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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014.



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

COMMISSION FILE NUMBER: 814-00926





FS Investment
Corporation II

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 80-0741103                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                                   |  |           
|------------------------------------------------------------------ |  | ----------
|Cira Centre 2929 Arch Street, Suite 675 Philadelphia,
Pennsylvania |  | 19104     
|(Address of principal executive offices)                           |  | (Zip Code)

Registrants telephone number, including area code: (215) 495-1150





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

The issuer had 305,599,757 shares of common stock outstanding as of May 12, 2014.









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TABLE OF CONTENTS



|                             |  |                                                                                                               |  |      |    | 
|---------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                             |  |                                                                                                               |  | Page |   
|PART IFINANCIAL INFORMATION |  |                                                                                                               |  |     
|ITEM 1.                      |  | FINANCIAL STATEMENTS                                                                                          |  |      | 1  | 
|                             |  | Consolidated Balance Sheets as of March 31, 2014 (Unaudited) and December 31, 2013                            |  |      | 1  | 
|                             |  | Unaudited Consolidated Statements of Operations for the three months ended March 31, 2014 and
2013            |  |      | 2  | 
|                             |  | Unaudited Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2014 and 2013 |  |      | 3  | 
|                             |  | Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and
2013            |  |      | 4  | 
|                             |  | Consolidated Schedules of Investments as of March 31, 2014 (Unaudited) and December 31,
2013                  |  |      | 5  | 
|                             |  | Notes to Unaudited Consolidated Financial Statements                                                          |  |      | 24 | 
|ITEM 2.                      |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                         |  |      | 51 | 
|ITEM 3.                      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                    |  |      | 74 | 
|ITEM 4.                      |  | CONTROLS AND PROCEDURES                                                                                       |  |      | 75 | 
|                             | 
|PART IIOTHER INFORMATION    |  |                                                                                                               |  |     
|ITEM 1.                      |  | LEGAL PROCEEDINGS                                                                                             |  |      | 76 | 
|ITEM 1A.                     |  | RISK FACTORS                                                                                                  |  |      | 76 | 
|ITEM 2.                      |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                   |  |      | 76 | 
|ITEM 3.                      |  | DEFAULTS UPON SENIOR SECURITIES                                                                               |  |      | 76 | 
|ITEM 4.                      |  | MINE SAFETY DISCLOSURES                                                                                       |  |      | 76 | 
|ITEM 5.                      |  | OTHER INFORMATION                                                                                             |  |      | 76 | 
|ITEM 6.                      |  | EXHIBITS                                                                                                      |  |      | 77 | 
|                             |  | SIGNATURES                                                                                                    |  |      | 81 | 



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##### Table of Contents

PART IFINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

FS Investment Corporation II

Consolidated Balance Sheets

(in thousands, except share and per share amounts)







|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                                                                       |  | March 31, 2014(Unaudited) |           |   | December 31, 2013 |  
|Assets                                                                                                                                 |  |                           |           |   |                   |   |           |  
|Investments, at fair value (amortized cost$3,251,468 and $2,626,969, respectively)                                                    |  | $                         | 3,307,386 |   |                   | $ | 2,655,828 |  
|Cash                                                                                                                                   |  |                           | 368,277   |   |                   |   | 581,632   |  
|Receivable for investments sold and repaid                                                                                             |  |                           | 11,067    |   |                   |   | 52,817    |  
|Interest receivable                                                                                                                    |  |                           | 41,315    |   |                   |   | 29,855    |  
|Receivable for common stock purchased                                                                                                  |  |                           |          |   |                   |   | 532       |  
|Deferred financing costs                                                                                                               |  |                           | 6,204     |   |                   |   | 1,273     |  
|Prepaid expenses and other assets                                                                                                      |  |                           | 179       |   |                   |   | 30        |  
|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|Total assets                                                                                                                           |  | $                         | 3,734,428 |   |                   | $ | 3,321,967 |  
|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|                                                                                                                                       |  |                          
|Liabilities                                                                                                                            |  |                           |           |   |                   |   |           |  
|Payable for investments purchased                                                                                                      |  | $                         | 79,506    |   |                   | $ | 163,785   |  
|Repurchase agreement payable(1)                                                                                                        |  |                           | 550,000   |   |                   |   | 550,000   |  
|Credit facilities payable                                                                                                              |  |                           | 170,494   |   |                   |   | 170,494   |  
|Stockholder distributions payable                                                                                                      |  |                           |          |   |                   |   | 17,826    |  
|Management fees payable                                                                                                                |  |                           | 17,641    |   |                   |   | 15,013    |  
|Accrued capital gains incentive
fees(2)                                                                                                |  |                           | 15,168    |   |                   |   | 9,234     |  
|Administrative services expense payable                                                                                                |  |                           | 1,731     |   |                   |   | 571       |  
|Interest payable                                                                                                                       |  |                           | 3,021     |   |                   |   | 2,858     |  
|Directors fees payable                                                                                                                |  |                           | 168       |   |                   |   | 183       |  
|Other accrued expenses and liabilities                                                                                                 |  |                           | 2,323     |   |                   |   | 1,018     |  
|Commitments and contingencies(3)                                                                                                       |  |                           |          |   |                   |   |          |  
|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|Total liabilities                                                                                                                      |  |                           | 840,052   |   |                   |   | 930,982   |  
|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|                                                                                                                                       |  |                          
|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, 304,898,490 and 254,572,096 shares issued and outstanding,
respectively |  |                           | 305       |   |                   |   | 255       |  
|Capital in excess of par value                                                                                                         |  |                           | 2,839,190 |   |                   |   | 2,363,943 |  
|Accumulated undistributed net realized gains on investments and gain/loss on foreign currency(4)                                       |  |                           | 10,520    |   |                   |   | 7,911     |  
|Accumulated distributions in excess of net investment
income(4)                                                                        |  |                           | (11,557   | ) |                   |   | (9,983    | )
|Net unrealized appreciation (depreciation) on investments and gain/loss on foreign currency                                            |  |                           | 55,918    |   |                   |   | 28,859    |  
|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|Total stockholders equity                                                                                                             |  |                           | 2,894,376 |   |                   |   | 2,390,985 |  
|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|Total liabilities and stockholders equity                                                                                             |  | $                         | 3,734,428 |   |                   | $ | 3,321,967 |  
|                                                                                                                                       |  |                           |           |   |                   |   |           |  
|Net asset value per share of common stock at period end                                                                                |  | $                         | 9.49      |   |                   | $ | 9.39      |  



|(1) | See Note 8 for a discussion of the Companys repurchase transaction.
|--- | --------------------------------------------------------------------



|(2) | See Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|(3) | See Note 9 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.



1



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share amounts)







|                                                                                     |  |                             |             |  |      |   |            |  
|------------------------------------------------------------------------------------ |  | --------------------------- | ----------- |  | ---- | - | ---------- | -
|                                                                                     |  | Three Months EndedMarch 31, |            
|                                                                                     |  | 2014                        |             |  | 2013 |  
|Investment income                                                                    |  |                             |             |  |      |   |            |  
|Interest income                                                                      |  | $                           | 68,584      |  |      | $ | 15,380     |  
|Fee income                                                                           |  |                             | 12,481      |  |      |   | 1,593      |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Total investment income                                                              |  |                             | 81,065      |  |      |   | 16,973     |  
|                                                                                     |  |                             |             |  |      |   |            |  
|                                                                                     |  |                            
|Operating expenses                                                                   |  |                             |             |  |      |   |            |  
|Management fees                                                                      |  |                             | 17,641      |  |      |   | 4,985      |  
|Capital gains incentive fees(1)                                                      |  |                             | 5,934       |  |      |   | 3,859      |  
|Administrative services expenses                                                     |  |                             | 1,374       |  |      |   | 461        |  
|Stock transfer agent fees                                                            |  |                             | 850         |  |      |   | 435        |  
|Accounting and administrative fees                                                   |  |                             | 317         |  |      |   | 89         |  
|Interest expense                                                                     |  |                             | 5,901       |  |      |   | 1,144      |  
|Directors fees                                                                      |  |                             | 179         |  |      |   | 146        |  
|Other general and administrative expenses                                            |  |                             | 1,169       |  |      |   | 477        |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Operating expenses                                                                   |  |                             | 33,365      |  |      |   | 11,596     |  
|Add: Expense recoupment to sponsor(2)                                                |  |                             |            |  |      |   | 2,041      |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Total operating expenses                                                             |  |                             | 33,365      |  |      |   | 13,637     |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Net investment income (loss)                                                         |  |                             | 47,700      |  |      |   | 3,336      |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Realized and unrealized gain/loss                                                    |  |                             |             |  |      |   |            |  
|Net realized gain (loss) on investments                                              |  |                             | 2,605       |  |      |   | 848        |  
|Net realized gain (loss) on total return swap(3)                                     |  |                             |            |  |      |   | 7,263      |  
|Net realized gain (loss) on foreign currency                                         |  |                             | 4           |  |      |   | (59        | )
|Net change in unrealized appreciation (depreciation) on investments                  |  |                             | 27,059      |  |      |   | 12,476     |  
|Net change in unrealized appreciation (depreciation) on total return
swap(3)         |  |                             |            |  |      |   | 3,971      |  
|Net change in unrealized gain (loss) on foreign currency                             |  |                             |            |  |      |   | 120        |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Total net realized and unrealized gain (loss) on investments                         |  |                             | 29,668      |  |      |   | 24,619     |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Net increase (decrease) in net assets resulting from operations                      |  | $                           | 77,368      |  |      | $ | 27,955     |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Per share informationbasic and diluted                                              |  |                             |             |  |      |   |            |  
|Net increase (decrease) in net assets resulting from operations (Earnings per Share) |  | $                           | 0.27        |  |      | $ | 0.37       |  
|                                                                                     |  |                             |             |  |      |   |            |  
|Weighted average shares outstanding                                                  |  |                             | 282,039,917 |  |      |   | 75,870,282 |  
|                                                                                     |  |                             |             |  |      |   |            |  



|(1) | See Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|(2) | See Note 4 for a discussion of expense reimbursements paid to the Company by its investment adviser and affiliates and recoupment of such amounts paid by the
Company to its investment adviser and affiliates.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | On June 13, 2013, the Company terminated its total return swap agreement with Citibank, N.A.
|--- | --------------------------------------------------------------------------------------------

See notes to unaudited consolidated financial statements.



2



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FS Investment Corporation II

Unaudited Consolidated Statements of Changes in Net Assets

(in thousands)







|                                                                                   |  |                             |           |   |      |   |         |  
|---------------------------------------------------------------------------------- |  | --------------------------- | --------- | - | ---- | - | ------- | -
|                                                                                   |  | Three Months EndedMarch 31, |          
|                                                                                   |  | 2014                        |           |   | 2013 |  
|Operations                                                                         |  |                             |           |   |      |   |         |  
|Net investment income                                                              |  | $                           | 47,700    |   |      | $ | 3,336   |  
|Net realized gain (loss) on investments, total return swap and foreign currency(1) |  |                             | 2,609     |   |      |   | 8,052   |  
|Net change in unrealized appreciation (depreciation) on investments                |  |                             | 27,059    |   |      |   | 12,476  |  
|Net change in unrealized appreciation (depreciation) on total return
swap(1)       |  |                             |          |   |      |   | 3,971   |  
|Net change in unrealized gain (loss) on foreign currency                           |  |                             |          |   |      |   | 120     |  
|                                                                                   |  |                             |           |   |      |   |         |  
|Net increase (decrease) in net assets resulting from operations                    |  |                             | 77,368    |   |      |   | 27,955  |  
|                                                                                   |  |                             |           |   |      |   |         |  
|Stockholder distributions(2)                                                       |  |                             |           |   |      |   |         |  
|Distributions from net investment income                                           |  |                             | (49,274   | ) |      |   | (13,016 | )
|Distributions from net realized gain on investments                                |  |                             |          |   |      |   | (1,775  | )
|                                                                                   |  |                             |           |   |      |   |         |  
|Net decrease in net assets resulting from stockholder distributions                |  |                             | (49,274   | ) |      |   | (14,791 | )
|                                                                                   |  |                             |           |   |      |   |         |  
|Capital share transactions                                                         |  |                             |           |   |      |   |         |  
|Issuance of common stock(3)                                                        |  |                             | 442,395   |   |      |   | 341,784 |  
|Reinvestment of stockholder distributions(3)                                       |  |                             | 35,865    |   |      |   | 6,240   |  
|Repurchases of common stock(3)                                                     |  |                             | (1,277    | ) |      |   |        |  
|Offering costs                                                                     |  |                             | (1,686    | ) |      |   | (1,200  | )
|                                                                                   |  |                             |           |   |      |   |         |  
|Net increase in net assets resulting from capital share transactions               |  |                             | 475,297   |   |      |   | 346,824 |  
|                                                                                   |  |                             |           |   |      |   |         |  
|Total increase in net assets                                                       |  |                             | 503,391   |   |      |   | 359,988 |  
|Net assets at beginning of period                                                  |  |                             | 2,390,985 |   |      |   | 527,727 |  
|                                                                                   |  |                             |           |   |      |   |         |  
|Net assets at end of period                                                        |  | $                           | 2,894,376 |   |      | $ | 887,715 |  
|                                                                                   |  |                             |           |   |      |   |         |  
|Accumulated distributions in excess of net investment income(2)                    |  | $                           | (11,557   | ) |      | $ | (13,162 | )
|                                                                                   |  |                             |           |   |      |   |         |  



|(1) | On June 13, 2013, the Company terminated its total return swap agreement with Citibank, N.A.
|--- | --------------------------------------------------------------------------------------------



|(2) | See Note 5 for a discussion of the sources of distributions paid by the Company.
|--- | --------------------------------------------------------------------------------



|(3) | See Note 3 for a discussion of transactions with respect to shares of the Companys common stock during the three months ended March 31, 2014 and 2013.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

See notes to unaudited consolidated financial statements.



3



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FS Investment Corporation II

Unaudited Consolidated Statements of Cash Flows

(in thousands)







|                                                                                                                                   |  |                            |          |   |      |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                                                                   |  | Three MonthsEndedMarch 31, |         
|                                                                                                                                   |  | 2014                       |          |   | 2013 |  
|Cash flows from operating activities                                                                                               |  |                            |          |   |      |   |          |  
|Net increase (decrease) in net assets resulting from operations                                                                    |  | $                          | 77,368   |   |      | $ | 27,955   |  
|Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating
activities: |  |                            |          |   |      |   |          |  
|Purchases of investments                                                                                                           |  |                            | (927,056 | ) |      |   | (627,076 | )
|Paid-in-kind interest                                                                                                              |  |                            | (1,442   | ) |      |   |         |  
|Proceeds from sales and repayments of investments                                                                                  |  |                            | 310,598  |   |      |   | 91,579   |  
|Net realized (gain) loss on investments                                                                                            |  |                            | (2,605   | ) |      |   | (848     | )
|Net change in unrealized (appreciation) depreciation on investments                                                                |  |                            | (27,059  | ) |      |   | (12,476  | )
|Net change in unrealized (appreciation) depreciation on total return swap(1)                                                       |  |                            |         |   |      |   | (3,971   | )
|Accretion of discount                                                                                                              |  |                            | (3,994   | ) |      |   | (1,423   | )
|Amortization of deferred financing costs                                                                                           |  |                            | 263      |   |      |   | 22       |  
|(Increase) decrease in due from counterparty                                                                                       |  |                            |         |   |      |   | 3,414    |  
|(Increase) decrease in receivable for investments sold and repaid                                                                  |  |                            | 41,750   |   |      |   | (5,214   | )
|(Increase) decrease in expense reimbursement due from
sponsor(2)                                                                   |  |                            |         |   |      |   | 1,635    |  
|(Increase) decrease in interest receivable                                                                                         |  |                            | (11,460  | ) |      |   | (7,232   | )
|(Increase) decrease in receivable due on total return
swap(1)                                                                      |  |                            |         |   |      |   | (3,274   | )
|(Increase) decrease in prepaid expenses and other assets                                                                           |  |                            | (149     | ) |      |   | 25       |  
|Increase (decrease) in payable for investments purchased                                                                           |  |                            | (84,279  | ) |      |   | 154,013  |  
|Increase (decrease) in management fees payable                                                                                     |  |                            | 2,628    |   |      |   | 4,985    |  
|Increase (decrease) in expense recoupment payable to
sponsor(2)                                                                    |  |                            |         |   |      |   | 847      |  
|Increase (decrease) in accrued capital gains incentive fees                                                                        |  |                            | 5,934    |   |      |   | 3,418    |  
|Increase (decrease) in administrative services expense payable                                                                     |  |                            | 1,160    |   |      |   | 285      |  
|Increase (decrease) in interest payable                                                                                            |  |                            | 163      |   |      |   | 1,122    |  
|Increase (decrease) in directors fees payable                                                                                     |  |                            | (15      | ) |      |   |         |  
|Increase (decrease) in other accrued expenses and liabilities                                                                      |  |                            | 1,305    |   |      |   | 654      |  
|                                                                                                                                   |  |                            |          |   |      |   |          |  
|Net cash used in operating activities                                                                                              |  |                            | (616,890 | ) |      |   | (371,560 | )
|                                                                                                                                   |  |                            |          |   |      |   |          |  
|Cash flows from financing activities                                                                                               |  |                            |          |   |      |   |          |  
|Issuance of common stock                                                                                                           |  |                            | 442,927  |   |      |   | 342,186  |  
|Reinvestment of stockholder distributions                                                                                          |  |                            | 35,865   |   |      |   | 6,240    |  
|Repurchases of common stock                                                                                                        |  |                            | (1,277   | ) |      |   |         |  
|Offering costs                                                                                                                     |  |                            | (1,686   | ) |      |   | (1,200   | )
|Stockholder distributions                                                                                                          |  |                            | (67,100  | ) |      |   | (12,413  | )
|Borrowings under credit facilities(3)                                                                                              |  |                            |         |   |      |   | 14,194   |  
|Borrowings under repurchase
agreement(4)                                                                                           |  |                            |         |   |      |   | 32,500   |  
|Deferred financing costs paid                                                                                                      |  |                            | (5,194   | ) |      |   | (1,557   | )
|                                                                                                                                   |  |                            |          |   |      |   |          |  
|Net cash provided by financing activities                                                                                          |  |                            | 403,535  |   |      |   | 379,950  |  
|                                                                                                                                   |  |                            |          |   |      |   |          |  
|Total increase (decrease) in cash                                                                                                  |  |                            | (213,355 | ) |      |   | 8,390    |  
|Cash at beginning of period                                                                                                        |  |                            | 581,632  |   |      |   | 107,157  |  
|                                                                                                                                   |  |                            |          |   |      |   |          |  
|Cash at end of period                                                                                                              |  | $                          | 368,277  |   |      | $ | 115,547  |  
|                                                                                                                                   |  |                            |          |   |      |   |          |  
|Supplemental disclosure                                                                                                            |  |                            |          |   |      |   |          |  
|Local and excise taxes paid                                                                                                        |  | $                          | 352      |   |      | $ |         |  
|                                                                                                                                   |  |                            |          |   |      |   |          |  



|(1) | On June 13, 2013, the Company terminated its total return swap agreement with Citibank, N.A.
|--- | --------------------------------------------------------------------------------------------



|(2) | See Note 4 for a discussion of expense reimbursements paid to the Company by its investment adviser and affiliates and recoupment of such amounts paid by the
Company to its investment adviser and affiliates.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | See Note 8 for a discussion of the Companys credit facilities. During the three months ended March 31, 2014 and 2013, the Company paid $907 and $0,
respectively, in interest expense on the credit facilities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | See Note 8 for a discussion of the Companys repurchase transaction. During the three months ended March 31, 2014 and 2013, the Company paid $4,568 and $0,
respectively, in interest expense pursuant to the repurchase agreement.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See notes to unaudited consolidated
financial statements.



4



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments

As of March 31, 2014

(in thousands, except share amounts)







|                                             |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   |               |  |  |   |         | 
|-------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ------- |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes |  | Industry                                       |  | Rate(b) |  | Floor |     |   | Maturity |          | Principal
Amount(c) |   |         | AmortizedCost |  |   | Fair
Value(d) | 
|Senior Secured LoansFirst Lien55.7%        |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   |               |  |  |   |         | 
|A.T. Cross Co.                               |  | (e)(g)    |  | Retailing                                      |  | L+825   |  |       |     |   |          | 9/6/19   |                     | $ | 36,815  |               |  | $ | 36,815        |  |  | $ | 36,815  | 
|A.T. Cross Co.                               |  | (m)       |  | Retailing                                      |  | L+825   |  |       |     |   |          | 9/6/19   |                     |   | 20,000  |               |  |   | 20,000        |  |  |   | 20,000  | 
|Advantage Sales & Marketing Inc.             |  |           |  | Commercial & Professional Services             |  | L+325   |  |       | 1.0 | % |          | 12/18/17 |                     |   | 2,107   |               |  |   | 2,097         |  |  |   | 2,120   | 
|Air Medical Group Holdings, Inc.             |  | (g)       |  | Health Care Equipment & Services               |  | L+400   |  |       | 1.0 | % |          | 6/30/18  |                     |   | 5,463   |               |  |   | 5,549         |  |  |   | 5,486   | 
|Alon USA Partners, L.P.                      |  | (e)(i)    |  | Energy                                         |  | L+800   |  |       | 1.3 | % |          | 11/26/18 |                     |   | 4,115   |               |  |   | 3,941         |  |  |   | 4,269   | 
|Alvogen Pharma US, Inc.                      |  | (g)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+575   |  |       | 1.3 | % |          | 5/23/18  |                     |   | 9,756   |               |  |   | 9,703         |  |  |   | 9,853   | 
|American Tire Distributors, Inc.             |  | (g)(h)    |  | Automobiles & Components                       |  | L+475   |  |       | 1.0 | % |          | 6/19/18  |                     |   | 1,290   |               |  |   | 1,287         |  |  |   | 1,300   | 
|AP Exhaust Acquisition, LLC                  |  | (e)       |  | Automobiles & Components                       |  | L+775   |  |       | 1.5 | % |          | 1/16/21  |                     |   | 155,000 |               |  |   | 155,000       |  |  |   | 155,000 | 
|Apex Tool Group, LLC                         |  |           |  | Capital Goods                                  |  | L+325   |  |       | 1.3 | % |          | 1/31/20  |                     |   | 5,286   |               |  |   | 5,264         |  |  |   | 5,251   | 
|ARG IH Corp.                                 |  |           |  | Consumer Services                              |  | L+400   |  |       | 1.0 | % |          | 11/15/20 |                     |   | 1,397   |               |  |   | 1,393         |  |  |   | 1,408   | 
|Ascend Learning, LLC                         |  |           |  | Software & Services                            |  | L+500   |  |       | 1.0 | % |          | 7/26/19  |                     |   | 3,584   |               |  |   | 3,566         |  |  |   | 3,638   | 
|Ascension Insurance, Inc.                    |  | (e)(f)    |  | Insurance                                      |  | L+825   |  |       | 1.3 | % |          | 3/5/19   |                     |   | 79,230  |               |  |   | 77,969        |  |  |   | 77,645  | 
|Aspect Software, Inc.                        |  |           |  | Software & Services                            |  | L+550   |  |       | 1.8 | % |          | 5/7/16   |                     |   | 7,772   |               |  |   | 7,799         |  |  |   | 7,889   | 
|Attachmate Corp.                             |  | (g)       |  | Software & Services                            |  | L+575   |  |       | 1.5 | % |          | 11/22/17 |                     |   | 6,724   |               |  |   | 6,788         |  |  |   | 6,783   | 
|Avaya Inc.                                   |  | (e)       |  | Technology Hardware & Equipment                |  | L+450   |  |       |     |   |          | 10/26/17 |                     |   | 7,318   |               |  |   | 6,810         |  |  |   | 7,159   | 
|Azure Midstream Energy LLC                   |  | (g)       |  | Energy                                         |  | L+550   |  |       | 1.0 | % |          | 11/15/18 |                     |   | 4,444   |               |  |   | 4,381         |  |  |   | 4,494   | 
|BlackBrush TexStar L.P.                      |  | (e)(g)    |  | Energy                                         |  | L+650   |  |       | 1.3 | % |          | 6/4/19   |                     |   | 14,143  |               |  |   | 14,020        |  |  |   | 14,306  | 
|Blue Coat Systems, Inc.                      |  | (e)       |  | Software & Services                            |  | L+300   |  |       | 1.0 | % |          | 5/31/19  |                     |   | 2,116   |               |  |   | 2,116         |  |  |   | 2,126   | 
|Boomerang Tube, LLC                          |  | (e)       |  | Energy                                         |  | L+950   |  |       | 1.5 | % |          | 10/11/17 |                     |   | 4,625   |               |  |   | 4,517         |  |  |   | 4,509   | 
|Bright Horizons Family Solutions LLC         |  |           |  | Health Care Equipment & Services               |  | L+300   |  |       | 1.0 | % |          | 1/30/20  |                     |   | 1,000   |               |  |   | 992           |  |  |   | 1,004   | 
|Cadillac Jack, Inc.                          |  | (e)(g)(i) |  | Consumer Services                              |  | L+700   |  |       | 1.0 | % |          | 12/20/17 |                     |   | 124,688 |               |  |   | 123,594       |  |  |   | 125,623 | 
|Caesars Entertainment Operating Co.          |  | (i)       |  | Consumer Services                              |  | L+425   |  |       |     |   |          | 1/26/18  |                     |   | 5,000   |               |  |   | 4,742         |  |  |   | 4,659   | 
|Caesars Entertainment Operating Co.          |  | (i)       |  | Consumer Services                              |  | L+750   |  |       | 2.0 | % |          | 10/31/16 |                     |   | 4,339   |               |  |   | 4,394         |  |  |   | 4,333   | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(f)(g) |  | Consumer Services                              |  | L+600   |  |       | 1.0 | % |          | 10/11/20 |                     |   | 58,945  |               |  |   | 55,578        |  |  |   | 59,803  | 
|CEC Entertainment, Inc.                      |  | (i)       |  | Consumer Services                              |  | L+325   |  |       | 1.0 | % |          | 2/12/21  |                     |   | 3,366   |               |  |   | 3,349         |  |  |   | 3,348   | 
|Cengage Learning, Inc.                       |  | (g)(h)    |  | Media                                          |  | L+600   |  |       | 1.0 | % |          | 3/6/20   |                     |   | 5,405   |               |  |   | 5,378         |  |  |   | 5,474   | 
|Clear Channel Communications, Inc.           |  | (e)       |  | Media                                          |  | L+365   |  |       |     |   |          | 1/29/16  |                     |   | 6,156   |               |  |   | 5,359         |  |  |   | 6,093   | 
|Clover Technologies Group, LLC               |  | (g)       |  | Commercial & Professional Services             |  | L+550   |  |       | 1.3 | % |          | 5/7/18   |                     |   | 5,697   |               |  |   | 5,697         |  |  |   | 5,709   | 
|Community Health Systems, Inc.               |  | (g)(i)    |  | Health Care Equipment & Services               |  | L+325   |  |       | 1.0 | % |          | 1/17/21  |                     |   | 4,030   |               |  |   | 4,011         |  |  |   | 4,069   | 
|Corner Investment PropCo, LLC                |  | (e)(g)    |  | Consumer Services                              |  | L+975   |  |       | 1.3 | % |          | 11/2/19  |                     |   | 41,000  |               |  |   | 41,601        |  |  |   | 42,230  | 
|CoSentry.Net, LLC                            |  | (f)       |  | Software & Services                            |  | L+800   |  |       | 1.3 | % |          | 12/31/19 |                     |   | 54,364  |               |  |   | 54,364        |  |  |   | 54,907  | 
|Crestwood Holdings LLC                       |  | (g)       |  | Energy                                         |  | L+600   |  |       | 1.0 | % |          | 6/19/19  |                     |   | 5,665   |               |  |   | 5,640         |  |  |   | 5,774   | 
|Cumulus Media Inc.                           |  | (i)       |  | Media                                          |  | L+325   |  |       | 1.0 | % |          | 12/23/20 |                     |   | 7,842   |               |  |   | 7,766         |  |  |   | 7,888   | 
|DAE Aviation Holdings, Inc.                  |  | (i)       |  | Capital Goods                                  |  | L+400   |  |       | 1.0 | % |          | 11/2/18  |                     |   | 3,895   |               |  |   | 3,886         |  |  |   | 3,961   | 
|Del Monte Foods Consumer Products, Inc.      |  | (i)       |  | Food, Beverage & Tobacco                       |  | L+325   |  |       | 1.0 | % |          | 12/6/20  |                     |   | 2,809   |               |  |   | 2,795         |  |  |   | 2,821   | 



See
notes to unaudited consolidated financial statements.



5



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                  |  |           |  |                                                |  |             |  |       |     |   |          |          |                     |   |        |               |  |   |               |  |  |   |        | 
|--------------------------------- |  | --------- |  | ---------------------------------------------- |  | ----------- |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------ | ------------- |  | - | ------------- |  |  | - | ------ | 
|Portfolio
Company(a)              |  | Footnotes |  | Industry                                       |  | Rate(b)     |  | Floor |     |   | Maturity |          | Principal
Amount(c) |   |        | AmortizedCost |  |   | Fair
Value(d) | 
|DigitalGlobe, Inc.                |  | (e)(i)    |  | Software & Services                            |  | L+275       |  |       | 1.0 | % |          | 1/31/20  |                     | $ | 2,521  |               |  | $ | 2,521         |  |  | $ | 2,528  | 
|Drew Marine Group Inc.            |  | (i)       |  | Energy                                         |  | L+350       |  |       | 1.0 | % |          | 11/19/20 |                     |   | 2,660  |               |  |   | 2,657         |  |  |   | 2,680  | 
|Drumm Investors LLC               |  |           |  | Health Care Equipment & Services               |  | L+375       |  |       | 1.3 | % |          | 5/4/18   |                     |   | 1,450  |               |  |   | 1,403         |  |  |   | 1,437  | 
|Eastman Kodak Co.                 |  | (g)       |  | Consumer Durables & Apparel                    |  | L+625       |  |       | 1.0 | % |          | 9/3/19   |                     |   | 7,218  |               |  |   | 7,085         |  |  |   | 7,331  | 
|Education Management LLC          |  | (g)(i)    |  | Consumer Services                              |  | L+400       |  |       |     |   |          | 6/1/16   |                     |   | 3,956  |               |  |   | 3,600         |  |  |   | 3,485  | 
|EFS Cogen Holdings I LLC          |  |           |  | Energy                                         |  | L+275       |  |       | 1.0 | % |          | 12/17/20 |                     |   | 1,778  |               |  |   | 1,761         |  |  |   | 1,790  | 
|EquiPower Resources Holdings, LLC |  | (g)       |  | Utilities                                      |  | L+325       |  |       | 1.0 | % |          | 12/21/18 |                     |   | 1,463  |               |  |   | 1,492         |  |  |   | 1,473  | 
|ERC Ireland Holdings Ltd.         |  | (i)       |  | Telecommunication Services                     |  | EURIBOR+450 |  |       |     |   |          | 9/30/19  |                     |  | 9,920  |               |  |   | 7,608         |  |  |   | 13,223 | 
|Extreme Reach, Inc.               |  | (g)       |  | Media                                          |  | L+575       |  |       | 1.0 | % |          | 1/24/20  |                     | $ | 2,897  |               |  |   | 2,854         |  |  |   | 2,969  | 
|FairPoint Communications, Inc.    |  | (e)(i)    |  | Telecommunication Services                     |  | L+625       |  |       | 1.3 | % |          | 2/14/19  |                     |   | 21,656 |               |  |   | 21,831        |  |  |   | 22,378 | 
|Filtration Group Corp.            |  |           |  | Energy                                         |  | L+350       |  |       | 1.0 | % |          | 11/20/20 |                     |   | 2,443  |               |  |   | 2,431         |  |  |   | 2,440  | 
|FR Dixie Acquisition Corp.        |  | (g)       |  | Energy                                         |  | L+475       |  |       | 1.0 | % |          | 12/18/20 |                     |   | 4,200  |               |  |   | 4,179         |  |  |   | 4,239  | 
|FR Utility Services LLC           |  | (g)       |  | Energy                                         |  | L+575       |  |       | 1.0 | % |          | 10/18/19 |                     |   | 4,618  |               |  |   | 4,575         |  |  |   | 4,647  | 
|Fram Group Holdings Inc.          |  | (g)       |  | Automobiles & Components                       |  | L+500       |  |       | 1.5 | % |          | 7/29/17  |                     |   | 2,012  |               |  |   | 2,036         |  |  |   | 2,019  | 
|Hamilton Lane Advisors, LLC       |  | (g)       |  | Diversified Financials                         |  | L+400       |  |       | 1.3 | % |          | 2/23/18  |                     |   | 1,575  |               |  |   | 1,587         |  |  |   | 1,583  | 
|Harlan Sprague Dawley, Inc.       |  | (e)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+550       |  |       |     |   |          | 7/11/14  |                     |   | 7,035  |               |  |   | 6,838         |  |  |   | 5,057  | 
|Ikaria Acquisition Inc.           |  | (g)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+400       |  |       | 1.0 | % |          | 2/12/21  |                     |   | 4,696  |               |  |   | 4,673         |  |  |   | 4,735  | 
|ILC Industries, LLC               |  | (g)       |  | Capital Goods                                  |  | L+650       |  |       | 1.5 | % |          | 7/11/18  |                     |   | 4,634  |               |  |   | 4,621         |  |  |   | 4,640  | 
|Industrial Packaging Group, Inc.  |  | (h)       |  | Capital Goods                                  |  | L+600       |  |       | 1.0 | % |          | 3/1/22   |                     |   | 10,000 |               |  |   | 10,000        |  |  |   | 10,000 | 
|Internap Network Services Corp.   |  | (g)(i)    |  | Software & Services                            |  | L+500       |  |       | 1.0 | % |          | 11/26/19 |                     |   | 9,975  |               |  |   | 9,881         |  |  |   | 10,050 | 
|Intralinks, Inc.                  |  | (g)(i)    |  | Software & Services                            |  | L+525       |  |       | 2.0 | % |          | 2/24/19  |                     |   | 25,000 |               |  |   | 24,754        |  |  |   | 24,750 | 
|Intrawest Operations Group, LLC   |  |           |  | Consumer Services                              |  | L+450       |  |       | 1.0 | % |          | 12/9/20  |                     |   | 7,481  |               |  |   | 7,409         |  |  |   | 7,603  | 
|Kanders C3 Holdings, LLC          |  | (e)(f)    |  | Capital Goods                                  |  | L+900       |  |       | 1.3 | % |          | 12/19/18 |                     |   | 23,965 |               |  |   | 23,776        |  |  |   | 23,786 | 
|Kanders C3 Holdings, LLC          |  | (m)       |  | Capital Goods                                  |  | L+900       |  |       | 1.3 | % |          | 12/19/18 |                     |   | 10,204 |               |  |   | 10,204        |  |  |   | 10,128 | 
|Lantiq Deutschland GmbH           |  | (e)(i)    |  | Software & Services                            |  | L+900       |  |       | 2.0 | % |          | 11/16/15 |                     |   | 1,521  |               |  |   | 1,453         |  |  |   | 1,513  | 
|Larchmont Resources, LLC          |  | (g)       |  | Energy                                         |  | L+725       |  |       | 1.0 | % |          | 8/7/19   |                     |   | 7,373  |               |  |   | 7,305         |  |  |   | 7,520  | 
|Leonardo Acquisition Corp.        |  |           |  | Consumer Services                              |  | L+325       |  |       | 1.0 | % |          | 1/27/21  |                     |   | 1,154  |               |  |   | 1,151         |  |  |   | 1,159  | 
|MB Precision Holdings LLC         |  | (e)       |  | Capital Goods                                  |  | L+725       |  |       | 1.3 | % |          | 1/23/20  |                     |   | 62,843 |               |  |   | 62,843        |  |  |   | 62,843 | 
|MetoKote Corp.                    |  | (e)(g)    |  | Materials                                      |  | L+800       |  |       | 1.3 | % |          | 9/30/19  |                     |   | 84,788 |               |  |   | 84,788        |  |  |   | 86,483 | 
|MetoKote Corp.                    |  | (e)(g)(m) |  | Materials                                      |  | L+800       |  |       | 1.3 | % |          | 9/30/19  |                     |   | 16,190 |               |  |   | 16,190        |  |  |   | 16,514 | 
|MMI International Ltd.            |  | (g)(i)    |  | Technology Hardware & Equipment                |  | L+600       |  |       | 1.3 | % |          | 11/20/18 |                     |   | 11,246 |               |  |   | 10,963        |  |  |   | 11,217 | 
|MMM Holdings, Inc.                |  | (g)       |  | Health Care Equipment & Services               |  | L+825       |  |       | 1.5 | % |          | 12/12/17 |                     |   | 2,931  |               |  |   | 2,947         |  |  |   | 2,953  | 
|MModal Inc.                       |  | (e)(g)(j) |  | Health Care Equipment & Services               |  | Prime+575   |  |       |     |   |          | 8/16/19  |                     |   | 15,768 |               |  |   | 15,467        |  |  |   | 12,531 | 
|Moxie Liberty LLC                 |  | (g)       |  | Energy                                         |  | L+650       |  |       | 1.0 | % |          | 8/21/20  |                     |   | 11,853 |               |  |   | 11,901        |  |  |   | 12,179 | 
|Moxie Patriot LLC                 |  |           |  | Energy                                         |  | L+575       |  |       | 1.0 | % |          | 12/19/20 |                     |   | 5,556  |               |  |   | 5,502         |  |  |   | 5,681  | 
|MSO of Puerto Rico, Inc.          |  | (g)       |  | Health Care Equipment & Services               |  | L+825       |  |       | 1.5 | % |          | 12/12/17 |                     |   | 2,131  |               |  |   | 2,143         |  |  |   | 2,147  | 



See
notes to unaudited consolidated financial statements.



