		$	3,293,291		75%
Senior Secured Loans—Second Lien			366,321			278,162		6%			385,761			327,135		7%			471,912			389,559		8%			418,015			333,986		8%
Senior Secured Bonds			182,439			179,191		4%			123,045			124,673		3%
Other Senior Secured Debt																			182,012			172,800		4%			207,181			196,616		5%
Subordinated Debt			255,303			257,023		6%			369,864			366,048		8%			229,637			222,850		5%			242,792			221,858		5%
Collateralized Securities			19,752			23,435		1%			20,435			25,763		1%
Asset Based Finance																			41,277			45,268		1%			42,050			46,152		1%
Equity/Other			261,293			281,874		6%			296,470			332,905		7%			263,808			285,221		6%			268,409			267,377		6%
Total		$	4,485,631		$	4,333,544		100%		$	4,603,708		$	4,597,594		100%		$	4,799,885		$	4,634,818		100%		$	4,560,605		$	4,359,280		100%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities.

As of ~~September 30, 2018,~~March 31, 2019, the Company did not “control” any of its portfolio companies. As of ~~September 30, 2018,~~March 31, 2019, the Company held investments in seven portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnote ~~(v)~~(t) to the unaudited consolidated schedule of investments as of ~~September 30, 2018~~March 31, 2019 in this quarterly report on Form 10-Q.

As of December 31, ~~2017,~~2018, the Company did not “control” any of its portfolio companies. ~~During the year ended~~As of December 31, ~~2017,~~2018, the Company held investments in ~~one portfolio company of which it was deemed to “control” which was sold prior to December 31, 2017. As of December 31, 2017, the Company held investments in six~~seven portfolio companies of which it was deemed to be an “affiliated person” but was not deemed to “control.” For additional information with respect to such portfolio companies, see footnote ~~(x)~~(u) to the consolidated schedule of investments as of December 31, ~~2017~~2018 in this quarterly report on Form 10-Q.

The Company’s investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of ~~September 30, 2018,~~March 31, 2019, the Company had ~~nineteen senior secured loan~~unfunded debt investments with aggregate unfunded commitments of ~~$194,639, one subordinated debt investment with~~$159,413 and an ~~unfunded commitment of $15,000 and one~~ unfunded commitment to purchase up to ~~$71~~$47 in shares of preferred stock of Altus Power America Holdings, LLC. As of December 31, 2017, the Company had twenty-one senior secured loan investments with aggregate unfunded commitments of $241,977, one subordinated debt investment with an unfunded commitment of $18,989, one unfunded commitment to purchase up to $295 in shares of preferred stock of Altus Power America Holdings, LLC and one unfunded commitment to purchase up to $4 in shares of common stock of Chisholm Oil and Gas, LLC. The Company maintains sufficient cash on hand, available borrowings and

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

As of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company’s investments were categorized as follows in the fair value hierarchy:

Valuation Inputs	September 30, 2018 (Unaudited)			December 31, 2017			March 31, 2019 (Unaudited)			December 31, 2018
Level 1—Price quotations in active markets		$	914		$	6,368		$	663		$	517
Level 2—Significant other observable inputs			838,933			—			869,552			906,192
Level 3—Significant unobservable inputs			3,493,697			4,591,226			3,764,603			3,452,571
Total		$	4,333,544		$	4,597,594		$	4,634,818		$	4,359,280

~~The Company has elected~~As of March 31, 2019 and December 31, 2018, the ~~fair value option under ASC Topic 825,~~ ~~Financial Instruments,~~ relating to accounting for debt obligations at their fair value for its secured borrowing which arose due to partial loan sales which did not meet the criteria for sale treatment under ASC Topic 860. The Company reports changesCompany’s interest rate swaps were categorized as follows in the fair value of its secured borrowing as a component of the net change in unrealized appreciation (depreciation) on secured borrowing in the consolidated statements of operations. The net gain or loss reflects the difference between the fair value and the principal amount due on maturity.hierarchy:

	March 31, 2019 (Unaudited)						December 31, 2018
Valuation Inputs	Assets			Liability			Asset			Liability
Level 1—Price quotations in active markets		$	—		$	—		$	—		$	—
Level 2—Significant other observable inputs			—			(5,739)			—			(1,743)
Level 3—Significant unobservable inputs			—			—			—			—
Total		$	—		$	(5,739)		$	—		$	(1,743)

The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated ~~prepayments~~repayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Company’s board of directors determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Company typically values its other investments and interest rate swaps by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent third-party pricing services and screened for validity by such services and are typically classified as Level 2 within the fair value hierarchy.

The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. The valuation committee ~~of the Company’s board of directors, or the valuation committee,~~ and the board of directors reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation policy.

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were as follows:

Type of Investment

Fair Value at
September 30, 2018
(Unaudited)

Valuation
Technique(1)

Unobservable Input

Range

Weighted
Average

Fair Value at
March 31, 2019
(Unaudited)(1)

Valuation
Technique(2)

Unobservable Input

Range(3)

Impact to
Valuation from
an Increase in
Input(4)

Senior Secured
Loans—First Lien

2,679,875

Market Comparables

Market Yield (%)

6.4% – 21.8%

10.3%

Senior Debt

3,024,159

Discounted Cash Flow

Discount Rate

8.06% – 16.73% (9.62%)

Decrease

EBITDA Multiples (x)

4.8x – 9.0x

8.0x

166,669

Waterfall

EBITDA Multiple

0.13x – 8.25x (4.81x)

Increase

216,411

Other(2)

Other

N/A

105,878

Other(5)

Senior Secured
Loans—Second Lien

160,705

Market Comparables

Market Yield (%)

8.6% – 15.0%

12.7%

EBITDA Multiples (x)

4.8x – 5.3x

5.0x

13,371

Other(2)

Other

N/A

Senior Secured Bonds

98,996

Market Comparables

Market Yield (%)

6.6% – 12.8%

8.3%

EBITDA Multiples (x)

6.9x – 9.0x

7.6x

99,959

Cost

Subordinated Debt

23,754

Market Comparables

Market Yield (%)

14.8% – 20.3%

15.4%

39,499

Discounted Cash Flow

Discount Rate

11.58% – 19.75% (12.11%)

Decrease

EBITDA Multiples (x)

12.5x – 13.0x

12.8x

206

Waterfall

EBITDA Multiple

10.64x – 10.64x (10.64x)

Increase

Collateralized Securities

23,435

Market Quotes

Indicative Dealer Quotes

60.6% – 100.3%

65.1%

Asset Based Finance

24,928

Waterfall

EBITDA Multiple

1.03x – 12.00x (1.51x)

Increase

20,340

Indicative Dealer Quotes

52.63% – 99.71% (71.35%)

Increase

Equity/Other

254,841

Market Comparables

Market Yield (%)

17.5% – 18.7%

18.1%

254,466

Waterfall

EBITDA Multiple

0.73x – 14.50x (5.29x)

Increase

Capacity Multiple ($/kW)

$1,875.0 – $2,125.0

$2,000.0

EBITDA Multiples (x)

4.8x – 14.2x

7.9x

Production Multiples (Mboe/d)

$36,250.0 – $53,750.0

$49,760.3

Production Multiples (MMcfe/d)

$4,200.0 – $4,700.0

$4,450.0

Proved Reserves Multiples (Bcfe)

$1.2 – $1.3

$1.2

Proved Reserves Multiples (Mmboe)

$8.3 – $18.0

$16.3

PV-10 Multiples (x)

1.1x – 2.4x

2.1x

Discounted Cash
Flow

Discount Rate (%)

14.5% – 15.5%

15.0%

23,375

Other(5)

Option Valuation
Model

Volatility (%)

25.0% – 25.0%

25.0%

4,655

Cost

22,309

Other(2)

Other

N/A

469

Option Pricing Model

Equity Illiquidity Discount

15.00% – 15.00% (15.00%)

Decrease

Total

3,493,697

3,764,603

(1)

Certain investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value.

(2)

For the assets and investments that have more than one valuation technique, the Company may rely on the stated techniques individually or in the aggregate based on a weight ascribed to each valuation technique, ranging from 0 – 100%. Indicative dealer quotes obtained for valuation purposes are reviewed by the Company relative to other valuation techniques.

(3)

Weighted average amounts are based on the estimated fair values.

(4)

This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

(5)

Fair value based on expected outcome of proposed corporate transactions and/or other factors.

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

Type of Investment

Fair Value at
December 31, 2018

Valuation
Technique(1)

Unobservable Input

Range

Weighted
Average

Senior Secured
Loans—First Lien

2,668,002

Market Comparables

Market Yield (%)

5.5% – 16.8%

10.5%

EBITDA Multiples (x)

5.3x – 9.5x

6.9x

Revenue Multiples (x)

0.1x – 0.1x

0.1x

61,692

Other(2)

Other

N/A

98,118

Cost

99.0% – 100.0%

99.5%

Senior Secured
Loans—Second Lien

157,615

Market Comparables

Market Yield (%)

8.9% – 15.0%

12.6%

8,316

Other(2)

Other

N/A

46,359

Cost

98.5% – 98.5%

98.5%

Other Senior Secured
Debt

95,132

Market Comparables

Market Yield (%)

8.2% – 13.6%

9.7%

EBITDA Multiples (x)

7.0x – 8.5x

7.5x

Subordinated Debt

6,201

Market Comparables

Market Yield (%)

12.0% – 20.0%

14.3%

EBITDA Multiples (x)

9.6x – 10.1x

9.9x

Asset Based Finance

24,385

Market Comparables

Market Yield (%)

17.7% – 19.0%

18.4%

Net Aircraft Book Value
Multiple (x)

1.0x – 1.0x

1.0x

21,767

Market Quotes

Indicative Dealer Quotes

51.8% – 99.6%

61.9%

Equity/Other

223,197

Market Comparables

Capacity Multiple ($/kW)

$1,875.0 – $2,125.0

$2,000.0

EBITDA Multiples (x)

4.0x – 14.3x

7.6x

Net Aircraft Book Value
Multiple (x)

1.0x – 1.0x

1.0x

Price to Book Multiple (x)

1.0x – 1.0x

1.0x

Production Multiples
(Mboe/d)

$25,000.0 – $38,750.0

$28,034.2

Production Multiples
(MMcfe/d)

$4,708.0 – $5,167.0

$4,937.5

Proved Reserves Multiples
(Bcfe)

$1.2 – $1.3

$1.2

Proved Reserves Multiples
(Mmboe)

$3.5 – $13.8

$5.4

PV-10 Multiples (x)

0.8x – 2.3x

1.7x

19,929

Discounted Cash Flow

Discount Rate (%)

11.8% – 13.8%

12.8%

471

Option Valuation Model

Volatility (%)

30.0% – 30.0%

30.0%

20,251

Other(2)

Other

N/A

1,136

Cost

100.0% – 100.0%

100.0%

Total

3,452,571

(1)

Investments using a market quotes valuation technique were primarily valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. Investments valued using an EBITDA multiple or a revenue multiple pursuant to the market comparables valuation technique may be conducted using an enterprise valuation waterfall analysis. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.

(2)

Fair value based on expected outcome of proposed corporate transactions and/or other factors.