6



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                            |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  
|------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ------- |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------- | ------------- |  | - | ------------- | - |  | - | --------- | -
|Portfolio
Company(a)                        |  | Footnotes |  | Industry                                       |  | Rate(b) |  | Floor |     |   | Maturity |          | Principal
Amount(c) |   |         | AmortizedCost |  |   | Fair
Value(d) |  
|New HB Acquisition, LLC                     |  |           |  | Food, Beverage & Tobacco                       |  | L+550   |  |       | 1.3 | % |          | 4/9/20   |                     | $ | 3,896   |               |  | $ | 3,862         |   |  | $ | 4,057     |  
|New Star Metals Inc.                        |  | (e)(g)    |  | Capital Goods                                  |  | L+800   |  |       | 1.3 | % |          | 3/20/20  |                     |   | 120,000 |               |  |   | 120,000       |   |  |   | 120,000   |  
|Nexeo Solutions, LLC                        |  | (e)       |  | Capital Goods                                  |  | L+350   |  |       | 1.5 | % |          | 9/8/17   |                     |   | 6,885   |               |  |   | 6,810         |   |  |   | 6,907     |  
|Nova Wildcat Amerock, LLC                   |  | (e)(g)    |  | Consumer Durables & Apparel                    |  | L+825   |  |       | 1.3 | % |          | 9/10/19  |                     |   | 75,000  |               |  |   | 75,000        |   |  |   | 75,000    |  
|Opal Acquisition, Inc.                      |  |           |  | Consumer Services                              |  | L+400   |  |       | 1.0 | % |          | 11/27/20 |                     |   | 10,918  |               |  |   | 10,836        |   |  |   | 10,973    |  
|Panda Sherman Power, LLC                    |  | (e)       |  | Energy                                         |  | L+750   |  |       | 1.5 | % |          | 9/14/18  |                     |   | 3,818   |               |  |   | 3,817         |   |  |   | 3,933     |  
|Panda Temple Power, LLC (TLA)               |  | (e)       |  | Energy                                         |  | L+700   |  |       | 1.5 | % |          | 7/17/18  |                     |   | 2,000   |               |  |   | 2,016         |   |  |   | 2,054     |  
|Patheon Inc.                                |  | (i)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+325   |  |       | 1.0 | % |          | 1/22/21  |                     |   | 9,736   |               |  |   | 9,712         |   |  |   | 9,702     |  
|Payless ShoeSource, Inc.                    |  | (e)(g)    |  | Consumer Durables & Apparel                    |  | L+400   |  |       | 1.0 | % |          | 3/5/21   |                     |   | 12,392  |               |  |   | 12,330        |   |  |   | 12,423    |  
|PeroxyChem LLC                              |  |           |  | Capital Goods                                  |  | L+650   |  |       | 1.0 | % |          | 2/28/20  |                     |   | 10,000  |               |  |   | 9,802         |   |  |   | 10,050    |  
|PharMEDium Healthcare Corp.                 |  | (g)       |  | Health Care Equipment & Services               |  | L+325   |  |       | 1.0 | % |          | 1/22/21  |                     |   | 743     |               |  |   | 739           |   |  |   | 745       |  
|Professional Plumbing Group, Inc.           |  | (e)(g)    |  | Capital Goods                                  |  | L+875   |  |       | 0.8 | % |          | 7/31/19  |                     |   | 32,338  |               |  |   | 32,338        |   |  |   | 32,984    |  
|PRV Aerospace, LLC                          |  | (g)       |  | Capital Goods                                  |  | L+525   |  |       | 1.3 | % |          | 5/9/18   |                     |   | 2,988   |               |  |   | 3,010         |   |  |   | 2,998     |  
|Reddy Ice Holdings, Inc.                    |  | (g)       |  | Food & Staples Retailing                       |  | L+550   |  |       | 1.3 | % |          | 5/1/19   |                     |   | 1,179   |               |  |   | 1,168         |   |  |   | 1,173     |  
|Sheridan Holdings, Inc.                     |  |           |  | Health Care Equipment & Services               |  | L+350   |  |       | 1.0 | % |          | 6/29/18  |                     |   | 2,030   |               |  |   | 2,021         |   |  |   | 2,044     |  
|Sheridan Holdings, Inc.                     |  |           |  | Health Care Equipment & Services               |  | L+350   |  |       | 1.0 | % |          | 6/29/18  |                     |   | 1,676   |               |  |   | 1,668         |   |  |   | 1,688     |  
|Sirius Computer Solutions, Inc.             |  | (e)       |  | Software & Services                            |  | L+575   |  |       | 1.3 | % |          | 12/7/18  |                     |   | 7,519   |               |  |   | 7,458         |   |  |   | 7,651     |  
|Smile Brands Group Inc.                     |  | (e)(f)(g) |  | Health Care Equipment & Services               |  | L+625   |  |       | 1.3 | % |          | 8/15/19  |                     |   | 38,992  |               |  |   | 38,361        |   |  |   | 39,177    |  
|Sorenson Communication, Inc.                |  | (e)(g)    |  | Telecommunication Services                     |  | L+1025  |  |       | 1.3 | % |          | 10/31/14 |                     |   | 29,754  |               |  |   | 29,811        |   |  |   | 29,940    |  
|Sports Authority, Inc.                      |  | (g)       |  | Consumer Durables & Apparel                    |  | L+600   |  |       | 1.5 | % |          | 11/16/17 |                     |   | 8,201   |               |  |   | 8,268         |   |  |   | 8,221     |  
|Sprint Industrial Holdings LLC              |  | (g)       |  | Energy                                         |  | L+575   |  |       | 1.3 | % |          | 11/14/19 |                     |   | 6,380   |               |  |   | 6,325         |   |  |   | 6,428     |  
|Stallion Oilfield Holdings, Inc.            |  | (e)(g)    |  | Energy                                         |  | L+675   |  |       | 1.3 | % |          | 6/19/18  |                     |   | 9,696   |               |  |   | 9,611         |   |  |   | 9,932     |  
|Swift Worldwide Resources US Holdings Corp. |  |           |  | Energy                                         |  | L+800   |  |       | 1.3 | % |          | 4/30/19  |                     |   | 20,037  |               |  |   | 20,037        |   |  |   | 20,438    |  
|Technicolor SA                              |  | (e)(g)(i) |  | Media                                          |  | L+600   |  |       | 1.3 | % |          | 7/10/20  |                     |   | 31,786  |               |  |   | 31,392        |   |  |   | 32,336    |  
|Therakos, Inc.                              |  | (e)(g)    |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+625   |  |       | 1.3 | % |          | 12/27/17 |                     |   | 6,588   |               |  |   | 6,492         |   |  |   | 6,649     |  
|Totes Isotoner Corp.                        |  | (f)       |  | Consumer Durables & Apparel                    |  | L+575   |  |       | 1.5 | % |          | 7/7/17   |                     |   | 907     |               |  |   | 906           |   |  |   | 912       |  
|TravelCLICK, Inc.                           |  | (g)       |  | Consumer Services                              |  | L+450   |  |       | 1.3 | % |          | 3/16/16  |                     |   | 1,963   |               |  |   | 1,965         |   |  |   | 1,975     |  
|Tri-Northern Acquisition, Inc.              |  | (e)(f)(g) |  | Retailing                                      |  | L+800   |  |       | 1.3 | % |          | 7/1/19   |                     |   | 89,325  |               |  |   | 89,325        |   |  |   | 89,325    |  
|Tri-Northern Acquisition, Inc.              |  | (m)       |  | Retailing                                      |  | L+800   |  |       | 1.3 | % |          | 7/1/19   |                     |   | 18,621  |               |  |   | 18,621        |   |  |   | 18,621    |  
|UTEX Industries, Inc.                       |  | (g)       |  | Energy                                         |  | L+325   |  |       | 1.3 | % |          | 4/10/20  |                     |   | 2,682   |               |  |   | 2,670         |   |  |   | 2,695     |  
|                                            |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  
|Total Senior Secured LoansFirst Lien       |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   | 1,656,961     |   |  |   | 1,676,489 |  
|Unfunded Loan Commitments                   |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   | (65,015       | ) |  |   | (65,015   | )
|                                            |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  
|Net Senior Secured LoansFirst Lien         |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   | 1,591,946     |   |  |   | 1,611,474 |  
|                                            |  |           |  |                                                |  |         |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  



See
notes to unaudited consolidated financial statements.



7



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                            |  |           |  |                                                |  |                               |  |       |     |   |          |          |                     |   |         |               |  |   |               |  |  |   |         | 
|------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ----------------------------- |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|Portfolio
Company(a)                        |  | Footnotes |  | Industry                                       |  | Rate(b)                       |  | Floor |     |   | Maturity |          | Principal
Amount(c) |   |         | AmortizedCost |  |   | Fair
Value(d) | 
|Senior Secured LoansSecond Lien29.9%      |  |           |  |                                                |  |                               |  |       |     |   |          |          |                     |   |         |               |  |   |               |  |  |   |         | 
|Accellent Inc.                              |  |           |  | Health Care Equipment & Services               |  | L+650                         |  |       | 1.0 | % |          | 2/21/22  |                     | $ | 8,814   |               |  | $ | 8,792         |  |  | $ | 8,770   | 
|Acquisition Glacier Inc.                    |  | (i)       |  | Health Care Equipment & Services               |  | L+675                         |  |       | 1.0 | % |          | 7/29/21  |                     |   | 5,000   |               |  |   | 4,975         |  |  |   | 5,088   | 
|Advantage Sales & Marketing Inc.            |  | (f)       |  | Commercial & Professional Services             |  | L+725                         |  |       | 1.0 | % |          | 6/12/18  |                     |   | 471     |               |  |   | 471           |  |  |   | 480     | 
|Alliance Laundry Systems LLC                |  | (e)       |  | Capital Goods                                  |  | L+825                         |  |       | 1.3 | % |          | 12/10/19 |                     |   | 3,450   |               |  |   | 3,420         |  |  |   | 3,501   | 
|American EnergyUtica, LLC                  |  | (e)(f)    |  | Energy                                         |  | L+400, 5.5% PIK(5.5% Max PIK) |  |       | 1.5 | % |          | 9/30/18  |                     |   | 102,322 |               |  |   | 102,322       |  |  |   | 102,322 | 
|American EnergyUtica, LLC                  |  | (f)(m)    |  | Energy                                         |  | L+400, 5.5% PIK(5.5% Max PIK) |  |       | 1.5 | % |          | 9/30/18  |                     |   | 70,443  |               |  |   | 70,443        |  |  |   | 70,443  | 
|AssuredPartners, Inc.                       |  | (h)       |  | Insurance                                      |  | L+675                         |  |       | 1.0 | % |          | 3/31/22  |                     |   | 7,000   |               |  |   | 6,930         |  |  |   | 7,009   | 
|Asurion, LLC                                |  |           |  | Insurance                                      |  | L+750                         |  |       | 1.0 | % |          | 3/3/21   |                     |   | 15,957  |               |  |   | 15,720        |  |  |   | 16,526  | 
|Attachmate Corp.                            |  | (e)       |  | Software & Services                            |  | L+950                         |  |       | 1.5 | % |          | 11/22/18 |                     |   | 20,919  |               |  |   | 20,941        |  |  |   | 20,932  | 
|Berlin Packaging LLC                        |  |           |  | Commercial & Professional Services             |  | L+750                         |  |       | 1.3 | % |          | 4/2/20   |                     |   | 3,571   |               |  |   | 3,636         |  |  |   | 3,670   | 
|Brasa (Holdings) Inc.                       |  | (e)       |  | Consumer Services                              |  | L+950                         |  |       | 1.5 | % |          | 1/20/20  |                     |   | 1,118   |               |  |   | 1,080         |  |  |   | 1,132   | 
|Camp International Holding Co.              |  | (f)(g)    |  | Capital Goods                                  |  | L+725                         |  |       | 1.0 | % |          | 11/29/19 |                     |   | 2,106   |               |  |   | 2,106         |  |  |   | 2,152   | 
|Capital Automotive L.P.                     |  | (g)       |  | Real Estate                                    |  | L+500                         |  |       | 1.0 | % |          | 4/30/20  |                     |   | 7,895   |               |  |   | 7,860         |  |  |   | 8,102   | 
|Centaur Acquisition, LLC                    |  |           |  | Consumer Services                              |  | L+750                         |  |       | 1.3 | % |          | 2/20/20  |                     |   | 15,585  |               |  |   | 15,892        |  |  |   | 15,955  | 
|Cervalis LLC                                |  | (e)(f)    |  | Commercial & Professional Services             |  | L+875                         |  |       | 1.3 | % |          | 2/8/19   |                     |   | 30,000  |               |  |   | 29,633        |  |  |   | 30,300  | 
|CHG Buyer Corp.                             |  | (e)       |  | Health Care Equipment & Services               |  | L+775                         |  |       | 1.3 | % |          | 11/19/20 |                     |   | 5,747   |               |  |   | 5,658         |  |  |   | 5,847   | 
|Citrus Energy Appalachia, LLC               |  | (e)       |  | Energy                                         |  | L+850                         |  |       | 1.3 | % |          | 7/26/18  |                     |   | 15,430  |               |  |   | 14,998        |  |  |   | 15,430  | 
|Consolidated Precision Products Corp.       |  | (e)       |  | Capital Goods                                  |  | L+775                         |  |       | 1.0 | % |          | 4/30/21  |                     |   | 16,750  |               |  |   | 16,670        |  |  |   | 17,022  | 
|Crossmark Holdings, Inc.                    |  |           |  | Commercial & Professional Services             |  | L+750                         |  |       | 1.3 | % |          | 12/21/20 |                     |   | 7,778   |               |  |   | 7,797         |  |  |   | 7,797   | 
|CT Technologies Intermediate Holdings, Inc. |  |           |  | Software & Services                            |  | L+800                         |  |       | 1.3 | % |          | 10/2/20  |                     |   | 5,000   |               |  |   | 4,928         |  |  |   | 5,075   | 
|DAE Aviation Holdings, Inc.                 |  | (i)       |  | Capital Goods                                  |  | L+675                         |  |       | 1.0 | % |          | 7/30/19  |                     |   | 18,750  |               |  |   | 18,565        |  |  |   | 19,113  | 
|Del Monte Foods Consumer Products, Inc.     |  | (i)       |  | Food, Beverage & Tobacco                       |  | L+725                         |  |       | 1.0 | % |          | 6/6/21   |                     |   | 3,333   |               |  |   | 3,300         |  |  |   | 3,325   | 
|Drew Marine Group Inc.                      |  | (i)       |  | Energy                                         |  | L+700                         |  |       | 1.0 | % |          | 5/19/21  |                     |   | 2,500   |               |  |   | 2,494         |  |  |   | 2,525   | 
|Eastman Kodak Co.                           |  |           |  | Consumer Durables & Apparel                    |  | L+950                         |  |       | 1.3 | % |          | 9/3/20   |                     |   | 25,000  |               |  |   | 24,411        |  |  |   | 25,203  | 
|Extreme Reach, Inc.                         |  |           |  | Media                                          |  | L+950                         |  |       | 1.0 | % |          | 1/24/21  |                     |   | 10,000  |               |  |   | 9,803         |  |  |   | 10,175  | 
|Filtration Group Corp.                      |  |           |  | Energy                                         |  | L+725                         |  |       | 1.0 | % |          | 11/21/21 |                     |   | 5,158   |               |  |   | 5,174         |  |  |   | 5,285   | 
|Flexera Software LLC                        |  | (h)       |  | Software & Services                            |  | L+700                         |  |       | 1.0 | % |          | 4/2/21   |                     |   | 10,000  |               |  |   | 9,950         |  |  |   | 10,050  | 
|Ikaria Acquisition Inc.                     |  |           |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+775                         |  |       | 1.0 | % |          | 2/14/22  |                     |   | 5,000   |               |  |   | 4,963         |  |  |   | 5,088   | 
|ILC Industries, LLC                         |  | (f)       |  | Capital Goods                                  |  | L+1000                        |  |       | 1.5 | % |          | 7/11/19  |                     |   | 3,024   |               |  |   | 2,874         |  |  |   | 2,994   | 
|Inmar Acquisition Sub, Inc.                 |  |           |  | Software & Services                            |  | L+700                         |  |       | 1.0 | % |          | 1/27/22  |                     |   | 2,830   |               |  |   | 2,802         |  |  |   | 2,841   | 
|Kronos Inc.                                 |  |           |  | Software & Services                            |  | L+850                         |  |       | 1.3 | % |          | 4/30/20  |                     |   | 7,700   |               |  |   | 7,632         |  |  |   | 8,027   | 



See
notes to unaudited consolidated financial statements.



8



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                       |  |           |  |                                                |  |                              |  |       |     |   |          |          |                     |   |        |               |  |   |               |   |  |   |         |  
|-------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ---------------------------- |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------- | -
|Portfolio
Company(a)                   |  | Footnotes |  | Industry                                       |  | Rate(b)                      |  | Floor |     |   | Maturity |          | Principal
Amount(c) |   |        | AmortizedCost |  |   | Fair
Value(d) |  
|Leedsworld Inc.                        |  | (e)(f)(g) |  | Retailing                                      |  | L+875                        |  |       | 1.3 | % |          | 6/28/20  |                     | $ | 62,500 |               |  | $ | 62,500        |   |  | $ | 62,500  |  
|LM U.S. Member LLC                     |  | (e)       |  | Transportation                                 |  | L+825                        |  |       | 1.3 | % |          | 10/26/20 |                     |   | 15,137 |               |  |   | 15,219        |   |  |   | 15,402  |  
|Mitchell International, Inc.           |  | (h)       |  | Software & Services                            |  | L+750                        |  |       | 1.0 | % |          | 10/11/21 |                     |   | 10,000 |               |  |   | 10,244        |   |  |   | 10,256  |  
|Onex Carestream Finance L.P.           |  | (e)(f)    |  | Health Care Equipment & Services               |  | L+850                        |  |       | 1.0 | % |          | 12/5/19  |                     |   | 9,435  |               |  |   | 9,265         |   |  |   | 9,663   |  
|P2 Upstream Acquisition Co.            |  |           |  | Energy                                         |  | L+800                        |  |       | 1.0 | % |          | 4/30/21  |                     |   | 14,500 |               |  |   | 14,778        |   |  |   | 14,799  |  
|Paw Luxco II Sarl                      |  | (i)       |  | Consumer Durables & Apparel                    |  | EURIBOR+950                  |  |       |     |   |          | 1/29/19  |                     |  | 5,727  |               |  |   | 6,999         |   |  |   | 7,291   |  
|Payless ShoeSource, Inc.               |  |           |  | Consumer Durables & Apparel                    |  | L+750                        |  |       | 1.0 | % |          | 3/4/22   |                     | $ | 14,092 |               |  |   | 13,952        |   |  |   | 14,172  |  
|Penton Media, Inc.                     |  |           |  | Media                                          |  | L+775                        |  |       | 1.3 | % |          | 10/2/20  |                     |   | 9,000  |               |  |   | 8,873         |   |  |   | 9,113   |  
|PSAV Acquisition Corp.                 |  | (e)       |  | Technology Hardware & Equipment                |  | L+825                        |  |       | 1.0 | % |          | 1/24/22  |                     |   | 80,000 |               |  |   | 78,822        |   |  |   | 81,600  |  
|Redtop Acquisitions Ltd.               |  | (i)       |  | Consumer Services                              |  | L+725                        |  |       | 1.0 | % |          | 5/22/21  |                     |   | 7,500  |               |  |   | 7,409         |   |  |   | 7,725   |  
|Renaissance Learning, Inc.             |  |           |  | Software & Services                            |  | L+775                        |  |       | 1.0 | % |          | 4/24/21  |                     |   | 7,000  |               |  |   | 6,898         |   |  |   | 7,144   |  
|Road Infrastructure Investment, LLC    |  | (h)       |  | Consumer Services                              |  | L+675                        |  |       |     |   |          | 9/21/21  |                     |   | 7,759  |               |  |   | 7,720         |   |  |   | 7,807   |  
|Sabine Oil & Gas LLC                   |  |           |  | Energy                                         |  | L+750                        |  |       | 1.3 | % |          | 12/31/18 |                     |   | 1,907  |               |  |   | 1,891         |   |  |   | 1,937   |  
|Securus Technologies Holdings, Inc.    |  |           |  | Telecommunication Services                     |  | L+775                        |  |       | 1.3 | % |          | 4/30/21  |                     |   | 4,000  |               |  |   | 3,964         |   |  |   | 4,021   |  
|Sensus USA Inc.                        |  | (f)       |  | Capital Goods                                  |  | L+725                        |  |       | 1.3 | % |          | 5/9/18   |                     |   | 2,050  |               |  |   | 2,056         |   |  |   | 2,065   |  
|SESAC Holdings Inc.                    |  | (e)       |  | Media                                          |  | L+875                        |  |       | 1.3 | % |          | 7/12/19  |                     |   | 2,000  |               |  |   | 1,975         |   |  |   | 2,043   |  
|Sheridan Holdings, Inc.                |  |           |  | Health Care Equipment & Services               |  | L+725                        |  |       | 1.0 | % |          | 12/20/21 |                     |   | 10,784 |               |  |   | 10,732        |   |  |   | 11,108  |  
|StoneRiver Group, L.P.                 |  | (f)       |  | Software & Services                            |  | L+725                        |  |       | 1.3 | % |          | 5/30/20  |                     |   | 6,618  |               |  |   | 6,588         |   |  |   | 6,705   |  
|Teine Energy Ltd.                      |  | (f)(i)    |  | Energy                                         |  | L+625                        |  |       | 1.3 | % |          | 5/17/19  |                     |   | 5,445  |               |  |   | 5,374         |   |  |   | 5,527   |  
|Templar Energy LLC                     |  |           |  | Energy                                         |  | L+700                        |  |       | 1.0 | % |          | 11/25/20 |                     |   | 19,231 |               |  |   | 18,859        |   |  |   | 19,459  |  
|Therakos, Inc.                         |  | (e)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+1000                       |  |       | 1.3 | % |          | 6/27/18  |                     |   | 28,000 |               |  |   | 27,352        |   |  |   | 28,683  |  
|TNS, Inc.                              |  | (f)       |  | Telecommunication Services                     |  | L+800                        |  |       | 1.0 | % |          | 8/14/20  |                     |   | 51,469 |               |  |   | 50,967        |   |  |   | 52,193  |  
|Travelport LLC                         |  | (f)       |  | Consumer Services                              |  | L+800                        |  |       | 1.5 | % |          | 1/31/16  |                     |   | 5,119  |               |  |   | 5,205         |   |  |   | 5,305   |  
|Travelport LLC                         |  | (e)       |  | Consumer Services                              |  | 4.0%, 4.4% PIK(4.4% Max PIK) |  |       |     |   |          | 12/1/16  |                     |   | 8,207  |               |  |   | 7,345         |   |  |   | 8,440   |  
|TriZetto Group, Inc.                   |  | (e)(h)    |  | Software & Services                            |  | L+725                        |  |       | 1.3 | % |          | 3/28/19  |                     |   | 12,558 |               |  |   | 12,517        |   |  |   | 12,652  |  
|Ultima US Holdings LLC                 |  | (i)       |  | Capital Goods                                  |  | L+850                        |  |       | 1.0 | % |          | 12/31/20 |                     |   | 57,000 |               |  |   | 55,947        |   |  |   | 55,860  |  
|US Renal Care, Inc.                    |  |           |  | Health Care Equipment & Services               |  | L+750                        |  |       | 1.0 | % |          | 7/3/20   |                     |   | 2,500  |               |  |   | 2,454         |   |  |   | 2,544   |  
|UTEX Industries, Inc.                  |  |           |  | Energy                                         |  | L+750                        |  |       | 1.3 | % |          | 4/10/21  |                     |   | 3,243  |               |  |   | 3,229         |   |  |   | 3,292   |  
|Vantage Energy, LLC                    |  |           |  | Energy                                         |  | L+750                        |  |       | 1.0 | % |          | 12/20/18 |                     |   | 18,415 |               |  |   | 18,239        |   |  |   | 18,577  |  
|Vertafore, Inc.                        |  | (f)       |  | Software & Services                            |  | L+825                        |  |       | 1.5 | % |          | 10/27/17 |                     |   | 830    |               |  |   | 831           |   |  |   | 846     |  
|WNA Holdings, Inc.                     |  |           |  | Materials                                      |  | L+725                        |  |       | 1.3 | % |          | 12/7/20  |                     |   | 5,000  |               |  |   | 4,954         |   |  |   | 5,100   |  
|                                       |  |           |  |                                                |  |                              |  |       |     |   |          |          |                     |   |        |               |  |   |               |   |  |   |         |  
|Total Senior Secured LoansSecond Lien |  |           |  |                                                |  |                              |  |       |     |   |          |          |                     |   |        |               |  |   | 919,398       |   |  |   | 936,008 |  
|Unfunded Loan Commitments              |  |           |  |                                                |  |                              |  |       |     |   |          |          |                     |   |        |               |  |   | (70,443       | ) |  |   | (70,443 | )
|                                       |  |           |  |                                                |  |                              |  |       |     |   |          |          |                     |   |        |               |  |   |               |   |  |   |         |  
|Net Senior Secured LoansSecond Lien   |  |           |  |                                                |  |                              |  |       |     |   |          |          |                     |   |        |               |  |   | 848,955       |   |  |   | 865,565 |  
|                                       |  |           |  |                                                |  |                              |  |       |     |   |          |          |                     |   |        |               |  |   |               |   |  |   |         |  



See
notes to unaudited consolidated financial statements.



9



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                             |  |           |  |                                                |  |                        |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|-------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ---------------------- |  | ----- |  | -------- |  | ------------------- | ------ |  | ------------- | - | ------- | ------------- |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes |  | Industry                                       |  | Rate(b)                |  | Floor |  | Maturity |  | Principal
Amount(c) |        |  | AmortizedCost |   |         | Fair
Value(d) | 
|Senior Secured Bonds10.0%                   |  |           |  |                                                |  |                        |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Advanced Lighting Technologies, Inc.         |  | (e)(f)    |  | Materials                                      |  | 10.5%                  |  |       |  | 6/1/19   |  | $                   | 35,500 |  |               | $ | 31,363  |               |  | $ | 26,447  | 
|Allen Systems Group, Inc.                    |  | (f)       |  | Software & Services                            |  | 10.5%                  |  |       |  | 11/15/16 |  |                     | 14,225 |  |               |   | 10,084  |               |  |   | 8,036   | 
|Aspect Software, Inc.                        |  |           |  | Software & Services                            |  | 10.6%                  |  |       |  | 5/15/17  |  |                     | 6,005  |  |               |   | 6,345   |               |  |   | 6,350   | 
|Avaya Inc.                                   |  | (e)(f)    |  | Technology Hardware & Equipment                |  | 7.0%                   |  |       |  | 4/1/19   |  |                     | 21,500 |  |               |   | 20,501  |               |  |   | 21,500  | 
|Avaya Inc.                                   |  | (e)(f)    |  | Technology Hardware & Equipment                |  | 9.0%                   |  |       |  | 4/1/19   |  |                     | 8,000  |  |               |   | 7,957   |               |  |   | 8,360   | 
|Caesars Entertainment Operating Co.          |  | (i)       |  | Consumer Services                              |  | 9.0%                   |  |       |  | 2/15/20  |  |                     | 15,000 |  |               |   | 14,482  |               |  |   | 13,522  | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(f)    |  | Consumer Services                              |  | 11.0%                  |  |       |  | 10/1/21  |  |                     | 60,000 |  |               |   | 60,739  |               |  |   | 63,233  | 
|CEVA Group Plc                               |  | (i)       |  | Transportation                                 |  | 9.0%                   |  |       |  | 9/1/21   |  |                     | 2,000  |  |               |   | 2,000   |               |  |   | 2,050   | 
|Clear Channel Communications, Inc.           |  | (e)       |  | Media                                          |  | 9.0%                   |  |       |  | 12/15/19 |  |                     | 1,844  |  |               |   | 1,716   |               |  |   | 1,947   | 
|Erickson Air-Crane Inc.                      |  | (e)(i)    |  | Capital Goods                                  |  | 8.3%                   |  |       |  | 5/1/20   |  |                     | 13,312 |  |               |   | 13,061  |               |  |   | 14,077  | 
|FourPoint Energy, LLC                        |  | (f)       |  | Energy                                         |  | 8.5%                   |  |       |  | 12/31/20 |  |                     | 9,750  |  |               |   | 7,972   |               |  |   | 7,995   | 
|Global A&T Electronics Ltd.                  |  | (f)(i)    |  | Technology Hardware & Equipment                |  | 10.0%                  |  |       |  | 2/1/19   |  |                     | 9,000  |  |               |   | 9,000   |               |  |   | 7,470   | 
|Greektown Holdings, LLC.                     |  |           |  | Consumer Services                              |  | 8.9%                   |  |       |  | 3/15/19  |  |                     | 3,000  |  |               |   | 3,000   |               |  |   | 3,104   | 
|Guitar Center, Inc.                          |  | (h)       |  | Retailing                                      |  | 6.5%                   |  |       |  | 4/15/19  |  |                     | 7,000  |  |               |   | 6,926   |               |  |   | 6,991   | 
|JW Aluminum Co.                              |  | (e)(f)    |  | Materials                                      |  | 11.5%                  |  |       |  | 11/15/17 |  |                     | 17,550 |  |               |   | 17,523  |               |  |   | 17,572  | 
|Logans Roadhouse Inc.                       |  | (f)       |  | Consumer Services                              |  | 10.8%                  |  |       |  | 10/15/17 |  |                     | 29,314 |  |               |   | 25,825  |               |  |   | 22,645  | 
|Modular Space Corp.                          |  |           |  | Consumer Services                              |  | 10.3%                  |  |       |  | 1/31/19  |  |                     | 1,650  |  |               |   | 1,650   |               |  |   | 1,720   | 
|Neff Rental LLC                              |  | (f)       |  | Capital Goods                                  |  | 9.6%                   |  |       |  | 5/15/16  |  |                     | 14,877 |  |               |   | 15,465  |               |  |   | 15,602  | 
|Prince Mineral Holding Corp.                 |  | (e)       |  | Materials                                      |  | 11.5%                  |  |       |  | 12/15/19 |  |                     | 2,750  |  |               |   | 2,722   |               |  |   | 3,094   | 
|Sorenson Communication, Inc.                 |  | (e)(f)(j) |  | Telecommunication Services                     |  | 10.5%                  |  |       |  | 2/1/15   |  |                     | 37,000 |  |               |   | 34,868  |               |  |   | 33,311  | 
|Waterjet Holdings, Inc.                      |  |           |  | Automobiles & Components                       |  | 7.6%                   |  |       |  | 2/1/20   |  |                     | 1,850  |  |               |   | 1,850   |               |  |   | 1,966   | 
|WMG Acquisition Corp.                        |  | (h)       |  | Media                                          |  | 5.6%                   |  |       |  | 4/15/22  |  |                     | 650    |  |               |   | 650     |               |  |   | 660     | 
|                                             |  |           |  |                                                |  |                        |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Total Senior Secured Bonds                   |  |           |  |                                                |  |                        |  |       |  |          |  |                     |        |  |               |   | 295,699 |               |  |   | 287,652 | 
|                                             |  |           |  |                                                |  |                        |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Subordinated Debt10.3%                      |  |           |  |                                                |  |                        |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|The AES Corp.                                |  | (i)       |  | Energy                                         |  | 5.5%                   |  |       |  | 3/15/24  |  |                     | 1,950  |  |               |   | 1,950   |               |  |   | 1,943   | 
|Alliant Holdings I, Inc.                     |  | (e)       |  | Insurance                                      |  | 7.9%                   |  |       |  | 12/15/20 |  |                     | 4,000  |  |               |   | 4,000   |               |  |   | 4,293   | 
|Atlas Energy Holdings Operating Co., LLC     |  | (i)       |  | Energy                                         |  | 7.8%                   |  |       |  | 1/15/21  |  |                     | 5,000  |  |               |   | 5,000   |               |  |   | 5,227   | 
|AuRico Gold Inc.                             |  | (i)       |  | Energy                                         |  | 7.8%                   |  |       |  | 4/1/20   |  |                     | 1,200  |  |               |   | 1,158   |               |  |   | 1,202   | 
|Aurora Diagnostics, LLC                      |  | (e)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 10.8%                  |  |       |  | 1/15/18  |  |                     | 7,000  |  |               |   | 7,035   |               |  |   | 5,565   | 
|Avaya Inc.                                   |  |           |  | Technology Hardware & Equipment                |  | 10.5%                  |  |       |  | 3/1/21   |  |                     | 6,950  |  |               |   | 6,395   |               |  |   | 6,481   | 
|Beazer Homes USA, Inc.                       |  | (i)       |  | Capital Goods                                  |  | 7.3%                   |  |       |  | 2/1/23   |  |                     | 2,750  |  |               |   | 2,750   |               |  |   | 2,888   | 
|BOE Intermediate Holding Corp.               |  |           |  | Materials                                      |  | 9.8% PIK(9.8% Max PIK) |  |       |  | 11/1/17  |  |                     | 6,012  |  |               |   | 5,963   |               |  |   | 6,553   | 



See
notes to unaudited consolidated financial statements.



10



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                          |  |           |  |                                  |  |                          |  |       |  |          |  |                     |        |  |               |   |        |               |  |   |        | 
|----------------------------------------- |  | --------- |  | -------------------------------- |  | ------------------------ |  | ----- |  | -------- |  | ------------------- | ------ |  | ------------- | - | ------ | ------------- |  | - | ------ | 
|Portfolio
Company(a)                      |  | Footnotes |  | Industry                         |  | Rate(b)                  |  | Floor |  | Maturity |  | Principal
Amount(c) |        |  | AmortizedCost |   |        | Fair
Value(d) | 
|Brocade Communications Systems, Inc.      |  | (i)       |  | Telecommunication Services       |  | 4.6%                     |  |       |  | 1/15/23  |  | $                   | 2,750  |  |               | $ | 2,750  |               |  | $ | 2,599  | 
|Calumet Specialty Products Partners, L.P. |  | (i)       |  | Energy                           |  | 6.5%                     |  |       |  | 4/15/21  |  |                     | 2,500  |  |               |   | 2,500  |               |  |   | 2,514  | 
|CEC Entertainment, Inc.                   |  | (i)       |  | Consumer Services                |  | 8.0%                     |  |       |  | 2/15/22  |  |                     | 11,000 |  |               |   | 11,020 |               |  |   | 11,385 | 
|CrownRock, L.P.                           |  | (e)(f)    |  | Energy                           |  | 7.1%                     |  |       |  | 4/15/21  |  |                     | 26,500 |  |               |   | 26,500 |               |  |   | 27,811 | 
|DigitalGlobe, Inc.                        |  | (i)       |  | Software & Services              |  | 5.3%                     |  |       |  | 2/1/21   |  |                     | 1,100  |  |               |   | 1,100  |               |  |   | 1,092  | 
|Drillships Financing Holding Inc.         |  | (i)       |  | Energy                           |  | 7.3%                     |  |       |  | 4/1/19   |  |                     | 4,700  |  |               |   | 4,700  |               |  |   | 4,694  | 
|Entegris, Inc.                            |  | (h)(i)    |  | Technology Hardware & Equipment  |  | 6.0%                     |  |       |  | 4/1/22   |  |                     | 3,750  |  |               |   | 3,750  |               |  |   | 3,853  | 
|EPL Oil & Gas, Inc.                       |  | (f)(i)    |  | Energy                           |  | 8.3%                     |  |       |  | 2/15/18  |  |                     | 2,150  |  |               |   | 2,133  |               |  |   | 2,333  | 
|Era Group Inc.                            |  | (i)       |  | Energy                           |  | 7.8%                     |  |       |  | 12/15/22 |  |                     | 7,250  |  |               |   | 7,138  |               |  |   | 7,685  | 
|First Data Corp.                          |  |           |  | Software & Services              |  | 11.8%                    |  |       |  | 8/15/21  |  |                     | 1,000  |  |               |   | 1,034  |               |  |   | 1,054  | 
|Guitar Center, Inc.                       |  | (h)       |  | Retailing                        |  | 9.6%                     |  |       |  | 4/15/20  |  |                     | 1,000  |  |               |   | 989    |               |  |   | 993    | 
|Halcon Resources Corp.                    |  | (e)(i)    |  | Energy                           |  | 8.9%                     |  |       |  | 5/15/21  |  |                     | 2,250  |  |               |   | 2,350  |               |  |   | 2,332  | 
|Hub International Ltd.                    |  |           |  | Insurance                        |  | 7.9%                     |  |       |  | 10/1/21  |  |                     | 3,500  |  |               |   | 3,500  |               |  |   | 3,741  | 
|Jefferies Finance LLC                     |  | (i)       |  | Diversified Financials           |  | 7.4%                     |  |       |  | 4/1/20   |  |                     | 1,500  |  |               |   | 1,500  |               |  |   | 1,576  | 
|Jefferies Finance LLC                     |  | (i)       |  | Diversified Financials           |  | 6.9%                     |  |       |  | 4/15/22  |  |                     | 950    |  |               |   | 950    |               |  |   | 962    | 
|The Kenan Advantage Group, Inc.           |  | (e)       |  | Transportation                   |  | 8.4%                     |  |       |  | 12/15/18 |  |                     | 6,250  |  |               |   | 6,428  |               |  |   | 6,703  | 
|Kinetic Concepts, Inc.                    |  | (f)       |  | Health Care Equipment & Services |  | 12.5%                    |  |       |  | 11/1/19  |  |                     | 7,800  |  |               |   | 8,135  |               |  |   | 9,080  | 
|Legacy Reserves L.P.                      |  | (e)(i)    |  | Energy                           |  | 8.0%                     |  |       |  | 12/1/20  |  |                     | 8,250  |  |               |   | 8,093  |               |  |   | 8,756  | 
|Legacy Reserves L.P.                      |  | (e)(i)    |  | Energy                           |  | 6.6%                     |  |       |  | 12/1/21  |  |                     | 4,900  |  |               |   | 4,827  |               |  |   | 4,917  | 
|Memorial Production Partners L.P.         |  | (e)(i)    |  | Energy                           |  | 7.6%                     |  |       |  | 5/1/21   |  |                     | 2,600  |  |               |   | 2,565  |               |  |   | 2,756  | 
|Memorial Resource Development LLC         |  |           |  | Energy                           |  | 10.8% PIK(10.8% Max PIK) |  |       |  | 12/15/18 |  |                     | 6,700  |  |               |   | 6,570  |               |  |   | 6,968  | 
|Mood Media Corp.                          |  | (e)(f)(i) |  | Media                            |  | 9.3%                     |  |       |  | 10/15/20 |  |                     | 46,207 |  |               |   | 45,550 |               |  |   | 44,359 | 
|MPH Acquisitions Holdings LLC             |  |           |  | Software & Services              |  | 6.6%                     |  |       |  | 4/1/22   |  |                     | 950    |  |               |   | 950    |               |  |   | 976    | 
|NRG Energy, Inc.                          |  | (i)       |  | Energy                           |  | 6.3%                     |  |       |  | 7/15/22  |  |                     | 4,750  |  |               |   | 4,750  |               |  |   | 4,893  | 
|Nuveen Investments, Inc.                  |  | (e)       |  | Diversified Financials           |  | 9.1%                     |  |       |  | 10/15/17 |  |                     | 12,000 |  |               |   | 12,000 |               |  |   | 12,735 | 
|Opal Acquisition, Inc.                    |  |           |  | Consumer Services                |  | 8.9%                     |  |       |  | 12/15/21 |  |                     | 27,000 |  |               |   | 27,000 |               |  |   | 27,304 | 
|Resolute Energy Corp.                     |  | (i)       |  | Energy                           |  | 8.5%                     |  |       |  | 5/1/20   |  |                     | 5,800  |  |               |   | 5,863  |               |  |   | 6,108  | 
|Rex Energy Corp.                          |  | (e)(i)    |  | Energy                           |  | 8.9%                     |  |       |  | 12/1/20  |  |                     | 15,000 |  |               |   | 14,905 |               |  |   | 16,576 | 
|Rockies Express Pipeline LLC              |  |           |  | Energy                           |  | 6.0%                     |  |       |  | 1/15/19  |  |                     | 3,250  |  |               |   | 3,250  |               |  |   | 3,281  | 
|Sidewinder Drilling Inc.                  |  | (e)       |  | Capital Goods                    |  | 9.8%                     |  |       |  | 11/15/19 |  |                     | 2,000  |  |               |   | 2,000  |               |  |   | 1,982  | 
|Six Flags Entertainment Corp.             |  | (i)       |  | Consumer Services                |  | 5.3%                     |  |       |  | 1/15/21  |  |                     | 2,500  |  |               |   | 2,500  |               |  |   | 2,538  | 
|Sophia Holding Finance, L.P.              |  | (f)       |  | Software & Services              |  | 9.6%                     |  |       |  | 12/1/18  |  |                     | 9,750  |  |               |   | 9,656  |               |  |   | 10,164 | 
|Southern Graphics Inc.                    |  | (e)       |  | Media                            |  | 8.4%                     |  |       |  | 10/15/20 |  |                     | 1,000  |  |               |   | 1,000  |               |  |   | 1,065  | 



See
notes to unaudited consolidated financial statements.