4446

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note ~~7. Fair Value of Financial Instruments (continued)~~

Type of Investment Fair Value at
December 31,
2017
Valuation
Technique(1)
Unobservable Input Range Weighted
Average
Senior Secured Loans—First
Lien
$ 2,947,886 Market Comparables Market Yield (%) 4.8% – 14.0% 9.2%
EBITDA Multiples (x) 5.0x – 8.0x 7.3x
80,848 Other(2) Other N/A N/A
392,336 Market Quotes Indicative Dealer Quotes 25.0% – 102.8% 98.2%
Senior Secured Loans—Second Lien 244,330 Market Comparables Market Yield (%) 8.3% – 20.7% 14.2%
EBITDA Multiples (x) 5.0x – 6.5x 6.1x
82,805 Market Quotes Indicative Dealer Quotes 13.2% – 102.3% 89.2%
Senior Secured Bonds 89,268 Market Comparables Market Yield (%) 7.7% – 12.3% 8.7%
EBITDA Multiples (x) 4.8x – 8.0x 7.7x
Production Multiples (Mboe/d) $42,250.0 – $44,750.0 $43,500.0
Proved Reserves Multiples (Mmboe) $10.3 – $11.3 $10.8
PV-10 Multiples (x) 0.8x – 0.8x 0.8x
28,347 Other(2) Other N/A N/A
7,058 Market Quotes Indicative Dealer Quotes 100.5% – 100.5% 100.5%
Subordinated Debt 62,138 Market Comparables Market Yield (%) 7.8% – 14.8% 10.2%
EBITDA Multiples (x) 10.5x – 11.0x 10.8x
303,910 Market Quotes Indicative Dealer Quotes 52.0% – 108.5% 97.9%
Collateralized Securities 25,763 Market Quotes Indicative Dealer Quotes 63.3% – 100.2% 72.1%
Equity/Other 260,420 Market Comparables Market Yield (%) 15.3% – 15.8% 15.5%
Capacity Multiple ($/kW) $2,000.0 – $2,250.0 $2,125.0
EBITDA Multiples (x) 4.8x – 23.5x 7.9x
Production Multiples (Mboe/d) $32,500.0 – $51,250.0 $35,881.4
Production Multiples (MMcfe/d) $5,000.0 – $5,500.0 $5,250.0
Proved Reserves Multiples (Bcfe) $1.8 – $2.0 $1.9
Proved Reserves Multiples (Mmboe) $8.3 – $11.3 $8.9
PV-10 Multiples (x) 0.8x – 2.6x 2.2x
Discounted Cash Flow Discount Rate (%) 11.0% – 13.0% 12.0%
Option Valuation Model Volatility (%) 30.0% – 36.5% 35.4%
60,431 Other(2) Other N/A N/A
5,686 Market Quotes Indicative Dealer Quotes 0.0% – 9.8% 8.1%
Total $ 4,591,226

~~(1)~~

Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.

~~(2)~~

~~Fair value based on expected outcome of proposed corporate transactions and/or other factors.~~

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 8.~~9. Financing Arrangements

The following tables present summary information with respect to the Company’s outstanding financing arrangements as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual report on Form 10-K for the year ended December 31, ~~2017.~~2018. Any significant changes to the Company’s financing arrangements during the three months ended ~~September 30, 2018~~March 31, 2019 are discussed below.

As of September 30, 2018
(Unaudited)
Arrangement(1)
Type of Arrangement Rate Amount
Outstanding Amount
Available Maturity
Date
Green Creek Credit Facility Term Loan Credit Facility L+2.50% $ 500,000 $ — December 15, 2019
Cooper River Credit Facility Revolving Credit Facility L+2.25% 132,000 68,000 May 29, 2020
Darby Creek Credit Facility Revolving Credit Facility L+2.50% 135,000 115,000 August 19, 2020
Juniata River Credit Facility Term Loan Credit Facility L+2.68% 850,000 — October 11, 2020
Senior Secured Revolving Credit Facility Revolving Credit Facility
L+2.00% – 2.25%(2)
276,394(3) 373,606 August 9, 2023
Total $ 1,893,394 $ 556,606

As of March 31, 2019
(Unaudited)

Arrangement(1)

Type of Arrangement

Rate

Amount
Outstanding

Amount
Available

Maturity Date

Green Creek Credit Facility

Term Loan Credit Facility

L+2.50%

500,000

—

December 15, 2019

Cooper River Credit Facility

Revolving Credit Facility

L+2.25%

115,000

85,000

March 31, 2021

Darby Creek Credit Facility

Revolving Credit Facility

L+1.95%

185,000

65,000

February 26, 2024

Juniata River Credit Facility

Revolving Credit Facility

L+2.68%

850,000

—

October 11, 2020

Senior Secured Revolving Credit Facility

Revolving Credit Facility

L+2.00% – 2.25%(2)

460,964(3)

189,036

August 9, 2023

Total

2,110,964

339,036

As of December 31, 2018

Arrangement(1)

Type of Arrangement

Rate

Amount
Outstanding

Amount
Available

Maturity Date

Green Creek Credit Facility

Term Loan Credit Facility

L+2.50%

500,000

—

December 15, 2019

Cooper River Credit Facility

Revolving Credit Facility

L+2.25%

107,000

93,000

May 29, 2020

Darby Creek Credit Facility

Revolving Credit Facility

L+2.50%

135,000

115,000

August 19, 2020

Juniata River Credit Facility

Term Loan Credit Facility

L+2.68%

850,000

—

October 11, 2020

Senior Secured Revolving Credit Facility

Revolving Credit Facility

L+2.00% – 2.25%(2)

298,254(4)

351,746

August 9, 2023

Total

1,890,254

559,746

(1)

The carrying amount outstanding under the facility approximates its fair value.

(2)

The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to ~~a combined debt~~the aggregate amount ~~calculation.~~of certain outstanding indebtedness of the Company.

(3)

Amount includes borrowings in U.S. ~~Dollars~~dollars, Euros, and Canadian Dollars. Euro balance outstanding of €1,500 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.12 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD ~~$73,000~~$98,700 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.75 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars.

(4)

Amount includes borrowings in U.S. dollars, Euros, and Canadian Dollars. Euro balance outstanding of €1,500 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.13 as of December 31, 2018 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD $63,500 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.77 as of ~~September 30,~~December 31, 2018 to reflect total amount outstanding in U.S. dollars.

As of December 31, 2017
Arrangement(1)
Type of Arrangement Rate Amount
Outstanding Amount
Available Maturity
Date
Green Creek Credit Facility Term Loan Credit Facility L+2.50% $ 500,000 $ — December 15, 2019
Cooper River Credit Facility Revolving Credit Facility L+2.25% 180,933 19,067 May 29, 2020
Wissahickon Creek Credit Facility Revolving Credit Facility L+1.50% to L+2.50% 240,146 9,854 February 18, 2022
Darby Creek Credit Facility Revolving Credit Facility L+2.50% 250,000 — August 19, 2020
Dunning Creek Credit Facility Revolving Credit Facility L+1.80% 150,000 — May 14, 2018
Juniata River Credit Facility Term Loan Credit Facility L+2.68% 850,000 — October 11, 2020
FSIC II Revolving Credit Facility Revolving Credit Facility
See Note(2)
13,400(3) 106,600 February 23, 2021
Total $ 2,184,479 $ 135,521

~~(1)~~

~~The carrying amount outstanding under the facility approximates its fair value.~~

~~(2)~~

Interest under the FSIC II revolving credit facility for (i) loans for which the Company elects the base rate option is payable at a rate equal to 0.75% per annum plus the greatest of (a) the “U.S. Prime Rate” as published in The Wall Street Journal, (b) the federal funds effective rate for such day plus 0.5%, (c) the three-month LIBOR plus 1% per annum and (d) zero; and (ii) loans for which the Company elects the Eurocurrency option is payable at a rate equal to LIBOR plus 1.75% per annum.

~~(3)~~

Amount includes borrowing in U.S. dollars, Euros, and Canadian Dollars. Euro balance outstanding of €9,000 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.20 as of December 31, 2017 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD$3,229 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to $0.80 as of December 31, 2017 to reflect total amount outstanding in U.S. dollars.

~~TABLE OF CONTENTS~~

~~FS Investment Corporation II~~

~~Notes to Unaudited Consolidated Financial Statements (continued)~~
~~(in thousands, except share and per share amounts)~~

~~Note 8. Financing Arrangements (continued)~~

~~For the three months ended September 30, 2018 and 2017, the components of total interest expense for the Company’s financing arrangements were as follows:~~

Three Months Ended September 30,
2018 2017
Arrangement(1)

Direct
Interest
Expense(2)
Amortization of
Deferred
Financing Costs Total
Interest
Expense
Direct
Interest
Expense(2)
Amortization of
Deferred
Financing Costs Total
Interest
Expense
Green Creek Credit Facility $ 6,187 $ 315 $ 6,502 $ 4,655 $ 125 $ 4,780
Cooper River Credit Facility 1,901 117 2,018 1,628 117 1,745
Wissahickon Creek Credit Facility 1,118 1,816 2,934 2,289 266 2,555
Darby Creek Credit Facility 2,243 139 2,382 2,567 345 2,912
Dunning Creek Credit Facility 268 — 268 1,198 94 1,292
Juniata River Credit Facility 10,907 370 11,277 8,587 369 8,956
FSIC II Revolving Credit Facility 11 4 15 407 13 420
Senior Secured Revolving Credit Facility 1,395 133 1,528 — — —
Partial Loan Sale(3)
— — — 121 5 126
Total $ 24,030 $ 2,894 $ 26,924 $ 21,452 $ 1,334 $ 22,786

~~(1)~~

Borrowings of each of the Company’s special-purpose financing subsidiaries (as defined below) are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.

~~(2)~~

~~Direct interest expense may include the effect of non-usage fees and/or make-whole fees.~~

~~(3)~~

~~Total interest expense for the secured borrowing includes the effect of amortization of discount.~~

~~For the nine months ended September 30, 2018 and 2017, the components of total interest expense for the Company’s financing arrangements were as follows:~~

Nine Months Ended September 30,
2018 2017
Arrangement(1)

Direct
Interest
Expense(2)
Amortization of
Deferred
Financing Costs Total
Interest
Expense
Direct
Interest
Expense(2)
Amortization of
Deferred
Financing Costs Total
Interest
Expense
Goldman Repurchase Facility $ — $ — $ — $ 5,249 $ 202 $ 5,451
Green Creek Credit Facility 17,225 583 17,808 6,503 205 6,708
Cooper River Credit Facility 5,876 347 6,223 4,586 347 4,933
Wissahickon Creek Credit Facility 6,342 2,342 8,684 6,519 744 7,263
Darby Creek Credit Facility 7,759 527 8,286 7,306 1,023 8,329
Dunning Creek Credit Facility 2,914 136 3,050 3,008 298 3,306
Juniata River Credit Facility 30,767 1,095 31,862 24,381 1,095 25,476
FSIC II Revolving Credit Facility 488 29 517 1,086 55 1,141
Senior Secured Revolving Credit Facility 1,395 133 1,528 — — —
Partial Loan Sale(3)
— — — 351 13 364
Total $ 72,766 $ 5,192 $ 77,958 $ 58,989 $ 3,982 $ 62,971

~~(1)~~

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8.9. Financing Arrangements (continued)

For the three months ended March 31, 2019 and 2018, the components of total interest expense for the Company’s financing arrangements were as follows:

	Three Months Ended March 31,
	2019									2018
Arrangement(1)	Direct Interest Expense(2)			Amortization of Deferred Financing Costs			Total Interest Expense			Direct Interest Expense(2)			Amortization of Deferred Financing Costs				Total Interest Expense
Green Creek Credit Facility		$	6,437		$	133		$	6,570		$	4,961		$	267			$	5,228
Cooper River Credit Facility			1,695			125			1,820			1,697			114	��			1,811
Wissahickon Creek Credit Facility			—			—			—			2,612			262				2,874
Darby Creek Credit Facility			2,473			130			2,603			2,786			250				3,036
Dunning Creek Credit Facility			—			—			—			1,365			92				1,457
Juniata River Credit Facility			11,692			361			12,053			9,242			361				9,603
FSIC II Revolving Credit Facility			—			—			—			162			12				174
Senior Secured Revolving Credit Facility			6,288			241			6,529			—			—				—
Total		$	28,585		$	990		$	29,575		$	22,825		$	1,358			$	24,183

(1)

Borrowings of each of the Company’s wholly owned, special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.

(2)

Direct interest expense ~~may include~~includes the effect of non-usage ~~fees and/or make-whole~~ fees.