11



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                                   |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|-------------------------------------------------- |  | --------- |  | -------------------------------- |  | ------- |  | ----- |  | -------- |  | ------------------- | ------ |  | ------------- | - | ------- | ------------- |  | - | ------- | 
|Portfolio
Company(a)                               |  | Footnotes |  | Industry                         |  | Rate(b) |  | Floor |  | Maturity |  | Principal
Amount(c) |        |  | AmortizedCost |   |         | Fair
Value(d) | 
|Spirit AeroSystems, Inc.                           |  | (i)       |  | Capital Goods                    |  | 5.3%    |  |       |  | 3/15/22  |  | $                   | 750    |  |               | $ | 750     |               |  | $ | 754     | 
|Tenet Healthcare Corp.                             |  | (i)       |  | Health Care Equipment & Services |  | 8.1%    |  |       |  | 4/1/22   |  |                     | 5,500  |  |               |   | 5,500   |               |  |   | 6,173   | 
|TMS International Corp.                            |  |           |  | Energy                           |  | 7.6%    |  |       |  | 10/15/21 |  |                     | 1,250  |  |               |   | 1,250   |               |  |   | 1,349   | 
|U.S. Coatings Acquisition Inc.                     |  |           |  | Capital Goods                    |  | 7.4%    |  |       |  | 5/1/21   |  |                     | 2,000  |  |               |   | 2,000   |               |  |   | 2,174   | 
|Windstream Corp.                                   |  | (i)       |  | Telecommunication Services       |  | 6.4%    |  |       |  | 8/1/23   |  |                     | 2,600  |  |               |   | 2,600   |               |  |   | 2,547   | 
|WMG Acquisition Corp.                              |  | (h)       |  | Media                            |  | 6.8%    |  |       |  | 4/15/22  |  |                     | 6,000  |  |               |   | 6,000   |               |  |   | 6,037   | 
|                                                   |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Total Subordinated Debt                            |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   | 290,307 |               |  |   | 298,971 | 
|                                                   |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Collateralized Securities6.2%                     |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|AMMC 2012 CDO 11A Class Subord.                    |  | (i)       |  | Diversified Financials           |  | 13.3%   |  |       |  | 10/30/23 |  |                     | 6,000  |  |               |   | 4,393   |               |  |   | 4,582   | 
|Apidos CLO XIV Class E                             |  | (i)       |  | Diversified Financials           |  | L+440   |  |       |  | 4/15/25  |  |                     | 6,000  |  |               |   | 5,344   |               |  |   | 5,488   | 
|Ares 2012 CLO 2A Class Subord.                     |  | (i)       |  | Diversified Financials           |  | 6.7%    |  |       |  | 10/12/23 |  |                     | 8,500  |  |               |   | 7,318   |               |  |   | 6,545   | 
|CGMS CLO 2013-3A Class E                           |  | (i)       |  | Diversified Financials           |  | L+525   |  |       |  | 7/15/25  |  |                     | 5,000  |  |               |   | 4,466   |               |  |   | 4,555   | 
|CGMS CLO 2013-3A Class Subord.                     |  | (i)       |  | Diversified Financials           |  | 15.8%   |  |       |  | 7/15/25  |  |                     | 22,000 |  |               |   | 17,906  |               |  |   | 22,292  | 
|Halcyon Loan Advisors Funding 2013-2 Class Subord. |  | (i)       |  | Diversified Financials           |  | 15.1%   |  |       |  | 8/1/25   |  |                     | 15,000 |  |               |   | 12,971  |               |  |   | 15,599  | 
|JPMorgan Chase Bank, N.A. Credit-Linked Notes      |  | (i)       |  | Diversified Financials           |  | 11.2%   |  |       |  | 12/20/21 |  |                     | 76,260 |  |               |   | 75,773  |               |  |   | 76,260  | 
|Octagon CLO 2012-1A Class Income                   |  | (i)       |  | Diversified Financials           |  | 17.1%   |  |       |  | 1/15/24  |  |                     | 4,650  |  |               |   | 3,324   |               |  |   | 3,818   | 
|Wind River CLO Ltd. 2013-1A Class Subord. B        |  | (i)       |  | Diversified Financials           |  | 13.0%   |  |       |  | 4/20/25  |  |                     | 40,720 |  |               |   | 36,233  |               |  |   | 40,874  | 
|                                                   |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Total Collateralized Securities                    |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   | 167,728 |               |  |   | 180,013 | 
|                                                   |  |           |  |                                  |  |         |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 



See
notes to unaudited consolidated financial statements.



12



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)







|                                                        |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   |           |  
|------------------------------------------------------- |  | --------- |  | ---------------------------------------------- |  |  |  |  |  |  |  | --------------- | ---------- |  | ---- | - | --------- | ------------ |  | - | --------- | -
|Portfolio
Company(a)                                    |  | Footnotes |  | Industry                                       |  |  |  |  |  |  |  | Number ofShares |            |  | Cost |   |           | FairValue(d) | 
|Equity/Other2.2%                                       |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   |           |  
|A.T. Cross Co., Common Equity, Class A Units            |  | (j)       |  | Retailing                                      |  |  |  |  |  |  |  |                 | 1,000,000  |  |      | $ | 1,000     |              |  | $ | 900       |  
|American Energy Ohio Holdings, LLC, Common Equity       |  | (j)(k)    |  | Energy                                         |  |  |  |  |  |  |  |                 | 9,823,959  |  |      |   | 9,824     |              |  |   | 9,824     |  
|AP Exhaust Holdings, LLC, Common Equity                 |  | (j)(l)    |  | Automobiles & Components                       |  |  |  |  |  |  |  |                 | 8,378      |  |      |   | 8,378     |              |  |   | 8,378     |  
|Burleigh Point, Ltd., Warrants                          |  | (i)(j)    |  | Retailing                                      |  |  |  |  |  |  |  |                 | 17,256,081 |  |      |   | 1,898     |              |  |   | 5,004     |  
|CoSentry.Net, LLC, Preferred Equity                     |  | (j)       |  | Software & Services                            |  |  |  |  |  |  |  |                 | 2,632      |  |      |   | 2,500     |              |  |   | 2,478     |  
|Eastman Kodak Co., Common Equity                        |  | (j)       |  | Consumer Durables & Apparel                    |  |  |  |  |  |  |  |                 | 1,846      |  |      |   | 36        |              |  |   | 61        |  
|ERC Ireland Holdings Ltd., Warrants                     |  | (i)(j)    |  | Telecommunication Services                     |  |  |  |  |  |  |  |                 | 4,943      |  |      |   | 551       |              |  |   | 986       |  
|ERC Ireland Holdings Ltd., Common Equity                |  | (i)(j)    |  | Telecommunication Services                     |  |  |  |  |  |  |  |                 | 21,101     |  |      |   | 2,346     |              |  |   | 4,208     |  
|FourPoint Energy, LLC, Common Equity                    |  | (j)(l)    |  | Energy                                         |  |  |  |  |  |  |  |                 | 2,437      |  |      |   | 1,610     |              |  |   | 2,437     |  
|Kanders C3 Holdings, LLC, Common Equity                 |  | (f)       |  | Capital Goods                                  |  |  |  |  |  |  |  |                 | 60,872     |  |      |   | 5,000     |              |  |   | 2,952     |  
|MB Precision Holdings LLC, Common Equity                |  | (j)       |  | Capital Goods                                  |  |  |  |  |  |  |  |                 | 2,100,000  |  |      |   | 2,100     |              |  |   | 2,100     |  
|New Star Metals Inc., Common Equity                     |  | (j)       |  | Capital Goods                                  |  |  |  |  |  |  |  |                 | 2,250,000  |  |      |   | 2,250     |              |  |   | 2,250     |  
|Professional Plumbing Group, Inc., Common Equity        |  | (j)       |  | Capital Goods                                  |  |  |  |  |  |  |  |                 | 3,000,000  |  |      |   | 3,000     |              |  |   | 3,000     |  
|PSAV Holdings LLC, Common Equity                        |  | (j)       |  | Technology Hardware & Equipment                |  |  |  |  |  |  |  |                 | 10,000,000 |  |      |   | 10,000    |              |  |   | 10,000    |  
|Swift Worldwide Resources Holdco Limited, Common Equity |  | (i)(j)    |  | Energy                                         |  |  |  |  |  |  |  |                 | 1,250,000  |  |      |   | 2,010     |              |  |   | 2,709     |  
|Therakos, Inc., Common Equity                           |  |           |  | Pharmaceuticals, Biotechnology & Life Sciences |  |  |  |  |  |  |  |                 | 14,366     |  |      |   | 1,478     |              |  |   | 3,844     |  
|Weight Watchers International, Inc., Put Option         |  | (i)(j)    |  | Food & Staples Retailing                       |  |  |  |  |  |  |  |                 | 400,000    |  |      |   | 2,852     |              |  |   | 2,580     |  
|                                                        |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   |           |  
|Total Equity/Other                                      |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   | 56,833    |              |  |   | 63,711    |  
|                                                        |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   |           |  
|TOTAL INVESTMENTS114.3%                                |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      | $ | 3,251,468 |              |  |   | 3,307,386 |  
|                                                        |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   |           |  
|LIABILITIES IN EXCESS OF OTHER ASSETS(14.3%)           |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   | (413,010  | )
|                                                        |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   |           |  
|NET ASSETS100.0%                                       |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  | $ | 2,894,376 |  
|                                                        |  |           |  |                                                |  |  |  |  |  |  |  |                 |            |  |      |   |           |              |  |   |           |  



See
notes to unaudited consolidated financial statements.



13



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2014

(in thousands, except share amounts)









|(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
March 31, 2014, the three-month London Interbank Offered Rate was 0.23%, the Euro Interbank Offered Rate was 0.31% and the U.S. Prime Lending Rate was 3.25%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Denominated in U.S. dollars unless otherwise noted.
|--- | ---------------------------------------------------



|(d) | Fair value determined by the Companys board of directors (see Note 7).
|--- | -----------------------------------------------------------------------



|(e) | Security or portion thereof held within Lehigh River LLC and is pledged as collateral supporting the amounts outstanding under the Class A Notes issued to Cobbs
Creek LLC pursuant to an indenture with Citibank, N.A., as trustee (see Note 8).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) | Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the obligations of Cobbs Creek LLC under the repurchase transaction with
JPMorgan Chase Bank, N.A., London Branch (see Note 8).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the obligations of Cooper River LLC under the revolving credit facility
with Citibank, N.A. (see Note 8).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | Position or portion thereof unsettled as of March 31, 2014.
|--- | -----------------------------------------------------------



|(i) | 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 a
qualifying asset, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development companys total assets. As of March 31, 2014, 78.9% of the Companys total assets represented
qualifying assets.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(j) | Security is non-income producing.
|--- | ---------------------------------



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



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



|(m) | Security is an unfunded loan commitment.
|--- | ----------------------------------------



See notes to unaudited consolidated financial statements.



14



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments

As of December 31, 2013

(in thousands, except share amounts)







|                                             |  |           |  |                                                |  |      |       |  |       |      |          |          |                     |   |         |               |  |   |               |  |  |   |         | 
|-------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ---- | ----- |  | ----- | ---- | -------- | -------- | ------------------- | - | ------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes |  | Industry                                       |  | Rate |       |  | Floor |      | Maturity |          | Principal
Amount(b) |   |         | AmortizedCost |  |   | Fair Value(c) | 
|Senior Secured LoansFirst Lien53.0%        |  |           |  |                                                |  |      |       |  |       |      |          |          |                     |   |         |               |  |   |               |  |  |   |         | 
|A.T. Cross Co.                               |  | (d)(f)    |  | Retailing                                      |  |      | L+825 |  |       |      |          | 9/6/19   |                     | $ | 36,908  |               |  | $ | 36,908        |  |  | $ | 36,908  | 
|A.T. Cross Co.                               |  | (d)(f)    |  | Retailing                                      |  |      | L+825 |  |       |      |          | 9/6/19   |                     |   | 20,000  |               |  |   | 20,000        |  |  |   | 20,000  | 
|Advantage Sales & Marketing Inc.             |  | (g)       |  | Commercial & Professional Services             |  |      | L+325 |  |       | 1.0% |          | 12/18/17 |                     |   | 2,107   |               |  |   | 2,097         |  |  |   | 2,120   | 
|Air Medical Group Holdings, Inc.             |  | (f)(g)    |  | Health Care Equipment & Services               |  |      | L+400 |  |       | 1.0% |          | 6/30/18  |                     |   | 5,474   |               |  |   | 5,566         |  |  |   | 5,546   | 
|Alcatel-Lucent USA Inc.                      |  | (d)(f)(h) |  | Technology Hardware & Equipment                |  |      | L+475 |  |       | 1.0% |          | 1/30/19  |                     |   | 8,138   |               |  |   | 8,182         |  |  |   | 8,188   | 
|Alon USA Partners, L.P.                      |  | (d)(h)    |  | Energy                                         |  |      | L+800 |  |       | 1.3% |          | 11/26/18 |                     |   | 4,125   |               |  |   | 3,944         |  |  |   | 4,256   | 
|Alvogen Pharma US, Inc.                      |  | (f)(g)    |  | Pharmaceuticals, Biotechnology & Life Sciences |  |      | L+575 |  |       | 1.3% |          | 5/23/18  |                     |   | 9,781   |               |  |   | 9,724         |  |  |   | 9,927   | 
|Apex Tool Group, LLC                         |  |           |  | Capital Goods                                  |  |      | L+325 |  |       | 1.3% |          | 1/31/20  |                     |   | 5,300   |               |  |   | 5,276         |  |  |   | 5,334   | 
|ARG IH Corp.                                 |  |           |  | Consumer Services                              |  |      | L+400 |  |       | 1.0% |          | 11/15/20 |                     |   | 1,400   |               |  |   | 1,397         |  |  |   | 1,410   | 
|Ascension Insurance, Inc.                    |  | (d)(e)    |  | Insurance                                      |  |      | L+825 |  |       | 1.3% |          | 3/5/19   |                     |   | 79,423  |               |  |   | 78,097        |  |  |   | 78,628  | 
|Aspect Software, Inc.                        |  | (g)       |  | Software & Services                            |  |      | L+525 |  |       | 1.8% |          | 5/7/16   |                     |   | 7,873   |               |  |   | 7,902         |  |  |   | 7,915   | 
|Attachmate Corp.                             |  | (f)       |  | Software & Services                            |  |      | L+575 |  |       | 1.5% |          | 11/22/17 |                     |   | 2,607   |               |  |   | 2,637         |  |  |   | 2,660   | 
|Audio Visual Services Group, Inc.            |  | (d)(f)    |  | Technology Hardware & Equipment                |  |      | L+550 |  |       | 1.3% |          | 11/9/18  |                     |   | 10,107  |               |  |   | 10,110        |  |  |   | 10,182  | 
|Audio Visual Services Group, Inc.            |  |           |  | Technology Hardware & Equipment                |  |      | L+550 |  |       | 1.3% |          | 11/9/17  |                     |   | 7,500   |               |  |   | 7,500         |  |  |   | 7,479   | 
|Avaya Inc.                                   |  | (d)(g)    |  | Technology Hardware & Equipment                |  |      | L+450 |  |       |      |          | 10/26/17 |                     |   | 7,340   |               |  |   | 6,809         |  |  |   | 7,200   | 
|Avaya Inc.                                   |  | (d)(f)    |  | Technology Hardware & Equipment                |  |      | L+675 |  |       | 1.3% |          | 3/31/18  |                     |   | 11,896  |               |  |   | 11,318        |  |  |   | 12,092  | 
|Azure Midstream Energy LLC                   |  | (f)       |  | Energy                                         |  |      | L+550 |  |       | 1.0% |          | 11/15/18 |                     |   | 4,500   |               |  |   | 4,434         |  |  |   | 4,534   | 
|BlackBrush TexStar L.P.                      |  | (d)(f)    |  | Energy                                         |  |      | L+650 |  |       | 1.3% |          | 6/4/19   |                     |   | 14,179  |               |  |   | 14,049        |  |  |   | 14,311  | 
|Blue Coat Systems, Inc.                      |  | (d)       |  | Software & Services                            |  |      | L+350 |  |       | 1.0% |          | 5/31/19  |                     |   | 2,121   |               |  |   | 2,121         |  |  |   | 2,132   | 
|Boomerang Tube, LLC                          |  | (d)       |  | Energy                                         |  |      | L+950 |  |       | 1.5% |          | 10/11/17 |                     |   | 4,688   |               |  |   | 4,573         |  |  |   | 4,523   | 
|Bright Horizons Family Solutions LLC         |  |           |  | Health Care Equipment & Services               |  |      | L+300 |  |       | 1.0% |          | 1/30/20  |                     |   | 1,003   |               |  |   | 994           |  |  |   | 1,011   | 
|Cadillac Jack, Inc.                          |  | (d)(f)(h) |  | Consumer Services                              |  |      | L+700 |  |       | 1.0% |          | 12/20/17 |                     |   | 125,000 |               |  |   | 123,770       |  |  |   | 123,750 | 
|Caesars Entertainment Operating Co.          |  | (g)(h)    |  | Consumer Services                              |  |      | L+425 |  |       |      |          | 1/26/18  |                     |   | 5,000   |               |  |   | 4,731         |  |  |   | 4,744   | 
|Caesars Entertainment Resort Properties, LLC |  | (d)(e)(f) |  | Consumer Services                              |  |      | L+600 |  |       | 1.0% |          | 10/1/20  |                     |   | 59,093  |               |  |   | 55,624        |  |  |   | 58,908  | 
|Cenveo Corp.                                 |  | (f)       |  | Commercial & Professional Services             |  |      | L+500 |  |       | 1.3% |          | 2/13/17  |                     |   | 2,822   |               |  |   | 2,810         |  |  |   | 2,845   | 
|Clear Channel Communications, Inc.           |  | (d)       |  | Media                                          |  |      | L+365 |  |       |      |          | 1/29/16  |                     |   | 6,156   |               |  |   | 5,267         |  |  |   | 5,974   | 
|Clover Technologies Group, LLC               |  | (f)       |  | Commercial & Professional Services             |  |      | L+550 |  |       | 1.3% |          | 5/7/18   |                     |   | 5,772   |               |  |   | 5,772         |  |  |   | 5,772   | 
|Collective Brands, Inc.                      |  | (d)(f)    |  | Consumer Durables & Apparel                    |  |      | L+600 |  |       | 1.3% |          | 10/9/19  |                     |   | 18,768  |               |  |   | 18,814        |  |  |   | 18,862  | 
|Corner Investment PropCo, LLC                |  | (d)(f)(g) |  | Consumer Services                              |  |      | L+975 |  |       | 1.3% |          | 11/2/19  |                     |   | 41,000  |               |  |   | 41,624        |  |  |   | 41,820  | 
|CoSentry.Net, LLC                            |  | (e)       |  | Software & Services                            |  |      | L+800 |  |       | 1.3% |          | 12/31/19 |                     |   | 54,500  |               |  |   | 54,500        |  |  |   | 54,500  | 



See notes to unaudited consolidated financial statements.



15



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)







|                                        |  |           |  |                                                |  |                      |  |       |     |   |          |          |                     |   |        |               |  |   |               |  |  |   |        | 
|--------------------------------------- |  | --------- |  | ---------------------------------------------- |  | -------------------- |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------ | ------------- |  | - | ------------- |  |  | - | ------ | 
|Portfolio
Company(a)                    |  | Footnotes |  | Industry                                       |  | Rate                 |  | Floor |     |   | Maturity |          | Principal
Amount(b) |   |        | AmortizedCost |  |   | Fair Value(c) | 
|Crestwood Holdings LLC                  |  | (f)       |  | Energy                                         |  | L+600                |  |       | 1.0 | % |          | 6/19/19  |                     | $ | 5,735  |               |  | $ | 5,709         |  |  | $ | 5,907  | 
|Cumulus Media Inc.                      |  | (g)(h)    |  | Media                                          |  | L+325                |  |       | 1.0 | % |          | 12/23/20 |                     |   | 7,865  |               |  |   | 7,786         |  |  |   | 7,924  | 
|DAE Aviation Holdings, Inc.             |  | (h)       |  | Capital Goods                                  |  | L+500                |  |       | 1.3 | % |          | 11/2/18  |                     |   | 3,928  |               |  |   | 3,964         |  |  |   | 3,969  | 
|Del Monte Foods Consumer Products, Inc. |  | (g)(h)    |  | Food, Beverage & Tobacco                       |  | L+325                |  |       | 1.0 | % |          | 12/6/20  |                     |   | 2,809  |               |  |   | 2,795         |  |  |   | 2,828  | 
|DigitalGlobe, Inc.                      |  | (d)(h)    |  | Software & Services                            |  | L+275                |  |       | 1.0 | % |          | 1/31/20  |                     |   | 2,528  |               |  |   | 2,528         |  |  |   | 2,545  | 
|Drew Marine Group Inc.                  |  | (h)       |  | Energy                                         |  | L+350                |  |       | 1.0 | % |          | 11/19/20 |                     |   | 2,667  |               |  |   | 2,663         |  |  |   | 2,680  | 
|Drumm Investors LLC                     |  |           |  | Health Care Equipment & Services               |  | L+375                |  |       | 1.3 | % |          | 5/4/18   |                     |   | 1,471  |               |  |   | 1,421         |  |  |   | 1,447  | 
|Eastman Kodak Co.                       |  | (f)       |  | Consumer Durables & Apparel                    |  | L+625                |  |       | 1.0 | % |          | 9/3/19   |                     |   | 7,236  |               |  |   | 7,098         |  |  |   | 7,229  | 
|Education Management LLC                |  | (f)(h)    |  | Consumer Services                              |  | L+400                |  |       |     |   |          | 6/1/16   |                     |   | 3,967  |               |  |   | 3,573         |  |  |   | 3,819  | 
|Edwards (Cayman Island II) Ltd.         |  | (f)(h)    |  | Capital Goods                                  |  | L+350                |  |       | 1.3 | % |          | 3/26/20  |                     |   | 3,195  |               |  |   | 3,166         |  |  |   | 3,203  | 
|EFS Cogen Holdings I LLC                |  | (g)       |  | Energy                                         |  | L+275                |  |       | 1.0 | % |          | 12/17/20 |                     |   | 1,852  |               |  |   | 1,833         |  |  |   | 1,868  | 
|EquiPower Resources Holdings, LLC       |  | (f)       |  | Utilities                                      |  | L+325                |  |       | 1.0 | % |          | 12/21/18 |                     |   | 1,463  |               |  |   | 1,494         |  |  |   | 1,471  | 
|ERC Ireland Holdings Ltd.               |  | (h)       |  | Telecommunication Services                     |  | EURIBOR+300,1.0% PIK |  |       |     |   |          | 9/30/17  |                     |  | 11,298 |               |  |   | 11,389        |  |  |   | 18,514 | 
|FairPoint Communications, Inc.          |  | (d)(h)    |  | Telecommunication Services                     |  | L+625                |  |       | 1.3 | % |          | 2/14/19  |                     | $ | 13,027 |               |  |   | 12,910        |  |  |   | 13,492 | 
|Filtration Group Corp.                  |  |           |  | Energy                                         |  | L+350                |  |       | 1.0 | % |          | 11/20/20 |                     |   | 2,449  |               |  |   | 2,437         |  |  |   | 2,447  | 
|FR Utility Services LLC                 |  | (f)       |  | Energy                                         |  | L+575                |  |       | 1.0 | % |          | 10/18/19 |                     |   | 4,630  |               |  |   | 4,584         |  |  |   | 4,630  | 
|Fram Group Holdings Inc.                |  | (f)       |  | Automobiles & Components                       |  | L+500                |  |       | 1.5 | % |          | 7/29/17  |                     |   | 2,015  |               |  |   | 2,042         |  |  |   | 2,003  | 
|Hamilton Lane Advisors, LLC             |  | (f)       |  | Diversified Financials                         |  | L+400                |  |       | 1.3 | % |          | 2/23/18  |                     |   | 1,726  |               |  |   | 1,739         |  |  |   | 1,739  | 
|Harlan Sprague Dawley, Inc.             |  | (d)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+550                |  |       |     |   |          | 7/11/14  |                     |   | 7,041  |               |  |   | 6,747         |  |  |   | 6,337  | 
|Ikaria Acquisition Inc.                 |  | (f)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+600                |  |       | 1.3 | % |          | 7/3/18   |                     |   | 7,088  |               |  |   | 6,990         |  |  |   | 7,141  | 
|ILC Industries, LLC                     |  | (f)       |  | Capital Goods                                  |  | L+650                |  |       | 1.5 | % |          | 7/11/18  |                     |   | 4,786  |               |  |   | 4,772         |  |  |   | 4,798  | 
|Inmar, Inc.                             |  | (f)       |  | Software & Services                            |  | L+525                |  |       | 1.3 | % |          | 8/4/17   |                     |   | 4,874  |               |  |   | 4,903         |  |  |   | 4,896  | 
|Internap Network Services Corp.         |  | (f)(h)    |  | Software & Services                            |  | L+500                |  |       | 1.0 | % |          | 11/26/19 |                     |   | 10,000 |               |  |   | 9,901         |  |  |   | 9,988  | 
|Intrawest Operations Group, LLC         |  |           |  | Consumer Services                              |  | L+450                |  |       | 1.0 | % |          | 12/9/20  |                     |   | 7,500  |               |  |   | 7,425         |  |  |   | 7,594  | 
|Kanders C3 Holdings, LLC                |  | (d)(e)    |  | Capital Goods                                  |  | L+900                |  |       | 1.3 | % |          | 12/19/18 |                     |   | 24,565 |               |  |   | 24,362        |  |  |   | 24,381 | 
|Kanders C3 Holdings, LLC                |  | (d)(e)    |  | Capital Goods                                  |  | L+900                |  |       | 1.3 | % |          | 12/19/18 |                     |   | 10,204 |               |  |   | 10,204        |  |  |   | 10,128 | 
|Keystone Automotive Operations, Inc.    |  | (f)       |  | Automobiles & Components                       |  | L+575                |  |       | 1.3 | % |          | 8/15/19  |                     |   | 4,988  |               |  |   | 4,916         |  |  |   | 5,023  | 
|Lantiq Deutschland GmbH                 |  | (d)(h)    |  | Software & Services                            |  | L+900                |  |       | 2.0 | % |          | 11/16/15 |                     |   | 1,521  |               |  |   | 1,445         |  |  |   | 1,475  | 
|Larchmont Resources, LLC                |  | (f)       |  | Energy                                         |  | L+725                |  |       | 1.0 | % |          | 8/7/19   |                     |   | 7,391  |               |  |   | 7,321         |  |  |   | 7,530  | 
|MetoKote Corp.                          |  | (d)(f)    |  | Materials                                      |  | L+800                |  |       | 1.3 | % |          | 9/30/19  |                     |   | 85,000 |               |  |   | 85,000        |  |  |   | 85,850 | 
|MetoKote Corp.                          |  | (d)(f)    |  | Materials                                      |  | L+800                |  |       | 1.3 | % |          | 9/30/19  |                     |   | 16,190 |               |  |   | 16,190        |  |  |   | 16,352 | 



See
notes to unaudited consolidated financial statements.



16



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)







|                                              |  |              |  |                                                |  |       |  |       |     |   |          |  |          |                     |  |   |               |  |  |               |        |  |  |   |        | 
|--------------------------------------------- |  | ------------ |  | ---------------------------------------------- |  | ----- |  | ----- | --- | - | -------- |  | -------- | ------------------- |  | - | ------------- |  |  | ------------- | ------ |  |  | - | ------ | 
|Portfolio
Company(a)                          |  | Footnotes    |  | Industry                                       |  | Rate  |  | Floor |     |   | Maturity |  |          | Principal
Amount(b) |  |   | AmortizedCost |  |  | Fair Value(c) |       
|MMI International Ltd.                        |  | (f)(g)(h)    |  | Technology Hardware & Equipment                |  | L+600 |  |       | 1.3 | % |          |  | 11/20/18 |                     |  | $ | 11,550        |  |  | $             | 11,244 |  |  | $ | 11,254 | 
|MMM Holdings, Inc.                            |  | (f)          |  | Health Care Equipment & Services               |  | L+825 |  |       | 1.5 | % |          |  | 12/12/17 |                     |  |   | 3,012         |  |  |               | 3,030  |  |  |   | 3,036  | 
|MModal Inc.                                   |  | (d)(f)       |  | Health Care Equipment & Services               |  | L+650 |  |       | 1.3 | % |          |  | 8/16/19  |                     |  |   | 16,801        |  |  |               | 16,469 |  |  |   | 14,480 | 
|Moxie Liberty LLC                             |  | (f)(g)       |  | Energy                                         |  | L+650 |  |       | 1.0 | % |          |  | 8/21/20  |                     |  |   | 11,853        |  |  |               | 11,901 |  |  |   | 12,179 | 
|Moxie Patriot, LLC                            |  | (g)          |  | Energy                                         |  | L+575 |  |       | 1.0 | % |          |  | 12/18/20 |                     |  |   | 5,556         |  |  |               | 5,500  |  |  |   | 5,694  | 
|MSO of Puerto Rico, Inc.                      |  | (f)          |  | Health Care Equipment & Services               |  | L+825 |  |       | 1.5 | % |          |  | 12/12/17 |                     |  |   | 2,191         |  |  |               | 2,204  |  |  |   | 2,208  | 
|National Mentor Holdings, Inc.                |  | (f)          |  | Health Care Equipment & Services               |  | L+525 |  |       | 1.3 | % |          |  | 2/9/17   |                     |  |   | 7,899         |  |  |               | 8,003  |  |  |   | 7,964  | 
|National Vision, Inc.                         |  | (f)          |  | Health Care Equipment & Services               |  | L+575 |  |       | 1.3 | % |          |  | 8/2/18   |                     |  |   | 2,336         |  |  |               | 2,363  |  |  |   | 2,343  | 
|New HB Acquisition, LLC                       |  |              |  | Food, Beverage & Tobacco                       |  | L+550 |  |       | 1.3 | % |          |  | 4/9/20   |                     |  |   | 3,896         |  |  |               | 3,860  |  |  |   | 4,042  | 
|Nexeo Solutions, LLC                          |  | (d)          |  | Capital Goods                                  |  | L+350 |  |       | 1.5 | % |          |  | 9/8/17   |                     |  |   | 6,903         |  |  |               | 6,823  |  |  |   | 6,911  | 
|Nova Wildcat Amerock, LLC                     |  | (d)(f)       |  | Consumer Durables & Apparel                    |  | L+825 |  |       | 1.3 | % |          |  | 9/10/19  |                     |  |   | 75,000        |  |  |               | 75,000 |  |  |   | 75,000 | 
|Opal Acquisition, Inc.                        |  | (g)          |  | Consumer Services                              |  | L+400 |  |       | 1.0 | % |          |  | 11/27/20 |                     |  |   | 14,946        |  |  |               | 14,821 |  |  |   | 14,983 | 
|Panda Sherman Power, LLC                      |  | (d)          |  | Energy                                         |  | L+750 |  |       | 1.5 | % |          |  | 9/14/18  |                     |  |   | 3,818         |  |  |               | 3,816  |  |  |   | 3,933  | 
|Panda Temple Power, LLC (TLA)                 |  | (d)          |  | Energy                                         |  | L+700 |  |       | 1.5 | % |          |  | 7/17/18  |                     |  |   | 2,000         |  |  |               | 2,017  |  |  |   | 2,054  | 
|Patheon Inc.                                  |  | (d)(h)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+600 |  |       | 1.3 | % |          |  | 12/14/18 |                     |  |   | 10,156        |  |  |               | 9,892  |  |  |   | 10,275 | 
|Professional Plumbing Group, Inc.             |  | (d)(f)       |  | Capital Goods                                  |  | L+875 |  |       | 0.8 | % |          |  | 7/31/19  |                     |  |   | 32,419        |  |  |               | 32,419 |  |  |   | 32,743 | 
|PRV Aerospace, LLC                            |  | (f)          |  | Capital Goods                                  |  | L+525 |  |       | 1.3 | % |          |  | 5/9/18   |                     |  |   | 3,039         |  |  |               | 3,063  |  |  |   | 3,053  | 
|Reddy Ice Holdings, Inc.                      |  | (f)          |  | Food & Staples Retailing                       |  | L+550 |  |       | 1.3 | % |          |  | 5/1/19   |                     |  |   | 1,182         |  |  |               | 1,170  |  |  |   | 1,181  | 
|Sheridan Holdings, Inc.                       |  | (g)          |  | Health Care Equipment & Services               |  | L+350 |  |       | 1.0 | % |          |  | 6/29/18  |                     |  |   | 2,035         |  |  |               | 2,025  |  |  |   | 2,046  | 
|Sheridan Holdings, Inc.                       |  | (g)          |  | Health Care Equipment & Services               |  | L+350 |  |       | 1.0 | % |          |  | 6/29/18  |                     |  |   | 1,680         |  |  |               | 1,672  |  |  |   | 1,680  | 
|Sirius Computer Solutions, Inc.               |  | (d)          |  | Software & Services                            |  | L+575 |  |       | 1.3 | % |          |  | 12/7/18  |                     |  |   | 8,096         |  |  |               | 8,027  |  |  |   | 8,228  | 
|Smile Brands Group Inc.                       |  | (d)(e)(f)    |  | Health Care Equipment & Services               |  | L+625 |  |       | 1.3 | % |          |  | 8/15/19  |                     |  |   | 39,090        |  |  |               | 38,429 |  |  |   | 38,650 | 
|Sorenson Communication, Inc.                  |  | (d)(f)       |  | Telecommunication Services                     |  | L+825 |  |       | 1.3 | % |          |  | 10/31/14 |                     |  |   | 29,754        |  |  |               | 29,830 |  |  |   | 30,200 | 
|Sports Authority, Inc.                        |  | (f)          |  | Consumer Durables & Apparel                    |  | L+600 |  |       | 1.5 | % |          |  | 11/16/17 |                     |  |   | 8,222         |  |  |               | 8,293  |  |  |   | 8,212  | 
|Sprint Industrial Holdings LLC                |  | (f)          |  | Energy                                         |  | L+575 |  |       | 1.3 | % |          |  | 11/14/19 |                     |  |   | 6,396         |  |  |               | 6,338  |  |  |   | 6,476  | 
|Stallion Oilfield Holdings, Inc.              |  | (d)(f)       |  | Energy                                         |  | L+675 |  |       | 1.3 | % |          |  | 6/19/18  |                     |  |   | 9,950         |  |  |               | 9,859  |  |  |   | 10,174 | 
|Swift Worldwide Resources US Holdings Corp. A |  |              |  | Energy                                         |  | L+800 |  |       | 1.3 | % |          |  | 4/30/19  |                     |  |   | 20,088        |  |  |               | 20,088 |  |  |   | 20,088 | 
|Technicolor SA                                |  | (d)(f)(g)(h) |  | Media                                          |  | L+600 |  |       | 1.3 | % |          |  | 7/10/20  |                     |  |   | 32,194        |  |  |               | 31,776 |  |  |   | 32,544 | 
|Therakos, Inc.                                |  | (d)(f)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+625 |  |       | 1.3 | % |          |  | 12/27/17 |                     |  |   | 6,605         |  |  |               | 6,503  |  |  |   | 6,630  | 
|Totes Isotoner Corp.                          |  | (e)          |  | Consumer Durables & Apparel                    |  | L+575 |  |       | 1.5 | % |          |  | 7/7/17   |                     |  |   | 911           |  |  |               | 910    |  |  |   | 916    | 
|TravelCLICK, Inc.                             |  | (f)          |  | Consumer Services                              |  | L+450 |  |       | 1.3 | % |          |  | 3/16/16  |                     |  |   | 1,969         |  |  |               | 1,970  |  |  |   | 1,988  | 



See
notes to unaudited consolidated financial statements.



17



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)







|                                            |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  
|------------------------------------------- |  | --------- |  | ---------------------------------- |  | ------ |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------- | ------------- |  | - | ------------- | - |  | - | --------- | -
|Portfolio
Company(a)                        |  | Footnotes |  | Industry                           |  | Rate   |  | Floor |     |   | Maturity |          | Principal
Amount(b) |   |         | AmortizedCost |  |   | Fair Value(c) |  
|Tri-Northern Acquisition, Inc.              |  | (d)(e)(f) |  | Retailing                          |  | L+800  |  |       | 1.3 | % |          | 7/1/19   |                     | $ | 89,550  |               |  | $ | 89,550        |   |  | $ | 89,550    |  
|Tri-Northern Acquisition, Inc.              |  | (d)(e)(f) |  | Retailing                          |  | L+800  |  |       | 1.3 | % |          | 7/1/19   |                     |   | 18,621  |               |  |   | 18,621        |   |  |   | 18,621    |  
|UTEX Industries, Inc.                       |  | (f)       |  | Energy                             |  | L+325  |  |       | 1.3 | % |          | 4/10/20  |                     |   | 2,689   |               |  |   | 2,677         |   |  |   | 2,705     |  
|                                            |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  
|Total Senior Secured LoansFirst Lien       |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   | 1,316,020     |   |  |   | 1,334,780 |  
|Unfunded Loan Commitments                   |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   | (66,687       | ) |  |   | (66,687   | )
|                                            |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  
|Net Senior Secured LoansFirst Lien         |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   | 1,249,333     |   |  |   | 1,268,093 |  
|                                            |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   |               |   |  |   |           |  
|Senior Secured LoansSecond Lien29.2%      |  |           |  |                                    |  |        |  |       |     |   |          |          |                     |   |         |               |  |   |               |  
|Advantage Sales & Marketing Inc.            |  | (e)       |  | Commercial & Professional Services |  | L+725  |  |       | 1.0 | % |          | 6/12/18  |                     |   | 471     |               |  |   | 471           |   |  |   | 479       |  
|Alliance Laundry Systems LLC                |  | (d)       |  | Capital Goods                      |  | L+825  |  |       | 1.3 | % |          | 12/10/19 |                     |   | 3,450   |               |  |   | 3,419         |   |  |   | 3,499     |  
|American EnergyUtica, LLC                  |  | (d)(e)    |  | Energy                             |  | L+950  |  |       | 1.5 | % |          | 9/30/18  |                     |   | 100,919 |               |  |   | 100,919       |   |  |   | 100,919   |  
|Attachmate Corp.                            |  | (d)       |  | Software & Services                |  | L+950  |  |       | 1.5 | % |          | 11/22/18 |                     |   | 17,223  |               |  |   | 17,246        |   |  |   | 16,907    |  
|Audio Visual Services Group, Inc.           |  | (d)       |  | Technology Hardware & Equipment    |  | L+950  |  |       | 1.3 | % |          | 5/9/18   |                     |   | 15,320  |               |  |   | 15,195        |   |  |   | 15,818    |  
|Berlin Packaging LLC                        |  |           |  | Commercial & Professional Services |  | L+750  |  |       | 1.3 | % |          | 4/2/20   |                     |   | 3,571   |               |  |   | 3,638         |   |  |   | 3,665     |  
|Brasa (Holdings) Inc.                       |  | (d)       |  | Consumer Services                  |  | L+950  |  |       | 1.5 | % |          | 1/20/20  |                     |   | 1,118   |               |  |   | 1,079         |   |  |   | 1,129     |  
|Camp International Holding Co.              |  | (e)(f)(g) |  | Capital Goods                      |  | L+725  |  |       | 1.0 | % |          | 11/29/19 |                     |   | 2,106   |               |  |   | 2,106         |   |  |   | 2,152     |  
|Capital Automotive L.P.                     |  | (f)       |  | Real Estate                        |  | L+500  |  |       | 1.0 | % |          | 4/30/20  |                     |   | 7,895   |               |  |   | 7,858         |   |  |   | 8,171     |  
|Centaur Acquisition, LLC                    |  | (g)       |  | Consumer Services                  |  | L+750  |  |       | 1.3 | % |          | 2/20/20  |                     |   | 13,585  |               |  |   | 13,840        |   |  |   | 13,993    |  
|Cervalis LLC                                |  | (d)(e)    |  | Commercial & Professional Services |  | L+875  |  |       | 1.3 | % |          | 2/8/19   |                     |   | 30,000  |               |  |   | 29,615        |   |  |   | 30,000    |  
|CHG Buyer Corp.                             |  | (d)       |  | Health Care Equipment & Services   |  | L+775  |  |       | 1.3 | % |          | 11/19/20 |                     |   | 5,747   |               |  |   | 5,655         |   |  |   | 5,847     |  
|Citrus Energy Appalachia, LLC               |  | (d)       |  | Energy                             |  | L+850  |  |       | 1.3 | % |          | 7/26/18  |                     |   | 15,430  |               |  |   | 14,979        |   |  |   | 15,392    |  
|Consolidated Precision Products Corp.       |  | (d)       |  | Capital Goods                      |  | L+775  |  |       | 1.0 | % |          | 4/30/21  |                     |   | 16,750  |               |  |   | 16,668        |   |  |   | 17,085    |  
|CT Technologies Intermediate Holdings, Inc. |  |           |  | Software & Services                |  | L+800  |  |       | 1.3 | % |          | 10/2/20  |                     |   | 5,000   |               |  |   | 4,927         |   |  |   | 5,016     |  
|Del Monte Foods Consumer Products, Inc.     |  | (g)(h)    |  | Food, Beverage & Tobacco           |  | L+725  |  |       | 1.0 | % |          | 6/6/21   |                     |   | 3,333   |               |  |   | 3,300         |   |  |   | 3,375     |  
|Digital Insight Corp.                       |  |           |  | Software & Services                |  | L+775  |  |       | 1.0 | % |          | 10/16/20 |                     |   | 12,000  |               |  |   | 12,253        |   |  |   | 12,255    |  
|Drew Marine Group Inc.                      |  | (h)       |  | Energy                             |  | L+700  |  |       | 1.0 | % |          | 5/19/21  |                     |   | 2,500   |               |  |   | 2,494         |   |  |   | 2,519     |  
|Eastman Kodak Co.                           |  |           |  | Consumer Durables & Apparel        |  | L+950  |  |       | 1.3 | % |          | 9/3/20   |                     |   | 25,000  |               |  |   | 24,395        |   |  |   | 25,219    |  
|Filtration Group Corp.                      |  | (g)       |  | Energy                             |  | L+725  |  |       | 1.0 | % |          | 11/21/21 |                     |   | 5,158   |               |  |   | 5,174         |   |  |   | 5,287     |  
|ILC Industries, LLC                         |  | (e)       |  | Capital Goods                      |  | L+1000 |  |       | 1.5 | % |          | 7/11/19  |                     |   | 3,024   |               |  |   | 2,869         |   |  |   | 2,903     |  
|Keystone Automotive Operations, Inc.        |  | (d)(e)    |  | Automobiles & Components           |  | L+950  |  |       | 1.3 | % |          | 8/15/20  |                     |   | 44,500  |               |  |   | 43,644        |   |  |   | 46,169    |  
|Kronos Inc.                                 |  |           |  | Software & Services                |  | L+850  |  |       | 1.3 | % |          | 4/30/20  |                     |   | 7,715   |               |  |   | 7,644         |   |  |   | 7,999     |  



See
notes to unaudited consolidated financial statements.



18



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)







|                                       |  |           |  |                                                |  |                |  |       |     |   |          |          |                     |   |        |               |  |   |               |  |  |   |         | 
|-------------------------------------- |  | --------- |  | ---------------------------------------------- |  | -------------- |  | ----- | --- | - | -------- | -------- | ------------------- | - | ------ | ------------- |  | - | ------------- |  |  | - | ------- | 
|Portfolio
Company(a)                   |  | Footnotes |  | Industry                                       |  | Rate           |  | Floor |     |   | Maturity |          | Principal
Amount(b) |   |        | AmortizedCost |  |   | Fair Value(c) | 
|Leedsworld Inc.                        |  | (d)(e)(f) |  | Retailing                                      |  | L+875          |  |       | 1.3 | % |          | 6/28/20  |                     | $ | 62,500 |               |  | $ | 62,500        |  |  | $ | 62,500  | 
|LM U.S. Member LLC                     |  | (d)       |  | Transportation                                 |  | L+825          |  |       | 1.3 | % |          | 10/26/20 |                     |   | 15,137 |               |  |   | 15,221        |  |  |   | 15,355  | 
|Onex Carestream Finance L.P.           |  | (d)(e)    |  | Health Care Equipment & Services               |  | L+850          |  |       | 1.0 | % |          | 12/5/19  |                     |   | 9,700  |               |  |   | 9,519         |  |  |   | 9,906   | 
|P2 Upstream Acquisition Co.            |  |           |  | Energy                                         |  | L+800          |  |       | 1.0 | % |          | 4/30/21  |                     |   | 14,500 |               |  |   | 14,788        |  |  |   | 14,790  | 
|Paw Luxco II Sarl                      |  | (h)       |  | Consumer Durables & Apparel                    |  | EURIBOR+950    |  |       |     |   |          | 1/29/19  |                     |  | 7,000  |               |  |   | 8,524         |  |  |   | 8,709   | 
|Penton Media, Inc.                     |  |           |  | Media                                          |  | L+775          |  |       | 1.3 | % |          | 10/2/20  |                     | $ | 9,000  |               |  |   | 8,868         |  |  |   | 9,000   | 
|Redtop Acquisitions Ltd.               |  | (g)(h)    |  | Consumer Services                              |  | L+725          |  |       | 1.0 | % |          | 5/22/21  |                     |   | 7,500  |               |  |   | 7,406         |  |  |   | 7,622   | 
|Renaissance Learning, Inc.             |  | (g)       |  | Software & Services                            |  | L+775          |  |       | 1.0 | % |          | 4/24/21  |                     |   | 7,000  |               |  |   | 6,895         |  |  |   | 7,083   | 
|Sabine Oil & Gas LLC                   |  |           |  | Energy                                         |  | L+750          |  |       | 1.3 | % |          | 12/31/18 |                     |   | 1,907  |               |  |   | 1,891         |  |  |   | 1,931   | 
|Securus Technologies Holdings, Inc.    |  |           |  | Telecommunication Services                     |  | L+775          |  |       | 1.3 | % |          | 4/30/21  |                     |   | 4,000  |               |  |   | 3,963         |  |  |   | 3,979   | 
|Sensus USA Inc.                        |  | (e)       |  | Capital Goods                                  |  | L+725          |  |       | 1.3 | % |          | 5/9/18   |                     |   | 2,050  |               |  |   | 2,056         |  |  |   | 2,050   | 
|SESAC Holdings Inc.                    |  | (d)       |  | Media                                          |  | L+875          |  |       | 1.3 | % |          | 7/12/19  |                     |   | 2,000  |               |  |   | 1,974         |  |  |   | 2,050   | 
|Sheridan Holdings, Inc.                |  | (g)       |  | Health Care Equipment & Services               |  | L+725          |  |       | 1.0 | % |          | 12/20/21 |                     |   | 10,784 |               |  |   | 10,730        |  |  |   | 10,885  | 
|StoneRiver Group, L.P.                 |  | (e)       |  | Software & Services                            |  | L+725          |  |       | 1.3 | % |          | 5/30/20  |                     |   | 7,246  |               |  |   | 7,212         |  |  |   | 7,323   | 
|Teine Energy Ltd.                      |  | (e)(h)    |  | Energy                                         |  | L+625          |  |       | 1.3 | % |          | 5/17/19  |                     |   | 5,459  |               |  |   | 5,385         |  |  |   | 5,541   | 
|Templar Energy LLC                     |  |           |  | Energy                                         |  | L+700          |  |       | 1.0 | % |          | 11/25/20 |                     |   | 19,231 |               |  |   | 18,849        |  |  |   | 19,339  | 
|Therakos, Inc.                         |  | (d)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+1000         |  |       | 1.3 | % |          | 6/27/18  |                     |   | 28,000 |               |  |   | 27,310        |  |  |   | 28,677  | 
|TNS, Inc.                              |  | (e)       |  | Telecommunication Services                     |  | L+800          |  |       | 1.0 | % |          | 8/14/20  |                     |   | 30,469 |               |  |   | 30,056        |  |  |   | 30,878  | 
|Travelport LLC                         |  | (e)       |  | Consumer Services                              |  | L+800          |  |       | 1.5 | % |          | 1/31/16  |                     |   | 5,119  |               |  |   | 5,216         |  |  |   | 5,313   | 
|Travelport LLC                         |  | (d)       |  | Consumer Services                              |  | 4.0%, 4.4% PIK |  |       |     |   |          | 12/1/16  |                     |   | 8,207  |               |  |   | 7,282         |  |  |   | 8,381   | 
|TriZetto Group, Inc.                   |  | (d)       |  | Software & Services                            |  | L+725          |  |       | 1.3 | % |          | 3/28/19  |                     |   | 4,186  |               |  |   | 4,133         |  |  |   | 4,019   | 
|Ultima US Holdings LLC                 |  | (h)       |  | Capital Goods                                  |  | L+850          |  |       | 1.0 | % |          | 12/31/20 |                     |   | 57,000 |               |  |   | 55,919        |  |  |   | 55,860  | 
|US Renal Care, Inc.                    |  |           |  | Health Care Equipment & Services               |  | L+750          |  |       | 1.0 | % |          | 7/3/20   |                     |   | 2,500  |               |  |   | 2,452         |  |  |   | 2,538   | 
|UTEX Industries, Inc.                  |  |           |  | Energy                                         |  | L+750          |  |       | 1.3 | % |          | 4/10/21  |                     |   | 3,243  |               |  |   | 3,228         |  |  |   | 3,324   | 
|Vantage Energy, LLC                    |  | (g)       |  | Energy                                         |  | L+750          |  |       | 1.0 | % |          | 12/20/18 |                     |   | 18,462 |               |  |   | 18,277        |  |  |   | 18,462  | 
|Vertafore, Inc.                        |  | (e)       |  | Software & Services                            |  | L+825          |  |       | 1.5 | % |          | 10/27/17 |                     |   | 830    |               |  |   | 831           |  |  |   | 846     | 
|WNA Holdings, Inc.                     |  |           |  | Materials                                      |  | L+725          |  |       | 1.3 | % |          | 12/7/20  |                     |   | 5,000  |               |  |   | 4,952         |  |  |   | 5,081   | 
|                                       |  |           |  |                                                |  |                |  |       |     |   |          |          |                     |   |        |               |  |   |               |  |  |   |         | 
|Total Senior Secured LoansSecond Lien |  |           |  |                                                |  |                |  |       |     |   |          |          |                     |   |        |               |  |   | 684,825       |  |  |   | 697,240 | 
|                                       |  |           |  |                                                |  |                |  |       |     |   |          |          |                     |   |        |               |  |   |               |  |  |   |         | 



See
notes to unaudited consolidated financial statements.



19



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)







|                                             |  |           |  |                                                |  |          |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|-------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | -------- |  | ----- |  | -------- |  | ------------------- | ------ |  | ------------- | - | ------- | ------------- |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes |  | Industry                                       |  | Rate     |  | Floor |  | Maturity |  | Principal
Amount(b) |        |  | AmortizedCost |   |         | Fair Value(c) | 
|Senior Secured Bonds8.5%                    |  |           |  |                                                |  |          |  |       |  |          |  |                     |        |  |               |   |         |              
|Advanced Lighting Technologies, Inc.         |  | (d)(e)    |  | Materials                                      |  | 10.5%    |  |       |  | 6/1/19   |  | $                   | 35,500 |  |               | $ | 31,238  |               |  | $ | 25,561  | 
|Allen Systems Group, Inc.                    |  | (e)       |  | Software & Services                            |  | 10.5%    |  |       |  | 11/15/16 |  |                     | 14,225 |  |               |   | 9,814   |               |  |   | 8,037   | 
|Avaya Inc.                                   |  | (d)(e)    |  | Technology Hardware & Equipment                |  | 7.0%     |  |       |  | 4/1/19   |  |                     | 16,000 |  |               |   | 14,990  |               |  |   | 15,760  | 
|Avaya Inc.                                   |  | (d)(e)    |  | Technology Hardware & Equipment                |  | 9.0%     |  |       |  | 4/1/19   |  |                     | 8,000  |  |               |   | 7,955   |               |  |   | 8,400   | 
|Caesars Entertainment Operating Co.          |  | (h)       |  | Consumer Services                              |  | 9.0%     |  |       |  | 2/15/20  |  |                     | 10,000 |  |               |   | 9,593   |               |  |   | 9,741   | 
|Caesars Entertainment Resort Properties, LLC |  | (d)(e)    |  | Consumer Services                              |  | 11.0%    |  |       |  | 10/1/21  |  |                     | 45,000 |  |               |   | 44,910  |               |  |   | 46,484  | 
|Clear Channel Communications, Inc.           |  | (d)       |  | Media                                          |  | 9.0%     |  |       |  | 12/15/19 |  |                     | 1,844  |  |               |   | 1,712   |               |  |   | 1,892   | 
|Erickson Air-Crane Inc.                      |  | (d)(h)    |  | Capital Goods                                  |  | 8.3%     |  |       |  | 5/1/20   |  |                     | 13,312 |  |               |   | 13,053  |               |  |   | 13,811  | 
|Global A&T Electronics Ltd.                  |  | (e)(h)    |  | Technology Hardware & Equipment                |  | 10.0%    |  |       |  | 2/1/19   |  |                     | 9,000  |  |               |   | 9,000   |               |  |   | 7,920   | 
|JW Aluminum Co.                              |  | (d)(e)    |  | Materials                                      |  | 11.5%    |  |       |  | 11/15/17 |  |                     | 11,750 |  |               |   | 11,722  |               |  |   | 11,735  | 
|Logans Roadhouse Inc.                       |  | (e)       |  | Consumer Services                              |  | 10.8%    |  |       |  | 10/15/17 |  |                     | 26,564 |  |               |   | 23,779  |               |  |   | 19,883  | 
|Neff Rental LLC                              |  | (e)       |  | Capital Goods                                  |  | 9.6%     |  |       |  | 5/15/16  |  |                     | 3,750  |  |               |   | 3,785   |               |  |   | 3,975   | 
|Prince Mineral Holding Corp.                 |  | (d)       |  | Materials                                      |  | 11.5%    |  |       |  | 12/15/19 |  |                     | 2,750  |  |               |   | 2,722   |               |  |   | 3,053   | 
|Sorenson Communication, Inc.                 |  | (d)(e)    |  | Telecommunication Services                     |  | 10.5%    |  |       |  | 2/1/15   |  |                     | 37,000 |  |               |   | 34,302  |               |  |   | 27,675  | 
|                                             |  |           |  |                                                |  |          |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Total Senior Secured Bonds                   |  |           |  |                                                |  |          |  |       |  |          |  |                     |        |  |               |   | 218,575 |               |  |   | 203,927 | 
|                                             |  |           |  |                                                |  |          |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Subordinated Debt11.6%                      |  |           |  |                                                |  |          |  |       |  |          |  |                     |        |  |               |   |         |              
|Accellent Inc.                               |  |           |  | Health Care Equipment & Services               |  | 10.0%    |  |       |  | 11/1/17  |  |                     | 10,000 |  |               |   | 9,989   |               |  |   | 10,375  | 
|Alliant Holdings I, Inc.                     |  | (d)       |  | Insurance                                      |  | 7.9%     |  |       |  | 12/15/20 |  |                     | 4,000  |  |               |   | 4,000   |               |  |   | 4,220   | 
|Atlas Energy Holdings Operating Co., LLC     |  | (h)       |  | Energy                                         |  | 7.8%     |  |       |  | 1/15/21  |  |                     | 5,000  |  |               |   | 5,000   |               |  |   | 4,773   | 
|Aurora Diagnostics, LLC                      |  | (d)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 10.8%    |  |       |  | 1/15/18  |  |                     | 7,000  |  |               |   | 7,039   |               |  |   | 5,180   | 
|Beazer Homes USA, Inc.                       |  | (h)       |  | Capital Goods                                  |  | 7.3%     |  |       |  | 2/1/23   |  |                     | 2,750  |  |               |   | 2,750   |               |  |   | 2,750   | 
|BOE Intermediate Holding Corp.               |  |           |  | Materials                                      |  | 9.8% PIK |  |       |  | 11/1/17  |  |                     | 6,012  |  |               |   | 5,960   |               |  |   | 6,297   | 
|Brocade Communications Systems, Inc.         |  | (h)       |  | Telecommunication Services                     |  | 4.6%     |  |       |  | 1/15/23  |  |                     | 2,750  |  |               |   | 2,750   |               |  |   | 2,532   | 
|CrownRock, L.P.                              |  | (d)(e)    |  | Energy                                         |  | 7.1%     |  |       |  | 4/15/21  |  |                     | 30,000 |  |               |   | 30,000  |               |  |   | 29,827  | 
|Diamondback Energy, Inc.                     |  | (h)       |  | Energy                                         |  | 7.6%     |  |       |  | 10/1/21  |  |                     | 4,250  |  |               |   | 4,250   |               |  |   | 4,483   | 
|DigitalGlobe, Inc.                           |  | (h)       |  | Software & Services                            |  | 5.3%     |  |       |  | 2/1/21   |  |                     | 1,100  |  |               |   | 1,100   |               |  |   | 1,077   | 
|EPE Holdings LLC                             |  | (d)       |  | Energy                                         |  | 8.9% PIK |  |       |  | 12/15/17 |  |                     | 4,357  |  |               |   | 4,340   |               |  |   | 4,537   | 
|EPL Oil & Gas, Inc.                          |  | (e)(h)    |  | Energy                                         |  | 8.3%     |  |       |  | 2/15/18  |  |                     | 2,150  |  |               |   | 2,133   |               |  |   | 2,317   | 
|Era Group Inc.                               |  | (h)       |  | Energy                                         |  | 7.8%     |  |       |  | 12/15/22 |  |                     | 7,250  |  |               |   | 7,136   |               |  |   | 7,540   | 



See
notes to unaudited consolidated financial statements.



20



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)







|                                          |  |           |  |                                  |  |           |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|----------------------------------------- |  | --------- |  | -------------------------------- |  | --------- |  | ----- |  | -------- |  | ------------------- | ------ |  | ------------- | - | ------- | ------------- |  | - | ------- | 
|Portfolio
Company(a)                      |  | Footnotes |  | Industry                         |  | Rate      |  | Floor |  | Maturity |  | Principal
Amount(b) |        |  | AmortizedCost |   |         | Fair Value(c) | 
|First Data Corp.                          |  | (g)       |  | Software & Services              |  | 11.8%     |  |       |  | 8/15/21  |  | $                   | 1,000  |  |               | $ | 1,035   |               |  | $ | 1,057   | 
|Halcon Resources Corp.                    |  | (d)(h)    |  | Energy                           |  | 8.9%      |  |       |  | 5/15/21  |  |                     | 2,250  |  |               |   | 2,353   |               |  |   | 2,276   | 
|Hub International Ltd.                    |  |           |  | Insurance                        |  | 7.9%      |  |       |  | 10/1/21  |  |                     | 3,500  |  |               |   | 3,500   |               |  |   | 3,618   | 
|Jefferies Finance LLC                     |  | (h)       |  | Diversified Financials           |  | 7.4%      |  |       |  | 4/1/20   |  |                     | 1,500  |  |               |   | 1,500   |               |  |   | 1,564   | 
|The Kenan Advantage Group, Inc.           |  | (d)       |  | Transportation                   |  | 8.4%      |  |       |  | 12/15/18 |  |                     | 6,250  |  |               |   | 6,436   |               |  |   | 6,609   | 
|Kinetic Concepts, Inc.                    |  | (e)       |  | Health Care Equipment & Services |  | 12.5%     |  |       |  | 11/1/19  |  |                     | 7,800  |  |               |   | 8,145   |               |  |   | 8,795   | 
|LBC Tank Terminals Holding Netherlands BV |  | (e)(h)    |  | Materials                        |  | 6.9%      |  |       |  | 5/15/23  |  |                     | 1,000  |  |               |   | 1,000   |               |  |   | 1,038   | 
|Legacy Reserves L.P.                      |  | (d)(h)    |  | Energy                           |  | 8.0%      |  |       |  | 12/1/20  |  |                     | 8,250  |  |               |   | 8,089   |               |  |   | 8,524   | 
|Legacy Reserves L.P.                      |  | (d)(h)    |  | Energy                           |  | 6.6%      |  |       |  | 12/1/21  |  |                     | 4,900  |  |               |   | 4,826   |               |  |   | 4,740   | 
|Memorial Production Partners L.P.         |  | (d)(h)    |  | Energy                           |  | 7.6%      |  |       |  | 5/1/21   |  |                     | 2,600  |  |               |   | 2,564   |               |  |   | 2,678   | 
|Memorial Resource Development LLC         |  |           |  | Energy                           |  | 10.8% PIK |  |       |  | 12/15/18 |  |                     | 6,700  |  |               |   | 6,566   |               |  |   | 6,700   | 
|Mood Media Corp.                          |  | (d)(e)(h) |  | Media                            |  | 9.3%      |  |       |  | 10/15/20 |  |                     | 46,207 |  |               |   | 45,524  |               |  |   | 40,662  | 
|NeuStar, Inc.                             |  | (h)       |  | Software & Services              |  | 4.5%      |  |       |  | 1/15/23  |  |                     | 2,750  |  |               |   | 2,750   |               |  |   | 2,499   | 
|Nuveen Investments, Inc.                  |  | (d)(e)    |  | Diversified Financials           |  | 9.1%      |  |       |  | 10/15/17 |  |                     | 15,000 |  |               |   | 15,000  |               |  |   | 15,082  | 
|Opal Acquisition, Inc.                    |  |           |  | Consumer Services                |  | 8.9%      |  |       |  | 12/15/21 |  |                     | 27,000 |  |               |   | 27,000  |               |  |   | 27,169  | 
|Resolute Energy Corp.                     |  | (h)       |  | Energy                           |  | 8.5%      |  |       |  | 5/1/20   |  |                     | 5,800  |  |               |   | 5,864   |               |  |   | 6,106   | 
|Revlon Consumer Products Corp.            |  | (h)       |  | Household & Personal Products    |  | 5.8%      |  |       |  | 2/15/21  |  |                     | 5,050  |  |               |   | 5,050   |               |  |   | 5,000   | 
|Rex Energy Corp.                          |  | (d)(h)    |  | Energy                           |  | 8.9%      |  |       |  | 12/1/20  |  |                     | 15,000 |  |               |   | 14,904  |               |  |   | 16,425  | 
|Rockies Express Pipeline LLC              |  |           |  | Energy                           |  | 6.0%      |  |       |  | 1/15/19  |  |                     | 3,250  |  |               |   | 3,250   |               |  |   | 3,024   | 
|Sidewinder Drilling Inc.                  |  | (d)       |  | Capital Goods                    |  | 9.8%      |  |       |  | 11/15/19 |  |                     | 2,000  |  |               |   | 2,000   |               |  |   | 1,770   | 
|Six Flags Entertainment Corp.             |  | (h)       |  | Consumer Services                |  | 5.3%      |  |       |  | 1/15/21  |  |                     | 2,500  |  |               |   | 2,500   |               |  |   | 2,456   | 
|Sophia Holding Finance, L.P.              |  | (e)       |  | Software & Services              |  | 9.6%      |  |       |  | 12/1/18  |  |                     | 9,750  |  |               |   | 9,653   |               |  |   | 10,067  | 
|Southern Graphics Inc.                    |  | (d)       |  | Media                            |  | 8.4%      |  |       |  | 10/15/20 |  |                     | 1,000  |  |               |   | 1,000   |               |  |   | 1,025   | 
|Tenet Healthcare Corp.                    |  | (h)       |  | Health Care Equipment & Services |  | 8.1%      |  |       |  | 4/1/22   |  |                     | 5,500  |  |               |   | 5,500   |               |  |   | 5,940   | 
|TMS International Corp.                   |  |           |  | Energy                           |  | 7.6%      |  |       |  | 10/15/21 |  |                     | 1,250  |  |               |   | 1,250   |               |  |   | 1,331   | 
|U.S. Coatings Acquisition Inc.            |  |           |  | Capital Goods                    |  | 7.4%      |  |       |  | 5/1/21   |  |                     | 2,000  |  |               |   | 2,000   |               |  |   | 2,143   | 
|Windstream Corp.                          |  | (h)       |  | Telecommunication Services       |  | 6.4%      |  |       |  | 8/1/23   |  |                     | 2,600  |  |               |   | 2,600   |               |  |   | 2,434   | 
|                                          |  |           |  |                                  |  |           |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 
|Total Subordinated Debt                   |  |           |  |                                  |  |           |  |       |  |          |  |                     |        |  |               |   | 278,306 |               |  |   | 276,640 | 
|                                          |  |           |  |                                  |  |           |  |       |  |          |  |                     |        |  |               |   |         |               |  |   |         | 



See
notes to unaudited consolidated financial statements.



21



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)







|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  
|------------------------------------------------------------ |  | --------- |  | ---------------------------------------------- |  | ----- |  | ----- |  | -------- |  | ------------------- | ------------ |  | ------------- | - | --------- | ------------- |  | - | --------- | -
|Portfolio
Company(a)                                         |  | Footnotes |  | Industry                                       |  | Rate  |  | Floor |  | Maturity |  | Principal
Amount(b) |              |  | AmortizedCost |   |           | Fair Value(c) | 
|Collateralized Securities7.6%                               |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |              
|AMMC 2012 CDO 11A Class Subord.                              |  | (h)       |  | Diversified Financials                         |  | 14.2% |  |       |  | 10/30/23 |  |                     | $      6,000 |  |               | $ | 4,527     |               |  | $ | 4,906     |  
|Apidos CLO XIV Class E                                       |  | (h)       |  | Diversified Financials                         |  | L+440 |  |       |  | 4/15/25  |  |                     | 6,000        |  |               |   | 5,331     |               |  |   | 5,421     |  
|Ares 2012 CLO 2A Class Subord.                               |  | (h)       |  | Diversified Financials                         |  | 7.1%  |  |       |  | 10/12/23 |  |                     | 8,500        |  |               |   | 7,569     |               |  |   | 6,855     |  
|CGMS CLO 2013-3A Class E                                     |  | (h)       |  | Diversified Financials                         |  | L+525 |  |       |  | 7/15/25  |  |                     | 5,000        |  |               |   | 4,457     |               |  |   | 4,453     |  
|CGMS CLO 2013-3A Class Subord.                               |  | (h)       |  | Diversified Financials                         |  | 12.8% |  |       |  | 7/15/25  |  |                     | 22,000       |  |               |   | 20,653    |               |  |   | 23,313    |  
|Halcyon Loan Advisors Funding 2013-2 Class Subord.           |  | (h)       |  | Diversified Financials                         |  | 13.1% |  |       |  | 8/1/25   |  |                     | 15,000       |  |               |   | 13,472    |               |  |   | 15,651    |  
|JPMorgan Chase Bank, N.A. Credit-Linked Notes                |  | (h)       |  | Diversified Financials                         |  | 11.2% |  |       |  | 12/20/21 |  |                     | 76,260       |  |               |   | 76,125    |               |  |   | 76,260    |  
|Octagon CLO 2012-1A Class Income                             |  | (h)       |  | Diversified Financials                         |  | 17.7% |  |       |  | 1/15/24  |  |                     | 4,650        |  |               |   | 3,454     |               |  |   | 4,111     |  
|Wind River CLO Ltd. 2013-1A Class Subord. B                  |  | (h)       |  | Diversified Financials                         |  | 13.1% |  |       |  | 4/20/25  |  |                     | 40,720       |  |               |   | 36,677    |               |  |   | 41,130    |  
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  
|Total Collateralized Securities                              |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   | 172,265   |               |  |   | 182,100   |  
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  
|                                                             |  |           |  |                                                |  |       |  |      
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  | Numberof Shares     |              |  | Cost          |   |           | FairValue(c)  | 
|Equity/Other1.2%                                            |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |              
|A.T. Cross Co., Common Equity, Class A Units                 |  | (i)       |  | Retailing                                      |  |       |  |       |  |          |  |                     | 1,000,000    |  |               |   | 1,000     |               |  |   | 1,200     |  
|American Energy Ohio Holdings, LLC, Common Equity            |  | (i)(j)    |  | Energy                                         |  |       |  |       |  |          |  |                     | 6,743,362    |  |               |   | 6,743     |               |  |   | 6,743     |  
|Burleigh Point, Ltd., Warrants                               |  | (h)(i)    |  | Retailing                                      |  |       |  |       |  |          |  |                     | 17,256,081   |  |               |   | 1,898     |               |  |   | 4,659     |  
|CoSentry.Net, LLC, Preferred Equity                          |  | (i)       |  | Software & Services                            |  |       |  |       |  |          |  |                     | 2,632        |  |               |   | 2,500     |               |  |   | 2,500     |  
|Eastman Kodak Co., Common Equity                             |  | (i)       |  | Consumer Durables & Apparel                    |  |       |  |       |  |          |  |                     | 1,846        |  |               |   | 36        |               |  |   | 64        |  
|ERC Ireland Holdings Ltd., Warrants                          |  | (h)(i)    |  | Telecommunication Services                     |  |       |  |       |  |          |  |                     | 4,943        |  |               |   |          |               |  |   |          |  
|ERC Ireland Holdings Ltd., Common Equity                     |  | (h)(i)    |  | Telecommunication Services                     |  |       |  |       |  |          |  |                     | 21,099       |  |               |   |          |               |  |   |          |  
|Kanders C3 Holdings, LLC, Common Equity                      |  | (e)       |  | Capital Goods                                  |  |       |  |       |  |          |  |                     | 60,872       |  |               |   | 5,000     |               |  |   | 3,756     |  
|Professional Plumbing Group, Inc., Common Equity             |  | (i)       |  | Capital Goods                                  |  |       |  |       |  |          |  |                     | 3,000,000    |  |               |   | 3,000     |               |  |   | 3,000     |  
|Swift Worldwide Resources US Holdings Corp. B, Common Equity |  | (h)(i)    |  | Energy                                         |  |       |  |       |  |          |  |                     | 1,250,000    |  |               |   | 2,010     |               |  |   | 2,072     |  
|Therakos, Inc., Common Equity                                |  |           |  | Pharmaceuticals, Biotechnology & Life Sciences |  |       |  |       |  |          |  |                     | 14,366       |  |               |   | 1,478     |               |  |   | 3,834     |  
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  
|Total Equity/Other                                           |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   | 23,665    |               |  |   | 27,828    |  
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  
|TOTAL INVESTMENTS111.1%                                     |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               | $ | 2,626,969 |               |  |   | 2,655,828 |  
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  
|LIABILITIES IN EXCESS OF OTHER ASSETS(11.1%)                |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   | (264,843  | )
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  
|NET ASSETS100.0%                                            |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  | $ | 2,390,985 |  
|                                                             |  |           |  |                                                |  |       |  |       |  |          |  |                     |              |  |               |   |           |               |  |   |           |  



See
notes to unaudited consolidated financial statements.



22



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2013

(in thousands, except share amounts)









|(a) | Security may be an obligation of one or more entities affiliated with the named company.
|--- | ----------------------------------------------------------------------------------------



|(b) | Denominated in U.S. dollars unless otherwise noted.
|--- | ---------------------------------------------------



|(c) | Fair value determined by the Companys board of directors (see Note 7).
|--- | -----------------------------------------------------------------------



|(d) | Security or portion thereof held within Lehigh River LLC and is pledged as collateral supporting the amounts outstanding under the Class A Notes issued to Cobbs
Creek LLC pursuant to an indenture with Citibank, N.A., as trustee (see Note 8).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | Security or portion thereof held within Cobbs Creek LLC and is pledged as collateral supporting the obligations of Cobbs Creek LLC under the repurchase transaction with
JPMorgan Chase Bank, N.A., London Branch (see Note 8).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) | Security or portion thereof held within Cooper River LLC and is pledged as collateral supporting the obligations of Cooper River LLC under the revolving credit facility
with Citibank, N.A. (see Note 8).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | Position or portion thereof unsettled as of December 31, 2013.
|--- | --------------------------------------------------------------



|(h) | 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 a
qualifying asset, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development companys total assets. As of December 31, 2013, 79.0% of the Companys total assets represented
qualifying assets.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(i) | Security is non-income producing.
|--- | ---------------------------------



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



See
notes to unaudited consolidated financial statements.



23



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##### 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 operations on June 18, 2012 upon raising gross proceeds in excess of $2,500, or the minimum offering requirement, from sales of shares of its common stock in its continuous public
offering to persons who were not affiliated with the Company or the Companys investment adviser, FSIC II Advisor, LLC, or FSIC II Advisor, a private investment firm that is registered as an investment adviser under the Investment Advisers Act
of 1940, as amended, or the Advisers Act, and an affiliate of the Company. Prior to satisfying the minimum offering requirement, the Company had no operations except for matters relating to its organization.

The Company 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. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be treated for 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 March 31, 2014, the Company had six wholly-owned financing subsidiaries and two wholly-owned subsidiaries through which it holds interests
in certain non-controlled and non-affiliated portfolio companies. The unaudited consolidated financial statements include both the Companys accounts and the accounts of its wholly-owned subsidiaries as of March 31, 2014. 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 primarily in senior secured loans and second lien secured loans
of private U.S. companies. The Company seeks to generate superior risk-adjusted returns by focusing on debt investments in a broad array 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 through secondary market transactions in the over-the-counter market for institutional loans or directly from its target
companies as primary market investments.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance
with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of
significant accounting policies and certain other information, the Companys interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of and for the year ended
December 31, 2013 included in the Companys annual report on Form 10-K. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2014. The December 31, 2013 consolidated balance sheet and consolidated schedule of investments are derived from the Companys audited consolidated financial statements as of and for the year ended December 31, 2013.
The Company has evaluated the impact of subsequent events through the date the consolidated financial statements were issued and filed with the Securities and Exchange Commission, or the SEC.



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##### 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)



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: The Company has entered into an investment advisory and administrative services agreement with FSIC
II Advisor, dated as of February 8, 2012, or the investment advisory and administrative services agreement. Pursuant to the terms of the 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 such agreement). Such fee will equal 20.0% of the Companys incentive fee capital gains (i.e., the Companys realized capital gains on a cumulative
basis from inception, calculated as of the end of the applicable period, net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On
a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

While the investment advisory and administrative services agreement neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to
an interpretation of an American Institute of Certified Public Accountants, or AICPA, Technical Practice Aid for investment companies, the Company 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 fees that would be payable to FSIC II Advisor if the Companys entire portfolio were liquidated at its fair value as of the balance sheet date even though FSIC II Advisor
is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

In
addition, the Company historically treated all net settlement payments received by the Company pursuant to its total return swap, or TRS (which was terminated on June 13, 2013), as realized capital gains and included only the aggregate amount
of unrealized depreciation on the TRS as a whole in calculating the capital gains incentive fee payable to FSIC II Advisor with respect to realized gains, in each case, in accordance with GAAP. However, the staff of the Division of Investment
Management of the SEC, or the Staff, informed the Company that it is their interpretation of the applicable language in the Advisers Act that the Company should look through the TRS in calculating its capital gains incentive fee. Under
this look through methodology, the portion of the net settlement payments received by the Company pursuant to the TRS which would have represented net investment income to the Company had the Company held the loans or securities
underlying the TRS directly would be treated as net investment income subject to the subordinated incentive fee on income payable to FSIC II Advisor pursuant to the investment advisory and administrative services agreement, rather than as realized
capital gains in accordance with GAAP, and any unrealized depreciation on individual loans or securities underlying the TRS would further reduce the capital gains incentive fee payable to FSIC II Advisor with respect to realized gains. FSIC II
Advisor voluntarily agreed to waive any capital gains incentive fee calculated in accordance with GAAP to which it would otherwise be entitled in respect of the TRS if and to the extent that the amount of such fee exceeds the sum of (i) the
amount of capital gains incentive fee determined in respect of the TRS on a look through basis under which the Company treats the reference assets underlying the TRS as investments of the Company and (ii) the aggregate amount of
subordinated incentive fees on income



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##### 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)



which would have been payable to FSIC II Advisor with respect to the portion of the net settlement payments received by the Company pursuant to the TRS which represent net investment income on
the loans or securities underlying the TRS on a look through basis.