~~(3)~~

~~Total interest expense for the secured borrowing includes the effect of amortization of discount.~~

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 were ~~$2,051,616~~$2,154,253 and ~~4.68%~~5.31%, respectively. As of ~~September 30,~~March 31, 2019, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 5.29%.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the three months ended March 31, 2018 were $2,183,146 and 4.18%, respectively. As of March 31, 2018, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was ~~5.03%~~4.24%.

~~Senior Secured Revolving~~Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of March 31, 2019 and December 31, 2018.

Darby Creek Credit Facility

On ~~August 9, 2018, or~~February 20, 2019, Darby Creek LLC, the ~~Effective Date, the Company~~Company’s wholly-owned special purpose financing subsidiary, entered into ~~a senior secured~~an amendment to the revolving credit facility ~~or the Senior Secured Revolving Credit Facility,~~originally entered into on February 20, 2014 with Corporate Capital Trust, Inc., or CCT, FS Investment Corporation, or FSIC, FS Investment Corporation III, or FSIC III, JPMorgan Chase Bank, N.A., or JPMorgan, as administrative agent, ING Capital LLC, or ING, as collateral agent and the lenders party thereto. The Senior Secured Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $3,435,000, with an option for the Company to request, at one or more times after the Effective Date, that existing or new lenders, at their election, provide up to $1,717,500 of additional commitments. As of the Effective Date, the Senior Secured Revolving Credit Facility provides for a sublimit available for the Company to borrow up to $650,000 of the total facility amount which sublimit may be reduced or increased from time to time pursuant to the terms of the Senior Secured Revolving Credit Facility and subject to the oversight and approval of the Company’s board of directors. A sublimit of the total facility amount also is available to each of CCT, FSIC and FSIC III, as additional borrowers, and the obligations of the other borrowers under the Senior Secured Revolving Credit Facility are several (and not joint) in all respects. The Senior Secured Revolving Credit Facility provides for the issuance of letters of credit on behalf of the Company in an aggregate face amount not to exceed $25,000. The Company’s obligations under the Senior Secured Revolving Credit Facility are guaranteed by certain of the Company’s subsidiaries, including Cobbs Creek LLC, IC II American Energy Investments, Inc., Wissahickon Creek LLC, FSIC II Investments, Inc., IC II Altus Investments, LLC, IC II Arches Investments, LLC and Dunning Creek LLC. The Company’s obligations under the Senior Secured Revolving Credit Facility are secured by a first priority security interest in substantially all of the assets of the Company and the subsidiary guarantors thereunder.

Availability under the Senior Secured Revolving Credit Facility will terminate on August 9, 2022, or the Revolver Termination Date, and the outstanding loans under the Senior Secured Revolving Credit Facility will mature on August 9, 2023. The Senior Secured Revolving Credit Facility also requires mandatory prepayment of interest and principal upon certain events during the term-out period commencing on the Revolver Termination Date.

The proceeds of the Senior Secured Revolving Credit Facility drawn by the Company on the Effective Date were used in part to prepay in full all loans outstanding on the Effective Date under (i) the Senior Secured Revolving Credit Agreement, dated as of February 23, 2016, by and among the Company, the lenders party thereto and ING as administrative agent (as amended, restated, amended and restated and otherwise modified on or prior to the Effective Date), or the FSIC II Revolving Credit Facility, (ii) the Credit Agreement, dated as of May 14, 2014, by and among Dunning Creek LLC, Deutsche Bank AG, New York Branch, as administrative agent, ~~and lender, and~~each of the lenders from time to time party thereto, the other ~~lenders~~agents party thereto ~~(as amended, restated, amended~~ and restated and otherwise modified on or prior to the Effective Date), or the Dunning Creek Credit Facility, and (iii) the Loan and Servicing Agreement, dated as of February 19, 2014, by and among Wissahickon Creek LLC, Wells Fargo Securities, LLC, as administrative agent, Wells Fargo Bank, National Association, as collateral agent ~~collateral bank~~ and collateral ~~custodians,~~custodian. The amendment, among other things, extended the end of the revolving period to February 26, 2022, extended the maturity date to February 26, 2024, decrease the interest rate to, during the revolving period, 1.95% per annum, and after the ~~lenders~~revolving period, 2.05% per annum, in each case, plus 3-month LIBOR (or the relevant reference rate for any foreign currency borrowings), and ~~lender agents party thereto (as amended, restated, amended and restated and otherwise modified on or prior~~decreased the non-usage fee from 0.50% to ~~the Effective Date), or the Wissahickon Creek Credit Facility.~~0.375%.

TABLE OF CONTENTS

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Note 8.9. Financing Arrangements (continued)

~~Borrowings under~~Juniata River Credit Facility

On March 13, 2019, Juniata River LLC, the ~~Senior Secured Revolving Credit Facility are subject~~Company’s wholly-owned special purpose financing subsidiary, or Juniata River, amended and restated the revolving credit facility originally entered into on November 14, 2015 with JPMorgan Chase Bank, N.A., as administrative agent, and the financial institutions and other lenders from time to ~~compliance with~~time party thereto, Citibank, N.A., or Citibank, as collateral agent, and Virtus Group, LP, or Virtus, as collateral administrator, to, among other things, (i) permit borrowings in certain foreign currencies up to a ~~borrowing base test. Interest under~~specified sublimit, (ii) provide for a reinvestment period during which Juniata River is permitted to borrow, repay and re-borrow advances through October 11, 2019, (iii) provide for an unfunded fee in an amount equal to the ~~Senior Secured Revolving Credit Facility for (i) loans for which the Company elects the base rate option, (A) if the value~~product of the ~~borrowing base is equal~~interest rate applicable to ~~or greater than 1.85 times~~U.S. Dollar borrowings on any day multiplied by the ~~combined debt~~unborrowed amount, is payable at an “alternate base rate” (which is the greatest of (a) the prime rate as publicly announced by JPMorgan, (b) the sum of (x) the greater of (I) the federal funds effective rate and (II) the overnight bank funding rate plus (y) 0.5%, and (c) the one month LIBOR plus 1% per annum) plus 1.00% and, (B) if ~~the value~~any, below 80% of the ~~borrowing base is less than 1.85 times~~committed facility amount, or the ~~combined debt amount, the alternate base rate plus 1.25%; and (ii) loans~~Minimum Funding Amount, as of such day, (iv) provide for which the Company elects the Eurocurrency option (A) if the value of the borrowing base is equal to or greater than 1.85 times the combined debt amount, is payable at a rate equal to LIBOR plus 2.00% and (B) if the value of the borrowing base is less than 1.85 times the combined debt amount, is payable at a rate equal to LIBOR plus 2.25%. The Company will pay a non-usagean unused fee of ~~at least 0.375% and up to 0.50%~~0.75% per annum (based on the immediately preceding quarter’s average usage) on the unused portion of its sublimit under the Senior Secured Revolving Credit Facility during the revolving period. The Company also will be required to pay letter of credit participation fees and a fronting fee on the average daily ~~amount of any lender’s exposure with respect to any letters of credit issued under the Senior Secured Revolving Credit Facility.~~

In connection with the Senior Secured Revolving Credit Facility, the Company has made certain representations and warranties and must comply with various covenants and reporting requirements customary for facilities of this type. In addition, the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 200% asset coverage ratio.

~~The Senior Secured Revolving Credit Facility contains events of default customary for facilities of this type. Upon the occurrence of an event of default, JPMorgan, at the instruction~~unborrowed portion of the ~~lenders, may terminate~~committed facility amount above the ~~commitments~~Minimum Funding Amount, and ~~declare the outstanding advances~~(v) replace both Citibank, in its role as collateral agent and ~~all other obligations under the Senior Secured Revolving Credit Facility immediately due~~securities intermediary, and ~~payable.~~

~~The Company incurred costs~~Virtus, in ~~connection~~its role as collateral administrator, with obtaining the Senior Secured Revolving Credit Facility, which the Company has recorded as deferred financing costs, along with $131 of unamortized fees from the FSIC II Revolving Credit Facility, on its consolidated balance sheets and which the company amortizes to interest expense over the life of the facility. As of September 30, 2018, $4,403 of such deferred financing costs had yet to be amortized to interest expense.Wells Fargo Bank, National Association.

~~Dunning Creek Credit Facility~~

~~In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated all loans outstanding under the Dunning Creek Credit Facility.~~

~~Wissahickon Creek Credit Facility~~

In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated all loans outstanding under the Wissahickon Creek Credit Facility. The $2,342 of remaining unamortized deferred financing costs for the Wissahickon Creek Credit Facility were charged to interest expense.

~~FSIC II Revolving Credit Facility~~

In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated all loans outstanding under the FSIC II Revolving Credit Facility. The Company incurred costs in connection with obtaining the FSIC II Revolving Credit Facility, which the Company had recorded as deferred financing costs on its consolidated balance sheets and amortized to interest expense over the life

TABLE OF CONTENTS

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands, except share and per share amounts)

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. ~~In this report, “we,” “us,” “our” and the “Company” refer to FS Investment Corporation II.~~

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:

•

our future operating results;

•

our business prospects and the prospects of the companies in which we may invest;

•

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;

•

changes in the general interest rate environment;

•

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 conflicts of interest with ~~FS/KKR~~the other funds advised by the Advisor, ~~FS Investments, KKR Credit~~their respective current or future investment advisers or any of their ~~respective affiliates;~~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 ~~FS/KKR~~the Advisor to locate suitable investments for us and to monitor and administer our investments;

•

the ability of ~~FS/KKR~~the Advisor or its affiliates to attract and retain highly talented professionals;

•

our ability to maintain our qualification as a RIC and as a BDC;

•

the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, and the rules and regulations issued thereunder;

•

the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position; and

•

the tax status of the enterprises in which we may ~~invest.~~invest;

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 quarterly report on Form 10-Q 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.

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We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. 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. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Overview

We were incorporated under the general corporation laws of the State of Maryland on July 13, 2011 and formally commenced investment operations on June 18, 2012. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. In March 2014, we closed our continuous public offering of shares of common stock to new investors.

~~Our investment activities~~We are externally managed by ~~FS/KKR~~the Advisor pursuant to the investment advisory and administrative services agreement and supervised by our board of directors, a majority of whom are independent. Under the FS/KKR Advisor investment advisory and administrative services agreement, we have agreed to pay FS/KKR Advisor an annual base management fee based on the average weekly value of our gross assets and an incentive fee based on our performance.

~~Our investment activities were managed by FSIC II Advisor until~~On April 9, 2018, ~~and thereafter have been managed by FS/KKR Advisor. FSIC II Advisor previously engaged GDFM to act as our investment sub-adviser.~~GSO/Blackstone Debt Funds Management LLC, or GDFM, resigned as our investment sub-adviser and terminated ~~the~~its investment sub-advisory agreement effective April 9, 2018. In connection with GDFM’s resignation as our investment sub-adviser, on April 9, ~~2018.~~2018, we entered into the investment advisory and administrative services agreement with the Advisor, which replaced an investment advisory and administrative services agreement, or the FSIC II Advisor investment advisory and administrative services agreement with our former investment adviser, FSIC II Advisor, LLC, or FSIC II Advisor.

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We ~~have identified and intend to~~pursue our investment objective by investing primarily in the debt of middle market U.S. companies with a focus on originated transactions sourced through the ~~following~~network of the Advisor and its affiliates. We define direct originations as any investment ~~categories,~~where the Advisor or its affiliates negotiates the terms of the transaction beyond just the price, which, ~~we believe will allow us to generate an attractive total return with an acceptable level of risk.~~

~~Direct Originations:~~ ~~We intend to directly source investment opportunities. Such investments are originated or structured~~ for ~~us or made by us and are not generally available to the broader market. These investments~~example, may include both debt and equity components, although we do not generally make equity investments independent of having an existing credit relationship. We believe directly originated investments may offer higher returns and more favorable protections than broadly syndicated transactions.

~~Opportunistic:~~ We intend to seek to capitalize on market price inefficiencies by investing in loans, bonds and other securities where the market price of such investment reflects a lower value than deemed warranted by our fundamental analysis. We believe that market price inefficiencies may occur due to, among other things, general dislocations in the markets, a misunderstanding by the market of a particular companynegotiating financial covenants, maturity dates or an industry being out of favor with the broader investment community. We seek to allocate capital to these securities that have been misunderstood or mispriced by the market and where we believe there is an opportunity to earn an attractive return on our investment. Such opportunities may include event driven investments, anchor orders (i.e., opportunities that are originated and then syndicated by a commercial or investment bank but where we provide a capital commitment significantly above the average syndicate participant) and CLOs.

In the case of event driven investments, we intend to take advantage of dislocations that arise in the markets due to an impending event and where the market’s apparent expectation of value differs substantially from our fundamental analysis. Such events may include a looming debt maturity or default, a merger, spin-off or other corporate reorganization, an adverse regulatory or legal ruling, or a material contract expiration, any of which may significantly improve or impair a company’s financial position. Compared to other investment strategies, event driven investing depends more heavily on our ability to

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successfully predict the outcome of an individual event rather than on underlying macroeconomic fundamentals. As a result, successful event driven strategies may offer both substantial diversification benefits and the ability to generate performance in uncertain market environments.

We may also invest in anchor orders. In these types of investments, we may receive fees, preferential pricing or other benefits not available to other lenders in return for our significant capital commitment. Our decision to provide an anchor order to a syndicated transaction is predicated on a rigorous credit analysis, our familiarity with a particular company, industry or financial sponsor, and the broader investment experiences of our investment adviser.

In addition, we opportunistically invest in CLOs. CLOs are a form of securitization where the cash flow from a pooled basket of syndicated loans is used to support distribution payments made to different tranches of securities. While collectively CLOs represent nearly fifty percent of the broadly syndicated loan universe, investing in individual CLO tranches requires a high degree of investor sophistication due to their structural complexity and the illiquid nature of their securities.

~~Broadly Syndicated/Other:~~ ~~Although our primary focus is to invest in~~interest rate terms. These directly originated transactions ~~and opportunistic investments,~~include participation in ~~certain circumstances we will also invest in the broadly syndicated loan and high yield markets. Broadly syndicated loans and bonds are generally more liquid than our directly~~other originated ~~investments and provide~~transactions where there may be third parties involved, or a complement to our less liquid strategies. In addition, and because we typically receive more attractive financing terms on these positions than we do on our less liquid assets, we are able to leverage the broadly syndicated portion of our portfolio in suchbank acting as an intermediary, for a ~~way that maximizes the levered return potential of our portfolio.~~closely held club, or similar transactions.

Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in our target companies, generally in conjunction with one of our debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of our portfolio may be comprised of corporate bonds, ~~CLOs,~~structured products, other debt securities and derivatives, including total return swaps and credit default swaps. ~~FS/KKR~~The Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structure or otherwise make opportunistic ~~investments.~~investments, such as where the market price of loans, bonds or other securities reflects a lower value than deemed warranted by the Advisor’s fundamental analysis, which may occur due to general dislocations in

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currency for those foreign denominated investment transactions. Net gain or loss on credit default swaps represents the amortized portion of swap premiums received, the periodic payments received and the net realized gain or loss resulting from the exit of our credit default swaps. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. ~~Net unrealized appreciation or depreciation on credit default swaps is the net change in the market value of our credit default swaps.~~ Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations.

We principally generate revenues in the form of interest income on the debt investments we hold. In addition, we generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we hold.

Expenses

Our primary operating expenses include the payment of management and incentive fees and other expenses under the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate ~~FS/KKR~~the Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

~~FS/KKR~~The 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/KKR~~The 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 stockholders and reports filed with the SEC. In addition, ~~FS/KKR~~the Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

Pursuant to the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement, we reimburse ~~FS/KKR~~the Advisor for expenses necessary to perform services related to our administration and operations, including ~~FS/KKR~~the Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of ~~FS/KKR~~the Advisor. We reimburse ~~FS/KKR~~the Advisor no less than monthly for expenses necessary to perform services related to our administration and operations. The amount of this reimbursement is set at the lesser of (1) ~~FS/KKR~~the Advisor’s actual costs incurred in providing such services and (2) the amount that we estimate we would be required to pay alternative service providers for comparable services in the same geographic location. ~~FS/KKR~~The Advisor

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allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directors reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of ~~FS/KKR~~the Advisor. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to ~~FS/KKR~~the Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.

We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:

•

corporate and organization expenses relating to offerings of our securities, subject to limitations included in the investment advisory and administrative services agreement;

•

the cost of calculating our net asset value, including the cost of any third-party pricing or valuation services;

•

the cost of effecting sales and repurchases of shares of our common stock and other securities;

•

investment advisory fees;

•

fees payable to third parties relating to, or associated with, making investments and valuing investments, including fees and expenses associated with performing due diligence reviews of prospective investments;

•

interest payments on our debt or related obligations;

•

transfer agent and custodial fees;

•

research and market data (including news and quotation equipment and services, and any computer hardware and connectivity hardware (e.g., telephone and fiber optic lines) incorporated into the cost of obtaining such research and market data);

•

fees and expenses associated with marketing efforts;

•

federal and state registration fees;

•

federal, state and local taxes;

•

fees and expenses of directors not also serving in an executive officer capacity for us or the Advisor;

•

costs of proxy statements, stockholders’ reports, notices and other filings;

•

fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums;

•

direct costs such as printing, mailing, long distance telephone and staff;

•

fees and expenses associated with accounting, corporate governance, government and regulatory affairs activities, independent audits and outside legal costs;

•

costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws, including compliance with the Sarbanes-Oxley Act;

•

brokerage commissions for our investments;

•

and all other expenses incurred by ~~FS/KKR~~the Advisor or us in connection with administering our business, including expenses incurred by the Advisor in performing administrative services for us and administrative personnel paid by ~~FS Investments~~the Advisor, to the extent they are not controlling persons of the Advisor or any of its affiliates, subject to the limitations included in the investment advisory and ~~KKR Credit.~~administrative services agreement.

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In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by ~~FS/KKR~~the Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.

Portfolio Investment Activity for the Three ~~and Nine~~ Months Ended ~~September 30, 2018~~March 31, 2019 and for the Year Ended December 31, ~~2017~~2018

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and the year ended December 31, 2018:

Net Investment Activity For the Three Months Ended
September 30, 2018 For the Nine Months Ended
September 30, 2018
Purchases $ 731,019 $ 1,331,866
Sales and Repayments (665,229) (1,458,900)
Net Portfolio Activity $ 65,790 $ (127,034)

For the Three Months Ended
September 30, 2018 For the Nine Months Ended
September 30, 2018
New Investment Activity by Asset Class Purchases Percentage Purchases Percentage
Senior Secured Loans—First Lien $ 585,507 80% $ 1,014,755 76%
Senior Secured Loans—Second Lien 100,328 14% 132,003 10%
Senior Secured Bonds 13,918 2% 78,684 6%
Subordinated Debt 30,707 4% 74,088 6%
Collateralized Securities 520 0% 912 0%
Equity/Other 39 0% 31,424 2%
Total $ 731,019 100% $ 1,331,866 100%

Net Investment Activity	For the Three Months Ended March 31, 2019			For the Year Ended December 31, 2018
Purchases		$	453,599		$	1,895,833
Sales and Repayments			(203,103)			(1,885,140)
Net Portfolio Activity		$	250,496		$	10,693

	For the Three Months Ended March 31, 2019					For the Year Ended December 31, 2018
New Investment Activity by Asset Class	Purchases			Percentage		Purchases			Percentage
Senior Secured Loans—First Lien		$	350,512		78%		$	1,448,861		76%
Senior Secured Loans—Second Lien			64,577		14%			197,852		11%
Other Senior Secured Debt			1,209		0%			103,808		6%
Subordinated Debt			33,178		7%			102,391		5%
Asset Based Finance			—		—			694		0%
Equity/Other			4,123		1%			42,227		2%
Total		$	453,599		100%		$	1,895,833		100%

The following table summarizes the composition of our investment portfolio at cost and fair value as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

	September 30, 2018 (Unaudited)								December 31, 2017								March 31, 2019 (Unaudited)								December 31, 2018
	Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio		Amortized Cost(1)			Fair Value			Percentage of Portfolio
Senior Secured Loans—First Lien		$	3,400,523		$	3,313,859		77%		$	3,408,133		$	3,421,070		74%		$	3,611,239		$	3,519,120		76%		$	3,382,158		$	3,293,291		75%
Senior Secured Loans—Second Lien			366,321			278,162		6%			385,761			327,135		7%			471,912			389,559		8%			418,015			333,986		8%
Senior Secured Bonds			182,439			179,191		4%			123,045			124,673		3%
Other Senior Secured Debt																			182,012			172,800		4%			207,181			196,616		5%
Subordinated Debt			255,303			257,023		6%			369,864			366,048		8%			229,637			222,850		5%			242,792			221,858		5%
Collateralized Securities			19,752			23,435		1%			20,435			25,763		1%
Asset Based Finance																			41,277			45,268		1%			42,050			46,152		1%
Equity/Other			261,293			281,874		6%			296,470			332,905		7%			263,808			285,221		6%			268,409			267,377		6%
Total		$	4,485,631		$	4,333,544		100%		$	4,603,708		$	4,597,594		100%		$	4,799,885		$	4,634,818		100%		$	4,560,605		$	4,359,280		100%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

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The following table presents certain selected information regarding the composition of our investment portfolio as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

September 30, 2018 December 31, 2017
Number of Portfolio Companies 152 131
% Variable Rate (based on fair value) 82.5% 82.4%
% Fixed Rate (based on fair value) 11.0% 9.9%
% Income Producing Equity or Other Investments (based on fair value) 0.8% 0.4%
% Non-Income Producing Equity or Other Investments (based on
fair value) 5.7% 7.3%
Average Annual EBITDA of Portfolio Companies $168,200 $108,500
Weighted Average Purchase Price of Debt Investments (as a % of par) 98.6% 98.8%
% of Investments on Non-Accrual (based on fair value) 1.7% 0.4%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) 9.3% 9.1%
Gross Portfolio Yield Prior to Leverage (based on amortized cost)—Excluding Non-Income Producing Assets 10.3% 9.8%

	March 31, 2019	December 31, 2018
Number of Portfolio Companies	154	160
% Variable Rate Debt Investments (based on fair value)(1)(2)	84.0%	81.4%
% Fixed Rate Debt Investments (based on fair value)(1)(2)	10.4%	12.2%
% Other Income Producing Investments (based on fair value)(3)	1.0%	0.1%
% Non-Income Producing Investments (based on fair value)(2)	4.2%	5.2%
% of Investments on Non-Accrual (based on fair value)	0.4%	1.1%
Weighted Average Annual Yield on Accruing Debt Investments(2)(4)	10.4%	10.5%

(1)

“Debt Investments” means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return.

(2)

Does not include investments on non-accrual status.

(3)

“Other Income Producing Investments” means investments that pay or are expected to pay interest, dividends or other income to the Company on an ongoing basis but do not have a stated interest rate, stated dividend rate or other similar stated return.

(4)

The Weighted Average Annual Yield for Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period.

Based on our regular monthly cash distribution amount of $0.06283 per share as of ~~September 30, 2018 and December~~March 31, ~~2017~~2019 and our distribution reinvestment price of ~~$8.40 as of September 30, 2018 and $8.80 as of December 31, 2017,~~$8.05 per share, the annualized distribution rate to stockholders as of ~~September 30, 2018 and December~~March 31, ~~2017~~2019 was ~~8.98% and 8.57%, respectively.~~9.37%. The annualized distribution rate to stockholders is expressed as a percentage equal to the projected annualized distribution amount per share divided by our distribution reinvestment price per share. Our annualized distribution rate to stockholders may include income, realized capital gains and a return of investors’ capital. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, our total return was ~~0.67%~~2.75% and our total return without assuming reinvestment of distributions was ~~0.80%~~2.80%.