Reclassifications: Certain amounts in
the unaudited consolidated financial statements for the three months ended March 31, 2013 have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements for the three months ended
March 31, 2014. These reclassifications had no material impact on the Companys consolidated financial position, results of operations or cash flows as previously reported.

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, 2014 and 2013:



|                                     |  |                              |            |   |        |   |         |        |  |  |            |  |  |   |         |  
|------------------------------------ |  | ---------------------------- | ---------- | - | ------ | - | ------- | ------ |  |  | ---------- |  |  | - | ------- | -
|                                     |  | Three Months Ended March 31, |           
|                                     |  | 2014                         |            |   | 2013   |  
|                                     |  | Shares                       |            |   | Amount |   |         | Shares |  |  | Amount     | 
|Gross Proceeds from Offering         |  |                              | 46,680,052 |   |        | $ | 486,879 |        |  |  | 36,765,301 |  |  | $ | 377,083 |  
|Reinvestment of Distributions        |  |                              | 3,781,436  |   |        |   | 35,865  |        |  |  | 671,780    |  |  |   | 6,240   |  
|                                     |  |                              |            |   |        |   |         |        |  |  |            |  |  |   |         |  
|Total Gross Proceeds                 |  |                              | 50,461,488 |   |        |   | 522,744 |        |  |  | 37,437,081 |  |  |   | 383,323 |  
|Commissions and Dealer Manager Fees  |  |                              |           |   |        |   | (44,484 | )      |  |  |           |  |  |   | (35,299 | )
|                                     |  |                              |            |   |        |   |         |        |  |  |            |  |  |   |         |  
|Net Proceeds to Company              |  |                              | 50,461,488 |   |        |   | 478,260 |        |  |  | 37,437,081 |  |  |   | 348,024 |  
|Share Repurchase Program             |  |                              | (135,094   | ) |        |   | (1,277  | )      |  |  |           |  |  |   |        |  
|                                     |  |                              |            |   |        |   |         |        |  |  |            |  |  |   |         |  
|Net Proceeds from Share Transactions |  |                              | 50,326,394 |   |        | $ | 476,983 |        |  |  | 37,437,081 |  |  | $ | 348,024 |  
|                                     |  |                              |            |   |        |   |         |        |  |  |            |  |  |   |         |  

Public Offering of Shares

In March 2014, the Company closed its continuous public offering of shares of common stock to new investors. The Company sold 302,266,066 shares of common stock for gross proceeds of $3,112,692 in its
continuous public offering, including shares issued pursuant to its distribution reinvestment plan. Following the closing of its continuous public offering, the Company has continued to issue shares pursuant to its distribution reinvestment plan. As
of May 12, 2014, the Company had sold a total of 306,391,791 shares of common stock and raised total gross proceeds of $3,150,710, including $200 of seed capital contributed by the principals of FSIC II Advisor in December 2011 and $18,395 in
proceeds raised from the principals of FSIC II Advisor, other individuals and entities affiliated with FSIC II Advisor, certain members of the Companys board of directors and certain individuals and entities affiliated with GSO / Blackstone
Debt Funds Management LLC, or GDFM, the Companys investment sub-adviser, in a private placement completed in June 2012 (See Note 4).

During the three months ended March 31, 2014 and 2013, the Company sold 50,461,488 and 37,437,081 shares of common stock for gross proceeds of $522,744 and $383,323, respectively, at an average price
per share of $10.36 and $10.24, respectively. The gross proceeds received during the three months ended March 31, 2014 and 2013 include reinvested stockholder distributions of $35,865 and $6,240, respectively, for which the



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##### 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)



Company issued 3,781,436 and 671,780 shares of common stock, respectively. During the period from April 1, 2014 to May 12, 2014, the Company issued 1,073,661 shares of common stock
pursuant to its distribution reinvestment plan for gross proceeds of $10,242 at a price per share of $9.54.

The proceeds from
the issuance of common stock as presented on the Companys unaudited consolidated statements of changes in net assets and unaudited consolidated statements of cash flows are presented net of selling commissions and dealer manager fees of
$44,484 and $35,299 for the three months ended March 31, 2014 and 2013, respectively.

Share Repurchase Program

The Company intends 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);
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ----------------------------------------

The Company currently intends to limit the number of shares of common stock to be repurchased during any calendar year to the number of shares of common stock it can repurchase with the proceeds it
receives from the issuance of shares of common stock under its distribution reinvestment plan. 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. In addition, the Company will limit the number of shares of common stock to be repurchased in any calendar year to 10% of the weighted
average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each quarter, though the actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above.

On February 24, 2014, the Company amended the terms of its share repurchase program. The amendment to the share
repurchase program will be effective as of the Companys quarterly repurchase offer for the second quarter of 2014, which the Company expects will commence in May 2014. Prior to the amendment of the share repurchase program, the Company offered
to repurchase shares of common stock on each date of repurchase at a price equal to 90% of the share price in effect on the date of repurchase. Under the amended share repurchase program, the Company intends to offer to repurchase shares of common
stock on each date of repurchase at a price equal to the price at which shares of common stock are issued pursuant to the Companys distribution reinvestment plan on the distribution date coinciding with the applicable share repurchase date.
The repurchase price will be determined by the Companys board of directors or a committee thereof, in its sole discretion, and will be (i) not less than the net asset value per share of the Companys common stock (as determined in
good



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 3. Share Transactions (continued)



faith by the Companys board of directors or a committee thereof, in its sole discretion) immediately prior to the repurchase date and (ii) not more than 2.5% greater than the net asset
value per share as of such date.

The Companys board of directors may amend, suspend or terminate the share repurchase
program at any time upon 30 days notice. The first such tender offer commenced in August 2012, and the repurchase occurred in connection with the Companys October 1, 2012 semi-monthly closing.

The following table provides information concerning the Companys repurchases of shares of common stock pursuant to its share
repurchase program during the three months ended March 31, 2014 and 2013:



|                           |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                             |       |  |  |   |       | 
|-------------------------- |  | --------------- | --------------- |  | ----------------- |  | ------- | ----------------------------------------------- |  |  | ------------------------ | - |  | ------------------------------------------- | ----- |  |  | - | ----- | 
|For the Three Months Ended |  | Repurchase Date |                 |  | SharesRepurchased |  |         | Percentageof SharesTenderedThat WereRepurchased |  |  | RepurchasePrice PerShare |   |  | AggregateConsiderationfor RepurchasedShares |      
|Fiscal 2013                |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                             |       |  |  |   |       | 
|December 31, 2012(1)       |  |                 | January 2, 2013 |  |                   |  |        |                                                 |  |  |                         |   |  | $                                           | 9.225 |  |  |   |      | 
|Fiscal 2014                |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                             |       |  |  |   |       | 
|December 31, 2013          |  |                 | January 2, 2014 |  |                   |  | 135,094 |                                                 |  |  | 100                      | % |  | $                                           | 9.450 |  |  | $ | 1,277 | 



|(1) | No shares were tendered for repurchase in connection with the quarterly tender offer.
|--- | -------------------------------------------------------------------------------------

On April 1, 2014, the Company repurchased 372,394 shares of common stock (representing 100% of the shares of common stock tendered
for repurchase) at $9.54 per share for aggregate consideration totaling $3,553.

Note 4. Related Party Transactions

Compensation of the Investment Adviser and Dealer Manager

Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor is entitled to an annual base management fee of 2.0% of the average value of the Companys gross assets and
an incentive fee based on the Companys performance. The Company commenced accruing fees under the investment advisory and administrative services agreement on June 18, 2012, upon commencement of the Companys operations. Management
fees are paid on a quarterly basis in arrears.

The incentive fee consists of two parts. The first part, which is referred to
as the subordinated incentive fee on income, is calculated and payable quarterly in arrears, equals 20.0% of 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, as defined in the investment advisory and administrative services agreement, equal to 1.875% per quarter, or an annualized hurdle rate of 7.5%. As a result, FSIC II 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 1.875%. Once the Companys pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FSIC II
Advisor will be entitled to a catch-up fee equal to the amount of the 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
2.34375%, or 9.375% annually, of adjusted capital. This catch-up feature allows FSIC II Advisor to recoup the fees foregone as a result of the existence of the hurdle rate. Thereafter, FSIC II Advisor will receive 20.0% of pre-incentive
fee net investment income.



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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 second part of the incentive fee, which is referred to as 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 investment advisory and administrative services agreement). This fee equals 20.0% of the Companys incentive fee capital gains,
which equal the Companys realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis,
less the aggregate amount of any previously paid capital gains incentive fees. The Company accrues for the capital gains incentive fee, which, if earned, is paid annually. The Company accrues the capital gains incentive fee based on net realized and
unrealized gains; however, under the terms of the investment advisory and administrative services agreement, the fee payable to FSIC II Advisor is based on realized gains and no such fee is payable with respect to unrealized gains unless and until
such gains are actually realized. See Note 2 for a discussion of the treatment of the TRS with respect to the calculation of the capital gains incentive fee.

The Company reimburses FSIC II Advisor 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) FSIC II 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.
FSIC II Advisor is required to allocate the cost of such services to the Company based on factors such as assets, revenues, time allocations and/or other reasonable metrics. The Companys board of directors then assesses the reasonableness of
such reimbursements 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 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 FSIC II Advisor for
such services as a percentage of the Companys net assets to the same ratio as reported by other comparable BDCs.

Franklin Square Holdings, L.P., or Franklin Square Holdings, the Companys sponsor and an affiliate of FSIC II Advisor, has funded
certain of the Companys offering costs and organization costs. These costs have been recorded by the Company as a contribution to capital. The offering costs were offset against capital in excess of par value on the consolidated financial
statements and the organization costs were charged to expense as incurred by the Company. Under the terms of the investment advisory and administrative services agreement, upon satisfaction of the minimum offering requirement, FSIC II Advisor became
entitled to receive 1.5% of gross proceeds raised in the Companys continuous public offering until all offering and organization costs funded by FSIC II Advisor or its affiliates (including Franklin Square Holdings) had been recovered. On
June 18, 2012, the Company satisfied the minimum offering requirement. During the three months ended March 31, 2014 and 2013, Franklin Square Holdings did not fund any of the Companys offering and organization costs, and the Company
did not pay any reimbursements to FSIC II Advisor and its affiliates for offering and organization costs previously funded.

The dealer manager for the Companys continuous public offering was
FS2Capital Partners, LLC, or FS2, which is one of the Companys affiliates. Under the dealer
manager agreement among the Company, FSIC II Advisor and
FS2, FS2was entitled to receive sales commissions and dealer manager fees in
connection with the sale of shares of common stock in the Companys continuous public offering, all or a portion of which were re-allowed to selected broker-dealers.



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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 accrued under the investment
advisory and administrative services agreement and the dealer manager agreement during the three months ended March 31, 2014 and 2013:



|                |  |                                                           |  |                                      |  |                             |        |  |      |   |       | 
|--------------- |  | --------------------------------------------------------- |  | ------------------------------------ |  | --------------------------- | ------ |  | ---- | - | ----- | 
|                |  |                                                           |  |                                      |  | Three Months EndedMarch 31, |       
|Related Party   |  | Source Agreement                                          |  | Description                          |  | 2014                        |        |  | 2013 |  
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Base Management Fee(1)               |  | $                           | 17,641 |  |      | $ | 4,985 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Capital Gains Incentive 
Fee(2)      |  | $                           | 5,934  |  |      | $ | 3,859 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Administrative Services 
Expenses(3) |  | $                           | 1,374  |  |      | $ | 461   | 
|FS2             |  | Dealer Manager Agreement                                  |  | Dealer Manager Fee(4)                |  | $                           | 8,821  |  |      | $ | 6,817 | 



|(1) | During the three months ended March 31, 2014 and 2013, $15,013 and $0, respectively, in base management fees were paid to FSIC II Advisor. As of March 31, 2014,
$17,641 in base management fees were payable to FSIC II Advisor.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | During the three months ended March 31, 2014 and 2013, the Company accrued capital gains incentive fees of $5,934 and $3,859, respectively, based on the
performance of its portfolio, of which $5,934 and $3,680, respectively, was based on unrealized gains and $0 and $179, respectively, was based on realized gains. No capital gains incentive fees are actually payable by the Company with respect to
unrealized gains unless and until those gains are actually realized. See Note 2 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fee. Effective as of March 31, 2013, FSIC II Advisor
voluntarily agreed to waive any capital gains incentive fees calculated in accordance with GAAP to the extent such fees exceeded those which would be payable in accordance with the look through methodology described more fully in Note 2.
This waiver resulted in a reduction of $441 to the amount of capital gains incentive fees payable to FSIC II Advisor with respect to realized gains. Accordingly, the Company reduced the amount of accrued capital gains incentive fees payable to FSIC
II Advisor by $441 effective as of March 31, 2013. The Company did not pay any capital gains incentive fees to FSIC II Advisor during the three months ended March 31, 2014 or 2013. As of March 31, 2014, the Company had
accrued capital gains incentive fees of $15,168 based on the performance of its portfolio, all of which was based on unrealized gains and none of which is currently payable to FSIC II Advisor.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | During the three months ended March 31, 2014 and 2013, $1,288 and $390, 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 Advisor and the remainder related to other reimbursable expenses. The Company paid $214 and $176, respectively, in administrative services expenses to FSIC II Advisor
during the three months ended March 31, 2014 and 2013.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Represents aggregate dealer manager fees retained by FS2and not re-allowed to selected broker-dealers.
|--- | ------------------------------------------------------------------------------------------------------



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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)



Capital Contribution by FSIC II Advisor and GDFM

In December 2011, Michael C. Forman and David J. Adelman, the principals of FSIC II Advisor, contributed an aggregate of $200 to purchase
22,222 shares of common stock at $9.00 per share, which represents the initial public offering price of $10.00 per share, net of selling commissions and dealer manager fees. The principals have agreed not to tender these shares of common stock for
repurchase as long as FSIC II Advisor remains the Companys investment adviser.

In June 2012, pursuant to a private
placement, Messrs. Forman and Adelman agreed to purchase, through affiliated entities controlled by each of them, 222,222 additional shares of common stock at $9.00 per share. The principals have agreed not to tender these shares of common
stock for repurchase as long as FSIC II Advisor remains the Companys investment adviser. In connection with the same private placement, certain members of the Companys board of directors and other individuals and entities affiliated with
FSIC II Advisor agreed to purchase 1,247,267 shares of common stock, and certain individuals and entities affiliated with GDFM agreed to purchase 574,444 shares of common stock, in each case at a price of $9.00 per share. In connection with the
private placement, the Company issued an aggregate of 2,043,933 shares of common stock for aggregate proceeds of $18,395 upon satisfaction of the minimum offering requirement on June 18, 2012. As of May 12, 2014, the Company has sold an
aggregate of 3,272,745 shares of common stock for aggregate gross proceeds of $29,912 to members of the Companys board of directors and individuals and entities affiliated with FSIC II Advisor and GDFM, including shares of common stock sold to
Messrs. Forman and Adelman in December 2011 and shares sold in the private placement completed in June 2012.

Potential Conflicts of
Interest

FSIC II Advisors senior management team is comprised of substantially the same personnel as the senior
management teams of FB Income Advisor, LLC, FS Investment Advisor, LLC, FSIC III Advisor, LLC and FS Global Advisor, LLC, the investment advisers to Franklin Square Holdings other affiliated BDCs and affiliated closed-end management investment
company. As a result, such personnel provide investment advisory services to the Company and each of FS Investment Corporation, FS Energy and Power Fund, FS Investment Corporation III and FS Global Credit Opportunities Fund. While none of FSIC II
Advisor, FB Income Advisor, LLC, FS Investment Advisor, LLC, FSIC III Advisor, LLC or FS Global Advisor, LLC is currently making private corporate debt investments for clients other than the Company, FS Investment Corporation, FS Energy and Power
Fund, FS Investment Corporation III or FS Global Credit Opportunities Fund, respectively, any, or all, may do so in the future. In the event that FSIC II Advisor undertakes to provide investment advisory services to other clients in the future, it
intends to allocate investment opportunities in a fair and equitable manner consistent with the Companys investment objectives and strategies, if necessary, so that the Company will not be disadvantaged in relation to any other client of FSIC
II Advisor or its management team. In addition, even in the absence of FSIC II Advisor retaining additional clients, it is possible that some investment opportunities may be provided to FS Investment Corporation, FS Energy and Power Fund, FS
Investment Corporation III and/or FS Global Credit Opportunities Fund rather than to the Company.

Exemptive Relief

In an order dated June 4, 2013, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain
conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FSIC II Advisor, including FS Investment Corporation, FS Energy and Power Fund, FS Investment



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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)



Corporation III and any future BDCs that are advised by FSIC II Advisor or its affiliated investment advisers, or, collectively, the Companys co-investment affiliates. The Company believes
this relief may not only enhance its ability to further its investment objectives and strategies, but may also increase favorable investment opportunities for the Company, in part by allowing it to participate in larger investments, together with
the Companys co-investment affiliates, than would be available to it if it had not obtained such relief. Because the Company did not seek exemptive relief to engage in co-investment transactions with GDFM and its affiliates, it will continue
to be permitted to co-invest with GDFM and its affiliates only in accordance with existing regulatory guidance.

Expense Reimbursement

Pursuant to an expense support and conditional reimbursement agreement, dated as of May 10, 2012 and amended and
restated as of May 16, 2013, or, as amended and restated, the expense reimbursement agreement, Franklin Square Holdings has agreed to reimburse the Company for expenses in an amount that is sufficient to ensure that no portion of the
Companys distributions to stockholders will be paid from its offering proceeds or borrowings. However, because certain investments the Company may make, including preferred and common equity investments, may generate dividends and other
distributions to the Company that are treated for tax purposes as a return of capital, a portion of the Companys distributions to stockholders may also be deemed to constitute a return of capital for tax purposes to the extent that the Company
may use such dividends or other distribution proceeds to fund its distributions to stockholders. Under those circumstances, Franklin Square Holdings will not reimburse the Company for the portion of such distributions to stockholders that represent
a return of capital for tax purposes, as the purpose of the expense reimbursement arrangement is not to prevent tax-advantaged distributions to stockholders.

Under the expense reimbursement agreement, Franklin Square Holdings will reimburse the Company for expenses in an amount equal to the difference between the Companys cumulative distributions paid to
its stockholders in each quarter, less the sum of its net investment income for tax purposes, net capital gains and dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies
(to the extent such amounts are not included in net investment income or net capital gains for tax purposes) in each quarter.

Pursuant to the expense reimbursement agreement, the Company has a conditional obligation to reimburse Franklin Square Holdings for any
amounts funded by Franklin Square Holdings under such agreement if (and only to the extent that), during any fiscal quarter occurring within three years of the date on which Franklin Square Holdings funded such amount, the sum of the Companys
net investment income for tax purposes, net capital gains and the amount of any dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent not included in net
investment income or net capital gains for tax purposes) exceeds the distributions paid by the Company to stockholders; provided, however, that (i) the Company will only reimburse Franklin Square Holdings for expense support payments made by
Franklin Square Holdings with respect to any calendar quarter beginning on or after July 1, 2013 to the extent that the payment of such reimbursement (together with any other reimbursement paid during such fiscal year) does not cause
other operating expenses (as defined below) (on an annualized basis and net of any expense support payments received by the Company during such fiscal year) to exceed the lesser of (A) 1.75% of the Companys average net assets
attributable to its shares of common stock for the fiscal year-to-date period after taking such payments into account and (B) the percentage of the Companys average net assets



32



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##### Table of Contents

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)



attributable to its shares of common stock represented by other operating expenses during the fiscal year in which such expense support payment from Franklin Square Holdings was made
(provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from Franklin Square Holdings made during the same fiscal year) and (ii) the Company will not reimburse
Franklin Square Holdings for expense support payments made by Franklin Square Holdings if the aggregate amount of distributions per share declared by the Company in such calendar quarter is less than the aggregate amount of distributions per share
declared by the Company in the calendar quarter in which Franklin Square Holdings made the expense support payment to which such reimbursement relates. Other operating expenses means the Companys total operating
expenses (as defined below), excluding base management fees, incentive fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. Operating expenses means
all operating costs and expenses incurred, as determined in accordance with GAAP for investment companies.

The Company or
Franklin Square Holdings may terminate the expense reimbursement agreement at any time. The specific amount of expenses reimbursed by Franklin Square Holdings, if any, will be determined at the end of each quarter. Upon termination of the expense
reimbursement agreement by Franklin Square Holdings, Franklin Square Holdings will be required to fund any amounts accrued thereunder as of the date of termination. Similarly, the Companys conditional obligation to reimburse Franklin Square
Holdings pursuant to the terms of the expense reimbursement agreement shall survive the termination of such agreement by either party.

Franklin Square Holdings is controlled by the Companys chairman, president and chief executive officer, Michael C. Forman, and its vice-chairman, David J. Adelman. There can be no assurance that the
expense reimbursement agreement will remain in effect or that Franklin Square Holdings will reimburse any portion of the Companys expenses in future quarters.

As of December 31, 2012, the Company had $1,635 of reimbursements due from Franklin Square Holdings. In connection with FSIC II Advisors voluntary agreement to waive $441 of accrued but unpaid
capital gains incentive fees, a corresponding reduction was made to the amount of accrued expense reimbursements due from Franklin Square Holdings. During the three months ended March 31, 2013, this balance was offset against expense recoupment
payable to sponsor. For the three months ended March 31, 2013, the Company accrued an expense recoupment payable to sponsor of $2,041, which the Company offset against the reimbursements due on the Companys consolidated balance sheet as
of December 31, 2012. As of March 31, 2014, no further amounts remained subject to repayment by the Company to Franklin Square Holdings in the future.

Note 5. Distributions

The following table reflects the cash
distributions per share that the Company has declared and paid on its common stock during the three months ended March 31, 2014 and 2013:



|                           |  |              |        |  |        |   |        | 
|-------------------------- |  | ------------ | ------ |  | ------ | - | ------ | 
|                           |  | Distribution |       
|For the Three Months Ended |  | Per Share    |        |  | Amount |  
|Fiscal 2013                |  |              |        |  |        |   |        | 
|March 31, 2013             |  | $            | 0.1871 |  |        | $ | 14,791 | 
|Fiscal 2014                |  |              |        |  |        |   |        | 
|March 31, 2014             |  | $            | 0.1740 |  |        | $ | 49,274 | 



33



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##### 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)



Prior to the closing of the Companys continuous public offering in March 2014, the
Company authorized and declared ordinary cash distributions on a weekly or semi-monthly basis and paid such distributions on a monthly basis. In connection with the closing of its continuous public offering, the Company expects to declare ordinary
cash distributions on a monthly basis and pay such distributions on either a monthly or quarterly basis. On April 2, 2014, the Companys board of directors declared a regular monthly cash distribution of $0.06283 per share, which was paid
on April 30, 2014 to stockholders of record on April 29, 2014. On May 6, 2014, the Companys board of directors declared a regular monthly cash distribution of $0.06283 per share, which will be paid on May 30, 2014 to
stockholders of record on May 29, 2014. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Companys board of directors.

The Company has adopted an opt in distribution reinvestment plan for its stockholders. As a result, if the Company makes a
cash distribution, its stockholders will receive distributions in cash unless they specifically opt in to the distribution reinvestment plan so as to have their cash distributions reinvested in additional shares of the Companys
common stock. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a stockholders ability to participate in the distribution reinvestment plan.

The Company may fund its cash distributions to stockholders from any sources of funds legally available to it, including proceeds from
the sale of shares of the Companys common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to
the Company on account of preferred and common equity investments in portfolio companies and expense reimbursements from Franklin Square Holdings. The Company has not established limits on the amount of funds it may use from available sources to
make distributions.

For a period of time following commencement of the Companys continuous public offering, substantial
portions of the Companys distributions were funded through the reimbursement of certain expenses by Franklin Square Holdings and its affiliates, including through the waiver of certain investment advisory fees by FSIC II Advisor, that were
subject to repayment by the Company within three years. The purpose of this arrangement was to ensure that no portion of the Companys distributions to stockholders was paid from offering proceeds or borrowings. Any such distributions funded
through expense reimbursements or waivers of advisory fees were not based on the Companys investment performance. No portion of the distributions paid during the three months ended March 31, 2014 or 2013 was funded through the
reimbursement of operating expenses by Franklin Square Holdings. However, the Companys repayment of amounts previously reimbursed or waived by Franklin Square Holdings and its affiliates reduced the distributions that stockholders may
otherwise have received during the three months ended March 31, 2013. During the three months ended March 31, 2014, the Company did not repay any amounts to Franklin Square Holdings for expenses previously reimbursed or waived. There can be no
assurance that the Company will continue to achieve the performance necessary to sustain its distributions or that the Company will be able to pay distributions at a specific rate or at all. Franklin Square Holdings and its affiliates have no
obligation to waive advisory fees or otherwise reimburse expenses in future periods.



34



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##### 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)



The following table reflects the sources of the cash distributions on a tax basis that
the Company has paid on its common stock during the three months ended March 31, 2014 and 2013:



|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|--------------------------------------------------------- |  | ---------------------------- | ------ |  | ---------- |  | --- | ------------------ |  | - | ---------- |  |  |  | --- | -
|                                                          |  | Three Months Ended March 31, |       
|                                                          |  | 2014                         |        |  | 2013       | 
|Source of Distribution                                    |  | DistributionAmount           |        |  | Percentage |  |     | DistributionAmount |  |   | Percentage | 
|Offering proceeds                                         |  | $                            |       |  |            |  |    |                    |  | $ |           |  |  |  |    |  
|Borrowings                                                |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Net investment income(1)                                  |  |                              | 49,274 |  |            |  | 100 | %                  |  |   | 13,016     |  |  |  | 88  | %
|Short-term capital gains proceeds from the sale of assets |  |                              |       |  |            |  |    |                    |  |   | 1,775      |  |  |  | 12  | %
|Long-term capital gains proceeds from the sale of assets  |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Non-capital gains proceeds from the sale of assets        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Distributions on account of preferred and common equity   |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Expense reimbursement from sponsor                        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|Total                                                     |  | $                            | 49,274 |  |            |  | 100 | %                  |  | $ | 14,791     |  |  |  | 100 | %
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  



|(1) | During the three months ended March 31, 2014 and 2013, 93.3% and 91.6%, respectively, of the Companys gross investment income was attributable to cash
interest earned, 4.9% and 8.4%, respectively, was attributable to non-cash accretion of discount and 1.8% and 0.0%, respectively, was attributable to paid-in-kind, or PIK, interest.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys net investment income on a tax basis for the three months ended March 31, 2014 and 2013 was $52,415 and $13,275,
respectively. As of March 31, 2014 and December 31, 2013, the Company had $14,908 and $7,638, respectively, of undistributed net investment income and realized gains on a tax basis.

The difference between the Companys GAAP-basis net investment income and its tax-basis net investment income is primarily due to
the reversal of the required accrual for GAAP purposes of incentive fees on unrealized gains even though no such incentive fees on unrealized gains are payable by the Company, the reclassification of unamortized original issue discount recognized
upon prepayment of loans from income for GAAP purposes to realized gains for tax purposes and, with respect to the three months ended March 31, 2013, the inclusion of a portion of the periodic net settlement payments due on the Companys
total return swap in tax-basis net investment income.



35



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##### 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)



The following table sets forth a reconciliation between GAAP-basis net investment income
and tax-basis net investment income during the three months ended March 31, 2014 and 2013:



|                                                                      |  |                             |        |   |      |   |        |  
|--------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                      |  | Three Months EndedMarch 31, |       
|                                                                      |  | 2014                        |        |   | 2013 |  
|GAAP-basis net investment income                                      |  | $                           | 47,700 |   |      | $ | 3,336  |  
|Reversal of incentive fee accrual on unrealized gains                 |  |                             | 5,934  |   |      |   | 3,680  |  
|Reclassification of unamortized original issue discount               |  |                             | (1,616 | ) |      |   | (168   | )
|Tax-basis net investment income portion of total return swap payments |  |                             |       |   |      |   | 6,318  |  
|Other miscellaneous differences                                       |  |                             | 397    |   |      |   | 109    |  
|                                                                      |  |                             |        |   |      |   |        |  
|Tax-basis net investment income                                       |  | $                           | 52,415 |   |      | $ | 13,275 |  
|                                                                      |  |                             |        |   |      |   |        |  

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 March 31, 2014 and December 31, 2013, the components of accumulated earnings on a tax basis were as follows:



|                                                                                               |  |                           |         |   |                  |   |        |  
|---------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---------------- | - | ------ | -
|                                                                                               |  | March 31, 2014(Unaudited) |         |   | December 31,2013 |  
|Distributable ordinary income (income and short-term capital gains)                            |  | $                         | 13,788  |   |                  | $ | 7,389  |  
|Distributable realized gains (long-term capital gains)                                         |  |                           | 1,120   |   |                  |   | 249    |  
|Incentive fee accrual on unrealized gains                                                      |  |                           | (15,168 | ) |                  |   | (9,234 | )
|Unamortized organization costs                                                                 |  |                           | (200    | ) |                  |   | (203   | )
|Net unrealized appreciation (depreciation) on investments and gain/loss on foreign currency(1) |  |                           | 55,645  |   |                  |   | 28,586 |  
|                                                                                               |  |                           |         |   |                  |   |        |  
|                                                                                               |  | $                         | 55,185  |   |                  | $ | 26,787 |  
|                                                                                               |  |                           |         |   |                  |   |        |  



|(1) | As of March 31, 2014 and December 31, 2013, the gross unrealized appreciation on the Companys investments and gain on foreign currency was $81,878 and
$61,822, respectively. As of March 31, 2014 and December 31, 2013, the gross unrealized depreciation on the Companys investments and loss on foreign currency was $26,233 and $33,236, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The aggregate cost of the Companys investments for federal income tax purposes totaled $3,251,741 and $2,627,242 as of
March 31, 2014 and December 31, 2013, respectively. The aggregate net unrealized appreciation (depreciation) on a tax basis was $55,645 and $28,586 as of March 31, 2014 and December 31, 2013, respectively.



36



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 6. Investment Portfolio

The following table summarizes the composition of the Companys investment portfolio at cost and fair value as of March 31, 2014
and December 31, 2013:



|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|-------------------------------- |  | ------------------------- | --------- |  | ----------------- | - | --------- | ----------------------- |  |  | ---------------- | - |  | ---------- | --------- |  | ----------------------- | - | --------- |  |  |  | --- | -
|                                 |  | March 31, 2014(Unaudited) |           |  | December 31, 2013 |  
|                                 |  | AmortizedCost(1)          |           |  | Fair Value        |   |           | Percentageof 
Portfolio |  |  | AmortizedCost(1) |   |  | Fair Value |           |  | Percentageof 
Portfolio |  
|Senior Secured LoansFirst Lien  |  | $                         | 1,591,946 |  |                   | $ | 1,611,474 |                         |  |  | 49               | % |  | $          | 1,249,333 |  |                         | $ | 1,268,093 |  |  |  | 48  | %
|Senior Secured LoansSecond Lien |  |                           | 848,955   |  |                   |   | 865,565   |                         |  |  | 26               | % |  |            | 684,825   |  |                         |   | 697,240   |  |  |  | 26  | %
|Senior Secured Bonds             |  |                           | 295,699   |  |                   |   | 287,652   |                         |  |  | 9                | % |  |            | 218,575   |  |                         |   | 203,927   |  |  |  | 8   | %
|Subordinated Debt                |  |                           | 290,307   |  |                   |   | 298,971   |                         |  |  | 9                | % |  |            | 278,306   |  |                         |   | 276,640   |  |  |  | 10  | %
|Collateralized Securities        |  |                           | 167,728   |  |                   |   | 180,013   |                         |  |  | 5                | % |  |            | 172,265   |  |                         |   | 182,100   |  |  |  | 7   | %
|Equity/Other                     |  |                           | 56,833    |  |                   |   | 63,711    |                         |  |  | 2                | % |  |            | 23,665    |  |                         |   | 27,828    |  |  |  | 1   | %
|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|                                 |  | $                         | 3,251,468 |  |                   | $ | 3,307,386 |                         |  |  | 100              | % |  | $          | 2,626,969 |  |                         | $ | 2,655,828 |  |  |  | 100 | %
|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  



|(1) | Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2014, the Company did not control and was not an affiliate of any
of its portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, the Company would be presumed to control a portfolio company if it owned 25% or more of its voting securities and would be an
affiliate of a portfolio company if it owned 5% or more of its voting securities.

The Companys investment
portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As
of March 31, 2014, the Company had five senior secured loan investments with aggregate unfunded commitments of $135,458 and one equity/other investment, American Energy Ohio Holdings, LLC, with an unfunded commitment of $3,076. As of
December 31, 2013, the Company had five senior secured loan investments with aggregate unfunded commitments of $66,687 and one equity/other investment, American Energy Ohio Holdings, LLC, with an unfunded commitment of $6,157. The Company
maintains sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.



37



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 6. Investment Portfolio (continued)



The table below describes investments by industry classification and enumerates the
percentage, by fair value, of the total portfolio assets in such industries as of March 31, 2014 and December 31, 2013:



|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|---------------------------------------------- |  | ------------------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                                               |  | March 31, 2014(Unaudited) |           |  | December 31, 2013       | 
|Industry Classification                        |  | Fair Value                |           |  | Percentageof 
Portfolio |  |     | Fair Value |  |   | Percentageof 
Portfolio | 
|Automobiles & Components                       |  | $                         | 168,663   |  |                         |  | 5   | %          |  | $ | 53,195                  |  |  |  | 2   | %
|Capital Goods                                  |  |                           | 433,830   |  |                         |  | 13  | %          |  |   | 199,070                 |  |  |  | 8   | %
|Commercial & Professional Services             |  |                           | 50,076    |  |                         |  | 2   | %          |  |   | 44,881                  |  |  |  | 2   | %
|Consumer Durables & Apparel                    |  |                           | 150,614   |  |                         |  | 5   | %          |  |   | 144,211                 |  |  |  | 5   | %
|Consumer Services                              |  |                           | 458,414   |  |                         |  | 14  | %          |  |   | 401,187                 |  |  |  | 15  | %
|Diversified Financials                         |  |                           | 196,869   |  |                         |  | 6   | %          |  |   | 200,485                 |  |  |  | 8   | %
|Energy                                         |  |                           | 443,471   |  |                         |  | 14  | %          |  |   | 417,589                 |  |  |  | 16  | %
|Food & Staples Retailing                       |  |                           | 3,753     |  |                         |  | 0   | %          |  |   | 1,181                   |  |  |  | 0   | %
|Food, Beverage & Tobacco                       |  |                           | 10,203    |  |                         |  | 0   | %          |  |   | 10,245                  |  |  |  | 0   | %
|Health Care Equipment & Services               |  |                           | 131,554   |  |                         |  | 4   | %          |  |   | 133,025                 |  |  |  | 5   | %
|Household & Personal Products                  |  |                           |          |  |                         |  |    |            |  |   | 5,000                   |  |  |  | 0   | %
|Insurance                                      |  |                           | 109,214   |  |                         |  | 3   | %          |  |   | 86,466                  |  |  |  | 3   | %
|Materials                                      |  |                           | 145,573   |  |                         |  | 4   | %          |  |   | 138,777                 |  |  |  | 5   | %
|Media                                          |  |                           | 130,159   |  |                         |  | 4   | %          |  |   | 101,071                 |  |  |  | 4   | %
|Pharmaceuticals, Biotechnology & Life Sciences |  |                           | 79,176    |  |                         |  | 2   | %          |  |   | 78,001                  |  |  |  | 3   | %
|Real Estate                                    |  |                           | 8,102     |  |                         |  | 0   | %          |  |   | 8,171                   |  |  |  | 0   | %
|Retailing                                      |  |                           | 202,528   |  |                         |  | 6   | %          |  |   | 194,817                 |  |  |  | 7   | %
|Software & Services                            |  |                           | 236,513   |  |                         |  | 7   | %          |  |   | 181,024                 |  |  |  | 7   | %
|Technology Hardware & Equipment                |  |                           | 157,640   |  |                         |  | 5   | %          |  |   | 104,293                 |  |  |  | 4   | %
|Telecommunication Services                     |  |                           | 165,406   |  |                         |  | 5   | %          |  |   | 129,704                 |  |  |  | 5   | %
|Transportation                                 |  |                           | 24,155    |  |                         |  | 1   | %          |  |   | 21,964                  |  |  |  | 1   | %
|Utilities                                      |  |                           | 1,473     |  |                         |  | 0   | %          |  |   | 1,471                   |  |  |  | 0   | %
|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total                                          |  | $                         | 3,307,386 |  |                         |  | 100 | %          |  | $ | 2,655,828               |  |  |  | 100 | %
|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  

Note 7. Fair Value of Financial Instruments

Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to
transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes that valuation techniques maximize the use of observable market inputs and
minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are
inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market
participants would use in pricing an asset or liability developed based on the best information available in the circumstances.



38



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##### 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)



The Company classifies the inputs used to measure these fair values into the following
hierarchy as defined by current accounting guidance:

Level 1: Inputs that are quoted prices (unadjusted) in active
markets for identical assets or liabilities.

Level 2: Inputs that are quoted prices for similar assets or liabilities
in active markets.

Level 3: Inputs that are unobservable for an asset or liability.

A financial instruments categorization within the valuation hierarchy is based upon the lowest level of input that is significant
to the fair value measurement.

As of March 31, 2014 and December 31, 2013, the Companys investments were
categorized as follows in the fair value hierarchy:



|                                            |  |                           |           |  |                   |   |           | 
|------------------------------------------- |  | ------------------------- | --------- |  | ----------------- | - | --------- | 
|Valuation Inputs                            |  | March 31, 2014(Unaudited) |           |  | December 31, 2013 |  
|Level 1Price quotations in active markets  |  | $                         | 2,641     |  |                   | $ | 64        | 
|Level 2Significant other observable inputs |  |                           |          |  |                   |   |          | 
|Level 3Significant unobservable inputs     |  |                           | 3,304,745 |  |                   |   | 2,655,764 | 
|                                            |  |                           |           |  |                   |   |           | 
|                                            |  | $                         | 3,307,386 |  |                   | $ | 2,655,828 | 
|                                            |  |                           |           |  |                   |   |           | 

The Companys investments as of March 31, 2014 consisted primarily of debt securities that are
traded on a private over-the-counter market for institutional investors. Except as described below, the Company valued its investments 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. Sixteen senior secured loan investments, one senior secured bond investment and one collateralized security, for which broker quotes were not
available, were valued by an independent valuation firm, which determined 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 and other relevant terms of the debt. Except as described below, all of the Companys equity/other investments were valued by the same independent valuation firm, which
determined 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. One senior secured loan investment and one equity/other investment, both of which were newly-issued and purchased near March 31, 2014,
were valued at cost, as the Companys board of directors determined that the cost of each such investment was the best indication of its fair value. Also, two equity/other investments which were traded on active public markets were valued at
their closing price as of March 31, 2014 and two equity/other investments were valued by an independent third-party pricing service in the manner described above.