Based on our regular monthly cash distribution amount of $0.06283 per share as of December 31, 2018 and our distribution reinvestment price of $8.05 per share, the annualized distribution rate to stockholders as of December 31, 2018 was 9.37%. During the year ended December 31, ~~2017,~~2018, our total ~~return~~ was ~~6.59%~~(1.64)% and our total return without assuming reinvestment of distributions was ~~6.52%~~(1.37)% .

Our ~~estimated gross portfolio~~weighted average annual yield on accruing debt investments may be higher than a stockholder’s yield on an investment in shares of our common stock. Our ~~estimated gross portfolio~~weighted average annual yield on accruing debt investments does not reflect operating expenses that may be incurred by ~~us.~~us, nor does it include all of our investments. In addition, our ~~estimated gross portfolio~~weighted average annual yield on accruing debt investments and total return figures disclosed above do not consider the effect of any sales commissions or charges that may have been incurred in connection with the sale of shares of our common stock. Our ~~estimated gross portfolio~~weighted average annual yield on accruing debt investments, total return and annualized distribution rate to stockholders do not represent actual investment returns to stockholders, are subject to change and, in the future, may be greater or less than the rates set forth above. See the section entitled “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, ~~2017~~2018 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements. See footnote 6 to the financial highlights table included in Note 1011 to our unaudited consolidated financial statements included herein for information regarding the calculations of our total return.

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For the Three Months Ended
September 30, 2018 For the Nine Months Ended
September 30, 2018
New Direct Originations by Asset Class (including unfunded commitments) Commitment
Amount Percentage Commitment
Amount Percentage
Senior Secured Loans—First Lien $ 481,773 86% $ 845,405 89%
Senior Secured Loans—Second Lien 77,296 14% 84,240 9%
Senior Secured Bonds — — — —
Subordinated Debt — — 1,389 0%
Collateralized Securities — — — —
Equity/Other — — 14,230 2%
Total $ 559,069 100% $ 945,264 100%

For the Three Months Ended
September 30, 2018 For the Nine Months Ended
September 30, 2018
Average New Direct Origination Commitment Amount $55,907 $35,010
Weighted Average Maturity for New Direct Originations 1/15/2023 2/10/2024
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period 8.7% 9.6%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period—Excluding Non-Income Producing Assets 8.7% 9.6%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period 10.4% 9.9%

The following table presents certain selected information regarding our direct originations as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

Characteristics of All Direct Originations Held in Portfolio September 30, 2018 December 31, 2017
Number of Portfolio Companies 76 75
Average Annual EBITDA of Portfolio Companies $89,400 $71,200
Average Leverage Through Tranche of Portfolio Companies—Excluding
Equity/Other and Collateralized Securities 5.6x 4.8x
% of Investments on Non-Accrual (based on fair value) 2.1% —
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations 9.2% 9.2%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations—Excluding Non-Income Producing
Assets 10.3% 9.8%

Characteristics of All Direct Originations Held in Portfolio	March 31, 2019	December 31, 2018
Number of Portfolio Companies	74	74
% of Investments on Non-Accrual (based on fair value)	2.4%	3.6%
Total Cost of Direct Originations	$3,928,473	$3,615,151
Total Fair Value of Direct Originations	$3,803,151	$3,497,141
% of Total Investments, at Fair Value	82.1%	80.2%
Weighted Average Annual Yield on Accruing Debt Investments(1)	10.5%	10.5%

(1)

The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Does not include Debt Investments on non-accrual status.

Portfolio Composition by ~~Strategy~~Industry Classification

The table below summarizes the composition of our investment portfolio by strategy and enumerates the percentage, by fair value, of the total portfolio assets in such strategies as of September 30, 2018 and December 31, 2017:

September 30, 2018 December 31, 2017
Portfolio Composition by Strategy Fair Value Percentage
of Portfolio Fair Value Percentage
of Portfolio
Direct Originations $ 3,524,869 81% $ 3,812,590 83%
Opportunistic 468,887 11% 634,049 14%
Broadly Syndicated/Other 339,788 8% 150,955 3%
Total $ 4,333,544 100% $ 4,597,594 100%

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Results of Operations

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and September 30, 2017~~

Revenues

Our investment income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ was as follows:

	Three Months Ended September 30,										Nine Months Ended September 30,										Three Months Ended March 31,
	2018					2017					2018					2017					2019					2018
	Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income		Amount			Percentage of Total Income
Interest income		$	97,381		83%		$	104,423		87%		$	297,917		87%		$	310,184		82%		$	107,868		90%		$	100,156		85%
Paid-in-kind interest income			5,356		5%			9,256		7%			13,547		4%			20,188		6%			4,956		4%			4,978		4%
Fee income			14,181		12%			7,223		6%			23,764		7%			46,323		12%			7,044		6%			5,074		4%
Dividend income			468		0%			—		—			7,962		2%			11		0%			71		0%			7,494		7%
Total investment income(1)		$	117,386		100%		$	120,902		100%		$	343,190		100%		$	376,706		100%		$	119,939		100%		$	117,702		100%

(1)

For the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ such revenues represent ~~$108,833~~$112,669 and ~~$110,418,~~$111,382, respectively, of cash income earned as well as ~~$8,553~~$7,270 and $10,484, respectively, in non-cash portions relating to accretion of discount and PIK interest. For the nine months ended September 30, 2018 and 2017, such revenues represent $324,041 and $348,791, respectively, of cash income earned as well as $19,149 and $27,915,$6,320, respectively, in non-cash portions relating to accretion of discount and PIK interest. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.

The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. Fee income is transaction based and typically consists of prepayment fees and structuring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.

The ~~decrease~~increase in interest income and PIK interest income during the three and nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017 was primarily due to the prepayment of certain higher yielding assets during the three and nine months ended September 30, 2018. The increase in fee income during the three months ended ~~September 30, 2018~~March 31, 2019 compared to the three months ended ~~September 30, 2017~~March 31, 2018 was primarily due to ~~increased prepayment activity~~the higher invested balance during the quarter ended March 31, 2019, compared to the quarter ended March 31, 2018.

The decrease in dividend income during the three months ended ~~September 30, 2018. The decrease in fee income during the nine months ended September 30, 2018~~March 31, 2019 compared to the three ~~and nine~~ months ended ~~September 30, 2017 was primarily due to the decrease of structuring activity during the nine months ended September 30,~~March 31, 2018 ~~compared to the nine months ended September 30, 2017.~~

~~The increase in dividend income during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017~~ was primarily due to a one-time dividend paid in respect of one of our investments during the ~~nine~~three months ended ~~September 30,~~March 31, 2018.

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Expenses

Our operating expenses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Management fees		$	17,567		$	25,769		$	61,739		$	77,005		$	17,864		$	25,234
Subordinated income incentive fees			11,939			10,137			18,994			42,352			11,131			5,575
Administrative services expenses			799			799			2,371			2,530			907			782
Stock transfer agent fees			506			506			1,502			1,502			705			495
Accounting and administrative fees			395			434			1,227			1,303			433			421
Interest expense			26,924			22,786			77,958			62,971			29,575			24,183
Directors’ fees			254			278			1,053			849			142			504
Expenses associated with our independent audit and related fees			74			129			275			382			73			126
Legal fees			308			207			632			612			113			34
Printing fees			137			187			330			847			343			53
Other			698			579			2,302			1,137			539			1,058
Total operating expenses		$	59,601		$	61,811		$	168,383		$	191,490		$	61,825		$	58,465
Management fee waiver			—			(3,222)			(3,432)			(9,626)			—			(3,154)
Net operating expenses		$	59,601		$	58,589		$	164,951		$	181,864		$	61,825		$	55,311

The following table reflects selected expense ratios as a percent of average net assets for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Ratio of operating expenses to average net assets		2.21%		2.13%		6.12%		6.56%		2.41%		2.06%
Ratio of management fee waiver to average net assets		—		(0.11)%		(0.12)%		(0.33)%		—		(0.11)%
Ratio of net operating expenses to average net assets		2.21%		2.02%		6.00%		6.23%		2.41%		1.95%
Ratio of incentive fees and interest expense to average net assets(1)		1.44%		1.14%		3.52%		3.61%		1.59%		1.05%
Ratio of net operating expenses, excluding certain expenses, to average net assets		0.77%		0.88%		2.48%		2.62%		0.82%		0.90%

(1)

Ratio data may be rounded in order to recompute the ending ratio of net operating expenses, excluding certain expenses, to average net assets.

Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in amounts outstanding under our financing ~~facilities~~arrangements and benchmark interest rates such as LIBOR, among other factors.

Net Investment Income

Our net investment income totaled ~~$57,785~~$58,114 ($0.18 per share) and ~~$62,313~~$62,391 ($0.19 per share) for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. The decrease in net investment income for the three months ended ~~September 30, 2018~~March 31, 2019 can be attributed to the ~~decrease~~increase in interest income as discussed ~~above.~~

~~Our net investment income totaled $178,239 ($0.55 per share)~~above, offset by higher incentive fees and $194,842 ($0.60 per share) for the nine months ended September 30, 2018 and 2017, respectively. The decrease in net investment income for the nine months ended September 30, 2018 can be attributed to the decrease in interest ~~and fee income as discussed above.~~expense.

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Net Realized Gains or Losses

Our net realized gains (losses) on investments and foreign currency for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Net realized gain (loss) on investments(1)		$	18,504		$	(5,942)		$	(10,805)		$	(49,199)		$	(18,486)		$	(19,294)
Net realized gain (loss) on foreign currency			446			122			(220)			439			3			(327)
Total net realized gain (loss)		$	18,950		$	(5,820)		$	(11,025)		$	(48,760)		$	(18,483)		$	(19,621)

(1)

We sold investments and received principal repayments, respectively, of ~~$377,864~~$114,730 and ~~$287,365~~$88,373 during the three months ended ~~September 30, 2018~~March 31, 2019 and ~~$131,102~~$55,669 and ~~$260,991~~$245,401 during the three months ended September 30, 2017. We sold investments and received principal repayments, respectively, of $653,396 and $805,504 during the nine months ended September 30, 2018 and $437,734 and $971,922 during the nine months ended September 30, 2017.March 31, 2018.

Net Change in Unrealized Appreciation (Depreciation) ~~on Investments and Secured Borrowing and Unrealized Gain (Loss) on Foreign Currency~~

Our net change in unrealized appreciation (depreciation) on investments ~~secured borrowing~~ and interest rate swaps and unrealized gain (loss) on foreign currency for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Net change in unrealized appreciation (depreciation) on investments		$	(40,039)		$	5,001		$	(145,973)		$	56,730		$	36,258		$	(88,612)
Net change in unrealized appreciation (depreciation) on secured borrowing			—			10			—			(26)
Net change in unrealized appreciation (depreciation) on interest rate swaps															(3,996)			—
Net change in unrealized gain (loss) on foreign currency			(693)			(186)			84			(370)			(1,124)			410
Total net change in unrealized appreciation (depreciation)		$	(40,732)		$	4,825		$	(145,889)		$	56,334		$	31,138		$	(88,202)

During the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, the net change in unrealized appreciation (depreciation) was driven primarily by ~~lower~~increased valuations in a ~~few select~~several of our equity investments.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017, the net increase in net assets resulting from operations was $36,003 ($0.11 per share) and $61,318 ($0.19 per share), respectively.~~

~~For the nine months ended September 30,~~ 2018, the net increase in net assets resulting from operations was ~~$21,325~~$70,769 ($~~0.07~~0.22 per share) ~~compared to a net increase in net assets resulting from operations of $202,416~~and $(45,432) ($~~0.62~~(0.14) per share) ~~during the nine months ended September 30, 2017.~~, respectively.