The Companys investments as of December 31, 2013 consisted primarily of debt securities that are traded on a private over-the-counter market for institutional investors. Except as described
below, the Company valued its investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant



39



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##### 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)



period end, which were provided by independent third-party pricing services and screened for validity by such services. Thirteen senior secured loan investments and one collateralized security,
for which broker quotes were not available, were valued by an independent valuation firm, which determined 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 and other relevant terms of the debt. Except as described below, all of the Companys equity/other investments were valued by the same independent
valuation firm, which determined 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 EBITDA, cash flows, net income, revenues
or, in limited instances, book value or liquidation value. One equity investment which is traded on an active public market was valued at its closing price as of December 31, 2013.

The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services 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. However, because of the private nature of this marketplace (meaning actual transactions are not publicly reported), the Company believes that these valuation inputs are classified as Level 3 within the fair value
hierarchy. The Company may also use other methods to determine fair value for securities for which it cannot obtain prevailing bid and ask prices through third-party pricing services or independent dealers, including the use of an independent
valuation firm. The Company periodically benchmarks the valuations provided by the independent valuation firm against the actual prices at which it purchases and sells its investments. The Companys valuation committee and board of directors
reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Companys valuation process.

The following is a reconciliation for the three months ended March 31, 2014 and 2013 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:



|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |        |  |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------- | --------- | - | ------------------------------ | - | ------- | ------------------ |  | - | ---------------- | - |  | ------------------------ | ------- | - | ------------ | - | ------- | ----- |  | - | ------ |  |  | - | --------- | -
|                                                                                                                                                                                                       |  | For the Three Months Ended March 31, 2014 |          
|                                                                                                                                                                                                       |  | Senior 
SecuredLoansFirstLien            |           |   | Senior
SecuredLoansSecondLien |   |         | SeniorSecuredBonds |  |   | SubordinatedDebt |   |  | CollateralizedSecurities |         |   | Equity/Other |   |         | Total | 
|Fair value at beginning of period                                                                                                                                                                      |  | $                                         | 1,268,093 |   |                                | $ | 697,240 |                    |  | $ | 203,927          |   |  | $                        | 276,640 |   |              | $ | 182,100 |       |  | $ | 27,764 |  |  | $ | 2,655,764 |  
|Accretion of discount (amortization of premium)                                                                                                                                                        |  |                                           | 1,421     |   |                                |   | 1,327   |                    |  |   | 1,206            |   |  |                          | 18      |   |              |   | 22      |       |  |   |       |  |  |   | 3,994     |  
|Net realized gain (loss)                                                                                                                                                                               |  |                                           | 1,309     |   |                                |   | 42      |                    |  |   | 15               |   |  |                          | 1,239   |   |              |   |        |       |  |   |       |  |  |   | 2,605     |  
|Net change in unrealized appreciation (depreciation)                                                                                                                                                   |  |                                           | 768       |   |                                |   | 4,195   |                    |  |   | 6,601            |   |  |                          | 10,330  |   |              |   | 2,450   |       |  |   | 2,990  |  |  |   | 27,334    |  
|Purchases                                                                                                                                                                                              |  |                                           | 493,635   |   |                                |   | 242,127 |                    |  |   | 77,222           |   |  |                          | 80,904  |   |              |   |        |       |  |   | 30,316 |  |  |   | 924,204   |  
|Paid-in-kind interest                                                                                                                                                                                  |  |                                           | 39        |   |                                |   | 1,403   |                    |  |   |                 |   |  |                          |        |   |              |   |        |       |  |   |       |  |  |   | 1,442     |  
|Sales and redemptions                                                                                                                                                                                  |  |                                           | (153,791  | ) |                                |   | (80,769 | )                  |  |   | (1,319           | ) |  |                          | (70,160 | ) |              |   | (4,559  | )     |  |   |       |  |  |   | (310,598  | )
|Net transfers in or out of Level 3                                                                                                                                                                     |  |                                           |          |   |                                |   |        |                    |  |   |                 |   |  |                          |        |   |              |   |        |       |  |   |       |  |  |   |          |  
|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |        |  |  |   |           |  
|Fair value at end of period                                                                                                                                                                            |  | $                                         | 1,611,474 |   |                                | $ | 865,565 |                    |  | $ | 287,652          |   |  | $                        | 298,971 |   |              | $ | 180,013 |       |  | $ | 61,070 |  |  | $ | 3,304,745 |  
|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |        |  |  |   |           |  
|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 |  | $                                         | 2,609     |   |                                | $ | 8,635   |                    |  | $ | 6,487            |   |  | $                        | 10,995  |   |              | $ | 2,450   |       |  | $ | 2,990  |  |  | $ | 34,166    |  
|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |        |  |  |   |           |  



40



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##### 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)



|                                                                                                                                                                                                       |  |                                           |         |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |        |       |  |   |       |   |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------- | ------- | - | ------------------------------ | - | ------- | ------------------ |  | - | ---------------- | - |  | ------------------------ | ------- | - | ------------ | - | ------ | ----- |  | - | ----- | - |  | - | --------- | -
|                                                                                                                                                                                                       |  | For the Three Months Ended March 31, 2013 |        
|                                                                                                                                                                                                       |  | Senior SecuredLoansFirstLien             |         |   | Senior SecuredLoansSecondLien |   |         | SeniorSecuredBonds |  |   | SubordinatedDebt |   |  | CollateralizedSecurities |         |   | Equity/Other |   |        | Total | 
|Fair value at beginning of period                                                                                                                                                                      |  | $                                         | 159,824 |   |                                | $ | 149,497 |                    |  | $ | 48,608           |   |  | $                        | 107,407 |   |              | $ | 18,308 |       |  | $ | 4,998 |   |  | $ | 488,642   |  
|Accretion of discount (amortization of premium)                                                                                                                                                        |  |                                           | 848     |   |                                |   | 184     |                    |  |   | 352              |   |  |                          | 39      |   |              |   |       |       |  |   |      |   |  |   | 1,423     |  
|Net realized gain (loss)                                                                                                                                                                               |  |                                           | 166     |   |                                |   | 30      |                    |  |   | 185              |   |  |                          | 467     |   |              |   |       |       |  |   |      |   |  |   | 848       |  
|Net change in unrealized appreciation (depreciation)                                                                                                                                                   |  |                                           | 4,322   |   |                                |   | 4,807   |                    |  |   | 2,742            |   |  |                          | 1,374   |   |              |   | (271   | )     |  |   | (498  | ) |  |   | 12,476    |  
|Purchases                                                                                                                                                                                              |  |                                           | 349,804 |   |                                |   | 139,484 |                    |  |   | 44,117           |   |  |                          | 51,085  |   |              |   | 39,586 |       |  |   | 3,000 |   |  |   | 627,076   |  
|Sales and redemptions                                                                                                                                                                                  |  |                                           | (32,209 | ) |                                |   | (22,129 | )                  |  |   | (9,340           | ) |  |                          | (26,315 | ) |              |   | (1,586 | )     |  |   |      |   |  |   | (91,579   | )
|Net transfers in or out of Level 3                                                                                                                                                                     |  |                                           |        |   |                                |   |        |                    |  |   |                 |   |  |                          |        |   |              |   |       |       |  |   |      |   |  |   |          |  
|                                                                                                                                                                                                       |  |                                           |         |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |        |       |  |   |       |   |  |   |           |  
|Fair value at end of period                                                                                                                                                                            |  | $                                         | 482,755 |   |                                | $ | 271,873 |                    |  | $ | 86,664           |   |  | $                        | 134,057 |   |              | $ | 56,037 |       |  | $ | 7,500 |   |  | $ | 1,038,886 |  
|                                                                                                                                                                                                       |  |                                           |         |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |        |       |  |   |       |   |  |   |           |  
|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 |  | $                                         | 4,950   |   |                                | $ | 5,263   |                    |  | $ | 2,326            |   |  | $                        | 1,918   |   |              | $ | (271   | )     |  | $ | (498  | ) |  | $ | 13,688    |  
|                                                                                                                                                                                                       |  |                                           |         |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |        |       |  |   |       |   |  |   |           |  

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value
measurements of assets valued by an independent valuation firm as of March 31, 2014 and December 31, 2013 were as follows:



|                                 |  |                                           |         |  |                        |                        |                    |                                   |       |                       |                  |          
|-------------------------------- |  | ----------------------------------------- | ------- |  | ---------------------- | ---------------------- | ------------------ | --------------------------------- | ----- | --------------------- | ---------------- | ---------
|Type of Investment               |  | Fair Value atMarch 
31,2014(1)(Unaudited) |         |  | Valuation
Technique(2) |                        | Unobservable Input |                                   | Range |                       | Weighted
Average
|Senior Secured LoansFirst Lien  |  | $                                         | 930,614 |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 7.3% - 10.8%          |                  | 9.0%     
|Senior Secured LoansSecond Lien |  | $                                         | 265,565 |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 9.5% - 11.3%          |                  | 10.5%    
|Senior Secured Bonds             |  | $                                         | 7,995   |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 12.3% - 12.8%         |                  | 12.5%    
|Collateralized Securities        |  | $                                         | 76,260  |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 11.5% - 12.5%         |                  | 12.0%    
|Equity/Other                     |  | $                                         | 38,798  |  |                        | Market Comparables     |                    | EBITDA Multiples (x)              |       | 6.0x - 11.5x          |                  | 7.6x     
|                                 |  |                                           |         |  |                        |                        |                    | Production Multiples (Mmb/d)      |       | $35,000.0 - $40,000.0 |                  | $37,500.0
|                                 |  |                                           |         |  |                        |                        |                    | Proved Reserves Multiples (Mmboe) |       | $7.5 - $8.0           |                  | $7.8     
|                                 |  |                                           |         |  |                        |                        |                    | PV-10 Multiples (x)               |       | 1.3x - 1.4x           |                  | 1.4x     
|                                 |  | $                                         | 9,824   |  |                        | Discounted Cash Flow   |                    | Discount Rate (%)                 |       | 24.4% - 29.4%         |                  | 26.9%    
|                                 |  | $                                         | 5,004   |  |                        | Option Valuation Model |                    | Volatility (%)                    |       | 61.5% - 61.5%         |                  | 61.5%    



|(1) | Except as described below, the remaining Level 3 assets were valued by using the midpoint of the prevailing bid and ask prices from dealers as of March 31, 2014,
which were provided by independent third-party pricing services and screened for validity by such services. One senior secured loan investment ($120,000) and one equity/other investment ($2,250), both of which were newly-issued and purchased near
March 31, 2014, were valued at cost, as the Companys board of directors determined that the cost of each such investment was the best indication of its fair value. As of March 31, 2014, $65,015 of the senior secured loansfirst
lien investments and $70,443 of the senior secured loanssecond lien investments valued by the independent valuation firm consisted of unfunded loan commitments.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### 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 atDecember 
31,2013(1) |         |  | Valuation
Technique(2) |                        | Unobservable Input |                      | Range |               | Weighted
Average
|Senior Secured LoansFirst Lien  |  | $                                 | 686,413 |  |                        | Market Comparables     |                    | Market Yield (%)     |       | 8.3% - 10.8%  |                  | 9.2% 
|Senior Secured LoansSecond Lien |  | $                                 | 193,419 |  |                        | Market Comparables     |                    | Market Yield (%)     |       | 9.8% - 11.3%  |                  | 10.5%
|Senior Secured Bonds             |  | $                                 | 76,260  |  |                        | Market Comparables     |                    | Market Yield (%)     |       | 11.5% - 12.5% |                  | 12.0%
|Equity/Other                     |  | $                                 | 27,764  |  |                        | Market Comparables     |                    | EBITDA Multiples (x) |       | 5.5x - 11.3x  |                  | 7.7x 
|                                 |  |                                   |         |  |                        | Discounted Cash Flow   |                    | Discount Rate (%)    |       | 19.3% - 24.3% |                  | 21.8%
|                                 |  |                                   |         |  |                        | Option Valuation Model |                    | Volatility (%)       |       | 60.0% - 61.5% |                  | 60.8%



|(1) | The remaining Level 3 assets were valued by using the midpoint of the prevailing bid and ask prices from dealers as of December 31, 2013, which were provided by
independent third-party pricing services and screened for validity by such services. As of December 31, 2013, $65,015 of the senior secured loansfirst lien investments valued by the independent valuation firm consisted of unfunded loan
commitments.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 8. Financing Arrangements

The following table presents summary information with respect to the Companys outstanding financing arrangements as of March 31, 2014. For additional information regarding these financing
facilities, please see the notes to the Companys audited consolidated financial statements contained in its annual report on Form 10-K for the fiscal year ended December 31, 2013 and the additional disclosure set forth in this Note 8.



|                                  |  |                  |  |                    |  |                   |         |  |                 |   |         |               |  |                  
|--------------------------------- |  | ---------------- |  | ------------------ |  | ----------------- | ------- |  | --------------- | - | ------- | ------------- |  | -----------------
|Facility                          |  | Type of
Facility |  | Rate               |  | AmountOutstanding |         |  | AmountAvailable |   |         | Maturity
Date
|JPM Facility                      |  | Repurchase       |  | 3.25%              |  | $                 | 550,000 |  |                 | $ |        |               |  | May 20, 2017     
|Cooper River Credit Facility      |  | Revolving        |  | L + 1.75%          |  | $                 | 170,494 |  |                 | $ | 29,506  |               |  | March 27, 2016   
|Wissahickon Creek Credit Facility |  | Revolving        |  | L + 1.50% to 2.50% |  | $                 |        |  |                 | $ | 250,000 |               |  | February 19, 2019
|Darby Creek Credit Facility       |  | Revolving        |  | L + 2.75%          |  | $                 |        |  |                 | $ | 250,000 |               |  | February 20, 2018

JPM Financing

On April 23, 2013, through its two wholly-owned, special-purpose financing subsidiaries, Lehigh River LLC, or Lehigh River, and Cobbs Creek LLC, or Cobbs Creek, the Company entered into an amendment,
or the April 2013 amendment, to its debt financing arrangement with JPMorgan Chase Bank, N.A., London Branch, or JPM, which the Company originally entered into with JPM on October 26, 2012 (and previously amended on February 6, 2013). The
April 2013 amendment, among other things: (i) increased the amount of debt financing available under the arrangement from $300,000 to $550,000; and (ii) extended the final repurchase date under the financing arrangement from
February 20, 2017 to May 20, 2017. The Company elected to structure the financing in the manner described more fully below in order to, among other things, obtain such financing at a lower cost than would be available through alternate
arrangements.

Pursuant to the financing arrangement, the assets held by Lehigh River secure the obligations of Lehigh River
under certain Class A Floating Rate Notes, or the Class A Notes, to be issued from time to time by Lehigh



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##### 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)



River to Cobbs Creek pursuant to an Amended and Restated Indenture, dated as of February 6, 2013, as supplemented by Supplemental Indenture No. 1, dated as of April 23, 2013, with
Citibank, N.A., or Citibank, as trustee, or the Amended and Restated Indenture. Pursuant to the Amended and Restated Indenture, the aggregate principal amount of Class A Notes that may be issued by Lehigh River from time to time is $660,000.
All principal and interest on the Class A Notes will be due and payable on the stated maturity date of May 20, 2024. Cobbs Creek will purchase the Class A Notes to be issued by Lehigh River from time to time at a purchase price equal
to their par value.

Cobbs Creek, in turn, has entered into an amended repurchase transaction with JPM pursuant to the terms
of an amended and restated global master repurchase agreement and the related annex and amended and restated confirmation thereto, each dated as of April 23, 2013, or, collectively, the JPM facility. The assets held by Cobbs Creek secure the
obligations of Cobbs Creek under the JPM facility. Pursuant to the JPM facility, JPM has agreed to purchase from time to time Class A Notes held by Cobbs Creek for an aggregate purchase price equal to approximately 83.33% of the principal
amount of Class A Notes purchased. Subject to certain conditions, the maximum principal amount of Class A Notes that may be purchased under the JPM facility is $660,000. Accordingly, the maximum amount payable at any time to Cobbs Creek
under the JPM facility is $550,000.

Under the JPM facility, Cobbs Creek will, on a quarterly basis, repurchase the
Class A Notes sold to JPM under the JPM facility and subsequently resell such Class A Notes to JPM. The final repurchase transaction must occur no later than May 20, 2017. The repurchase price paid by Cobbs Creek to JPM for each
repurchase of Class A Notes will be equal to the purchase price paid by JPM for such Class A Notes, plus interest thereon accrued at a fixed rate of 3.25% per annum. Commencing May 20, 2015, Cobbs Creek is permitted to reduce
(based on certain thresholds) the aggregate principal amount of Class A Notes subject to the JPM facility. Such reductions, and any other reductions of the principal amount of Class A Notes, including upon an event of default, will be
subject to breakage fees in an amount equal to the present value of 1.25% per annum over the remaining term of the JPM facility applied to the amount of such reduction.

As of March 31, 2014 and December 31, 2013, Class A Notes in the aggregate principal amount of $660,000 had been purchased by Cobbs Creek from Lehigh River and subsequently sold to JPM
under the JPM facility for aggregate proceeds of $550,000. The carrying amount outstanding under the JPM facility approximates its fair value. The Company funded each purchase of Class A Notes by Cobbs Creek through a capital contribution to
Cobbs Creek. As of March 31, 2014 and December 31, 2013, Cobbs Creeks liability under the JPM facility was $550,000, plus $1,986 and $2,085, respectively, of accrued interest expense. The Class A Notes issued by Lehigh River and
purchased by Cobbs Creek eliminate in consolidation on the Companys financial statements.

As of March 31, 2014 and
December 31, 2013, the fair value of assets held by Lehigh River was $1,213,100 and $1,217,548, respectively, which included assets purchased by Lehigh River with proceeds from the issuance of Class A Notes. As of March 31, 2014 and
December 31, 2013, the fair value of assets held by Cobbs Creek was $372,526 and $345,492, respectively.

The Company
incurred costs of $159 in connection with obtaining and amending the JPM facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the JPM facility. As
of March 31, 2014, $103 of such deferred financing costs had yet to be amortized to interest expense.



43



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##### 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 March 31, 2014 and 2013, the components of total
interest expense, cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the JPM facility were as follows:



|                                         |  |                             |         |   |      |   |         |  
|---------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                         |  | Three Months EndedMarch 31, |        
|                                         |  | 2014                        |         |   | 2013 |  
|Direct interest expense                  |  | $                           | 4,469   |   |      | $ | 1,118   |  
|Amortization of deferred financing costs |  |                             | 10      |   |      |   | 10      |  
|                                         |  |                             |         |   |      |   |         |  
|Total interest expense                   |  | $                           | 4,479   |   |      | $ | 1,128   |  
|                                         |  |                             |         |   |      |   |         |  
|Cash paid for interest expense(1)        |  | $                           | 4,568   |   |      | $ |        |  
|Average borrowings under the facility    |  | $                           | 550,000 |   |      | $ | 136,209 |  
|Effective interest rate on borrowings    |  |                             | 3.25    | % |      |   | 3.25    | %
|Weighted average interest rate           |  |                             | 3.25    | % |      |   | 3.25    | %



|(1) | Interest under the JPM facility is payable quarterly in arrears and commenced in May 2013.
|--- | ------------------------------------------------------------------------------------------

Amounts outstanding under the JPM facility will be considered borrowings by the Company for purposes of complying with the asset coverage
requirements under the 1940 Act applicable to BDCs.

Cooper River Credit Facility

On March 27, 2013, the Companys wholly-owned, special-purpose financing subsidiary, Cooper River LLC, or Cooper River, entered
into a revolving credit facility, or the Cooper River facility, with Citibank, as administrative agent, and the financial institutions and other lenders from time to time party thereto. The Cooper River facility provides for borrowings in an
aggregate principal amount up to $200,000 on a committed basis.

The Company may contribute cash or debt securities to Cooper
River from time to time, subject to certain restrictions set forth in the Cooper River facility, and will retain a residual interest in any assets contributed through its ownership of Cooper River or will receive fair market value for any debt
securities sold to Cooper River. Cooper River may purchase additional debt securities from various sources. Cooper River has appointed the Company to manage its portfolio of debt securities pursuant to the terms of an investment management
agreement. Cooper Rivers obligations to the lenders under the Cooper River facility are secured by a first priority security interest in substantially all of the assets of Cooper River, including its portfolio of debt securities. The
obligations of Cooper River under the Cooper River facility are non-recourse to the Company and the Companys exposure under the Cooper River facility is limited to the value of the Companys investment in Cooper River.

Borrowings under the Cooper River facility accrue interest at a rate equal to the three-month London Interbank Offered Rate, or LIBOR,
plus 1.75% per annum during the first two years of the Cooper River facility and three-month LIBOR plus 2.00% per annum thereafter. Borrowings under the Cooper River facility are subject to compliance with an equity coverage ratio with
respect to the current value of Cooper Rivers portfolio and a loan compliance test with respect to the initial acquisition of each debt security in Cooper Rivers portfolio.

Beginning on June 24, 2013, Cooper River became subject to a non-usage fee of 0.50% per annum to the extent that the aggregate
principal amount available under the Cooper River facility is not borrowed. Outstanding



44



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##### 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)



borrowings under the Cooper River facility will be amortized beginning June 27, 2015. Any amounts borrowed under the Cooper River facility will mature, and all accrued and unpaid interest
thereunder will be due and payable, on March 27, 2016.

As of March 31, 2014 and December 31, 2013, $170,494
was outstanding under the Cooper River facility. The carrying amount outstanding under the Cooper River facility approximates its fair value. The Company incurred costs of $1,557 in connection with obtaining the Cooper River facility, which the
Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of March 31, 2014, $1,033 of such deferred financing costs had yet to be amortized to
interest expense.

For the three months ended March 31, 2014 and 2013, the components of total interest expense, cash
paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Cooper River facility were as follows:



|                                                                        |  |                             |         |   |      |   |        |  
|----------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                        |  | Three Months EndedMarch 31, |        
|                                                                        |  | 2014                        |         |   | 2013 |  
|Direct interest expense                                                 |  | $                           | 846     |   |      | $ | 4      |  
|Non-usage fees                                                          |  |                             | 37      |   |      |   |       |  
|Amortization of deferred financing costs                                |  |                             | 127     |   |      |   | 7      |  
|                                                                        |  |                             |         |   |      |   |        |  
|Total interest expense                                                  |  | $                           | 1,010   |   |      | $ | 11     |  
|                                                                        |  |                             |         |   |      |   |        |  
|Cash paid for interest expense(1)                                       |  | $                           | 907     |   |      | $ |       |  
|Average borrowings under the facility(2)                                |  | $                           | 170,494 |   |      | $ | 14,194 |  
|Effective interest rate on borrowings                                   |  |                             | 1.99    | % |      |   | 2.08   | %
|Weighted average interest rate (including the effect of non-usage fees) |  |                             | 2.08    | % |      |   | 2.08   | %



|(1) | Interest under the Cooper River facility is payable quarterly in arrears and commenced on March 27, 2013.
|--- | ---------------------------------------------------------------------------------------------------------



|(2) | Average borrowings under the facility for the three months ended March 31, 2013 are calculated since the inception date of the facility, or March 27, 2013.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

Borrowings of Cooper River will be considered borrowings of the Company for purposes of complying with the
asset coverage requirements under the 1940 Act applicable to BDCs.

Wissahickon Creek Credit Facility

On February 19, 2014, the Companys wholly-owned, special-purpose financing subsidiary, Wissahickon Creek LLC, or Wissahickon
Creek, entered into a revolving credit facility, or the Wissahickon Creek facility, with Wells Fargo Securities, LLC, as administrative agent, each of the conduit lenders and institutional lenders from time to time party thereto and Wells Fargo
Bank, National Association, or, collectively with Wells Fargo Securities, LLC, Wells Fargo, as the collateral agent, account bank and collateral custodian under the Wissahickon Creek facility. The Wissahickon Creek facility provides for borrowings
in an aggregate principal amount up to $250,000 on a committed basis.

The Company may contribute cash, loans or bonds to
Wissahickon Creek from time to time and will retain a residual interest in any assets contributed through its ownership of Wissahickon Creek or will receive fair market



45



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##### 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)



value for any assets sold to Wissahickon Creek. Wissahickon Creek may purchase additional assets from various sources. Wissahickon Creek has appointed the Company to manage its portfolio of
assets pursuant to the terms of a collateral management agreement. Wissahickon Creeks obligations to Wells Fargo under the Wissahickon Creek facility are secured by a first priority security interest in substantially all of the assets of
Wissahickon Creek, including its portfolio of assets. The obligations of Wissahickon Creek under the Wissahickon Creek facility are non-recourse to the Company and the Companys exposure under the facility is limited to the value of its
investment in Wissahickon Creek.

Pricing under the Wissahickon Creek facility is based on LIBOR for a three-month interest
period, plus a spread ranging between 1.50% and 2.50% per annum, depending on the composition of the portfolio of assets for the relevant period. Beginning June 19, 2014, Wissahickon Creek will be subject to a non-usage fee to the extent
the aggregate principal amount available under the facility has not been borrowed. The non-usage fee will equal 0.50% per annum on unborrowed amounts up to and including $25,000 and 2.00% on unborrowed amounts exceeding $25,000. Any amounts
borrowed under the Wissahickon Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on February 19, 2019. Borrowings under the Wissahickon Creek facility are subject to compliance with a borrowing
base, pursuant to which the amount of funds advanced to Wissahickon Creek varies depending upon the types of assets in Wissahickon Creeks portfolio.

As of March 31, 2014, no amounts were outstanding under the Wissahickon Creek facility. The Company incurred costs of $3,260 in connection with obtaining the facility, which the Company has recorded
as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of March 31, 2014, $3,187 of such deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2014, the components of total interest expense, cash paid for interest expense,
average borrowings, effective interest rate and weighted average interest rate for the Wissahickon Creek facility were as follows:



|                                                                        |  |                                  |    |  
|----------------------------------------------------------------------- |  | -------------------------------- | -- | -
|                                                                        |  | Three Months EndedMarch 31, 2014 |   
|Direct interest expense                                                 |  | $                                |   |  
|Non-usage fees                                                          |  |                                  |   |  
|Amortization of deferred financing costs                                |  |                                  | 73 |  
|                                                                        |  |                                  |    |  
|Total interest expense                                                  |  | $                                | 73 |  
|                                                                        |  |                                  |    |  
|Cash paid for interest expense(1)                                       |  | $                                |   |  
|Average borrowings under the facility                                   |  | $                                |   |  
|Effective interest rate on borrowings                                   |  |                                  |   | %
|Weighted average interest rate (including the effect of non-usage fees) |  |                                  |   | %



|(1) | Interest under the Wissahickon Creek facility is payable quarterly in arrears and will commence upon the earlier of (i) the date that the Company begins borrowing
under the facility or (ii) June 19, 2014.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Borrowings of Wissahickon Creek will be considered
borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.



46



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##### 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)



Darby Creek Credit Facility

On February 20, 2014, the Companys wholly-owned, special-purpose financing subsidiary, Darby Creek LLC, or Darby Creek, entered
into a revolving credit facility, or the Darby Creek facility, with Deutsche Bank AG, New York Branch, or Deutsche Bank, as administrative agent, each of the lenders from time to time party thereto, the other agents parties thereto and Wells Fargo
Bank, National Association, as the collateral agent and collateral custodian under the Darby Creek facility. The Darby Creek facility provides for borrowings in an aggregate principal amount up to $250,000 on a committed basis.

The Company may contribute assets to Darby Creek from time to time and will retain a residual interest in any assets contributed through
its ownership of Darby Creek or will receive fair market value for any assets sold to Darby Creek. Darby Creek may purchase additional assets from various sources. Darby Creek has appointed the Company to manage its portfolio of assets pursuant to
the terms of an investment management agreement. Darby Creeks obligations to Deutsche Bank under the Darby Creek facility are secured by a first priority security interest in substantially all of the assets of Darby Creek, including its
portfolio of assets. The obligations of Darby Creek under the Darby Creek facility are non-recourse to the Company and the Companys exposure under the facility is limited to the value of its investment in Darby Creek.

Pricing under the Darby Creek facility is based on LIBOR for a three-month interest period (for each committed lender) or the commercial
paper rate of each conduit lender, plus, in each case, a spread of 2.75% per annum. Darby Creek is subject to a non-usage fee of 0.75% per annum to the extent the aggregate principal amount available under the facility is not borrowed. Any
amounts borrowed under the Darby Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on February 20, 2018. Borrowings under the Darby Creek facility are subject to compliance with a borrowing
base, pursuant to which the amount of funds advanced to Darby Creek varies depending upon the types of assets in Darby Creeks portfolio.

As of March 31, 2014, no amounts were outstanding under the Darby Creek facility. The Company incurred costs of $1,934 in connection with obtaining the facility, which the Company has recorded as
deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of March 31, 2014, $1,881 of such deferred financing costs had yet to be amortized to interest expense.



47



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##### 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 March 31, 2014, the components of total interest
expense, cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Darby Creek facility were as follows:



|                                                                        |  |                                  |     |  
|----------------------------------------------------------------------- |  | -------------------------------- | --- | -
|                                                                        |  | Three Months EndedMarch 31, 2014 |    
|Direct interest expense                                                 |  | $                                |    |  
|Non-usage fees                                                          |  |                                  | 286 |  
|Amortization of deferred financing costs                                |  |                                  | 53  |  
|                                                                        |  |                                  |     |  
|Total interest expense                                                  |  | $                                | 339 |  
|                                                                        |  |                                  |     |  
|Cash paid for interest expense(1)                                       |  | $                                |    |  
|Average borrowings under the facility                                   |  | $                                |    |  
|Effective interest rate on borrowings                                   |  |                                  |    | %
|Weighted average interest rate (including the effect of non-usage fees) |  |                                  |    | %



|(1) | Interest under the Darby Creek facility is payable quarterly in arrears and commenced on February 20, 2014.
|--- | -----------------------------------------------------------------------------------------------------------

Borrowings of Darby Creek will be considered borrowings of the Company for purposes of complying with the asset coverage requirements
under the 1940 Act applicable to BDCs.

Note 9. Commitments and Contingencies

The Company enters into contracts that contain a variety of indemnification provisions. The Companys maximum exposure under these
arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management of FSIC II Advisor has reviewed the Companys existing contracts and expects the risk of loss to the Company to be remote.

The Company is not currently subject to any material legal proceedings and, to the Companys knowledge, no material
legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Companys rights under
contracts with its portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material adverse effect upon its financial condition or results of
operations.

See Note 6 for a discussion of the Companys unfunded commitments.



48



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 10. Financial Highlights

The following is a schedule of financial highlights of the Company for the three months ended March 31, 2014 and the year ended
December 31, 2013:



|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------- | ----------- | - | --------------------------- | - | ----------- | -
|                                                                                                                               |  | Three Months EndedMarch 31, 2014(Unaudited) |             |   | Year EndedDecember 31, 2013 |  
|Per Share Data:                                                                                                                |  |                                             |             |   |                             |   |             |  
|Net asset value, beginning of period                                                                                           |  | $                                           | 9.39        |   |                             | $ | 9.16        |  
|Results of operations(1)                                                                                                       |  |                                             |             |   |                             |   |             |  
|Net investment income (loss)                                                                                                   |  |                                             | 0.17        |   |                             |   | 0.62        |  
|Net realized and unrealized appreciation (depreciation) on investments and total return swap and gain/loss on foreign
currency |  |                                             | 0.10        |   |                             |   | 0.27        |  
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Net increase (decrease) in net assets resulting from operations                                                                |  |                                             | 0.27        |   |                             |   | 0.89        |  
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Stockholder distributions(2)                                                                                                   |  |                                             |             |   |                             |   |             |  
|Distributions from net investment income                                                                                       |  |                                             | (0.17       | ) |                             |   | (0.69       | )
|Distributions from net realized gain on investments                                                                            |  |                                             |            |   |                             |   | (0.07       | )
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Net decrease in net assets resulting from stockholder distributions                                                            |  |                                             | (0.17       | ) |                             |   | (0.76       | )
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Capital share transactions                                                                                                     |  |                                             |             |   |                             |   |             |  
|Issuance of common stock(3)                                                                                                    |  |                                             | 0.01        |   |                             |   | 0.15        |  
|Repurchases of common stock(4)                                                                                                 |  |                                             |            |   |                             |   |            |  
|Offering costs(1)                                                                                                              |  |                                             | (0.01       | ) |                             |   | (0.05       | )
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Net increase (decrease) in net assets resulting from capital share transactions                                                |  |                                             |            |   |                             |   | 0.10        |  
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Net asset value, end of period                                                                                                 |  | $                                           | 9.49        |   |                             | $ | 9.39        |  
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Shares outstanding, end of period                                                                                              |  |                                             | 304,898,490 |   |                             |   | 254,572,096 |  
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Total return(5)                                                                                                                |  |                                             | 2.88        | % |                             |   | 10.81       | %
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Ratio/Supplemental Data:                                                                                                       |  |                                             |             |   |                             |   |             |  
|Net assets, end of period                                                                                                      |  | $                                           | 2,894,376   |   |                             | $ | 2,390,985   |  
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Ratio of net investment income to average net assets(6)                                                                        |  |                                             | 1.77        | % |                             |   | 6.60        | %
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Ratio of operating expenses to average net assets(6)                                                                           |  |                                             | 1.24        | % |                             |   | 5.46        | %
|Ratio of expense recoupment payable to sponsor to average net assets(6)                                                        |  |                                             |            |   |                             |   | 0.15        | %
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Ratio of total operating expenses to average net assets(6)                                                                     |  |                                             | 1.24        | % |                             |   | 5.61        | %
|                                                                                                                               |  |                                             |             |   |                             |   |             |  
|Portfolio turnover(7)                                                                                                          |  |                                             | 10.27       | % |                             |   | 46.38       | %
|                                                                                                                               |  |                                             |             |   |                             |   |             |  



|(1) | The per share data was derived by using the weighted average shares outstanding during the applicable period.
|--- | -------------------------------------------------------------------------------------------------------------



|(2) | The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.
|--- | -----------------------------------------------------------------------------------------------------------------------------



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 10. Financial Highlights (continued)



|(3) | The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock in the
Companys continuous public offering and pursuant to the Companys distribution reinvestment plan. The issuance of common stock at an offering price, net of sales commissions and dealer manager fees, that is greater than the net asset
value per share results in an increase in net asset value per share.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | The per share impact of the Companys repurchases of common stock is a reduction to net asset value of less than $0.01 per share during the period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | The total return for each period presented was calculated by taking the net asset value per share as of the end of the applicable period, adding the cash distributions
per share which were declared during the applicable period and dividing the total by the net asset value per share at the beginning of the applicable period. The total return does not consider the effect of the sales load from the sale of the
Companys common stock. The total return includes the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. The historical calculation of
total return in the table should not be considered a representation of the Companys future total return, which may be greater or less than the return shown in the table due to a number of factors, including the Companys ability or
inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Companys expenses, variations in and the timing of the recognition of
realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being
indicative of performance in future periods. The total return calculations set forth above represent the total return on the Companys investment portfolio during the applicable period and are calculated in accordance with GAAP. These return
figures do not represent an actual return to stockholders.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Weighted average net assets during the applicable period are used for this calculation. Ratios for the three months ended March 31, 2014 are not annualized. The
following is a schedule of supplemental ratios for the three months ended March 31, 2014 and the year ended December 31, 2013:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                    |  |                                              |      |   |                             |  |      |  
|------------------------------------------------------------------- |  | -------------------------------------------- | ---- | - | --------------------------- |  | ---- | -
|                                                                    |  | Three Months EndedMarch 
31, 2014(Unaudited) |      |   | Year EndedDecember 31, 2013 | 
|Ratio of accrued capital gains incentive fees to average net assets |  |                                              | 0.22 | % |                             |  | 0.45 | %
|Ratio of subordinated income incentive fees to average net assets   |  |                                              |     |   |                             |  | 0.65 | %
|Ratio of interest expense to average net assets                     |  |                                              | 0.22 | % |                             |  | 0.89 | %



|(7) | Portfolio turnover for the three months ended March 31, 2014 is not annualized.
|--- | -------------------------------------------------------------------------------



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##### 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 included elsewhere in this quarterly report on Form 10-Q. In this report, we, us and our 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;
| | - |  | ----------------------------------------------------



| |  |  | 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 FSIC II Advisor, FB Income Advisor, LLC, FS Investment Corporation, FS Investment Advisor, LLC, FS
Energy and Power Fund, FSIC III Advisor, LLC, FS Investment Corporation III, FS Global Advisor, LLC, FS Global Credit Opportunities Fund, FS Global Credit Opportunities FundA, FS Global Credit Opportunities FundD, GDFM or any of their
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 FSIC II Advisor to locate suitable investments for us and to monitor and administer our investments;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of FSIC II 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 and the rules and regulations issued thereunder;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effect of changes to tax legislation and our tax position; and
| | - |  | ------------------------------------------------------------------



| |  |  | the tax status of the enterprises in which we 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;
| | - |  | -----------------------



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| |  |  | risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | future changes in laws or regulations and conditions in our operating areas.
| | - |  | ----------------------------------------------------------------------------

We have based the forward-looking statements included in this 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 operations
on June 18, 2012 upon raising gross proceeds in excess of $2,500 from sales of shares of our common stock in our continuous public offering to persons who were not affiliated with us or FSIC II Advisor. 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 federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the
Code. Prior to satisfying the minimum offering requirement, we had no operations except for matters relating to our organization. In March 2014, we closed our continuous public offering of shares of common stock to new investors.

Our investment activities are managed by FSIC II Advisor and supervised by our board of directors, a majority of whom are independent.
Under the investment advisory and administrative services agreement, we have agreed to pay FSIC II Advisor an annual base management fee based on our gross assets as well as incentive fees based on our performance. FSIC II Advisor has engaged GDFM
to act as our investment sub-adviser. GDFM assists FSIC II Advisor in identifying investment opportunities and makes investment recommendations for approval by FSIC II Advisor according to guidelines set by 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 focus on the following investment categories, which we believe will allow us to generate an attractive total return with an acceptable level of risk.

Direct Originations: We intend to leverage our relationship with GDFM and its global sourcing and origination platform to directly source investment opportunities. Such investments are originated
or structured specifically for us or made by us and are not generally available to the broader market. These investments may include both debt and equity components, although we do not expect to 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 company 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 and collateralized loan obligations, or CLOs.



52



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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 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 certain 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, i.e., an anchor order. 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 FSIC II Advisor and GDFM.

In addition, our relationship with GSO Capital Partners LP, the parent of GDFM and one of the largest CLO managers in the world, allows
us to 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 directly originated transactions and
opportunistic investments, 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 originated investments and provide 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 such a way that maximizes the levered return potential of our portfolio.

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 through secondary market transactions in the over-the-counter market for institutional loans or
directly from our target companies. 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 minority interests in the form of common or
preferred equity in our target companies, either in conjunction with one of our debt 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 and other debt securities.

The senior secured and second lien secured loans in which we
invest generally have stated terms of three to seven years and any subordinated debt investments that we make generally will have stated terms of up to ten years, but the expected average life of such securities is generally between three and seven
years. However, there is no limit on the maturity or duration of any security in our portfolio. The loans in which we invest may be rated by a nationally recognized statistical rating organization and, in such case, generally will carry a rating
below investment grade (rated lower than Baa3 by Moodys Investors Service, Inc., or Moodys, or lower than BBB- by Standard & Poors Ratings Services). We also
invest in non-rated debt securities.



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Revenues

The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized
gain or loss on foreign currency, net realized gain or loss on total return swap, net unrealized appreciation or depreciation on investments, net unrealized appreciation or depreciation on total return swap and net unrealized gain or loss on foreign
currency. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds
received from dispositions of portfolio investments and their amortized cost. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net realized gain or loss on total
return swap is the net monthly settlement payments received on the TRS. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio. Net unrealized appreciation or depreciation on total
return swap is the net change in the fair value of the TRS. 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. In future periods, we do not
expect our revenues to include net realized gain or loss on total return swap or net unrealized appreciation or depreciation on total return swap as a result of the termination of our TRS on June 13, 2013. We may, however, elect to utilize a
total return swap in the future.

We principally generate revenues in the form of interest income on the debt investments we
hold. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we may hold. In addition, we may generate revenues in the form of commitment, closing, origination, structuring or diligence fees,
monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. Any such fees generated in connection with our investments will be recognized as earned.

Expenses

Our primary
operating expenses include the payment of advisory fees and other expenses under the investment advisory and administrative services agreement, interest expense from financing facilities and other expenses necessary for our operations. Our
investment advisory fee compensates FSIC II Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. FSIC II Advisor is responsible for compensating our investment sub-adviser.

We reimburse FSIC II Advisor for expenses necessary to perform services related to our administration and operations. Such services
include the provision of general ledger accounting, fund accounting, legal services, investor relations and other administrative services. FSIC II 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, FSIC II 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. See Related Party Transactions for additional information regarding the reimbursements payable to FSIC II Advisor for administrative services and the methodology for determining the amount of any
such reimbursements. We bear all other expenses of our operations and transactions. For additional information regarding these expenses, please see our annual report on Form 10-K for the fiscal year ended December 31, 2013.

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 FSIC II 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.



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Expense Reimbursement

Pursuant to the expense reimbursement agreement, Franklin Square Holdings has agreed to reimburse us for expenses in an amount that is sufficient to ensure that no portion of our distributions to
stockholders will be paid from offering proceeds or borrowings. However, because certain investments we may make, including preferred and common equity investments, may generate dividends and other distributions to us that are treated for tax
purposes as a return of capital, a portion of our distributions to stockholders may also be deemed to constitute a return of capital for tax purposes to the extent that we may use such dividends or other distribution proceeds to fund our
distributions to stockholders. Under those circumstances, Franklin Square Holdings will not reimburse us for the portion of such distributions to stockholders that represent a return of capital for tax purposes, as the purpose of the expense
reimbursement arrangement is not to prevent tax-advantaged distributions to stockholders.

Under the expense reimbursement
agreement, Franklin Square Holdings will reimburse us for expenses in an amount equal to the difference between our cumulative distributions paid to our stockholders in each quarter, less the sum of our net investment income for tax purposes, net
capital gains and dividends and other distributions paid to us on account of preferred and common equity investments in portfolio companies (to the extent such amounts are not included in net investment income or net capital gains for tax purposes)
in each quarter.

Pursuant to the expense reimbursement agreement, we have a conditional obligation to reimburse Franklin
Square Holdings for any amounts funded by Franklin Square Holdings under such agreement if (and only to the extent that), during any fiscal quarter occurring within three years of the date on which Franklin Square Holdings funded such amount, the
sum of our net investment income for tax purposes, net capital gains and the amount of any dividends and other distributions paid to us on account of preferred and common equity investments in portfolio companies (to the extent not included in net
investment income or net capital gains for tax purposes) exceeds the distributions paid by us to our stockholders; provided, however, that (i) we will only reimburse Franklin Square Holdings for expense support payments made by Franklin Square
Holdings with respect to any calendar quarter beginning on or after July 1, 2013 to the extent that the payment of such reimbursement (together with any other reimbursement paid during such fiscal year) does not cause other operating
expenses (as defined below) (on an annualized basis and net of any expense support payments received by us during such fiscal year) to exceed the lesser of (A) 1.75% of our average net assets attributable to shares of our common stock for
the fiscal year-to-date period after taking such payments into account and (B) the percentage of our average net assets attributable to shares of our common stock represented by other operating expenses during the fiscal year in
which such expense support payment from Franklin Square Holdings was made (provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from Franklin Square Holdings made
during the same fiscal year) and (ii) we will not reimburse Franklin Square Holdings for expense support payments made by Franklin Square Holdings if the aggregate amount of distributions per share declared by us in such calendar quarter is
less than the aggregate amount of distributions per share declared by us in the calendar quarter in which Franklin Square Holdings made the expense support payment to which such reimbursement relates. Other operating expenses means our
total operating expenses (as defined below), excluding base management fees, incentive fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses.
Operating expenses means all operating costs and expenses incurred, as determined in accordance with GAAP for investment companies.

We or Franklin Square Holdings may terminate the expense reimbursement agreement at any time. The specific amount of expenses reimbursed by Franklin Square Holdings, if any, will be determined at the end
of each quarter. Upon termination of the expense reimbursement agreement by Franklin Square Holdings, Franklin Square Holdings will be required to fund any amounts accrued thereunder as of the date of termination. Similarly, our conditional
obligation to reimburse Franklin Square Holdings pursuant to the terms of the expense reimbursement agreement shall survive the termination of such agreement by either party.



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Franklin Square Holdings is controlled by our chairman, president and chief executive
officer, Michael C. Forman, and our vice-chairman, David J. Adelman. There can be no assurance that the expense reimbursement agreement will remain in effect or that Franklin Square Holdings will reimburse any portion of our expenses in future
quarters.

As of December 31, 2012, we had $1,635 of reimbursements due from Franklin Square Holdings. In connection with
FSIC II Advisors voluntary agreement to waive $441 of accrued but unpaid capital gains incentive fees, a corresponding reduction was made to the amount of accrued expense reimbursements due from Franklin Square Holdings. During the three
months ended March 31, 2013, this balance was offset against expense recoupment payable to sponsor. For the three months ended March 31, 2013, we accrued an expense recoupment payable to sponsor of $2,041, which we offset against the
reimbursements due on our consolidated balance sheet as of December 31, 2012. As of March 31, 2014 and December 31, 2013, no further amounts remained subject to repayment by us to Franklin Square Holdings in the future. See
Critical Accounting PoliciesCapital Gains Incentive Fee for a discussion of the methodology employed by us in calculating the capital gains incentive fee.

Portfolio Investment Activity for the Three Months Ended March 31, 2014 and for the Year Ended December 31, 2013

During the three months ended March 31, 2014, we made investments in portfolio companies totaling $927,056. During the same period, we sold investments for proceeds of $129,299 and received principal
repayments of $181,299. As of March 31, 2014, our investment portfolio, with a total fair value of $3,307,386, consisted of interests in 205 portfolio companies (49% in first lien senior secured loans, 26% in second lien senior secured loans,
9% in senior secured bonds, 9% in subordinated debt, 5% in collateralized securities and 2% in equity/other securities). The portfolio companies that comprised our portfolio as of such date had an average annual EBITDA of approximately $262.9
million. As of March 31, 2014, the investments in our portfolio were purchased at a weighted average price of 98.3% of par or stated value, as applicable, the weighted average credit rating of the investments in our portfolio that were rated
(constituting approximately 47.0% of our portfolio based on the fair value of our investments) was B3 based upon the Moodys scale and our estimated gross annual portfolio yield, prior to leverage (which represents the expected yield to be
generated by us on our investment portfolio based on the composition of our portfolio as of such date), was 9.3% based upon the amortized cost of our investments. The portfolio yield does not represent an actual investment return to stockholders.

Based on our regular weekly cash distribution rate of $0.0145 per share as of March 31, 2014 and our last offered price
of $10.60 per share, the annualized distribution rate to stockholders as of March 31, 2014 was 7.11%. The distribution rate to stockholders does not represent an actual investment return to stockholders and may include income, realized capital
gains and a return of investors capital. Our gross annual portfolio yield and distribution rate 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 Risk
Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2013 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements.

During the year ended December 31, 2013, we made investments in portfolio companies totaling $2,838,032. During the same
period, we sold investments for proceeds of $337,169 and received principal repayments of $374,483. As of December 31, 2013, our investment portfolio, with a total fair value of $2,655,828, consisted of interests in 179 portfolio companies (48%
in first lien senior secured loans, 26% in second lien senior secured loans, 8% in senior secured bonds, 10% in subordinated debt, 7% in collateralized securities and 1% in equity/other securities). The portfolio companies that comprised our
portfolio as of such date had an average annual EBITDA of approximately $242.1 million. As of December 31, 2013, the investments in our portfolio were purchased at a weighted average price of 98.0% of par or stated value, as applicable, the
weighted average credit rating of the investments in our portfolio that were rated (constituting approximately 54.0% of our portfolio based on the fair value of our investments) was B3 based upon the



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Moodys scale and our estimated gross annual portfolio yield, prior to leverage, was 9.5% based upon the amortized cost of our investments. Our gross annual portfolio yield, prior to
leverage, represents the expected yield to be generated by us on our investment portfolio based on the composition of our portfolio as of December 31, 2013. The portfolio yield does not represent an actual investment return to stockholders.

Based on our regular weekly cash distribution rate of $0.0145 per share as of December 31, 2013 and our public offering
price of $10.50 per share as of such date, the annualized distribution rate to stockholders as of December 31, 2013 was 7.18%. The distribution rate to stockholders does not represent an actual investment return to stockholders and may include
income, realized capital gains and a return of investors capital. Our gross annual portfolio yield and distribution rate 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 Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2013 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated
with these statements.

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three months ended March 31, 2014 and the year ended December 31, 2013:



|                        |  |                                          |          |   |                                     |   |           |  
|----------------------- |  | ---------------------------------------- | -------- | - | ----------------------------------- | - | --------- | -
|Net Investment Activity |  | For the Three Months EndedMarch 31, 2014 |          |   | For the Year EndedDecember 31, 2013 |  
|Purchases               |  | $                                        | 927,056  |   |                                     | $ | 2,838,032 |  
|Sales and Redemptions   |  |                                          | (310,598 | ) |                                     |   | (711,652  | )
|                        |  |                                          |          |   |                                     |   |           |  
|Net Portfolio Activity  |  | $                                        | 616,458  |   |                                     | $ | 2,126,380 |  
|                        |  |                                          |          |   |                                     |   |           |  



|                                       |  |                                          |         |  |                                     |  |     |           |  |   |            |  |  |  |     |  
|-------------------------------------- |  | ---------------------------------------- | ------- |  | ----------------------------------- |  | --- | --------- |  | - | ---------- |  |  |  | --- | -
|                                       |  | For the Three Months EndedMarch 31, 2014 |         |  | For the Year EndedDecember 31, 2013 | 
|New Investment Activity by Asset Class |  | Purchases                                |         |  | Percentage                          |  |     | Purchases |  |   | Percentage | 
|Senior Secured LoansFirst Lien        |  | $                                        | 493,635 |  |                                     |  | 53  | %         |  | $ | 1,417,796  |  |  |  | 50  | %
|Senior Secured LoansSecond Lien       |  |                                          | 242,127 |  |                                     |  | 26  | %         |  |   | 773,919    |  |  |  | 27  | %
|Senior Secured Bonds                   |  |                                          | 77,222  |  |                                     |  | 8   | %         |  |   | 192,607    |  |  |  | 7   | %
|Subordinated Debt                      |  |                                          | 80,904  |  |                                     |  | 9   | %         |  |   | 273,078    |  |  |  | 9   | %
|Collateralized Securities              |  |                                          |        |  |                                     |  |    |           |  |   | 160,445    |  |  |  | 6   | %
|Equity/Other                           |  |                                          | 33,168  |  |                                     |  | 4   | %         |  |   | 20,187     |  |  |  | 1   | %
|                                       |  |                                          |         |  |                                     |  |     |           |  |   |            |  |  |  |     |  
|Total                                  |  | $                                        | 927,056 |  |                                     |  | 100 | %         |  | $ | 2,838,032  |  |  |  | 100 | %
|                                       |  |                                          |         |  |                                     |  |     |           |  |   |            |  |  |  |     |  

The following table summarizes the composition of our investment portfolio at cost and fair value as of
March 31, 2014 and December 31, 2013:



|                                 |  |                           |           |  |                   |   |           |                        |  |  |                   |   |  |            |           |  |                        |   |           |  |  |  |     |  
|-------------------------------- |  | ------------------------- | --------- |  | ----------------- | - | --------- | ---------------------- |  |  | ----------------- | - |  | ---------- | --------- |  | ---------------------- | - | --------- |  |  |  | --- | -
|                                 |  | March 31,
2014(Unaudited) |           |  | December 31, 2013 |  
|                                 |  | Amortized
Cost(1)         |           |  | Fair Value        |   |           | Percentageof Portfolio |  |  | Amortized
Cost(1) |   |  | Fair Value |           |  | Percentageof Portfolio |  
|Senior Secured LoansFirst Lien  |  | $                         | 1,591,946 |  |                   | $ | 1,611,474 |                        |  |  | 49                | % |  | $          | 1,249,333 |  |                        | $ | 1,268,093 |  |  |  | 48  | %
|Senior Secured LoansSecond Lien |  |                           | 848,955   |  |                   |   | 865,565   |                        |  |  | 26                | % |  |            | 684,825   |  |                        |   | 697,240   |  |  |  | 26  | %
|Senior Secured Bonds             |  |                           | 295,699   |  |                   |   | 287,652   |                        |  |  | 9                 | % |  |            | 218,575   |  |                        |   | 203,927   |  |  |  | 8   | %
|Subordinated Debt                |  |                           | 290,307   |  |                   |   | 298,971   |                        |  |  | 9                 | % |  |            | 278,306   |  |                        |   | 276,640   |  |  |  | 10  | %
|Collateralized Securities        |  |                           | 167,728   |  |                   |   | 180,013   |                        |  |  | 5                 | % |  |            | 172,265   |  |                        |   | 182,100   |  |  |  | 7   | %
|Equity/Other                     |  |                           | 56,833    |  |                   |   | 63,711    |                        |  |  | 2                 | % |  |            | 23,665    |  |                        |   | 27,828    |  |  |  | 1   | %
|                                 |  |                           |           |  |                   |   |           |                        |  |  |                   |   |  |            |           |  |                        |   |           |  |  |  |     |  
|                                 |  | $                         | 3,251,468 |  |                   | $ | 3,307,386 |                        |  |  | 100               | % |  | $          | 2,626,969 |  |                        | $ | 2,655,828 |  |  |  | 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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|                                                                                                        |  |                |  |                  
|------------------------------------------------------------------------------------------------------- |  | -------------- |  | -----------------
|                                                                                                        |  | March 31, 2014 |  | December 31, 2013
|Number of Portfolio Companies                                                                           |  | 205            |  | 179              
|% Variable Rate (based on fair value)                                                                   |  | 74.6%          |  | 74.0%            
|% Fixed Rate (based on fair value)                                                                      |  | 22.1%          |  | 24.9%            
|% Income Producing Equity or Other Investments (based on fair value)                                    |  | 0.2%           |  | 0.3%             
|% Non-Income Producing Equity or Other Investments (based on fair value)                                |  | 3.1%           |  | 0.8%             
|Average Annual EBITDA of Portfolio Companies                                                            |  | $262,900       |  | $242,100         
|Weighted Average Purchase Price of Investments (as a % of par or stated value)                          |  | 98.3%          |  | 98.0%            
|Weighted Average Credit Rating of Investments that were Rated                                           |  | B3             |  | B3               
|% of Investments on Non-Accrual                                                                         |  |               |  |                 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)                                       |  | 9.3%           |  | 9.5%             
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)Excluding Non-Income Producing Assets |  | 9.3%           |  | 9.5%             

Direct Originations

The following tables present certain selected information regarding our direct originations for the three months ended March 31, 2014 and the year ended December 31, 2013:



|                                                   |  |                                          |         |   |                                     |   |           |  
|-------------------------------------------------- |  | ---------------------------------------- | ------- | - | ----------------------------------- | - | --------- | -
|New Direct Originations                            |  | For the Three Months EndedMarch 31, 2014 |         |   | For the Year EndedDecember 31, 2013 |  
|Total Commitments (including Unfunded Commitments) |  | $                                        | 557,532 |   |                                     | $ | 1,116,128 |  
|Exited Investments (including partial paydowns)    |  |                                          | (56,560 | ) |                                     |   | (127,809  | )
|                                                   |  |                                          |         |   |                                     |   |           |  
|Net Direct Originations                            |  | $                                        | 500,972 |   |                                     | $ | 988,319   |  
|                                                   |  |                                          |         |   |                                     |   |           |  



|                                       |  |                                          |         |  |                                     |  |     |                   |  |   |            |  |  |  |     |  
|-------------------------------------- |  | ---------------------------------------- | ------- |  | ----------------------------------- |  | --- | ----------------- |  | - | ---------- |  |  |  | --- | -
|                                       |  | For the Three Months EndedMarch 31, 2014 |         |  | For the Year EndedDecember 31,
2013 | 
|New Direct Originations by Asset Class |  | Commitment Amount                        |         |  | Percentage                          |  |     | Commitment Amount |  |   | Percentage | 
|Senior Secured LoansFirst Lien        |  | $                                        | 363,000 |  |                                     |  | 65  | %                 |  | $ | 776,998    |  |  |  | 70  | %
|Senior Secured LoansSecond Lien       |  |                                          | 160,443 |  |                                     |  | 29  | %                 |  |   | 239,500    |  |  |  | 21  | %
|Senior Secured Bonds                   |  |                                          | 9,750   |  |                                     |  | 2   | %                 |  |   |           |  |  |  |    |  
|Subordinated Debt                      |  |                                          |        |  |                                     |  |    |                   |  |   |           |  |  |  |    |  
|Collateralized Securities              |  |                                          |        |  |                                     |  |    |                   |  |   | 76,260     |  |  |  | 7   | %
|Equity/Other                           |  |                                          | 24,339  |  |                                     |  | 4   | %                 |  |   | 23,370     |  |  |  | 2   | %
|                                       |  |                                          |         |  |                                     |  |     |                   |  |   |            |  |  |  |     |  
|Total                                  |  | $                                        | 557,532 |  |                                     |  | 100 | %                 |  | $ | 1,116,128  |  |  |  | 100 | %
|                                       |  |                                          |         |  |                                     |  |     |                   |  |   |            |  |  |  |     |  



|                                                                                                                                                 |  |                                          |  |                                    
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------- |  | -----------------------------------
|                                                                                                                                                 |  | For the Three Months EndedMarch 31, 2014 |  | For the Year EndedDecember 31, 2013
|Average New Direct Origination Commitment Amount                                                                                                 |  | $79,647                                  |  | $65,655                            
|Weighted Average Maturity for New Direct Originations                                                                                            |  | 7/8/20                                   |  | 12/18/18                           
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)of New Direct Originations during Period                                        |  | 8.7%                                     |  | 10.7%                              
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations during PeriodExcluding
Non-Income Producing Assets |  | 9.2%                                     |  | 10.8%                              
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)of Investments Exited during Period                                             |  | 10.9%                                    |  | 18.2%                              



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|                                                                                                                                      |  |                |  |                  
|------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | -----------------
|Characteristics of All Direct Originations held in Portfolio                                                                          |  | March 31, 2014 |  | December 31, 2013
|Number of Portfolio Companies                                                                                                         |  | 21             |  | 16               
|Average Annual EBITDA of Portfolio Companies                                                                                          |  | $40,300        |  | $32,100          
|Average Leverage through Tranche of Portfolio CompaniesExcluding Equity/Other and Collateralized Securities                          |  | 4.7x           |  | 6.3x             
|% of Investments on Non-Accrual                                                                                                       |  |               |  |                 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations                                       |  | 9.2%           |  | 9.7%             
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct OriginationsExcluding Non-Income
Producing Assets |  | 9.5%           |  | 9.8%             

Portfolio Composition by Strategy and Industry

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 March 31, 2014 and December 31, 2013:



|                                  |  |                |           |  |                        |  |     |            |  |   |                        |  |  |  |     |  
|--------------------------------- |  | -------------- | --------- |  | ---------------------- |  | --- | ---------- |  | - | ---------------------- |  |  |  | --- | -
|                                  |  | March 31, 2014 |           |  | December 31, 2013      | 
|Portfolio Composition by Strategy |  | Fair Value     |           |  | Percentage ofPortfolio |  |     | Fair Value |  |   | Percentage ofPortfolio | 
|Direct Originations               |  | $              | 1,398,857 |  |                        |  | 42  | %          |  | $ | 961,269                |  |  |  | 36  | %
|Opportunistic                     |  |                | 780,978   |  |                        |  | 24  | %          |  |   | 765,748                |  |  |  | 29  | %
|Broadly Syndicated/Other          |  |                | 1,127,551 |  |                        |  | 34  | %          |  |   | 928,811                |  |  |  | 35  | %
|                                  |  |                |           |  |                        |  |     |            |  |   |                        |  |  |  |     |  
|Total                             |  | $              | 3,307,386 |  |                        |  | 100 | %          |  | $ | 2,655,828              |  |  |  | 100 | %
|                                  |  |                |           |  |                        |  |     |            |  |   |                        |  |  |  |     |  



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The table below describes investments by industry classification and enumerates the
percentage, by fair value, of the total portfolio assets in such industries as of March 31, 2014 and December 31, 2013:



|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|---------------------------------------------- |  | ------------------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                                               |  | March 31, 2014(Unaudited) |           |  | December 31, 2013       | 
|Industry Classification                        |  | Fair Value                |           |  | Percentageof 
Portfolio |  |     | Fair Value |  |   | Percentageof 
Portfolio | 
|Automobiles & Components                       |  | $                         | 168,663   |  |                         |  | 5   | %          |  | $ | 53,195                  |  |  |  | 2   | %
|Capital Goods                                  |  |                           | 433,830   |  |                         |  | 13  | %          |  |   | 199,070                 |  |  |  | 8   | %
|Commercial & Professional Services             |  |                           | 50,076    |  |                         |  | 2   | %          |  |   | 44,881                  |  |  |  | 2   | %
|Consumer Durables & Apparel                    |  |                           | 150,614   |  |                         |  | 5   | %          |  |   | 144,211                 |  |  |  | 5   | %
|Consumer Services                              |  |                           | 458,414   |  |                         |  | 14  | %          |  |   | 401,187                 |  |  |  | 15  | %
|Diversified Financials                         |  |                           | 196,869   |  |                         |  | 6   | %          |  |   | 200,485                 |  |  |  | 8   | %
|Energy                                         |  |                           | 443,471   |  |                         |  | 14  | %          |  |   | 417,589                 |  |  |  | 16  | %
|Food & Staples Retailing                       |  |                           | 3,753     |  |                         |  | 0   | %          |  |   | 1,181                   |  |  |  | 0   | %
|Food, Beverage & Tobacco                       |  |                           | 10,203    |  |                         |  | 0   | %          |  |   | 10,245                  |  |  |  | 0   | %
|Health Care Equipment & Services               |  |                           | 131,554   |  |                         |  | 4   | %          |  |   | 133,025                 |  |  |  | 5   | %
|Household & Personal Products                  |  |                           |          |  |                         |  |    |            |  |   | 5,000                   |  |  |  | 0   | %
|Insurance                                      |  |                           | 109,214   |  |                         |  | 3   | %          |  |   | 86,466                  |  |  |  | 3   | %
|Materials                                      |  |                           | 145,573   |  |                         |  | 4   | %          |  |   | 138,777                 |  |  |  | 5   | %
|Media                                          |  |                           | 130,159   |  |                         |  | 4   | %          |  |   | 101,071                 |  |  |  | 4   | %
|Pharmaceuticals, Biotechnology & Life Sciences |  |                           | 79,176    |  |                         |  | 2   | %          |  |   | 78,001                  |  |  |  | 3   | %
|Real Estate                                    |  |                           | 8,102     |  |                         |  | 0   | %          |  |   | 8,171                   |  |  |  | 0   | %
|Retailing                                      |  |                           | 202,528   |  |                         |  | 6   | %          |  |   | 194,817                 |  |  |  | 7   | %
|Software & Services                            |  |                           | 236,513   |  |                         |  | 7   | %          |  |   | 181,024                 |  |  |  | 7   | %
|Technology Hardware & Equipment                |  |                           | 157,640   |  |                         |  | 5   | %          |  |   | 104,293                 |  |  |  | 4   | %
|Telecommunication Services                     |  |                           | 165,406   |  |                         |  | 5   | %          |  |   | 129,704                 |  |  |  | 5   | %
|Transportation                                 |  |                           | 24,155    |  |                         |  | 1   | %          |  |   | 21,964                  |  |  |  | 1   | %
|Utilities                                      |  |                           | 1,473     |  |                         |  | 0   | %          |  |   | 1,471                   |  |  |  | 0   | %
|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total                                          |  | $                         | 3,307,386 |  |                         |  | 100 | %          |  | $ | 2,655,828               |  |  |  | 100 | %
|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  

As of March 31, 2014, we did not control and were not an affiliate of any of our
portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, we would be presumed to control a portfolio company if we owned 25% or more of its voting securities and would be an affiliate of a
portfolio company if we owned 5% or more of its voting securities.

Our investment portfolio may contain loans that are in the
form of lines of credit or revolving credit facilities, which require us to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of March 31, 2014, we had five senior secured
loan investments with aggregate unfunded commitments of $135,458 and one equity/other investment, American Energy Ohio Holdings, LLC, with an unfunded commitment of $3,076. As of December 31, 2013, we had five senior secured loan investments
with aggregate unfunded commitments of $66,687 and one equity/other investment, American Energy Ohio Holdings, LLC, with an unfunded commitment of $6,157. We maintain sufficient cash on hand and available borrowings to fund such unfunded commitments
should the need arise.

Portfolio Asset Quality

In addition to various risk management and monitoring tools, FSIC II Advisor uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio.
FSIC II



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Advisor uses an investment rating scale of 1 to 5. The following is a description of the conditions associated with each investment rating:



|                  |  |                                                                                                                                                   
|----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Investment Rating |  | Summary Description                                                                                                                               
|                  | 
|1                 |  | Investment exceeding expectations and/or capital gain expected.                                                                                   
|2                 |  | Performing investment generally executing in accordance with the portfolio companys business planfull return of principal and interest expected.
|3                 |  | Performing investment requiring closer monitoring.                                                                                                
|4                 |  | Underperforming investmentsome loss of interest or dividend possible, but still expecting a positive return on investment.                       
|5                 |  | Underperforming investment with expected loss of interest and some principal.                                                                     

The following table shows the distribution of our investments on the 1 to 5 investment rating scale at
fair value as of March 31, 2014 and December 31, 2013:



|                  |  |                |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|----------------- |  | -------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                  |  | March 31, 2014 |           |  | December 31, 2013       | 
|Investment Rating |  | Fair Value     |           |  | Percentage 
ofPortfolio |  |     | Fair Value |  |   | Percentage 
ofPortfolio | 
|1                 |  | $              | 47,728    |  |                         |  | 2   | %          |  | $ | 86,131                  |  |  |  | 3   | %
|2                 |  |                | 2,983,604 |  |                         |  | 90  | %          |  |   | 2,286,820               |  |  |  | 86  | %
|3                 |  |                | 223,260   |  |                         |  | 7   | %          |  |   | 269,660                 |  |  |  | 10  | %
|4                 |  |                | 40,263    |  |                         |  | 1   | %          |  |   | 13,217                  |  |  |  | 1   | %
|5                 |  |                | 12,531    |  |                         |  | 0   | %          |  |   |                        |  |  |  |    |  
|                  |  |                |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|                  |  | $              | 3,307,386 |  |                         |  | 100 | %          |  | $ | 2,655,828               |  |  |  | 100 | %
|                  |  |                |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  

The amount of the portfolio in each grading category may vary substantially from period to period
resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in
investment values.

Results of Operations

Comparison of the Three Months Ended March 31, 2014 and 2013

Revenues

We generated investment income of $81,065 and $16,973 for the three months ended March 31, 2014 and 2013, respectively, in the form
of interest and fees earned on senior secured loans, senior secured bonds, subordinated debt and collateralized securities in our portfolio. Such revenues represent $75,629 and $15,550 of cash income earned as well as $5,436 and $1,423 in non-cash
portions relating to accretion of discount and PIK interest for the three months ended March 31, 2014 and 2013, respectively. 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 increase in investment income is due primarily to the growth of our portfolio over the last year. The level of income we receive is directly related to the balance of income-producing investments multiplied by the
weighted average yield of our investments. We expect the dollar amount of interest that we earn to level off as the size of our investment portfolio stabilizes as a result of the closing of our continuous public offering in March 2014.

Expenses

Our total operating expenses were $33,365 and $11,596 for the three months ended March 31, 2014 and 2013, respectively. Our operating
expenses include base management fees attributed to FSIC II Advisor of



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$17,641 and $4,985 for the three months ended March 31, 2014 and 2013, respectively. Our expenses also include administrative services expenses attributed to FSIC II Advisor of $1,374 and
$461 for the three months ended March 31, 2014 and 2013, respectively.

FSIC II Advisor is eligible to receive incentive
fees based on performance. During the three months ended March 31, 2014 and 2013, we accrued capital gains incentive fees of $5,934 and $3,859, respectively, based on the performance of our portfolio, of which $5,934 and $3,680, respectively,
was based on unrealized gains and $0 and $179, respectively, was based on realized gains. No capital gains incentive fees are actually payable by us with respect to unrealized gains unless and until those gains are actually realized. See
Critical Accounting PoliciesCapital Gains Incentive Fee.

We recorded interest expense of $5,901 and
$1,144 for the three months ended March 31, 2014 and 2013, respectively, in connection with our financing arrangements. For the three months ended March 31, 2014 and 2013, fees and expenses incurred with our fund administrator, which
provides various accounting and administrative services to us, totaled $317 and $89, respectively, and fees and expenses incurred with our stock transfer agent totaled $850 and $435, respectively. Fees for our board of directors were $179 and $146
for the three months ended March 31, 2014 and 2013, respectively.

Our other general and administrative expenses totaled
$1,169 and $477 for the three months ended March 31, 2014 and 2013, respectively, and consisted of the following:



|                                                                |  |                             |       |  |      |   |     | 
|--------------------------------------------------------------- |  | --------------------------- | ----- |  | ---- | - | --- | 
|                                                                |  | Three Months EndedMarch 31, |      
|                                                                |  | 2014                        |       |  | 2013 |  
|Expenses associated with our independent audit and related fees |  | $                           | 121   |  |      | $ | 78  | 
|Compensation of our chief compliance officer                    |  |                             | 30    |  |      |   | 11  | 
|Legal fees                                                      |  |                             | 197   |  |      |   | 200 | 
|Printing fees                                                   |  |                             | 249   |  |      |   | 107 | 
|Other                                                           |  |                             | 572   |  |      |   | 81  | 
|                                                                |  |                             |       |  |      |   |     | 
|Total                                                           |  | $                           | 1,169 |  |      | $ | 477 | 
|                                                                |  |                             |       |  |      |   |     | 

During the three months ended March 31, 2014 and 2013, the ratio of our operating expenses to our
average net assets was 1.24% and 1.65%, respectively. During the three months ended March 31, 2013, the ratio of our total operating expenses to our average net assets, which includes $2,041 of expense recoupments payable to Franklin Square
Holdings, was 1.94%. During the three months ended March 31, 2014 and 2013, the ratio of our total operating expenses to average net assets included $5,901 and $1,144, respectively, related to interest expense and $5,934 and $3,859,
respectively, related to accruals for incentive fees. Without such expenses, our ratio of total operating expenses to average net assets would have been 0.80% and 1.23% for the three months ended March 31, 2014 and 2013, respectively. 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 benchmark interest rates such as LIBOR, among other factors.

Expense Reimbursement

As of December 31, 2012, we had $1,635 of reimbursements due from Franklin Square Holdings. In connection with FSIC II Advisors voluntary agreement to waive $441 of accrued but unpaid capital
gains incentive fees, a corresponding reduction was made to the amount of accrued expense reimbursements due from Franklin Square Holdings. During the three months ended March 31, 2013, this balance was offset against expense recoupment payable
to sponsor. For the three months ended March 31, 2013, we accrued an expense recoupment payable to sponsor of $2,041, which we offset against the reimbursements due on our consolidated balance sheet as of December 31, 2012. As of
March 31, 2014, no further amounts remained subject to



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repayment by us to Franklin Square Holdings in the future. For a discussion of the expense reimbursement agreement, see OverviewExpense Reimbursement.

Net Investment Income

Our net investment income totaled $47,700 ($0.17 per share) and $3,336 ($0.04 per share) for the three months ended March 31, 2014 and 2013, respectively. The increase in net investment income on a
per share basis can be attributed to, among other things, the increase in the number of directly originated transactions and better economies of scale during the three months ended March 31, 2014.

Net Realized Gains or Losses

We sold investments and received principal repayments of $129,299 and $181,299, respectively, during the three months ended March 31, 2014, from which we realized a net gain of $2,605. During the
three months ended March 31, 2014, we realized a net gain of $4 from settlements on foreign currency. We sold investments and received principal repayments of $47,256 and $44,323, respectively, during the three months ended March 31, 2013,
from which we realized net gains of $848. During the three months ended March 31, 2013, we earned $7,263 from periodic net settlement payments on our TRS, which are reflected as realized gains, and realized a net loss of $59 from settlements on
foreign currency.

Net Change in Unrealized Appreciation (Depreciation) on Investments and Total Return Swap and Unrealized
Gain (Loss) on Foreign Currency

For the three months ended March 31, 2014, the net change in unrealized appreciation
(depreciation) on investments totaled $27,059 and the net change in unrealized gain (loss) on foreign currency was $0. The net change in unrealized appreciation (depreciation) on our investments during the three months ended March 31, 2014 was
primarily driven by the performance of certain of our senior secured bond and subordinated debt investments. For the three months ended March 31, 2013, the net change in unrealized appreciation (depreciation) on investments totaled $12,476, the
net change in unrealized appreciation (depreciation) on our TRS was $3,971 and the net change in unrealized gain (loss) on foreign currency was $120. The net change in unrealized appreciation (depreciation) on our investments and our TRS during the
three months ended March 31, 2013 was primarily driven by tightening of credit spreads as demand for senior loans and subordinated debt increased during the period.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the
three months ended March 31, 2014 and 2013, the net increase in net assets resulting from operations was $77,368 ($0.27 per share) and $27,955 ($0.37 per share), respectively.

Financial Condition, Liquidity and Capital Resources

As of March 31,
2014, we had $368,277 in cash, which we held in a custodial account, and $529,506 in borrowings available under our financing facilities. Below is a summary of our outstanding financing facilities as of March 31, 2014:



|                                  |  |                  |  |                    |  |                   |         |  |                 |   |         |              |  |                  
|--------------------------------- |  | ---------------- |  | ------------------ |  | ----------------- | ------- |  | --------------- | - | ------- | ------------ |  | -----------------
|Facility                          |  | Type of Facility |  | Rate               |  | AmountOutstanding |         |  | AmountAvailable |   |         | MaturityDate
|JPM Facility                      |  | Repurchase       |  | 3.25%              |  | $                 | 550,000 |  |                 | $ |        |              |  | May 20, 2017     
|Cooper River Credit Facility      |  | Revolving        |  | L + 1.75%          |  | $                 | 170,494 |  |                 | $ | 29,506  |              |  | March 27, 2016   
|Wissahickon Creek Credit Facility |  | Revolving        |  | L + 1.50% to 2.50% |  | $                 |        |  |                 | $ | 250,000 |              |  | February 19, 2019
|Darby Creek Credit Facility       |  | Revolving        |  | L + 2.75%          |  | $                 |        |  |                 | $ | 250,000 |              |  | February 20, 2018

For additional information regarding our outstanding financing facilities as of March 31, 2014, see Note
8 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q.



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In March 2014, we closed our continuous public offering of shares of common stock to new
investors. We sold 302,266,066 shares of common stock for gross proceeds of $3,112,692 in our continuous public offering, including shares issued pursuant to our distribution reinvestment plan. Following the closing of our continuous public
offering, we have continued to issue shares pursuant to our distribution reinvestment plan. As of May 12, 2014, we had sold a total of 306,391,791 shares of common stock and raised total gross proceeds of $3,150,710, including $200 of seed
capital contributed by the principals of FSIC II Advisor in December 2011 and $18,395 in proceeds raised from the principals of FSIC II Advisor, other individuals and entities affiliated with FSIC II Advisor, certain members of our board of
directors and certain individuals and entities affiliated with GDFM in a private placement completed in June 2012.

During the three months ended March 31, 2014, we sold 50,461,488 shares of our common stock for gross proceeds of $522,744 at an average price per share of $10.36. The gross proceeds received during
the three months ended March 31, 2014 include reinvested stockholder distributions of $35,865 for which we issued 3,781,436 shares of common stock. During the three months ended March 31, 2014, we also incurred offering costs of $1,686 in
connection with the sale of our common stock, which consisted primarily of legal, due diligence and printing fees. The offering costs were offset against capital in excess of par value on our consolidated financial statements. The sales commissions
and dealer manager fees related to the sale of our common stock were $44,484 for the three months ended March 31, 2014. These sales commissions and fees include $8,821 retained by FS2, which served as the dealer manager for our continuous public offering.

We generate cash primarily from the issuance of shares under our distribution reinvestment plan and from cash flows from fees, interest
and dividends earned from our investments, as well as principal repayments and proceeds from sales of our investments.

Prior
to investing in securities of portfolio companies, we invest the net proceeds from the issuance of shares of our common stock under our distribution reinvestment plan and from sales and paydowns of existing investments primarily in cash, cash
equivalents, 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.

To provide our stockholders with limited liquidity, we conduct quarterly tender offers pursuant to our share repurchase program. The
first such tender offer commenced in August 2012, and the repurchase occurred in connection with our October 1, 2012 semi-monthly closing.