Financial Condition, Liquidity and Capital Resources

Overview

As of ~~September 30, 2018,~~March 31, 2019, we had ~~$287,374~~$110,995 in cash and foreign currency, which we and our wholly-owned financing subsidiaries held in custodial accounts, and ~~$556,606~~$339,036 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of ~~September 30, 2018,~~March 31, 2019, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of ~~September 30, 2018,~~March 31, 2019, we had ~~nineteen senior secured loan~~unfunded debt investments with aggregate unfunded commitments of ~~$194,639, one subordinated debt investment with~~$159,413 and an ~~unfunded commitment of $15,000, one~~ unfunded commitment to purchase up to ~~$71 in~~$47 shares of preferred stock. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.

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cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.

Financing Arrangements

The following table presents summary information with respect to our outstanding financing arrangements as of ~~September 30, 2018:~~March 31, 2019:

Arrangement(1)	Type of Arrangement	Rate	Amount Outstanding			Amount Available			Maturity Date	Type of Arrangement	Rate	Amount Outstanding			Amount Available			Maturity Date
Green Creek Credit Facility	Term Loan Credit Facility	L+2.50%		$	500,000		$	—	December 15, 2019	Term Loan Credit Facility	L+2.50%		$	500,000		$	—	December 15, 2019
Cooper River Credit Facility	Revolving Credit Facility	L+2.25%			132,000			68,000	May 29, 2020	Revolving Credit Facility	L+2.25%			115,000			85,000	March 31, 2021
Darby Creek Credit Facility	Revolving Credit Facility	L+2.50%			135,000			115,000	August 19, 2020	Revolving Credit Facility	L+1.95%			185,000			65,000	February 26, 2024
Juniata River Credit Facility	Term Loan Credit Facility	L+2.68%			850,000			—	October 11, 2020	Revolving Credit Facility	L+2.68%			850,000			—	October 11, 2020
Senior Secured Revolving Credit Facility	Revolving Credit Facility	L+2.00%—2.25%(2)			276,394(3)			373,606	August 9, 2023	Revolving Credit Facility	L+2.00% – 2.25%(2)			460,964(3)			189,036	August 9, 2023
Total				$	1,893,394		$	556,606					$	2,110,964		$	339,036

(1)

The carrying amount outstanding under the facility approximates its fair value.

(2)

(3)

Amount includes ~~borrowings~~borrowing in U.S. ~~Dollars~~dollars, Euros, and Canadian Dollars. Euro balance outstanding of €1,500 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.12 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD ~~$73,000~~$98,700 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to ~~$0.77~~$0.75 as of ~~September 30, 2018~~March 31, 2019 to reflect total amount outstanding in U.S. dollars.

For additional information regarding our financing arrangements, see ~~Notes 8~~Note 9 to our unaudited consolidated financial statements included herein.

RIC Status and Distributions

We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our ~~“investment~~investment company taxable income,” determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the ninth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our stockholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our stockholders generally of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our ~~U.S.~~ stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results

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Subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.

During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions ~~(i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a non-taxable distribution)~~ will be mailed to our stockholders. No portion of the distributions paid during the three months ended March 31, 2019 and 2018 represented a return of capital.

We intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, ~~unless~~except for those stockholders ~~elect to~~who receive their ~~cash~~ distributions in ~~additional~~the form of shares of our common stock under ~~the DRP.~~our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder.

The following table reflects the cash distributions per share that we have declared and paid on our common stock during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:

	Distribution						Distribution
For the Three Months Ended	Per Share			Amount			Per Share			Amount
Fiscal 2017
March 31, 2017		$	0.1885		$	61,436
June 30, 2017			0.1885			61,505
September 30, 2017			0.1885			61,277
Total		$	0.5655		$	184,218
Fiscal 2018
March 31, 2018		$	0.1885		$	61,153		$	0.1885		$	61,153
June 30, 2018			0.1885			61,146
September 30, 2018			0.1885			61,137
Total								$	0.1885		$	61,153
Fiscal 2019
March 31, 2019								$	0.1885		$	61,114
Total		$	0.5655		$	183,436		$	0.1885		$	61,114

See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions, including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Critical Accounting Policies

Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors,

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including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.

~~ASC~~Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by ~~the Financial Accounting Standards Board, or~~ the FASB, clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:

•

our quarterly fair valuation process begins with ~~FS/KKR Advisor’s management team~~the Advisor reviewing and documenting valuations of each portfolio company or investment, which valuations ~~may be~~are obtained from an independent third-party valuation service ~~if applicable;~~and provide a valuation range;

•

~~FS/KKR Advisor’s management team~~the Advisor then provides the valuation committee of our board of directors, or the valuation committee, with ~~the preliminary valuations~~its valuation recommendation for each portfolio company or ~~investment;~~investment, along with supporting materials;

•

preliminary valuations are then discussed with the valuation committee;

•

~~the~~our valuation committee reviews the preliminary valuations and ~~FS/KKR Advisor’s management team,~~the Advisor, together with our independent third-party valuation services, if applicable, supplement the preliminary valuations to reflect any comments provided by the valuation committee;

•

following its review, the valuation committee will recommend that our board of directors approve our fair valuations; and

•

our board of directors discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of ~~FS/KKR~~the Advisor, the valuation committee and any independent third-party valuation services, if applicable.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of directors may use any approved independent third-party pricing or valuation services. However, our board of directors is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from ~~FS/KKR~~the Advisor or any approved independent third-party valuation or pricing service that

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For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.

Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of directors, in its determination of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.

~~FS/KKR Advisor’s management team,~~The Advisor, any approved independent third-party valuation services and our board of directors may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. ~~FS/KKR Advisor’s management team,~~The Advisor, any approved independent third-party valuation services and our board of directors may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as our board of directors, in consultation with ~~FS/KKR Advisor’s management team~~the Advisor and any approved independent third party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.

When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of directors subsequently values these warrants or other equity securities received at their fair value.

The fair values of our investments are determined in good faith by our board of directors. Our board of directors is responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of directors has delegated day-to-day responsibility for implementing our valuation policy to ~~FS/KKR Advisor’s management team,~~the Advisor, and has authorized ~~FS/KKR Advisor’s management team~~the Advisor to utilize independent third-party valuation and pricing services that have been approved by our board of directors. The valuation committee is responsible for overseeing ~~FS/KKR~~the Advisor’s implementation of the valuation process.

See Note 78 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.

Revenue Recognition

Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect such amounts. We record dividend income on the ex-dividend date. Distributions received from limited liability company (“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to

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Loan origination fees, original issue discount and market discount are capitalized and we amortize such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. For the three months ended March 31, 2019, we recognized $6,105 in structuring fee revenue. We record prepayment premiums on loans and securities as fee income when we ~~receive~~earn such amounts.

~~Effective January 1, 2018, we adopted ASC Topic 606,~~ ~~Revenue from Contracts with Customers,~~ ~~using the cumulative effect method applied to in-scope contracts with customers that have not been completed as of the date of adoption~~. We did not identify any in-scope contracts that had not been completed as of the date of adoption and, as a result, we did not recognize a cumulative effect on stockholders’ equity in connection with the adoption of the new revenue recognition guidance.

The new revenue recognition guidance applies to all entities and all contracts with customers to provide goods or services in the ordinary course of business, excluding, among other things, financial instruments as well as certain other contractual rights and obligations. Under the new revenue recognition guidance, which we have applied to all new in-scope contracts as of the date of adoption, structuring and other upfront fees are recognized as revenue based on the transaction price as the performance obligation is fulfilled. The related performance obligation consists of structuring activities and is satisfied over time as such activities are performed. Consideration is variable and is constrained from being included in the transaction price until the uncertainty associated with the variable consideration is resolved, typically as of the trade date of the related transaction. Payment is typically due on the settlement date of the related transaction.

For the nine months ended September 30, 2018, we recognized $7,168 in structuring fee revenue under the new revenue recognition guidance and included such revenue in the fee income line item on our consolidated statement of operations. Comparative periods are presented in accordance with revenue recognition guidance effective prior to January 1, 2018, under which we recorded structuring and other non-recurring upfront fees as income when earned. We have determined that the adoption of the new revenue recognition guidance did not have a material impact on the amount of revenue recognized for the nine months ended September 30, 2018.

Net Realized Gains or Losses, Net Change in Unrealized Appreciation or Depreciation and Net Change in Unrealized Gains or Losses on Foreign Currency

Gains or losses on the sale of investments are calculated by using the specific identification method. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized fees. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gains or losses when gains or losses are realized. Net change in unrealized gains or losses on foreign currency reflects the change in the value of receivables or accruals during the reporting period due to the impact of foreign currency fluctuations.

We follow the guidance in ASC Topic 860 when accounting for loan participations and other partial loan sales. This guidance requires a participation or other partial loan sale to meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on our

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consolidated balance sheets and the proceeds are recorded as a secured borrowing until the participation or other partial loan sale meets the definition. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value.

Uncertainty in Income Taxes

We evaluate our tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in our consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. During the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ we did not incur any interest or penalties.

Derivative Instruments

Our derivative instruments include foreign currency forward contracts and cross currency swaps. We recognize all derivative instruments as assets or liabilities at fair value in our consolidated financial statements. Derivative contracts entered into by us are not designated as hedging instruments, and as a result, we present changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the consolidated statements of operations.

See Note 2 to our unaudited consolidated financial statements included herein for additional information regarding our significant accounting policies.

Contractual Obligations

We have entered into an agreement with ~~FS/KKR~~the Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the ~~FS/KKR Advisor~~ investment advisory and administrative services agreement are equal to (a) an annual base management fee based on the average weekly value of our gross assets and (b) an incentive fee based on our performance. ~~FS/KKR~~The Advisor is reimbursed for administrative expenses incurred on our behalf. See Note 4 to our unaudited consolidated financial statements included herein for a discussion of ~~these agreements~~this agreement and for the amount of fees and expenses accrued under similar agreements with FSIC II Advisor during the ~~nine~~three months ended ~~September 30, 2018 and 2017.~~March 31, 2018.

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A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at ~~September 30, 2018~~March 31, 2019 is as follows:

	Payments Due By Period														Payments Due By Period
	Maturity Date(1)	Total			Less than 1 year		1-3 years			3-5 years			More than 5 years		Maturity Date(1)	Total			Less than 1 year			1 – 3 years			3 – 5 years			More than 5 years
Green Creek Credit Facility(2)	December 15, 2019		$	500,000		—		$	500,000			—		—	December 15, 2019		$	500,000		$	500,000			—			—		—
Cooper River Credit Facility(3)	May 29, 2020		$	132,000		—		$	132,000			—		—	March 31, 2021		$	115,000			—		$	115,000			—		—
Darby Creek Credit Facility(4)	August 19, 2020		$	135,000		—		$	135,000			—		—	February 26, 2024		$	185,000			—			—		$	185,000		—
Juniata River Credit Facility(2)	October 11, 2020		$	850,000		—		$	850,000			—		—	October 11, 2020		$	850,000			—		$	850,000			—		—
Senior Secured Revolving Credit Facility(5)	August 9, 2023		$	276,394		—			—		$	276,394		—	August 9, 2023		$	460,964			—			—		$	460,964		—

(1)

Amounts outstanding under the financing arrangements will mature, and all accrued and unpaid interest thereunder will be due and payable, on the maturity date.

(2)

At ~~September 30, 2018,~~March 31, 2019, no amounts remained unused under the financing arrangement.

(3)

At ~~September 30, 2018, $68,000~~March 31, 2019, $85,000 remained unused under the Cooper River credit facility.

(4)

At ~~September 30, 2018, $115,000~~March 31, 2019, $65,000 remained unused under the Darby Creek credit facility.

(5)

At ~~September 30, 2018, $373,606~~March 31, 2019, $189,036 remained unused under the Senior Secured Revolving Credit Facility. ~~Borrowings~~Amount includes borrowing in U.S. ~~Dollars~~dollars, Euros, and Canadian Dollars. Euro balance outstanding of €1,500 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.12 as of March 31, 2019 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD ~~$73,000~~$98,700 has been converted to U.S. dollars at an exchange rate of CAD $1.00 to ~~$0.77~~$0.75 as of ~~September 30, 2018~~March 31, 2019 to reflect total amount outstanding in U.S. dollars.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Recently Issued Accounting Standards

69In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement—Disclosures Framework—Changes to Disclosure Requirements for Fair Value Measurement (Topic 820), or ASU 2018-13. ASU 2018-13 introduces new fair value disclosure requirements and eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently evaluating the impact of ASU 2018-13 on our financial statements.

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk.
~~(dollar amounts in thousands)~~

Interest Rate Risk

We are subject to financial market risks, including changes in interest rates. As of ~~September 30, 2018, 82.5%~~March 31, 2019, 84.0% of our portfolio investments (based on fair value) ~~paid~~were debt investments paying variable interest rates ~~11.0% paid~~and 10.4% were debt investments paying fixed interest rates, ~~5.7%~~while 1.0% were other income producing investments, 4.2% were of non-income producing ~~senior secured loans or equity/other~~ investments and the remaining ~~0.8% were income producing equity/other investments.~~0.4% consisting of investments on non-accrual status. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or

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exceed the hurdle rate applicable to the subordinated incentive fee on income, ~~under the FS/KKR Advisor investment advisory and administrative services agreement,~~ and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to ~~FS/KKR~~the Advisor with respect to our increased pre-incentive fee net investment income.

Subject to the requirements of the 1940 Act, we may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. Although hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates. As of March 31, 2019, we have four pay-fixed, receive-floating interest rate swaps which we pay an annual fixed rate of 2.59% to 2.81% and receive three-month LIBOR on an aggregate notional amount of $360 million. The interest rate swaps have quarterly settlement payments.

Pursuant to the terms of all of our financing arrangements, borrowings are at a floating rate based on LIBOR. To the extent that any present or future credit facilities, total return swap agreements or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of ~~September 30, 2018:~~March 31, 2019 (dollar amounts are presented in thousands):

Basis Point Change in Interest Rates	Increase (Decrease) in Interest Income(1)			Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income			Percentage Change in Net Interest Income		Increase (Decrease) in Interest Income(1)			Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income			Percentage Change in Net Interest Income
Down 100 basis points		$	(34,125)		$	(17,185)		$	(16,940)		(5.2)%		$	(38,660)		$	(21,110)		$	(17,550)		(5.0)%
No change			—			—			—		—			—			—			—		—
Up 100 basis points		$	35,028		$	17,185		$	17,843		5.5%		$	39,372		$	21,110		$	18,262		5.2%
Up 300 basis points		$	105,687		$	51,556		$	54,131		16.6%		$	118,827		$	63,329		$	55,498		15.9%
Up 500 basis points		$	176,473		$	85,927		$	90,546		27.8%		$	198,337		$	105,548		$	92,789		26.6%

(1)

Assumes no defaults or prepayments by portfolio companies over the next twelve months.

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. ~~During the nine months ended September 30, 2018 and 2017, we did not engage in interest rate hedging activities.~~

In addition, we may have risk regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments.”

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Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September 30, 2018.~~March 31, 2019.

Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.

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Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act) that occurred during the three-month period ended ~~September 30, 2018~~March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material adverse effect upon our financial condition or results of operations.

Item 1A.

Risk Factors.

There have been no material changes from the risk factors set forth in our annual report on Form 10-K for the year ended December 31, ~~2017,~~2018, as supplemented by our quarterly report on Form 10-Q for the quarter ended March 31, ~~2018.~~2019.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The table below provides information concerning our repurchases of shares of our common stock during the three months ended ~~September 30, 2018,~~March 31, 2019, pursuant to our share repurchase program.

Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs		Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2018 through July 31, 2018		3,296,879		$	8.50		3,296,879		(1)
August 1, 2018 through August 31, 2018		—			—		—		—
September 1, 2018 through September 30, 2018		—			—		—		—
January 1, 2019 through January 31, 2019											3,297,056		$	8.05		3,297,056		(1)
February 1, 2018 through February 28, 2019											—			—		—		—
March 1, 2019 through March 31, 2019											—			—		—		—
Total		3,296,879		$	8.50		3,296,879		(1)		3,297,056		$	8.50		3,297,056		(1)

(1)

The maximum number of shares available for repurchase on ~~July~~January 2, ~~2018~~2019 was ~~3,296,879.~~3,297,056. A description of the calculation of the maximum number of shares of our common stock that may be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements included herein.

See Note 3 to our unaudited consolidated financial statements included herein for a more detailed discussion of the terms of our share repurchase program.

Item 3.

Defaults upon Senior Securities.

Not applicable.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

Not applicable.

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Item 6.

Exhibits.

~~Item 15.b. Exhibits.~~

	3.1			Articles of Amendment and Restatement of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 14, 2012.)
	3.2			Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 1, 2017.)

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	3.3			Articles Supplementary of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 13, 2017.)
	3.4			Third Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 13, 2017.)
	4.1			Amended and Restated Distribution Reinvestment Plan of the Company, effective as of March 26, 2014. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 24, 2014.)
	10.1			Investment Advisory and Administrative Services Agreement, dated as of April 9, 2018, by and between FS Investment Corporation II and FS/KKR Advisor, LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 9, 2018.)
	10.2			Investment Advisory and Administrative Services Agreement, dated as of February 8, 2012, by and between the Company and FSIC II Advisor, LLC. (Incorporated by reference to Exhibit (g)(1) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)
	10.3			Investment Sub-Advisory Agreement, dated as of February 8, 2012, by and between FSIC II Advisor, LLC and GSO / Blackstone Debt Funds Management LLC. (Incorporated by reference to Exhibit (g)(2) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)
	10.4			Custodian Agreement, dated as of February 8, 2012, by and between the Company and State Street Bank and Trust Company. (Incorporated by reference to Exhibit (j) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)
	10.5			Amended and Restated Credit Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 4, 2015.)
	10.6			Second Amendment, dated as of June 1, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 filed on August 14, 2018.)
	10.7*10.7			Third Amendment, dated as of July 30, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 filed on November 14, 2018.)
	10.8*10.8			Fourth Amendment, dated as of September 10, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 filed on November 14, 2018.)
	10.9			Fifth Amendment, dated as of November 30, 2018, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-K filed on March 19, 2019.)

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	~~10.9~~10.11			Omnibus Sixth Amendment to Amended and Restated ~~Account Control~~Credit and Security Agreement andLender Fee Letter, dated as of ~~May~~March 29, ~~2015, by and among~~2019, between Cooper River LLC, as ~~pledgor,~~borrower, Citibank N.A., as ~~secured~~administrative agent, the lenders party ~~and~~thereto, Citibank, N.A., acting through its agency & trust division, as ~~securities intermediary.~~collateral custodian and collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit ~~10.4~~10.1 to the Company’s Current Report on Form 8-K filed on ~~June 4, 2015.~~April 3, 2019.)
	10.10			Security Agreement, dated as of March 27, 2013, by and between Cooper River LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 28, 2013.)
	~~10.11~~			Agreement and Plan of Merger, dated as of March 27, 2013, by and among Cooper River LLC, Cooper River CBNA Loan Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 28, 2013.)
	~~10.12~~			Amended and Restated Investment Management Agreement, dated as of May 29, 2015, by and between the Company, as investment manager, and Cooper River LLC. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 4, 2015.)
	~~10.13~~			Amended and Restated Sale and Contribution Agreement, dated as of May 29, 2015, by and between the Company, as seller, and Cooper River LLC, as purchaser. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 4, 2015.)
	~~10.14~~			Loan Financing and Servicing Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 25, 2014.)
	~~10.15~~10.11			Amendment No. 1 to Loan Financing and Servicing Agreement, dated as of January 12, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.)
	~~10.16~~10.12			Amendment No. 2 to Loan Financing and Servicing Agreement, dated as of February 3, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.)
	~~10.17~~10.13			Amendment No. 3 to Loan Financing and Servicing Agreement, dated as of May 7, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.)
	~~10.18~~10.14			Amendment No. 4 to Loan Financing and Servicing Agreement, dated as of October 8, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K filed on March 25, 2016.)
	~~10.19~~10.15			Amendment No. 6 to Loan Financing and Servicing Agreement, dated as of August 19, 2016, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 22, 2016.)
	10.16			Amendment No. 7 to Loan Financing and Servicing Agreement, dated as of February 15, 2019, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-K filed on March 19, 2019.)
	10.17			Omnibus Amendment, dated as of February 20, 2019, between Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as facility agent, each lender party thereto, each agent party thereto, and Wells Fargo Bank, National Association, as collateral agent and collateral custodian. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 25, 2019.)

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	~~10.20~~			Sale and Contribution Agreement, dated as of February 20, 2014, by and between Darby Creek LLC, as purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 25, 2014.)
	~~10.21~~			Investment Management Agreement, dated as of February 20, 2014, by and between Darby Creek LLC and the Company, as investment manager. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 25, 2014.)
	~~10.22~~			Securities Account Control Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as pledgor, Wells Fargo Bank, National Association, as secured party, and Wells Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on February 25, 2014.)
	~~10.23~~10.18			Loan Agreement, dated as of November 14, 2014, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.)
	~~10.24~~10.19			Amendment No. 1 to Loan Agreement, dated as of October 11, 2016, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2016.)
	~~10.25~~10.20			~~Sale~~Amended and ~~Contribution~~Restated Loan and Security Agreement, dated as of ~~November 14, 2014,~~March 13, 2019, by and between Juniata River LLC, as ~~purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.52 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.)~~
	~~10.26~~			Investment Management Agreement, dated as of November 14, 2014, between Juniata River LLC and FS Investment Corporation, as investment manager. (Incorporated by reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K filed on March 18, 2015.)
	~~10.27~~			~~Collateral Administration Agreement, dated as of November 14, 2014, by and among Juniata River LLC,~~borrower, JPMorgan Chase Bank, National Association, as administrative agent, the ~~Company, as investment manager~~lenders party thereto, and ~~Virtus Group, LP,~~Wells Fargo Bank, National Association, as collateral ~~administrator.~~administrator, collateral agent and securities intermediary. (Incorporated by reference to Exhibit ~~10.54~~10.20 to the Company’s ~~Annual~~Quarterly Report on Form 10-K filed on March ~~18, 2015.~~19, 2019.)
	~~10.28~~10.21			Credit Agreement, dated as of May 15, 2017, among Green Creek LLC, Goldman Sachs Bank USA, as lender, sole lead arranger and administrative agent, Citibank, N.A., as collateral agent, and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 16, 2017.)
	~~10.29~~10.22			Senior Secured Revolving Credit Agreement, dated as of August 9, 2018, among Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, each other person designated as a “borrower” thereunder pursuant to section 9.19 thereof, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and ING Capital LLC, as collateral agent. (Incorporated by reference to Exhibit 10.56 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 filed on August 14, 2018.)
	10.23			Commitment Increase Agreement, dated as of November 8, 2018, among BNP Paribas, Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, JPMorgan Chase Bank, N.A., Bank of Montreal, Suntrust Bank, and ING Capital LLC. (Incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-K filed on March 19, 2019.)
	10.24			Commitment Increase Agreement, dated as of November 8, 2018, among U.S. Bank National Association, Corporate Capital Trust, Inc., FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, JPMorgan Chase Bank, N.A., Bank of Montreal, Suntrust Bank, and ING Capital LLC. (Incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-K filed on March 19, 2019.)
	31.1*			Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
	31.2*			Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
	32.1*			Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized on ~~November 14, 2018.~~May 15, 2019.