The following table provides information concerning our repurchases of shares of common stock pursuant to our share repurchase program during the three months ended March 31, 2014 and 2013:



|                           |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                            |       |  |  |   |       | 
|-------------------------- |  | --------------- | --------------- |  | ----------------- |  | ------- | ----------------------------------------------- |  |  | ------------------------ | - |  | ------------------------------------------ | ----- |  |  | - | ----- | 
|For the Three Months Ended |  | Repurchase Date |                 |  | SharesRepurchased |  |         | Percentageof SharesTenderedThat WereRepurchased |  |  | RepurchasePrice PerShare |   |  | AggregateConsiderationforRepurchasedShares |      
|Fiscal 2013                |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                            |       |  |  |   |       | 
|December 31, 2012(1)       |  |                 | January 2, 2013 |  |                   |  |        |                                                 |  |  |                         |   |  | $                                          | 9.225 |  |  |   |      | 
|Fiscal 2014                |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                            |       |  |  |   |       | 
|December 31, 2013          |  |                 | January 2, 2014 |  |                   |  | 135,094 |                                                 |  |  | 100                      | % |  | $                                          | 9.450 |  |  | $ | 1,277 | 



|(1) | No shares were tendered for repurchase in connection with the quarterly tender offer.
|--- | -------------------------------------------------------------------------------------

On April 1, 2014, we repurchased 372,394 shares of common stock (representing 100% of the shares of common stock tendered for
repurchase) at $9.54 per share for aggregate consideration totaling $3,553.



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Capital Contribution by FSIC II Advisor and GDFM

In December 2011, Michael C. Forman and David J. Adelman, the principals of FSIC II Advisor, contributed an aggregate of $200 to purchase
22,222 shares of common stock at $9.00 per share, which represents the initial public offering price of $10.00 per share, net of selling commissions and dealer manager fees. The principals have agreed not to tender these shares of common stock for
repurchase as long as FSIC II Advisor remains our investment adviser.

In June 2012, pursuant to a private placement,
Messrs. Forman and Adelman agreed to purchase, through affiliated entities controlled by each of them, 222,222 additional shares of common stock at $9.00 per share. The principals have agreed not to tender these shares of common stock for
repurchase as long as FSIC II Advisor remains our investment adviser. In connection with the same private placement, certain members of our board of directors and other individuals and entities affiliated with FSIC II Advisor agreed to purchase
1,247,267 shares of common stock, and certain individuals and entities affiliated with GDFM agreed to purchase 574,444 shares of common stock, in each case at a price of $9.00 per share. In connection with the private placement, we issued an
aggregate of 2,043,933 shares of common stock for aggregate proceeds of $18,395 upon satisfaction of the minimum offering requirement on June 18, 2012. As of May 12, 2014, we had sold an aggregate of 3,272,745 shares of common stock for
aggregate gross proceeds of $29,912 to members of our board of directors and individuals and entities affiliated with FSIC II Advisor and GDFM, including shares of common stock sold to Messrs. Forman and Adelman in December 2011 and shares sold in
the private placement completed in June 2012.

RIC Status and Distributions

We have elected to be treated for federal income tax purposes, and intend to qualify annually, as a RIC under Subchapter M of the Code. In
order to qualify as a RIC, we must, among other things, distribute at least 90% of our investment company taxable income, as defined by the Code, each year. As long as the distributions are declared by the later of the fifteenth day of
the ninth month following the close of the taxable year or the due date of the tax return, including extensions, distributions paid up to one year 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 status each year. We are also subject to nondeductible federal excise taxes if we do not distribute at least 98% of net
ordinary income, 98.2% of any capital gain net income, if any, and any recognized and undistributed income from prior years on which we paid no federal income taxes.

We declared our first distribution on June 20, 2012. Prior to the closing of our continuous public offering, in March 2014 we authorized and declared ordinary cash distributions on a weekly or
semi-monthly basis and paid such distributions on a monthly basis. In connection with the closing of our continuous public offering, we expect to authorize and declare ordinary cash distributions on a monthly basis and pay such distributions on
either a monthly or quarterly basis, in each case subject to our board of directors discretion and applicable legal restrictions.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 common stock at
the 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 will represent a return of capital. A return of capital generally is a return of an investors investment rather than a return of earnings or gains derived from our investment activities,
and will be made after the deduction of fees and expenses, including any fees payable to FSIC II Advisor. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our stockholders. No portion of the
distributions paid during the three months ended March 31, 2014 and 2013 represented a return of capital.



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We intend to continue to make our ordinary distributions in the form of cash out of assets
legally available for distribution, unless stockholders elect to receive their distributions in additional shares of our common stock under 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 three months ended March 31, 2014 and 2013:



|                           |  |              |        |  |        |   |        | 
|-------------------------- |  | ------------ | ------ |  | ------ | - | ------ | 
|                           |  | Distribution |       
|For the Three Months Ended |  | Per Share    |        |  | Amount |  
|Fiscal 2013                |  |              |        |  |        |   |        | 
|March 31, 2013             |  | $            | 0.1871 |  |        | $ | 14,791 | 
|Fiscal 2014                |  |              |        |  |        |   |        | 
|March 31, 2014             |  | $            | 0.1740 |  |        | $ | 49,274 | 



On April 2, 2014, our board of
directors declared a regular monthly cash distribution of $0.06283 per share, which was paid on April 30, 2014 to stockholders of record on April 29, 2014. On May 6, 2014, our board of directors declared a regular monthly cash
distribution of $0.06283 per share, which will be paid on May 30, 2014 to stockholders of record on May 29, 2014. 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.

We have adopted an opt in distribution reinvestment plan for our
stockholders. As a result, if we make a distribution, our stockholders will receive distributions in cash unless they specifically opt in to the distribution reinvestment plan so as to have their cash distributions reinvested in
additional shares of our common stock. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a stockholders ability to participate in the distribution reinvestment plan.

We may fund our cash distributions to stockholders from any sources of funds legally available to us, including proceeds from
the sale of shares of our common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of
preferred and common equity investments in portfolio companies and expense reimbursements from Franklin Square Holdings. We have not established limits on the amount of funds we may use from available sources to make distributions.

For a period of time following commencement of our continuous public offering, substantial portions of our distributions were funded
through the reimbursement of certain expenses by Franklin Square Holdings and its affiliates, including through the waiver of certain investment advisory fees by FSIC II Advisor, that were subject to repayment by us within three years. The purpose
of this arrangement was to ensure that no portion of our distributions to stockholders was paid from offering proceeds or borrowings. Any such distributions funded through expense reimbursements or waivers of advisory fees were not based on our
investment performance. No portion of the distributions paid during the three months ended March 31, 2014 or 2013 was funded through the reimbursement of operating expenses by Franklin Square Holdings. However, our repayment of amounts
previously reimbursed or waived by Franklin Square Holdings and its affiliates reduced the distributions that stockholders may otherwise have received during the three months ended March 31, 2013. During the three months ended March 31, 2014, we did
not repay any amounts to Franklin Square Holdings for expenses previously reimbursed or waived. There can be no assurance that we will continue to achieve the performance necessary to sustain our distributions or that we will be able to pay
distributions at a specific rate or at all. Franklin Square Holdings and its affiliates have no obligation to waive advisory fees or otherwise reimburse expenses in future periods.



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The following table reflects the sources of the cash distributions on a tax basis that we
have paid on our common stock during the three months ended March 31, 2014 and 2013:



|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|--------------------------------------------------------- |  | ---------------------------- | ------ |  | ---------- |  | --- | ------------------ |  | - | ---------- |  |  |  | --- | -
|                                                          |  | Three Months Ended March 31, |       
|                                                          |  | 2014                         |        |  | 2013       | 
|Source of Distribution                                    |  | DistributionAmount           |        |  | Percentage |  |     | DistributionAmount |  |   | Percentage | 
|Offering proceeds                                         |  | $                            |       |  |            |  |    |                    |  | $ |           |  |  |  |    |  
|Borrowings                                                |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Net investment income(1)                                  |  |                              | 49,274 |  |            |  | 100 | %                  |  |   | 13,016     |  |  |  | 88  | %
|Short-term capital gains proceeds from the sale of assets |  |                              |       |  |            |  |    |                    |  |   | 1,775      |  |  |  | 12  | %
|Long-term capital gains proceeds from the sale of assets  |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Non-capital gains proceeds from the sale of assets        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Distributions on account of preferred and common equity   |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Expense reimbursement from sponsor                        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|Total                                                     |  | $                            | 49,274 |  |            |  | 100 | %                  |  | $ | 14,791     |  |  |  | 100 | %
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  



|(1) | During the three months ended March 31, 2014 and 2013, 93.3% and 91.6%, respectively, of our gross investment income was attributable to cash interest earned, 4.9%
and 8.4%, respectively, was attributable to non-cash accretion of discount and 1.8% and 0.0%, respectively, was attributable to PIK interest.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our net investment income on a tax basis for the three months ended March 31, 2014 and 2013 was $52,415 and $13,275, respectively. As of March 31, 2014 and December 31, 2013, we had $14,908
and $7,638, respectively, of undistributed net investment income and realized gains on a tax basis.

See Note 5 to our
unaudited consolidated financial statements contained in this quarterly report on Form 10-Q for additional information regarding our distributions, including a reconciliation of our GAAP-basis net
investment income and tax-basis net investment income for the three months ended March 31, 2014 and 2013.

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, in forming its estimates and judgments, giving due
consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses.
As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.

Valuation of Portfolio Investments

We determine the net asset value of our investment portfolio each quarter. Securities that are publicly-traded are valued at the reported closing price on the valuation date. Securities that are not
publicly-traded are valued at fair value as determined in good faith by our board of directors. In connection with that determination, FSIC II



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Advisor provides our board of directors with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities,
recent portfolio company financial statements and forecasts, and valuations prepared by third-party valuation services.

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the
Financial Accounting Standards Board, 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 valuation process begins with FSIC II Advisors management team providing a preliminary valuation of each portfolio company or
investment to our valuation committee, which valuation may be obtained from an independent valuation firm, if applicable;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | preliminary valuation conclusions are then documented and discussed with our valuation committee;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | our valuation committee reviews the preliminary valuation and FSIC II Advisors management team, together with our independent valuation firm, if
applicable, responds and supplements the preliminary valuation to reflect any comments provided by the valuation committee; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on various
statistical and other factors, including the input and recommendation of FSIC II Advisor, the valuation committee and any third-party valuation firm, 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. Below is a description of factors that our board of directors may consider when valuing our
debt and equity investments.

Valuation of fixed income investments, such as loans and debt securities, depends upon a number
of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may
incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that our board of directors may consider include the borrowers ability to adequately service its debt, the fair market value of the portfolio
company in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments.

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 (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 analysis of fair value, may consider various factors, such
as multiples of



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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.

Our board of directors may also look to 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. Our board of directors may also consider the size and scope of a portfolio company and its specific
strengths and weaknesses, as well as any other factors it deems relevant in assessing the 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, our board of directors will allocate the cost basis in the
investment between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of directors will subsequently value these warrants or other equity securities received at fair value.

The fair values of our investments are determined in good faith by our board of directors. Our board of directors is solely 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 investments as of March 31, 2014 consisted primarily of debt securities that are traded on a private over-the-counter market for institutional investors. Except as described below, we valued our
investments 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. Sixteen senior
secured loan investments, one senior secured bond investment and one collateralized security, for which broker quotes were not available, were valued by an independent valuation firm, which determined 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 and other relevant terms of the debt. Except as
described below, all of our equity/other investments were valued by the same independent valuation firm, which determined 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 EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. One senior secured loan investment and one equity/other investment, both of which were newly-issued
and purchased near March 31, 2014, were valued at cost, as our board of directors determined that the cost of each such investment was the best indication of its fair value. Also, two equity/other investments which were traded on active public
markets were valued at their closing price as of March 31, 2014 and two equity/other investments were valued by an independent third-party pricing service in the manner described above.

Our investments as of December 31, 2013 consisted primarily of debt securities that are traded on a private over-the-counter market
for institutional investors. Except as described below, we valued our investments 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. Thirteen senior secured loan investments and one collateralized security, for which broker quotes were not available, were valued by an independent valuation firm, which determined 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, and other relevant
terms of the debt. Except as described below, all of our equity/other investments were valued by the same independent valuation firm, which determined the fair value of such investments by considering, among other factors, contractual rights



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ascribed to such investments, as well as various income scenarios and multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. One equity
investment which is traded on an active public market was valued at its closing price as of December 31, 2013.

We
periodically benchmark the bid and ask prices we receive from the third-party pricing services against the actual prices at which we purchase and sell our investments. Based on the results of the benchmark analysis and the experience of our
management in purchasing and selling these investments, we believe that these prices are reliable indicators of fair value. However, because of the private nature of this marketplace (meaning actual transactions are not publicly reported), we
believe that these valuation inputs are classified as Level 3 within the fair value hierarchy. We may also use other methods to determine fair value for securities for which we cannot obtain prevailing bid and ask prices through our third-party
pricing services or independent dealers, including the use of an independent valuation firm. We periodically benchmark the valuations provided by the independent valuation firm against the actual prices at which we purchase and sell our investments.
Our valuation committee and board of directors reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with our valuation process.

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. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to doubt our ability to collect such income. 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. Upfront structuring fees
are recorded as fee income when earned. We record prepayment premiums on loans and securities as fee income when we receive such amounts.

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 upfront 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.

Capital Gains Incentive Fee

Pursuant to the terms of the 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 such agreement). Such fee will equal 20.0% of our incentive fee capital gains (i.e., our realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, net of all realized capital
losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a quarterly basis, we accrue for the capital gains incentive fee by calculating such fee as if it
were due and payable as of the end of such period.

While the investment advisory and administrative services agreement
neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of



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an AICPA Technical Practice Aid for investment companies, we include unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive
fee. This accrual reflects the incentive fees that would be payable to FSIC II Advisor if our entire portfolio were liquidated at its fair value as of the balance sheet date even though FSIC II Advisor is not entitled to an incentive fee with
respect to unrealized gains unless and until such gains are actually realized.

In addition, we historically treated all net
settlement payments received by us pursuant to our TRS (which was terminated on June 13, 2013) as realized capital gains and included only the aggregate amount of unrealized depreciation on the TRS as a whole in calculating the capital gains
incentive fee payable to FSIC II Advisor with respect to realized gains, in each case, in accordance with GAAP. However, the Staff informed us that it is their interpretation of the applicable language in the Advisers Act that we should look
through the TRS in calculating our capital gains incentive fee. Under this look through methodology, the portion of the net settlement payments received by us pursuant to the TRS which would have represented net investment income
to us had we held the loans or securities underlying the TRS directly would be treated as net investment income subject to the subordinated incentive fee on income payable to FSIC II Advisor pursuant to the investment advisory and administrative
services agreement, rather than as realized capital gains in accordance with GAAP, and any unrealized depreciation on individual loans or securities underlying the TRS would further reduce the capital gains incentive fee payable to FSIC II Advisor
with respect to realized gains. FSIC II Advisor voluntarily agreed to waive any capital gains incentive fee calculated in accordance with GAAP to which it would otherwise be entitled in respect of the TRS if and to the extent that the amount of such
fee exceeds the sum of (i) the amount of capital gains incentive fee determined in respect of the TRS on a look through basis under which we treat the reference assets underlying the TRS as our investments and (ii) the
aggregate amount of subordinated incentive fees on income which would have been payable to FSIC II Advisor with respect to the portion of the net settlement payments received by us pursuant to the TRS which represent net investment income on the
loans or securities underlying the TRS on a look through basis.

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 three months ended March 31, 2014 and 2013, we did not incur any interest or penalties.

Contractual Obligations

We have entered into an agreement with FSIC II
Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory and administrative services agreement are equal to (a) an annual base management fee of 2.0% of
the average value of our gross assets and (b) an incentive fee based on our performance. FSIC II Advisor and, to the extent it is required to provide such services, our sub-adviser, are reimbursed for administrative expenses incurred on our
behalf. For the three months ended March 31, 2014 and 2013, we incurred $17,641 and $4,985, respectively, in base management fees and $1,374 and $461, respectively, in administrative services expenses under the investment advisory and
administrative services agreement. In addition, FSIC II Advisor is eligible to receive incentive fees based on the performance of our portfolio. During the three months ended March 31, 2014 and 2013, we accrued capital gains incentive fees of
$5,934 and $3,859, respectively, based on the performance of our portfolio, of which $5,934 and $3,680, respectively, was based on unrealized gains and $0 and $179, respectively, was based on realized gains. As of December 31, 2013, we had
accrued capital gains incentive fees payable to FSIC II Advisor of $9,234 based on the performance of our portfolio, all of which was based on



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unrealized gains. We did not pay any capital gains incentive fees to FSIC II Advisor during the three months ended March 31, 2014. As of March 31, 2014, we had accrued capital gains
incentive fees of $15,168, all of which was based on unrealized gains and none of which is currently payable to FSIC II Advisor.

A summary of our significant contractual payment obligations for the repayment of outstanding borrowings under the JPM facility and the Cooper River facility at March 31, 2014 is as follows:



|                              |  |                        |         |  |                  |   |         |           |  |   |           |  |  |                   |   |  |  |  |   | 
|----------------------------- |  | ---------------------- | ------- |  | ---------------- | - | ------- | --------- |  | - | --------- |  |  | ----------------- | - |  |  |  | - | 
|                              |  | Payments Due By Period |        
|                              |  | Total                  |         |  | Less than 1 year |   |         | 1-3 years |  |   | 3-5 years |  |  | More than 5 years |  
|Borrowings of Cobbs Creek(1)  |  | $                      | 550,000 |  |                  | $ | 550,000 |           |  |   |          |  |  |                   |  |  |  |  |  | 
|Borrowings of Cooper River(2) |  | $                      | 170,494 |  |                  |   |        |           |  | $ | 170,494   |  |  |                   |  |  |  |  |  | 



|(1) | At March 31, 2014, no amounts remained unused under the JPM facility. Cobbs Creek will, on a quarterly basis, repurchase the Class A Notes sold to JPM under
the JPM facility and subsequently resell such Class A Notes to JPM. The final repurchase transaction is scheduled to occur no later than May 20, 2017.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | At March 31, 2014, $29,506 remained unused under the Cooper River facility. All amounts under the Cooper River facility will mature, and all accrued and unpaid
interest thereunder will be due and payable, on March 27, 2016.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2014, no amounts were
outstanding under the Wissahickon Creek facility or the Darby Creek facility.

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

None.

Related Party Transactions

Compensation of the Investment Adviser and Dealer Manager

Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor is entitled to an annual base management fee of 2.0% of the average value of our gross assets and an incentive
fee based on our performance. We commenced accruing fees under the investment advisory and administrative services agreement on June 18, 2012, upon commencement of our operations. Management fees are paid on a quarterly basis in arrears.

The incentive fee consists of two parts. The first part, which is referred to as the subordinated incentive fee on income, is
calculated and payable quarterly in arrears, equals 20.0% of 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, as defined in
the investment advisory and administrative services agreement, equal to 1.875% per quarter, or an annualized hurdle rate of 7.5%. The second part of the incentive fee, which is referred to as the incentive fee on capital gains, is accrued for
on a quarterly basis and, if earned, is paid annually. We accrue this incentive fee based on net realized and unrealized gains; however, under the terms of the investment advisory and administrative services agreement, the fee payable to FSIC II
Advisor is based on realized gains and no such fee is payable with respect to unrealized gains unless and until such gains are actually realized. See Critical Accounting PoliciesCapital Gains Incentive Fee for a discussion of
the treatment of the TRS with respect to the calculation of the capital gains incentive fee.



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We reimburse FSIC II Advisor for expenses necessary to perform services related to our
administration and operations. The amount of this reimbursement is set at the lesser of (1) FSIC II 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. FSIC II Advisor is required to allocate the cost of such services to us based on factors such as assets, revenues, time allocations and/or other reasonable metrics. Our board
of directors then assesses the reasonableness of such reimbursements 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 FSIC II Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.

Franklin Square Holdings has funded certain of our offering costs and organization costs. These costs have been recorded by us as a
contribution to capital. The offering costs were offset against capital in excess of par value on the consolidated financial statements and the organization costs were charged to expense as incurred by us. Under the terms of the investment advisory
and administrative services agreement, upon satisfaction of the minimum offering requirement, FSIC II Advisor became entitled to receive 1.5% of gross proceeds raised in our continuous public offering until all offering costs and organization costs
funded by FSIC II Advisor or its affiliates (including Franklin Square Holdings) had been recovered. On June 18, 2012, we satisfied the minimum offering requirement. During the three months ended March 31, 2014 and 2013, Franklin Square
Holdings did not fund any of our offering and organization costs, and we did not pay any reimbursements to FSIC II Advisor and its affiliates for offering and organization costs previously funded.

The dealer manager for our continuous public offering was
FS2, which is one of our affiliates. Under the dealer
manager agreement among us, FSIC II Advisor and FS2,
FS2was entitled to receive sales commissions and dealer
manager fees in connection with the sale of shares of common stock in our continuous public offering, all or a portion of which were re-allowed to selected broker-dealers.

The following table describes the fees and expenses accrued under the investment advisory and administrative services agreement and the dealer manager agreement during the three months ended
March 31, 2014 and 2013:



|                |  |                                                           |  |                                      |  |                             |        |  |      |   |       | 
|--------------- |  | --------------------------------------------------------- |  | ------------------------------------ |  | --------------------------- | ------ |  | ---- | - | ----- | 
|                |  |                                                           |  |                                      |  | Three Months EndedMarch 31, |       
|Related Party   |  | Source Agreement                                          |  | Description                          |  | 2014                        |        |  | 2013 |  
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Base Management Fee(1)               |  | $                           | 17,641 |  |      | $ | 4,985 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Capital Gains Incentive 
Fee(2)      |  | $                           | 5,934  |  |      | $ | 3,859 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Administrative Services 
Expenses(3) |  | $                           | 1,374  |  |      | $ | 461   | 
|FS2             |  | Dealer Manager Agreement                                  |  | Dealer Manager Fee(4)                |  | $                           | 8,821  |  |      | $ | 6,817 | 



|(1) | During the three months ended March 31, 2014 and 2013, $15,013 and $0, respectively, in base management fees were paid to FSIC II Advisor. As of March 31, 2014,
$17,641 in base management fees were payable to FSIC II Advisor.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | During the three months ended March 31, 2014 and 2013, we accrued capital gains incentive fees of $5,934 and $3,859, respectively, based on the
performance of our portfolio, of which $5,934 and $3,680, respectively, was based on unrealized gains and $0 and $179, respectively, was based on realized gains. No capital gains incentive fees are actually payable by us with respect to unrealized
gains unless and until those gains are actually realized. See Critical Accounting PoliciesCapital Gains Incentive Fee for a discussion of the methodology employed by us in calculating the capital gains incentive fee.
Effective as of March 31, 2013, FSIC II Advisor
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | voluntarily agreed to waive any capital gains incentive fees calculated in accordance with GAAP to the extent such fees exceeded those which would be payable in accordance with the look
through methodology described more fully in Critical Accounting PoliciesCapital Gains Incentive Fee. This waiver resulted in a reduction of $441 to the amount of capital gains incentive fees payable to FSIC II Advisor
with respect to realized gains. Accordingly, we reduced the amount of accrued capital gains incentive fees payable to FSIC II Advisor by $441 effective as of March 31, 2013. We did not pay any capital gains incentive fees to FSIC II Advisor
during the three months ended March 31, 2014 or 2013. As of March 31, 2014, we had accrued capital gains incentive fees of $15,168 based on the performance of our portfolio, all of which was based on unrealized gains and none of which is
currently payable to FSIC II Advisor.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | During the three months ended March 31, 2014 and 2013, $1,288 and $390, respectively, of the administrative services expenses related to the allocation of costs of
administrative personnel for services rendered to us by FSIC II Advisor and the remainder related to other reimbursable expenses. We paid $214 and $176 in administrative services expenses to FSIC II Advisor during the three months ended
March 31, 2014 and 2013, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Represents aggregate dealer manager fees retained by FS2and not re-allowed to selected broker-dealers.
|--- | ------------------------------------------------------------------------------------------------------

See Note 4 to our unaudited consolidated financial statements contained in this quarterly report on
Form 10-Q for additional information regarding our related party transactions and relationships, including potential conflicts of interest, our exemptive relief order and our expense reimbursement
arrangement with Franklin Square Holdings.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.
|------- | -----------------------------------------------------------

We are subject to financial market risks, including changes in interest rates. As of March 31, 2014, 74.6% of our portfolio investments (based on fair value) paid variable interest rates, 22.1% paid
fixed interest rates, 3.1% were non-income producing equity or other investments and the remainder (0.2%) were income-producing equity or other investments. A rise in the general level of interest rates can be expected to lead to higher
interest rates applicable to certain variable rate investments we hold and to declines in the value of any fixed rate investments we hold. To the extent that a substantial portion of our investments may be in variable rate investments, an increase
in interest rates would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable
to FSIC II Advisor with respect to our increased pre-incentive fee net investment income.

Pursuant to the terms of the Cooper
River facility, the Wissahickon Creek facility and the Darby Creek facility, Cooper River, Wissahickon Creek and Darby Creek, respectively, borrow at a floating rate based on LIBOR. Under the terms of the JPM facility, Cobbs Creek pays interest to
JPM at a fixed rate. To the extent that any present or future credit facilities 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.



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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 our investment portfolio and borrowing arrangements in effect as of March 31, 2014 (dollar amounts are presented in thousands):



|                         |  |                                        |        |   |                                      |   |       |                                          |  |   |                                         |  |  |  |      |  
|------------------------ |  | -------------------------------------- | ------ | - | ------------------------------------ | - | ----- | ---------------------------------------- |  | - | --------------------------------------- |  |  |  | ---- | -
|LIBOR Basis Point Change |  | Increase(Decrease)in InterestIncome(1) |        |   | Increase(Decrease)in InterestExpense |   |       | Increase(Decrease) 
inNet InterestIncome |  |   | PercentageChange in 
NetInterest Income | 
|Down 25 basis points     |  | $                                      | (213   | ) |                                      | $ | (354  | )                                        |  | $ | 141                                     |  |  |  | 0.1  | %
|Current LIBOR            |  |                                        |       |   |                                      |   |      |                                          |  |   |                                        |  |  |  |     |  
|Up 100 basis points      |  |                                        | 3,004  |   |                                      |   | 1,416 |                                          |  |   | 1,588                                   |  |  |  | 0.6  | %
|Up 300 basis points      |  |                                        | 50,536 |   |                                      |   | 4,248 |                                          |  |   | 46,288                                  |  |  |  | 16.5 | %
|Up 500 basis points      |  |                                        | 99,171 |   |                                      |   | 7,080 |                                          |  |   | 92,091                                  |  |  |  | 32.9 | %



|(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 three months ended March 31, 2014 and 2013, 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.



|Item 4. | 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 March 31, 2014. 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.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the three month period ended March 31, 2014 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 and, to our knowledge, no material legal proceedings are 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 fiscal year ended December 31, 2013.



|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 March 31, 2014 pursuant to our share repurchase program.



|                                |  |                                |         |  |                            |   |      |                                                                              |  |  |                                                                            |  |  |  |    |  
|------------------------------- |  | ------------------------------ | ------- |  | -------------------------- | - | ---- | ---------------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------- |  |  |  | -- | -
|Period                          |  | Total Numberof SharesPurchased |         |  | AveragePrice Paidper Share |   |      | Total Number ofShares Purchased asPart of
PubliclyAnnounced Plans orPrograms |  |  | Maximum Number ofShares that May YetBe
PurchasedUnder thePlans or Programs | 
|January 1 to January 31, 2014   |  |                                | 135,094 |  |                            | $ | 9.45 |                                                                              |  |  | 135,094                                                                    |  |  |  | (1 | )
|February 1 to February 28, 2014 |  |                                |        |  |                            |   |     |                                                                              |  |  |                                                                           |  |  |  |   |  
|March 1 to March 31, 2014       |  |                                |        |  |                            |   |     |                                                                              |  |  |                                                                           |  |  |  |   |  
|                                |  |                                |         |  |                            |   |      |                                                                              |  |  |                                                                            |  |  |  |    |  
|Total                           |  |                                | 135,094 |  |                            | $ | 9.45 |                                                                              |  |  | 135,094                                                                    |  |  |  | (1 | )
|                                |  |                                |         |  |                            |   |      |                                                                              |  |  |                                                                            |  |  |  |    |  



|(1) | A description 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 contained in this quarterly report on Form 10-Q.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Note 3 to our
unaudited consolidated financial statements contained in this quarterly report on Form 10-Q 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.
|------- | ---------



| |      |  |  |                                                                                                                                                                                                                                                                                                                                          
| | ---- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     
| | 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  |  |  | Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit (b) to Pre-Effective Amendment No. 3 to the Companys registration statement on
Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                                                                                            
| |     
| | 4.1  |  |  | Distribution Reinvestment Plan of the Company. (Incorporated by reference to Exhibit (e) to Pre-Effective Amendment No. 3 to the Companys registration statement on
Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                                                                                         
| |     
| | 4.2  |  |  | Amended and Restated Distribution Reinvestment Plan of the Company, effective as of January 1, 2013. (Incorporated by reference to Exhibit 4.3 to the Companys Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2012 filed on November 14, 2012.)                                                             
| |     
| | 4.3  |  |  | 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 February 8, 2012, by and between the Company and FSIC II Advisor, LLC. (Incorporated by reference to
Exhibit (g)(1) to Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)       
| |     
| | 10.2 |  |  | 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) to 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 |  |  | Dealer Manager Agreement, dated as of February 8, 2012, by and among the Company, FSIC II Advisor, LLC and FS2Capital Partners, LLC. (Incorporated by reference to Exhibit (h)(1) to 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 |  |  | Form of Follow-On Dealer Manager Agreement. (Incorporated by reference to Exhibit (h)(2) to Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2
(File No. 333-184474) filed on May 10, 2013.)                                                                                                              
| |     
| | 10.5 |  |  | Form of Selected Dealer Agreement (Included as Appendix A to the Dealer Manager Agreement). (Incorporated by reference to Exhibit (h)(1) to Pre-Effective Amendment No. 3 to
the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                                         
| |     
| | 10.6 |  |  | Form of Follow-On Selected Dealer Agreement (Included as Exhibit A to the Form of Follow-On Dealer Manager Agreement). (Incorporated by reference to Exhibit (h)(2) to
Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-184474) filed on May 10, 2013.)                                   
| |     
| | 10.7 |  |  | 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) to
Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                 
| |     
| | 10.8 |  |  | Escrow Agreement, dated as of January 23, 2012, by and among the Company, UMB Bank, N.A. and FS2Capital Partners, LLC. (Incorporated by reference to Exhibit (k) to Pre-Effective Amendment No. 3 to the
Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                 



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|      |  |                                                                                                                                                                                                                                                                                                                                                  
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.9  |  | ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, each dated as of July 2, 2012, by and between Del River LLC (formerly known
as IC-II Investments LLC) and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on July 3, 2012.)
|      | 
|10.10 |  | Confirmation Letter Agreement, dated as of July 2, 2012, by and between Del River LLC (formerly known as IC-II Investments LLC) and Citibank, N.A. (Incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K filed on July 3, 2012.)                                                                                
|      | 
|10.11 |  | Amended and Restated Confirmation Letter Agreement, dated as of September 12, 2012, by and between Del River LLC (formerly known as IC-II Investments LLC) and Citibank, N.A.
(Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on September 12, 2012.)                                               
|      | 
|10.12 |  | Amended and Restated Confirmation Letter Agreement, dated as of September 27, 2012, by and between Del River LLC (formerly known as IC-II Investments LLC) and Citibank, N.A.
(Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on October 1, 2012.)                                                  
|      | 
|10.13 |  | Amended and Restated Confirmation Letter Agreement, dated as of November 15, 2012, by and between Del River LLC (formerly known as IC-II Investments LLC) and Citibank, N.A.(Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on November 15, 2012.)                                                  
|      | 
|10.14 |  | Amended and Restated Confirmation Letter Agreement, dated as of December 13, 2012, by and between Del River LLC (formerly known as IC-II Investments LLC) and Citibank, N.A.
(Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on December 17, 2012.)                                                 
|      | 
|10.15 |  | Termination Acknowledgment (TRS), dated as of June 13, 2013, by and between Del River LLC (formerly known as IC-II Investments LLC) and Citibank, N.A. (Incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on June 17, 2013.)                                                                           
|      | 
|10.16 |  | Investment Management Agreement, dated as of July 2, 2012, by and between the Company and Del River LLC (formerly known as IC-II Investments LLC). (Incorporated by reference to
Exhibit 10.3 to the Companys Current Report on Form 8-K filed on July 3, 2012.)                                                                                
|      | 
|10.17 |  | Asset Transfer Agreement, dated as of October 26, 2012, by and between the Company and Lehigh River LLC. (Incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K filed on October 30, 2012.)                                                                                                                      
|      | 
|10.18 |  | Indenture, dated as of October 26, 2012, by and between Lehigh River LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K filed on October 30, 2012.)                                                                                                                      
|      | 
|10.19 |  | Amended and Restated Indenture, dated as of February 6, 2013, by and between Lehigh River LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on February 7, 2013.)                                                                                                 
|      | 
|10.20 |  | Supplemental Indenture No. 1, dated as of April 23, 2013, by and between Lehigh River LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on April 26, 2013.)                                                                                                       
|      | 
|10.21 |  | Lehigh River LLC Class A Floating Rate Secured Note, due 2023. (Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on
October 30, 2012.)                                                                                                                                                                
|      | 
|10.22 |  | Lehigh River LLC Class A Floating Rate Secured Note, due 2024. (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on February 7,
2013.)                                                                                                                                                                



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                           
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.23 |  | Lehigh River LLC Class A Floating Rate Secured Note, due 2024. (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on April 26,
2013.)                                                                                                                                                                                                           
|      | 
|10.24 |  | TBMA/ISMA 2000 Global Master Repurchase Agreement, by and between JPMorgan Chase Bank, N.A., London Branch, and Cobbs Creek LLC, together with the related Annex and Confirmation
thereto, each dated as of October 26, 2012. (Incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed on October 30, 2012.)                                          
|      | 
|10.25 |  | TBMA/ISMA 2000 Amended and Restated Global Master Repurchase Agreement, by and between JPMorgan Chase Bank, N.A., London Branch, and Cobbs Creek LLC, together with the related Annex
and Amended and Restated Confirmation thereto, each dated as of February 6, 2013. (Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on February 7, 2013.)
|      | 
|10.26 |  | TBMA/ISMA 2000 Amended and Restated Global Master Repurchase Agreement, by and between JPMorgan Chase Bank, N.A., London Branch, and Cobbs Creek LLC, together with the related Annex
and Amended and Restated Confirmation thereto, each dated as of April 23, 2013. (Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on April 26, 2013.)    
|      | 
|10.27 |  | Revolving Credit Agreement, dated as of October 26, 2012, by and between the Company and Cobbs Creek LLC. (Incorporated by reference to Exhibit 10.5 to the Companys
Current Report on Form 8-K filed on October 30, 2012.)                                                                                                                                                              
|      | 
|10.28 |  | Asset Transfer Agreement, dated as of October 26, 2012, by and between the Company and Cobbs Creek LLC. (Incorporated by reference to Exhibit 10.6 to the Companys
Current Report on Form 8-K filed on October 30, 2012.)                                                                                                                                                                
|      | 
|10.29 |  | Collateral Management Agreement, dated as of October 26, 2012, by and between Lehigh River LLC and the Company. (Incorporated by reference to Exhibit 10.7 to the
Companys Current Report on Form 8-K filed on October 30, 2012.)                                                                                                                                                        
|      | 
|10.30 |  | Collateral Administration Agreement, dated as of October 26, 2012, by and among Lehigh River LLC, the Company and Virtus Group, LP. (Incorporated by reference to
Exhibit 10.8 to the Companys Current Report on Form 8-K filed on October 30, 2012.)                                                                                                                                    
|      | 
|10.31 |  | Collateral Management Agreement, dated as of October 26, 2012, by and between Cobbs Creek LLC and the Company. (Incorporated by reference to Exhibit 10.9 to the
Companys Current Report on Form 8-K filed on October 30, 2012.)                                                                                                                                                         
|      | 
|10.32 |  | Loan Agreement, dated as of March 27, 2013, by and between Cooper River LLC, the financial institutions and other lenders from time to time party thereto and Citibank, N.A., as
administrative agent. (Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on March 28, 2013.)                                                                   
|      | 
|10.33 |  | Account Control Agreement, dated as of March 27, 2013, by and between Cooper River LLC, Citibank, N.A. and Virtus Group, LP. (Incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed on March 28, 2013.)                                                                                                                                             
|      | 
|10.34 |  | 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.)                                                                                                                                                                       
|      | 
|10.35 |  | 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.)                                                                                                                           
|      | 
|10.36 |  | Investment Management Agreement, dated as of March 27, 2013, by and between the Company and Cooper River LLC. (Incorporated by reference to Exhibit 10.5 to the Companys
Current Report on Form 8-K filed on March 28, 2013.)                                                                                                                                                            



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.37 |  | Loan and Servicing Agreement, dated as of February 19, 2014, by and among Wissahickon Creek LLC, as borrower, Wells Fargo Securities, LLC, as administrative agent, Wells Fargo Bank,
National Association, as collateral agent, account bank 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 February 25, 2014.)
|      | 
|10.38 |  | Purchase and Sale Agreement, dated as of February 19, 2014, by and between Wissahickon Creek LLC, as purchaser, and the Company, as seller. (Incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K filed on February 25, 2014.)                                                                                                                                                                                                     
|      | 
|10.39 |  | Collateral Management Agreement, dated as of February 19, 2014, by and between Wissahickon Creek LLC and the Company, as collateral manager. (Incorporated by reference to Exhibit
10.3 to the Companys Current Report on Form 8-K filed on February 25, 2014.)                                                                                                                                                                                                    
|      | 
|10.40 |  | Securities Account Control Agreement, dated as of February 19, 2014, by and among Wissahickon Creek LLC, as pledgor, Wells Fargo Bank, National Association, as collateral agent, and
Wells Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed on February 25, 2014.)                                                                                       
|      | 
|10.41 |  | 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.)    
|      | 
|10.42 |  | 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.)                                                                                                                                                                                                       
|      | 
|10.43 |  | 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.)                                                                                                                                                                                                          
|      | 
|10.44 |  | 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.)                                                                                                
|      | 
|31.1* |  | Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                                                                                             
|      | 
|31.2* |  | Certification of Chief Financial Officer pursuant to Rule 13a-14 under 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 report to be signed on its
behalf by the undersigned thereunto duly authorized on May 14, 2014.



FS INVESTMENT CORPORATION IIBy:

/S/    MICHAEL C. FORMANMichael C. Forman Chief Executive Officer (Principal Executive
Officer)By:

/S/    WILLIAM GOEBELWilliam Goebel Chief Financial Officer (Principal Financial and Accounting
Officer)




81