				FS INVESTMENT CORPORATION II
				By:			/s/ Michael C. Forman Michael C. Forman Chief Executive Officer (Principal Executive Officer)
				By:			/s/ William Goebel William Goebel Chief Financial Officer (Principal Financial and Accounting Officer)

7675

	Maryland			80-0741103
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
	201 Rouse Boulevard Philadelphia, Pennsylvania			19112
	(Address of principal executive offices)			(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☐

	Page
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of ~~September 30, 2018~~March 31, 2019 (Unaudited) and December 31, ~~2017~~2018		1
Unaudited Consolidated Statements of Operations for the three and ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~		2
Unaudited Consolidated Statements of Changes in Net Assets for the ~~nine~~three months ended ~~September 30,~~ March 31, 2019 and 2018 ~~and 2017~~		3
Unaudited Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~		4
Consolidated Schedules of Investments as of ~~September 30, 2018~~March 31, 2019 (Unaudited) and December 31, ~~2017~~2018		5
Notes to Unaudited Consolidated Financial Statements		2628
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		53
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		7068
ITEM 4. CONTROLS AND PROCEDURES		7169
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		7271
ITEM 1A. RISK FACTORS		7271
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		7271
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		7271
ITEM 4. MINE SAFETY DISCLOSURES		7271
ITEM 5. OTHER INFORMATION		7271
ITEM 6. EXHIBITS		7371
SIGNATURES		7675

Derivative Instrument	Statement Location	Fair Value
Derivative Instrument	Statement Location	March 31, 2019 (Unaudited)			December 31, 2018
Interest rate swaps	Unrealized depreciation on interest rate swaps		$	(5,739)		$	(1,743)
Total			$	(5,739)		$	(1,743)

Derivative Instrument	Statement Location	Net Realized Gains (Losses)
		Three Months Ended March 31,
		2019			2018
Interest Rate Swaps	Net realized gains (losses) on interest rate swaps		$	—		$	—
Total			$	—		$	—

Derivative Instrument	Statement Location	Net Unrealized Gains (Losses)
		Three Months Ended March 31,
		2019			2018
Interest Rate Swaps	Net change in unrealized appreciation (depreciation) on interest rate swaps		$	(3,996)		$	—
Total			$	(3,996)		$	—

Counterparty	Derivative Liabilities Subject to Master Netting Agreement			Derivatives Available for Offset			Non-cash Collateral Received(1)			Cash Collateral Pledged1)			Net Amount of Derivative Liabilities(3)
JP Morgan Chase Bank		$	3,183		$	—		$	—		$	3,183		$	—
ING Capital Markets			2,556			—			—			2,556			—
Total		$	5,739		$	—		$	—		$	5,739		$	—

As of March 31, 2019 (Unaudited)
Counterparty	Notional Amount			Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)			Value			Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.78%	12/18/2023		$	—		$	(2,029)		$	(2,029)
JP Morgan Chase Bank		$	80,000	3-Month LIBOR		2.81%	12/18/2021			—			(1,154)			(1,154)
ING Capital Markets		$	100,000	3-Month LIBOR		2.59%	1/14/2024			—			(1,654)			(1,654)
ING Capital Markets		$	100,000	3-Month LIBOR		2.62%	1/14/2022			—			(902)			(902)
									$	—		$	(5,739)		$	(5,739)

	For the Nine Months Ended September 30, 2018
	Senior Secured Loans—First Lien			Senior Secured Loans—Second Lien			Senior Secured Bonds			Subordinated Debt			Collateralized Securities			Equity/ Other			Total
Fair value at beginning of period		$	3,421,070		$	327,135		$	124,673		$	366,048		$	25,763		$	326,537		$	4,591,226
Accretion of discount (amortization of premium)			2,272			57			414			—			4			117			2,864
Net realized gain (loss)			(25,716)			611			(1,846)			—			—			32,186			5,235
Net change in unrealized appreciation (depreciation)			(97,573)			(30,768)			(4,502)			(1,404)			(1,645)			(14,013)			(149,905)
Purchases			826,657			92,816			3,370			18,782			912			31,266			973,803
Paid-in-kind interest			3,773			1,339			2,636			2,444			—			3,065			13,257
Sales and repayments			(841,856)			(134,310)			(18,691)			(58,206)			(1,599)			(96,322)			(1,150,984)
Net transfers in or out of Level 3(1)			(392,341)			(82,804)			(7,058)			(303,910)			—			(5,686)			(791,799)
Fair value at end of period		$	2,896,286		$	174,076		$	98,996		$	23,754		$	23,435		$	277,150		$	3,493,697
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date		$	(85,430)		$	(29,344)		$	(5,544)		$	(809)		$	(1,645)		$	15,558		$	(107,214)

	~~For the Nine~~ ~~Months Ended~~ ~~September 30, 2017~~
~~Fair value at beginning of period~~		$	~~(8,273~~)
~~Amortization of premium (accretion of discount)~~			~~(13~~)
~~Net realized gain (loss)~~			—
~~Net change in unrealized (appreciation) depreciation~~			~~(26~~)
~~Proceeds from secured borrowing~~			—
~~Paid-in-kind interest~~			—
~~Repayments on secured borrowing~~			—
~~Net transfers in or out of Level 3~~			—
~~Fair value at end of period~~		$	~~(8,312~~)
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to a secured borrowing still held at the reporting date		$	~~(26~~)

	For the Three Months Ended March 31, 2019
	Senior Secured Loans— First Lien			Senior Secured Loans— Second Lien			Other Senior Secured Debt			Subordinated Debt			Asset Based Finance			Equity/ Other			Total
Fair value at beginning of period		$	2,827,812		$	212,290		$	95,132		$	6,201		$	46,152		$	264,984		$	3,452,571
Accretion of discount (amortization of premium)			837			68			119			2			1			100			1,127
Net realized gain (loss)			(1,521)			—			—			—			114			(10,299)			(11,706)
Net change in unrealized appreciation (depreciation)			(8,812)			(564)			(3,257)			742			(111)			22,575			10,573
Purchases			291,045			64,577			1,209			32,614			—			4,123			393,568
Paid-in-kind interest			651			484			1,156			146			525			1,774			4,736
Sales and repayments			(86,294)			—			—			—			(1,413)			(292)			(87,999)
Net transfers in or out of Level 3			1,733			—			—			—			—			—			1,733
Fair value at end of period		$	3,025,451		$	276,855		$	94,359		$	39,705		$	45,268		$	282,965		$	3,764,603
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date		$	(29)		$	14,613		$	(3,257)		$	(9,231)		$	(1,303)		$	51		$	844

Category/Company(1)	Commitment Amount
Senior Secured Loans—First Lien
5 Arch Income Fund 2, LLC		$	34,470
Altus Power America Inc			140
Apex Group Limited			2,241
Apex Group Limited			5,809
Ascension Insurance Inc			13,800
Aspect Software Inc			865
Conservice LLC			5,919
CSafe Global			3,965
Eagle Family Foods Inc			4,087
Fairway Group Holdings Corp			453
JHC Acquisition LLC			35,269
Kodiak BP LLC			9,849
Lazard Global Compounders Fund			7,214
Lipari Foods LLC			25,220
North Haven Cadence Buyer Inc			2,625
North Haven Cadence Buyer Inc			292
Zeta Interactive Holdings Corp			6,571
Senior Secured Loans—Second Lien
Bellatrix Exploration Ltd			624
Total unfunded loans		$	159,413
Unfunded equity commitments		$	47

	Nine Months Ended September 30, 2018 (Unaudited)			Year Ended December 31, 2017			Three Months Ended March 31, 2019 (Unaudited)			Year Ended December 31, 2018
Per Share Data:(1)
Net asset value, beginning of period		$	8.73		$	8.90		$	7.86		$	8.73
Results of operations(2)
Net investment income			0.55			0.83			0.18			0.73
Net realized and unrealized appreciation (depreciation) on investments, gain/loss on foreign currency and secured borrowing			(0.48)			(0.25)
Net realized gain (loss) and unrealized appreciation (depreciation)									0.04			(0.85)
Net increase (decrease) in net assets resulting from operations			0.07			0.58			0.22			(0.12)
Stockholder distributions(3)
Distributions from net investment income			(0.57)			(0.75)			(0.19)			(0.75)
Distributions from net realized gain on investments			—			—
Net decrease in net assets resulting from stockholder distributions			(0.57)			(0.75)			(0.19)			(0.75)
Capital share transactions
Issuance of common stock(4)			—			—			—			—
Repurchases of common stock(5)			—			—			—			—
Net increase (decrease) in net assets resulting from capital share transactions			—			—			—			—
Net asset value, end of period		$	8.23			8.73		$	7.89		$	7.86
Shares outstanding, end of period			326,478,291			326,748,337			326,339,625			326,445,320
Total return(6)			0.67%			6.59%			2.75%			(1.64)%
Total return (without assuming reinvestment of distributions)(6)			0.80%			6.52%			2.80%			(1.37)%
Ratio/Supplemental Data:
Net assets, end of period		$	2,688,126		$	2,853,021		$	2,576,217		$	2,567,409
Ratio of net investment income to average net assets(7)			8.63%			9.32%			9.07%			8.68%
Ratio of operating expenses and excise taxes to average net assets(7)			8.16%			9.10%			9.65%			8.12%
Ratio of net operating expenses and excise taxes to average net assets(7)			7.99%			8.66%			9.65%			7.99%
Portfolio turnover(8)			30.31%			39.62%			4.44%			43.12%
Total amount of senior securities outstanding, exclusive of treasury securities		$	1,893,394		$	2,184,479		$	2,110,964		$	1,890,254
Asset coverage per unit(9)			2.42			2.31			2.22			2.36

Net Investment Activity	For the Three Months Ended September 30, 2018			For the Nine Months Ended September 30, 2018
Purchases		$	731,019		$	1,331,866
Sales and Repayments			(665,229)			(1,458,900)
Net Portfolio Activity		$	65,790		$	(127,034)

New Direct Originations	For the Three Months Ended September 30, 2018			For the Nine Months Ended September 30, 2018
Total Commitments (including unfunded commitments)		$	559,069		$	945,264
Exited Investments (including partial paydowns)			(586,851)			(1,100,610)
Net Direct Originations		$	(27,782)		$	(155,346)

	For the Three Months Ended September 30, 2018					For the Nine Months Ended September 30, 2018
New Direct Originations by Asset Class (including unfunded commitments)	Commitment Amount			Percentage		Commitment Amount			Percentage
Senior Secured Loans—First Lien		$	481,773		86%		$	845,405		89%
Senior Secured Loans—Second Lien			77,296		14%			84,240		9%
Senior Secured Bonds			—		—			—		—
Subordinated Debt			—		—			1,389		0%
Collateralized Securities			—		—			—		—
Equity/Other			—		—			14,230		2%
Total		$	559,069		100%		$	945,264		100%

	For the Three Months Ended September 30, 2018	For the Nine Months Ended September 30, 2018
Average New Direct Origination Commitment Amount	$55,907	$35,010
Weighted Average Maturity for New Direct Originations	1/15/2023	2/10/2024
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period	8.7%	9.6%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations Funded during Period—Excluding Non-Income Producing Assets	8.7%	9.6%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period	10.4%	9.9%

	September 30, 2018					December 31, 2017
Portfolio Composition by Strategy	Fair Value			Percentage of Portfolio		Fair Value			Percentage of Portfolio
Direct Originations		$	3,524,869		81%		$	3,812,590		83%
Opportunistic			468,887		11%			634,049		14%
Broadly Syndicated/Other			339,788		8%			150,955		3%
Total		$	4,333,544		100%		$	4,597,594		100%

Investment Rating			Summary Description
1			~~Investment exceeding expectations and/~~Performing Investment—generally executing in accordance with plan and there are no concerns about the portfolio company’s performance or ~~capital gain expected.~~ability to meet covenant requirements.
2			Performing ~~investment generally executing~~investment—no concern about repayment of both interest and our cost basis but company’s recent performance or trends in ~~accordance with~~ the ~~portfolio company’s business plan—full return of principal and interest expected.~~
3			~~Performing investment requiring~~industry require closer monitoring.
43			Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment.
54			Underperforming ~~investment with expected loss~~investment—concerns about the recoverability of ~~interest and some principal.~~principal or interest.